As filed with the Securities and Exchange Commission on April 19, 2021
Registration No. 333-254999 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
IMPEL NEUROPHARMA, INC.
(Exact name of registrant as specified in its charter)
Delaware | 2834 | 26-3058238 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
201 Elliott Avenue West, Suite 260
Seattle, WA 98119
(206) 568-1466
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Adrian Adams
President and Chief Executive Officer
Impel NeuroPharma, Inc.
201 Elliott Avenue West, Suite 260
Seattle, WA 98119
(206) 568-1466
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Alan C. Smith Amanda L. Rose Ryan Mitteness Fenwick & West LLP 1191 Second Avenue, Floor 10 Seattle, WA 98101 (206) 389-4510 |
Michael Nordtvedt Bryan D. King Tony Jeffries Wilson Sonsini Goodrich & Rosati, Professional Corporation 701 Fifth Avenue, Suite 5100
Seattle, WA 98104
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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, 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 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. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered |
Proposed maximum
aggregate offering price(1)(2) |
Amount of
registration fee |
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Common Stock, par value $0.001 per share |
$98,133,346 | $10,707(3) | ||
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(1) |
The proposed maximum aggregate offering price includes the offering price of additional shares that the underwriters have the option to purchase. |
(2) |
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. |
(3) |
The registrant previously paid a registration fee of $8,183 with the initial filing of this registration statement. |
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, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
PROSPECTUS (Subject to Completion) |
Dated April 19, 2021 |
5,333,334 Shares
Impel NeuroPharma, Inc.
Common Stock
This is an initial public offering of shares of our common stock. We are offering 5,333,334 shares of our common stock. Prior to this offering, there has been no public market for our common stock. We will apply for listing of our common stock on The Nasdaq Global Market under the symbol IMPL. We expect that the public offering price will be between $14.00 and $16.00 per share.
We have granted the underwriters an option to purchase up to 800,000 additional shares of our common stock at the initial public offering price, less underwriting discounts and commissions. We have applied to list our common stock on The Nasdaq Global Market under the symbol IMPL.
We are an emerging growth company under applicable Securities and Exchange Commission rules and will be subject to reduced public company reporting requirements for this prospectus and future filings.
Our business and an investment in our common stock involve significant risks. These risks are described under the caption Risk Factors beginning on page 14 of this prospectus.
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.
Per Share | Total | |||||||
Public offering price |
$ | $ | ||||||
Underwriting discounts and commissions(1) |
$ | $ | ||||||
Proceeds, before expenses, to Impel NeuroPharma, Inc. |
$ | $ |
(1) |
See the section titled Underwriting for additional information regarding underwriting compensation. |
The underwriters may also purchase up to an additional 800,000 shares from us at the public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus to cover overallotments.
The underwriters expect to deliver the shares against payment in New York, New York on , 2021.
Joint Book-Running Managers
Cowen | Guggenheim Securities |
Lead Manager
Wedbush PacGrow
, 2021
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
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Material U.S. Federal Income Tax Consequences to Non-U.S. Holders |
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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 we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. 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.
Persons who come into possession of this prospectus and any applicable free writing prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any such free writing prospectus applicable to that jurisdiction.
This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes and the information set forth under the sections titled Risk Factors, Summary Consolidated Financial Data and Managements Discussion and Analysis of Financial Condition and Results of Operations, in each case included in this prospectus. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See the section titled Special Note Regarding Forward-Looking Statements. Unless the context otherwise requires, we use the terms Impel, company, we, us and our in this prospectus to refer to Impel NeuroPharma, Inc.
Overview
We are a late-stage pharmaceutical company focused on utilizing our proprietary technology to develop and commercialize transformative therapies for patients suffering from diseases with high unmet medical needs, with an initial focus on diseases of the central nervous system, or CNS. Our company was founded on the premise that the upper nasal cavity can be an optimal treatment entry point for CNS and other diseases where rapid vascular absorption can result in superior clinical outcomes. Our strategy is to pair our proprietary Precision Olfactory Delivery, or POD, upper nasal delivery technology with well-established therapeutics or other therapeutics where rapid vascular absorption is preferred to drive therapeutic benefit, improve patient outcomes, reduce drug development risk and expand the commercial opportunity within our target diseases. Since 2016, we have identified and advanced multiple product candidates, including TRUDHESATM (INP104) for the acute treatment of migraine and INP105 for the acute treatment of agitation and aggression in patients with Autism Spectrum Disorder, or ASD. Our pipeline of proprietary product candidates also includes INP107 for the treatment of OFF episodes in Parkinsons Disease. In November 2020, we submitted an NDA for TRUDHESA, for the acute treatment of migraine headaches with or without aura in adult patients. The FDA has filed and accepted the new drug application, or NDA, for review and established a Prescription Drug User Fee Act, or PDUFA, goal date of September 6, 2021.
We have designed our proprietary POD technology to target the vascular-rich upper nasal cavity, and to provide rapid absorption, consistent drug biodistribution and ease of use for a patient, provider or caregiver. Our goal with our POD technology is to deliver injection-like clinical outcomes non-invasively. We believe that we are the first company to successfully harness the benefits of delivery to the upper nasal cavity to improve delivery and the pharmacologic potential of CNS therapies.
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We have developed a pipeline of proprietary CNS product candidates built around our intellectual property and expertise in upper nasal cavity delivery. The following table summarizes our product candidates, each of which is wholly owned:
POD Technology
Using our proprietary POD technology, we have developed devices that deliver therapeutics directly to the upper nasal cavity. These devices are designed to offer several key benefits compared to traditional nasal delivery systems, including:
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Rapid Onset. The precise spray plume and biphasic nature of delivery to the upper nasal cavity allows for superior dose deposition and rapid absorption into the systemic circulation as compared to traditional nasal delivery systems. |
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Consistent Drug Bioavailability. Metered propellant dosing allows for more consistent blood levels than typically seen with traditional nasal sprays and are equivalent, or superior, to those achieved through intramuscular, or IM, injections. |
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Improved Patient-Provider Experience. Our proprietary gas propulsion mechanism eliminates the need for coordination of breathing and enables delivery of a dosing in 1/10th of a second, enabling self- or provider-administration in a manner that improves patient comfort and compliance. |
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Manufacturability. Separation of propellant and drug within the POD device helps streamline chemistry, manufacturing and controls, or CMC, development, as we are not constrained by the limits of co-formulating our therapeutics inside of a pressurized propellant canister. |
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Formulation Versatility. The POD device is versatile and can deliver both liquid and powder formulations in order to potentially address a wide variety of indications across multiple therapeutic areas. |
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Strong Intellectual Property Position. We believe that we have a strong global intellectual property position relating to our POD device and product candidates. We have four U.S. issued patents and 21 patents issued in ex-U.S. jurisdictions directed to our approach of drug delivery to the upper nasal cavity, including claims directed to a nasal device with separate drug and propellant compartments. Our patent portfolio is expected to provide patent protection ranging from 2032 to 2040. |
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We believe that our in-house technical and development expertise positions us to address unmet medical needs across multiple therapeutic areas by delivering well-established and novel drugs consistently, rapidly and non-invasively. Our technical and development expertise has allowed us to rapidly identify and develop our product candidates to their current state in under five years. For example, INP105 was advanced from lead candidate selection to development of more than 20 formulations, the completion of five nonclinical studies, and ultimately a proof-of-concept clinical trial, within 16 months. We have tested over 30 small molecules and biologics for suitability of nasal drug administration with our proprietary POD technology. This depth of knowledge and experience, along with our proprietary technology, creates a platform for rapid additional pipeline expansion. In addition to our technology and development expertise, our strong intellectual property portfolio protects multiple aspects of our approach to delivering drug to the upper nasal cavity. We believe that our apparatus, composition of matter and method of use intellectual property can provide strong exclusivity protection to our product candidates.
Our Product Candidates
TRUDHESA (Acute Treatment of Migraine)
We are currently developing our lead product candidate, TRUDHESA (INP104), as an upper nasal formulation of dihydroergotamine, or DHE, administered using our proprietary POD technology for the acute treatment of migraine. The brand name TRUDHESA has been conditionally approved by the FDA. Migraine is a growing market projected to triple in size to over $10 billion by 2028 with the introduction of multiple new product offerings and an expected increase in disease diagnosis. DHE is widely used as part of a standard of care for treatment of migraines, despite being limited by intravenous, or IV, and injection delivery or traditional nasal administration. IV and injection delivery require administration in physicians offices, migraine clinics and hospitals, and traditional nasal administration has been challenged by inconsistent efficacy.
In June 2020, we announced the following exploratory efficacy results of our STOP301 trial to evaluate the safety and tolerability of long-term, intermittent use of TRUDHESA as an acute treatment of migraine with or without aura in adult patients. In this trial, baseline results prior to trial initiation were based on migraine attacks where patients used their standard acute migraine medication. In the trial:
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38% of patients were pain free at two hours after their first dose of TRUDHESA. |
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52% of patients receiving TRUDHESA were free of their most bothersome migraine symptom at two hours. |
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Patients treated with TRUDHESA also demonstrated improvement in pain relief: 16% of patients treated with TRUDHESA had pain relief within 15 minutes of treatment, and 66% had pain relief within two hours. |
The exploratory endpoints of the trial also included an assessment of the following long-term outcomes of TRUDHESA when patients were treated for six months:
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38% of patients treated with TRUDHESA remained pain free at two hours through three months of treatment and 34% of patients treated with TRUDHESA remained pain free at two hours through six months of treatment. |
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Patients who received TRUDHESA saw a 48% reduction in the frequency of their migraines compared to baseline during the six-month trial. |
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98% and 95% of patients achieving pain freedom at two hours on TRUDHESA did not suffer a relapse in migraine or require a rescue medication at 24 hours and 48 hours, respectively, by weeks 21 to 24. |
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Exposure Adjusted Event Rate, or EAER, data showed a meaningful reduction in the usage of healthcare resources by patients treated with TRUDHESA versus their baseline. Emergency room visits were reduced by approximately 73% and hospitalizations and urgent care visits were reduced by 100%. |
Although the trial was not powered to determine statistical significance of the exploratory efficacy endpoints, we believe these exploratory endpoints provide important data for evaluating the clinical benefit of TRUDHESA and showed consistency with the generally understood benefits of DHE for the acute treatment of migraines. The primary endpoints of the STOP301 trial were safety and tolerability of long-term, intermittent use. In this trial, TRUDHESA was generally well tolerated. There were a total of seven treatment emergent serious adverse events, or SAEs among five patients (1.4%) over the 52-week study. Three patients had one SAE each, consisting of one event each of ovarian mass, intestinal obstruction and miscarriage. Two patients had more than one SAE: one patient with a pulmonary embolism and visual impairment and one patient with clavicle and rib fractures. None of the SAEs were nasal-related and none of the SAEs, were determined by the investigator to be related to TRUDHESA or led to withdrawal from the trial. There were also no significant changes to sense of smell, and no significant abnormal findings from endoscopy examinations.
In November 2020, we submitted an NDA for TRUDHESA for the acute treatment of migraine headaches with or without aura in adult patients. The FDA has filed and accepted the NDA for review and established a PDUFA goal date of September 6, 2021. The brand name TRUDHESA has been conditionally approved by the FDA.
If approved, we believe we can successfully commercialize TRUDHESA in the United States with a specialty sales force beginning with approximately 60 representatives, and increasing to approximately 120 representatives, focusing in areas with increased demand. We intend to strategically pursue high value prescribers and early adopters, beginning with 8,000 of the highest volume migraine treatment prescribers. Based on recent migraine treatment product launches, such as ubrogepant and rimegepant, we believe this approach can be successful in accessing the concentrated prescriber bases in migraine. This target base includes approximately 4,000 neurologists and approximately 4,000 high prescribing primary care physicians and headache specialists who have significant experience with prescribing DHE. These groups make up 35% of the migraine treatment prescriptions written in 2020 in the United States. In particular, neurologist prescription productivity has grown an average of approximately 15% per year over the last two years, a growth figure aided by an increase in the number of patients seeking treatment from neurologists and primary care physicians for migraine. The planned scale up to 120 representatives is intended to allow us to target an additional 8,000 high prescribing physicians that we believe will enable us to expand coverage to 45% of all migraine treatment prescriptions in the United States. We intend to build a commercial infrastructure focused on distribution, access, promotion, education and customer support. Our market research indicates that over 70% of migraine sufferers are seeking better treatments, and physicians are willing to prescribe and payors support access at profitable price and rebate points. With approximately 72% of migraine prescriptions paid by commercial payors, we believe this market presents an attractive payor mix. We anticipate using a robust sample program to ensure trial with TRUDHESA for patients seeking better treatments and outcomes. Also, as part of our commercialization strategy, we plan to educate healthcare practitioners and patients, partner with national associations and actively support advocacy groups in the migraine market. These efforts will be supplemented with non-personal promotion to all targeted and non-targeted medium value physicians. To capture the maximum commercial opportunity of TRUDHESA, we may also selectively seek partners to commercialize the product outside of our target markets, including additional penetration within the broader primary care setting, as well as in geographies outside of the United States.
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INP105 (Acute Treatment of Agitation and Aggression in Autism Spectrum Disorder)
We are currently developing our second product candidate, INP105, as an upper nasal formulation of olanzapine administered using our proprietary POD technology for the treatment of agitation and aggression associated with ASD. ASD is a neurodevelopmental disorder affecting approximately 3.5 million children and adults in the United States and characterized by persistent difficulties in social communication and social interaction, coupled with restricted, repetitive patterns of behavior and higher aggression rates. Agitation and aggression are frequent and difficult to manage symptoms, and associated with negative outcomes for patients with ASD and their caregivers, including decreased quality of life, increased stress levels, and reduced availability of educational and social support. Based on a study of emergency room usage in Canada, which found that 18% of individuals with ASD aged 12 and up had visited the emergency room within the past year, and that approximately 34% of such visits were for mental health issues, we estimate that approximately 220,000 patients with ASD in the United States seek emergency room care due to mental health issues annually. Current treatment strategies include functional behavioral assessment, reinforcement strategies, functional communication training, and the use of second-generation antipsychotics. With an increasing rate of ASD diagnosis, we believe that the development of effective therapeutic and pharmacologic methods for preventing and treating aggression are essential to improving outcomes in this disorder. Currently, there is no approved treatment for patients living with ASD once there is onset of agitation leading to aggression, and we believe that INP105 has the potential to be an on-demand therapy in this indication.
In a double-blind, placebo-controlled, single ascending dose Phase 1 clinical trial in 40 healthy adults conducted in Australia, we observed similar bioavailability for INP105 compared to equivalent doses of olanzapine delivered through IM administration, as measured by the area under the plasma drug concentration-time curve, or AUC, which reflects the actual body exposure to the drug after administration of a drug dose, and the maximum drug concentration, or Cmax, and achieved time to maximum drug concentration, or Tmax, 25-22% faster than that of IM olanzapine.
Based on its pharmacokinetic profile and method of administration, we believe INP105, if approved, has the potential to treat acute agitation and aggression events in this under-served population and in patients homes, potentially reducing visits to the emergency department and limiting the need to call in reinforcements to help caregivers. We plan to initiate a double-blind, placebo-controlled Phase 2 proof-of-concept clinical trial of INP105 in adolescents with ASD in the United States by the end of 2021 and expect to report topline results in the second half of 2022.
INP107 (Treatment of OFF Episodes in Parkinsons Disease)
We are also currently developing INP107 as an upper nasal formulation of carbidopa/levodopa administered using our proprietary POD technology for the treatment of OFF episodes in Parkinsons Disease, or Parkinsons. The overall Parkinsons market is expected to grow to over $8.4 billion by 2026, with emerging treatments for OFF episodes contributing to that growth. Current standard of care for the symptomatic treatment of Parkinsons is oral levodopa; however when levodopa levels fall below their therapeutic range, patients may lose adequate control of motor symptoms, which are referred to as OFF episodes. Carbidopa is co-administered with levodopa to slow levodopas rapid absorption, thereby increasing the amount of levodopa available for the symptoms of Parkinsons. INP107 is a self- or caregiver-administered, upper nasal therapy candidate designed to provide rapid delivery of levodopa to the brain for the treatment of OFF episodes. In 2019, we completed a Phase 2a clinical trial of INP107 and a levodopa-only formulation in Australia, which demonstrated an encouraging pharmacokinetic profile in Parkinsons patients. Based on results of the Phase 2a clinical trial, we expect to further develop the formulation of INP107 prior to advancing into additional clinical trials. We expect to initiate a Phase 1 pharmacokinetic and tolerability trial in Australia or the United States in 2022 for dose selection for additional clinical development of INP107.
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Our Team
We have assembled a team of scientific, clinical and business leaders with deep expertise in neuroscience and a track record of building, growing and transacting pharmaceutical companies. Our Chief Executive Officer, Adrian Adams, has over 25 years of pharmaceutical experience with an emphasis on commercialization and strategic execution. Our co-founder and Chief Scientific Officer, John Hoekman, Ph.D., has over 15 years of experience in investigating upper nasal drug delivery and nose-to-brain delivery, is an inventor of our proprietary POD technology, is widely recognized as a pioneer in upper nasal cavity drug delivery and has evaluated over 30 CNS targeting compounds with over six different modalities including small molecules, proteins, peptides and antibodies as opportunities for upper nasal cavity delivery. Our Chief Financial Officer, John Leaman, M.D., has over 15 years of pharmaceutical experience with an emphasis on public company financial oversight, corporate strategy and business development. Our Chief Medical Officer, Stephen Shrewsbury, M.B. ChB., has over 30 years of experience in developing pulmonary and nasal drug delivery and CNS therapies at pharmaceutical companies including GlaxoSmithKline, Aquinox Pharmaceuticals, AVI Biopharma and MAP Pharmaceuticals, where he led the development of Levadex. Our Chief Commercial Officer, Leonard S. Paolillo, has nearly 20 years of experience with various companies in the healthcare and pharmaceutical industries, including Warner Chilcott and Kyowa Kirin. Our Senior Vice President of Regulatory Affairs, Lynn Gold, has over 30 years of experience of leading regulatory activities for pharmaceutical companies, including at Warner Chilcott, Pharmacia and Camargo Pharmaceutical Services, and has been involved in over 40 NDA submissions, with expertise in drug devices and delivery. We are supported by our board of directors, scientific advisory boards and a group of leading biotechnology-focused investors, including KKR Iris Investors LLC, or KKR Iris, which is owned by investment funds and other entities affiliated with Kohlberg Kravis Roberts & Co. L.P., Norwest Venture Partners, 5AM Venture Management, LLC, venBio and Vivo Capital.
Our Strategy
Our goal is to deliver transformative therapies, harnessing the benefits of delivery to the upper nasal cavity, to patients suffering from CNS diseases and other diseases with high unmet medical needs. The key tenets of our strategy to accomplish this goal include:
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Successfully commercialize TRUDHESA for the acute treatment of migraine after potential regulatory approval. |
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Rapidly advance INP105 through clinical development for the acute treatment of agitation and aggression associated with ASD. |
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Maximize the therapeutic and commercial potential of our proprietary POD technology platform. |
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Expand applications of our existing product candidates. |
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Independently develop and commercialize product candidates in indications and geographies where we believe we can maximize value. |
Risks Affecting Us
Our business is subject to risks and uncertainties, including those highlighted in the section titled Risk Factors immediately following this prospectus summary. These risks include, among others, the following:
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We are a late-stage pharmaceutical company with a limited operating history and have incurred net losses since our inception. We anticipate that we will continue to incur substantial operating losses for the foreseeable future and we may never achieve or sustain profitability. |
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We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts. |
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Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates on unfavorable terms to us. |
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The development and commercialization of pharmaceutical products is subject to extensive regulation, and we may not obtain regulatory approvals for TRUDHESA, INP105, INP107 or any other product candidates. |
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Our future commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients, health care payors and others in the medical community necessary for commercial success. |
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Clinical failure may occur at any stage of clinical development, and we may never succeed in developing marketable product candidates or generating product revenue. |
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Delays in the commencement, enrollment or completion of clinical trials of our product candidates, or in the acceptance of foreign clinical trial data, could result in increased costs to us as well as a delay or failure in obtaining regulatory approval, or prevent us from commercializing our product candidates on a timely basis, or at all. |
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The outbreak of COVID-19, or similar public health crises, could have a material adverse impact on our business, financial condition and results of operations, including through disruption to our planned clinical trials, supply chains, business operations and commercialization efforts, or through delay in the FDAs approval of our NDA for TRUDHESA. |
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We rely entirely on third parties for the manufacturing of product candidates that we develop for nonclinical studies and clinical trials and expect to continue to do so for commercialization. If we encounter difficulties in negotiating manufacturing and supply agreements with third-party manufacturers and suppliers of our POD device and the active ingredients in TRUDHESA, INP105, and INP107, our ability to commercialize our product candidates, if approved, would be impaired. |
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If we are not able to obtain and enforce patent protection for our technologies or product candidates, development and commercialization of our technology and product candidates may be adversely affected. |
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We may encounter difficulties in managing our growth and expanding our operations successfully. |
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If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop and commercialize our product candidates. |
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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. Purchases of common stock in this offering by our affiliates will reduce the liquidity of our common stock. |
Corporate Information
We were incorporated under the laws of the State of Delaware in July 2008. Our principal executive offices are located at 201 Elliott Avenue West, Suite 260, Seattle, Washington 98119, and our telephone number is (206) 568-1466. Our website address is www.impelnp.com. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated by reference into, this prospectus. Investors should not rely on any such information in deciding whether to purchase our common stock.
The marks IMPEL, POD, TRUDHESA, IMPELPOD and the Impel NeuroPharma logo and our other registered or common law trade names, trademarks or service marks appearing in this prospectus are the property of Impel. All other service marks, trademarks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, the trademarks
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and tradenames referred to in this prospectus appear without the ® and symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor, to these trademarks and tradenames.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. 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:
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being permitted to present only two years of audited financial statements and only two years of related Managements Discussion and Analysis of Financial Condition and Results of Operations in this prospectus; |
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not being required to comply with the auditor attestation requirements on the effectiveness of our internal controls over financial reporting; |
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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements (auditor discussion and analysis); |
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reduced disclosure obligations regarding executive compensation arrangements; and |
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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 or such earlier time when we no longer qualify as an emerging growth company. We will cease to be an emerging growth company upon the earliest of (i) the end of the fiscal year following the fifth anniversary of this offering; (ii) the last day of the fiscal year during which our annual gross revenues are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; and (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700.0 million as of the end of the second quarter of that fiscal year.
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, until those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act of 1933, as amended, upon issuance of a new or revised accounting standard that applies to our financial statements and that has
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a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
Smaller Reporting Company
Additionally, we are a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company as long as either (i) the market value of our common stock held by non-affiliates is less than $250 million as of the prior June 30, or (ii) our annual revenues is less than $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates is less than $700 million as of the prior June 30.
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THE OFFERING
Common stock offered |
5,333,334 shares |
Option to purchase additional shares |
We have granted the underwriters an option, exercisable for 30 days after the date of this prospectus, to purchase up to an additional 800,000 shares from us. See the section of this prospectus titled Underwriting. |
Common stock to be outstanding immediately after this offering |
19,414,834 shares (or 20,214,834 shares if the underwriters exercise their option to purchase additional shares in full). |
Use of proceeds |
We estimate that the net proceeds from this offering will be approximately $71.4 million (or approximately $82.6 million if the underwriters exercise their option to purchase additional shares in full), based upon the assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses. |
We intend to use the net proceeds that we receive in this offering as follows: approximately $60 million to fund the regulatory approval process and initial commercial launch of TRUDHESA; approximately $10 million to initiate a clinical proof-of-concept trial for INP105 in patients with ASD; and any remaining amounts to fund working capital and general corporate purposes. See the section titled Use of Proceeds. |
Risk factors |
You should read the section titled Risk Factors in this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock. |
Listing |
We have applied to list our shares of common stock on The Nasdaq Global Market under the symbol IMPL. |
The number of shares of our common stock to be outstanding after this offering is based on 14,081,500 shares of our common stock outstanding as of December 31, 2020, which gives effect to (i) the automatic conversion of all outstanding shares of our redeemable convertible preferred stock as of December 31, 2020 into an aggregate of 12,605,800 shares of common stock immediately prior to the completion of this offering, (ii) the automatic exchange of a warrant held by Avenue Venture Opportunities Fund, L.P., or Avenue, into 107,663 shares upon completion of this offering, (iii) the issuance of 52,974 shares of common stock pursuant to the net exercise of warrants to purchase
10
1,987,348 shares of redeemable convertible preferred stock outstanding as of December 31, 2020, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, and (iv) the automatic conversion of convertible notes we issued in March 2021 into 559,585 shares of common stock immediately prior to the completion of this offering and excludes:
∎ |
2,441,889 shares of common stock issuable upon the exercise of options outstanding as of December 31, 2020, with a weighted-average exercise price of $5.17 per share; |
∎ |
276,843 shares of our common stock issuable upon the exercise of 276,843 stock options granted after December 31, 2020, with a weighted-average exercise price of $12.95 per share; and |
∎ |
2,825,456 shares of common stock reserved for future issuance under our stock-based compensation plans, consisting of (i) 344,456 shares of common stock reserved for future issuance under our 2018 Equity Incentive Plan as of December 31, 2020, (ii) 2,205,000 shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan, which will become effective on the date immediately prior to the date of this prospectus and (iii) 276,000 shares of common stock reserved for future issuance under our 2021 Employee Stock Purchase Plan, which will become effective on the date of this prospectus. Upon completion of this offering, any remaining shares available for issuance under our 2018 Equity Incentive Plan will be added to the shares reserved under our 2021 Equity Incentive Plan and we will cease granting awards under our 2018 Equity Incentive Plan. Our 2021 Equity Incentive Plan and 2021 Employee Stock Purchase Plan also provide for automatic annual increases in the number of shares reserved under the plans each year, as more fully described in Executive CompensationEquity Compensation Plans and Other Benefit Plans. |
Except as otherwise indicated, all information in this prospectus assumes or gives effect to:
∎ |
the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 12,605,800 shares of common stock immediately prior to the completion of this offering; |
∎ |
the automatic exchange of a warrant held by Avenue into 107,663 shares of common stock upon completion of this offering; |
∎ |
the net exercise immediately prior to the completion of this offering of outstanding warrants to purchase 1,987,348 shares of redeemable convertible preferred stock that would otherwise terminate upon completion of this offering, which will result in the issuance of 52,974 shares of common stock, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus; |
∎ |
the automatic conversion of $7.5 million aggregate principal amount of convertible notes issued in March 2021 into 559,585 shares of common stock immediately prior to the completion of this offering; |
∎ |
a one-for-16.37332 reverse stock split, which became effective on April 16, 2021; |
∎ |
the effectiveness of our restated certificate of incorporation and restated bylaws in connection with the completion of this offering; |
∎ |
no exercise of outstanding options or warrants after December 31, 2020, other than as described in the second and third bullets above; and |
∎ |
no exercise of the underwriters option to purchase up to 800,000 additional shares of our common stock. |
11
Summary Consolidated Financial Data
The following tables set forth our summary consolidated statements of operations and consolidated balance sheet data. The summary consolidated statements of operations data presented below for the years ended December 31, 2019 and 2020 and the summary consolidated balance sheet data as of December 31, 2020 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated financial data should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in any future period. The summary consolidated financial data in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this prospectus.
Year ended December 31, | ||||||||
2019 | 2020 | |||||||
(in thousands, except share
and per share data) |
||||||||
Statement of Operations Data: |
||||||||
Operating expenses: |
||||||||
Research and development |
$ | 28,812 | $ | 27,285 | ||||
General and administrative |
12,754 | 18,049 | ||||||
|
|
|
|
|||||
Total operating expenses |
41,566 | 45,334 | ||||||
|
|
|
|
|||||
Loss from operations |
(41,566 | ) | (45,334 | ) | ||||
Interest income (expense), net |
417 | (55 | ) | |||||
Other expense, net |
(680 | ) | (408 | ) | ||||
|
|
|
|
|||||
Loss before income taxes |
(41,829 | ) | (45,797 | ) | ||||
Provision for income taxes |
(30 | ) | (1 | ) | ||||
|
|
|
|
|||||
Net loss and comprehensive loss |
$ | (41,859 | ) | $ | (45,798 | ) | ||
Accretion on redeemable convertible preferred stock |
(505 | ) | (518 | ) | ||||
|
|
|
|
|||||
Net loss attributable to common stockholders |
$ | (42,364 | ) | $ | (46,316 | ) | ||
|
|
|
|
|||||
Per share information: |
||||||||
Net loss per share attributable to common stockholders, basic and diluted(1) |
$ | (122.07 | ) | $ | (91.05 | ) | ||
|
|
|
|
|||||
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted(1) |
347,042 | 508,668 | ||||||
|
|
|
|
|||||
Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(2) |
$ | (3.47 | ) | |||||
|
|
|||||||
Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(2) |
13,138,929 | |||||||
|
|
(1) |
See Note 13 to our audited financial statements included elsewhere in this prospectus for an explanation of the method used to calculate basic and diluted net loss per share and basic and diluted weighted-average number of shares of common stock used in the computation of the per share amounts. |
(2) |
See the subsection titled Managements Discussion and Analysis of Financial Condition and Results of OperationsUnaudited Pro Forma Information for an explanation of the calculations of our basic and diluted pro forma net loss per share attributable to common stockholders, and the weighted-average number of shares outstanding used in the computation of the per share amounts. |
12
As of December 31, 2020 | ||||||||||||
Actual | Pro Forma(1) |
Pro Forma
As Adjusted(2) |
||||||||||
(in thousands) | ||||||||||||
Balance Sheet Data: |
||||||||||||
Cash |
$ | 7,095 | $ | 14,595 | $ | 85,995 | ||||||
Working capital (deficit)(3) |
(2,354 | ) | 7,768 | 79,168 | ||||||||
Total assets |
12,059 | 19,559 | 90,959 | |||||||||
Redeemable convertible preferred stock warrant liabilities |
2,622 | | | |||||||||
Long-term debt, current and noncurrent |
8,411 | 8,411 | 8,411 | |||||||||
Total redeemable convertible preferred stock |
127,039 | | | |||||||||
Total stockholders (deficit) equity |
(133,500 | ) | 3,661 | 75,061 |
(1) |
Pro forma amounts give effect to (i) the automatic conversion of all outstanding shares of our redeemable convertible preferred stock as of December 31, 2020 into an aggregate of 12,605,800 shares of our common stock immediately prior to the completion of this offering, (ii) the automatic exchange of a warrant held by Avenue into 107,663 shares upon completion of this offering, (iii) the issuance of 52,974 shares of common stock pursuant to the net exercise of warrants to purchase 1,987,348 shares of redeemable convertible preferred stock outstanding as of December 31, 2020 that would otherwise expire upon completion of this offering, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, (iv) $7.5 million in proceeds from the convertible notes we issued in March 2021 and their conversion into 559,585 shares of common stock immediately prior to the completion of this offering at 90% of the offering price and (v) the effectiveness of our restated certificate of incorporation in connection with the completion of this offering. |
(2) |
Pro forma as adjusted amounts reflect pro forma adjustments described in footnote (1) as well as the sale of 5,333,334 shares of our common stock in this offering, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated 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. The pro forma as adjusted information is illustrative only, and will change based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, working capital, total assets and total stockholders equity by $5.0 million, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1.0 million in the number of shares offered by us in this offering would increase (decrease) the pro forma as adjusted amount of each of cash, working capital, total assets and total stockholders equity by $14.0 million, assuming the assumed initial offering price remains the same and after deducting estimated underwriting discounts and commissions. |
(3) |
We define working capital (deficit) as current assets less current liabilities. |
13
Investing in our common stock involves a high degree of risk. Before making your decision to invest in shares of our common stock, you should carefully consider the risks described below, together with the other information contained in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus. We cannot assure you that any of the events discussed below will not occur. Any of these events could have a material and adverse impact on our business, financial condition, results of operations and prospects. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.
Risks Related to Our Financial Position and Need for Additional Capital
We are a late-stage pharmaceutical company and have incurred net losses since our inception. We anticipate that we will continue to incur substantial operating losses for the foreseeable future and we may never achieve or sustain profitability.
We are a late-stage pharmaceutical company formed in 2008. Since inception, we have devoted substantially all of our financial resources to research and development, including our clinical and nonclinical development activities. To date, we have financed our operations primarily through the sale and issuance of redeemable convertible preferred stock, convertible notes and warrants.
We have incurred significant net losses since our inception. Our net losses were $41.9 million and $45.8 million for the years ended December 31, 2019 and 2020, respectively. As of December 31, 2020, we had an accumulated deficit of $138.3 million. We cannot predict when or whether we will become profitable. To date, we have not generated any product revenues, and we may never be able to develop or commercialize a marketable product. Our losses have resulted principally from costs incurred in our product candidate discovery and development activities. We expect to incur net losses for the foreseeable future.
Our financial position will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations, or additional grants. If we are required by the U.S. Food and Drug Administration, or FDA, or any equivalent foreign regulatory authority to perform clinical trials or studies in addition to those we currently expect to conduct, including if foreign clinical trial data are not accepted by the FDA, or if there are any delays in completing the clinical trials of our product candidates, our expenses could increase substantially. Although we have submitted an NDA for TRUDHESA, we may not receive approval for commercialization and even if approved, the resulting revenue may not enable us to achieve profitability. Even if we obtain regulatory approval to market a product candidate, our future revenues will depend upon the size of any markets in which our product candidates have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors and adequate market share for our product candidates in those markets.
We expect our expenses and net losses to increase significantly as we prepare to potentially commercialize TRUDHESA, continue our development of, and seek regulatory approvals for, our other product candidates, and begin to commercialize other approved products, if any, as well as hire additional personnel, protect our intellectual property and incur additional costs associated with operating as a public company. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical studies and trials, associated manufacturing needs, commercialization activities if our product candidates are approved and our expenditures on other research and development activities.
14
To become and remain profitable, we must successfully develop product candidates, obtain regulatory approval for them, and manufacture, market and sell those product candidates for which we may obtain regulatory approval. We may not succeed in these activities and we may never generate revenue from product sales that are significant enough to achieve profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business for any reason, including as a result of the COVID-19 pandemic. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders equity and working capital. Our failure to become or remain profitable would depress our market value and could impair our ability to raise capital, expand our business, discover or develop other product candidates or continue our operations. A decline in the value of our business could cause you to lose all or part of your investment.
We will require substantial additional financing to achieve our goals and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
As of December 31, 2020, we had $7.1 million of cash. We believe that we will continue to expend substantial resources for the foreseeable future as we continue clinical trials, pursue product commercialization, in particular as we prepare for potential commercialization of TRUDHESA and develop additional product candidates. In addition, other unanticipated costs may arise. Because the outcome of our planned and anticipated clinical trials are highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates. Our costs will increase if we suffer any delays in our planned clinical trials for our current product candidates. Following this offering, we expect to incur additional costs associated with operating as a public company, hiring additional personnel and potentially expanding our facilities.
We believe that the net proceeds from this offering, together with our existing cash and $10 million in an available draw under our debt and equity financing agreement with Avenue, or the Avenue Agreement, will fund our projected operating requirements to the middle of 2022. Our forecast of the period of time through which our financial reserves will adequately support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this Risk Factors section. For further details regarding the terms of the Avenue Agreement, see Managements Discussion and AnalysisLiquidity and Capital ResourcesSources of Liquidity. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
Our future capital requirements will depend on many factors, including:
∎ |
the timing of, and the costs involved in, obtaining regulatory approvals for TRUDHESA and our other product candidates if clinical trials are successful; |
∎ |
the cost of commercialization activities for TRUDHESA, if approved, or any other approved product, including marketing, sales and distribution costs; |
∎ |
the scope, progress, results and costs of developing and advancing our product candidates through clinical trials and researching and discovering new product candidates; |
∎ |
our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such agreements; |
∎ |
the cost of manufacturing our product candidates for clinical trials in preparation for regulatory approval and in preparation for commercialization; |
∎ |
our ability to generate revenue from approved product candidates, if any; and |
15
∎ |
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation. |
We will need to raise additional funds to address our goals. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. Until we can generate sufficient revenue to finance our cash requirements, which we may never do, we expect to finance our future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, and other marketing or distribution arrangements. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate nonclinical studies, clinical trials or other development activities for one or more of our product candidates or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates if approved.
We have disclosed that there is substantial doubt about our ability to continue as a going concern.
As a result of our net losses from operations, accumulated deficit and need for substantial additional capital, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2020 that raises substantial doubt about our ability to continue as a going concern. The conditions giving rise to this uncertainty and our plan with respect to this uncertainty are disclosed in Note 1 to our consolidated financial statements appearing at the end of this prospectus. If we are unable to obtain sufficient funding, we could be forced to delay, reduce or eliminate all of our research and development programs, future research and development efforts and ongoing preclinical studies and clinical trials, and our financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. After the completion of this offering, future financial statements may continue to disclose substantial doubt about our ability to continue as a going concern and our forecast of the period of time through which our financial resources will adequately support our operations may be inaccurate and we may need to raise additional capital sooner than we expect. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates on unfavorable terms to our business.
We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of such equity or convertible debt securities may include liquidation or other preferences that are senior to or otherwise adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures, declaring dividends or encumbering our assets to secure future indebtedness. For example, our debt and equity financing agreement with Avenue is secured by a lien on substantially all of our assets, including our intellectual property and following this offering will be secured by a lien on substantially all of our assets, excluding our intellectual property. If we raise additional funds through strategic partnerships with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts for our product candidates, or grant rights to third parties to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
16
Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.
We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
∎ |
variations in the level of expense related to the ongoing development of our product candidates or future development programs; |
∎ |
results of nonclinical and clinical trials, or the addition or termination of clinical trials or funding support by us, or existing or future collaborators or licensing partners; |
∎ |
our execution of any additional collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under existing or future arrangements or the termination or modification of any such existing or future arrangements; |
∎ |
any intellectual property infringement lawsuit or opposition, interference or cancellation proceeding in which we may become involved; |
∎ |
additions and departures of key personnel; |
∎ |
strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; |
∎ |
if any of our product candidates receive regulatory approval, the terms of such approval and market acceptance and demand for such product candidates; |
∎ |
if any of our product candidates receive regulatory approval, variation in the level of expense related to the commercialization of such product candidates and quarterly fluctuations in any future product sales; |
∎ |
regulatory developments affecting our product candidates or those of our competitors; and |
∎ |
changes in general market and economic conditions. |
If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially. We believe that quarterly comparisons of our financial results should not be relied upon as an indication of our future performance.
Risks Related to Regulatory Review and Approval of Our Product Candidates
The development and commercialization of pharmaceutical products is subject to extensive regulation, and we may not obtain regulatory approvals for TRUDHESA, INP105, INP107 or any other product candidates.
The clinical development, manufacturing, labeling, packaging, storage, recordkeeping, advertising, promotion, export, import, marketing, distribution, adverse event reporting, including the submission of safety and other post-marketing information and reports, and other possible activities relating to TRUDHESA and INP105, which are our furthest advanced product candidates under clinical development, as well as INP107 and any other product candidate that we may develop in the future, are subject to extensive regulation. Marketing approval of drugs in the United States requires the submission of an NDA to the FDA, and we are not permitted to market any product candidate in the United States until we obtain approval from the FDA of the NDA for that product. An NDA must be supported by extensive clinical and preclinical data, as well as extensive information regarding pharmacology, CMC, and current good manufacturing practices, or cGMP, at the manufacturing facilities. Further, our product candidates must be approved by comparable regulatory authorities in other jurisdictions where we intend to market our product candidates prior to commercialization.
17
FDA approval of an NDA is not guaranteed, and review and approval is an expensive and uncertain process that may take several years. Of the large number of drugs in development in the United States, only a small percentage will successfully complete the FDA regulatory approval process and will be commercialized. Accordingly, there can be no assurance that any of our product candidates will receive regulatory approval in the United States, or other jurisdictions. The FDA also has substantial discretion in the approval process. The number and types of preclinical studies and clinical trials that will be required for NDA approval varies depending on the product candidate, the disease or the condition that the product candidate is designed to treat and the regulations applicable to any particular product candidate. We have submitted an NDA for TRUDHESA through the Section 505(b)(2) regulatory pathway and intend to seek FDA approval for our other product candidates through the Section 505(b)(2) regulatory pathway. If the FDA does not agree that the 505(b)(2) regulatory pathway is appropriate or scientifically justified for one or more of our product candidates, we may need to conduct additional clinical trials, provide additional data and information and meet additional standards for regulatory approval. Additionally, if CMC information in the NDA is found to be deficient, if the FDA disagrees with our interpretation or analysis of clinical data, or identifies any deficiency in our clinical data, we may fail to obtain approval of TRUDHESA or approval may be delayed. CMC issues that could be found to be deficient to the FDA include our investigation of increased levels of impurities in some vials of certain drug lots used in the STOP301 trial, or the use of certain drug lots for our primary stability data because the FDA concludes that the manufacturing process has not been in a state of control at the time of their manufacture.
Clinical trial failure may result from a multitude of factors including flaws in trial design, dose selection, placebo effect, patient enrollment criteria and failure to demonstrate favorable safety or efficacy traits, and failure in clinical trials can occur at any stage. Companies in the pharmaceutical industry frequently suffer setbacks in the advancement of clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from clinical trials are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may further delay, limit or prevent marketing approval.
The FDA could delay, limit or deny approval of a product candidate for many reasons, including because the FDA:
∎ |
may not deem our product candidate to be safe and effective; |
∎ |
determines that the product candidate does not have an acceptable benefit-risk profile; |
∎ |
determines in the case of an NDA seeking accelerated approval that the NDA does not provide evidence that the product candidate represents a meaningful advantage over available therapies; |
∎ |
determines that the objective response rate, or ORR, and duration of response are not clinically meaningful; |
∎ |
may not agree that the data collected from preclinical studies and clinical trials are acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval, and may impose requirements for additional preclinical studies or clinical trials; |
∎ |
may determine that adverse events experienced by participants in our clinical trials represent an unacceptable level of risk; |
∎ |
may determine that population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; |
∎ |
may disagree regarding the formulation, labeling and/or the specifications; |
∎ |
may not approve the manufacturing processes associated with our product candidate or may determine that a manufacturing facility does not have an acceptable compliance status; |
18
∎ |
may conclude there are CMC issues that preclude approval of the NDA; |
∎ |
may conclude that the drug substance or drug product manufacturing process is not in a state of control or does not meet cGMPs or all the regulatory requirements; |
∎ |
may not be able to timely conduct the necessary pre-approval inspection or devote sufficient resources to NDA review on a timely basis due to the COVID-19 pandemic; |
∎ |
may change approval policies or adopt new regulations; or |
∎ |
may not file a submission due to, among other reasons, the content or formatting of the submission. |
We have not obtained FDA approval for any of our product candidates. This lack of experience may impede our ability to obtain FDA approval in a timely manner, if at all, for our clinical product candidates.
If we experience delays in obtaining approval or if we fail to obtain approval of TRUDHESA, INP105 or INP107, our commercial prospects will be harmed and our ability to generate revenues will be materially impaired which would adversely affect our business, prospects, financial condition and results of operations.
Clinical failure may occur at any stage of clinical development, and we may never succeed in developing marketable product candidates or generating product revenue.
Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. Although our NDA for TRUDHESA for the acute treatment of migraine headaches with or without aura in adult patients has been accepted for filing, the FDA may reject this NDA or require additional clinical testing prior to approval.
Although the active ingredients in our product candidates, TRUDHESA, INP105, and INP107, are approved or commonly used as treatments for migraine, agitation associated with ASD, and Parkinsons, respectively, they have not previously been approved or demonstrated to be safe for chronic use over an extended period of time using an upper nasal cavity drug delivery. Our NDA submission for TRUDHESA proposes to bridge TRUDHESA to two Listed Drugs, or LDs, for which we have conducted a comparative bioavailability study, and conducted a long-term safety study to evaluate local toxicity on the nasal and olfactory epithelia. Our prior clinical results for our product candidates are not necessarily indicative of our ability to bridge to LD, as there can be significant variability in results between different clinical trials due to numerous factors, including changes in trial procedures, differences in the size and type of patient populations, including across geographies, changes in and adherence to the clinical trial protocols, and the rate of dropout among clinical trial participants. If we are not able to establish a bridge between a product candidate and each LD upon which they rely to demonstrate that such reliance is justified, we may be required to show safety and efficacy through one or more clinical trials. In addition, the long-term safety studies we are conducting or plan to conduct may reveal safety concerns, including with regard to nasal mucosa or olfactory function. If either or both of these outcomes occur, we may be prevented or delayed in obtaining marketing approval.
We may be required to perform additional or unanticipated clinical trials to obtain approval or be subject to additional post-marketing testing requirements to maintain regulatory approval. In addition, regulatory authorities may withdraw their approval of a product or impose restrictions on our distribution, such as in the form of a Risk Evaluation and Mitigation Strategy, or REMS. The failure to obtain timely regulatory approval of product candidates, any product marketing limitations or a product
19
withdrawal would materially and adversely affect our business, results of operations and financial condition.
Delays in the commencement, enrollment or completion of clinical trials of our product candidates could result in increased costs to us as well as a delay or failure in obtaining regulatory approval, or prevent us from commercializing our product candidates on a timely basis, or at all.
We plan to initiate a Phase 2 trial of a double-blind placebo-controlled single dose of INP105 study in adolescents with ASD by the end of 2021. Any of our future clinical trials may not be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage. Events that may prevent successful or timely commencement, enrollment or completion of clinical development include:
∎ |
delays by us in reaching a consensus with regulatory agencies on trial design; |
∎ |
delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites; |
∎ |
delays in obtaining required Institutional Review Board, or IRB, approval at each clinical trial site; |
∎ |
delays in recruiting suitable patients to participate in clinical trials; |
∎ |
the effects of COVID-19 on our ability to recruit and retain patients, including as a result of potential heightened exposure to COVID-19, prioritization of hospital resources toward the outbreak and unwillingness by patients to enroll or comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services; |
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imposition of a clinical hold by regulatory agencies for any reason, including safety concerns or after an inspection of clinical operations or trial sites; |
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failure by CROs, other third parties or us to adhere to clinical trial requirements; |
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failure to perform clinical trials in accordance with the FDAs good clinical practices, or GCP, or applicable regulatory guidelines in other countries; |
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delays in the testing, validation, manufacturing and delivery of the product candidates to the clinical sites; |
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delays caused by patients not completing participation in a trial or not returning for post-treatment follow-up, which we have experienced and believe may be caused by patients experiencing reduced symptoms or incidences of disease; |
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clinical trial sites or patients dropping out of a trial; |
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delays or interruptions to supply or failure to ensure compliance with cGMP or quality standards of our product candidates or the other product candidates in a combination product trial or other materials necessary to conduct clinical trials of our product candidates; |
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occurrence of adverse events in clinical trials that are associated with the product candidates that are viewed to outweigh their potential benefits; or |
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changes in regulatory requirements and guidance that require amending or submitting new clinical protocols. |
Delays, including delays caused by any of the above factors, can be costly and could negatively affect our ability to complete a clinical trial. If we are not able to successfully complete clinical trials, we will not be able to obtain regulatory approval and will not be able to commercialize our product candidates.
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If we are not able to use the 505(b)(2) regulatory approval pathway for regulatory approval of TRUDHESA or any of our other product candidates or if the FDA requires additional clinical or nonclinical data to support an NDA under Section 505(b)(2) than we have previously anticipated, it will likely take significantly longer, cost significantly more and be significantly more complicated to gain FDA approval for our product candidates, and in any case may not be successful.
We have submitted an NDA for TRUDHESA through the Section 505(b)(2) regulatory pathway and intend to seek FDA approval for our other product candidates through the Section 505(b)(2) regulatory pathway. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Amendments, added Section 505(b)(2) to the Federal Food, Drug, and Cosmetic Act, or the FDCA. In general, Section 505(b)(2) allows a 505(b)(2) applicant to rely on the FDAs finding of safety or effectiveness for an LD only to the extent that the proposed product in the 505(b)(2) application shares common characteristics with the LD. The 505(b)(2) application must include sufficient data to support differences between the LD and the proposed drug in the 505(b)(2) application. If the FDA does not agree that the 505(b)(2) regulatory pathway is appropriate or scientifically justified for one or more of our product candidates, we may need to conduct additional clinical trials, provide additional data and information and meet additional standards for regulatory approval. For example, the FDA may not agree that we have provided a scientific bridge, through, for example, comparative bioavailability data, to demonstrate that reliance on the prior findings of safety or efficacy for an LD is justified. If we are unable to pursue a Section 505(b)(2) pathway, the time and financial resources required to obtain FDA approval for our product candidates would likely increase substantially. Moreover, the inability to pursue the Section 505(b)(2) regulatory pathway could result in new competitive products reaching the market faster than our product candidates, which could materially adversely impact our competitive position and prospects.
Even if we are successful in pursuing the Section 505(b)(2) regulatory pathway for TRUDHESA or are able to pursue the Section 505(b)(2) regulatory pathway for any other product candidate, we cannot assure you that nonclinical studies or clinical trials that we have conducted or that we currently anticipate conducting will be sufficient for approval or that we will receive the requisite or timely approvals for commercialization of such product candidate. Although the Section 505(b)(2) pathway allows us to rely in part on the FDAs prior findings of safety or efficacy for approved LDs or on published literature, the FDA may determine that prior findings by the FDA or the published literature that we believe supports the safety or efficacy of one or more of our product candidates is insufficient or not applicable to our application or that additional studies will need to be conducted. To the extent that we are relying on the Section 505(b)(2) regulatory pathway based on the approval of an LD for a similar indication, the FDA may require that we include in the labeling of our product candidates, if approved, some or all of the safety information that is included in the labeling of the approved LD. Moreover, even if our product candidates are approved through the Section 505(b)(2) regulatory pathway, the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.
The outbreak of COVID-19, or similar public health crises, could have a material adverse impact on our business, financial condition and results of operations, including through disruption to our planned clinical trials, supply chains, business operations and commercialization efforts, or through delay in the FDAs approval of our NDA.
In December 2019, a novel strain of the coronavirus SARS-CoV-2, was identified in Wuhan, China. This virus spread globally, including within the United States and in March 2020 the World Health Organization declared the disease caused by SARS-CoV-2, COVID-19, a pandemic. The pandemic and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred, supply chains have been disrupted, facilities and production have been suspended, and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such
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as travel, has fallen. The extent to which COVID-19 impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain the virus or treat its impact.
Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis for our planned clinical trials may be delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. Additionally, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and we may be unable to conduct our planned clinical trials. If the global effort to control the spread of COVID-19 and treat COVID-19 patients continues on the current trajectory for an extended period of time, we risk a delay in activating sites and enrolling subjects as previously projected. Any such delays to our planned clinical trials for our current product candidates could impact the use and sufficiency of our existing cash reserves, and we may be required to raise additional capital earlier than we had previously planned. We may be unable to raise additional capital if and when needed, which may result in further delays or suspension of our development plans.
Further, as a result of the COVID-19 public health emergency, we may be required to develop and implement additional clinical trial policies and procedures based on new guidance and regulatory requirements promulgated by the FDA or other regulatory authorities. For example, the FDA issued guidance in March 2020, which the FDA subsequently updated, on conducting clinical trials during the pandemic, which describe a number of considerations for sponsors of clinical trials impacted by the pandemic. In June 2020, the FDA also issued a guidance on good manufacturing practice considerations for responding to COVID-19 infection in employees in drug products manufacturing, including recommendations for manufacturing controls to prevent contamination of drugs. Additional COVID-19 related guidance released by the FDA includes guidance addressing resuming normal drug and biologics manufacturing operations; manufacturing, supply chain, and inspections; and statistical considerations for clinical trials during the COVID-19 public health emergency.
Further, infections and deaths related to COVID-19 are disrupting certain healthcare and healthcare regulatory systems globally. Such disruptions could divert healthcare resources away from, or materially delay review by, the FDA and comparable foreign regulatory agencies. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially adversely affect the development and study of our product candidates.
The COVID-19 pandemic could have an adverse impact on our commercial launch plans for TRUDHESA, if approved, due to the continuation of government-imposed quarantines, stay at home orders, travel restrictions, mandated business closures and other public health safety measures which may result in limiting our ability to hire a sales force prior to launch, conduct necessary trainings of such sales force and attending and presenting at various conferences or other programs. If TRUDHESA is approved, continuation of these government-imposed orders may also result in patients not visiting their healthcare providers or their pharmacies to get their prescriptions filled, in-person interactions by sales and medical representatives in healthcare settings may be suspended, and any remote interactions may be less effective than in-person interactions. In addition, due to the prioritization of healthcare resources toward pandemic efforts, even remote interactions may not be possible. These factors could have an adverse impact on our business and our ability to effectively launch TRUDHESA, if approved.
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We currently utilize third parties to, among other things, manufacture raw materials and our product candidates, components, parts, and consumables, and to perform quality control and testing. If either we or any third-party in the supply chain for materials used in the production of our product candidates are adversely impacted by restrictions resulting from the COVID-19 pandemic, our supply chain may be disrupted, limiting our ability to manufacture product candidates for our clinical trials.
The spread of COVID-19, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material adverse effect on our business. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets and the trading prices of pharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the global effort to control COVID-19 infections could materially and adversely affect our business.
The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our planned clinical trials, healthcare systems or the global economy as a whole. However, these effects could have a material adverse impact on our business, financial condition and results of operations.
All of our product candidates utilize similar drug delivery devices. If a drug delivery device in one of our clinical trials demonstrates unanticipated biocompatibility, usability, performance or safety issues in a clinical or nonclinical study for one product candidate, our entire pipeline of product candidates may be adversely affected.
All of our product candidates utilize similar POD devices, which are designed to deliver the drug into the upper nasal cavity using a gas propellant. While our product candidates have been generally well tolerated in nonclinical studies and early clinical trials, patients may in the future experience different or more severe adverse events due in part to our POD device. Any failure of our POD device to demonstrate adequate biocompatibility, usability, performance or safety could adversely affect the development, approval, or commercialization of our other product candidates utilizing the same or similar POD device, including a suspension or delay of all ongoing development in our other product candidates, or our marketed product candidates, if any.
If we do not achieve our projected development goals in the timeframes we announce and expect, the commercialization of our product candidates may be delayed and, as a result, our stock price may decline.
From time to time, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of nonclinical studies and clinical trials and the submission of regulatory filings. All of these milestones are, and will be, based on a variety of assumptions. The actual timing of these milestones can vary significantly compared to our estimates, in some cases for reasons beyond our control. We may experience numerous unforeseen events during, or as a result of, any future clinical trials that we conduct that could delay or prevent our ability to reach subsequent milestones, receive marketing approval or commercialize our product candidates, including:
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the FDA and other governmental health authorities, IRBs, or ethics committees may not authorize or may delay authorizing us or our investigators to commence or continue a clinical trial or conduct a clinical trial at all or at a prospective trial site, such as by requiring us to |
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conduct additional nonclinical studies and to programs for our product candidates submit additional data or imposing other requirements before permitting us to initiate or continue a clinical trial; |
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we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective contract research organizations, or CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; |
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clinical trials of our product candidates may produce negative or inconclusive results and we may decide, or regulators may require us, to conduct nonclinical studies in addition to those we currently have planned or additional clinical trials or we may decide to abandon drug development programs for our product candidates; |
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the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; |
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our contractors, such as our CROs, clinical trial sites or investigators, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or investigators; |
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we may elect to, or regulators, IRBs or ethics committees may require that, we or our investigators, suspend or terminate clinical trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to health risks; |
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the cost of planned clinical trials of our product candidates may be greater than we anticipate; |
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the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; |
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our third-party suppliers, such as our contract manufacturers of the POD device and our active ingredients, may not provide us with the information we need for our marketing submissions or may not manufacture product for us that is in compliance with regulatory requirements; and |
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our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs or ethics committees to suspend or terminate the trials, or reports may arise from nonclinical or clinical testing of studies conducted by competitors that raise safety or efficacy concerns broadly about our POD technology, upper nasal cavity delivery or about our product candidates specifically. |
Clinical development, regulatory review and approval by the FDA and comparable foreign authorities are lengthy, time consuming, costly, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.
Our product candidates are subject to extensive governmental regulation relating to, among other things, development, clinical trials, manufacturing and commercialization. In order to obtain regulatory approval for the commercial sale of any of our product candidates, we must demonstrate through extensive nonclinical studies and clinical trials that the candidate is safe and effective for use in each target indication.
The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable, typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the acceptance of clinical data developed in foreign geographies. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidates clinical development and may vary
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among jurisdictions, which may cause delays in the approval or the decision not to approve a product candidate. We have not obtained regulatory approval for any product candidate, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval. In addition, we may gain regulatory approval in some but not all of the territories available or some but not all of the target indications, resulting in limited commercial opportunity for the approved product.
Applications for our product candidates could be delayed or could fail to receive regulatory approval for many reasons, including but not limited to the following:
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the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials; |
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the population studied in the clinical program may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; |
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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from nonclinical studies clinical trials or may refuse to accept data from nonclinical studies or clinical trials conducted in other geographies or jurisdictions; |
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data collected from clinical trials may not be sufficient to support the submission of an NDA, or other submission, or to obtain regulatory approval in the United States or elsewhere; |
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the FDA may determine that we cannot rely on the Section 505(b)(2) approval pathway for any of our product candidates, in which case we may be required to conduct additional clinical trials, provide additional data and information and meet additional standards for product approval, resulting in increased time and financial resources required to obtain FDA approval for our product candidates; |
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the FDA may determine that we have identified the wrong LD or LDs or that approval of a Section 505(b)(2) application for any of our product candidates is blocked by patent or non-patent exclusivity of the LD or LDs; |
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the FDA may require us to conduct additional clinical trials depending on the safety or exploratory efficacy data from our existing and planned future clinical trials; |
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we may be unable to demonstrate to the FDA or comparable foreign regulatory authorities that a product candidates risk-benefit ratio for our proposed indication is acceptable; |
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the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications of third-party manufacturers with which we contract for clinical and commercial supplies; |
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we or any third-party manufacturers may be unable to demonstrate compliance with cGMP to the satisfaction of the FDA or comparable foreign regulatory authorities, which could result in delays in regulatory approval or require us to withdraw or recall product candidates and interrupt commercial supply of our product candidates; and |
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the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval. |
This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations, and prospects.
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Inadequate funding for the FDA, the SEC and other government agencies or other disruptions at these agencies could hinder these agencies ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times, and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical employees and stop critical activities. Separately, in response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to temporarily postpone most inspections of foreign manufacturing facilities and products. On March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities and provided guidance regarding the conduct of clinical trials, which has since been further updated. As of June 23, 2020, the FDA noted it was continuing to ensure timely reviews of applications for medical products during the COVID-19 pandemic in line with its user fee performance goals and conducting mission critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA quality standards. As of July 2020, utilizing a rating system to assist in determining when and where it is safest to conduct such inspections based on data about the virus trajectory in a given state and locality and the rules and guidelines that are put in place by state and local governments, the FDA is either continuing to, on a case-by-case basis, conduct only mission critical inspections, or, where possible to do so safely, resuming prioritized domestic inspections, which generally include pre-approval inspections. Foreign pre-approval inspections that are not deemed mission-critical remain postponed, while those deemed mission-critical will be considered for inspection on a case-by-case basis. The FDA will use similar data to inform resumption of prioritized operations abroad as it becomes feasible and advisable to do so. The FDA may not be able to maintain this pace, and delays or setbacks are possible in the future. Should the FDA determine that an inspection is necessary for approval because available information raises concerns about the adequacy of the facility or site and an inspection cannot be completed during the review cycle due to restrictions on travel, the FDA has stated that it generally intends to issue a complete response letter. Further, if there is inadequate information to make a determination on the acceptability of a facility, the FDA may defer action on the application until an inspection can be completed. Additionally, regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Additionally, as of June 23, 2020, the FDA noted it is continuing to ensure timely reviews of applications for medical products during the COVID-19 pandemic in line with its user fee performance goals; however, the FDA may not be able to continue its current pace and review timelines could be extended.
Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
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Results of earlier studies or clinical trials may not be predictive of future clinical trial results, and initial studies or clinical trials may not establish an adequate safety or efficacy profile for our product candidates to justify proceeding to advanced clinical trials or an application for regulatory approval.
The results of nonclinical and preclinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials, and interim results of a clinical trial do not necessarily predict final results. The results of preclinical studies and clinical trials in one set of patients or disease indications may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size, demographics and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. In addition, preclinical and clinical data are often susceptible to various interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval. For example, our STOP301 trial for TRUDHESA primarily evaluated the safety and tolerability of TRUDHESA against the patients best previous migraine treatment. While exploratory efficacy endpoints were analyzed as part of the trial and were notable, the exploratory nature of the trial limits the interpretability of these results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through nonclinical studies and initial clinical trials. Even if early-stage clinical trials are successful, we may need to conduct additional clinical trials of our product candidates in additional patient populations or under different treatment conditions before we are able to seek approvals from the FDA and regulatory authorities outside the United States to market and sell these product candidates. Our failure to obtain marketing approval for our product candidates would substantially harm our business, prospects, financial condition and results of operations.
Additionally, several of our past and planned clinical trials utilize an open-label trial design, including our STOP301 trial for TRUDHESA. An open-label clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a patient bias where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In addition, open-label clinical trials may be subject to an investigator bias where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge. The results from an open-label trial may not be predictive of future clinical trial results with any of our product candidates in clinical trials when studied in a controlled environment with a double-blind placebo or active control.
Our product candidates may cause undesirable side effects or have other properties that delay or prevent their regulatory approval or limit their commercial potential.
Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims. Adverse events deemed to be caused by our product candidates could have a material adverse effect on the development of our product candidates and our business as a whole. For example, the most common adverse events in our STOP301 trial evaluating TRUDHESA were nasal congestion, nausea, nasal discomfort and unpleasant taste. Moreover, we could in the future observe local toxicity in the nasal or olfactory epithelia.
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If we or others identify undesirable side effects caused by our product candidates either before or after receipt of marketing approval, a number of potentially significant negative consequences could result, including:
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we may be unable to obtain regulatory approval for our product candidates; |
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our clinical trials may be put on hold; |
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regulatory authorities may withdraw approvals of our product candidates or require additional nonclinical studies or clinical trials; |
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regulatory authorities may require additional warnings in the labeling; |
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regulatory authorities may require us to implement a REMS; |
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a medication guide outlining the risks of such side effects for distribution to patients may be required; |
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we could be sued and held liable for harm caused to patients; and |
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our reputation may suffer. |
Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and could substantially increase commercialization costs.
Some of our clinical trials for our product candidates have been, and we may in the future conduct clinical trials for our product candidates, outside the United States, and the FDA or comparable foreign regulatory authorities may not accept data from such trials.
Some of our clinical trials for our product candidates have been conducted, and we may in the future choose to conduct one or more clinical trials, outside the United States. The acceptance of trial data from clinical trials conducted outside the United States or another jurisdiction by the FDA or comparable foreign regulatory authorities may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; and (ii) the trials were performed by clinical investigators of recognized competence and pursuant to Good Clinical Practice, or GCP, regulations. Additionally, the FDAs clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory authorities have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA, EMA or any comparable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction. If the FDA, EMA or any comparable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in product candidates that we may develop not receiving approval for commercialization in the applicable jurisdiction.
This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations, and prospects.
If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our product candidates in those jurisdictions.
We intend to market our product candidates, if approved, in international markets either directly or through partnerships. Such marketing will require separate regulatory approvals in each jurisdiction and compliance with numerous and varying regulatory requirements. The approval procedures vary from jurisdiction to jurisdiction and may require additional testing that we are not required to perform to
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obtain regulatory approval in the United States. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. In addition, in many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign jurisdictions or by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our product candidates in any foreign market. If we or any future partner are unable to obtain regulatory approval for our product candidates in one or more significant foreign jurisdictions, then the commercial opportunity for our product candidates, as well as our financial condition, will be adversely affected.
Even if we receive regulatory approval for our product candidates, they will be subject to ongoing regulatory requirements, which may result in significant additional expenses. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.
Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed, or to conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor safety and efficacy. In addition, the manufacturing processes, labeling, packaging, distribution, adverse event, or AE, reporting, storage, advertising, promotion and recordkeeping for any approved product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, including reporting of certain adverse events, malfunctions, corrections and removals related to the POD device, registration, as well as continued compliance with cGMP for the drug products, the quality system regulation, or QSR, for medical devices and GCP for any clinical trials that we conduct post-approval.
Later discovery of previously unknown problems with an approved product, including AEs of unanticipated severity or frequency, or with manufacturing operations or processes, or failure to comply with regulatory requirements, may result in, among other things:
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holds on clinical trials; |
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls; |
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imposition of a REMS, which may include distribution or use restrictions; |
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requirements to conduct additional post-market clinical trials to assess the safety of the product; |
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revisions to the labeling, including limitation on approved uses or the addition of additional warnings, contraindications or other safety information, including boxed warnings; |
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manufacturing delays and supply disruptions where regulatory inspections identify observations of noncompliance requiring remediation; |
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fines, warning or untitled letters; |
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refusal by the FDA to approve pending applications or supplements to approved applications submitted by us, or withdrawal of product approvals; |
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product seizure or detention, or refusal to permit the import or export of product candidates; and |
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injunctions or the imposition of civil or criminal penalties. |
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The FDAs policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or not able to maintain regulatory compliance, we may lose any marketing approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.
We may be subject to enforcement action by the FDA or other government agencies or competitor lawsuits or other claims, including litigation brought by the government, if we engage or are found to have engaged in improper promotion of our products.
Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including laws and regulations prohibiting marketing claims that promote the off-label use of our products or that omit material facts or make false or misleading statements about the safety or efficacy of our products. We are responsible for training our marketing and sales force against promoting our product candidates for off-label use, but healthcare providers may use our products off-label, as the FDA does not restrict or regulate a physicians choice of treatment within the practice of medicine. The FDA also could conclude that a claim is misleading if it determines that there are inadequate nonclinical and/or clinical data supporting the claim, or if a claim fails to reveal material facts about the safety or efficacy of our products. If the FDA determines that our promotional labeling or advertising materials promote an off-label use or make false or misleading claims, it could request that we modify our promotional materials or training content or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fines and criminal penalties.
The FDA closely regulates the pre- and post-approval marketing and promotion of drugs to ensure they are promoted and marketed in compliance with the FDCA and its implementing regulations and only for the approved indications and in a manner consistent with the approved labeling. For example, our labeling for TRUDHESA, pending FDA approval, cannot include any of the data from the exploratory efficacy endpoints that we evaluated in our Phase 3 safety clinical trial or make any broad efficacy claims based on the results of this study. Post approval, if the FDA disagrees with our claims or approach to describing the efficacy results from any data deemed as unreliable or uninterpretable, including our exploratory efficacy analyses, in our promotional materials, it may take enforcement action against us. In addition, without conducting head-to-head clinical trials designed to investigate the clinical superiority of our product candidates to marketed products, we would not be able to make any such claims in our promotional materials. The FDA imposes stringent restrictions on manufacturers communications regarding use of their products. If we promote our product candidates in a manner inconsistent with the FDA-approved labeling or otherwise not in compliance with the FDCA or implementing regulations, we may be subject to enforcement action. Violations of the FDCA relating to improper promotion of prescription drugs may lead to warning letters, investigations, violations under federal and state healthcare fraud and abuse laws, including the False Claims Act, as well as state consumer protection laws.
It is also possible that other federal, state or foreign enforcement authorities might take action if they determine that our promotional or training materials promote an unapproved use or make false or misleading claims, which could result in significant fines or penalties. Although our policy is to refrain from statements that could be considered off-label promotion of our products or false or misleading claims, the FDA or another regulatory agency could disagree with the manner in which we advertise and promote our products. Violations of the FDCA may also lead to investigations alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws, which may lead to costly penalties and may adversely impact our business. Recent court decisions have impacted the FDAs enforcement activity regarding off-label promotion in light of First Amendment
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considerations; however, there are still significant risks in this area, in part due to the potential for False Claims Act exposure.
Many companies have also faced government investigations or lawsuits by whistleblowers who bring a qui tam action under the False Claims Act on behalf of themselves and the government for a variety of alleged improper marketing activities. In addition, the government and private whistleblowers have pursued False Claims Act cases against pharmaceutical companies for causing false claims to be submitted as a result of the marketing of their products for unapproved uses. If we are found to have improperly promoted our products, we may be subject to significant liability, including civil fines, criminal fines and penalties, civil damages, exclusion from federally funded healthcare programs and potential liability under the federal False Claims Act and any applicable state false claims act. In addition, we may incur liability from claims initiated under the Lanham Act or other federal and state unfair competition laws with respect to how our products are marketed and promoted. Furthermore, the off-label use of our products may increase the risk of product liability claims. The scope of potential liability with respect to any such claims, enforcement actions, or lawsuits is uncertain, and we cannot assure you that we will not receive claims from competitors or other third parties or be subject to enforcement actions in the future from regulatory agencies. Moreover, threatened or actual government enforcement actions or lawsuits by third parties could generate adverse publicity, which could decrease demand for our products and require that we devote substantial resources that could be used productively on other aspects of our business.
Our relationships with health care professionals, institutional providers, principal investigators, consultants, potential customers and third-party payors are, and will continue to be, subject, directly and indirectly, to federal and state health care fraud and abuse, false claims, marketing expenditure tracking and disclosure, government price reporting, and privacy and data security laws. If we are unable to comply, or have not fully complied, with such laws, we could face penalties, including, without limitation, civil, criminal, and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal and state health care programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations.
Our business operations and activities may be directly or indirectly subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act. If we obtain FDA approval for any of our product candidates and begin commercializing those product candidates in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. Our current and future arrangements with healthcare professionals, clinical investigators, CROs, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. In addition, we may be subject to laws of the federal government and state governments in which we conduct our business relating to privacy and data security with respect to patient information. The laws that may affect our ability to operate include, but are not limited to:
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal health care program, such as the Medicare and Medicaid programs; |
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federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be |
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presented, claims for payment or approval from a federal health care program, such as Medicare, Medicaid, or other third-party payors that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government; |
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, health care benefits, items or services relating to health care matters; |
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose requirements on certain covered health care providers, health plans, and health care clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization; |
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the federal physician self-referral law, commonly known as the Stark Law, which prohibits a physician from making a referral to an entity for certain designated health services reimbursed by Medicare or Medicaid if the physician or a member of the physicians family has a financial relationship with the entity, and which also prohibits the submission of any claims for reimbursement for designated health services furnished pursuant to a prohibited referral; |
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the federal Physician Payments Sunshine Act, created under Section 6002 of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, or the ACA, and its implementing regulations require manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Childrens Health Insurance Program (with certain exceptions) to report annually to the United States Department of Health and Human Services, Centers for Medicare & Medicaid Services information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, including ownership and investment interests held by physicians and their immediate family members; effective January 1, 2022, reporting on payments and transfers of value made in the previous year to covered recipients will be expanded to include physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and anesthesiologist assistants, and certified nurse-midwives; |
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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; |
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federal government price reporting laws, changed by the ACA to, among other things, increase the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program and offer such rebates to additional populations, that require us to calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement or discounts on our marketed drugs (participation in these programs and compliance with the applicable requirements may subject us to potentially significant discounts on our product candidates, increased infrastructure costs, and potentially limit our ability to offer certain marketplace discounts); |
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the Foreign Corrupt Practices Act, a United States law which regulates certain financial relationships with foreign government officials (which could include, for example, certain medical professionals); and |
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state law equivalents and adjuncts to many of the above federal laws, such as anti-kickback, false claims, consumer protection, unfair competition, and privacy and data security laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements as well as submission of claims involving any of our product candidates or related health care services for reimbursement by any third-party payor, including public and commercial insurers; state laws that require biotech companies to comply with the pharmaceutical industrys voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to health care providers; state laws that require drug manufacturers to file reports with states regarding marketing information, such as the tracking and reporting of gifts, compensation and other remuneration and items of value provided to health care professionals and entities (compliance with such requirements may require investment in infrastructure to ensure that tracking is performed properly, and some of these laws result in the public disclosure of various types of payments and relationships, which could potentially have a negative effect on our business or increase enforcement scrutiny of our activities); state laws regarding the reporting of certain pricing information; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, with differing effects and obligations. |
In addition, the regulatory approval and commercialization of any of our product candidates outside the United States will also likely subject us to foreign equivalents of the laws and regulations mentioned above, including reporting requirements detailing interactions with and payments to healthcare providers, and requirements in Europe and other jurisdictions relating to privacy, data protection and cybersecurity, among other foreign laws. In addition to health information privacy, data security, and data protection laws that apply to some of the patient data we hold, other privacy, data security and data protection laws may also apply to such data, as well as to the personal data of our employees and other individuals generally. Many of these laws governing privacy, data protection and cybersecurity differ from each other in significant ways and may not have the same effects or obligations, thus complicating compliance efforts. We expect to incur increased costs of compliance with such laws and regulations as they continue to evolve, as well as the increased risk of regulatory investigations, enforcement actions, and other claims and litigation, with the potential for significant fines, penalties, and other liabilities in the event of actual or alleged noncompliance. Any of these could adversely affect our business, financial condition, and results of operations.
The ACA, among other things, amended the intent standard of the federal Anti-Kickback Statute and criminal health care fraud statutes to a stricter standard such that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act.
Efforts to ensure that our business arrangements with third parties will comply with applicable health care laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other health care laws and regulations. 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, without limitation, civil, criminal, and administrative penalties, damages, monetary fines, disgorgement, imprisonment, loss of eligibility to obtain approvals from the FDA, qui tam actions, lawsuits, government investigations, exclusion from participation in government contracting, healthcare
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reimbursement, or other federal or state government healthcare programs, including Medicare and Medicaid, corporate integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations.
The impact of recent health care reform legislation and other changes in the health care industry and in healthcare spending on us is currently unknown, and may adversely affect our business model.
Existing regulatory policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. The pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example, in March 2010, the ACA was enacted, which was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The ACA substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things, (i) subjected therapeutic biologics to potential competition by lower-cost biosimilars by creating a licensure framework for follow on biologic products, (ii) proscribed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and therapeutic biologics that are inhaled, infused, instilled, implanted or injected, (iii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, (iv) established annual nondeductible fees and taxes on manufacturers of certain branded prescription drugs and therapeutic biologics, apportioned among these entities according to their market share in certain government healthcare programs, (v) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs and therapeutic biologics to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers outpatient drugs and therapeutic biologics to be covered under Medicare Part D, which has since been increased to 70% by the Bipartisan Budget Act of 2018, or the BBA, (vi) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers Medicaid rebate liability, (vii) expanded the entities eligible for discounts under the Public Health program (viii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research and (ix) established a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Since its enactment, there have been executive, judicial, and Congressional challenges to certain aspects of the ACA. The Tax Cuts and Jobs Act of 2017, or the Tax Reform Act, among other things, included a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the individual mandate. In November 2020, the
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United States Supreme Court held oral arguments on the Fifth Circuit U.S. Court of Appeals decision that held that the individual mandate is unconstitutional. The Supreme Court is expected to issue a decision by mid-2021. It is uncertain how the Supreme Court will rule on this case. In January 2021, President Biden issued an executive order to initiate a special enrollment period to allow people to obtain health insurance coverage through the ACA marketplace, and instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, among others. We cannot predict how the Supreme Court ruling, other litigation, or the healthcare reform measures of the Biden administration will impact our business. We are continuing to monitor any changes to the ACA that, in turn, may potentially impact our business in the future. Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated Cadillac tax on certain high-cost employer-sponsored insurance plans and the medical device excise tax, and effective January 1, 2021, also eliminates the health insurer tax. The BBA, among other things, also amended the ACA, effective January 1, 2019, by increasing from 50% to 70% the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the donut hole. In addition, CMS published a final rule that would give states greater flexibility, effective January 1, 2020, in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislations automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in 2013 and will remain in effect through 2030, with the exception of a temporary suspension implemented under various COVID-19 relief legislation from May 1, 2020 through March 31, 2021, unless additional Congressional action is taken. Congress recently introduced a bill to extend the moratorium on 2% Medicare sequester cuts through the end of 2021. We are continuing to monitor the status of this bill. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several types of 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.
Further, there have been several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMSs policy change that was effective January 1, 2019. In 2020, the U.S. Department of Health and Human Services (HHS) and the CMS issued various rules that are expected to impact, among others, price reductions from pharmaceutical manufacturers to plan sponsors under Part D, fee arrangements between pharmacy benefit managers and manufacturers, manufacturer price reporting requirements under the Medicaid Drug Rebate Program, including regulations that affect manufacturer-sponsored patient assistance programs subject to pharmacy benefit manager accumulator programs and Best Price reporting related to certain value-based purchasing arrangements. Multiple lawsuits have been brought against the HHS challenging various aspects of the rules. In January 2021, the Biden administration issued a regulatory freeze memorandum that directs department and agency heads to review new or
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pending rules of the prior administration. It is unclear whether these new regulations will be withdrawn or when they will become fully effective under the current administration. The impact of these lawsuits as well as legislative, executive, and administrative actions of the current administration on us and the pharmaceutical industry as a whole is unclear. We expect additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved. Complying with any new legislation and regulatory changes could be time-intensive and expensive, resulting in a material adverse effect on our business.
We expect to transition the POD device used in the INP105 and INP107 clinical trials to a commercial stage POD device for pivotal clinical trials and commercialization, which may be unsuccessful or costly.
While we used for our TRUDHESA STOP301 trial the version of our POD device that we intend to use for commercialization, the version of our POD devices used in the initial clinical trials for INP105 and INP107 will need to be further refined for use in later-stage clinical trials and to enable larger scale manufacturing and distribution, if the INP105 and INP107 candidates receive regulatory approvals. We expect to transition these clinical-stage POD devices to commercial stage POD devices prior to pivotal clinical trials and commercialization. The development work on the commercial stage devices for INP105 and INP107 is ongoing. We cannot be certain that the transition from the clinical stage POD device to the commercial stage POD device will be successful or be completed on time. If we are unable to complete the transition in a timely and cost-effective manner, our clinical trials and commercialization efforts may be harmed.
Risks Related to Commercialization of Our Product Candidates
Our future commercial success depends upon attaining significant market acceptance of TRUDHESA and our other product candidates, if approved, among physicians, patients, health care payors and others in the medical community necessary for commercial success.
Even if we obtain regulatory approval for TRUDHESA, INP105, and INP107 or any other product candidate that we may develop or acquire in the future, these product candidates may not gain market acceptance among physicians, health care payors, patients and the medical community. There are several approved acute treatments for migraine currently on the market, including triptans, ditans, calcitonin gene-related peptides antagonists, or gepants, lasmiditan and alternative formulations of DHE, such as Migranal, which is administered intranasally. All of these will be competitive with TRUDHESA and our level of market acceptance of TRUDHESA for the acute treatment for migraine may be lower than we expect. Market acceptance of any approved product candidates depends on a number of factors, including:
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the efficacy and safety of our product candidates; |
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perceived advantages of our product candidates over alternative treatments, such as oral, IM and IV formulations; |
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the indications for which the product candidates are approved and the labeling approved by regulatory authorities for use with the product candidates, including any warnings, limitations or contraindications contained in a products approved labeling; |
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acceptance by physicians and patients of the product candidate as a safe and effective treatment; |
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the cost, safety and efficacy of treatment in relation to alternative treatments, including generic versions of the product candidates; |
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the extent to which our product candidates are included on formularies of hospitals and managed care organizations; |
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the availability of coverage and adequate reimbursement and pricing by third-party payors and government authorities for the product candidates; |
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relative convenience and ease of administration of the product candidates; |
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the prevalence and severity of adverse side effects; |
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the timing of market introduction of competitive product; |
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restrictions on the distribution of our product candidates; |
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the effectiveness of our sales and marketing efforts; |
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unfavorable publicity relating to our product candidates; and |
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the approval of other new therapies for the same indications. |
Market acceptance is critical to our ability to generate significant revenue and become profitable. Any product candidate, if approved and commercialized, may be accepted in only limited capacities or not at all. If any approved product candidates are not accepted by the market to the extent that we expect, we may not be able to generate significant revenue and our business would suffer.
The market for our product candidates may not be as large as we expect.
Our estimates of the potential market opportunity for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research reports and other surveys, including surveys commissioned by us. These assumptions include the size of our target populations, the prevalence and incidence of each of our target indications, the number of patients receiving current treatment, the percentage of patients unsatisfied with the current treatments, the number of diagnosed but untreated patients, the compliance and adherence of patients in our target populations, the number of treatment centers and prescribing physicians and the percentage of payer acceptance. While we believe that our internal assumptions are reasonable, if any of these assumptions proves to be inaccurate, then the actual market for our product candidates could be smaller than our estimates of our potential market opportunity. If the actual market for any of our product candidates is smaller than we expect, our product revenue may be limited, and it may be more difficult for us to achieve or maintain profitability.
In addition, we anticipate that, if approved, the FDA may require labeling restrictions on the patients and uses of our product candidates, including but not limited to contraindications for use in certain populations. For example, upper nasal cavity drug delivery may not be appropriate for use by patients with certain pre-existing conditions, such as chronic rhinitis, seasonal allergies or anatomical nasal obstruction.
If we are unable to establish sales, marketing and distribution capabilities, we may not be successful in commercializing our product candidates if and when they are approved.
While certain of our executives have commercialization expertise, we do not have a sales or marketing infrastructure. To achieve commercial success for any product for which we have obtained marketing approval, we will need to establish a sales and marketing organization.
We expect to build a focused sales and marketing infrastructure to market TRUDHESA and potentially other product candidates in the United States, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, including failure to receive marketing approval from the FDA, we
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would have prematurely or unnecessarily incurred these commercialization expenses. We may also inaccurately estimate the number of representatives needed to build our sales force, which may result in unnecessary expense or the inability to scale as quickly as needed. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our product candidates, if approved, on our own include:
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our inability to recruit, train and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel; |
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the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any product candidates; |
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the inability of reimbursement professionals to negotiate arrangements for formulary access, reimbursement and other acceptance by payors for our product candidates; |
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the inability to price our product candidates at a sufficient price point to ensure an adequate and attractive level of profitability; |
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restricted or closed distribution channels that make it difficult to distribute our product candidates to segments of the patient population; |
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the lack of complementary product candidates to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and |
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unforeseen costs and expenses associated with creating an independent commercialization organization. |
In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates outside of the United States or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our product candidates effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.
Problems related to large-scale commercial manufacturing could cause delays in product launches, an increase in costs or shortages of product candidates.
Manufacturing finished drug products, especially in large quantities, is complex. If our product candidates receive regulatory approval, they will require several manufacturing steps and may involve complex techniques to assure quality and sufficient quantity, especially as the manufacturing scale increases. Our product candidates will need to be made consistently and in compliance with a clearly defined manufacturing process pursuant to FDA regulations. Accordingly, it will be essential to be able to validate and control the manufacturing process to assure that it is reproducible. Slight deviations anywhere in the manufacturing process, including obtaining materials, filling, labeling, packaging, storage, shipping, quality control and testing, may result in lot failures, delay in the release of lots, product recalls or spoilage. Success rates can vary dramatically at different stages of the manufacturing process, which can lower yields and increase costs. We may experience deviations in the manufacturing process that may take significant time and resources to resolve and, if unresolved, may affect manufacturing output and cause us to fail to satisfy contractual commitments, lead to delays in our clinical trials or result in litigation or regulatory action. Such actions would hinder our ability to meet contractual obligations and could cause material adverse consequences for our business.
Reimbursement for any approved products may be limited or unavailable, which could make it difficult for us to sell our product candidates profitably.
In both domestic and foreign markets, sales of any of our product candidates, if approved, will depend, in part, on the extent to which the costs of our product candidates will be covered by third-
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party payors, such as government health care programs, commercial insurance and managed health care organizations. These third-party payors decide which drugs will be covered and establish reimbursement levels for those drugs. The containment of health care costs has become a priority of foreign and domestic governments as well as private third-party payors. The prices of drugs have been a focus in this effort. Governments and private third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability to sell our product candidates profitably. Cost-control initiatives could cause us to decrease the price we might establish for product candidates, which could result in lower than anticipated product revenues.
Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payors determination that use of a product is:
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a covered benefit under its health plan; |
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safe, effective and medically necessary; |
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appropriate for the specific patient; |
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cost-effective relative to other alternatives, including generic products; and |
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neither experimental nor investigational. |
Adverse pricing limitations may hinder our ability to recoup our investment in our existing and any future product candidates, even if such product candidates obtain marketing approval.
Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our product candidates to the payor. Further, there is significant uncertainty related to third-party payor coverage and reimbursement of newly approved product candidates, including our product candidates if they are approved. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for any of our product candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our product candidates. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize certain of our product candidates. In addition, in the United States, third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement of new product candidates. As a result, significant uncertainty exists as to whether and how much third-party payors will reimburse patients for their use of newly approved product candidates, which in turn will put pressure on pricing.
Price controls may be imposed in foreign markets, which may adversely affect our future profitability.
In some countries, including member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states and other countries and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or
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reimbursement levels within the country of publication and other countries. If reimbursement of our product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.
We face substantial competition, which may result in others discovering, developing or commercializing product candidates before, or more successfully, than we do.
The development and commercialization of new and improved pharmaceutical products is highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations actively engaged in research development of product candidates which may target the same markets as our product candidates. Our future success depends on our ability to demonstrate and maintain a competitive advantage with respect to the design, development and commercialization of our product candidates within those markets. We expect any future product candidates we develop and commercialize on our own or with our strategic partners, if approved, to compete with existing and leading products in the market on the basis of, among other things, product efficacy and safety, time to market, price, extent of adverse side effects experienced and convenience of administration and drug delivery.
For our product candidates, we are aware of the following competing efforts:
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TRUDHESA. Approved acute treatments for migraine include triptans, ditans, gepants, lasmiditan and alternative formulations of DHE, such as Migranal, which is administered intranasally. Some of these competitor products have been launched. In addition, there are product candidates in development by large pharmaceutical companies such as Eli Lilly & Co., Allergan plc, Alder Biopharmaceuticals, Inc., and other smaller companies. Some of these competitors are also developing product candidates that utilize alternative routes of administration, including Biohaven Pharmaceuticals, Inc., GlaxoSmithKline plc, OptiNose Inc., and Promius Pharma LLC, whose product candidates use nasal pumps or other nasal drug delivery technologies. |
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INP105. While there are no FDA-approved acute treatments for agitation and aggression in ASD, commonly prescribed treatments include mostly atypical (second generation) antipsychotics. These can include risperdone (Risperdal), olanzapine (Zyprexa), quetiapine (Seroquel), aripiprazole (Abilify), ziprasidone (Geodon) and others. |
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INP107. Approved treatments for the symptoms of OFF episodes in Parkinsons include carbidopa/levodopa (both short and long-acting oral forms), MAO-B inhibitors, COM-T inhibitors, dopamine agonists, amantadine such as Gocovri, apomorphine and inhaled levodopa, such as Inbrija. In addition, there are several product candidates under development by pharmaceutical companies such as Eli Lilly & Co., Intec Pharma Ltd. and AbbVie Inc. Some of these product candidates also utilize alternative routes of administration, such as Sunovion Pharmaceuticals, Inc., whose product candidate uses a sublingual film, and Acorda Therapeutics, Inc. whose product candidate uses a dry powder inhaler. |
One or more of our competitors may utilize their expertise in other methods of pharmaceutical drug delivery to develop and obtain approval for upper nasal cavity delivery products that may compete with our product candidates. These competitors may include Aegis, Optinose and other smaller pharmaceutical companies. Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we have had to date. Our ability to compete effectively will depend, in part, on the timing and scope of regulatory approvals for these product candidates, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position, the safety and effectiveness of our product candidates, the ease with which our product candidates can be administered and the extent to which patients accept relatively new routes of administration. Competing products could present superior
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treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than any product candidates we may develop. Competitive products may reduce the demand and price for any product candidates we develop, making them obsolete or noncompetitive before we recover the expense of developing and commercializing such product. Our competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan.
We rely entirely on third parties for the manufacturing of product candidates that we develop for nonclinical studies and clinical trials and expect to continue to do so for commercialized products. If we encounter difficulties in negotiating manufacturing and supply agreements with third-party manufacturers and suppliers of our POD device and the active ingredients in TRUDHESA, INP105 and INP107, our ability to commercialize our product candidates, if approved, would be impaired.
We do not own any manufacturing facilities and have limited experience in drug development and commercial manufacturing. We currently rely, and expect to continue to rely, on a limited number of experienced personnel and contract manufacturing organizations, or CMOs, and suppliers, including in some cases single-source suppliers, who assist in the production, assembly, test, validation, supply, storage and distribution of our drug-device combination product candidates in our clinical trials, and we do not control their activities. While we have developmental and commercial supply agreements in place with some of our key suppliers, we may not be able to obtain terms that are favorable to us or enter into commercial manufacturing and supply agreements at all with other necessary third parties. If we are unable to enter into such agreements on commercially reasonable terms, our ability to commercialize our product candidates, if approved, would be impaired, and our business, financial condition and results of operations would be materially adversely affected.
If approved and if and when product sales grow, our product candidates will require production processes to be scaled up. We will be dependent on external manufacturers and suppliers to ensure that their manufacturing processes can be scaled up adequately such that we are able to supply the market. If any of our key suppliers are unable or unwilling to scale up production, our product candidates would be impaired, and our business, financial condition and results of operations would be materially adversely affected.
Additionally, we currently have no plans to build our own clinical or commercial scale manufacturing facility. Should any of our product candidates receive approval, we would lack the resources and expertise to manufacture and test, on a commercial scale, the technical performance of our POD device and the active ingredients, and would need to incur significant expense to develop and acquire such expertise internally or partner with a third-party who possesses such expertise.
We rely on third parties to conduct nonclinical studies and clinical trials, and if they do not properly and successfully perform their obligations to do so, we may not be able to obtain regulatory approvals for our product candidates.
We rely on CROs and other third parties to assist in managing, monitoring and otherwise carrying out nonclinical and clinical trials for our product candidates. We compete with many other companies for the resources of these third parties. Any disruption in supply from any supplier or manufacturing location, including on account of the COVID-19 pandemic, could lead to supply delays or interruptions which would damage our business, financial condition, results of operations and prospects. Further, the third parties on whom we rely generally may terminate their engagements at any time. Having to enter into alternative arrangements would delay development and commercialization of our product candidates.
The FDA and comparable foreign regulatory authorities require compliance with regulations and standards, including GCP, for designing, conducting, monitoring, recording, analyzing, and reporting
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the results of clinical trials to assure that the data and results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Although we rely on third parties to conduct many of our clinical trials, they are not our employees, and we are responsible for ensuring that each of these clinical trials is conducted in accordance with our general investigational plan, protocol and other requirements. Our reliance on these third parties for clinical research and development activities will reduce our control over these activities but will not relieve us of our responsibilities.
If these third parties do not successfully carry out their duties under their agreements, if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to clinical trial protocols or to regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, the clinical trials of our product candidates may not meet regulatory requirements. If clinical trials do not meet regulatory requirements or if these third parties need to be replaced, our nonclinical development activities or clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates on a timely basis, or at all.
If we encounter issues with our CMOs or suppliers, we may need to qualify alternative manufacturers or suppliers, which could impair our ability to sufficiently and timely manufacture and supply product candidates.
We currently depend on third parties to manufacture and supply our POD device, the active pharmaceutical ingredients and final formulations in our product candidates. Although we could obtain each of these components from other third-party suppliers, we would need to qualify and obtain FDA approval for another contract manufacturer or supplier as an alternative source for each such component, which could be costly and cause significant delays. Each of our current manufacturing and supply agreements include limitations on our ability to utilize alternative manufacturers or suppliers during the terms of the agreements, which impairs our ability to prepare in advance for any future manufacturing and supply shortages or quality issues.
In addition, some of our suppliers conduct their manufacturing operations for us at a single facility. Unless and until we qualify additional facilities, we may face limitations in our ability to respond to manufacturing and supply issues. For example, if regulatory, manufacturing or other problems require one of these manufacturers or suppliers to discontinue production at their respective facility, or if the equipment used for the production of our POD device or the active ingredients in these facilities is significantly damaged or destroyed by fire, flood, earthquake, power loss or similar events, the ability of such manufacturer or supplier to provide components or the active pharmaceutical ingredients needed for our product candidates, or to manufacture our product candidates may be significantly impaired. In the event that these parties suffer a temporary or protracted loss of our facility or equipment, we would still be required to obtain FDA approval to qualify a new manufacturer or supplier, as applicable, as an alternate manufacturer or source for the respective component before any components manufactured by such manufacturer or by such supplier could be sold or used. To do so, we would need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product candidates according to the specifications previously submitted to the FDA or another regulatory authority. The delays associated with the verification of a new CMO could negatively affect our ability to develop product candidates or commercialize any of our approved products in a timely manner or within budget. Furthermore, a CMO may possess technology related to the manufacture of our product candidate that such CMO owns independently. This would increase our reliance on such CMO or require us to obtain a license from such CMO in order to have another CMO manufacture the product candidates. In addition, changes in manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies before implementing the change for our clinical supply for use in clinical trials or for commercial supply of any approved product. We may be unsuccessful in demonstrating the comparability of supplies before and after a
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manufacturing change, which could require the conduct of additional clinical trials and result in a delay or disruption in our clinical development plan or our ability to commercialize any approved product.
Any production shortfall that impairs the supply of our POD device or the active ingredients or any of these components could negatively impact our ability to complete clinical trials, obtain regulatory approval and commercialize our product candidates. If our product candidates receive approval, a product shortfall could have a material adverse effect on our business, financial condition and results of operations and adversely affect our ability to satisfy demand for our product candidates, which could materially and adversely affect our product sales and operating results.
If third-party manufacturers, wholesalers and distributors fail to perform as expected, or fail to devote sufficient time and resources to our product candidates, our clinical development may be delayed, our costs may be higher than expected or our product candidates may fail to be approved.
Our reliance on third-party manufacturers, wholesalers and distributors exposes us to the following risks, any of which could delay FDA approval of our product candidates and commercialization of our product candidates, result in higher costs, or deprive us of potential product revenues:
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our CMOs, or other third parties we rely on, may encounter difficulties in achieving the volume of production needed to satisfy commercial demand, may experience technical issues that impact quality or compliance with applicable and strictly enforced regulations governing the manufacture of pharmaceutical products, and may experience shortages of qualified personnel to adequately staff production operations; |
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our wholesalers and distributors could become unable to sell and deliver our product candidates for regulatory, compliance and other reasons; |
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our CMOs, wholesalers and distributors could breach or default on their agreements with us to meet our requirements for commercialization of our product candidates; |
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our CMOs, wholesalers and distributors may not perform as agreed or may not remain in business for the time required to successfully produce, store, sell and distribute our product candidates and we may incur additional cost; |
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our CMOs, wholesalers and distributors may misappropriate our proprietary information; and |
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if our CMOs, wholesalers and distributors were to terminate our arrangements or fail to meet their contractual obligations, we may be forced to delay our commercial programs. |
For example, we identified increased levels of impurities in some drug vials of certain drug lots used in our TRUDHESA STOP301 trial. Vials from those drug lots were removed from the trial and we conducted a root cause investigation, identifying the likely root cause as long stoppages in the production of two lots. We have not identified any safety issues in our Phase 3 clinical trials related to exposure to the increased levels of impurity. We had a pre-NDA meeting with the FDA on this topic and described our investigation and response to the issue in the NDA submission. At that time, the FDA did not concur that the investigation had adequately identified the root cause of the presence of impurities. While we have conducted additional investigations that have led us to believe we identified the root cause and we have worked with our CMO to avoid those conditions in future production runs, there is no guarantee that the FDA will agree that our subsequent investigations have adequately identified the root cause, or that our corrective and preventive actions have sufficiently remediated the issue. The FDA may request more detailed safety analyses, additional product stability data, and further investigations into the impurity issue or other CMC issues, which could have a material and adverse impact on review of the TRUDHESA NDA, including, for example, the issuance of a complete response letter.
Our reliance on third parties reduces our control over our product candidate development activities but does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and
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scientific standards. For example, the FDA and other regulatory authorities require that our product candidates and any products that we may eventually commercialize be manufactured according to cGMP and QSR, and similar foreign standards. Any failure by our third-party manufacturers to comply with cGMP or QSR or maintain a compliance status acceptable to the FDA or other regulatory authorities or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our product candidates. In addition, our third-party manufacturers will be subject to periodic inspections by the FDA and other regulatory authorities, and failure to comply with cGMP or QSR could be the basis for the FDA to issue a warning or untitled letter, withdraw approvals for product candidates previously granted to us, or take other regulatory or legal action, including request a recall or seize product candidates, total or partial suspension of production, suspension of clinical trials, refusal to approve pending applications or supplemental applications, detention of product, refusal to permit the import or export of product candidates, injunction, imposing civil penalties or pursuing criminal prosecution.
Additionally, as we scale up manufacturing of our product candidates and conduct required stability testing, issues may arise involving product-packaging and third-party equipment malfunctions. These issues may require refinement or resolution in order to proceed with commercial marketing of our product candidates. In addition, quality issues may arise during scale-up and validation of commercial manufacturing processes. Any issues in our product or delivery devices could result in increased scrutiny by regulatory authorities, delays in our regulatory approval process, increases in our operating expenses, or failure to obtain or maintain approval for our product candidates.
We may not be successful in establishing and maintaining strategic partnerships, which could adversely affect our ability to develop and commercialize product candidates, negatively impacting our operating results.
We continue to strategically evaluate and, as deemed appropriate, we may enter into partnerships in the future when strategically attractive, including potentially with major biotechnology or pharmaceutical companies, although there is no guarantee we will be able to enter into these agreements if we elect to do so. We face significant competition in seeking appropriate partners for our product candidates, and the negotiation process is time-consuming and complex. In order for us to successfully identify and work with partners, potential partners must view our product candidates as economically valuable in markets they determine to be attractive in light of the terms that we are seeking and other available product candidates for licensing by other companies. Even if we are successful in our efforts to establish strategic partnerships, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such strategic partnerships if, for example, development or approval of a product candidate is delayed or sales of an approved product are disappointing. Any delay in entering into strategic partnership agreements related to our product candidates could delay the development and commercialization of such candidates and reduce their competitiveness even if they reach the market. In addition, we have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our product candidates effectively or create sufficient sales.
If we fail to establish and maintain strategic partnerships related to our product candidates, we will bear all of the risk and costs related to the development of any such candidate, and we may need to seek additional financing, hire additional employees and otherwise develop expertise, such as regulatory expertise, for which we have not budgeted. This could negatively affect the development of any unpartnered product candidate.
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Risks Related to Our Intellectual Property
If we are not able to obtain and enforce patent protection for our technologies or product candidates, development and commercialization of our technology and product candidates may be adversely affected.
Our success depends in part on our ability to obtain, maintain, protect and enforce patents and other forms of intellectual property rights, including in-licenses of intellectual property rights of others, relating to our product candidates, our technology such as our proprietary POD nasal drug delivery platform, and methods for treating patients using our product candidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights and to operate without infringing upon the proprietary rights of others. As of December 31, 2020, we solely owned four issued U.S. patents, 14 pending U.S. patent applications, 21 issued foreign patents, 55 pending foreign patent applications, and three pending international applications that cover our lead product candidates and our proprietary POD nasal drug delivery platform. We may not be able to apply for patents on certain aspects of our technology and our product candidates in a timely fashion or at all. Further, we may not be able to prosecute all necessary or desirable patent applications, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing and prosecution of any patent applications that we license from third parties, or the ability to maintain the rights to patents licensed to third parties, and should we decide to license any of our patents to third parties in the future, we may not retain sufficient rights to prosecute and enforce such patents. Our existing issued and granted patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing product candidates and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents, that any of our issued or granted patents will not later be found to be invalid or unenforceable or that any issued or granted patents will include claims that are sufficiently broad to cover our technology and our product candidates or to provide meaningful protection from our competitors. Moreover, the patent position of biotechnology and pharmaceutical companies can be highly uncertain because it involves complex legal and factual questions. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our current and future proprietary technology and product candidates are covered by valid and enforceable patents or are effectively maintained as trade secrets. If third parties disclose or misappropriate our proprietary rights, it may materially and adversely affect our position in the market.
The U.S. Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. The standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology and pharmaceutical patents. As such, we do not know the degree of future protection that we will have on our proprietary product candidates and drug delivery system. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property. While we will endeavor to try to protect our technology and product candidates with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time consuming, expensive and sometimes unpredictable. The failure to adequately protect our intellectual property and other proprietary rights could materially harm our business.
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We may be required to spend significant resources to monitor and protect our intellectual property rights. Monitoring unauthorized uses and disclosures is difficult and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patents may be challenged in the courts or patent offices in the U.S. and abroad. Any patents that are issued may subsequently be invalidated or otherwise limited, allowing other companies to develop offerings that compete with our offerings, which could adversely affect our competitive business position, business prospects and financial condition. In addition, issuance of a patent does not guarantee that we have a right to practice the patented invention. Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action before patent offices for a given period after allowance or grant, during which time third parties can raise objections against such initial grant, or in court. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked, or may lose the allowed or granted claims altogether.
We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or our patents, trade secrets or other intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations.
In addition, there can be no assurance that:
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others will not or may not be able to make, use or sell upper nasal cavity product candidates that are the same as or similar to our product candidates but that are not covered by the claims of the patents that we own; |
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we or our existing or future collaborators are the first to make the inventions covered by each of our issued patents and pending patent applications that we own; |
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we, or our existing or future collaborators, are the first to file patent applications covering certain aspects of our inventions; |
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others will not independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; |
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a third party will not challenge our patents and, if challenged, a court would hold that our patents are valid, enforceable and infringed; |
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any issued patents that we own or have licensed will provide us with any competitive advantages, or will not be challenged by third parties; |
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we may develop additional proprietary technologies that are patentable; |
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the patents of others will not have a material or adverse effect on our business, financial condition, results of operations and prospects; and |
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our competitors do not conduct research and development activities in countries where we do not have enforceable patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets. |
If we, our licensor or collaborators fail to maintain the patents and patent applications covering our technology or product candidates, our competitors might be able to enter the market, which could have a material and adverse effect on our business, financial condition, results of operations and prospects.
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If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent protection for certain aspects of our technology and our product candidates, we also consider trade secrets, including confidential and unpatented know-how, important to the maintenance of our competitive position. We protect trade secrets and confidential and unpatented know-how, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our employees, corporate collaborators, outside scientific collaborators, CROs, CMOs, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants that obligate them to maintain confidentiality and assign their inventions to us. Despite these efforts, we cannot be certain that such agreements have been entered into with all relevant parties. In addition, 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. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts in the United States and certain foreign jurisdictions are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed which could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Other companies or organizations may challenge our or our licensors patent rights or may assert patent rights that prevent us from developing and commercializing our product candidates.
The issued patents and pending patent applications in the United States and in key markets around the world that we own or license claim many different devices, compositions and methods, including processes relating to the discovery, development, manufacture and commercialization of upper nasal cavity drug delivery. As the field of upper nasal cavity drug delivery continues to mature, patent applications are being processed by national patent offices around the world. There is uncertainty about which patents will issue and, if they do, as to when, to whom, and with what claims. In addition, third parties may attempt to invalidate our intellectual property rights. Even if our rights are not directly challenged, disputes could lead to the weakening of our intellectual property rights. Our defense against any attempt by third parties to circumvent or invalidate our intellectual property rights could be costly to us, could require significant time and attention of our management and could have a material and adverse effect on our business, financial condition, results of operations and prospects or our ability to successfully compete.
We may not be able to protect our intellectual property rights throughout the world.
Obtaining a valid and enforceable issued or granted patent covering our technology in the United States and worldwide can be extremely costly, and our or our licensors or collaborators intellectual property rights may not exist in some countries outside the United States or may be less extensive in some countries than in the United States. In jurisdictions where we or our licensor or collaborators have not obtained patent protection, competitors may seek to use our or their technology to develop their own products and further, may export otherwise infringing products to territories where we or they have patent protection, but where it is more difficult to enforce a patent as compared to the United States. Competitor products may compete with our future product candidates in jurisdictions where we do not have issued or granted patents or where our or our licensors or collaborators issued or granted patent claims or other intellectual property rights are not sufficient to prevent competitor activities in these jurisdictions. The legal systems of certain countries, particularly certain developing countries, make it difficult to enforce patents and such countries may not recognize other types of intellectual
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property protection, particularly relating to pharmaceuticals. This could make it difficult for us or our licensor or collaborators to prevent the infringement of our or their patents or marketing of competing products in violation of our or their proprietary rights generally in certain jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our and our licensors or collaborators efforts and attention from other aspects of our business, could put our and our licensors or collaborators patents at risk of being invalidated or interpreted narrowly, and our and our licensors or collaborators patent applications at risk of not issuing and could provoke third parties to assert claims against us or our licensor or collaborators. We or our licensor or collaborators may not prevail in any lawsuits that we or our licensor or collaborators initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.
We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In addition, we may decide to abandon national and regional patent applications before grant. Finally, the grant proceeding of each national or regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant registration authorities, while granted by others. It is also quite common that depending on the country, various scopes of patent protection may be granted on the same product candidate or technology.
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United States, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensor or collaborators encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensor or collaborators are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position in the relevant jurisdiction may be impaired and our business, financial condition, results of operations and prospects may be adversely affected.
We, our collaborators, or any future strategic partners may need to resort to litigation to protect or enforce our patents or other proprietary rights, all of which could be costly, time consuming, delay or prevent the development and commercialization of our technology or product candidates, or put our patents and other proprietary rights at risk.
Competitors may infringe our patents or other intellectual property. If we were to initiate legal proceedings against a third party to enforce a patent covering one of our product candidates or our technology, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that an individual connected with prosecution of the patent withheld information material to patentability from the USPTO, or made a materially misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our product candidates or certain aspects of our platform technology. Such a loss of patent protection could have a material and adverse effect on our business, financial condition, results of operations and prospects.
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Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without legally infringing our patents or other intellectual property rights.
Intellectual property rights of third parties could adversely affect our ability to commercialize our technology or our product candidates, and we, our licensor or collaborators, or any future strategic partners may become subject to third party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights. We might be required to litigate or obtain licenses from third parties in order to develop or market our technology or our product candidates. Such litigation or licenses could be costly or not available on commercially reasonable terms.
We, our collaborators, or any future strategic partners may be subject to third-party claims for infringement or misappropriation of patent or other proprietary rights. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, post grant review and inter partes review proceedings before the USPTO, and corresponding foreign patent offices. There are issued and pending patents that might claim aspects of our technology and our product candidates, and modifications that we may need to apply to our technology or our product candidates. Thus, it is possible that one or more individuals or organizations will hold patent rights to which we will need a license. If those individuals or organizations refuse to grant us a license to such patent rights or refuse to grant us a license on reasonable terms, we may not be able to market product candidates or perform research and development or other activities covered by these patents which could have a material and adverse effect on our business, financial condition, results of operations and prospects. We are obligated under certain of our license and collaboration agreements to indemnify and hold harmless our licensor or collaborators for damages arising from intellectual property infringement by use. If we, our licensor or collaborators, or any future strategic partners are found to infringe a third-party patent or other intellectual property rights, we could be required to pay damages, potentially including treble damages, if we are found to have infringed willfully. In addition, we, our licensor or collaborators, or any future strategic partners may choose to seek, or be required to seek, a license from a third party, which may not be available on acceptable terms, if at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. If we fail to obtain a required license, we or our existing or future collaborators may be unable to effectively market our technology or our product candidates, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. In addition, we may find it necessary to pursue claims or initiate lawsuits to protect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation could divert our managements attention. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from
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the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue our operations.
Because the upper nasal cavity therapeutics landscape is still evolving, it is difficult to conclusively assess our freedom to operate without infringing on third-party rights. Our competitive position may suffer if patents issued to third parties or other third-party intellectual property rights cover our technology or our product candidates or elements thereof, or our manufacture or uses relevant to our development plans. In such cases, we may not be in a position to develop or commercialize our technology or our product candidates until such patents expire or unless we successfully pursue litigation to nullify or invalidate the third-party intellectual property right concerned, or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. There may be issued patents held by third parties of which we are not aware that, if found to be valid and enforceable, could be alleged to be infringed by our POD nasal drug delivery platform and related technologies and product candidates. There also may be pending patent applications of which we are not aware that may result in issued patents, which could be alleged to be infringed by our POD nasal drug delivery platform and related technologies and product candidates. If such an infringement claim should be brought and be successful, we may be required to pay substantial damages, including potentially treble damages and attorneys fees for willful infringement, and we may be forced to abandon our technology or our product candidates or seek a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.
It is also possible that we have failed to identify relevant third-party patents or applications. For example, U.S. applications filed before November 29, 2000 and certain U.S. applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our product candidates or platform technology could have been filed by others without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technology, our product candidates or the use of our product candidates. Third-party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in marketing our product candidates. Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have material adverse effect on our ability to raise additional funds or otherwise have a material adverse effect on our business, results of operations, financial condition and prospects. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our technology or our product candidates that are held to be infringing. We might, if possible, also be forced to redesign our technology or our product candidates so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business and could have a material and adverse effect on our business, financial condition, results of operations and prospects.
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Intellectual property rights of third parties could delay the development timeline with respect to one or more of our product candidates.
TRUDHESA includes a prior-approved formulation of our active pharmaceutical ingredient and our INP105 and INP107 product candidates include prior-approved active pharmaceutical ingredients. We are not aware of any unexpired patents that cover these active pharmaceutical ingredients, and there are no unexpired patents or regulatory exclusivities listed on the FDA Orange Book for the formulation we are using in TRUDHESA. However, it is possible that one or more individuals or organizations will hold patent rights to which we will need to obtain a license. If those individuals or organizations refuse to grant us a license to such patent rights or refuse to grant us a license on commercially reasonable terms, our development timeline with respect to one or more of our product candidates may be materially and adversely delayed.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time consuming and is likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities. 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 and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Moreover, such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.
We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating or from successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
We may be subject to claims that we or our employees, consultants or independent contractors have wrongfully used or disclosed confidential information or alleged trade secrets of third parties or their former employers. These claims may be costly to defend and if we do not successfully do so, we may be required to pay monetary damages and may lose valuable intellectual property rights or personnel.
Many of our employees were previously employed at universities or biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper our ability to commercialize, or prevent us from commercializing, our technology or our product candidates, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
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Patent terms may be inadequate to protect our competitive position on our technology or our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our technology or our product candidates are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics or biosimilars. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to our products.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents 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 or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm or rely on our outside counsel to pay these fees due to the USPTO and non-U.S. patent agencies. 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. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business.
Changes in U.S. patent and ex-U.S. patent laws could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
Changes in either the patent laws or interpretation of the patent laws in the United States or in other ex-U.S. jurisdictions could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. In the United States, numerous recent changes to the patent laws and proposed changes to the rules of the USPTO may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years, some of which cases either narrow the scope of patent protection available in certain circumstances or weaken the rights of patent owners in certain situations. For example, the decision by the U.S. Supreme Court in Association for Molecular Pathology v. Myriad Genetics, Inc. precludes a claim to a nucleic acid having a stated nucleotide sequence that is identical to a sequence found in nature and unmodified. We currently are not aware of an immediate impact of this decision on our patents or patent applications because we are developing product candidates that contain modifications that we believe are not found in nature. However, this decision has yet to be unambiguously interpreted by courts and by the USPTO. We cannot assure you that the interpretations of this decision or subsequent rulings will not adversely impact our patents or patent applications. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, and similar legislative and regulatory bodies in other countries in which
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may pursue patent protection, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
After March 2013, under the Leahy-Smith America Invents Act, or the America Invents Act, enacted in September 2011, the U.S. transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. Assuming that other requirements for patentability are met, prior to March 2013, in the U.S., the first to invent the claimed invention was entitled to the patent, while outside the U.S., the first to file a patent application was entitled to the patent. A third party that files a patent application in the USPTO after March 2013, but before we do, could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Since patent applications in the U.S. and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to either (i) file any patent application related to our product candidates or (ii) invent any of the inventions claimed in our patents or patent applications. The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, and results of operations.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively which could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Risks Related to Our Employee Matters, Managing Growth and Other Risks Related to Our Business
We may encounter difficulties in managing our growth and expanding our operations successfully.
As we seek to advance our product candidates through clinical trials and commercialization, we will need to expand our development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers,
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manufacturers and other third parties. Future growth will impose significant added responsibilities on members of our management. Our future financial performance and our ability to commercialize our product candidates, if approved, and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative and, if necessary, sales and marketing personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company or disrupt our operations.
If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop and commercialize our product candidates.
We are highly dependent on members of our senior management, including Adrian Adams, our President and Chief Executive Officer, John Hoekman, Ph.D., Chief Scientific Officer and one of our founders, John Leaman, M.D., our Chief Financial Officer, Leonard S. Paolillo, our Chief Commercial Officer, and Stephen Shrewsbury M.B. ChB., our Chief Medical Officer. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives. Also, each of these persons may terminate their employment with us at any time. We do not maintain key person insurance for any of our executives or other employees.
Recruiting and retaining qualified scientific, clinical, manufacturing, sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors, including our scientific co-founders, may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Global Market, or Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. We will need to hire additional accounting, finance and other personnel and make further investments in processes and systems in connection with these efforts. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain sufficient coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements 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. Moreover, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in
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practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
We are not currently required to comply with the SECs rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an emerging growth company or a non-accelerated filer, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, if we are not able to continue to meet these requirements, we may not be able to remain listed on Nasdaq.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state health care fraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the health care 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. Employee misconduct could 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. Employees may also misappropriate information in violation of applicable insider trading laws, which could also seriously harm our reputation even if we are not deemed to be at fault. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to 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, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal health care programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any product candidates. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
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injury to our reputation; |
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decreased demand for our product candidates or products that we may develop; |
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withdrawal of clinical trial participants; |
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costs to defend the related litigations; |
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a diversion of managements time and our resources; |
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substantial monetary awards to trial participants or patients; |
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product recalls, withdrawals, or labeling, marketing or promotional restrictions; |
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loss of revenue; |
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the inability to commercialize our product candidates, if approved; and |
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a decline in our stock price. |
Failure to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of product candidates we develop. We currently carry product liability insurance covering our clinical trials. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, we could prevent or inhibit the development and commercial production and sale of our product candidates, which could adversely affect our business, financial condition, and results of operations.
The security of the information technology systems used in our business may be compromised, and confidential information, including non-public personal information, could be improperly disclosed.
Our information technology systems, and those of our contractors and consultants, may be vulnerable to physical or electronic intrusions, computer viruses or other attacks, as well as employee, vendor, or contractor errors or malfeasance. As part of our business, we and our contractors and consultants maintain large amounts of confidential information, including non-public personal information on patients and our employees. Breaches in security and other information security events and incidents could result in interruption to our or our service providers systems and operations, and the loss, unauthorized modification, or misuse of information. Any such breach or other incident may result in significant costs to remediate and otherwise respond, including efforts to analyze, correct, eliminate, remediate or work around deficiencies in our systems or our security measures, recover and
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validate data, and to address any applicable legal or contractual obligations. Further, any actual or perceived breach in security may result in potential regulatory actions or litigation, including material claims for damages, interruption to our operations, delays in regulatory filings and approvals, damage to our reputation or otherwise have a material adverse effect on our business, financial condition and operating results. Like many businesses, we have been in the past, and may again be in the future, subject to phishing attacks. In 2018 we experienced a successful phishing attack. While we were able to swiftly contain and remediate this incident, without a material impact to our business, there can be no assurances that we will be able to defend against or successfully remediate any such attacks that may occur in the future. Further, companies have experienced an increase in phishing and social engineering attacks from third parties, including in connection with the COVID-19 pandemic. Also, due to the COVID-19 pandemic, all of our employees are working remotely. As a result, we may have increased cybersecurity and data security risks, due to increased use of home wi-fi networks and virtual private networks, as well as increased disbursement of physical machines. While we have implemented IT controls to reduce the risk of a cybersecurity or data security breach, there is no guarantee that these measures will be adequate to safeguard all systems, especially with an increased number of employees working remotely. While we expect to implement and maintain appropriate information security policies and systems in order to prevent unauthorized loss, unavailability, modification, use or disclosure of confidential information, including non-public personal information, there can be no assurance that any such loss, unavailability, modification, use or disclosure will not occur.
While we maintain insurance with respect to cybersecurity, our insurance may be insufficient to cover all liabilities incurred by us in connection with any privacy or cybersecurity incidents. We also cannot be certain that any insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results and reputation.
If we acquire complementary business or technologies in the future, we may be unable to integrate such acquired businesses and technologies successfully or fail to achieve the expected benefits.
Although we have not made any acquisitions to date, our business strategy in the future may include acquiring other complementary therapies, products, technologies or businesses. We also may enter into relationships with other businesses to expand our domestic and international operations. An acquisition, investment, or business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, therapies, technologies, products, services, personnel or operations of the acquired companies, particularly if the key personnel of the acquired companies choose not to work for us. Acquisitions may also disrupt our business, divert our resources and require significant management attention that would otherwise be available for the development of our business. Moreover, the anticipated benefits of any acquisition, investment or business relationship may not be realized or we may be exposed to unknown liabilities.
Negotiating these transactions can be time consuming, difficult, and expensive, and our ability to close these transactions may often be subject to approvals that are beyond our control. Consequently, these transactions, even if undertaken and announced, may not close. Even if we do successfully complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions we complete could be viewed negatively by our customers, securities analysts and investors.
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Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
We have incurred substantial losses during our history and do not expect to become profitable in the near future, and we may never achieve profitability. Unused losses incurred in taxable years beginning on or prior to December 31, 2017, will carry forward to offset future taxable income, if any, until such unused losses expire. Under the Tax Reform Act, as modified by the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, unused U.S. federal net operating losses generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely but the deductibility of such federal net operating losses is limited to 80% of current year taxable income in taxable years beginning after December 31, 2020. As a result, our net operating loss carryforwards generated in taxable years beginning on or before December 31, 2017, may expire prior to being used, and the deductibility of our net operating loss carryforwards generated in taxable years beginning after December 31, 2017 in taxable years beginning after December 31, 2020, may be limited. It is uncertain if and to what extent various states will conform to the Tax Reform Act or the CARES Act. In addition, both our current and our future unused losses and other tax attributes may be subject to limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code) if we undergo, or have undergone, an ownership change, generally defined as a greater than 50 percentage point change (by value) in our equity ownership by certain stockholders over a three-year period. We have not completed a Section 382 study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since our formation due to the complexity and cost associated with such a study and the fact that there may be additional ownership changes in the future. If we undergo an ownership change (or if we previously underwent such an ownership change), our ability to use all of our pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset our post-change income or taxes may be limited. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, even if we attain profitability, we may be unable to use all or a material portion of our net operating losses and other tax attributes, which could adversely affect our future cash flows.
Changes in U.S. tax law could adversely affect our financial condition and results of operations.
The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service, or IRS, and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. For example, on March 27, 2020, the CARES Act was enacted, which included certain changes in tax law intended to stimulate the U.S. economy in light of the COVID-19 coronavirus outbreak, including temporary beneficial changes to the treatment of net operating losses, interest deductibility limitations and payroll tax matters. Future changes in U.S. tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations. We urge investors to consult with their legal and tax advisors regarding the implications of potential changes in U.S. tax laws on an investment in our common stock.
Risks Related to Our Common Stock and this Offering
The market price of our Common Stock may be volatile.
The market price of our common stock following this offering may be volatile. The market price for our common stock may be influenced by many factors, including the other risks described in this section of the prospectus entitled Risk Factors and the following:
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receipt of marketing approval for TRUDHESA or any of our other product candidates; |
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results of nonclinical studies and clinical trials of our product candidates, or those of our competitors or our existing or future collaborators; |
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introductions and announcements of new product candidates by us, our future commercialization partners, or our competitors, and the timing of these introductions or announcements; |
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regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our product candidates; |
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material and adverse impact of the COVID-19 pandemic on the markets and the broader global economy; |
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the success of competitive products or technologies; |
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actions taken by regulatory agencies with respect to our product candidates, clinical trials, manufacturing process or sales and marketing terms; |
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actual or anticipated variations in our financial results or those of companies that are perceived to be similar to us; |
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the success of our efforts to acquire or in-license additional technologies, products or product candidates; |
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developments concerning any future collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners; |
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market conditions in the life sciences and pharmaceutical sectors; |
∎ |
announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures or capital commitments; |
∎ |
developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our product candidates and products; |
∎ |
our ability or inability to raise additional capital and the terms on which we raise it; |
∎ |
the recruitment or departure of key personnel; |
∎ |
changes in the structure of healthcare payment systems; |
∎ |
actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally; |
∎ |
our failure or the failure of our competitors to meet analysts projections or guidance that we or our competitors may give to the market; |
∎ |
fluctuations in the valuation of companies perceived by investors to be comparable to us; |
∎ |
announcement and expectation of additional financing efforts; |
∎ |
speculation in the press or investment community; |
∎ |
trading volume of our common stock; |
∎ |
sales of our common stock by us or our stockholders; |
∎ |
the concentration in ownership of our common stock; |
∎ |
changes in accounting principles; |
∎ |
potential litigation or the threat thereof; |
∎ |
terrorist acts, acts of war or periods of widespread civil unrest; |
∎ |
natural disasters and other calamities; and |
∎ |
general economic, industry and market conditions. |
In addition, the stock market in general, and the markets for pharmaceutical and medical device stocks in particular, have experienced extreme price and volume fluctuations that have been often unrelated or disproportionate to the operating performance of these companies, including as a result of
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the COVID-19 pandemic. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in this Risk Factors section, could have a dramatic and adverse impact on the market price of our common stock.
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. Purchases of common stock in this offering by our affiliates will reduce the liquidity of our common stock.
Based on the ownership of our common stock as of March 31, 2021, prior to this offering, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates owned approximately 85.9% of our voting stock and, upon the completion of this offering, that same group will hold approximately 59.2% of our outstanding voting stock (assuming no exercise of the underwriters option to purchase additional shares, no exercise of our outstanding options and no purchases of shares in this offering by any of this group), in each case assuming the conversion of all outstanding shares of our redeemable convertible preferred stock into shares of our common stock and the net exercise of warrants outstanding. As a result, these stockholders, if acting together, will continue to have significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, amendment of our organizational documents, any merger, consolidation or sale of all or substantially all of our assets and 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.
Certain of our existing stockholders, including stockholders affiliated with certain of our directors and stockholders who own more than 5% of our outstanding common stock before this offering, have indicated an interest in purchasing a substantial majority of the shares of our common stock offered in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, any of these entities may determine to purchase fewer shares than they indicate an interest in purchasing or not to purchase in this offering. It also is possible that any of these entities could purchase more shares of our common stock than currently indicated. In addition, the underwriters could determine to sell fewer shares to any of these entities than these entities indicate an interest in purchasing or not to sell any shares to these entities. It is also possible that the underwriters could determine to sell more shares to these entities than currently indicated. Accordingly, the foregoing discussion regarding the pro forma ownership and voting power of this group does not reflect any purchases by these potential purchasers. Further, to the extent entities that are affiliates of ours purchase a significant portion of shares in the offering, the number of shares freely tradeable without restriction would be significantly reduced, thereby materially and adversely impacting the liquidity of our common stock and depressing the price at which you may be able to sell shares of common stock purchased in this offering.
We are an emerging growth company and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (ii) reduced disclosure
60
obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements and (iii) exemptions from the requirements of holding nonbinding advisory stockholder votes on executive compensation and stockholder approval of any golden parachute payments not approved previously. In addition, as an emerging growth company, we are only required to provide two years of audited financial statements and two years of selected financial data in this prospectus.
We could be an emerging growth company for up to five years following the completion of this offering, although circumstances could cause us to lose that status earlier, including if we are deemed to be a large accelerated filer, which occurs when the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30, or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31, or if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, in which case we would no longer be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this prospectus and in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act, upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
Anti-takeover provisions in our restated certificate of incorporation and our restated bylaws and under Delaware or Washington law could make an acquisition of our business, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Our restated certificate of incorporation and our restated bylaws that will be in effect upon completion of this offering contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors who are not nominated by current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions:
∎ |
establish a classified board of directors so that not all members of our board are elected at one time; |
∎ |
permit only the board of directors to establish the number of directors and fill vacancies on the board; |
∎ |
provide that directors may only be removed for cause and only with the approval of two-thirds of our stockholders; |
∎ |
require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws; |
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∎ |
authorize the issuance of blank check preferred stock that our board could use to implement a stockholder rights plan; |
∎ |
eliminate the ability of our stockholders to call special meetings of stockholders; |
∎ |
prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; |
∎ |
prohibit cumulative voting; and |
∎ |
establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings. |
Moreover, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Likewise, because our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain circumstances now or in the future. These provisions prohibit a target corporation from engaging in any of a broad range of business combinations with any stockholder constituting an acquiring person for a period of five years following the date on which the stockholder became an acquiring person. Any of these provisions of our charter documents or Delaware or Washington law could, under certain circumstances, depress the market price of our common stock.
Our restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders and our restated bylaws will designate federal district courts as the sole and exclusive forum for actions under the Securities Act, which could limit our stockholders ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or agents.
Our restated certificate of incorporation that will become effective upon the completion of this offering will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for the following types of actions or proceedings under the DGCL: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction.
Our restated bylaws will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. The enforceability of similar exclusive federal forum provisions in other companies organizational documents has been challenged in legal proceedings, and while the Delaware Supreme Court has ruled that this type of exclusive federal forum provision is facially valid under Delaware law, there is uncertainty as to whether other courts would enforce such provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
These choice of forum provisions may limit a stockholders ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provisions contained in our restated certificate of incorporation or restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
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We will have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. You will not have the opportunity, as part of your investment decision, to assess whether we are using the proceeds appropriately. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. If we do not invest or apply the net proceeds in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
General Risk Factors
Natural disasters, catastrophic events and calamities including epidemics and pandemics may disrupt our business.
Natural disasters or other catastrophic events may damage or disrupt our operations and thus could harm our business. For example, our headquarters are located in Seattle, Washington, an earthquake-prone area. A natural disaster or catastrophic event in Seattle could interrupt our operations and impair access to internal systems, documents, and materials critical to the operation and growth of our business.
Further, occurrences of epidemics or pandemics, depending on their scale, may result in damage to the national and local economies within our geographic area. Global economic conditions may be disrupted by widespread outbreaks of infectious or contagious diseases, and such disruption may adversely affect clinical development plans. See Risk FactorsThe outbreak of COVID-19, or similar public health crises, could have a material adverse impact on our business, financial condition and results of operations, including the execution of our planned clinical trials.
As we grow, the need for business continuity planning and disaster recovery plans will become increasingly important. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business. If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster, and successfully execute on those plans in the event of a disaster or emergency, our business could be harmed.
We and our CMOs must comply with environmental, health and safety laws and regulations, and failure to comply with these laws and regulations could expose us to significant costs or liabilities.
We and our CMOs are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the use, generation, manufacture, distribution, storage, handling, treatment, remediation and disposal of hazardous materials and wastes. Hazardous chemicals, including flammable and biological materials, are involved in certain aspects of our business, and we cannot eliminate the risk of injury or contamination from the use, generation, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials and wastes. In the event of contamination or injury, or failure to comply with environmental, health and safety laws and regulations, we could be held liable for any resulting damages and any such liability could exceed our assets and resources. We could also incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations. We are uninsured for third-party injury from contamination.
Environmental, health and safety laws and regulations are becoming increasingly more stringent. We may incur substantial costs in order to comply with current or future environmental, health and
63
safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Further, with respect to the operations of our CMOs, it is possible that if they fail to operate in compliance with applicable environmental, health and safety laws and regulations or properly dispose of wastes associated with our product candidates, we could be held liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product candidates or products.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our common stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our managements attention from other business concerns, which could seriously harm our business.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our common stock, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our common stock could be impacted negatively. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our nonclinical studies and clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of such analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause a decline in our stock price or trading volume.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections titled Prospectus Summary, Risk Factors, Use of Proceeds, Managements Discussion and Analysis of Financial Condition and Results of Operations, and Business contains forward-looking statements. The words believe, may, will, potentially, estimate, continue, anticipate, intend, could, would, project, plan, expect and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.
These forward-looking statements are subject to several risks, uncertainties and assumptions, including those described in Risk Factors and elsewhere in this prospectus. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the following important factors, in addition to those discussed in the section titled Risk Factors and elsewhere in this prospectus, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:
∎ |
our ability to obtain and maintain regulatory approval of TRUDHESA and our other product candidates, and any related restrictions, limitations or warnings in the label of any approved product; |
∎ |
our ability to successfully formulate and execute on our commercialization strategy for TRUDHESA, if approved by the FDA; |
∎ |
the timing or likelihood of regulatory filings and approvals; |
∎ |
the size and growth potential of the markets for our product candidates, if approved for commercial use, and our ability to serve those markets; |
∎ |
the success, cost and timing of our development activities, preclinical studies and clinical trials; |
∎ |
the number, size and design of clinical trials that regulatory authorities may require to obtain marketing approval; |
∎ |
our plans relating to the future development and manufacturing of our product candidates, including plans for future development of our POD devices and plans to address additional indications for which we may pursue regulatory approval; |
∎ |
future agreements with third parties in connection with preclinical and clinical development as well as the manufacture and commercialization of our product candidates, if approved for commercial use; |
∎ |
our ability to attract customers for any approved products; |
∎ |
the effect of litigation, complaints or adverse publicity on our business; |
∎ |
our ability to establish and expand our sales force to address effectively the new indications, geographies and types of organizations we intend to target; |
∎ |
our ability to forecast and maintain an adequate rate of revenue growth and appropriately plan our expenses; |
∎ |
our liquidity and working capital requirements; |
65
∎ |
our ability to attract and retain qualified employees and key personnel; |
∎ |
our ability to protect and enhance our brand and intellectual property; |
∎ |
the costs related to defending intellectual property infringement and other claims; |
∎ |
privacy, data security, and data protection laws, actual or perceived privacy or data breaches or other data security incidents, or the loss of data; |
∎ |
future regulatory, judicial, and legislative changes in our industry; |
∎ |
future arrangements with, or investments in, other entities or associations, products, services or technologies; |
∎ |
the adequacy of our financial resources following this offering to fund our operations into the middle of 2022; |
∎ |
our use of the net proceeds from this offering; and |
∎ |
the increased expenses and administrative workload associated with being a public company. |
These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this prospectus are more fully described in the section titled Risk Factors and elsewhere in this prospectus. The risks described in the section titled Risk Factors are not exhaustive. Other sections of this prospectus describe additional factors that could adversely affect our business, financial condition or results of operations. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
In addition, statements that we believe and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the Securities and Exchange Commission, or SEC, as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
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This prospectus contains estimates and other statistical data made by independent parties and by us relating to our industry and the markets in which we operate, including our general expectations and market position, market opportunity, the incidence of certain medical conditions and other industry data. These data, to the extent they contain estimates or projections, involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates or projections. Industry publications and other reports we have obtained from independent parties generally state that the data contained in these publications or other reports have been obtained in good faith or from sources considered to be reliable, but they do not guarantee the accuracy or completeness of such data. The industry in which we operate is subject to risks and uncertainties due to a variety of factors, including those described in the section titled Risk Factors. These and other factors could cause results to differ materially from those expressed in these publications and reports.
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We estimate that the net proceeds from our sale of 5,333,334 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses, will be approximately $71.4 million, or $82.6 million if the underwriters exercise their option to purchase additional shares in full.
Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us from this offering by $5.0 million, assuming the number of shares offered, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered would increase (decrease) the net proceeds that we receive from this offering by $14.0 million, assuming that the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions.
We currently intend to use the net proceeds we receive from this offering as follows:
∎ |
approximately $60 million to fund the regulatory approval process and initial commercial launch of TRUDHESA; |
∎ |
approximately $10 million to initiate a clinical proof-of-concept trial for INP105 in patients with ASD; and |
∎ |
any remaining amounts to fund working capital and general corporate purposes. |
Based on our planned use of the net proceeds, we estimate such funds, together with our existing cash and $10 million in an available draw under the Avenue Agreement, will be sufficient for us to fund our operating expenses and capital expenditure requirements to the middle of 2022. For further details regarding the terms of the Avenue Agreement, see Managements Discussion and AnalysisLiquidity and Capital ResourcesSources of Liquidity. Until such time as we can generate significant revenue from sales of our products, if ever, we expect to finance our future operations, including the development of our product candidates, through the sale of additional equity, debt financings or other capital sources.
The amounts we actually spend in these areas, and the timing of such spending, may vary significantly from our current intentions and will depend on a number of factors, including the success of research and product development efforts, cash generated from future operations and actual expenses to operate our business.
The expected use of the net proceeds from the offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our clinical expenditures and the extent of clinical development may vary significantly depending on numerous factors, including the status, results and timing of our current preclinical studies and clinical trials and those which we may commence in the future, the product approval process with the FDA and other regulatory agencies, any collaborations we may enter into with third parties and any unforeseen cash needs. As a result, we cannot predict with any certainty all of the particular uses for the net proceeds or the amounts that we will actually spend on the uses set forth above. We may use a portion of the net proceeds for the acquisition of, or investment in, businesses that complement our business, although we have no present commitments or agreements to do so. Accordingly, our management will have broad discretion in the application of the net proceeds, and investors will be relying on the judgment of our management regarding the application of the net proceeds of this offering.
Pending the uses described above, we intend to invest the net proceeds from this offering in short term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government.
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We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Our future ability to pay cash dividends on our capital stock is limited by the terms of our existing debt and equity agreement with Avenue.
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The following table sets forth our cash and capitalization as of December 31, 2020 on:
∎ |
an actual basis; |
∎ |
a pro forma basis, giving effect to (i) the automatic conversion of all outstanding shares of our redeemable convertible preferred stock as of December 31, 2020 into an aggregate of 12,605,800 shares of common stock immediately prior to the completion of this offering, (ii) the automatic exchange of a warrant held by Avenue into 107,663 shares upon completion of this offering, (iii) the issuance of 52,974 shares of common stock pursuant to the net exercise of warrants to purchase 1,987,348 shares of redeemable convertible preferred stock outstanding as of December 31, 2020 that would otherwise expire upon completion of this offering, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, (iv) $7.5 million in proceeds from the convertible notes we issued in March 2021 and their conversion into 559,585 shares of common stock immediately prior to the completion of this offering at 90% of the offering price, and (v) the effectiveness of our restated certificate of incorporation in connection with the completion of this offering; and |
∎ |
a pro forma as adjusted basis, giving effect to (i) the pro forma adjustments described above and (ii) the sale of 5,333,334 shares of common stock in this offering, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses. |
The pro forma as adjusted information set forth in the table below is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.
You should read this table together with Managements Discussion and Analysis of Financial Condition and Results of Operations, and our audited consolidated financial statements and related notes, each included elsewhere in this prospectus.
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As of December 31, 2020 | ||||||||||||
Actual | Pro Forma |
Pro Forma
As Adjusted(1) |
||||||||||
(in thousands, except share
and per share data) |
||||||||||||
(unaudited) | ||||||||||||
Cash |
$ | 7,095 | $ | 14,595 | $ | 85,995 | ||||||
|
|
|
|
|
|
|||||||
Long-term debt, current and noncurrent |
$ | 8,411 | $ | 8,411 | $ | 8,411 | ||||||
Redeemable convertible preferred stock warrant liabilities |
2,622 | | | |||||||||
Redeemable convertible preferred stock, $0.001 par value; 204,198,489 shares authorized and 202,009,981 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted |
127,039 | | | |||||||||
Stockholders (deficit) equity: |
||||||||||||
Preferred stock, $0.001 par value, no shares authorized, issued and outstanding, actual; 10,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted |
| | | |||||||||
Common stock, $0.001 par value; 266,833,885 shares authorized; 755,478 shares issued and outstanding, actual; 300,000,000 shares authorized, 14,081,500 shares issued and outstanding, pro forma; 300,000,000 shares authorized, 19,414,834 shares issued and outstanding, pro forma as adjusted |
| 14 | 19 | |||||||||
Additional paid-in capital |
4,762 | 141,964 | 213,359 | |||||||||
Accumulated deficit |
(138,262 | ) | (138,316 | ) | (138,316 | ) | ||||||
|
|
|
|
|
|
|||||||
Total stockholders (deficit) equity |
(133,500 | ) | 3,662 | 75,062 | ||||||||
|
|
|
|
|
|
|||||||
Total capitalization |
$ | 4,572 | $ | 12,073 | $ | 83,473 | ||||||
|
|
|
|
|
|
(1) |
Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, would increase (decrease) each of our pro forma as adjusted cash, additional paid-in-capital, total stockholders (deficit) equity and total capitalization by approximately $5.0 million, assuming that the number of shares offered remains the same and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered would increase (decrease) each of our pro forma as adjusted cash, additional paid-in-capital, total stockholders (deficit) equity and total capitalization by approximately $14.0 million, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions. |
The table above excludes the following shares:
∎ |
2,441,889 shares of common stock issuable upon the exercise of options outstanding as of December 31, 2020, with a weighted-average exercise price of $5.17 per share; |
∎ |
276,843 shares of our common stock issuable upon the exercise of stock options granted after December 31, 2020, with a weighted-average exercise price of $12.95 per share; and |
∎ |
2,825,456 shares of common stock reserved for future issuance under our stock-based compensation plans, consisting of (i) 344,456 shares of common stock reserved for future issuance under our 2018 Equity Incentive Plan as of December 31, 2020, (ii) 2,205,000 shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan, which will become effective on the date immediately prior to the date of this prospectus and (iii) 276,000 shares of common stock reserved for future issuance under our 2021 Employee Stock Purchase Plan, which will become effective on the date of this prospectus. Upon completion of this offering, any remaining shares available for issuance under our 2018 Equity Incentive Plan |
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will be added to the shares reserved under our 2021 Equity Incentive Plan and we will cease granting awards under our 2018 Equity Incentive Plan. Our 2021 Equity Incentive Plan and 2021 Employee Stock Purchase Plan also provide for automatic annual increases in the number of shares reserved under the plans each year, as more fully described in Executive CompensationEquity Compensation Plans and Other Benefit Plans. |
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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 amount per share paid by purchasers of shares of our common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after this offering.
Net tangible book value (deficit) per share is determined by dividing our total tangible assets (which excludes deferred offering costs) less our total liabilities and redeemable convertible preferred stock by the number of shares of our common stock outstanding. Our historical net tangible book value (deficit) as of December 31, 2020 was $(133.5) million, or $(176.71) per share, based on 755,478 shares of common stock outstanding as of December 31, 2020. Our net tangible book value (deficit) per share represents total tangible assets, excluding deferred offering costs, less total liabilities and redeemable convertible preferred stock, all divided by the number of shares of common stock outstanding on December 31, 2020.
Our pro forma net tangible book value per share represents the amount of our total tangible assets (which excludes deferred offering costs) reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of December 31, 2020, after giving effect to (i) the automatic conversion of all outstanding shares of our redeemable convertible preferred stock as of December 31, 2020 into an aggregate of 12,605,800 shares of common stock immediately prior to the completion of this offering, (ii) the automatic exchange of a warrant held by Avenue into 107,663 shares upon completion of this offering, (iii) the issuance of 52,974 shares of common stock pursuant to the net exercise of warrants to purchase 1,987,348 shares of redeemable convertible preferred stock outstanding as of December 31, 2020 that would otherwise expire upon completion of this offering, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus and (iv) $7.5 million in proceeds from the convertible notes we issued in March 2021 and their conversion into 559,585 shares of common stock immediately prior to the completion of this offering. Our pro forma net tangible book value as of December 31, 2020 was approximately $3.7 million, or $0.26 per share of common stock.
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 (i) the pro forma adjustments described in the immediately preceding paragraph and (ii) our sale in this offering of shares of our common stock at an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of December 31, 2020 would have been approximately $75.1 million, or $3.87 per share of our common
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stock. This represents an immediate increase in pro forma net tangible book value of $3.61 per share to our existing stockholders and an immediate dilution of $11.13 per share to investors in this offering, as illustrated in the following table:
Assumed initial public offering price per share |
$ | 15.00 | ||||||
Historical net tangible book deficit per share as of December 31, 2020 |
$ | (176.71 | ) | |||||
Pro forma increase in net tangible book value per share attributable to the pro forma transactions described above |
176.97 | |||||||
|
|
|||||||
Pro forma net tangible book value per share as of December 31, 2020 |
$ | 0.26 | ||||||
Increase in pro forma net tangible book value per share attributable to new investors participating in this offering |
3.61 | |||||||
|
|
|||||||
Pro forma as adjusted net tangible book value per share after this offering |
3.87 | |||||||
|
|
|||||||
Dilution in pro forma as adjusted net tangible book value per share to new investors in this offering |
$ | 11.13 | ||||||
|
|
Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value by $5.0 million, or $0.25 per share and the dilution in pro forma as adjusted net tangible book value per share to new investors in this offering by $0.75 per share, assuming the number of shares offered, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Similarly, each increase of 1,000,000 shares in the number of shares of common stock offered in this offering would increase our pro forma as adjusted net tangible book value by approximately $14.0 million, or approximately $0.49 per share, and would increase dilution per share to new investors in this offering by approximately $0.49 per share and each decrease of 1,000,000 shares in the number of shares of common stock offered in this offering would decrease our pro forma as adjusted net tangible book value by approximately $14.0 million, or approximately $0.55 per share, and would decrease dilution per share to new investors in this offering by approximately $0.55 per share, assuming the assumed initial public offering price per share remains the same and after deducting the estimated underwriting discounts and commissions. 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 exercise their option in full to purchase additional shares, the pro forma as adjusted net tangible book value per share after this offering would be $4.27 per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $0.40 per share and the dilution to new investors in this offering would be $0.40 per share.
The following table shows, as of December 31, 2020, on a pro forma as adjusted basis described above, 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 redeemable convertible preferred stock, cash received from the exercise of stock options, 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 |
14,081,500 | 72.5 | % | $ | 126,280,000 | 61.2 | % | $ | 8.97 | |||||||||||
Investors purchasing shares in this offering |
5,333,334 | 27.5 | 80,000,010 | 38.8 | 15.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total |
19,414,834 | 100.0 | % | $ | 206,280,010 | 100.0 | % | |||||||||||||
|
|
|
|
|
|
|
|
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Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, would increase (decrease) total consideration paid by new investors and total consideration paid by all stockholders by approximately $5.3 million, assuming that the number of shares offered, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered in this offering would increase (decrease) total consideration paid by new investors and total consideration paid by all stockholders by approximately $15.0 million, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions.
To the extent that any outstanding stock options or warrants are exercised, or new stock options or warrants are issued under our equity incentive plans, or we issue additional equity in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or equity-linked securities, the issuance of these securities could result in further dilution to our stockholders.
Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters option to purchase additional shares. If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own 69.7% and our new investors would own 30.3% of the total number of shares of our common stock outstanding upon the completion of this offering (assuming no purchase of shares offered in this offering by our existing stockholders).
The number of shares of common stock outstanding as of December 31, 2020 excludes:
∎ |
2,441,889 shares of common stock issuable upon the exercise of options outstanding as of December 31, 2020, with a weighted-average exercise price of $5.17 per share; |
∎ |
276,843 shares of our common stock issuable upon the exercise of stock options granted after December 31, 2020, with a weighted-average exercise price of $12.95 per share; and |
∎ |
2,825,456 shares of common stock reserved for future issuance under our stock-based compensation plans, consisting of (i) 344,456 shares of common stock reserved for future issuance under our 2018 Equity Incentive Plan as of December 31, 2020, (ii) 2,205,000 shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan, which will become effective on the date immediately prior to the date of this prospectus and (iii) 276,000 shares of common stock reserved for future issuance under our 2021 Employee Stock Purchase Plan, which will become effective on the date of this prospectus. Upon completion of this offering, any remaining shares available for issuance under our 2018 Equity Incentive Plan will be added to the shares reserved under our 2021 Equity Incentive Plan and we will cease granting awards under our 2018 Equity Incentive Plan. Our 2021 Equity Incentive Plan and 2021 Employee Stock Purchase Plan also provide for automatic annual increases in the number of shares reserved under the plans each year, as more fully described in Executive CompensationEquity Compensation Plans and Other Benefit Plans. |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and consolidated results of operations together with our consolidated financial statements and related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See Special Note Regarding Forward-Looking Statements and Risk Factors for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements.
Overview
We are a late-stage pharmaceutical company focused on utilizing our proprietary technology to develop and commercialize transformative therapies for patients suffering from diseases with high unmet medical needs, with an initial focus on diseases of the central nervous system, or CNS. Our company was founded on the premise that the upper nasal cavity can be an optimal treatment entry point for CNS and other diseases where rapid vascular absorption can result in superior clinical outcomes. Our strategy is to pair our proprietary Precision Olfactory Delivery, or POD, upper nasal delivery technology with well-established therapeutics or other therapeutics where rapid vascular absorption is preferred to drive therapeutic benefit, improve patient outcomes, reduce drug development risk and expand the commercial opportunity within our target diseases. Since 2016, we have identified and advanced multiple product candidates, including TRUDHESATM (INP104) for the acute treatment of migraine and INP105 for the acute treatment of agitation and aggression in patients with Autism Spectrum Disorder, or ASD. Our pipeline of proprietary product candidates also includes INP107 for the treatment of OFF episodes in Parkinsons Disease. In November 2020, we submitted an NDA for TRUDHESA, for the acute treatment of migraine headaches with or without aura in adult patients. The FDA has filed and accepted the new drug application, or NDA, for review and established a Prescription Drug User Fee Act, or PDUFA, goal date of September 6, 2021.
We have retained all development and commercial rights to each of our product candidates. Given the concentrated prescriber base of our target market for TRUDHESA and our other product candidates, we believe we will be able to independently commercialize each of our existing product candidates, if approved. We initially plan to build a targeted sales team of approximately 60 representatives for TRUDHESA, as well as similar targeted sales teams for our other existing product candidates. We would then build and leverage a central organization comprised of market access, medical affairs, patient support, marketing and operations to support these distinct field teams.
We have built out an internal research and development team and also used and plan to continue to use third-party contract research organizations, or CROs, to carry out our preclinical and clinical development. We rely on third-party contract manufacturing organizations, or CMOs, to manufacture and supply our clinical materials to be used during the development of our product candidates. These CMOs are currently manufacturing commercial stage POD devices for TRUDHESA, which we used for our Phase 1 clinical trial, our registration lots and our STOP301 trial, and we intend to use for commercial launch of TRUDHESA. CMOs are currently manufacturing clinical stage POD devices for INP105 and INP107, which we expect to transition to a commercial stage POD device for pivotal studies and commercialization. The development work on the commercial stage POD device for INP105 is ongoing while the commercial formulation and drug production are scaled to commercial level.
From inception through December 31, 2020, we funded our operations primarily with an aggregate of $135.0 million in gross cash proceeds from the sale and issuance of redeemable convertible
76
preferred stock, convertible notes, debt and warrants. Since inception, we have incurred significant operating losses and expect to incur significant and increasing losses in the foreseeable future as we advance our product candidates into later stages of development and, if approved, commercialization. Our net losses were $41.9 million and $45.8 million for the years ended December 31, 2019 and 2020, respectively. As of December 31, 2020, we had an accumulated deficit of $138.3 million.
We expect our expenses and net losses to increase significantly as we prepare to commercialize TRUDHESA, continue our development of, and seek regulatory approvals for, our other product candidates, and begin to commercialize any approved products, if any, as well as hire additional personnel, protect our intellectual property and incur additional costs associated with operating as a public company. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical studies and trials, associated manufacturing needs, commercialization activities if our product candidates are approved and our expenditures on other research and development activities.
Until such time as we can generate significant revenue from sales of our products, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of our product candidates or delay our efforts to advance and expand our pipeline.
COVID-19 Impact
We are continuing to proactively monitor and assess the novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019, or COVID-19, global pandemic. Since early March we have been monitoring the potential impact on our business that may result from this rapidly evolving crisis and to avoid any unnecessary potential delays to our programs. The safety and well-being of employees, patients and partners is our highest priority. To date, we have continued to operate without material impact on our business.
In response to the COVID-19 pandemic, we have implemented or are planning to implement various strategies to minimize any disruptions to our potential commercialization of TRUDHESA and our planned clinical trials. As of the date of this prospectus, we do not expect any disruption in our supply chain of drugs necessary to initially launch TRUDHESA and to conduct our clinical trials. However, we are continuing to evaluate our clinical supply chain in light of the COVID-19 pandemic. Numerous state and local jurisdictions have imposed, and others in the future may impose, shelter-in-place orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. We are supporting our employees by utilizing remote work, leveraging virtual meeting technology and encouraging employees to follow local guidance.
The global pandemic of COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact our business, including our clinical trials, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
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Financial Operations Overview
Operating Expenses
Research and Development
Research and development costs are expensed as incurred. Research and development expenses consist primarily of salaries, benefits and other staff-related costs, including associated stock-based compensation, laboratory supplies, nonclinical and clinical studies and trials, manufacturing, costs for product candidates and POD devices to support our studies and trials, to design new versions of PODs, vendor validation and quality control preparation and fees paid to other entities that conduct certain research and development activities on our behalf.
We accrue for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from our external service providers. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and the services are performed. In addition, we account for fully refundable research and development tax credits, based on 43.5% of qualified research and development expenditures of our Australian subsidiary, as an offset to research and development expenses.
We track our direct costs by product candidate, but we do not allocate overhead costs or certain external costs because they support multiple product candidates. In particular, with respect to internal costs, several of our departments support multiple product candidate research and development programs, and we do not allocate those costs by product candidate.
We expect to continue to incur significant research and development expenses over the next several years as our clinical programs progress and we seek to complete existing clinical studies and trials and initiate additional nonclinical and clinical studies and trials and pursue regulatory approval of our product candidates.
The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. Our research and development expenses may vary significantly based on factors such as:
∎ |
the phases of development of our product candidates; |
∎ |
the progress and results of our research and development activities; |
∎ |
the number of trials required for regulatory approval of our product candidates; |
∎ |
the number of sites included in the trials; |
∎ |
the countries in which the trials are conducted; |
∎ |
the length of time required to enroll eligible subjects and initiate clinical trials; |
∎ |
the number of subjects that participate in the trials; |
∎ |
the drop-out and discontinuation rate of subjects; |
∎ |
potential additional safety monitoring requested by regulatory agencies; |
∎ |
the duration of subject participation in the trials and follow-up; |
∎ |
the cost and timing of manufacturing of our product candidates; |
∎ |
the receipt of regulatory approvals from applicable regulatory authorities; |
∎ |
the timing, receipt and terms of any marketing approvals from applicable regulatory authorities; |
∎ |
the hiring and retention of research and development personnel; |
∎ |
the impact of the COVID-19 pandemic or other future pandemics on timelines and clinical operations, which may lead to increased costs, delays or both; and |
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∎ |
the extent to which we establish collaboration, licensing or similar arrangements and the performance of any related third parties. |
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.
General and Administrative
Our general and administrative expenses consist primarily of employee-related expenses, including salaries, benefits, travel and stock-based compensation for our personnel in executive, finance and accounting, human resources, and other administrative functions, as well as fees paid for accounting, legal and tax services, consulting fees and facilities costs not otherwise included in research and development expenses. We also expect selling and marketing costs to increase significantly as we prepare for the expected commercial launch of TRUDHESA, if approved, including the build out of our specialized sales force beginning in 2021 and further growth of our commercial infrastructure thereafter. We anticipate that, following completion of this offering, we will incur additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.
Other Expense, Net
Other expense, net, consists of interest earned on our cash and changes in the fair value of our redeemable convertible preferred stock warrant liabilities.
Consolidated Results of Operations
Comparison of the Years Ended December 31, 2019 and 2020
Year Ended
December 31, |
Change | |||||||||||
2019 | 2020 | |||||||||||
(in thousands) | ||||||||||||
Operating expenses: |
||||||||||||
Research and development |
$ | 28,812 | $ | 27,285 | $ | (1,527 | ) | |||||
General administrative |
12,754 | 18,049 | 5,295 | |||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
41,566 | 45,334 | 3,768 | |||||||||
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|
|
|
|
|
|||||||
Loss from operations |
(41,566 | ) | (45,334 | ) | (3,768 | ) | ||||||
Other expense, net |
(263 | ) | (463 | ) | (200 | ) | ||||||
|
|
|
|
|
|
|||||||
Loss before income taxes |
(41,829 | ) | (45,797 | ) | (3,968 | ) | ||||||
Provision for income taxes |
(30 | ) | (1 | ) | 29 | |||||||
|
|
|
|
|
|
|||||||
Net loss and comprehensive loss |
(41,859 | ) | (45,798 | ) | (3,939 | ) | ||||||
Accretion on redeemable convertible preferred stock |
(505 | ) | (518 | ) | (13 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss attributable to common stockholders |
$ | (42,364 | ) | $ | (46,316 | ) | $ | (3,952 | ) | |||
|
|
|
|
|
|
Research and Development
Research and development expenses were $28.8 million in 2019, compared to $27.3 million in 2020. The decrease of $1.5 million was primarily due to a $4.0 million decrease in program-specific
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costs supporting clinical development of our product candidates, primarily for TRUDHESA, INP105 and INP107, as clinical trials either closed or neared completion. This decrease was partially offset by an increase in non program-specific costs of $2.5 million primarily related to personnel costs due to an increase in headcount.
The following table summarizes the period-over-period change in research and development expenses by product candidate for the periods indicated:
Year Ended
December 31, |
||||||||||||
2019 | 2020 | Change | ||||||||||
(in thousands) | ||||||||||||
Program-specific costs: |
||||||||||||
TRUDHESA |
$ | 17,199 | $ | 15,961 | $ | (1,238 | ) | |||||
INP105 |
1,759 | 222 | (1,537 | ) | ||||||||
INP107(1) |
1,242 | 82 | (1,160 | ) | ||||||||
Other programs |
102 | 55 | (47 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total program-specific costs |
20,302 | 16,320 | (3,982 | ) | ||||||||
|
|
|
|
|
|
|||||||
Non program-specific costs: |
||||||||||||
Personnel-related |
7,599 | 9,701 | 2,102 | |||||||||
Cost reimbursements and credits |
(227 | ) | (47 | ) | 180 | |||||||
Internal, overhead and other expenses |
1,138 | 1,311 | 173 | |||||||||
|
|
|
|
|
|
|||||||
Total non program-specific costs |
8,510 | 10,965 | 2,455 | |||||||||
|
|
|
|
|
|
|||||||
Total research and development expenses |
$ | 28,812 | $ | 27,285 | $ | (1,527 | ) | |||||
|
|
|
|
|
|
(1) |
Includes expenditures relating to a levodopa-only formulation, prior to our decision to move INP107 forward in clinical development. |
General and Administrative
General and administrative expenses were $12.8 million in 2019, compared to $18.0 million in 2020. The increase of $5.3 million was primarily due to a $3.2 million increase in personnel-related expenses due to an increase in headcount, along with accrued bonus and severance for our former CEO. The increase was also due to an increase in commercialization activities in marketing, market access and sales related services of $0.9 million, and an increase in routine legal expenses of $1.1 million.
Other Expense, Net
Other expense, net was $0.3 million in 2019, compared to $0.5 million in 2020. The increase of $0.2 million was primarily due to a decrease in interest income of $0.4 million as a result of lower cash balances and an increase in interest expense of $0.2 million related to the amortization of the debt discount. This was partially offset by a decrease of expense of $0.4 million attributable to changes in the fair value of our convertible preferred stock warrant liabilities.
Unaudited Pro Forma Information
Immediately prior to the completion of this offering, all outstanding shares of our redeemable convertible preferred stock will automatically convert into shares of our common stock. Unaudited pro forma net loss per share attributable to common stockholders was computed to give effect to the (i) automatic conversion of all outstanding shares of redeemable convertible preferred stock into shares of common stock at a ratio of (a) 1:16.37332 for Series A, C, and D, and (b) 1:7.77431 for Series B, in connection with a Qualified Public Offering, using the as-converted method as though the conversion had occurred as of the beginning of the period or the date of issuance, if later; (ii) the automatic
80
exchange of a warrant held by Avenue Venture Opportunities Fund, L.P., or Avenue, into 107,663 shares upon completion of this offering, and (iii) the net exercise of redeemable convertible preferred stock warrants, that would otherwise expire upon completion of the IPO, based on an assumed IPO price of 15.00 per share. Pro forma net loss per share attributable to common stockholders does not include the shares expected to be sold in this offering or the conversion of the 2021 convertible notes.
The following table sets forth the computation of the unaudited pro forma basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):
Year Ended
December 31, 2020 |
||||
(Unaudited) | ||||
Numerator: |
||||
Net loss attributable to common stockholders |
$ | (46,316 | ) | |
Change in fair value of redeemable convertible preferred stock warrant liabilities |
153 | |||
Accretion to redemption value on redeemable convertible preferred stock |
518 | |||
|
|
|||
Net loss used in computing pro forma net loss per share attributable to common stockholders, basic and diluted |
$ | (45,645 | ) | |
|
|
|||
Denominator: |
||||
Weighted-average shares of common stock used in computing net loss per share attributable to common stockholders |
508,668 | |||
Pro forma adjustment to reflect conversion of redeemable convertible preferred stock |
12,560,769 | |||
Pro forma adjustment to reflect automatic exchange of Avenue warrant |
16,518 | |||
Pro forma adjustment to reflect net exercise of redeemable convertible preferred stock warrants |
52,974 | |||
|
|
|||
Weighted-average shares of common stock used in computing pro forma net loss per share attributable to common stockholders, basic and diluted |
13,138,929 | |||
|
|
|||
Pro forma net loss per share attributable to common stockholders, basic and diluted |
$ | (3.47 | ) | |
|
|
Liquidity and Capital Resources
Sources of Liquidity
Due to our significant research and development expenditures, we have incurred significant operating losses and negative cash flows from operations since our inception. Through December 31, 2020, we have funded our operations primarily through the issuance of convertible promissory notes, redeemable convertible preferred stock, debt and warrants with aggregate proceeds of $135.0 million. In March 2021, we issued convertible promissory notes for aggregate proceeds of $7.5 million, or the 2021 convertible notes. As of December 31, 2020, we had available cash of $7.1 million. We believe our cash as of December 31, 2020, together with the proceeds from the 2021 convertible notes, will not be sufficient for us to continue as a going concern for at least one year from the issuance date of our financial statements. We believe that this raises substantial doubt about our ability to continue as a going concern. As a result, we will be required to raise additional capital. If sufficient funds on acceptable terms are not available when needed, we could be required to significantly reduce our operating expenses and delay, reduce the scope of or eliminate one or more of our development programs. Failure to manage discretionary spending or raise additional financing, as needed, may adversely impact our ability to achieve our intended business objectives.
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In November 2020, we entered into a debt and equity financing agreement, or the Avenue Agreement, with Avenue. The Avenue Agreement provides for a 36-month term loan of up to $20.0 million, of which $10.0 million was funded at close and an additional $10.0 million is available at our request until December 31, 2021, subject to (i) completion of an underwritten public offering with gross proceeds of at least $75.0 million, or a Qualified Public Offering, (ii) receipt of FDA approval of TRUDHESA and (iii) approval by Avenues investment committee. Under the agreement, Avenue also had the right to invest up to $10.0 million in our equity securities in a private placement concurrent with the closing of our initial public offering at the initial price to the public, subject to mutual agreement. Loans under the Avenue Agreement incur interest at an initial interest rate of 11% per year. Payments for the term loan are interest only for the initial 12 months and can be extended to (i) 24 months upon achieving a Qualified Public Offering or (ii) 36 months upon achieving the first interest only period extension and FDA approval of TRUDHESA. The term loan will amortize in equal payments of principal from the end of the interest only period to the expiration of the 36-month term on November 1, 2023. The term loan is subject to a final payment fee and prepayment fees. Prior to a Qualified Public Offering, the term loan is secured by substantially all of our assets, including substantially all of our intellectual property. Following closing of a Qualified Public Offering, the term loan will be secured by substantially all of our assets, excluding our intellectual property.
We also issued a warrant to Avenue to purchase, at its option, either 1,762,810 shares of our Series D redeemable convertible preferred stock or a number of shares of the preferred stock issued in our next preferred stock equity financing determined based on the sale price of such preferred stock. Upon completion of this offering, this warrant will be automatically exchanged for 107,663 shares of common stock for no additional consideration.
Cash Flows
Year Ended
December 31, |
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2019 | 2020 | |||||||
(in thousands) | ||||||||
Cash used in operating activities |
$ | (36,487 | ) | $ | (39,183 | ) | ||
Cash used in investing activities |
(1,523 | ) | (1,782 | ) | ||||
Cash provided by financing activities |
21 | 11,059 | ||||||
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Net decrease in cash |
$ | (37,989 | ) | $ | (29,906 | ) | ||
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Cash Flows From Operating Activities
For 2019, cash used in operating activities was $36.5 million, which consisted of a net loss of $41.9 million partially offset by a net change of $3.2 million in operating assets and liabilities and $2.2 million in non-cash charges. The net change in our operating assets was primarily due to increases in accounts payable and accrued expenses of $3.8 million due to an increase in the level of research and development expenses and other assets of $0.3 million partially offset by an increase in prepaid expenses and other current assets and other assets of $0.9 million. The non-cash charges primarily consisted of depreciation and amortization of $0.7 million, stock-based compensation of $0.8 million and $0.7 million from a change in the fair value of our redeemable convertible preferred stock warrant liabilities.
For 2020, cash used in operating activities was $39.2 million, which consisted of a net loss of $45.8 million partially offset by $5.1 million in non-cash charges and by a net change of $1.5 million in operating assets and liabilities. The non-cash charges primarily consisted of stock-based compensation of $3.6 million, depreciation and amortization of $1.1 million, amortization of debt discounts of $0.2 million, and $0.2 million from a change in the fair value of our redeemable convertible
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preferred stock warrant liabilities. The net change in our operating assets was primarily due to an increase in accounts payable of $1.5 million and a decrease in prepaid expenses and other current assets of $1.4 million partially offset by a decrease in accrued liabilities of $1.2 million and an increase in other assets of $0.2 million.
Cash Flows From Investing Activities
For 2019 and 2020, cash used in investing activities of $1.5 million and $1.8 million, respectively, was related to purchases of property and equipment.
Cash Flows From Financing Activities
For 2019, cash provided by financing activities was $21,000, consisting primarily of proceeds from the exercise of stock options.
For 2020, cash provided by financing activities was $11.1 million, consisting primarily of $9.7 million in proceeds from the issuance of debt, $0.9 million in proceeds from the exercise of stock options, and $0.5 million in proceeds from the issuance of redeemable convertible preferred stock.
Funding Requirements
We use our cash to fund operating expenses, including research and development expenditures and sales and marketing in anticipation of a potential commercial launch for TRUDHESA. We will incur significant expense as we prepare for and execute a potential commercial launch for TRUDHESA. We plan to continue to incur research and development expenses for the foreseeable future as we continue clinical trials and move further into product candidate development. As a result, until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs primarily through a combination of equity or debt financings.
The timing and amount of our operating expenditures will depend largely on:
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the costs and timing of commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval; |
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the costs, timing and outcome of regulatory review of our product candidates; |
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the number and development requirements of other product candidates that we may pursue; |
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the costs associated with building out our operations; |
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the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; |
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our ability to establish strategic collaborations; |
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the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; |
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the risk/benefit profile, cost and reimbursement policies with respect to our product candidates, if approved, and existing and potential future therapies that compete with our product candidates; and |
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the costs associated with being a public company. |
If we do raise additional capital through public or private equity or convertible debt offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders rights. If we raise additional capital through debt financing, we may be subject to additional liens against potentially all of our assets and covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
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Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Polices and Estimates
Our managements discussion and analysis of our financial condition and consolidated results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated, and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying 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.
While our significant accounting policies are described in the notes to our consolidated financial statements included elsewhere in this prospectus, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.
Research and Development
We expense research and development costs as incurred. Research and development costs consist primarily of salaries, benefits, occupancy, materials and supplies, manufacturing and assembly of devices for clinical trials, contracted research, consulting arrangements, and other expenses incurred to sustain our research and development programs. We defer and capitalize non-refundable advance payments for goods or services that will be used or rendered for future research and development activities as prepaid expenses until the related goods are delivered or services are performed. We evaluate such payments for current or long-term classification based on when such services are expected to be received.
We are required to estimate our expenses resulting from our obligation under contracts with vendors and consultants and clinical site agreements in connection with our research and development efforts. The financial terms of these contracts are subject to negotiations which vary contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. We match those expenses with the period in which services and efforts are expended and we account for these expenses according to the progress of our research and development efforts. We determine advance payments for research and development services and accrual estimates through discussion with applicable personnel and outside service providers as to the progress or state of communication of clinical trials, or other services completed. We adjust our rate of research and development expense recognition if actual results differ from our estimates.
Stock-Based Compensation
We maintain a stock-based compensation plan as a long-term incentive for employees, consultants and members of our board of directors. The plan allows for the issuance of incentive stock options, non-qualified stock options, restricted stock units and other forms of stock awards.
We recognize stock-based compensation expense for stock options on a straight-line basis over the requisite service period. Our stock-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes-Merton option pricing model. This model utilizes
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inputs which are highly subjective assumptions and generally require significant judgment. These assumptions include:
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Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding. We use the simplified method (based on the mid-point between the vesting date and the end of the contractual term) to determine the expected term. |
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Expected Volatility. Since we have been privately held and do not have any trading history for our common stock, the expected volatility was estimated based on the average historical volatilities for comparable publicly traded pharmaceutical companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle and area of specialty. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. |
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Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option. |
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Expected Dividend. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero. |
We recorded stock-based compensation expense of $0.8 million and $3.6 million for the years ended December 31, 2019 and 2020, respectively. The fair values of the shares of common stock underlying our share-based awards are estimated on each grant date by our board of directors. Our board of directors considers, among other things, valuations of our common stock which were prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. In determining a fair value for our common stock, we used the Backsolve Method. The Backsolve Method utilizes a recent equity financing to back into the implied equity value. The equity value is then allocated to the equity classes using an option pricing method and then reducing the implied common stock value by a discount for lack of marketability.
Given the absence of a public trading market prior to this offering, our board of directors with input from management considered numerous objective and subjective factors to determine the fair value of common stock. The factors included, but were not limited to:
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third-party valuations of our common stock; |
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our stage of development; |
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the status of research and development efforts; |
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the rights, preferences and privileges of our redeemable convertible preferred stock relative to those of our common stock; |
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our operating results and financial condition, including our levels of available capital resources; |
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equity market conditions affecting comparable public companies; |
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general U.S. market conditions; and |
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the lack of marketability of our common stock. |
For valuations after the completion of this offering, the fair value of each share of underlying common stock will be based on the closing price of our common stock as reported on the date of grant.
The intrinsic value of all outstanding options as of December 31, 2020 was $24.0 million based on an assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover of this prospectus.
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Redeemable Convertible Preferred Stock Warrant Liabilities
We have issued warrants to purchase shares of our redeemable convertible preferred stock that are accounted for as liabilities at fair value, because the shares underlying the warrants contain contingent redemption features outside our control. Warrants classified as liabilities are recorded on the consolidated balance sheets at their fair value on the date of issuance and remeasured to fair value on each subsequent reporting period, with the changes in fair value recognized as a component of other expense, net in the consolidated statements of operations. The fair value of the warrants was determined using an option pricing model. Under this model, our estimated equity value as of the measurement date is allocated to various classes of financial instruments (such as common and redeemable convertible preferred stock and warrants to purchase redeemable convertible preferred stock) based on their rights and preferences in an assumed liquidity scenario. The liability is adjusted for changes in the fair value of these warrants until the earlier of the exercise of the warrants, the expiration of the warrants, or until such time as the warrants are no longer considered liability instruments.
Income Taxes
We recognize deferred income taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. In evaluating our valuation allowance, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Due to uncertainty with respect to ultimate realizability of deferred tax assets, we have provided a valuation allowance against the U.S. deferred tax assets. We intend to maintain a full valuation allowance on the federal and state deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.
At December 31, 2020, we had federal NOL and research and development credit carryforwards of approximately $21.4 million and $6.5 million that begin to expire in 2028 and 2029, respectively. In addition, we have $98.7 million of post 2017 federal NOL carryforwards that carry forward indefinitely. Utilization of the post 2017 federal NOL carryforwards is limited to eighty-percent of taxable income generated in a given tax year.
Under Sections 382 and 383 of the IRC, substantial changes in our ownership may limit the amount of NOL and research and development credit carryforwards that could be used annually in the future to offset taxable income. The tax benefits related to future utilization of federal and state NOL carryforwards, credit carryforwards, and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50% within any three-year period. We have not completed an IRC Section 382/383 analysis regarding the limitation of NOL and credit carryforwards. If a change in ownership were to have occurred, the annual limitation may result in the expiration of NOL carryforwards and credits before utilization. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.
We record unrecognized tax benefits as liabilities and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.
Recent Accounting Pronouncements
See Note 2 to our audited consolidated financial statements included elsewhere in this prospectus for more information.
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Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. We held cash of $7.1 million and $37.0 million as of December 31, 2020 and December 31, 2019, respectively. We generally hold our cash in interest-bearing money market accounts. Historical fluctuations in interest rates have not been significant for us. Due to the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash.
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We are using the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company.
We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenues of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
We are also a smaller reporting company, meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Reports on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
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Overview
We are a late-stage pharmaceutical company focused on utilizing our proprietary technology to develop and commercialize transformative therapies for patients suffering from diseases with high unmet medical needs, with an initial focus on diseases of the CNS. Our company was founded on the premise that the upper nasal cavity can be an optimal treatment entry point for CNS and other diseases where rapid vascular absorption can result in superior clinical outcomes. Our strategy is to pair our proprietary POD upper nasal delivery technology with well-established therapeutics or other therapeutics where rapid vascular absorption is preferred to drive therapeutic benefit, improve patient outcomes, reduce drug development risk and expand the commercial opportunity within our target diseases. Since 2016, we have identified and advanced multiple product candidates, including TRUDHESA for the acute treatment of migraine and INP105 for the acute treatment of agitation and aggression in patients with Autism Spectrum Disorder, or ASD. Our pipeline of proprietary product candidates also includes INP107 for the treatment of OFF episodes in Parkinsons Disease. In November 2020, we submitted an NDA for TRUDHESA, for the acute treatment of migraine headaches with or without aura in adult patients. The FDA has filed and accepted the NDA for review and established a PDUFA goal date of September 6, 2021.
We have designed our proprietary POD technology to target the vascular-rich upper nasal cavity, and to provide rapid absorption, consistent drug biodistribution and ease of use for a patient, provider or caregiver. Our goal with our POD technology is to deliver injection-like clinical outcomes non-invasively. We believe that we are the first company to successfully harness the benefits of delivery to the upper nasal cavity to improve delivery and the pharmacologic potential of CNS therapies.
The following table summarizes our product candidates, each of which is wholly owned:
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POD Technology
Using our proprietary POD technology, we have developed devices that deliver therapeutics directly to the upper nasal cavity. These devices are designed to offer several key benefits compared to traditional nasal delivery systems, including:
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Rapid Onset. The precise spray plume and biphasic nature of delivery to the upper nasal cavity allows for superior dose deposition and rapid absorption into the systemic circulation as compared to traditional nasal delivery systems. |
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Consistent Drug Bioavailability. Metered propellant dosing allows for more consistent blood levels than typically seen with traditional nasal sprays and are equivalent, or superior, to those achieved through IM injections. |
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Improved Patient-Provider Experience. Our proprietary gas propulsion mechanism eliminates the need for coordination of breathing and enables delivery of a dosing in 1/10th of a second, enabling self- or provider-administration in a manner that improves patient comfort and compliance. |
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Manufacturability. Separation of propellant and drug within the POD device helps streamline CMC development, as we are not constrained by the limits of co-formulating our therapeutics inside of a pressurized propellant canister. |
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Formulation Versatility. The POD device is versatile and can deliver both liquid and powder formulations in order to potentially address a wide variety of indications across multiple therapeutic areas. |
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Strong Intellectual Property Position. We believe that we have a strong global intellectual property position relating to our POD device and product candidates. We have four U.S. issued patents and 21 patents issued in ex-U.S. jurisdictions directed to our approach of drug delivery to the upper nasal cavity, including claims directed to a nasal device with separate drug and propellant compartments. Our patent portfolio is expected to provide patent protection ranging from 2032 to 2040. |
We believe that our in-house technical and development expertise positions us to address unmet medical needs across multiple therapeutic areas by delivering well-established and novel drugs consistently, rapidly and non-invasively. Our technical and development expertise has allowed us to rapidly identify and develop our product candidates to their current state in under 5 years. For example, INP105 was advanced from lead candidate selection to development of more than 20 formulations, the completion of five nonclinical studies, and ultimately a proof-of-concept clinical trial, within 16 months. We have tested over 30 small molecules and biologics for suitability of nasal drug administration with our proprietary POD technology. This depth of knowledge and experience, along with our proprietary technology, creates a platform for rapid additional pipeline expansion. In addition to our technology and development expertise, our strong intellectual property portfolio protects multiple aspects of our approach to delivering drug to the upper nasal cavity. We believe that our apparatus, composition of matter and method of use intellectual property can provide strong exclusivity protection to our product candidates.
Our Product Candidates
TRUDHESA (Acute Treatment of Migraine)
We are currently developing our lead product candidate, TRUDHESA (INP104), as an upper nasal formulation of DHE administered using our proprietary POD technology for the acute treatment of migraine. Migraine is a growing market projected to triple in size to over $10 billion by 2028 with the introduction of multiple new product offerings and an expected increase in disease diagnosis. DHE is widely used as part of a standard of care for treatment of migraines, despite being limited by IV and
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injection delivery or traditional nasal administration. IV and injection delivery require administration administered in physicians offices, migraine clinics and hospitals, and traditional nasal administration has been challenged by inconsistent efficacy.
In June 2020, we announced the following exploratory efficacy results of our STOP301 trial to evaluate the safety and tolerability of long-term, intermittent use of TRUDHESA as an acute treatment of migraine with or without aura in adult patients. In this trial, baseline results prior to trial initiation were based on migraine attacks where patients used their standard acute migraine medication. In the trial:
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38% of patients were pain free at two hours after their first dose of TRUDHESA. |
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52% of patients receiving TRUDHESA were free of their most bothersome migraine symptom at two hours. |
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Patients treated with TRUDHESA also demonstrated improvement in pain relief: 16% of patients treated with TRUDHESA had pain relief within 15 minutes of treatment, and 66% had pain relief within two hours. |
The exploratory endpoints of the trial also included an assessment of the following long-term outcomes of TRUDHESA when patients were treated for six months:
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38% of patients treated with TRUDHESA remained pain free at two hours through three months of treatment and 34% of patients treated with TRUDHESA remained pain free at two hours through six months of treatment. |
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Patients who received TRUDHESA saw a 48% reduction in the frequency of their migraines compared to baseline during the six-month trial. |
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98% and 95% of patients achieving pain freedom at two hours on TRUDHESA did not suffer a relapse in migraine or require a rescue medication at 24 hours and 48 hours, respectively, by weeks 21 to 24. |
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EAER data showed a meaningful reduction in the usage of healthcare resources by patients treated with TRUDHESA versus their baseline. Emergency room visits were reduced by approximately 73% and hospitalizations and urgent care visits were reduced by 100%. |
Although the trial was not powered to determine statistical significance of the exploratory efficacy endpoints, we believe these exploratory endpoints provide important data for evaluating the clinical benefit of TRUDHESA and showed consistency with the generally understood benefits of DHE for the acute treatment of migraines. The primary endpoints of the STOP301 trial were safety and tolerability of long-term, intermittent use. In this trial, TRUDHESA was generally well tolerated. There were a total of seven treatment emergent SAEs none of which were determined by the investigator to be related to TRUDHESA, or led to withdrawal from the trial. There were also no significant changes to sense of smell, and no significant abnormal findings from endoscopy examinations.
In November 2020, we submitted an NDA for TRUDHESA for the acute treatment of migraine headaches with or without aura in adult patients. The FDA has filed and accepted the NDA for review and established a PDUFA goal date of September 6, 2021. The brand name TRUDHESA has been conditionally approved by the FDA.
If approved, we believe we can successfully commercialize TRUDHESA in the United States with a specialty sales force beginning with approximately 60 representatives, and increasing to approximately 120 representatives, focusing in areas with increased demand. We intend to strategically pursue high value prescribers and early adopters, beginning with 8,000 of the highest volume migraine treatment
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prescribers. Based on recent migraine treatment product launches, such as ubrogepant and rimegepant, we believe this approach can be successful in accessing the concentrated prescriber bases in migraine. This target base includes approximately 4,000 neurologists and 4,000 high prescribing primary care physicians and headache specialists who have significant experience with prescribing DHE. These groups make up 35% of the migraine treatment prescriptions written in 2020 in the United States. In particular, neurologist prescription productivity has grown an average of approximately 15% per year over the last two years, a growth figure aided by an increase in the number of patients seeking treatment from neurologists and primary care physicians for migraine. The planned scale up to 120 representatives is intended to allow us to target an additional 8,000 high prescribing physicians that we believe will enable us to expand coverage to 45% of all migraine treatment prescriptions in the United States. We intend to build a commercial infrastructure focused on distribution, access, promotion, education and customer support. Our market research indicates that over 70% of migraine sufferers are seeking better treatments, and physicians are willing to prescribe and payors support access at profitable price and rebate points. With approximately 72% of migraine prescriptions paid by commercial payors, we believe this market presents an attractive payor mix. We anticipate using a robust sample program to ensure trial with TRUDHESA for patients seeking better treatments and outcomes. Also, as part of our commercialization strategy, we plan to educate healthcare practitioners and patients, partner with national associations and actively support advocacy groups in the migraine market. These efforts will be supplemented with non-personal promotion to all targeted and non-targeted medium value physicians. To capture the maximum commercial opportunity of TRUDHESA, we may also selectively seek partners to commercialize the product outside of our target markets, including additional penetration within the broader primary care setting, as well as in geographies outside of the United States.
INP105 (Acute Treatment of Agitation and Aggression in Autism Spectrum Disorder)
We are currently developing our second product candidate, INP105, as an upper nasal formulation of olanzapine administered using our proprietary POD technology for the treatment of agitation and aggression associated with ASD. ASD is a neurodevelopmental disorder affecting approximately 3.5 million children and adults in the United States and characterized by persistent difficulties in social communication and social interaction, coupled with restricted, repetitive patterns of behavior and higher aggression rates. Agitation and aggression are frequent and difficult to manage symptoms, and associated with negative outcomes for patients with ASD and their caregivers, including decreased quality of life, increased stress levels, and reduced availability of educational and social support. Based on a study of emergency room usage in Canada, which found that 18% of individuals with ASD aged 12 and up had visited the emergency room within the past year, and that approximately 34% of such visits were for mental health issues, we estimate that approximately 220,000 patients with ASD in the United States seek emergency room care due to mental health issues annually. Current treatment strategies include functional behavioral assessment, reinforcement strategies, functional communication training, and the use of second-generation antipsychotics. With an increasing rate of ASD diagnosis, we believe that the development of effective therapeutic and pharmacologic methods for preventing and treating aggression are essential to improving outcomes in this disorder. Currently, there is no approved treatment for patients living with ASD once there is onset of agitation leading to aggression, and we believe that INP105 has the potential to be an on-demand therapy in this indication.
In a double-blind, placebo-controlled, single ascending dose Phase 1 clinical trial in 40 healthy adults conducted in Australia, we observed similar bioavailability for INP105 compared to equivalent doses of olanzapine delivered through IM administration, as measured by the area under the plasma drug concentration-time curve, or AUC, which reflects the actual body exposure to the drug after administration of a drug dose, and the maximum drug concentration, or Cmax, and achieved time to maximum drug concentration, or Tmax, 25-22% faster than that of IM olanzapine.
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Based on its pharmacokinetic profile and method of administration, we believe INP105, if approved, has the potential to treat acute agitation and aggression events in this under-served population and in patients homes, potentially reducing visits to the emergency department and limiting the need to call in reinforcements to help caregivers. We plan to initiate a double-blind, placebo-controlled Phase 2 proof-of-concept clinical trial of INP105 in adolescents with ASD in the United States by the end of 2021 and expect to report topline results in the second half of 2022.
INP107 (Treatment of OFF Episodes in Parkinsons Disease)
We are also currently developing INP107 as an upper nasal formulation of carbidopa/levodopa administered using our proprietary POD technology for the treatment of OFF episodes in Parkinsons Disease, or Parkinsons. The overall Parkinsons market is expected to grow to over $8.4 billion by 2026, with emerging treatments for OFF episodes contributing to that growth. Current standard of care for the symptomatic treatment of Parkinsons is oral levodopa; however when levodopa levels fall below their therapeutic range, patients may lose adequate control of motor symptoms, which are referred to as OFF episodes. Carbidopa is co-administered with levodopa to slow levodopas rapid absorption, thereby increasing the amount of levodopa available for the symptoms of Parkinsons. INP107 is a self- or caregiver-administered, upper nasal therapy candidate designed to provide rapid delivery of levodopa to the brain for the treatment of OFF episodes. In 2019, we completed a Phase 2a clinical trial of INP107 and a levodopa-only formulation, in Australia, which demonstrated an encouraging pharmacokinetic profile in Parkinsons patients. Based on results of the Phase 2a clinical trial, we expect to further develop the formulation of INP107 prior to advancing into additional clinical trials. We expect to initiate a Phase 1 pharmacokinetic and tolerability trial in Australia or the United States in 2022 for dose selection for additional clinical development of INP107.
Our Team
We have assembled a team of scientific, clinical and business leaders with deep expertise in neuroscience and a track record of building, growing and transacting pharmaceutical companies. Our Chief Executive Officer, Adrian Adams, has over 25 years of pharmaceutical experience with an emphasis on commercialization and strategic execution. Our co-founder and Chief Scientific Officer, John Hoekman, Ph.D., has over 15 years of experience in investigating upper nasal drug delivery and nose-to-brain delivery, is an inventor of our proprietary POD technology, is widely recognized as a pioneer in upper nasal cavity drug delivery and has evaluated over 30 CNS targeting compounds with over six different modalities including small molecules, proteins, peptides and antibodies as opportunities for upper nasal cavity delivery. Our Chief Financial Officer, John Leaman, M.D., has over 15 years of pharmaceutical experience with an emphasis on public company financial oversight, corporate strategy and business development. Our Chief Medical Officer, Stephen Shrewsbury, M.B. ChB., has over 30 years of experience in developing pulmonary and nasal drug delivery and CNS therapies at pharmaceutical companies including GlaxoSmithKline, Aquinox Pharmaceuticals, AVI Biopharma and MAP Pharmaceuticals, where he led the development of Levadex. Our Chief Commercial Officer, Leonard S. Paolillo, has nearly 20 years of experience with various companies in the healthcare and pharmaceutical industries, including Warner Chilcott and Kyowa Kirin. Our Senior Vice President of Regulatory Affairs, Lynn Gold, has over 30 years of experience of leading regulatory activities for pharmaceutical companies, including at Warner Chilcott, Pharmacia and Camargo Pharmaceutical Services, and has been involved in over 40 NDA submissions, with expertise in drug devices and delivery. We are supported by our board of directors, scientific advisory boards and a group of leading biotechnology-focused investors, including KKR Iris, Norwest Venture Partners, 5AM Venture Management, LLC, venBio and Vivo Capital.
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Our Strategy
Our goal is to deliver transformative therapies, harnessing the benefits of delivery to the upper nasal cavity, to patients suffering from CNS diseases and other diseases with high unmet medical needs. The key tenets of our strategy to accomplish this goal include:
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Successfully commercialize TRUDHESA for the acute treatment of migraine after potential regulatory approval. Based on the positive data from our STOP301 Phase 3 trial, we submitted an NDA in November 2020 for TRUDHESA for the acute treatment of migraine headaches with or without aura in adult patients. The FDA filed and accepted the NDA for review and established a PDUFA goal date of September 6, 2021. If approved, we believe we can successfully commercialize TRUDHESA in the United States with a specialty sales force beginning with approximately 60 representatives, and increasing to approximately 120 representatives, focusing in areas with increased demand. We intend to strategically pursue high value prescribers and early adopters, beginning with 8,000 of the highest volume migraine treatment prescribers. Based on recent migraine treatment product launches, such as ubrogepant and rimegepant, we believe this approach can be successful in accessing the concentrated prescriber bases in migraine. This target base includes approximately 4,000 neurologists and 4,000 high prescribing primary care physicians and headache specialists who have significant experience with prescribing DHE. These groups make up 35% of the migraine treatment prescriptions written in 2020 in the United States. In particular, neurologist prescription productivity has grown an average of approximately 15% per year over the last two years, a growth figure aided by an increase in the number of patients seeking treatment from neurologists and primary care physicians for migraine. The planned scale up to 120 representatives is intended to allow us to target an additional 8,000 high prescribing physicians that we believe will enable us to expand coverage to 45% of all migraine treatment prescriptions in the United States. These efforts will be supplemented with non-personal promotion to all targeted and non-targeted medium value physicians. To capture the maximum commercial opportunity of TRUDHESA, we may also selectively seek partners to commercialize the product outside of our target markets, including additional penetration within the broader primary care setting, as well as in geographies outside of the United States. |
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Rapidly advance INP105 through clinical development for the acute treatment of agitation and aggression associated with ASD. We believe INP105 has the potential to become a first-line on-demand therapy for the safe and rapid treatment of agitation and aggression events in patients with ASD. Based on the positive clinical data generated to date, INP105s rapid onset of action and non-invasive delivery, we believe it is well positioned to expand the treatment setting beyond the emergency department to administration in in-patient treatment facilities and patients homes by parents or caregivers. We believe INP105 has the potential to reduce emergency room visits for the approximately 220,000 ASD patients in the United States that we estimate seek care due to mental health issues annually. We plan to initiate a double-blind, placebo-controlled Phase 2 proof-of-concept clinical trial of INP105 as an acute treatment of agitation and aggression associated with ASD in adolescents and young adults in the United States by the end of 2021, and expect to report topline results in the second half of 2022. |
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Maximize the therapeutic and commercial potential of our proprietary POD technology platform. Based on the unique characteristics and versatility of our proprietary POD technology, and expertise with developing novel drug formulations, we believe we are positioned to address multiple therapeutic areas with unmet medical needs. Our current strategy is to pair proven therapeutics with our proprietary POD technology and, thus, reduce risk by capitalizing on these therapeutics known safety, efficacy and commercialization history. We also intend to pair our proprietary POD technology with new chemical entities. While our initial focus is to address CNS diseases, we intend to explore the broader therapeutic utility of |
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our POD technology in diseases where rapid vascular absorption can result in superior clinical outcomes. In doing so, we may elect to enter into collaborations for third-party product candidates for which we believe that our technologies and expertise may be valuable. |
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Expand applications of our existing product candidates. Our goal is to maximize the commercial potential of our existing product candidates by exploring additional indications. For example, in the case of INP105, in addition to patients with ASD, we believe the product candidate has potential utility as an acute treatment of agitation and aggression associated with bipolar disorder and schizophrenia. We plan to selectively pursue development in follow-on indications and in patient populations where our product candidates can deliver meaningful clinical impact, and we have a clear clinical and regulatory approval pathway and that we believe we can commercialize successfully, if approved. |
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Independently develop and commercialize product candidates in indications and geographies where we believe we can maximize value. Given the potential of our POD technology and product candidates to treat a wide range of diseases, we believe that it will be important to maintain in-house discipline with respect to our development and commercialization efforts. We have a disciplined strategy to maximize the value of our pipeline by retaining development and commercialization rights to those product candidates, indications and geographies that we believe we can ultimately commercialize successfully on our own if they are approved. We plan to collaborate on product candidates that we believe have promising utility in disease areas or patient populations that are better served by the resources or specific expertise of other biopharmaceutical companies. |
Our Technology
We have developed upper nasal cavity devices to enable differentiated clinical profiles for our product candidates. These devices utilize our proprietary POD technology propellant and a biphasic spray that creates a precise plume or stream of drug to initially reach the vascular-rich upper nasal cavity and then a second puff of propellant to further distribute drug across the upper nasal cavity. Two of our devices are depicted below.
We have designed our proprietary POD technology to target the vascular-rich upper nasal cavity, and to provide rapid absorption, consistent drug biodistribution and ease of use for a patient, provider or caregiver. Our goal with our POD technology is to deliver injection-like clinical outcomes non-invasively. We believe that we are the first company to successfully harness the benefits of delivery to the upper nasal cavity to improve the therapeutic potential of CNS therapies. Traditional nasal pumps have suffered from high variability and low overall absorption. These characteristics have generally limited the nasal route of administration to local treatment of allergies or nasal inflammation. We have pioneered research into systemic drug delivery through the upper nasal cavity,the anatomy of
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which is depicted in the picture below, to the CNS. We have demonstrated with multiple molecules that targeting the upper nasal cavity could improve the bioavailability and biodistribution of drugs into systemic circulation. The upper nasal cavity is more permeable, has a higher density of vasculature and has a reduced clearance rate compared to the lower nasal cavity. These advantages of the upper nasal cavity may allow for a better consistency in dosing and uptake as well as the potential for faster time to onset of action. We have spent years developing device technologies and drug formulations to take advantage of this route of administration. We currently pair our technologies with established therapeutics approved through other routes of administration to create drug-device combination product candidates with the potential to address significant unmet medical needs and broaden the addressable patient population within our initial indications. This technology also offers potential to expand into other therapeutic areas.
As demonstrated in the figures below, compared to traditional nasal pumps, which have a diffuse aerosol spray, the POD technology creates a soft focused stream which consistently delivers drug to the upper nasal cavity. The figure on the top left shows a demonstrative spray pattern of DHE in our proprietary POD technology. The figure on the top right shows a demonstrative spray pattern of DHE in a traditional nasal pump. The figure on the bottom left shows the different route to the CNS as a result of upper nasal cavity delivery.
POD Technology | Traditional Nasal Pump | |
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Potential Advantages of Upper Nasal Cavity Delivery
∎ Rapid uptake into the blood stream
∎ Decreased dripping and swallowing
∎ Consistent dosing and distribution |
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Our proprietary POD technology is designed to offer a number of key benefits compared to traditional nasal delivery systems. These features include:
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Dose Consistency. Consistent dosing is critical to producing predictable and reproducible clinical outcomes. Unlike existing nasal delivery systems, which rely solely on mechanical pressure to deliver the drug into the nasal cavity, our proprietary POD technology utilizes hydrofluoroalkane, or HFA, gas as a propellant to expel the drug from our device into the upper nasal cavity, allowing us to achieve dose consistency within a 15% standard deviation of the mean consistent with guidance from the FDA. |
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Biphasic Spray. The POD devices deliver drugs through a biphasic spray, which consists of a first phase that delivers the drug to the upper nasal cavity and then a second phase that further distributes the drug across the upper nasal cavity. |
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Narrow Plume Geometry. Traditional nasal delivery systems create a wide aerosol plume that is typically unable to get past the two-to-three millimeter wide nasal vestibule, which creates variability in the absorption of the drug. The POD devices use a proprietary drug flow path and nozzle to create a narrow spray plume that can deliver drug past the vestibule and into the upper nasal cavity. |
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Reduces Human Error. Conventional nasal spray devices rely on the user to breathe in through their nasal passages while the dose is being administered. This can be challenging for patients to perform accurately and consistently. The POD device uses HFA gas to expel drug into the upper nasal cavity. The HFA gas is metered out in a consistent manner regardless of how much force the user applies to actuate the device. The HFA gas is then able to consistently expel the drug with less chance for user error. These features allow the POD devices to be used independently of patients breathing coordination, which may lead to more consistent drug absorption. |
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Separated Drug and Propellant. In our product candidates, the drug formulation and propellant are maintained in separated compartments of the device until delivery of the dose. This separation of the drug and propellant allows us to formulate our product candidates without being constrained by the limits of formulating inside of a pressurized propellant canister. We are developing POD devices for both liquid and powder drug formulations, and we believe that these devices can deliver a wide range of total dose. |
We have developed unique POD devices for each of nonclinical development, early clinical trials, and commercialization. We have spent years developing these nonclinical devices and methods to create a robust early development process. With each of our product candidates, we have done extensive nonclinical testing to assess safety and expected clinical performance. Our proprietary POD technology allows for rapid decision making when advancing product candidates into clinical development by testing a variety of doses and formulations. With our proprietary POD technology, we have evaluated in a nonclinical setting multiple additional candidates that could be developed further in the future.
In addition to our proprietary POD technology, we have expertise in developing proprietary upper nasal formulations that further improve the product profile. The flexibility of our proprietary POD technology to deliver both liquid and powder formulations allows us to develop the most appropriate formulation for the patient, indication and dosing regimen. We evaluate each molecule in early development with the goal of making the simplest formulation using inactive ingredients present in FDA-approved drug products. Since our proprietary POD technology is not reliant on breath coordination, our nasal drug formulations do not need to achieve a specific particle size range like many other nasal or pulmonary delivery devices, which allows for more flexibility in the manufacturing process. Our expertise in upper nasal formulation allows us to select therapeutics that are already in wide use and regarded as safe in other delivery formats, for our product candidate pipeline. We believe we can also pair our proprietary POD technology with new chemical entities.
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We believe that we have the ability to use our proprietary POD technology and upper nasal formulation expertise to produce product candidates that allow for convenient, non-invasive administration with the potential for injection-like clinical outcomes. Given their ease of administration, our product candidates can be self- or caregiver-administered outside of traditional patient care settings, thus expanding patient access. Additionally, our separation of propellant and drug in the POD device allows for reduced CMC risks. The unique characteristics of our product candidates have the potential to address unmet needs across multiple CNS diseases.
We have issued patent claims covering certain devices and methods of drug delivery, as well as pending patent applications directed to certain other embodiments of our device, drug formulations and methods of using our current product candidates. We believe that this apparatus, composition of matter and method of use intellectual property can provide strong exclusivity protection to our product candidates. Our existing solely owned patent portfolio is expected to provide patent protection ranging from 2032 to 2040, unless we receive patent term adjustment or patent term extension, or both.
Our Product Candidates
TRUDHESA for the Acute Treatment of Migraine
We are currently developing TRUDHESA as an upper nasal formulation of DHE administered using our proprietary POD technology for the acute treatment of migraine. DHE is widely used as part of a standard of care for the acute treatment of migraines, in addition to the use of triptans, but is generally limited by IV and injection delivery administered in physicians offices, migraine clinics and hospitals. In June 2020, we announced positive results of our 360-patient STOP301 trial to evaluate the safety and tolerability of long-term, intermittent use of TRUDHESA, and in November 2020, we submitted an NDA for TRUDHESA for the acute treatment of migraine headaches with or without aura in adult patients. The FDA has filed and accepted the NDA for review and established a PDUFA goal date of September 6, 2021.
Disease Overview and Market Opportunity
Migraine is a chronic and debilitating disorder characterized by recurrent attacks generally lasting four to 72 hours with multiple symptoms, including typically one-sided, pulsating headaches of moderate to severe pain intensity that are associated with nausea or vomiting, sound sensitivity and light sensitivity. Migraines are often preceded by transient neurological warning symptoms, known as auras, which typically involve visual disturbances such as flashing lights but may also involve numbness or tingling in parts of the body. Migraines are both widespread and disabling.
The State of U.S. Health, 1990-2016 Study rates migraine as the fifth leading cause of years lived with disability in 2016. Based on market research commissioned by us, we believe that approximately 36 million individuals in the United States suffer from migraine attacks. Most sufferers experience migraine attacks once or twice per month and over 1.2 million emergency room visits per year are for acute treatment of migraine attacks. Migraine is a growing market projected to triple in size to over $10 billion by 2028 with the introduction of multiple new product offerings and an expected rise in disease diagnosis. Additionally, with the approvals of calcitonin gene-related peptide antagonists, or gepants, for chronic migraine and the approvals of new therapies for the acute treatment of migraine, such as oral gepants and ditans, a new specific form of triptan, the awareness of migraine and its impact and treatment are expected to continue to grow. Of the approximately 18 million diagnosed migraine patients, approximately 12 million are not on active treatment. Of the six million patients diagnosed and on prescription treatment, up to 79% of the patients are willing to try another medication for the acute treatment of migraine.
Acute Treatment of Migraine and Limitation of Current Treatments
Until the recent approval of the gepant and ditan drugs, there has been limited innovation in the acute treatment of migraine since the introduction of triptans in 1992. Additional pharmacologic agents
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used for the acute treatment of migraine include analgesics, non-steroidal anti-inflammatory drugs, anti-emetics and ergotamines. The migraine market has steadily increased from approximately 20 million prescriptions in 2017 to approximately 27 million prescriptions in 2020, while triptans share of the migraine market has steadily decreased from approximately 97% in 2017 to 72% in 2020. While triptans remain the most common prescribed therapy for migraines, they possess four major limitations that result in an unmet need for migraine patients:
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Unmet Need for Efficacy. Approximately 30% to 40% of migraine patients do not fully respond to triptans, and alternatives, including gepant and ditan drugs, are limited. Triptans have also been shown to be more efficacious when taken early in a migraine attack, but those patients who wait or delay treatment may not experience the full benefit of triptan therapy. |
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Need for More Rapid Onset. While triptans have improved the treatment of migraine, their onset of pain relief is relatively slow. Historically, estimated onset of significant pain relief with oral triptans occurs between one and three hours after dosing. |
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Need for Longer Duration of Effect. Published studies cite that the recurrence within 24 hours of an effectively treated migraine is a common reason given for dissatisfaction with triptans. |
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Opportunity for Improved Tolerability Profile. Triptans as a class are known to be associated with an increase in blood pressure. |
The recent approvals of gepant and ditan drugs have introduced new migraine treatment options into the market. While these oral medications are generally an improvement over triptans, there remains a significant unmet need. As oral medications, these products have relatively low efficacy and persistence rates. Further, ditans have significant potential side effects, including significant driving impairment, sleepiness and dizziness.
DHE is an acute therapy and an alternative to existing treatments that has been used for more than 60 years to safely and effectively treat migraine. DHE is widely used as part of a standard of care for treatment of migraines, despite being limited by IV and injection delivery or traditional nasal administration. IV and injection delivery require administration in physicians offices, migraine clinics and hospitals, and traditional nasal administration has been challenged by inconsistent efficacy. The AUC of DHE in the first two hours of exposure, or AUC0-2hr, is thought to be critical for achievement of pain relief in acute migraine. Many headache specialists consider DHE to be the current standard of care for the treatment of status migrainosus, which is a condition characterized by debilitating migraines that last more than 72 hours. Unlike triptans, DHE is known to bind to multiple receptors theorized to be implicated in migraine onset and duration. DHE also offers fast-onset efficacy, with continued protection from a single dose at any point during an attack. DHE overcomes many of the limitations of other existing treatments but in its current methods of administration present a number of limitations resulting in unmet needs for migraine patients, including:
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Need for More Convenient and Consistent Dosing. DHE is available for administration both intravenously and nasally. Intravenous administration of DHE requires the supervision of a healthcare provider and is typically performed in a headache clinic or hospital setting, requiring the patient to travel while suffering with the migraine. DHE administrated nasally with traditional, lower cavity devices may lead to inconsistent dosing and slower speed of effect and pain relief. |
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Opportunity for an Improved Tolerability Profile Compared to Intravenous Administration. One of the common side effects of conventional DHE administered intravenously is nausea, which is thought to be due to the high Cmax. Patients who receive DHE intravenously are often administered an anti-nausea medication at the same time. |
A survey of neurologists commissioned by us found that most neurologists are familiar with DHE and its mechanism of action as an acute therapy for migraine, and nearly all are interested in a new DHE delivery system.
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Our Solution: TRUDHESA
We believe TRUDHESA, if approved, has the potential to be a preferred therapy for the acute treatment of migraines. TRUDHESA delivers DHE to the richly-vascularized upper nasal cavity, offering the potential for rapid and consistent biodistribution without injection. We believe that TRUDHESA may provide patients with the following benefits when compared to existing migraine therapeutics:
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Rapid Onset. The delivery of DHE through our POD technology may offer rapid onset of pain relief similar to IV DHE and investigational pulmonary inhaled DHE (MAP0004). As observed in our completed studies, TRUDHESA administration resulted in a total plasma exposure of DHE in the first two hours of dosing similar to IV administration. |
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Long-lasting. DHE has been shown to interact with multiple receptors theorized to be implicated in migraine onset and duration. The durability of effect, as observed in our exploratory efficacy analyses by lower migraine recurrence with DHE (18%) versus triptans (45%), is likely attributable to longer-lasting effect at receptors such as 5-HT1B and 5HT-1D. In our Phase 1 clinical trial, TRUDHESA was observed to have similar blood levels of DHE compared to IV DHE from measurements at 20-minute through 48-hour. |
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Broad Target Population. Based on historical DHE use, TRUDHESA, like other forms of DHE, may provide a higher response rate than triptans and has the potential to treat patients who have not previously responded to triptans. Similar to other forms of DHE, TRUDHESA may also be effective against patients who suffer from morning migraine, severe and prolonged migraine, menstrual migraine or have cluster headache. Migraine treatment with DHE has also demonstrated efficacy, independent of when the migraine treatment is initiated, based on DHE reversing central sensitization, while triptans are ineffective once the migraine becomes centralized. |
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Convenient and Consistent Delivery. TRUDHESA is non-injectable, with the DHE dose delivered in 3/10ths of a second with minimal coordination from the patient. TRUDHESA has demonstrated more consistent blood levels than traditional nasal spray, yielding improved blood levels and a lower coefficient of variance with doses. Further, in our STOP301 trial, 84% of trial participants agreed or strongly agreed with the statement that TRUDHESA was easy to use. |
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Low Incidence of Side Effects. Nausea and vomiting related to DHE therapy are linked to the high Cmax related to IV administration. In our completed clinical trials, TRUDHESA has shown to be generally well-tolerated with few instances of nausea and vomiting. |
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Reducing the Need for Additional Healthcare Resources for Acute Treatment of Migraines. EAER data from our STOP301 trials showed a significant reduction in the usage of healthcare resources by patients treated with TRUDHESA versus their baseline. By reducing the need for emergency room visits for patients with migraines, TRUDHESA has the potential to improve patients quality of life and reduce resource strain on healthcare facilities. |
STOP301 Trial Results
Our STOP301 trial conducted in the United States evaluated the safety and tolerability of long-term, intermittent use of TRUDHESA in 354 patients for 24 weeks, with 74% of patients completing the treatment period, with a subset of 73 patients continuing for up to a total of 52 weeks, with 90% of continuing patients completing this extended treatment period. In total, 5,273 migraines were treated over the first 48 weeks and approximately 5,650 migraines were treated over the full trial. We completed the trial and announced positive top-line data in June 2020, and we submitted data from this trial, along with the Phase 1 pharmacokinetic trial, in our NDA submission in November 2020.
This trial consisted of a four-week screening period, a 24-week treatment period for all participants, a 28-week treatment period extension with a sufficient number of participants to ensure 150 and 50 evaluable data sets in the 24 and 52 week periods, respectively, and a two-week post-treatment follow-up period for all participants. This was an outpatient trial in patients who currently suffer a minimum of two migraines per month. During the trial, participants were instructed on how to self-administer TRUDHESA. The primary endpoints of the clinical trial were:
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treatment emergent adverse events, or TEAEs; |
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change in nasal mucosa as measured by focused, endoscopic nasal exams conducted by an ear, nose and throat physician following the Nasal Examination Manual; and |
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change in olfactory function as assessed by the University of Pennsylvania Smell Identification Test. |
In the trial, TRUDHESA was generally well-tolerated. There were seven SAEs among five patients (1.4%) over the 52-week study. Three patients had one SAE each, consisting of one event each of ovarian mass, intestinal obstruction and miscarriage. Two patients had more than one SAE: one patient with pulmonary embolism and visual impairment and one patient with clavicle and rib fractures. none of the SAEs were nasal-related and none of the SAEs were determined by the trial investigator to be related to TRUDHESA or led to withdrawal from the trial. There were also no clinically significant changes in olfactory function, and no abnormal findings from endoscopy examinations. The majority of TRUDHESA-related TEAEs were mild and transient, with the most frequent being nasal congestion (15.0%), nausea (6.8%), nasal discomfort (5.1%) and unpleasant taste (5.1%). There were no cardiac adverse events and the discontinuation rate due to adverse events was only 6.8%. While the 12-month trial extension was initiated to gather additional data on long term use of TRUDHESA, ultimately the extension was unnecessary per trial protocol due to lack of safety signals in the 6-month cohort.
Exploratory efficacy measures were captured consisting of reporting in an electronic diary the time of onset of an aura, a migraine and associated symptoms, such as nausea, vomiting, sound sensitivity and light sensitivity. After taking a dose of TRUDHESA, questions about the severity of and relief from all symptoms were repeated at 15 minutes, 30 minutes and 1, 2, 8, 24 and 48 hours post dosing. Patients were also required to undergo periodic evaluation using Migraine Disability Assessment, or MIDAS, and Headache Impact Test, or HIT-6, questionnaires.
The trial evaluated the acute treatment effects of TRUDHESA against the patients best previous migraine treatment and the long-term effects of TRUDHESA utilized by patients for six months as exploratory efficacy endpoints. While not powered for statistical significance, on their first dose of TRUDHESA, 38% of patients reported being pain free at two hours. This effect remained consistent with long-term administration as 39% of all patients treated with TRUDHESA through three months had pain freedom at two hours (2,559 total migraines), and 35% of all patients treated with TRUDHESA through six months had pain freedom at two hours (1,736 total migraines). TRUDHESA was also associated with a reduction in pain symptoms, as 52% of patients receiving TRUDHESA were free of their most bothersome migraine symptom at two hours. Further, as shown in the figure below, 16% of patients who were treated with TRUDHESA had pain relief within 15 minutes and 66% of patients had pain relief within 2 hours (N=354).
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The long-term nature of the STOP301 trial also provided notable long-term data on the continued administration of TRUDHESA in an exploratory efficacy analysis conducted as part of the trial. As reflected in the figure below, patients treated with TRUDHESA reported a 48% reduction in the frequency of their migraines over baseline during the 6-month trial.
Pain freedom was consistent across multiple attacks throughout the 52-week treatment period, with between 31%-39% of patients in each measurement period achieving pain freedom at two hours. Additionally, 98% and 95% of patients achieving pain freedom at two hours on TRUDHESA did not suffer a relapse in migraine or require a rescue medication at 24 hours and 48 hours, respectively, by weeks 21 to 24.
EAER data also showed a meaningful reduction in the usage of healthcare resources by patients treated with TRUDHESA versus their baseline. Specifically, emergency room visits were reduced by approximately 73% and hospitalizations and urgent care visits were reduced by 100%.
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Phase 1 Clinical Trial Results
We completed a randomized three-way crossover pivotal Phase 1 clinical trial in the fourth quarter of 2017. Thirty-six healthy volunteers in Australia were randomized, and 27 were included in the evaluation of pharmacokinetic measures and comparative bioavailability. Migranal and TRUDHESA were self-administered by the trial participants. Migranal is a FDA-approved nasal spray product using DHE. The primary endpoint was to compare the bioavailability of DHE following single dose administration of 1.45 mg TRUDHESA, 1mg IV DHE as a safety comparator and 2mg Migranal (a nasal pump administered DHE) as an efficacy comparator. Pharmacokinetic measures, which refers to the movement of drug through the body, were recorded from baseline through 48 hours, with measures taken at 5, 10, 20, 30, 40 50 and 60 minutes within the first hour. Secondary endpoints were to evaluate the safety and tolerability of single doses of TRUDHESA and to assess plasma concentrations of 8-hydroxy-dihydroergotamine, the primary metabolite of DHE.
Despite containing approximately 28% less DHE per dose than Migranal, TRUDHESA achieved blood levels comparable to IV DHE, which quickly separated from Migranal blood levels at five minutes, achieved Tmax more rapidly, achieved a four-fold increase in Cmax and a three-fold increase in AUC. After 20 minutes, TRUDHESA reached and sustained DHE levels similar to those seen with IV dosing through the next 48 hours. The following figure shows the pharmacokinetic measurements of DHE with TRUDHESA, IV DHE and Migranal for the first four hours after dosing.
Unlike standard bioequivalence studies, the intent of this trial was to investigate whether Cmax, AUC and Tmax of TRUDHESA lay between the 90% confidence intervals of IV DHE and Migranal. This would permit a bridge to the FDAs findings of safety data for the IV product with higher blood levels, and to the FDAs efficacy findings for Migranal with lower blood levels. As the following table indicates, TRUDHESA met the preplanned statistical endpoints to satisfy this recommendation from the FDA with statistical power in excess of 95% on all endpoints. Our proprietary POD technology demonstrated more consistent dosing than a traditional nasal spray as seen with the lower coefficient of variance measures of plasma levels compared to Migranal as highlighted in the table below.
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DHE Pharmacokinetics
Migranal
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TRUDHESA
(1.45mg) |
D.H.E.45 IV
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AUC0-inf (pg*hr/ml) [%CV] |
2,199 [75%] | 6,275 [42%] | 7,490 [17%] | |||||||||
Cmax (pg/ml) [%CV] |
300 [92%] | 1,301 [51%] | 14,190 [37%] | |||||||||
Tmax, median (min) [%CV] |
47 [59%] | 30 [57%] | 5 [118%] | |||||||||
AUC0-2 (hr*pg/ml) |
388 | 1,603 | 3,022 |
TRUDHESA was generally well-tolerated, with no participants experiencing serious adverse events that were drug related. The most common treatment-related adverse events observed for TRUDHESA included drowsiness, headaches and muscle soreness. Participants of this trial were surveyed on preference in administration, and TRUDHESA was preferred three to one over Migranal. TRUDHESA was noted to have less dripping, less post-nasal drip, was viewed as easier to use and over two-thirds of the volunteers were quite satisfied or very satisfied with nasal delivery experience with our proprietary POD technology.
Optimized DHE delivery has been shown to yield rapid and sustained clinical benefit in pain relief and pain freedom in the acute treatment of migraines. AUC0-2hr is thought to be critical for achievement of pain relief. In a pharmacokinetic clinical trial of MAP0004, an investigational pulmonary inhaled DHE product that has not been approved by the FDA, an AUC0-2hr of 1,447 pg*hr/mL was observed.
Commercialization Strategy for TRUDHESA
If approved, we believe we can successfully commercialize TRUDHESA in the United States with specialty sales force beginning with approximately 60 representatives, and increasing to approximately 120 representatives, focusing in areas with increased demand. We intend to strategically pursue high value prescribers and early adopters, beginning with 8,000 of the highest volume migraine treatment prescribers. Based on recent migraine treatment product launches, such as ubrogepant and rimegepant, we believe this approach can be successful in accessing the concentrated prescriber bases in migraine. This target base includes approximately 4,000 neurologists and 4,000 high prescribing primary care physicians and headache specialists who have significant experience prescribing DHE. These groups make up 35% of the migraine treatment prescriptions written in 2020 in the United States. In particular, neurologist prescription productivity has grown an average of approximately 15% per year over the last two years, a growth figure aided by an increase in the number of patients seeking treatment from neurologists and primary care physicians for migraine. The planned scale up to 120 representatives is intended to allow us to target an additional 8,000 high prescribing physicians that we believe will enable us to expand coverage to 45% of all migraine treatment prescriptions in the United States. We intend to build a commercial infrastructure focused on distribution, access, promotion, education and customer support. Our market research indicates that over 70% of migraine sufferers are seeking better treatments, and physicians are willing to prescribe and payors support access at profitable price and rebate points. With approximately 72% of migraine prescriptions paid by commercial payors, we believe this market presents an attractive payor mix. We anticipate using a robust sample program to ensure trial with TRUDHESA for patients seeking better treatments and outcomes. Also, as part of our commercialization strategy, we plan to educate healthcare practitioners and patients, partner with national associations and actively support advocacy groups in the migraine market. These efforts will be supplemented with non-personal promotion to all targeted and non-targeted medium value physicians. To capture the maximum commercial opportunity of TRUDHESA, we may also selectively seek partners to commercialize the product outside of our target markets, including additional penetration within the broader primary care setting, as well as in geographies outside of the United States.
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INP105 for the Acute Treatment of Agitation and Aggression associated with Autism Spectrum Disorder
We are currently developing INP105 as an upper nasal formulation of olanzapine administered using our proprietary POD technology for the acute treatment of agitation and aggression associated with Autism Spectrum Disorder, or ASD. ASD is a neurodevelopmental disorder characterized by persistent difficulties in social communication and social interaction, coupled with restricted, repetitive patterns of behavior or interest. Research indicates that aggression rates may be higher in individuals with ASD compared to those with other developmental disabilities. Agitation and aggression are frequent and difficult to manage symptoms, and associated with negative outcomes for patients with ASD and their caregivers, including decreased quality of life, increased stress levels, and reduced availability of educational and social support. Based on a study of emergency room usage in Canada, which found that 18% of individuals with ASD aged 12 and up had visited the emergency room within the past year, and that approximately 34% of such visits were for mental health issues, we estimate that approximately 220,000 patients with ASD in the United States seek emergency room care due to mental health issues annually. In addition to patients with ASD, we believe there is potential utility to expand the label for INP105 for the acute treatment of agitation and aggression associated with bipolar disorder and schizophrenia.
We are developing INP105 as a potential acute treatment option for agitation and aggression events in this under-served population. We believe INP105 is well positioned to expand the treatment setting beyond the emergency room to new settings, such as inpatient treatment facilities and also into patients homes. Following additional discussion with the FDA, we plan to initiate a double-blind, placebo-controlled Phase 2 safety and efficacy trial of a single dose of INP105 in adolescents with ASD in the United States by the end of 2021.
Disease Overview and Market Opportunity
ASD is characterized by marked impairment in social and communicative functioning combined with restricted interests and repetitive behaviors. In March 2020, the CDC released its biennial update of autisms estimated prevalence among the nations children, stating that 1 in 54 children had a diagnosis of ASD by age 8 in 2016, a nearly 10 percent increase over 2014 when the estimate was 1 in 59. ASD is a serious neurodevelopmental disorder that currently affects approximately 3.5 million children and adults in the US. There is no single known cause, but it is hypothesized that genetic factors may play a role. There is no cure approved for ASD.
While there is no cure, intensive early treatment consisting of both psychotherapy and pharmacological treatment can make a big difference in the lives of many children. Approximately 58% of patients with ASD receive some kind of pharmacological treatment which targets non-core associated symptoms such as hyperactivity, agitation, aggression and self-injury.
We believe the potential value of INP105 would be in treating the approximately 1.5 million children and adolescent patients who receive pharmacological treatments for their ASD-related conditions, and in approximately 40% of such patients that exhibit agitation or aggression. There is a tremendous support from doctors, behavioral therapists, parents and payors to provide the caregivers of individuals with ASD with tools to manage the agitative and aggressive behaviors at home to avoid emergency department visits and hospitalization. ASD children have nine times more emergency department visits compared to non-ASD children due to psychiatric crises. Externalizing behaviors including aggression are the leading cause for these visits. Emergency department visits are associated with traumatic experience for the patient, loss of productivity for the parent and economic burden for the healthcare system. We believe INP105 has the potential to reduce emergency room visits for the approximately 220,000 ASD patients in the United States that we estimate seek care due to mental health issues annually.
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Agitation Associated with Autism Spectrum Disorder
Individuals with ASD have a high incidence of mood lability, self-injurious behavior and aggressiveness toward others. Approximately 50-70% of individuals with ASD exhibit psychological behaviors as reported by parents and caregivers, such as agitation, with a high prevalence of anxiety, attention-deficit/hyperactivity disorder and depression. Market research sponsored by us indicates approximately 40% of ASD patients had demonstrated agitation or aggression.
The Aberrant Behavior Checklist, or ABC, scale measured the emotional, social, irritability, agitation, speech, and behavioral symptoms of autism. The ABC-I (irritability, agitation, and crying) subscale includes symptoms of aggression towards others, deliberate self-injuriousness, temper tantrums, screams, and quickly changing moods. The ABC-I subscale has been used as a key primary measurement for efficacy assessment supporting the approval of a chronic treatment of risperidone and aripiprazole for the treatment of irritability in children and adolescents with ASD.
Aggression Associated with Autism Spectrum Disorder
Aggressive behaviors in ASD are the primary cause of residential placement and are associated with greater functional impairment and more intensive medical interventions. Additionally, aggressive behaviors in children with ASD are a frequent source of parental concern and are known to increase family stress, financial strain and demands on caregivers. Prevalence estimates of aggression in children with ASD vary based on the definitions used, but with certain finding that the prevalence of aggression in ASD may be up to 78.5%. Because of the variable nature of aggressive behavior, researchers have defined aggression in many different ways. Aggression is generally characterized as behavior that is threatening or likely to cause harm and may be verbal (e.g., threatening or cursing at another person) or physical (e.g., hitting, biting, or throwing objects at another person). A person can demonstrate one form of aggressive behavior or many, with variable frequency, intensity, and duration.
According to the ABC scale, aggression is a symptom categorized under the irritability, agitation, and crying subscale (ABC-I), and there are approved daily oral preventative products for irritability in ASD. However, recent studies have identified that irritability and aggression can be dissected. While DSM-V-defined argumentative and defiant behavior is associated with externalizing problems, angry/irritable symptoms predicted internalizing problems. It is important to distinguish between agitiative mood and acts of hostility or aggression, as their mechanisms may be different, suggesting aggression may need to be treated differently compared to irritable symptoms. Aggression is also a major cause of morbidity in subjects with ASD.
Current Agitation and Aggression Treatment Approaches and Their Limitations
The goal in treating agitation and aggression is to rapidly de-escalate the patient in crisis while ensuring no harm comes to the patient and the providers. Antipsychotics are currently the standard of care for the acute treatment of agitation and aggression in schizophrenia and bipolar I disorder but also have widespread utility, along with Behavioral Therapy, in treating agitation and aggression in ASD. Some atypical antipsychotics, such as olanzapine, have been shown to have fewer side effects and better adherence than traditional antipsychotics prescribed for the same indications.
The side effect profile of a chronic treatment and issues with efficacy in acute settings are the biggest unmet needs in the treatment of agitation and aggression of children and adolescent patients with ASD. We commissioned a market research survey of 64 ASD providers asking about the greatest unmet needs for treatment of agitation and/or aggression associated with autism, and respondents indicated a need for faster acting, easier to administer treatments with fewer side effects for adolescents and young adults with ASD-associated agitation and aggression.
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Our Solution: INP105
INP105 utilizes our proprietary POD technology to deliver olanzapine to the richly-vascularized upper nasal cavity. We believe that INP105 could be well positioned to disrupt the landscape in the acute treatment of ASD by rapidly delivering a preferred and widely used drug, olanzapine, in a non-invasive manner. We believe INP105 may provide the first viable treatment option that allows patients and providers the ability to treat agitation and aggression in patients with ASD before it escalates to the point of danger to the family/caregiver and patient him/herself, which may require police and/or emergency medical care intervention and/or hospital admission.
We are evaluating INP105 for its potential to provide the following specific benefits when compared to existing therapies acutely treating agitation and aggression in patients with ASD:
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Olanzapine for Agitation and Aggression. Olanzapine is a preferred drug to treat agitation and aggression events generally. Specifically, IM olanzapine can have a faster onset of action, greater efficacy and fewer adverse effects than other atypical antipsychotics and other types of drugs. |
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Rapid Onset of Action. In clinical trials, the delivery of olanzapine through our proprietary POD technology has demonstrated shorter time to peak blood level at five minutes compared to IM olanzapine, while achieving equivalent Cmax and AUC. |
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Non-invasive Delivery. Our proprietary POD technology delivered olanzapine with a pharmacokinetic profile similar to IM administration. Providing a non-invasive therapy helps secure the patient-caregiver trust and improve overall outcome for the patient by enabling the provider to intervene earlier during a period of agitation and/or aggression. INP105 utilizes our proprietary POD technology to deliver olanzapine to the upper nasal cavity in less than a 3/10th of a second with the push of a button. We believe it is well positioned to expand the treatment setting beyond the emergency department to administration in in-patient treatment facilities and patients homes by parents or caregivers. |
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Manageable Tolerability Profile. Our single ascending dose trial in healthy volunteers testing three doses of olanzapine (5mg, 10mg, and 15mg) was generally well-tolerated both systemically and locally with no serious adverse events. We intend to study the 5mg dose in adolescents/young adults with ASD. |
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Potential to avoid side effects associated with chronic treatment. In our single ascending dose trial in healthy volunteers, INP105 demonstrated a more rapid rate of olanzapine absorption as compared to the currently approved IM olanzapine and the oral disintegrating tablet treatment, which may allow some patients to reduce their chronic medication use. |
INP105 is intended to fulfill a major need for caregivers of ASD patients and is designed to be suitable for use in the home, in in-patient treatment facilities and, if necessary, in the emergency room.
INP105 Clinical Development Program
We have completed a dose ranging Phase 1b safety and pharmacokinetics trial with INP105 in healthy adults in Australia. We have also completed the formulation development and scale-up work with 12 months of stability data. We plan to initiate a Phase 2 proof-of-concept trial in adolescents with ASD in the United States by the end of 2021, with initial results expected in the second half of 2022. In this study we will be using the same dry powder POD device that was used successfully in the Phase 1b study.
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Phase 1b Clinical Trial Results
We conducted a randomized, double-blind, single ascending dose Phase 1b trial that evaluated INP105 (5mg, 10mg and 15mg), IM olanzapine (5mg and 10mg), olanzapine (10mg) orally disintegrating tablets, or ODT, and placebo in 40 healthy volunteers in Australia. Thirty-seven evaluable subjects self-administered INP105. The primary endpoints were the safety and tolerability and pharmacokinetic profile of three single-ascending doses of INP105. Secondary endpoints evaluated the pharmacodynamic effects, which refers to the effect of drugs on the body, of three single-ascending doses of INP105 as compared to those of IM and ODT olanzapine. Pharmacokinetic timepoints were recorded at baseline through 120 hours, with measures taken at 5, 10, 15, 20, 30, 45, and 60 minutes within the first hour and pharmacodynamic effects were measured with Visual Analog Scale, or VAS, the Digit Symbol Substitution Test, or DSST, and the Agitation Calmness Evaluation Scale, or ACES.
As shown in the table below, the adverse events observed in the Phase 1b trial were similar to the side effects generally observed with olanzapine, with the most common adverse events being dizziness, light-headedness and hypotension. The frequency of these adverse events with administration through our proprietary POD technology was similar compared to IM or ODT administration of olanzapine, and we observed no serious adverse events.
Olanzapine
5 mg IM n=20 |
Olanzapine
10 mg IM n=2 |
Olanzapine
ODT 10 mg n=18 |
POD-OLZ
5 mg n=10 |
POD-OLZ
10 mg n=9 |
POD-OLZ
15 mg n=8 |
POD-
Placebon=10 |
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No. with at least one treatment related TEAE |
18 | 2 | 15 | 8 | 6 | 6 | 1 | ||||||||||||||||||||||||||||
(90%) | (100%) | (83%) | (80%) | (67%) | (75%) | (10%) | |||||||||||||||||||||||||||||
Dizziness + postural dizziness |
10 | 2 | 8 | 3 | 3 | 1 | 0 | ||||||||||||||||||||||||||||
(50%) | (100%) | (44%) | (30%) | (33%) | (13%) | (0%) | |||||||||||||||||||||||||||||
Presyncope (lightheadedness) |
1 | 0 | 1 | 0 | 1 | 1 | 0 | ||||||||||||||||||||||||||||
(5%) | (0%) | (6%) | (0%) | (11%) | (13%) | (0%) | |||||||||||||||||||||||||||||
Hypotension + orthostatic hypotension |
4 | 2 | 2 | 1 | 2 | 2 | 0 | ||||||||||||||||||||||||||||
(20%) | (100%) | (11%) | (10%) | (22%) | (25%) | (0%) |
Key pharmacokinetic and pharmacodynamic observations are provided in the figures below. INP105 achieved similar bioavailability compared to equivalent doses of IM olanzapine as measured by AUC and Cmax, and INP105 achieved peak observable concentration more rapidly than IM olanzapine. Olanzapine ODT was significantly slower to achieve Tmax (2 hours) and had a lower overall Cmax and AUC. After 60 minutes, INP105 achieved similar bioavailability compared to equivalent doses of IM olanzapine 120 minutes after dosing. Data from two patients were excluded due to non-matching plasma levels pursuant to clinical trial procedure.
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Olanzapine Pharmacokinetic Results, 0-1 Hour
Olanzapine Pharmacokinetic Results, 0-8 Hours
To measure pharmacodynamic effects of INP105 subjects were assessed using the DSST, ACES and VAS. As can be seen in the three graphs below, INP105 had a dose dependent effect on each of
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these pharmacodynamic measures similar to IM olanzapine, which further supports the novel and unique profile of INP105 to provide rapid onset of effect non-invasively.
ACES is a 9-point scale that evaluates levels of agitation/calmness. A decrease in ACES score represents a reduction in agitation and in increased tranquil or calm state. Although these healthy subjects were not in an agitated state before dose administration, the increase in score indicates a transition into a more tranquil or calm state. The preliminary ACES results from our INP105-101 trial in the figure below showed that INP105 had a similar effect as IM olanzapine and a greater effect than placebo.
ACES Results from INP105 Phase 1b Study
The DSST test is a measure of change in cognitive function. Atypical antipsychotic drugs would be expected to result in a negative change from baseline. The preliminary DSST results from our INP105-101 trial in the figure below showed that INP105 had a similar effect as IM olanzapine and a greater effect than placebo.
DSST Results from INP105 Phase 1b Trial
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Patients self-reported the VAS on three scales of 0-100 dosing feeling drowsy to alert, foggy to clear-headed and lethargic to energetic at baseline and at various times after dosing. A reduction, or negative change, in score from baseline in each measure indicates an increase in feelings of drowsiness, foggy-headedness and lethargy, respectively. The preliminary VAS results from our INP105-101 trial in the figure below showed that INP105 had a similar effect as IM olanzapine and a greater effect than placebo.
VAS Results from INP105 Phase 1b Trial
Commercialization Strategy for INP105
If approved, we believe we can successfully commercialize INP105 in the United States with a targeted, specialty sales force. We would intend to leverage the commercial and medical affairs infrastructure we would have in place for TRUDHESA for the acute treatment of migraine if approved. We plan to work with national autism associations, as well as inpatient treatment facilities to update treatment guidelines to include INP105 in treatment plans as part of behavior therapy plans for treating agitation and aggression in ASD. We plan to educate healthcare practitioners and patients, partner with national associations and actively support advocacy groups in the autism market.
INP107 for the Treatment of OFF Episodes in Parkinsons Disease
We are currently developing INP107 as an upper nasal formulation of carbidopa/levodopa, administered using our proprietary POD technology, for the treatment of OFF episodes in Parkinsons. Current standard of care for the symptomatic treatment of Parkinsons is oral levodopa, but when levodopa levels fall below their therapeutic range, patients may lose adequate control of motor symptoms, which are referred to as OFF episodes. Carbidopa is co-administered with levodopa to slow levodopas rapid metabolism thereby increasing the amount available for the symptoms of Parkinsons. INP107 is a non-invasive, self- or caregiver-administered, investigational upper nasal therapy designed to provide rapid delivery of levodopa to the brain for the treatment of OFF episodes. We have conducted a Phase 2a clinical trial with one dose of INP107 in Australia, and based on the trial results, we expect to further optimize the INP107 formulation prior to advancing into future clinical development.
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Disease Overview and Market Opportunity
Parkinsons is a progressive neurodegenerative disorder that results from the gradual death of certain dopamine producing neurons that aid in regulating motor control, among other functions. As the disease progresses, motor function gradually worsens until a patient is no longer able to perform normal daily tasks such as eating, bathing and dressing. In order to compensate for the loss of dopamine, patients are typically treated with oral carbidopa/levodopa therapy. However, as the disease progresses, dopamine levels fluctuate because of variable responses to oral treatment and insufficient levels of dopamine in the brain, causing OFF episodes.
Parkinsons is the second most common neurodegenerative disorder worldwide and over one million people in the United States currently suffer from Parkinsons. Its prevalence increases with age. It is estimated that over 350,000 Parkinsons patients in the United States deal with OFF episodes on a daily basis. The overall Parkinsons market is expected to grow to over $8.4 billion by 2026, with emerging treatments for OFF episodes contributing to that growth.
Current Parkinsons Treatment Approaches and Inherent Limitations
There is no cure or disease-modifying treatment currently available for Parkinsons. Current treatment strategies are focused on the management and reduction of the major symptoms of the disease and related disabilities. These therapies either aim to supplement dopamine levels in the brain, mimic the effect of dopamine in the brain by stimulating dopamine receptors or prevent the enzymatic breakdown of dopamine.
The standard of care regimen for symptomatic treatment of Parkinsons is the oral administration of levodopa, which was the first drug approved specifically for Parkinsons over 50 years ago. Levodopa remains the most efficacious and widely used treatment for Parkinsons. Levodopa improves motor function as long as its levels in the brain remain within an individuals therapeutic range.
Variations in levodopa concentrations outside of the therapeutic range are the determining factor for motor fluctuations. When levels are below the therapeutic range, patients do not experience adequate control of motor symptoms, which are referred to as OFF episodes. If levodopa levels exceed the therapeutic range, patients typically experience involuntary movements, which are referred to as dyskinesia. Using currently available oral treatment options, it is extremely challenging for physicians to create a customized patient-specific regimen that consistently maintains levodopa levels within a patients therapeutic range due to both the inherent nature of the levodopa chemical structure as well as the physiologic manifestations of the disease in patients.
The limitations to the use of oral levodopa include:
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Delayed and Variable Levodopa Clinical Effect. Levodopa blood levels are patient-specific and occasion-specific, but generally have peak blood levels at 1 to 2 hours after dosing. This delayed onset and variability lead to difficulties in planning levodopa dosing and frequently cause patients to be out of their therapeutic window. This variability is a significant contributor to the unreliability of oral levodopa and highlights the challenge that patients face every day in not knowing when their medication will take effect, if at all. |
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Reduced Absorption and Food Effect. Levodopa must be actively absorbed through the gastrointestinal, or GI, tract into the bloodstream and competes with food for active transport. GI transport is frequently slowed by meals, decreasing the amount of levodopa that can be absorbed when it is given orally near mealtime. The frequency with which levodopa is administered throughout the day complicates dosing, as patients have difficulty planning meals around their complex oral dose regimens in order to minimize the impact on their levodopa absorption. |
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Challenges with Swallowing. Parkinsons patients frequently have difficulty swallowing oral medications. |
As a result of these challenges, more than 90% of Parkinsons patients experience at least one OFF episode per day. Nearly 65% of Parkinsons patients are OFF for two or more hours per day and 20% are OFF for more than four hours per day. Nearly half the patients experiencing OFF indicate the need to avoid or stop activities they can perform while ON. The average disability rating was almost twice when patients described their state as OFF when compared to being ON.
There is a lack of available therapies to address these OFF episodes. Injectable apomorphine has been used as a non-selective dopamine agonist and is effective in rapidly reducing OFF time, but its route of administration and significant nausea and vomiting hinder its utilization. Recently approved Inbrija, pulmonary inhaled levodopa, is indicated for the intermittent treatment of OFF episodes in Parkinsons patients currently being treated with another form of carbidopa/levodopa. Clinical data in support of Inbrija indicate peak clinical effect, reversal of OFF, at 30 minutes after dosing.
Limitations of OFF treatments in Parkinsons, which have resulted in unmet needs for Parkinsons patients, include:
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Route of Administration. Injectable apomorphine is invasive and challenging for a patient in an OFF episode to administer. Inhaled levodopa requires strong pulmonary function and a 30-second inhalation process. Oral levodopa, due to its route of administration, has significant GI delays and may have variability in absorption. |
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Requires a Baseline of Carbidopa/Levodopa. Inhaled levodopa must be used as an adjunct to oral carbidopa/levodopa to achieve maximum impact due to the high metabolism of levodopa absent a decarboxylase inhibitor. |
Our Solution: INP107
We are developing INP107 as a self- or caregiver- administered, upper nasal carbidopa/levodopa therapy. Co-administration of carbidopa with levodopa increases amounts of levodopa available in the CNS to be converted to dopamine by limiting peripheral conversion of levodopa in the blood. Additionally, reducing peripheral conversion to dopamine helps to avoid side effects such as nausea and low blood pressure.
We believe that INP107 has the potential to provide the following advantages:
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Rapid Onset and Pronounced Effect. Based on our initial PK and PD data, INP107 provided an encouraging bioavailability profile. |
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Self or Caregiver Administration. INP107 utilizes our proprietary POD technology to deliver carbidopa/levodopa to the upper nasal cavity with a propellant, which would enable either self or caregiver administration. |
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Delivery Without Breathing Coordination. INP107 is designed to deliver carbidopa/levodopa in a spray of 3/10ths of a second with no breathing coordination required. |
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Potential Treatment of Morning OFF. We have designed INP107 to potentially be utilized without oral or baseline administration of carbidopa, which could facilitate use for morning OFF episodes when the patients do not have any levodopa or carbidopa in their system. |
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Alternative to Oral Carbidopa/Levodopa Dosing. INP107 could be used to replace oral dosing and allow patients to better titrate their dosing due to its rapid uptake and without having to worry about food effects. |
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INP107 Clinical Development Program
We have completed a Phase 2a safety, tolerability and pharmacokinetics/pharmacodynamics trial in Parkinsons patients testing INP107 and a levodopa-only formulation. The next phase of the program will be to initiate a Phase 1 pharmacokinetic and tolerability trial in Australia or the United States in 2022 to inform dose selection for further clinical development of INP107.
INP107 Clinical Results
Our Phase 2a clinical trial, completed in 2019, was a randomized, double-blind, placebo controlled, trial to evaluate the safety, tolerability and pharmacokinetics/pharmacodynamics of both a levodopa-only formulation pretreated with an oral decarboxylase inhibitor and INP107 (7mg carbidopa/70mg levodopa) in the absence of a decarboxylase inhibitor in PD patients during an OFF episode. The trial enrolled 32 patients in Australia who were randomized into one of four cohorts, all versus a placebo. Three cohorts consisted of a levodopa-only formulation and the fourth cohort consisted of INP107.
Patients in this trial were required to be levodopa responsive, to stop taking all Parkinsons medications the evening before they arrived in clinic and were then confirmed to be in an OFF episode the morning of trial intervention. Once confirmed to be in an OFF episode, patients were randomized to either placebo or active treatment. Blood draws were completed at 4, 9, 14, 29, 44, 59, 89 and 119 minutes after dosing.
The primary endpoint of the trial was safety and tolerability over the immediate 240 minutes following dosing and over seven days of follow-up. In this trial, INP107 was generally well tolerated, with no serious adverse events reported. Secondary endpoints included evaluating the pharmacokinetic profile of levodopa and the pharmacodynamic effect of INP107 in the 120 minutes following dosing. The latter was measured by trained assessors using the Movement Disorder SocietyUnified Parkinsons Disease Rating Scale Part 3. Trial results showing INP107 plasma concentrations over time are shown in the figure below.
Levodopa Plasma Concentrations Over Time from
INP107 Phase 2a Interim Analysis
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INP107 (7mg carbidopa/70mg levodopa) plasma levels were observed to increase over time throughout the duration of blood draws and were significantly higher than placebo after the first five minutes. However, despite this increase in plasma levels, there was no significant improvement in the UPDRS Part III motor scores between INP107 and placebo. Based on this result, we intend to further develop the formulation to improve the overall plasma absorption and speed of absorption before advancing into further clinical development.
Manufacturing
All of our manufacturing processes are outsourced to third parties with oversight by our internal managers. We rely on third-party manufacturers to comply with cGMP and produce sufficient quantities of drug product for use in clinical trials. We intend to continue this practice for any future clinical trials and commercialization of TRUDHESA, INP105 and INP107 and for any other potential product candidates for which we retain significant development and commercialization rights.
The active pharmaceutical ingredient and drug formulation of TRUDHESA has been developed and manufactured by a CMO located in Europe. Our CMO has extensive experience manufacturing liquid formulation of dihydroergotamine mesylate under cGMP and has the capacity to manufacture at commercial scale. This CMO has manufactured Migranal, a drug that uses the same primary container and formulation as TRUDHESA, for over 20 years. The DHE batches used in the pivotal Phase 1 clinical trial, our registration lots, and our STOP301 trial were all produced by the same manufacturer, and on the same manufacturing lines that we expect will be used for commercial launch of TRUDHESA, if approved.
The TRUDHESA POD device is manufactured by third-party CMOs. This device has been used for the pivotal Phase 1 clinical trial, our registration lots, and our STOP301 trial and is the device intended for commercial launch of TRUDHESA. The plastic component manufacturing and sub-assembly, valve manufacture, canister manufacture and canister fill with final assembly are each performed by a different third-party CMO. Each have extensive experience with medical-grade clinical and commercial scale device manufacture under cGMP. We used the same assembly group through all stages of development and intend to utilize the same assembly lines and validated processes through the NDA approval and submission process.
The INP105 and INP107 product candidates are both powder drug formulations. They have both utilized the clinical stage POD device for initial clinical trials and are both expected to transition to a commercial stage POD device for pivotal studies and commercialization. The development work on the commercial stage device for INP105 is ongoing, while the formulation has been developed and produced at commercial scale with 12 months of stability data. Both of these drug formulations have been developed with our powder formulation CMO. This CMO has the capability to produce these formulations at all scales of development including through commercialization.
Competition
The pharmaceutical industry is highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations actively engaged in research and development of product candidates which may target the same markets as our product candidates. We expect any future product candidates we develop to compete on the basis of, among other things, product efficacy and safety, time to market, price, extent of adverse side effects experienced and convenience of administration and drug delivery.
For our product candidates, we are aware of the following competing efforts:
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TRUDHESA. Approved acute treatments for migraine include triptans, ditans, calcitonin gene-related peptides antagonists, or gepants, lasmiditan and alternative formulations of DHE, |
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such as Migranal, which is administered intranasally. Some of these competitor products have been launched by large pharmaceutical companies such as Eli Lilly & Co., Allergan plc, Alder Biopharmaceuticals, Inc., and other smaller companies. Some of these competitors are also developing product candidates that utilize alternative routes of administration, including Biohaven Pharmaceuticals, Inc., GlaxoSmithKline plc, OptiNose Inc., and Promius Pharma LLC, whose product candidates use nasal pumps or other nasal drug delivery technologies. |
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INP105. While there are no FDA-approved acute treatments for agitation and aggression in ASD, commonly prescribed treatments include mostly atypical (second generation) antipsychotics. These can include risperdone (Risperdal), olanzapine (Zyprexa), quetiapine (Seroquel), aripiprazole (Abilify), ziprasidone (Geodon) and others. |
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INP107. Approved treatments for the symptoms of OFF episodes in Parkinsons include carbidopa/levodopa (both short and long-acting oral forms), MAO-B inhibitors, COM-T inhibitors, dopamine agonists, amantadine such as Gocovri, apomorphine and inhaled levodopa, such as Inbrija. In addition, there are several product candidates under development by pharmaceutical companies such as Eli Lilly & Co., Intec Pharma Ltd. and AbbVie Inc. Some of these product candidates also utilize alternative routes of administration, such as Sunovion Pharmaceuticals, Inc., whose product candidate uses a sublingual film, and Acorda Therapeutics, Inc. whose product candidate uses a dry powder inhaler. |
Many of our competitors, either alone or with strategic partners, have substantially greater financial, technical and human resources than we do. Accordingly, our competitors may be more successful than us in obtaining approval for treatments and achieving widespread market acceptance, rendering our treatments obsolete or non-competitive. Accelerated merger and acquisition activity in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. These companies also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials and acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our commercial opportunity could be substantially limited in the event that our competitors develop and commercialize product candidates that are more effective, safer, less toxic, more convenient or less expensive than our comparable product candidates. In geographies that are critical to our commercial success, competitors may also obtain regulatory approvals before us, resulting in our competitors building a strong market position in advance of the entry of our product candidates. We believe the factors determining the success of our programs will be the efficacy, safety and convenience of our product candidates.
Intellectual Property
We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to our business, including seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. Our policy is to seek to protect our proprietary position by, among other methods, pursuing and obtaining patent protection in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements, platforms and product candidates that are important to the development and implementation of our business. Our patent portfolio is intended to cover, but is not limited to, our POD technology, our product candidates and components thereof, their methods of use and processes for their manufacture, and any other inventions that are commercially important to our business. We expect to rely on data exclusivity, market exclusivity, patent term adjustment and patent term extensions when available. Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions, and improvements; to maintain our licenses to use intellectual property owned or controlled by third parties; to defend and enforce our proprietary rights, including our patents; to defend against and challenge the assertion by
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third parties of their purported intellectual property rights; and to operate without the unauthorized infringement on the valid and enforceable patents and other proprietary rights of third parties.
We believe that we have a strong global intellectual property position relating to our POD device and product candidates. Our patent portfolio as of December 31, 2020 contained four U.S. issued patents and 21 patents issued in ex-U.S. jurisdictions including Australia, Canada, China, Switzerland, Germany, France, Great Britain, Japan, and Russia and 16 U.S. pending applications as well as 55 patent applications pending in ex-U.S. jurisdictions including Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Korea, Mexico, New Zealand, Russia, South Africa and three pending international patent applications owned solely by us.
Our TRUDHESA product candidate is covered by five patent families: three of the families include claims relating to the POD device used for delivery of DHE to the upper nasal cavity; the other two families include claims relating to methods of delivering DHE to the upper nasal cavity. As of December 31, 2020, from the three device patent families, three U.S. patents have issued, 17 patents have issued in ex-US jurisdictions including Australia, China, Switzerland, Germany, France, Great Britain, Japan, and Russia, and 28 applications were pending in the U.S., Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Korea, Mexico, New Zealand, and South Africa. Upon FDA approval, we intend to list the issued U.S. patents on the FDA Orange Book. As of December 31, 2020, from the two method of use patent families, three applications were pending in the U.S., and nine applications were pending in ex-U.S. jurisdictions including Australia, Brazil, Canada, China, Europe, India, Japan, Korea, and Russia. Our issued patents, and any patents that may issue from our pending patent applications, are expected to expire between 2032 and 2039, absent any patent term adjustments or extensions.
Our INP105 product candidate is covered by three patent families: two of the families include claims relating to the POD device used for delivery of olanzapine to the upper nasal cavity; one patent family includes composition of matter claims covering our dry powder formulation and claims directed to methods of delivering olanzapine to the upper nasal cavity. As of December 31, 2020, from the two device patent families, two U.S. patents have issued, ten patents have issued in ex-US jurisdictions including Australia, China, Switzerland, Germany, France, Great Britain, Japan, and Russia, and six applications were pending in the U.S., Brazil, Canada, Europe, India, and a PCT international application. As of December 31, 2021, in the composition of matter and method of use patent family, nine applications were pending in the U.S. and ex-U.S. jurisdictions including Australia, Brazil, Canada, China, Europe, India, Japan and Korea. Our issued patents, and any patents that may issue from our pending patent applications, are expected to expire between 2032 and 2039, absent any patent term adjustments or extensions.
Our INP107 product candidate is covered by three patent families: two of the families include claims relating to the POD device used for delivery of a combination of levodopa and carbidopa to the upper nasal cavity; one patent family includes composition of matter claims covering our dry powder formulation and claims directed to methods of delivering a levodopa/carbidopa combination to the upper nasal cavity. As of December 31, 2020, from the two device patent families, two U.S. patents have issued, ten patents have issued in ex-US jurisdictions including Australia, China, Switzerland, Germany, France, Great Britain, Japan, and Russia, and six applications were pending in the U.S., Brazil, Canada, Europe, India, and a patent cooperation treaty, or PCT, international application. As of December 31, 2020, one application was pending in the U.S. in the composition of matter and method of use patent family and one PCT international application was pending. Our issued patents, and any patents that may issue from our pending patent applications, are expected to expire between 2032 and 2039, absent any patent term adjustments or extensions.
In addition, we have exclusively licensed a patent portfolio that as of December 31, 2020 contained two U.S. issued patents and nine patents issued in ex-U.S. jurisdictions including Canada, Italy, Great
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Britain, France, Spain, and Germany. This patent portfolio includes claims relating to a circumferential aerosol device for delivering drugs including to the olfactory epithelium and brain. Our issued patents that have been licensed are expected to expire between 2029 and 2031, absent any patent term adjustments or extensions. None of our licensed patents are material to our current pipeline product candidates.
We continually assess and refine our intellectual property strategy as we develop new platform technologies and product candidates. To that end, we are prepared to file additional patent applications if our intellectual property strategy requires such filings, or where we seek to adapt to competition or seize business opportunities. Further, we are prepared to file patent applications, as we consider appropriate under the circumst ances, relating to the new technologies that we develop. In addition to filing and prosecuting patent applications in the United States, we often file counterpart patent applications in Europe and in additional countries where we believe such foreign filing is likely to be beneficial.
The term of individual patents depends upon the laws of the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing of a non-provisional patent application. However, the term of U.S. patents may be extended for delays incurred encountered during prosecution that are caused by the USPTO or due to compliance with FDA requirements. For example, the Hatch-Waxman Act permits a patent term extension for FDA-approved drugs of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent extension cannot extend the remaining term of a patent beyond five years, nor beyond a total of 14 years from the date of product approval, and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our pharmaceutical product candidates receive FDA approval, we expect to apply for patent term extensions on patents covering those product candidates. We intend to seek patent term extensions of our issued patents in any jurisdiction where these are available; however, there is no guarantee that the applicable authorities, including the USPTO and FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions. Our currently issued patents, including those owned and exclusively licensed, will likely expire on dates ranging from 2029 to 2036. If patents are issued on our pending patent applications, including those owned and exclusively licensed, the resulting patents are projected to expire on dates ranging from 2032 to 2040, unless we receive patent term adjustment or patent term extension, or both. However, the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.
The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. No consistent policy regarding the scope of claims allowable in patents in the field of CNS diseases has emerged in the United States. The patent situation outside of the United States is even more uncertain. Changes in the patent laws and rules, either by legislation, judicial decisions, or regulatory interpretation in the United States and other countries may diminish our ability to protect our inventions and enforce our intellectual property rights, and more generally could affect the value of our intellectual property. In particular, our ability to stop third parties from making, using, selling, offering to sell, or importing any of our patented inventions, either directly or indirectly, will depend in part on our success in obtaining, defending, and enforcing patent claims that cover our technology, inventions, and improvements. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our platforms and product candidates and the methods used to manufacture those platforms and product candidates.
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Our issued patents and those that may issue in the future may be challenged, invalidated, or circumvented, which could limit our ability to stop competitors from marketing related platforms or product candidates or limit the length of the term of patent protection that we may have for our POD device and product candidates. In addition, the rights granted under any issued patents may not provide us with protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may have competition for our POD device and product candidates. Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any particular product candidate can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent. For this and more comprehensive risks related to our proprietary technology, inventions, improvements, platforms and product candidates, please see the section titled Risk FactorsRisks Related to Intellectual Property.
Moreover, even our issued patents do not guarantee us the right to practice our technology in relation to the commercialization of our platforms product candidates. Third parties may have, or may obtain, blocking patents that could be used to prevent us from commercializing our POD device and product candidates and practicing our proprietary technology.
We own trademark registrations and pending applications for use in connection with our product candidates in several jurisdictions, including the United States. The IMPEL mark is registered in Austria, Canada, China, the European Union, India, Japan, South Korea, United Kingdom, and the United States, and we own a pending application in Mexico. The IMPEL mark in simplified Chinese characters mark is registered in China. The IMPEL mark with the Impel NeuroPharma logo is registered in Australia. The Impel NeuroPharma logo is registered in Australia, China, the European Union, India, Japan, Mexico, South Korea, United Kingdom, and the United States, and we own a pending application in Canada. The POD mark is registered in Australia, the European Union, India, United Kingdom, and the United States. The IMPELPOD mark is registered in China, Japan, Mexico, and South Korea, and we own pending applications in Canada and Mexico. The TRUDHESA mark is registered in Australia, China, the European Union, India, Japan, South Korea, and the United Kingdom, and we own pending applications in Canada, Mexico, and the United States. We own pending applications for the TULIFTA mark and the TRUDHESA logo in the United States.
It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individuals relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and which are related to our current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property. In many cases our confidentiality and other agreements with consultants, outside scientific collaborators, sponsored researchers and other advisors require them to assign or grant us licenses to inventions they invent as a result of the work or services they render under such agreements or grant us an option to negotiate a license to use such inventions.
We also seek to preserve the integrity and confidentiality of our proprietary technology and processes by maintaining physical security of our premises and physical and electronic security of our information technology systems. Although we have confidence in these individuals, organizations, and systems, agreements or security measures may be breached and we may not have adequate
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remedies for any breach. To the extent that our employees, contractors, consultants, collaborators, and advisors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting inventions.
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
FDA Approval Process
In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products and medical devices. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as a clinical hold, FDA refusal to approve a pending NDA, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.
Pharmaceutical product development for a new product or certain changes to an approved product in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA of an investigational new drug application, or IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.
Preclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including good laboratory practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product CMC, and a proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue 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 trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.
Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with good clinical practices, or GCPs, which are standards meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.
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The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol and informed consent information for patients in clinical trials must also be submitted to an IRB for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRBs requirements, or may impose other conditions.
Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance, and optimum dosage, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial may be sufficient in rare instances, including (1) where the study is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) when in conjunction with other confirmatory evidence.
The manufacturer of an investigational drug in a Phase 2 or 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access.
After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the United States. The NDA must include the results of all preclinical, clinical, and other testing and a compilation of data relating to the products pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally subject to a substantial application user fee, currently exceeding $2,875,000 for Fiscal Year 2021. The manufacturer or sponsor under an approved NDA is also subject to an annual program fee, currently exceeding $336,000 for each prescription drug product for Fiscal Year 2021. These fees are typically increased annually.
The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agencys threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of NDAs. Most applications for standard review drug products that are not new molecular entities, or NMEs, are reviewed within ten months of the date of submission of the NDA to the FDA; most applications for priority review drugs that are not NMEs are reviewed within six months of the date of submission of the NDA to the FDA. Priority review can be applied to drugs that the FDA determines offer major advances in treatment or provide a treatment where no adequate therapy exists. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission.
The FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an advisory committeetypically a panel that includes clinicians and
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other expertsfor review, evaluation, and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.
Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will generally inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unless compliance with cGMPs is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.
After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDAs satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included.
An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product approval may require substantial post-approval testing and surveillance to monitor the drugs safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.
Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing NDAs.
Section 505(b)(2) New Drug Applications
An alternative to the 505(b)(1) NDA pathway described above is an NDA submitted under Section 505(b)(2) of the FDCA, which enables the applicant to rely, in part, on the FDAs prior findings in approving a similar product or published literature in support of its application.
505(b)(2) NDAs often provide an alternate path to FDA approval for modified formulations, new routes of administration, or new uses of previously approved products.
Section 505(b)(2) permits the submission of an NDA where at least some of the safety and efficacy information required for approval comes from studies not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference. If the Section 505(b)(2) applicant can establish that reliance on the FDAs prior findings of safety or effectiveness is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all, or some, of the indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.
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Fast Track Designation and Accelerated Approval
The FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the Fast Track program, the sponsor of a new drug candidate may request that the FDA designate the drug candidate for a specific indication as a Fast Track drug concurrent with, or after, the filing of the IND for the drug candidate. The FDA must determine if the drug candidate qualifies for Fast Track Designation within 60 days of receipt of the sponsors request.
Under the Fast Track program, the FDA may grant Fast Track Designation for a drug if it is intended, whether alone or in combination with one or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. 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.
If a submission is granted Fast Track Designation, the sponsor may engage in more frequent interactions with the FDA, and the FDA may initiate review of sections of the NDA before the application is complete. This rolling review is available if the applicant provides, and the FDA approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, the FDAs time period goal for reviewing an application does not begin until the last section of the NDA is submitted. Additionally, Fast Track Designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon adequate and well-controlled clinical trials establishing that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a condition when the drug has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.
A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval trials, or confirm a clinical benefit during post-marketing trials, will allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information on ClinicalTrials.gov. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
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Pediatric Information
Under the Pediatric Research Equity Act, NDAs or supplements to NDAs must contain data 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 drug is safe and effective. The FDA may grant full or partial waivers or deferrals for submission of data.
The Best Pharmaceuticals for Children Act, or BPCA, provides NDA holders a six-month extension of any exclusivitypatent or nonpatentfor a drug if certain conditions are met. Conditions for exclusivity include the FDAs determination that information relating to the use of a new drug in the pediatric population may produce health benefits in that population, the FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.
Post-Approval Requirements
Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.
Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.
The FDA strictly regulates marketing, labeling, advertising and promotion of drugs that are placed on the market. Advertising and promotion of drugs must be in compliance with the FDCA and its implementing regulations and only for the approved indications and in a manner consistent with the approved labeling. 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, including investigation by federal and state authorities.
The Hatch-Waxman Act
Orange Book Listing
In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims cover the applicants product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDAs Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an Abbreviated New Drug
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Application, or ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, pre-clinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are commonly referred to as generic equivalents to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug.
The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDAs Orange Book. Specifically, the applicant must certify that (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. The ANDA applicant may also elect to submit a statement certifying that its proposed ANDA label does not contain (or carve out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired. A certification that the new product will not infringe the already approved products listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant.
The ANDA application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired.
To the extent that a Section 505(b)(2) applicant is relying on the FDAs prior findings of safety or effectiveness for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. Thus, approval of a 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.
Exclusivity
Upon NDA approval of a new chemical entity, which is a drug that contains no active moiety that has been approved by the FDA in any other NDA, that drug receives five years of marketing exclusivity during which the FDA cannot receive any ANDA seeking approval of a generic version of that drug. An ANDA may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed. If there is no listed patent in the Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA may be filed before the expiration of the exclusivity period. Certain changes to a drug, such as the addition of a new indication to the package insert, can be the subject of a three-year period of exclusivity if the application contains reports of new clinical investigations (other than bioavailability studies) conducted or sponsored by the sponsor that were essential to approval of the application. FDA cannot approve an ANDA for a generic drug that includes the change during the exclusivity period.
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The FDCA alternatively provides three years of marketing exclusivity for an NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or condition of use. 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.
Patent Term Extension
After NDA approval, owners of relevant drug patents may apply for up to a five-year patent extension. The allowable patent term extension is calculated as half of the drugs testing phase (the time between IND application and NDA submission) and all of the review phase (the time between NDA submission and approval up to a maximum of five years). The time can be shortened if the FDA determines that the applicant did not pursue approval with due diligence. The total patent term after the extension may not exceed 14 years, and only one patent can be extended. For patents that might expire during the application phase, the patent owner may request an interim patent extension. An interim patent extension increases the patent term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is reduced by one year. The director of the United States Patent and Trademark Office must determine that approval of the drug covered by the patent for which a patent extension is being sought is likely. Interim patent extensions are not available for a drug for which an NDA has not been submitted.
Combination Products
A combination product is a product comprising (i) two or more regulated components, i.e., drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity; (ii) two or more separate products packaged together in a single package or as a unit and comprising drug and device products, device and biological products, or biological and drug products; (iii) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling is intended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, or effect and where upon approval of the proposed product the labeling of the approved product would need to be changed, for example, to reflect a change in intended use, dosage form, strength, route of administration, or significant change in dose; or (iv) any investigational drug, device, or biological product packaged separately that according to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required to achieve the intended use, indication, or effect.
The FDA is divided into various branches, or Centers, by product type. Different Centers typically review drug, biologic, or device applications. In order to review an application for a combination product, the FDA must decide which Center should be responsible for the review. FDA regulations require that the FDA determine the combination products primary mode of action, which is the single mode of a combination product that provides the most important therapeutic action of the combination product. The Center that regulates that portion of the product becomes the lead evaluator. When evaluating an application, a lead Center may consult other Centers but still retain complete reviewing authority, or it may collaborate with another Center, by which the Center assigns review of a specific section of the application to another Center, delegating its review authority for that section. Typically, an applicant submits a single marketing application to the Center selected to be the lead evaluator, although separate applications for each constituent part may be submitted to the applicable Centers.
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One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accrues only from approval under a particular type of application, like new drug product exclusivity. If multiple applications are submitted, each may be evaluated by a different lead Center.
In a drug/device combination product, where the device component is a prefilled drug delivery device, the primary mode of action is typically a drug mode of action with the Center for Drug Evaluation and Research, or CDER, as the lead Center. CDER would review the NDA in consultation with the Center for Devices and Radiological Health on device-specific issues. For co-packaged or single-entity combination products, such as pre-filled drug-delivery devices, there are two ways to comply with cGMP requirements. Manufacturers can either (i) demonstrate compliance with all cGMP regulations applicable to each of the constituent parts in the combination product or (ii) in the case of drug-device combination products, demonstrate compliance with either the drug cGMP regulations or the device QSR and also demonstrate compliance with additional provisions from the other of these two sets of cGMP requirements, as specified in the combination products regulations.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: warning or untitled letters, fines, injunctions, civil or criminal penalties, recall or seizure of current or future products, operating restrictions, partial suspension or total shutdown of production, refusal or denial of submissions for new products, or withdrawal of clearance, authorization, or approval.
Other Healthcare Laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain general business and marketing practices in the pharmaceutical industry. These laws include anti-kickback statutes, false claims, transparency, and health information privacy laws and other healthcare 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 the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. The Affordable Care Act, or ACA, amended the intent element of the federal statute so that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to commit a violation. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers, among others, on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.
Federal civil and criminal false claims laws, including the federal civil False Claims Act, prohibit any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. This includes claims made to programs where the federal government reimburses, such as Medicare and Medicaid, as well as programs where the federal government is a direct purchaser, such as when it purchases off the Federal Supply Schedule. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. Additionally, the
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ACA amended the federal Anti-Kickback Statute such that a violation of that statute can serve as a basis for liability under the federal False Claims Act. Most states also have statutes or regulations similar to the federal Anti-Kickback Statute and civil False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
Other federal statutes pertaining to healthcare fraud and abuse include the civil monetary penalties statute, which prohibits, among other things, the offer or payment of remuneration to a Medicaid or Medicare beneficiary that the offeror or payor knows or should know is likely to influence the beneficiary to order a receive a reimbursable item or service from a particular supplier, and the additional federal criminal statutes created by the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or obtain by means of false or fraudulent pretenses, representations or promises any money or property owned by or under the control of any healthcare benefit program in connection with the delivery of or payment for healthcare benefits, items or services.
In addition, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, including the Final Omnibus Rule published on January 25, 2013, impose obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services involving the storage, use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information. HITECH 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 attorneys fees and costs associated with pursuing federal civil actions. In addition, many state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, and often are not preempted by HIPAA.
Further, pursuant to the ACA, the CMS has issued a final rule that requires manufacturers of prescription drugs to collect and annually report information on certain payments or transfers of value to physicians and teaching hospitals, as well as investment interests held by physicians and their immediate family members. The reported data is made available in searchable form on a public website on an annual basis. Failure to submit required information may result in civil monetary penalties. Effective January 1, 2022, reporting on payments and transfers of value made in the previous year to covered recipients will be expanded to include physician assistants, nurse practitioners clinical nurse specialists, certified registered nurse anesthetists and anesthesiologist assistants, and certified nurse-midwives.
In addition, several states now require prescription drug companies to report certain expenses relating to the marketing and promotion of drug products and to report gifts and payments to individual healthcare practitioners in these states. Other states prohibit various marketing-related activities, such as the provision of certain kinds of gifts or meals. Still other states require the posting of information relating to clinical studies and their outcomes. Some states require the reporting of certain pricing information, including information pertaining to and justifying price increases, or prohibit prescription drug price gouging. In addition, certain states require pharmaceutical companies to implement compliance programs or marketing codes. Certain states and local jurisdictions also require the
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registration of pharmaceutical sales representatives. Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws face civil penalties.
Efforts to ensure that business arrangements with third parties comply with applicable healthcare laws and regulations involve substantial costs. If a drug companys operations are found to be in violation of any such requirements, it may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, the curtailment or restructuring of its operations, loss of eligibility to obtain approvals from the FDA, exclusion from participation in government contracting, healthcare reimbursement or other federal or state government healthcare programs, including Medicare and Medicaid, integrity oversight and reporting obligations, imprisonment, and reputational harm. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action for an alleged or suspected violation can cause a drug company to incur significant legal expenses and divert managements attention from the operation of the business, even if such action is successfully defended.
Reimbursement
The regulations that govern pricing and reimbursement for new drugs and therapeutic biologics vary widely from country to country. Some countries require approval of the sale price of a drug or therapeutic biologic before it can be marketed. In many countries, the pricing review period begins after marketing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, a drug company can obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of that product.
A drug companys ability to commercialize any products successfully will also depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government authorities, private health insurers and other organizations. Even if one or more products are successfully brought to the market, these products may not be considered cost-effective, and the amount reimbursed for such products may be insufficient to allow them to be sold on a competitive basis. Increasingly, third-party payors who reimburse patients or healthcare providers, such as government and private insurance plans, are requiring that drug companies provide them with predetermined discounts from list prices, and are seeking to reduce the prices charged or the amounts reimbursed for pharmaceutical products.
Significant delays can occur in obtaining reimbursement for newly-approved drugs or therapeutic biologics, and coverage may be more limited than the purposes for which the drug or therapeutic biologic is approved by the FDA or similar foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug or therapeutic biologic will be reimbursed in all cases or at a rate that covers a drug companys costs, including research, development, manufacture, sale and distribution.
Interim reimbursement levels for new drugs or therapeutic biologics, if applicable, may also be insufficient to cover a drug companys costs and may not be made permanent. Reimbursement rates may be based on payments allowed for lower cost drugs or therapeutic biologics that are already reimbursed, may be incorporated into existing payments for other services and may reflect budgetary constraints or imperfections in Medicare data. Net prices for drugs or therapeutic biologics may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs or therapeutic biologics from countries where they may be sold at lower prices than in the United States. Further, no uniform policy for coverage and reimbursement exists in the United States. Third-party payors often
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rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. Therefore, coverage and reimbursement can differ significantly from payor to payor.
U.S. Healthcare Reform
In the United States there have been, and continue to be, proposals by the federal government, state governments, regulators and third-party payors to control or manage the increased costs of health care and, more generally, to reform the U.S. healthcare system. The pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example, in March 2010, the ACA was enacted, which was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The ACA substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things, (i) subjected therapeutic biologics to potential competition by lower-cost biosimilars by creating a licensure framework for follow-on biologic products, (ii) established a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and therapeutic biologics that are inhaled, infused, instilled, implanted or injected, (iii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, (iv) established annual nondeductible fees and taxes on manufacturers of certain branded prescription drugs and therapeutic biologics, apportioned among these entities according to their market share in certain government healthcare programs, (v) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs and therapeutic biologics to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers outpatient drugs and therapeutic biologics to be covered under Medicare Part D, which has since been increased to 70% by the BBA, (vi) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers Medicaid rebate liability, (vii) expanded the entities eligible for discounts under the Public Health program (viii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research, and (ix) established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Since its enactment, there have been executive, judicial, and Congressional challenges to certain aspects of the ACA. The Tax Reform Act, among other things, included a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the individual mandate. In November 2020, the United States Supreme Court held oral arguments on the Fifth Circuit U.S. Court of Appeals decision that held that the individual mandate is unconstitutional. The Supreme Court is expected to issue a decision by mid-2021. It is uncertain how the Supreme Court will rule on this case. In January 2021, President Biden issued an executive order to initiate a special enrollment period to allow people to obtain health insurance coverage through the ACA marketplace, and instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, among others. We cannot predict how the Supreme Court ruling, other litigation, or the healthcare reform measures of the Biden administration will impact our business. We are continuing to monitor any changes to the ACA that, in turn, may potentially impact our business in the future. Additionally, the 2020 federal spending package permanently
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eliminated, effective January 1, 2020, the ACA-mandated Cadillac tax on certain high-cost employer-sponsored insurance plans and the medical device excise tax, and effective January 1, 2021, also eliminates the health insurer tax. The BBA, among other things, also amended the ACA, effective January 1, 2019, by increasing from 50% to 70% the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the donut hole. In addition, CMS published a final rule that would give states greater flexibility, effective January 1, 2020, in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislations automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in 2013 and will remain in effect through 2030, with the exception of a temporary suspension implemented under various COVID-19 relief legislation from May 1, 2020 through March 31, 2021, unless additional Congressional action is taken. Congress recently introduced a bill to extend the moratorium on 2% Medicare sequester cuts through the end of 2021. We are continuing to monitor the status of this bill. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several types of 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.
Further, there have been several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMSs policy change that was effective January 1, 2019. In 2020, the U.S. Department of Health and Human Services (HHS) and the CMS issued various rules that are expected to impact, among others, price reductions from pharmaceutical manufacturers to plan sponsors under Part D, fee arrangements between pharmacy benefit managers and manufacturers, manufacturer price reporting requirements under the Medicaid Drug Rebate Program, including regulations that affect manufacturer-sponsored patient assistance programs subject to pharmacy benefit manager accumulator programs and Best Price reporting related to certain value-based purchasing arrangements. Multiple lawsuits have been brought against the HHS challenging various aspects of the rules. In January 2021, the Biden administration issued a regulatory freeze memorandum that directs department and agency heads to review new or pending rules of the prior administration. It is unclear whether these new regulations will be withdrawn or when they will become fully effective under the current administration. The impact of these lawsuits as well as legislative, executive, and administrative actions of the current administration on us and the pharmaceutical industry as a whole is unclear.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
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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 any product candidates we may develop or additional pricing pressures. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved. Complying with any new legislation and regulatory changes could be time-intensive and expensive, resulting in a material adverse effect on our business.
Employees and Human Capital Resources
Employees
As of March 31, 2021, we had 61 full-time employees and three full-time contract employees. Of these employees, 15 have an M.D. or a Ph.D. From time to time, we also retain consultants to support our organization. As of March 31, 2021, we had 18 consultants. None of our employees are represented by a labor union or covered by collective bargaining agreements, and we believe our relationship with our employees is good.
Diversity and Inclusion
We are committed to creating and maintaining a workplace free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law. Our management team and employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace.
Competitive Pay & Benefits
We strive to provide pay, comprehensive benefits and services that help meet the varying needs of our employees. Our total rewards package includes competitive pay; comprehensive healthcare benefits package for employees. In addition, we offer every full-time employee, both exempt and non-exempt, the benefit of equity ownership in the company through stock option grants.
Employee Development & Training
We focus on attracting, retaining, and cultivating talented individuals. We emphasize employee development and training by providing access to a wide range of online and instructor led development and continual learning programs. Employees are encouraged to attend scientific, clinical and technological meetings and conferences and have access to broad resources they need to be successful.
Properties and Facilities
Our principal executive office is located in Seattle, Washington, where we lease a total of approximately 11,256 square feet of office and laboratory space that we use for our administrative, research and development and other activities. Our lease expires in August 2022.
Legal Proceedings
From time to time, we may be involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, in the opinion of management, would have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, and other factors.
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Executive Officers and Directors
The following table provides information regarding our executive officers, key employee and directors as of March 31, 2021:
Name |
Age |
Position |
||||
Executive Officers: | ||||||
Adrian Adams |
70 | President, Chief Executive Officer and Chair | ||||
John Hoekman, Ph.D.(5) |
40 | Chief Scientific Officer and Director | ||||
John Leaman, M.D. |
48 | Chief Financial Officer | ||||
Stephen Shrewsbury, M.B. ChB. |
64 | Chief Medical Officer | ||||
Leonard S. Paolillo |
42 | Chief Commercial Officer | ||||
Key Employee: | ||||||
Lynn Gold, Ph.D. |
64 | Senior Vice President, Regulatory Affairs | ||||
Non-Employee Directors: | ||||||
David Allison, Ph.D.(2)(3)(4) |
39 | Director | ||||
Robert Mittendorff, M.D.(5) |
44 | Director | ||||
Timothy S. Nelson(2) |
57 | Director | ||||
H. Stewart Parker(1)(3) |
65 | Director | ||||
Aaron Royston, M.D.(5) |
36 | Director | ||||
Ali Satvat(3) |
43 | Director | ||||
Mahendra G. Shah, Ph.D.(1)(2) |
76 | Director | ||||
Diane E. Wilfong(1) |
59 | Director |
(1) |
Member of the Audit Committee. |
(2) |
Member of the Compensation Committee. |
(3) |
Member of the Nominating and Governance Committee. |
(4) |
Lead Independent Director |
(5) |
Each of Drs. Hoekman, Mittendorff and Royston has notified us that he will resign from our board of directors effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. |
Executive Officers
Adrian Adams has served as Chair of our Board of Directors since January 2020, and as our Chief Executive Officer and President since May 2020. Prior to serving as our Chief Executive Officer, from February 2016 to January 2019, Mr. Adams served as Chief Executive Officer of Aralez Pharmaceuticals Inc., a specialty pharmaceutical company, after the merger between Pozen, Inc. and Tribute Pharmaceuticals Canada, Inc., and as a member of the Aralez board of directors. From May 2015 to January 2016, Mr. Adams served as Chief Executive Officer and a member of the board of directors of Aralezs predecessor, Pozen, Inc. Prior to joining Pozen, Inc., Mr. Adams served as Chief Executive Officer and President of Auxilium Pharmaceuticals, Inc., a specialty biopharmaceutical company, from December 2011 until its acquisition by Endo International plc in January 2015. Prior to joining Auxilium, from September 2011 until November 2011, Mr. Adams served as Chairman and Chief Executive Officer of Neurologix, Inc. a biotechnology company. Before Neurologix, Mr. Adams served as President and Chief Executive Officer of Inspire Pharmaceuticals, Inc., where he led the company through a strategic acquisition by global pharmaceutical leader Merck & Co., Inc. in May 2011. Prior to Inspire, Mr. Adams served as President and Chief Executive Officer of Sepracor, Inc. from December 2006 until February 2010, when it was acquired by Dainippon Sumitomo Pharma Co. Mr. Adams currently serves as the Chairman of the board of directors at AcelRx Pharmaceuticals, Inc., and Chairman of the board of directors at Akebia Therapeutics, Inc. Mr. Adams graduated from the Royal Institute of Chemistry at Salford University in the United Kingdom. We believe that Mr. Adams is qualified to
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serve on our board of directors because of his experience as our Chief Executive Officer and his extensive corporate development experience in the pharmaceutical and biotechnology industries.
John Hoekman, Ph.D., our co-founder, has served as our Chief Scientific Officer since July 2008. Prior to co-founding our company, Dr. Hoekman was a researcher at the Alzheimers Research Center in St. Paul, Minnesota from April 2004 to June 2006. Dr. Hoekman holds a B.S. in Physics from the University of Minnesota and a Ph.D. in Pharmaceutics from the University of Washington. We believe that Dr. Hoekman is qualified to serve on our board of directors because of his extensive research experience and expertise in upper nasal drug delivery.
John H. Leaman, M.D. has served as our Chief Financial Officer since June 2019. From October 2017 to March 2019, Dr. Leaman served as the Chief Financial Officer and Head of Corporate Development at Selecta Biosciences Inc. From June 2016 to September 2017, he served as Head of Corporate Development at InfaCare Pharmaceutical Corp., a specialty pharmaceutical company, until it was acquired by Mallinckrodt plc. in September 2017. From August 2014 to March 2016, Dr. Leaman was the Chief Financial Officer of Medgenics Inc. He also previously held senior roles at Shire plc. and Devon Park Bioventures, a venture capital fund targeting investments in therapeutics companies, and began his career serving a range of life sciences companies as an Associate Principal at McKinsey & Company. He received an M.D. from the Perelman School of Medicine at the University of Pennsylvania, an M.B.A. from the Wharton School at the University of Pennsylvania, a B.A. in psychology, philosophy and physiology from Oriel College, University of Oxford while completing a Rhodes Scholarship, and a B.S. in biology from Elizabethtown College.
Leonard S. Paolillo has served as our Chief Commercial Officer since March 2021. Prior to that, Mr. Paolillo served from August 2019 to February 2021 as Executive Vice President and Chief Commercial Officer of Kyowa Kirin Inc., the North American affiliate of Kyowa Kirin Co. Ltd., a global specialty pharmaceutical company based in Tokyo, as well as in other roles from March 2014 to July 2019. Prior, from May 2011 to January 2014 he served as senior director of sales at Warner Chilcott Pharmaceuticals where he led the womens healthcare, osteoporosis and urology sales forces. Mr. Paolillo began his healthcare career at EURO RSCG LIFE LM&P, a full-service healthcare advertising agency, before joining Warner Chilcott in March 2003, and holds a B.S. in business administration from Manhattan College.
Stephen Shrewsbury, M.B. ChB., has served as our Chief Medical Officer since March 2017. Prior to that, Dr. Shrewsbury was the Executive Vice President, Development, and Chief Medical Officer at Fortuna Fix Inc., a clinical biotechnology company, from June 2016 to December 2016. From April 2013 to June 2016, Dr. Shrewsbury was the Chief Medical Officer and Senior Vice President, Clinical Development of Aquinox Pharmaceuticals Inc., a pharmaceutical company focused on treating inflammation, inflammatory pain, and blood cancers. Prior to that, Dr. Shrewsbury served in executive positions at various other pharmaceutical companies, including MAP Pharmaceuticals, Inc., AVI BioPharma, Inc. and Adamas Pharmaceuticals. Dr. Shrewsbury holds an M.B. ChB. from the University of Liverpool, an MRCGP from the Royal College of General Practitioners and a Diploma in Pharmaceutical Medicine from the Royal College of Physicians.
Key Employee
Lynn Gold, Ph.D., has served as our Senior Vice President, Regulatory Affairs since July 2018. From November 2008 to June 2018, Dr. Gold served as Vice President, Scientific and Regulatory Affairs, at Camargo Pharmaceutical Services, LLC. Dr. Gold holds a B.S. in Chemistry from the State University of New York at Buffalo and a Ph.D. in Chemistry from the University of Rochester.
Non-Employee Directors
David Allison, Ph.D., has served as a member of our board of directors since June 2019. Dr. Allison has served as a Partner at 5AM Venture Management, LLC since July 2018, and was previously a
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Principal at 5AM Venture Management, LLC since August 2016. Dr. Allison previously served as a Principal at Versant Ventures from April 2014 to August 2016. Prior to Versant Ventures, Dr. Allison worked at Split Rock Partners as a Principal from August 2009 to August 2014, and at PTV Healthcare Capital as a Senior Associate from 2006 to 2009. Before his venture career, he worked in the diagnostics and drug discovery business unit at SurModics in 2004 and was a National Science Foundation Research Fellow at The Cleveland Clinic Foundations Heart Valve Laboratory. Dr. Allison currently serves on the boards of directors of various private companies. Dr. Allison received a Ph.D. in Bioengineering from Rice University with a focus in Cell Biology and Extracellular Matrix in Cardiovascular Disease. He received a B.S.E in Biomedical Engineering from The University of Iowa. We believe that Dr. Allison is qualified to serve on our board of directors based on his expertise in corporate governance, financing and financial matters and his investment experience in the health care industry.
Robert Mittendorff, M.D., has served as a member of our board of directors since December 2018. Dr. Mittendorff is a general partner and head of the healthcare group at B Capital Group, a venture firm, which he joined in March 2021. Dr. Mittendorff previously served as a partner at Norwest Venture Partners from 2012 until March 2021 and currently serves as a consultant to Norwest. He has previously served as a board member at Silk Road Medical, Inc., a public medical device company, from July 2017 until July 2020 and currently serves on the boards of various private companies, including Avalyn Pharma Inc., Neocis, Inc., Qventus, Inc., TigerConnect, Inc. and VisitPay LLC. He was previously also a board member at iCardiac Technologies, Inc., a pharmaceutical services company, and a board observer at iRhythm Technologies, Inc. Prior to Norwest, Dr. Mittendorff was the Vice President of Marketing and Business Development at Hansen Medical Inc. He has prior experience with the Boston Consulting Group and Merck. Dr. Mittendorff is a board certified emergency physician who completed his residency training at Stanford. He received his M.D. from Harvard Medical School and his M.B.A. from Harvard Business School, and his B.S. in biomedical engineering (general and departmental honors) from Johns Hopkins University. He has completed fellowships under the Howard Hughes Medical Institute (neuroscience), MIT Sloan School of Management, and Harvard Business School. We believe that Dr. Mittendorff is qualified to serve on our board of directors because of his medical training and his extensive investment, business and board experience in the healthcare and medical device industries.
Timothy S. Nelson has served on our board of directors since February 2017. Mr. Nelson previously served on the boards of directors of SurModics, Inc. a medical technologies company, from February 2014 to March 2015, and of MAP Pharmaceuticals, Inc., a development stage neurological company, from April 2005 to March 2013. Mr. Nelson has also served as Chairman of the board of Xoc Pharmaceuticals, a private biotechnology company since January 2018, and Civitas Therapeutics, Inc., a private pharmaceutical company, from December 2013 to October 2014. Mr. Nelson also serves on the board of directors of Dermavant, a private biopharmaceutical company, since April 2019. Prior to that, Mr. Nelson also held various senior management positions at other life sciences companies, including Medtronic plc, a multinational medical device company. Mr. Nelson holds a Bachelor of Chemical Engineering from the University of Minnesota and a Master of Management with distinction from the J.L. Kellogg Graduate School of Management at Northwestern University. We believe that Mr. Nelson is qualified to serve on our board of directors because of his extensive experience in the pharmaceuticals industry and as a director of a public company.
H. Stewart Parker has served as a member of our board of directors since May 2014. From March 2011 to June 2014, Ms. Parker served in various roles at the Infectious Disease Research Institute, including as its Chief Executive Officer, strategic advisor and a member of the board of directors. Since January 2009, Ms. Parker has also served as a Principal at Parker BioConsulting, a biotechnology consulting firm. Prior to that, Ms. Parker has also served in various roles of leadership at other biopharmaceutical companies since 1992, including as Chief Executive Officer of Targeted Genetics Corporation, a biopharmaceutical company. Since August 2017, Ms. Parker has served on the board of directors of Achieve Life Sciences, Inc., a pharmaceutical company. Ms. Parker has also served on the
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board of directors of Armata Pharmaceuticals, Inc. (formerly C3J Therapeutics, Inc.) since 2010. Since June 2014, Ms. Parker has served on the board of directors of Sangamo Therapeutics, Inc., a genomic therapies company. Ms. Parker also currently serves on the board of directors of various private companies. Ms. Parker holds a B.A. in Slavic Language & Literature and an M.B.A. in Finance and International Business from the University of Washington. We believe that Ms. Parker is qualified to serve on our board of directors because of her extensive experience in the life sciences industry and as a director of other public companies.
Aaron Royston, M.D., has served as a member of our board of directors since November 2016. Dr. Royston is a Managing Partner at venBio Partners, a life sciences investment firm and has also been with venBio Partners since 2015. Prior to joining venBio Partners, Dr. Royston worked for Vivo Capital, a global life sciences investment firm from July 2014 to November 2015, Previously, Dr. Royston worked at Bain & Company, Inc. from July 2013 to July 2014 where he advised biotechnology companies on a broad range of strategic and operational issues. Earlier in his career, Dr. Royston coordinated clinical research at Mount Sinai Medical Center, where his research has been published and presented in multiple medical journals and conferences. In 2011, Dr. Royston was recognized by the Obama Administration as a Champion of Change for his work in technology and innovation. Dr. Royston previously served on the boards of directors of Akero Therapeutics, a biotechnology company, from June 2018 to August 2019 and Menlo Therapeutics Inc., a biotechnology company, from June 2017 to August 2019. Dr. Royston currently serves on the board of directors of several private companies. Dr. Royston received a B.S. in biological sciences from Duke University, and an M.D. and M.B.A. from the University of Pennsylvania. We believe that Dr. Royston is qualified to serve on our board of directors because of his clinical and biotechnology industry experience.
Ali Satvat has served as a member of our board of directors since December 2018. Mr. Satvat joined Kohlberg Kravis Roberts & Co. L.P., a global investment firm (together with its affiliates, KKR), in January 2012 and is a Partner and Co-Head of the Health Care industry team within KKRs Americas Private Equity platform, for which he is a member of the Investment Committee and the Portfolio Management Committee. Mr. Satvat is also Global Head of KKRs Health Care Strategic Growth platform, for which he chairs the Investment Committee and the Portfolio Management Committee. Mr. Satvat has served as a member of the boards of directors of BridgeBio Pharma, Inc., a biopharmaceutical company, since March 2016, Coherus BioSciences, Inc., a biopharmaceutical company, since May 2014, Eidos Therapeutics, Inc., a biopharmaceutical company, from June 2018 through January 2021, PRA Health Sciences, Inc., a global contract research organization, from September 2013 through April 2018, and multiple privately held companies. Prior to joining KKR, Mr. Satvat was a Principal with Apax Partners, where he invested in health care from 2006 to 2012. Previously, Mr. Satvat held various positions with Johnson & Johnson Development Corporation, Audax Group, and The Blackstone Group. Mr. Satvat holds an A.B. in History and Science from Harvard College and a M.B.A. in Health Care Management and Entrepreneurial Management from the Wharton School of the University of Pennsylvania. Mr. Satvat previously served as a member of the board of directors of the Healthcare Private Equity Association. We believe that Mr. Satvat is qualified to serve on our board of directors because of his extensive investment and board experience with public and private companies in the health care industry.
Mahendra G. Shah, Ph.D., has served as a member of our board of directors since November 2016. Since March 2010, Dr. Shah has served in various roles with Vivo Capital, a healthcare focused investment firm, most recently as Managing Director. Dr. Shah is also the founder and executive chairman of Semnur Pharmaceuticals, Inc. (acquired by Scilex Pharmaceuticals Inc.). Dr. Shah previously served as a board member of Soleno Therapeutics Inc., a biopharmaceutical company, from March 2018 to April 2019, Crinetics Pharmaceuticals, Inc., a clinical stage pharmaceutical company, from October 2015 to January 2018, and Homology Medicines, Inc., a genetic medicines company, from July 2017 to June 2019. Since July 2016, Dr. Shah has served as a member of the board of
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directors of Verona Pharma PLC, a biopharmaceutical company. Dr. Shah also currently serves on the boards of directors of various private companies. Dr. Shah holds a Ph.D. in Pharmaceutical Sciences from St. Johns University and a B.S. and M.S. in Pharmacy from L.M. College of Pharmacy in Gujarat, India. We believe that Dr. Shah is qualified to serve on our board of directors because of his vast experience as a finance professional in the biomedical and pharmaceutical industries.
Diane E. Wilfong has served as a member of our board of directors since September 2019. Since February 2016, Ms. Wilfong has served as Senior Vice President, Controller and Chief Accounting Officer at Gilead Sciences, Inc., a biotechnology company. From November 2014 to February 2016, Ms. Wilfong served as Vice President, Controller and Principal Accounting Officer at Computer Sciences Corporation, a technology company. Prior to that, Ms. Wilfong held various finance roles at other companies since 1983. Ms. Wilfong, a certified public accountant since 1985, holds a B.S.B.A. in Accounting from the Kenan-Flagler Business School, University of North Carolina at Chapel Hill. We believe that Ms. Wilfong is qualified to serve on our board of directors because of her vast experience as a finance professional in the technology and biotechnology industries.
Disclosed Legal Proceedings
From February 2016 to January 2019, Mr. Adams served as Chief Executive Officer of Aralez Pharmaceuticals Inc., a specialty pharmaceutical company, after the merger between Pozen, Inc. and Tribute Pharmaceuticals Canada, Inc., and as a member of the Aralez board of directors. From May 2015 to January 2016, Mr. Adams served as Chief Executive Officer and a member of the board of directors of Aralezs predecessor, Pozen, Inc. In August 2018, Aralez voluntarily commenced restructuring proceedings in Canadian Court and its U.S.-based subsidiaries, including POZEN, Inc., filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code.
From September 2011 until November 2011, Mr. Adams also served as Chairman and Chief Executive Officer of Neurologix, Inc. a biotechnology company which filed for bankruptcy under Chapter 7 in 2012.
Election of Officers
Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers.
Board Composition
Our board of directors currently consists of ten members. Pursuant to our current voting agreement and certificate of incorporation, Adrian Adams, David Allison, John Hoekman, Robert Mittendorff, Timothy S. Nelson, H. Stewart Parker, Aaron Royston, Ali Satvat, Mahendra G. Shah, and Diane E. Wilfong, have been designated to serve as members of our board. Ms. Parker was designated by the holders of our Series A-1 and Series A-2 redeemable convertible preferred stock. Messrs. Shah, Royston and Allison were designated by the holders of our Series C redeemable convertible preferred stock. Messrs. Mittendorff and Satvat were designated by the holders of our Series D redeemable convertible preferred stock. Mr. Nelson and Ms. Wilfong were designated by agreement of all of the members of the board of directors and at least 60% of the holders of our Series C and Series D redeemable convertible preferred stock. Mr. Hoekman was elected by the holders of all of our capital stock, voting together as a single class on an as-converted basis. Mr. Adams was elected by the holders of our common stock.
The voting agreement and the provisions of our current certificate of incorporation that govern the election and designation of our directors will terminate in connection with this offering, after which no contractual obligations will concern the election of our directors. Each of our current directors will continue to serve until the election and qualification of his successor, or until his earlier death, resignation or removal.
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Classified Board of Directors
In accordance with the terms of our restated certificate of incorporation and restated bylaws that will become effective upon the completion of this offering, our board of directors will be divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be subject to re-election for a three-year term. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our directors will be divided among the three classes as follows:
∎ |
the Class I directors will be Mahendra G. Shah, Ph.D. and H. Stewart Parker and their terms will expire at the first annual meeting of stockholders held following the completion of the offering; |
∎ |
the Class II directors will be David Allison, Ph.D. and Ali Satvat and their terms will expire at the second annual meeting of stockholders held following the completion of the offering; and |
∎ |
the Class III directors will be Adrian Adams, Timothy S. Nelson and Diane E. Wilfong and their terms will expire at the third annual meeting of stockholders held following the completion of the offering. |
Each directors term continues until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Our restated certificate of incorporation and restated bylaws that will be in effect upon the completion of this offering authorize only our board of directors to fill vacancies on our board of directors. Any increase or decrease 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. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company. See the section titled Description of Capital StockAnti-Takeover ProvisionsRestated Certificate of Incorporation and Restated Bylaw Provisions.
Director Independence
In connection with this offering, we intend to list our common stock on Nasdaq. Under the rules of Nasdaq, independent directors must comprise a majority of a listed companys board of directors within a specified period following the completion of this offering. In addition, the rules of Nasdaq require that, subject to specified exceptions, each member of a listed companys audit, compensation and nominating and governance committees be independent. Under the rules of Nasdaq, a director will only qualify as an independent director if, in the opinion of that companys 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.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In order 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: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its subsidiaries. We intend to satisfy the audit committee independence requirements of Rule 10A-3 as of the completion of this offering. Additionally, compensation committee members must not have a relationship with us that is material to the directors ability to be independent from management in connection with the duties of a compensation committee member.
Our board of directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his ability to exercise independent judgment in carrying out his responsibilities. As a result of this review, our board of directors determined that all of our directors following this offering, except for Adrian Adams, are independent directors as defined under the applicable rules and regulations of the SEC and the
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listing requirements and rules of Nasdaq. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each directors business and personal activities and relationships as the may relate to us and our management, including the beneficial ownership of our capital stock by each non-employee director and then transactions involving them described in the section titled Certain Relationships and Related Party Transactions.
Committees of the Board of Directors
Our board of directors has an audit committee, a compensation committee and a nominating and governance committee, each of which will have the composition and responsibilities described below as of the completion of this offering. Each of the below committees has a written charter approved by our board of directors. Members serve on these committees will serve until their resignation or until otherwise determined by our board of directors. Upon completion of this offering, copies of each charter will be posted on our website at www.Impelnp.com. Information contained on or accessible through our website is not a part of this prospectus, and the inclusion of such website address in this prospectus is an inactive textual reference only.
Audit Committee
Our audit committee is comprised of Ms. Wilfong, Ms. Parker and Dr. Shah, with Ms. Wilfong serving as the chair of our audit committee. The composition of our audit committee meets the requirements for independence under the current Nasdaq and SEC rules and regulations. Each member of our audit committee is financially literate. In addition, our board of directors has determined that Ms. Wilfong is an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act of 1933, as amended, or the Securities Act. This designation does not impose on such person any duties, obligations or liabilities that are greater than are generally imposed on members of our audit committee and our board of directors. Our audit committee is directly responsible for, among other things:
∎ |
selecting and hiring our independent registered public accounting firm; |
∎ |
the qualifications, independence and performance of our independent auditors; |
∎ |
the preparation of the audit committee report to be included in our annual proxy statement; |
∎ |
our compliance with legal and regulatory requirements; |
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our accounting and financial reporting processes, including our financial statement audits and the integrity of our financial statements; and |
∎ |
reviewing and approving related-person transactions. |
Compensation Committee
Our compensation committee is comprised of Mr. Nelson, Dr. Allison and Dr. Shah, with Mr. Nelson serving as the chair of our compensation committee. Each member of our compensation committee is a non-employee director, as defined by Rule 16b-3 promulgated under the Exchange Act and meets the requirements for independence under the current Nasdaq listing standards and SEC rules and regulations. Our compensation committee is responsible for, among other things:
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evaluating, recommending, approving and reviewing executive officer compensation arrangements, plans, policies and programs; |
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evaluating and recommending non-employee director compensation arrangements for determination by our board of directors; |
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administering our cash-based and equity-based compensation plans; and |
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overseeing our compliance with regulatory requirements associated with the compensation of directors, officers and employees. |
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Nominating and Governance Committee
Our nominating and governance committee is comprised of Mr. Satvat, Dr. Allison and Ms. Parker, with Mr. Satvat serving as the chair of our nominating and governance committee. Each member of our nominating and governance committee meets the requirements for independence under the current Nasdaq listing standards. Our nominating and governance committee is responsible for, among other things:
∎ |
identifying, considering and recommending candidates for membership on our board of directors; |
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overseeing the process of evaluating the performance of our board of directors; and |
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advising our board of directors on other corporate governance matters. |
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has at any time been one of our officers or employees, and none of our executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our board of directors or compensation committee during the year ended December 31, 2020. Prior to establishing the compensation committee, our full board of directors made decisions relating to the compensation of our officers.
Code of Business Conduct and Ethics
Prior to the completion of this offering, our board of directors will adopt a code of business conduct and ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer and other executive and senior officers. The full text of our code of business conduct and ethics will be available on our website at www.Impelnp.com. Information contained on or accessible through such website is not a part of this prospectus, and the inclusion of the website address in this prospectus is an inactive textual reference only. We intend to disclose future amendments to certain provisions of our code of business conduct and ethics, or waivers of these provisions, on our website or in public filings to the extent required by the applicable rules.
Non-Employee Director Compensation
Mr. Congleton, Mr. Adams and Dr. Hoekman did not receive any compensation for their services as directors during fiscal year 2020, while also serving as our former Chief Executive Officer, our current Chief Executive and our Chief Scientific Officer, respectively. Please see the section entitled Executive Compensation of ImpelSummary Compensation Table for a summary of payments made to each of Mr. Congleton and Mr. Adams. Dr. Hoekman is an executive officer but not a named executive officer and does not receive any additional compensation for services provided as a director. Other than as described below, none of our non-employee directors received any fees or reimbursement of any expenses (other than customary expenses in connection with the attendance of meetings of our board of directors) or any equity or non-equity awards in the year ended December 31, 2020.
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2020 Director Compensation Table
The following table presents the total compensation earned by each of our non-employee directors in the year ended December 31, 2020.
Name |
Fees Earned
or Paid in Cash(1) |
Option
Awards(3) |
All Other
Compensation |
Total | ||||||||||||
David Allison, Ph.D. |
| | | | ||||||||||||
Robert Mittendorff, M.D. |
| | | | ||||||||||||
Timothy S. Nelson |
$ | 30,000 | | $ | 78,000 | (2) | $ | 108,000 | ||||||||
H. Stewart Parker |
$ | 40,000 | | | $ | 40,000 | ||||||||||
Aaron Royston, M.D. |
| | | | ||||||||||||
Ali Satvat |
| | | | ||||||||||||
Mahendra G. Shah, Ph.D. |
| | | | ||||||||||||
Diane E. Wilfong. |
$ | 30,000 | | | $ | 30,000 |
(1) |
The amounts reported in this column represent fees earned for service on our board of directors. |
(2) |
In 2020, Mr. Nelson received $78,000 pursuant to his consulting agreement with us, pursuant to which he provides strategic business consulting services. |
(3) |
The following table sets forth the aggregate number of shares of our common stock subject to outstanding options held by our non-employee directors as of December 31, 2020: |
Name |
Number of Shares
Underlying Options Held as of December 31, 2020 |
|||
David Allison, Ph.D.. |
| |||
Robert Mittendorff, M.D. |
| |||
Timothy S. Nelson |
99,197 | (a) | ||
H. Stewart Parker |
74,843 | (b) | ||
Aaron Royston, M.D. |
| |||
Ali Satvat |
| |||
Mahendra G. Shah, Ph.D. |
| |||
Diane E. Wilfong |
31,356 | (c) |
(a) |
This amount reflects (i) options to purchase 12,303 shares, 1/4th of which vested on February 14, 2018, the one-year anniversary of the vesting commencement date, and 1/48th of which vest monthly thereafter, (ii) options to purchase 61,516 shares, all of which are vested, (iii) options to purchase 3,053 shares, 1/4th of which vested on February 13, 2019, the one-year anniversary of the vesting commencement date, and 1/48th of which vest monthly thereafter and (iv) options to purchase 22,325 shares, 1/4th of which vested on February 8, 2020, the one-year anniversary of the vesting commencement date, and 1/48th of which vest monthly thereafter. |
(b) |
This amount reflects (i) options to purchase 6,107 shares, all of which are vested, (ii) options to purchase 12,214 shares, all of which are vested, (iii) options to purchase 18,627 shares, 1/4th of which vested on March 9, 2018, the one-year anniversary of the vesting commencement date, and 1/48th of which vest monthly thereafter, (iv) options to purchase 10,688 shares, 1/4th of which vested on February 13, 2019, the one-year anniversary of the vesting commencement date, and 1/48th of which vest monthly thereafter and (v) options to purchase 27,207 shares, 1/4th of which vested on February 8, 2020, the one-year anniversary of the vesting commencement date, and 1/48th of which vest monthly thereafter. In May 2019, our board of directors approved an amendment to Ms. Parkers options referenced in clauses (iii), (iv) and (v) above, such that in the event of an initial public offering, a combination transaction, an |
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acquisition or other such combination, all of such options will accelerate and become fully vested. Upon this initial public offering, these options will become fully vested. |
(c) |
This amount reflects options to purchase 31,356 shares, 1/4th of which vested on September 20, 2020, the one-year anniversary of the vesting commencement date, and 1/48th of which vest monthly thereafter. |
Non-Employee Director Compensation Policy
Prior to this offering, we did not have a formal policy to provide any cash or equity compensation to our non-employee directors for their service on our board of directors or committees of our board of directors.
In April 2021, our board of directors approved compensation for our non-employee directors, to be effective in connection with the completion of this offering. Beginning after this offering, our non-employee directors will receive annual cash compensation of $40,000 for service on the board, and additional cash compensation for the chairperson and committee members as set forth below. All cash payments will be made quarterly in arrears, and pro-rated for any partial quarters of service.
∎ |
Non-Executive Board Chairperson: $35,000 |
∎ |
Lead Director: $25,000 |
∎ |
Audit Committee Chair: $15,000 |
∎ |
Audit Committee Member (Non-Chair): $7,500 |
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Compensation Committee Chair: $12,000 |
∎ |
Compensation Committee Member (Non-Chair): $6,000 |
∎ |
Nominating and Corporate Governance Committee Chair: $10,000 |
∎ |
Nominating and Corporate Governance Committee Member (Non-Chair): $5,000 |
In addition, each non-employee director who is elected or appointed to our board of directors after completion of this offering will be granted an option to purchase shares of our common stock equal to 0.069% of our fully-diluted common stock, upon the directors initial appointment to our board of directors, referred to as the Initial Grant. The Initial Grant will vest in over three years, with 1/3 vesting on the first anniversary of the Initial Grant and in equal monthly installments thereafter, such that the Initial Grant will become fully vested and exercisable on the three-year anniversary of the date of grant, subject to the directors continued service through each applicable vesting date.
Each non-employee director who is serving on our board of directors immediately prior to, and will continue to serve on the Board following, our annual meeting of stockholders, will be granted an option to purchase shares of our common stock equal to 0.046% of our fully-diluted common stock on the date of such annual meeting of stockholders, referred to as the Annual Grant. Each Annual Grant will vest on the one-year anniversary of the date of grant, such that the Annual Grant will become fully vested and exercisable on the one-year anniversary of the date of grant, subject to the directors continued service through the vesting date.
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Executive Compensation Overview
The following tables and accompanying narrative disclosure set forth information about the compensation earned by our named executive officers during the year ended December 31, 2020, who are Jon Congleton, our former principal executive officer, Adrian Adams, our current principal executive officer, John H. Leaman, M.D., our Chief Financial Officer, and Stephen Shrewsbury, M.D., our Chief Medical Officer.
In May 2020, Mr. Congleton resigned as our President, Chief Executive Officer and Director, and Mr. Adams, who was at that time a Director of our company, was appointed to those executive officer roles.
The named executive officers compensation primarily consists of (1) base salary, (2) annual performance-based cash bonus and (3) equity incentive awards, as well as perquisites described below. Our named executive officers, during their employment with us, are also eligible to participate in the same retirement and health and welfare benefit plans as our other full-time employees.
2020 Summary Compensation Table
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to and earned by our named executive officers during the year ended December 31, 2020.
Name and Principal Position |
Salary ($) | Option Awards($)(1) |
Non-Equity
Incentive Plan Compensation ($)(2) |
All Other
Compensation ($) |
Total ($) | |||||||||||||||
Adrian Adams President & Chief Executive Officer |
266,041 | 3,348,910 | 95,544 | (3) | 15,330 | (4) | 3,725,825 | |||||||||||||
Jon Congleton(5) Former President & Chief Executive Officer |
173,548 | | | 1,924,378 | (6) | 2,097,926 | ||||||||||||||
John Leaman, M.D. Chief Financial Officer |
415,231 | | 123,463 | | 538,694 | |||||||||||||||
Stephen Shrewsbury, M.B. Ch B. Chief Medical Officer |
361,526 | | 112,163 | 44,839 | (7) | 518,528 |
(1) |
Amounts represent the aggregate grant date fair value of the stock options awarded to the named executive officer during 2020 in accordance with FASB Accounting Standards Codification Topic 718. The assumptions used in calculating the grant date fair value of the stock options reported in the Option Awards column are set forth in Note 9 of the notes to our financial statements included in this prospectus. Such grant-date fair market value does not take into account any estimated forfeitures related to service-based vesting conditions. |
(2) |
The amounts reported reflect the annual performance-based cash bonus amounts awarded to our named executive officers for their service in 2020. For additional information regarding the non-equity incentive plan compensation, see Non-Equity Incentive Plan Awards. |
(3) |
Mr. Adams declined in full the non-equity incentive plan compensation he was entitled to for 2020. |
(4) |
This amount reflects the compensation that Mr. Adams received for his service as a non-employee director prior to his appointment as our President and Chief Executive Officer as set forth in the 2020 Director Compensation Table contained elsewhere in this prospectus. Since becoming our Chief Executive Officer, Mr. Adams has not received any compensation in his capacity as a director. |
(5) |
Mr. Congleton resigned as our President and Chief Executive Officer effective May 4, 2020. |
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(6) |
This amount reflects (i) the payments Mr. Congleton received or will receive in connection with his resignation as our Chief Executive Officer, which included (A) an aggregate severance amount of $433,102, which is being paid monthly for a period of 12 months from May 12, 2020, (B) a lump sum payment to be paid in 2021 of $59,329, which is equal to his target bonus for 2020, as pro-rated for his period of service in 2020, (C) payments by us for premiums required to maintain his healthcare insurance for up to 12 months, the aggregate cost of which we estimate will be $26,455 (which is based on the payment of COBRA premiums after Mr. Congletons termination date starting June 2020 through December 2020 in the aggregate amount of $15,114, and the estimated payment of monthly COBRA premiums of $2,268 per month for the remaining 5 months), and (D) full acceleration of a portion of Mr. Congletons previously granted options, with an incremental value of $1,393,209, (ii) $3,259 for travel, (iii) $361 for internet services, (iv) $5,054 for rental housing expenses paid on behalf of Mr. Congleton, whose residence is in Pennsylvania, in conjunction with his regular duties in our Seattle, Washington corporate offices, and (v) $3,609 for moving costs. |
(7) |
This amount reflects (i) our matching contributions of $8,839 made on behalf of Dr. Shrewsbury under our 401(k) plan and (ii) $36,000 for living expenses paid to Dr. Shrewsbury. |
Narrative Disclosure to the Summary Compensation Table
Non-Equity Incentive Plan Awards
Annual bonuses for our named executive officers are based on the achievement of corporate performance objectives. For the 2020 bonuses, the target annual bonuses for Mr. Adams, Dr. Leaman and Dr. Shrewsbury were equal to 40%, 35% and 35%, respectively, of their respective annual base salaries. In January 2021, based on the achievement of corporate performance objectives, our board of directors determined to award bonuses for 2020 equal to 85% of each of Mr. Adams, Dr. Leaman and Dr. Shrewsburys target bonuses, as set forth in the table above. Mr. Adams declined acceptance of his cash bonus for 2020.
Employment Agreements with our Executive Officers
Each of our current named executive officers is employed at-will and their compensation is reviewed periodically and subject to the discretion of our board of directors and compensation committee.
In April 2021, we entered into employment agreements with each of our named executive officers, as described below.
Adrian Adams
Our employment agreement with Mr. Adams provides for an annual base salary of $575,000. Mr. Adams is also entitled to reimbursement in an annual amount not to exceed $55,000 for reasonable expenses for travel between his home and Seattle, Washington, which amount will be grossed up for any applicable income taxes. Pursuant to Mr. Adams employment agreement, he is eligible to earn an annual target cash bonus equal to 60% of Mr. Adams base salary, and he is eligible to participate in our employee benefit plans, including health insurance, at the same level as our other similarly situated executives.
John Leaman
Our employment agreement with Dr. Leaman provides for an annual base salary of $440,000. Pursuant to Dr. Leamans employment agreement, he is eligible to earn an annual target cash bonus equal to 40% of Dr. Leamans base salary, and he is eligible to participate in our employee benefit plans, including health insurance, at the same level as our other similarly situated executives.
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Stephen Shrewsbury
Our employment agreement with Dr. Shrewsbury provides for an annual base salary of $410,000. Pursuant to Dr. Shrewsburys employment agreement, he is eligible to earn an annual target cash bonus equal to 40% of Dr. Shrewsburys base salary, and he is eligible to participate in our employee benefit plans, including health insurance, at the same level as our other similarly situated executives.
Potential Payments upon an Involuntary Termination or Corporate Transaction
Our named executive officers employment agreements provide for the benefits described below upon a termination, a corporate transaction (as defined in the applicable employment agreement), or a termination upon or within 12 months following a corporate transaction, as applicable.
Adrian Adams
Pursuant to Mr. Adams employment agreement, if Mr. Adams is subject to a termination without cause or if he resigns for good reason (each, as defined in Mr. Adams employment agreement) absent a corporate transaction, then Mr. Adams will be entitled to receive, subject to execution of a general release of claims, (i) 12 months of his base salary, (ii) continuation of his existing medical, dental, and/or life insurance benefits under COBRA for up to 12 months, to be paid on our regular payroll dates in accordance with our regular payroll schedule, (iii) a lump sum cash payment equal to a pro-rated portion of Mr. Adams target bonus amount, payable when such bonuses are paid to other participants in our bonus program and (iv) 12 months of vesting acceleration of his outstanding unvested equity, provided that equity that vests based on performance criteria will be governed solely by the applicable award agreements.
Pursuant to Mr. Adams employment agreement, if Mr. Adams is subject to a termination without cause or if he resigns for good reason upon or within 12 months following a corporate transaction (as defined in Mr. Adams employment agreement), Mr. Adams will be entitled to receive, subject to execution of a general release of claims (i) 18 months of his base salary, (ii) his full target bonus, (iii) continuation of his existing medical, dental, and/or life insurance benefits under COBRA for up to 18 months, paid on our regular payroll dates in accordance with our regular payroll schedule, (iv) a lump sum cash payment equal to a pro-rated portion of Mr. Adams target bonus amount, payable when such bonuses are paid to other participants in our bonus program and (v) full vesting acceleration of his outstanding unvested equity. Pursuant to Mr. Adams employment agreement, if, in connection with a corporation transaction, any of Mr. Adams outstanding equity will not be continued, assumed, converted, replaced, or substituted by any successor entity, then all time- and service-based vesting conditions applicable to such equity will be accelerated in full and any performance-based vesting conditions will be deemed to be met at target, as of the date of such corporate transaction.
John Leaman
Pursuant to Dr. Leamans employment agreement, if Dr. Leaman is subject to a termination without cause or if he resigns for good reason (each, as defined in Dr. Leamans employment agreement) absent a corporate transaction, then Dr. Leaman will be entitled to receive, subject to execution of a general release of claims, (i) nine months of his base salary and (ii) continuation of his existing medical, dental, and/or life insurance benefits under COBRA for up to nine months, to be paid on our regular payroll dates in accordance with our regular payroll schedule.
Pursuant to Dr. Leamans employment agreement, if Dr. Leaman is subject to a termination without cause or if he resigns for good reason upon or within 12 months following a corporate transaction (as defined in Dr. Leamans employment agreement), Dr. Leaman will be entitled to receive, subject to
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execution of a general release of claims, (i) 12 months of his base salary, (ii) his full target bonus, (iii) and continuation of his existing medical, dental, and/or life insurance benefits under COBRA for up to 12 months, paid on our regular payroll dates in accordance with our regular payroll schedule, (iv) a lump sum cash payment equal to a pro-rated portion of Dr. Leamans target bonus amount, payable when such bonuses are paid to other participants in our bonus program and (v) full vesting acceleration of his outstanding unvested equity. Pursuant to Dr. Leamans employment agreement, if, in connection with a corporation transaction, any of Dr. Leamans outstanding equity will not be continued, assumed, converted, replaced, or substituted by any successor entity, then all time- and service-based vesting conditions applicable to such equity will be accelerated in full and any performance-based vesting conditions will be deemed to be met at target, as of the date of such corporate transaction.
Stephen Shrewsbury
Pursuant to Dr. Shrewsburys employment agreement, if Dr. Shrewsbury is subject to a termination without cause or if he resigns for good reason (each, as defined in Dr. Shrewsburys employment agreement) absent a corporate transaction, then Dr. Shrewsbury will be entitled to receive, subject to execution of a general release of claims, (i) nine months of his base salary and (ii) continuation of his existing medical, dental, and/or life insurance benefits under COBRA for up to nine months, to be paid on our regular payroll dates in accordance with our regular payroll schedule.
Pursuant to Dr. Shrewsburys employment agreement, if Dr. Shrewsbury is subject to a termination without cause or if he resigns for good reason upon or within 12 months following a corporate transaction (as defined in Dr. Shrewsburys employment agreement), Dr. Shrewsbury will be entitled to receive, subject to execution of a general release of claims, (i) 12 months of his base salary, (ii) his full target bonus, (iii) continuation of his existing medical, dental, and/or life insurance benefits under COBRA for up to 12 months, paid on our regular payroll dates in accordance with our regular payroll schedule, (iv) a lump sum cash payment equal to a pro-rated portion of Dr. Shrewsburys target bonus amount, payable when such bonuses are paid to other participants in our bonus program and (v) full vesting acceleration of his outstanding unvested equity. Pursuant to Dr. Shrewsburys employment agreement, if, in connection with a corporation transaction, any of Dr. Shrewsburys outstanding equity will not be continued, assumed, converted, replaced, or substituted by any successor entity, then all time- and service-based vesting conditions applicable to such equity will be accelerated in full and any performance-based vesting conditions will be deemed to be met at target, as of the date of such corporate transaction.
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Outstanding Equity Awards at 2020 Fiscal Year-End
The following table sets forth information concerning outstanding equity awards held by each of our named executive officers as of December 31, 2020.
Option Awards | ||||||||||||||||||||||||
Name |
Grant
Date(1) |
Vesting
Commencement Date |
Number of
Securities Underlying Unexercised Options Exercisable |
Number of
Securities Underlying Unexercised Options Unexercisable |
Option
Exercise Price ($/share) |
Option
Expiration Date |
||||||||||||||||||
Adrian Adams |
1/23/2020 | (2) | 1/8/2020 | | 58,812 | $ | 8.19 | 1/23/2030 | ||||||||||||||||
5/4/2020 | (2) | 5/4/2020 | | 715,358 | (3) | 7.86 | 5/4/2030 | |||||||||||||||||
John Leaman, M.D.(5) |
6/24/2019 | (4) | 6/24/2019 | 88,190 | 146,983 | 6.72 | 6/23/2029 | |||||||||||||||||
Stephen Shrewsbury, M.B., Ch.B. |
2/14/2017 | (4) | 2/14/2017 | 23,580 | 1,026 |
|
1.97
|
|
2/14/2027 | |||||||||||||||
10/18/2017 | (4) | 9/1/2017 | 12,008 | 2,772 | 1.97 | 10/18/2027 | ||||||||||||||||||
3/9/2018 | (4) | 2/13/2018 | 3,676 | 1,515 | 2.46 | 3/9/2028 | ||||||||||||||||||
2/8/2019 | (4) | 2/8/2019 | 38,290 | 45,251 | 2.95 | 2/7/2029 |
(1) |
Outstanding equity awards granted prior to November 30, 2018, the effective date of our 2018 Equity Incentive Plan, were granted under our 2008 Equity Incentive Plan. |
(2) |
1/4th of the option will vest on the one-year anniversary of the vesting commencement date and an additional 1/48th will vest monthly thereafter. |
(3) |
On May 4, 2020, our board of directors approved the grant of Mr. Adrians options, which also provided for (i) full vesting acceleration upon an involuntary termination within 12 months following a change in control or (ii) if an involuntary termination occurs prior to a change in control, vesting acceleration as to the number of then-unvested shares subject to the option which would have vested in the 12-month period following termination had Mr. Adams remained as our chief executive officer. |
(4) |
1/4th of the option vested on the one-year anniversary of the vesting commencement date and an additional 1/48th vests monthly thereafter. |
(5) |
On October 30, 2019, our board of directors approved an amendment of Dr. Leamans options granted on June 24, 2019 to provide for full vesting acceleration upon an involuntary termination within 12 months following a change in control. |
Equity Compensation Plans and Other Benefit Plans
2008 Equity Incentive Plan
Our 2008 Plan was initially adopted by our board of directors and approved by our stockholders in September 2008, and was amended most recently in February 2018. The 2008 Plan allows for the grant of stock options and restricted stock, as described below. As of December 31, 2020 we had 634,788 shares of our common stock reserved for issuance pursuant to awards granted under our 2008 Plan, of which no shares remained available for future grants. We terminated our 2008 Plan effective November 30, 2018 and transitioned to our 2018 Plan. Any awards granted under the 2008 Plan that remain outstanding as of such date will continue to be subject to the terms of our 2008 Plan and applicable award agreements until such awards are exercised or until they terminate or expire by their terms.
Administration. Our 2008 Plan is administered by our board of directors or a committee appointed by our board of directors. Subject to the terms of the 2008 Plan, our board of directors has the
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authority to, among other things, select the persons to whom awards will be granted, construe and interpret our 2008 Plan as well as to prescribe, amend, and rescind rules and regulations relating to the 2008 Plan and awards granted pursuant to the 2008 Plan.
Eligibility. Pursuant to the 2008 Plan, we may grant incentive stock options only to our employees (including officers and directors who are also employees). We may grant non-statutory stock options and restricted stock to our employees, directors, and consultants.
Options. The 2008 Plan provides for the grant of both (i) incentive stock options, which are intended to qualify for tax treatment as set forth under Section 422 of the Code, and (ii) non-statutory stock options to purchase shares of our common stock, each at a stated exercise price. The exercise price of each incentive stock option must be at least equal to the fair market value of our common stock on the date of grant, except that incentive stock options granted to any individual who owns more than ten percent of the total combined voting power of all classes of our capital stock must have an exercise price at least equal to 110% of the fair market value of our common stock on the date of grant. The maximum term of options granted under our 2008 Plan is ten years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who owns stock representing more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant. As of December 31, 2020, options to purchase 401,512 shares of common stock had been exercised and options to purchase 634,788 shares of common stock remained outstanding under our 2008 Plan, with a weighted-average exercise price of $2.04 per share.
Restricted Stock Awards. Awards of restricted stock represent an offer by us to sell shares of our common stock subject to restrictions which may lapse based on terms and conditions determined by our board of directors or applicable committee. Holders of restricted stock are entitled to vote and, unless otherwise determined by the board of directors, are entitled to receive all dividends and distributions with respect to such shares. Any dividends or stock distributions paid pursuant to any unvested shares of restricted stock will be subject to the same restrictions on transferability and forfeiture as the restricted stock. As of December 31, 2020, no shares of restricted stock have been issued under the 2008 Plan.
Transferability. Unless otherwise determined by the board of directors, awards granted under the 2008 Plan may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will, the laws of descent and distribution or qualified domestic relations orders.
Change of Control and Dissolution or Liquidation. In the event of a merger, a combination transaction (as defined in the 2008 Plan), an asset sale or a dissolution or liquidation of us, the 2008 Plan provides that outstanding awards will be treated in the manner determined by our board of directors, and may (i) be assumed, converted, substituted or replaced by a successor corporation with substantially equivalent awards of any successor corporation or affiliate, with appropriate adjustments as to the number of shares and exercise or purchase prices, or provided with substantially similar consideration as was provided to our stockholders; or (ii) be terminated upon, or immediately prior to the consummation of the transaction.
Adjustments. In the event of a dividend or other distribution (whether in the form of cash, shares of our common stock or other securities or property), recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, or similar change in our corporate structure affecting the shares of common stock issued under the 2008 Plan, our board of directors will adjust the number and class of shares that may be delivered under 2008 Plan and/or the number, class and price of shares covered by each outstanding award, in order to prevent diminution or enlargement of benefits or potential benefits intended to be made available under the 2008 Plan.
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2018 Equity Incentive Plan
Our 2018 Plan was adopted by our board of directors and approved by our stockholders in November 2018. The 2018 Plan allows for the grant of stock options, stock appreciation rights, restricted stock, and restricted stock units, or RSUs, as described below. As of December 31 2020, we had 2,151,557 shares of our common stock reserved for issuance pursuant to awards under our 2018 Plan, of which 344,456 shares remained available for grant. We expect to terminate the 2018 Plan upon the effective date of the Equity Incentive Plan, which will be the date immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part. Any awards granted under the 2018 Plan that remain outstanding as of such date will continue to be subject to the terms of our 2018 Plan and applicable award agreements until such awards are exercised or until they terminate or expire by their terms.
Administration. Our 2018 Plan is administered by our board of directors or a committee appointed by our board of directors. Subject to the terms of the 2018 Plan, our board of directors has the authority to, among other things, select the persons to whom awards will be granted, construe and interpret our 2018 Plan as well as to prescribe, amend, and rescind rules and regulations relating to the 2018 Plan and awards granted pursuant to the 2018 Plan.
Eligibility. Pursuant to the 2018 Plan, we may grant incentive stock options only to our employees (including officers and directors who are also employees). We may grant non-statutory stock options, stock appreciation rights, restricted stock, and restricted stock units to our employees, directors, and consultants.
Options. The 2018 Plan provides for the grant of both (i) incentive stock options, which are intended to qualify for tax treatment as set forth under Section 422 of the Code, and (ii) non-statutory stock options to purchase shares of our common stock, each at a stated exercise price. The exercise price of each incentive stock option must be at least equal to the fair market value of our common stock on the date of grant, except that incentive stock options granted to any individual who owns more than ten percent of the total combined voting power of all classes of our capital stock must have an exercise price at least equal to 110% of the fair market value of our common stock on the date of grant. The maximum term of options granted under our 2018 Plan is ten years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who owns stock representing more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant. As of December 31, 2020, 50,678 options to purchase shares of common stock had been exercised and 1,807,101 options to purchase shares of common stock remained outstanding under our 2018 Plan, with a weighted-average exercise price of $6.28 per share.
Restricted Stock Awards. Awards of restricted stock represent an offer by us to sell shares of our common stock subject to restrictions which may lapse based on terms and conditions determined by our board of directors or applicable committee. Holders of restricted stock are entitled to vote and, unless otherwise determined by the board of directors, are entitled to receive all dividends and distributions with respect to such shares. Any dividends or stock distributions paid pursuant to any unvested shares of restricted stock will be subject to the same restrictions on transferability and forfeiture as the restricted stock. As of December 31, 2020, no shares of restricted stock had been issued under the 2018 Plan.
Other Awards. The 2018 Plan also provides for the grant of stock appreciation rights and restricted stock units, neither of which has been granted as of December 31, 2020.
Transferability. Unless otherwise determined by the board of directors, awards granted under the 2018 Plan may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will, the laws of descent and distribution or qualified domestic relations orders.
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Acquisition or Other Combination. In the event of an acquisition (as defined in the 2018 Plan), or other combination (as defined in the 2018 Plan), the 2018 Plan provides that outstanding awards will be treated in the manner determined by our board of directors, and may (i) be continued, assumed or substituted with substantially equivalent awards of any successor corporation or affiliate, with appropriate adjustments as to the number of shares and exercise or purchase prices; (ii) become vested or exercisable, in full or in part; (iii) be terminated for no consideration or in exchange for an amount of cash or securities property followed by the cancellation of such awards; or (iv) any combination of the foregoing. After giving effect to the foregoing, any awards outstanding under the 2018 Plan that are not assumed or substituted will terminate if not exercised, as applicable, immediately following the consummation of the acquisition or other combination.
Adjustments. In the event of a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, or other change in our corporate structure affecting the shares of common stock issued under the 2018 Plan, our board of directors will adjust the number and class of shares that may be delivered under 2018 Plan and/or the number, class and price of shares covered by each outstanding award, in order to prevent diminution or enlargement of benefits or potential benefits intended to be made available under the 2018 Plan.
Dissolution or Liquidation. In the event of a proposed dissolution or liquidation, the 2018 Plan provides that each outstanding award will terminate if not exercised prior to the dissolution or liquidation event.
2021 Equity Incentive Plan
We intend to adopt our 2021 Plan that will become effective on the date immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part and will serve as the successor to our 2018 Plan. Our 2021 Plan authorizes the award of stock options, RSUs, restricted stock awards, stock bonus awards, stock appreciation rights, performance awards, and cash awards. We intend to initially reserve 2,205,000 shares of our common stock, plus any reserved shares not issued or subject to outstanding grants under the 2018 Plan on the effective date of the 2021 Plan, for issuance pursuant to awards granted under our 2021 Plan. The number of shares reserved for issuance under our 2021 Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to the lesser of 5% of the total number of outstanding shares of all classes of our common stock as of the immediately preceding December 31, or a number as may be determined by our board of directors. In addition, the following shares of our common stock will be available for grant and issuance under our 2021 Plan:
∎ |
shares subject to awards granted under our 2008 Plan and/or 2018 Plan, or the Prior Plans, that cease to be subject to such awards by forfeiture or otherwise after the effective date; |
∎ |
shares issued under our Prior Plans before or after the effective date pursuant to the exercise of stock options that are forfeited after the effective date; |
∎ |
shares issued pursuant to outstanding awards under our Prior Plans that are forfeited or repurchased by us at the original issue price after the effective date of the 2021 Plan; |
∎ |
shares subject to options or other awards under the Prior Plans that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award; |
∎ |
shares subject to issuance upon exercise of an option or SAR granted under the 2021 Plan but which cease to be subject to the option or SAR for any reason other than exercise of the option or SAR; |
∎ |
shares subject to outstanding awards under our 2021 Plan that are forfeited or repurchased by us at the original issue price; |
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∎ |
shares subject to awards under our 2021 Plan that otherwise terminate without such shares being issued; and |
∎ |
shares subject to awards under our 2021 Plan that are surrendered pursuant to an exchange program. |
The following is a description of the material terms of the 2021 Plan. The summary below does not contain a complete description of all provisions of the 2021 Plan and is qualified in its entirety by reference to the 2021 Plan, a copy of which will be included as an exhibit to the registration statement to which this prospectus forms a part.
Administration. Our 2021 Plan will be administered by our compensation committee or by our board of directors acting in place of our compensation committee. Subject to the terms and conditions of the 2021 Plan, the compensation committee will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret our 2021 Plan as well as to determine the terms of such awards and prescribe, amend, and rescind the rules and regulations relating to the plan or any award granted thereunder. The 2021 Plan provides that our board of directors or compensation committee may delegate its authority, including the authority to grant awards, to one or more officers to the extent permitted by applicable law, provided that awards granted to non-employee directors may only be determined by our board of directors.
Eligibility. Our 2021 Plan provides for the grant of awards to our employees, directors, and consultants. No non-employee director may receive awards under our 2021 Plan that, when combined with cash compensation received for service as a non-employee director, exceed $750,000 in value (measured as of the date of grant) in any fiscal year, or $1,000,000 in his or her initial fiscal year.
Options. The 2021 Plan provides for the grant of both incentive stock options intended to qualify under Section 422 of the Code, and non-statutory stock options to purchase shares of our Common Stock at a stated exercise price. Incentive stock options may only be granted to our employees, including our officers and directors who are also employees. The exercise price of incentive stock options granted under the 2021 Plan must be at least equal to the fair market value of our Common Stock on the date of grant. Incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock must have an exercise price of at least 110% the fair market value of our Common Stock on the date of grant. Subject to stock splits, dividends, recapitalizations or similar events, no more than 6,615,000 shares may be issued pursuant to the exercise of incentive stock options granted under the 2021 Plan.
Options may vest based on service or achievement of performance conditions. Our compensation committee may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. The maximum term of options granted under our 2021 Plan is ten years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant.
Restricted Stock Awards. An award of restricted stock is an offer by us to sell shares of our Common Stock subject to restrictions that may lapse based on the satisfaction of service or achievement of performance conditions. The price, if any, of an award of restricted stock will be determined by the compensation committee. Unless otherwise determined by the compensation committee, holders of restricted stock will be entitled to vote and to receive any dividends or stock distributions paid pursuant to any unvested shares of restricted stock. If any such dividends or
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distributions are paid in shares of common stock, the shares will be subject to the same restrictions on transferability and forfeiture as the shares of restricted stock with respect to which they were paid.
Stock Appreciation Rights. A SAR provides for a payment, in cash or shares of our Common Stock (up to a specified maximum of shares, if determined by our compensation committee), to the holder based upon the difference between the fair market value of our Common Stock on the date of exercise and a pre-determined exercise price, multiplied by the number of shares with respect to which the SAR is being exercised. The exercise price of a SAR must be at least the fair market value of a share of our Common Stock on the date of grant. SARs may vest based on service or achievement of performance conditions, and may not have a term that is longer than ten years from the date of grant.
Restricted Stock Units. RSUs represent the right to receive shares of our Common Stock at a specified date in the future, and may be subject to vesting based on service or achievement of performance conditions. Payment of earned RSUs may be made as soon as practicable after the date determined at the time of grant or on a deferred basis in the discretion of the committee, and may be settled in cash, shares of our common stock or a combination of both. No RSU may have a term that is longer than ten years from the date of grant.
Performance Awards. Performance awards granted to pursuant to the 2021 Plan may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our Common Stock, that may be settled in cash, property or by issuance of those shares subject to the satisfaction or achievement of specified performance conditions.
Stock Bonus Awards. A stock bonus award provides for payment in the form of cash, shares of our Common Stock or a combination thereof, based on the fair market value of shares subject to such award as determined by our compensation committee. The awards may be subject to vesting restrictions based on continued service or performance conditions.
Cash Awards. A cash award is an award that is denominated in, or payable to an eligible participant solely in, cash.
Dividend Equivalent Rights. Dividend equivalent rights may be granted at the discretion of our compensation committee and represent the right to receive the value of dividends, if any, paid by us in respect of the number of shares of our Common Stock underlying an award. Dividend equivalent rights will be subject to the same vesting or performance conditions as the underlying award and will be paid only at such time as the underlying award has become fully vested. Dividend equivalent rights may be settled in cash, shares or other property, or a combination of thereof as determined by the compensation committee.
Corporate Transaction. In the event of a corporate transaction (which includes a merger, consolidation or asset sale), the 2021 Plan provides that outstanding awards will be treated in the manner determined by our board of directors, and may (i) be assumed, converted, replaced, or substituted with substantially equivalent awards of any successor corporation or affiliate, (ii) become vested or exercisable, in full or in part, (iii) be settled in cash, cash equivalents, or securities of any successor entity followed by the cancellation of such awards, or (iv) be cancelled for no consideration. In the event any successor corporation refuses to assume, convert, replace, or substitute awards, then immediately prior to such corporate transaction all awards shall expire. Awards need not all be treated in the same manner in a corporate transaction. Notwithstanding the foregoing, the vesting of all awards granted to our non-employee directors will accelerate and such awards will become exercisable (to the extent applicable) in full prior to the consummation of a corporate transaction.
Adjustment. In the event of a change in the number of outstanding shares of our Common Stock without consideration by reason of a stock dividend, extraordinary dividend or distribution,
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recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, spin-off or similar change in our capital structure, appropriate proportional adjustments will be made to (i) the number and class of shares reserved for issuance under our 2021 Plan and the incentive stock option limit; (ii) the exercise prices of options and SARs; (iii) number and class of shares subject to outstanding awards; and (iv) any applicable maximum award limits pursuant to the 2021 Plan.
Clawback; Transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our board of directors or required by law to the extent set forth in such policy or applicable agreement. Except in limited circumstances, awards granted under our 2021 Plan may generally not be transferred in any manner prior to vesting other than by will or by the laws of descent and distribution.
Amendment and Termination; Exchange Program. Our board of directors may amend our 2021 Plan at any time, subject to stockholder approval as may be required. Our 2021 Plan will terminate ten years from the date our board of directors adopted the plan, unless it is terminated earlier by our board of directors. No termination or amendment of the 2021 Plan may adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws. Subject to the foregoing, the compensation committee may at any time increase or decrease the exercise price applicable to outstanding options or SARs or pay cash or issue new awards in exchange for the surrender and cancellation of any, or all, outstanding awards.
No awards under our 2021 Plan have been made prior to the date hereof.
Employee Stock Purchase Plan
We intend to adopt our ESPP that will become effective upon the effectiveness of the registration statement of which this prospectus forms a part in order to enable eligible employees to purchase shares of our common stock at a discount with accumulated payroll deductions. Our ESPP is intended to qualify under Section 423 of the Code.
The following is a description of the material terms of the ESPP. The summary below does not contain a complete description of all provisions of the ESPP and is qualified in its entirety by reference to the ESPP, a copy of which will be included as an exhibit to the registration statement to which this prospectus forms a part.
Share Reserve. We intend to initially reserve 276,000 shares of our common stock for sale under our ESPP. The aggregate number of shares reserved for sale under our ESPP will increase automatically on January 1st of each fiscal year following the fiscal year that contains the first offering date (as defined in the ESPP) by the number of shares equal to the lesser of 1% of the total number of shares of all classes of our common stock issued and outstanding on each December 31st immediately prior to the date of increase or a lower number of shares as may be determined by our board of directors or compensation committee in any particular year. The aggregate number of shares issued over the term of our ESPP, subject to adjustment due to stock-splits, recapitalizations or similar events, may not exceed 5,520,000 shares of our common stock.
Administration. Our compensation committee will administer our ESPP subject to the terms and conditions of the ESPP. Among other things, the compensation committee will have the authority to determine eligibility for participation in the ESPP, designate separate offerings under the plan, and construe, interpret and apply the terms of the plan.
Eligibility. Employees eligible to participate in any offering pursuant to the ESPP generally include any employee that is employed by us at the beginning of the offering period. While our employees generally are eligible to participate in our ESPP, our compensation committee may in its discretion
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elect to exclude employees who do not meet eligibility criteria chosen by the compensation committee. In addition, employees who are 5% stockholders, or would become 5% stockholders as a result of their participation in our ESPP, are ineligible to participate in our ESPP. We may impose additional restrictions on eligibility within the limits permitted by the Code.
Offering Periods; Enrollment. Under our ESPP, eligible employees will be offered the option to purchase shares of our common stock at a discount over a series of offering periods. Each offering period may itself consist of one or more purchase periods. No offering period may be longer than 27 months and each offering period will be determined by our compensation committee. When the first offering period commences, our employees who meet the eligibility requirements for participation in that offering period will be eligible to enroll. For subsequent offering periods, new participants will be required to enroll in a timely manner. Once an employee is enrolled, participation will be automatic in subsequence offering periods. An employees participation automatically ends upon a termination of employment for any reason. The initial enrollment period for our ESPP will not commence until a later date to be determined by our compensation committee.
Offerings; Payroll Deductions; Limitations. Under our ESPP, eligible employees will be offered the option to purchase shares of our common stock at a discount over a series of offering periods by accumulating funds through payroll deductions of between 1% and 15% of their compensation. The purchase price for shares of our common stock purchased under the ESPP will be 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period and (ii) the date of purchase. However, no participant may purchase more than 1,000 shares on any one purchase date. Our compensation committee, in its discretion, may set a lower maximum number of shares which may be purchased. In addition, no participant will have the right to purchase our shares in an amount, when aggregated with purchase rights under all our employee stock purchase plans that are also in effect in the same calendar years, that has a fair market value of more than $25,000, determined as of the first day of the applicable offering period, for each calendar year in which that right is outstanding.
Adjustments upon Recapitalization. If the number of outstanding shares of our common stock is changed by stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, or similar change in our capital structure without consideration, then our compensation committee will proportionately adjust the number and class of common stock that is available under the ESPP, the purchase price and number of shares any participant has elected to purchase as well as the maximum number of shares which may be purchased by participants.
Corporate Transaction. If we experience a corporate transaction (which includes a merger, consolidation or asset sale), then any offering period for each outstanding right to purchase common stock will be shortened by setting a new purchase date and will end on the new purchase date. The new purchase date shall occur on or prior to the consummation of the corporate transaction, as determined by the committee, and the ESPP shall terminate on the consummation of the corporate transaction.
Transferability. No participant may assign, transfer, pledge, or otherwise dispose of payroll deductions credited to his or her account, or any rights with regard to an election to purchase shares pursuant to the ESPP other than by will or the laws of descent or distribution.
Amendment; Termination. The compensation committee may amend, suspend, or terminate the ESPP at any time without stockholder consent, except as required by law. Our ESPP will continue until the earlier to occur of (i) termination of the ESPP by the board of directors, (ii) issuance of all of the shares reserved for issuance under the ESPP, or (iii) the tenth anniversary of the effective date under the ESPP.
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401(k) Plan
We sponsor a retirement savings plan established in January 1, 2018 that is intended to qualify for favorable tax treatment under Section 401(a) of the IRC, and contains a cash or deferred feature that is intended to meet the requirements of Section 401(k) of the IRC. Participants may make pre-tax and certain after-tax (Roth) salary deferral contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit under the IRC. Participants who are 50 years of age or older may contribute additional amounts based on the statutory limits for catch-up contributions. Participant contributions are held in trust as required by law. No minimum benefit is provided under the plan. The plan provides for employer safe harbor matching contributions equal to 100% of an employees salary deferrals that do not exceed 4% of the employees compensation. An employees interest in his or her deferrals and safe harbor matching contributions is 100% vested when contributed.
Other Benefits
Our named executive officers, if and while employed by us, are eligible to participate in our employee benefit plans on the same basis as our other employees, including our health and welfare plans.
Limitations on Liability and Indemnification Matters
Our restated certificate of incorporation that will become effective in connection with the completion of this offering contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by the DGCL. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
∎ |
any breach of the directors duty of loyalty to us or our stockholders; |
∎ |
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
∎ |
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or |
∎ |
any transaction from which the director derived an improper personal benefit. |
Our restated certificate of incorporation and our restated bylaws that will become effective in connection with the completion of this offering require us to indemnify our directors and officers to the maximum extent not prohibited by the DGCL and allow us to indemnify other employees and agents as set forth in the DGCL.
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors, officers and certain of our key employees, in addition to the indemnification provided for in our restated certificate of incorporation and restated bylaws. These agreements, among other things, require us to indemnify our directors, officers and key employees for certain expenses, including attorneys fees, judgments, penalties, fines and settlement amounts actually incurred by these individuals in any action or proceeding arising out of their service to us or any of our subsidiaries or any other company or enterprise to which these individuals provide services at our request. Subject to certain limitations, our indemnification agreements also require us to advance expenses incurred by our directors, officers and key employees for the defense of any action for which indemnification is required or permitted.
We believe that these indemnification provisions and agreements are necessary to attract and retain qualified directors, officers and key employees. We also maintain directors and officers liability insurance.
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The limitation of liability and indemnification provisions in our restated certificate of incorporation and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholders investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements, including employment, termination of employment and change in control arrangements, with our directors and executive officers, including those discussed in the sections titled Management and Executive Compensation, the following is a description of each transaction since January 1, 2018 and each currently proposed transaction in which:
∎ |
we have been or are to be a participant; |
∎ |
the amounts involved exceeded or will exceed $120,000; and |
∎ |
any of our directors, executive officers or holders of more than 5% of our capital stock, or an affiliate or immediate family member of the foregoing persons, had or will have a direct or indirect material interest. |
Other than as described below, there have not been, nor are there any currently proposed, transactions or series of similar transactions to which we have been or will be a party other than compensation arrangements, which are described where required under the section titled Executive Compensation.
Series D Redeemable Convertible Preferred Stock Financing
In December 2018, we sold an aggregate of 95,191,755 shares of our Series D redeemable convertible preferred stock at a purchase price of $0.7091 per share for an aggregate purchase price of approximately $67.5 million. Each 16.37332 shares of our Series D redeemable convertible preferred stock will convert automatically into one share of our common stock upon the completion of this offering.
The following table summarizes the Series D redeemable convertible preferred stock purchased by members of our board of directors or their affiliates and holders of more than 5% of our outstanding capital stock:
Name of Stockholder |
Shares of Series D
Redeemable Convertible Preferred Stock |
Total Purchase Price | ||||||
Norwest Venture Partners XIV, LP(1) |
35,256,206 | $ | 24,999,999 | |||||
KKR Iris Investors LLC(2) |
42,307,448 | 30,000,000 | ||||||
Entities affiliated with Vivo Capital LLC(3) |
5,876,033 | 4,166,666 | ||||||
venBio Global Strategic Fund II, L.P.(4) |
5,876,034 | 4,166,666 | ||||||
5AM Ventures V, L.P.(5) |
5,876,034 | 4,166,666 |
(1) |
Norwest Venture Partners XIV, LP, or Norwest Venture Partners, holds more than 5% of our outstanding capital stock. NVP Associates, LLC is the managing member of Genesis VC Partners XIV, LLC, which is the general partner of Norwest Venture Partners. Robert Mittendorff, M.D., a member of our board of directors, is a partner at Norwest Venture Partners. |
(2) |
KKR Iris Investors LLC, or KKR Iris, holds more than 5% of our outstanding capital stock. Ali Satvat, a member of our board of directors, is a partner at Kohlberg Kravis Roberts & Co. L.P. |
(3) |
Consists of shares purchased by Vivo Capital Fund VIII, L.P., or Vivo VIII, and Vivo Capital Surplus Fund VIII, L.P., or Vivo Surplus, which collectively hold more than 5% of our outstanding capital stock. Vivo Capital VIII, LLC is the general partner of Vivo VIII and Vivo Surplus. Mahendra Shah, Ph.D., a member of our board of directors, is a managing director at Vivo Capital LLC, an affiliate of Vivo Capital VIII, LLC. |
(4) |
venBio Global Strategic Fund II, L.P., or venBio Strategic Fund, holds more than 5% of our outstanding capital stock. Aaron Royston, M.D., a member of our board of directors, is a partner at venBio Partners LLC, an affiliate of venBio Strategic Fund. |
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(5) |
5AM Ventures V, L.P., or 5AM Ventures, holds more than 5% of our outstanding capital stock. David Allison, Ph.D., a member of our board of directors, is a partner at 5AM Venture Management, LLC. |
Series C-3 Redeemable Convertible Preferred Stock Financing
In February 2018, we sold an aggregate of 24,605,790 shares of our Series C-3 redeemable convertible preferred stock at a purchase price of $0.6096 per share for an aggregate purchase price of approximately $15.0 million. Each 16.37332 shares of our Series C-3 redeemable convertible preferred stock will convert automatically into one share of our common stock upon the completion of this offering.
The following table summarizes the Series C-3 redeemable convertible preferred stock purchased by members of our board of directors or their affiliates and holders of more than 5% of our outstanding capital stock:
Name of Stockholder |
Shares of Series C-3
Redeemable Convertible Preferred Stock |
Total Purchase Price | ||||||
Entities affiliated with Vivo Capital LLC(1) |
8,201,930 | $ | 5,000,000 | |||||
venBio Global Strategic Fund II, L.P.(2) |
8,201,930 | 5,000,000 | ||||||
5AM Ventures V, L.P.(3) |
8,201,930 | 5,000,000 |
(1) |
Consists of shares purchased by Vivo VIII and Vivo Surplus, which collectively hold more than 5% of our outstanding capital stock. Vivo Capital VIII, LLC is the general partner of Vivo VIII and Vivo Surplus. Mahendra Shah, Ph.D., a member of our board of directors, is a managing director at Vivo Capital LLC, an affiliate of Vivo Capital VIII, LLC. |
(2) |
venBio Strategic Fund holds more than 5% of our outstanding capital stock. Aaron Royston, M.D., a member of our board of directors, is a partner at venBio Partners LLC, an affiliate of venBio Strategic Fund. |
(3) |
5AM Ventures V, L.P. holds more than 5% of our outstanding capital stock. David Allison, Ph.D., a member of our board of directors, is a partner at 5AM Venture Management, LLC. |
Series C-2 Redeemable Convertible Preferred Stock Financing
In February 2018, we sold an aggregate of 26,537,826 shares of Series C-2 redeemable convertible preferred stock at a purchase price of $0.5652 per share, for an aggregate purchase price of approximately $15.0 million. Each 16.37332 shares of our Series C-2 redeemable convertible preferred stock will convert automatically into one share of our common stock upon the completion of this offering.
The following table summarizes the Series C-2 redeemable convertible preferred stock purchased by members of our board of directors or their affiliates and holders of more than 5% of our outstanding capital stock:
Name of Stockholder |
Shares of Series C-2
Redeemable Convertible Preferred Stock |
Total Purchase Price | ||||||
Entities affiliated with Vivo Capital LLC(1) |
8,845,942 | $ | 5,000,000 | |||||
venBio Global Strategic Fund II, L.P.(2) |
8,845,942 | 5,000,000 | ||||||
5AM Ventures V, L.P.(3) |
8,845,942 | 5,000,000 |
(1) |
Consists of shares purchased by Vivo VIII and Vivo Surplus, which collectively hold more than 5% of our outstanding capital stock. Vivo Capital VIII, LLC is the general partner of Vivo VIII and Vivo Surplus. Mahendra Shah, Ph.D., a member of our board of directors, is a managing director at Vivo Capital LLC, an affiliate of Vivo Capital VIII, LLC. |
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(2) |
venBio Strategic Fund holds more than 5% of our outstanding capital stock. Aaron Royston, M.D., a member of our board of directors, is a partner at venBio Partners LLC, an affiliate of venBio Strategic Fund. |
(3) |
5AM Ventures V, L.P. holds more than 5% of our outstanding capital stock. David Allison, Ph.D., a member of our board of directors, is a partner at 5AM Venture Management, LLC. |
Convertible Notes Financing
In March 2021, we issued convertible promissory notes to various investors for an aggregate amount of $7.5 million. The notes bear interest at a rate of 5.0% per annum and mature on the earlier of (a) December 31, 2021 and (b) a change of control. The notes will automatically convertible into shares of our common stock upon the closing of this offering at 90% of the public offering price set forth on the cover page of this prospectus. The notes are also convertible at the holders option or upon a change of control into shares of our Series D redeemable convertible preferred stock at the Series D original issuance price or, upon a new redeemable convertible preferred stock financing, into shares of redeemable preferred stock issued in such financing at 90% of the price per share.
The following table summarizes the convertible promissory notes purchased by members of our board of directors or their affiliates and holders of more than 5% of our outstanding capital stock:
Name of Stockholder |
Principal Amount
of Convertible Notes |
|||
KKR Iris Investors LLC(1) |
$ | 1,591,072 | ||
5AM Ventures V, L.P.(2) |
1,359,799 | |||
venBio Global Strategic Fund II, L.P.(3) |
1,359,799 | |||
Entities affiliated with Vivo Capital LLC(4) |
1,359,799 | |||
Norwest Venture Partners XIV, LP(5) |
1,325,893 |
(1) |
KKR Iris holds more than 5% of our outstanding capital stock. Ali Satvat, a member of our board of directors, is a partner at Kohlberg Kravis Roberts & Co. L.P. |
(2) |
5AM Ventures holds more than 5% of our outstanding capital stock. David Allison, Ph.D., a member of our board of directors, is a partner at 5AM Venture Management, LLC. |
(3) |
venBio Strategic Fund holds more than 5% of our outstanding capital stock. Aaron Royston, M.D., a member of our board of directors, is a partner at venBio Partners LLC, an affiliate of venBio Strategic Fund. |
(4) |
Consists of notes purchased by Vivo VIII and Vivo Surplus, which collectively hold more than 5% of our outstanding capital stock. Vivo Capital VIII, LLC is the general partner of Vivo VIII and Vivo Surplus. Mahendra Shah, Ph.D., a member of our board of directors, is a managing director at Vivo Capital LLC, an affiliate of Vivo Capital VIII, LLC. |
(5) |
Norwest Venture Partners holds more than 5% of our outstanding capital stock. NVP Associates, LLC is the managing member of Genesis VC Partners XIV, LLC, which is the general partner of Norwest Venture Partners. Robert Mittendorff, M.D., a member of our board of directors, is a partner at Norwest Venture Partners. |
Amended and Restated Investors Rights Agreement
We have entered into an amended and restated investors rights agreement, dated December 4, 2018, with certain holders of our redeemable convertible preferred stock, including entities affiliated with Norwest Venture Partners, KKR Iris, Vivo Capital, venBio Strategy Fund and 5AM Venture Management, LLC. These stockholders are entitled to rights with respect to the registration of their shares following this offering under the Securities Act. For a description of these registration rights, see the section titled Description of Capital StockRegistration Rights.
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Equity Grants to Executive Officers and Directors
We have granted stock options to our executive officers and certain directors, as more fully described in the sections titled Executive Compensation and ManagementNon-Employee Director Compensation, respectively.
Director and Executive Officer Compensation
Please see the sections titled ManagementNon-Employee Director Compensation and Executive Compensation for information regarding the compensation of our directors and executive officers.
Employment Agreements
We have entered into employment agreements with our executive officers. For more information regarding these agreements, see the section titled Executive CompensationEmployment Agreements.
Indemnification Agreements
In connection with this offering, we intend to enter into new indemnification agreements with each of our directors and executive officers. The indemnification agreements, our restated certificate of incorporation and our restated bylaws will require us to indemnify our directors to the fullest extent not prohibited by Delaware law. Subject to certain limitations, our restated bylaws also require us to advance expenses incurred by our directors and officers. For more information regarding these agreements, see the section titled Executive CompensationLimitations on Liability and Indemnification Matters for information on our indemnification arrangements with our directors and executive officers.
Policies and Procedures for Related Party Transactions
Upon consummation of this offering, we will adopt a written related person transaction policy that provides that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of our common stock, and any members of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a material related person transaction with us without the review and approval of our audit committee, or a committee composed solely of independent directors in the event it is inappropriate for our audit committee to review such transaction due to a conflict of interest.
The policy will provide that any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our common stock or with any of their immediate family members or affiliates in which the amount involved exceeds $120,000 will be presented to our audit committee (or the committee composed solely of independent directors, if applicable) for review, consideration and approval. In approving or rejecting any such proposal, we expect that our audit committee (or the committee composed solely of independent directors, if applicable) will consider the relevant facts and circumstances available and deemed relevant to the audit committee (or the committee composed solely of independent directors, if applicable), including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related persons interest in the transaction.
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The following table and accompanying footnotes set forth certain information with respect to the beneficial ownership of our common stock on March 31, 2021, and as adjusted to reflect the shares of common stock to be issued and sold in this offering, for:
∎ |
each of our directors; |
∎ |
each of our named executive officers; |
∎ |
all of our current directors and executive officers as a group; and |
∎ |
each person, or group of affiliated persons, who beneficially owned more than 5% of our outstanding shares of common stock. |
We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable community property laws.
Beneficial ownership prior to this offering is based on 13,369,373 shares of common stock outstanding as of March 31, 2021, assuming the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into common stock in connection with this offering. Beneficial ownership after this offering is based on 19,422,929 shares of common stock outstanding, assuming (i) the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into common stock as described above, (ii) the automatic exchange of a warrant held by Avenue into 107,633 shares upon completion of this offering, (iii) the issuance of 52,974 shares, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range reflected on the cover of this prospectus, upon the expected net exercise of warrants outstanding at March 31, 2021 that would otherwise expire upon the completion of this offering, (iv) the automatic conversion of convertible notes we issued in March 2021 into 559,585 shares of common stock immediately prior to the completion of this offering and (v) the issuance and sale of shares of common stock in this offering.
Certain of our existing stockholders, including stockholders affiliated with certain of our directors and stockholders who own more than 5% of our outstanding common stock before this offering, have indicated an interest in purchasing a substantial majority of the shares of our common stock offered in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, any of these entities may determine to purchase fewer shares than they indicate an interest in purchasing or not to purchase in this offering. It also is possible that any of these entities could purchase more shares of our common stock than currently indicated. In addition, the underwriters could determine to sell fewer shares to any of these entities than these entities indicate an interest in purchasing or not to sell any shares to these entities. It is also possible that the underwriters could determine to sell more shares to any of these entities than currently indicated. Accordingly, the following table does not reflect any potential purchases by these potential purchasers. If any shares are purchased by these entities, the number and percentage of shares of our common stock beneficially owned by them after this offering will differ from those set forth in the following table.
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In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock subject to options and warrants held by that person or entity that are currently exercisable or that will become exercisable within 60 days of March 31, 2021. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Impel NeuroPharma, Inc., 201 Elliott Avenue West, Suite 260, Seattle, Washington 98119.
Beneficial Ownership
Prior to this Offering |
Beneficial Ownership
After this Offering |
|||||||||||||||
Name of Beneficial Owner |
Number | Percent | Number | Percent | ||||||||||||
Directors and Named Executive Officers: |
||||||||||||||||
Adrian Adams(1) |
198,444 | 1.5 | % | 198,444 | 1.0 | % | ||||||||||
Jon Congleton |
322,810 | 2.4 | % | 322,810 | 1.7 | % | ||||||||||
Stephen Shrewsbury, M.B., Ch.B.(2) |
89,364 | * | 89,364 | * | ||||||||||||
John Leaman, M.D.(3) |
112,687 | * | 112,687 | * | ||||||||||||
David Allison, Ph.D. |
| | | | ||||||||||||
John Hoekman, Ph.D. (4) |
456,219 | 3.3 | % | 456,219 | 2.3 | % | ||||||||||
Robert Mittendorff, M.D. |
| | | | ||||||||||||
Timothy S. Nelson(5) |
88,858 | * | 88,858 | * | ||||||||||||
H. Stewart Parker(6) |
80,816 | * | 80,816 | * | ||||||||||||
Aaron Royston, M.D. |
| | | | ||||||||||||
Ali Satvat |
| | | | ||||||||||||
Mahendra Shah, Ph.D. |
| | | | ||||||||||||
Diane E. Wilfong(7) |
13,065 | * | 13,065 | * | ||||||||||||
All executive officers and directors as a group (13 persons) |
1,039,453 | 7.3 | % | 1,039,453 | 5.1 | % | ||||||||||
Other 5% Stockholders: |
||||||||||||||||
5AM Ventures V, L.P.(8) |
2,208,334 | 16.5 | % | 2,208,334 | 11.4 | % | ||||||||||
KKR Iris Investors LLC(9) |
2,583,926 | 19.3 | % | 2,583,926 | 13.3 | % | ||||||||||
Norwest Venture Partners XIV, LP(10) |
2,153,271 | 16.1 | % | 2,153,271 | 11.1 | % | ||||||||||
venBio Global Strategic Fund II, L.P.(11) |
2,208,334 | 16.5 | % | 2,208,334 | 11.4 | % | ||||||||||
Entities affiliated with Vivo Capital LLC(12) |
2,208,333 | 16.5 | % | 2,208,333 | 11.4 | % |
* |
Represents beneficial ownership of less than one percent. |
(1) |
Represents 198,444 shares underlying options to purchase common stock that are exercisable within 60 days of March 31, 2021. |
(2) |
Represents 89,364 shares underlying options to purchase common stock that are exercisable within 60 days of March 31, 2021. |
(3) |
Represents 112,687 shares underlying options to purchase common stock that are exercisable within 60 days of March 31, 2021. |
(4) |
Represents (i) 107,992 shares of common stock, (ii) 347,723 shares underlying options to purchase common stock that are exercisable within 60 days of March 31, 2021, and (iii) 504 shares underlying warrants to purchase common stock that are exercisable within 60 days of March 31, 2021. |
(5) |
Represents 88,858 shares underlying options to purchase common stock that are exercisable within 60 days of March 31, 2021. |
(6) |
Represents (i) 16,154 shares of common stock, (ii) 60,936 shares underlying options to purchase common stock that are exercisable within 60 days of March 31, 2021 and (iii) 3,726 shares underlying warrants to purchase common stock that are exercisable within 60 days of March 31, 2021. |
(7) |
Represents 13,065 shares underlying options to purchase common stock that are exercisable within 60 days of March 31, 2021. |
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(8) |
Represents 2,208,334 shares of common stock held by 5AM Ventures V, L.P., or 5AM Ventures V. David Allison, a member of our board of directors, is a partner at 5AM Venture Management, LLC and has no voting or dispositive power over the shares held by 5AM Ventures V. Andrew Schwab, Kush Parmar and Scott Rocklage are the managing members of 5AM Partners V, LLC, which is the general partner of 5AM Ventures V. Messrs. Schwab, Parmar and Rocklage may be deemed to share voting and dispositive power over the shares held by 5AM Ventures V. The address of 5AM Venture Management, LLC and its affiliates is 501 2nd Street, Suite 350, San Francisco, California 94107. |
(9) |
Represents 2,583,926 shares of common stock held by KKR Iris Investors LLC, or KKR Iris. Each of KKR Health Care Strategic Growth Fund L.P. (as the managing member of KKR Iris); KKR Associates HCSG L.P. (as the general partner of KKR Health Care Strategic Growth Fund L.P.); KKR HCSG GP LLC (as the general partner of KKR Associates HCSG L.P.); KKR Group Partnership L.P. (as the sole member of KKR HCSG GP LLC); KKR Group Holdings Corp. (as the general partner of KKR Group Partnership L.P.); KKR & Co. Inc. (as the sole shareholder of KKR Group Holdings Corp.); KKR Management LLP (as the Series I preferred stockholder of KKR & Co. Inc.); and Messrs. Henry R. Kravis and George R. Roberts (as the founding partners of KKR Management LLP) may be deemed to share voting and dispositive power over the shares held by KKR Iris. The principal business address of each of the entities and persons identified in this footnote, except Mr. Roberts, is c/o Kohlberg Kravis Roberts & Co. L.P., 30 Hudson Yards, New York, New York 10001. The principal business address for Mr. Roberts is c/o Kohlberg Kravis Roberts & Co. L.P., 2800 Sand Hill Road, Suite 200, Menlo Park, CA 94025. |
(10) |
Represents 2,153,271 shares of common stock held by Norwest Venture Partners XIV, LP, or Norwest XIV. Robert Mittendorff, a member of our board of directors, is a partner at Norwest Ventures and has no voting or dispositive power over the shares held by Norwest XIV. Genesis VC Partners XIV, LLC, or Genesis XIV, is the general partner of Norwest XIV and may be deemed to have sole voting and dispositive power over the shares held by Norwest XIV. NVP Associates, LLC, or NVP Associates, is the managing member of Genesis XIV. Promod Haque, Jeffrey Crowe and Jon E. Kossow, the co-chief executive officers of NVP Associates, may be deemed to share voting and dispositive power over the shares held by Norwest XIV. Each of such individuals, together with NVP Associates and Genesis XIV, disclaims beneficial ownership over the shares held by Norwest XIV except to the extent of their pecuniary interest therein. The address of Norwest is 525 University Avenue, Suite 800, Palo Alto, California 94301. |
(11) |
Represents 2,208,334 shares of common stock held by venBio Global Strategic Fund II, L.P., or venBio II. Aaron Royston, a member of our board of directors, is a partner at venBio Partners and has no voting or dispositive power over the shares held by venBio II. venBio Global Strategic GP II, Ltd., or venBio Ltd., is the general partner of venBio Global Strategic GP II, L.P., or venBio L.P., which is the general partner of VenBio II. Corey Goodman and Robert Adelman are the directors of venBio Ltd. and may be deemed to share voting and dispositive power over the shares held by venBio II. Each of such individuals, together with venBio Ltd. and venBio L.P., disclaims beneficial ownership over the shares held by venBio II except to the extent of their pecuniary interest therein. The address of venBio is 1700 Owens Street, Suite 595, San Francisco, California 94158. |
(12) |
Represents (i) 1,940,350 shares of common stock held by Vivo Capital Fund VIII, L.P., or Vivo VIII, and (ii) 267,983 shares of common stock held by Vivo Capital Surplus Fund VIII, L.P., or Vivo Surplus. Mahendra Shah, a member of our board of directors, is a managing director of Vivo Capital LLC and has no voting or dispositive power over the shares held by each of Vivo VIII or Vivo Surplus. Frank Kung, Edgar Engleman and Shan Fu are the managing members of Vivo Capital VIII, LLC, or Vivo LLC, which is the general partner of each of Vivo VIII and Vivo Surplus. Messrs. Kung, Engleman and Fu may be deemed to share voting and dispositive power over the shares held by each of Vivo VIII and Vivo Surplus. Each of such individuals disclaims beneficial ownership over the shares held by each of Vivo VIII and Vivo Surplus except to the extent of their pecuniary interest therein. The address of the each of Vivo VIII and Vivo Surplus is 192 Lytton Avenue, Palo Alto California 94301. |
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The following description summarizes the most important terms of our capital stock, as they will be in effect following this offering. Because it is only a summary, it does not contain all the information that may be important to you. We expect to adopt a restated certificate of incorporation and restated bylaws that will become effective upon the completion of this offering, and this description summarizes provisions that are expected to be included in these documents. For a complete description, please refer to our restated certificate of incorporation and restated bylaws, copies of which are included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law.
Upon the completion of this offering, our authorized capital stock will consist of 300,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of undesignated preferred stock, $0.001 par value per share.
Pursuant to the provisions of our current certificate of incorporation, all of the outstanding redeemable convertible preferred stock will automatically convert into common stock in connection with the completion of this offering. Each outstanding share of our redeemable convertible preferred stock will convert at a ratio of one-for-16.37332, with the exception of our Series B redeemable convertible preferred stock, which will convert at a ratio of one-for-7.77431. Assuming the effectiveness of this conversion as of December 31, 2020, there were 13,361,278 shares of our common stock issued, held by approximately 86 stockholders of record, and no shares of our redeemable convertible preferred stock outstanding. Our board of directors is authorized, without stockholder approval, to issue additional shares of our capital stock.
Common Stock
Voting Rights
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. We have not provided for cumulative voting for the election of directors in our restated certificate of incorporation, which means that holders of a majority of the shares of our common stock will be able to elect all of our directors.
Dividend Rights
Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. See the section titled Dividend Policy.
No Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.
Right to Receive Liquidation Distributions
Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
163
Preferred Stock
Following the completion of this offering, our board of directors will be authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of their qualifications, limitations or restrictions, in each case without further vote or action by our stockholders. Our board of directors will also be able to increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company and might adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have no current plan to issue any shares of preferred stock.
Warrants
As of December 31, 2020, we had outstanding the following warrants to purchase shares of our capital stock:
Type of Capital Stock Underlying Warrant |
Total Number
of Shares Subject to Warrants |
Exercise
Price Per Share(1) |
||||||
Series A-2 Redeemable Convertible Preferred Stock |
52,672 | $ | 8.1802 | |||||
Series C-1 Redeemable Convertible Preferred Stock |
68,699 | $ | 8.6599 | |||||
Series D Redeemable Convertible Preferred Stock |
107,663 | $ | 11.6103 |
(1) |
The exercise price of these warrants may be paid either in cash or by surrendering the right to receive shares having a value equal to the exercise price. These warrants will expire immediately prior to the completion of this offering if not exercised. |
Stock Options
As of December 31, 2020, we had outstanding options to purchase an aggregate of 2,441,889 shares of our common stock, with a weighted-average exercise price of $5.17.
Registration Rights
Following the completion of this offering, the holders of an aggregate of 12,605,800 shares of our common stock or their permitted transferees will be entitled to rights with respect to the registration of the offer and sale of such shares under the Securities Act. These rights are provided under the terms of an amended and restated investors rights agreement between us and the holders of these shares, which was entered into in connection with our redeemable convertible preferred stock financings, and include demand registration rights, Form S-3 registration rights, and piggyback registration rights. In any registration made pursuant to such amended and restated investors rights agreement, up to $50,000 of fees, costs, and expenses of underwritten registrations will be borne by us and all selling expenses, including estimated underwriting discounts, selling commissions and stock transfer taxes, will be borne by the holders of the shares being registered.
The registration rights terminate five years following the completion of this offering or, with respect to any particular stockholder, at the time that stockholder can sell all of its shares during any 90-day period pursuant to Rule 144 of the Securities Act.
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Demand Registration Rights
The holders of registration rights are entitled to demand registration rights at any time after the earlier of (i) five years after the date of the amended and restated investors rights agreement and (ii) 180 days after the effective date of the registration statement for this offering. Under the terms of the amended and restated investors rights agreement, we will be required, upon the written request of holders of at least 25% of the shares that are entitled to registration rights under the amended and restated investors rights agreement, to file a registration statement on Form S-1 to register, as soon as practicable and in any event within 90 days of the date of the request, all or a portion of these shares for public resale, if the aggregate price to the public of the shares offered is at least $5 million, net of selling expenses. We are required to effect only two registrations pursuant to this provision of the amended and restated investors rights agreement. We may postpone the filing of a registration statement for up to 90 days in a 12-month period if our board of directors determines that the filing would be materially detrimental to us. We are not required to effect a demand registration under certain additional circumstances specified in the amended and restated investors rights agreement, including at any time earlier than 180 days after the effective date of this offering.
Form S-3 Registration Rights
The holders of registration rights are also entitled to Form S-3 registration rights. The holders of at least 331/3% of the outstanding shares having registration rights can request that we register all or part of their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered is at least $1 million, net of selling expenses. We will be required, as soon as practicable and in any even within 45 days of the request, to file a registration statement on Form S-3 to register these shares for public resale. The holders may only require us to effect at most two registration statements on Form S-3 in any 12-month period. We may postpone the filing of a registration statement for up to 90 days in a 12-month period if our board of directors determines that the filing would be materially detrimental to us. We are not required to effect a demand registration under certain additional circumstances specified in the amended and restated investors rights agreement.
Piggyback Registration Rights
If we register any of our common stock for public sale under the Securities Act and solely for cash, the holders of registration rights will have the right to include their shares in the registration statement. However, this right does not apply to a registration relating to employee benefit plans, a registration relating to an SEC Rule 145 transaction, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the common stock, or a registration in which the only common stock being registered is common stock issuable upon conversion of debt securities that are also being registered. The underwriters of any underwritten offering will have the right to limit the number of shares registered by these holders if they determine that marketing factors require limitation, in which case the number of shares to be registered will be apportioned among the holders in such other proportion as shall mutually be agreed to by all such selling holders. However, the number of shares to be registered by these holders cannot be reduced (i) unless all other securities (other than securities to be sold by our company) are first excluded from the offering or (ii) below 25% of the total shares covered by the registration statement, other than in the initial public offering.
Anti-Takeover Provisions
The provisions of DGCL, our restated certificate of incorporation and our restated bylaws, as we expect they will be in effect upon the completion of this offering, could have the effect of delaying, deferring or discouraging another person from acquiring control of our company. These provisions, which are summarized below, may have the effect of discouraging takeover bids. They are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our
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board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Washington Law
We may also be subject to the provisions of Chapter 23B.19 of the Washington Business Corporation Act, or WBCA, which imposes restrictions on certain transactions between a corporation and certain significant stockholders. The WBCA generally prohibits a target corporation (as defined in the WBCA) from engaging in certain significant business transactions with an acquiring person, which is defined as a person or group of persons that beneficially owns 10% or more of the voting securities of the target corporation, for a period of five years after such acquisition, unless the transaction or acquisition of shares is approved by a majority of the members of the target corporations board of directors prior to the time of the acquisition or at or subsequent to the acquiring persons share acquisition time, such significant business transaction is approved by a majority of the members of the target corporations board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 662/3% of the outstanding voting shares, except for shares beneficially owned by or under the voting control of the acquiring person. Such prohibited transactions include, among other things:
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a merger or consolidation with, disposition of assets to, or issuance or redemption of stock to or from the acquiring person; |
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termination of five percent or more of the employees of the target corporation as a result of the acquiring persons acquisition of 10% or more of the shares; or |
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allowing the acquiring person to receive any disproportionate benefit as a stockholder. |
After the five-year period, a significant business transaction may occur if it complies with fair price provisions specified in the statute. A corporation may not opt out of this statute and, therefore, we anticipate this statute will apply to us. Depending upon whether we meet the definition of a target corporation, Chapter 23B.19 of the WBCA may have the effect of delaying, deferring, or preventing a change in control.
Delaware Law
We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years following the date on which the person became an interested stockholder unless:
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prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
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the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, (i) shares owned by persons who are directors and also officers and(ii) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
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at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66.67% of the outstanding voting stock that is not owned by the interested stockholder. |
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Generally, a business combination includes a merger, asset or stock sale, or other transaction or series of transactions together resulting in a financial benefit to the interested stockholder. 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 corporations outstanding voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.
Restated Certificate of Incorporation and Restated Bylaw Provisions
Our restated certificate of incorporation and our restated bylaws, as we expect they will be in effect upon the completion of this offering, include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our company, including the following:
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Board of Directors Vacancies. Our restated certificate of incorporation and restated bylaws will authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors is permitted to be set only by a resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our board of directors but promotes continuity of management. |
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Classified Board. Our restated certificate of incorporation and restated bylaws will provide that our board of directors is classified into three classes of directors, each with staggered three-year terms. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for stockholders to replace a majority of the directors on a classified board of directors. See the section titled ManagementBoard Composition. |
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Stockholder Action; Special Meetings of Stockholders. Our restated certificate of incorporation will provide that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, a holder controlling a majority of our capital stock would not be able to amend our restated bylaws or remove directors without holding a meeting of our stockholders called in accordance with our restated bylaws. Further, our restated bylaws will provide that special meetings of our stockholders may be called only by a majority of our board of directors, the chair of our board of directors, our Chief Executive Officer or our President, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors. |
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Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our restated bylaws will provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our restated bylaws also will specify certain requirements regarding the form and content of a stockholders notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to obtain control of our company. |
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No Cumulative Voting. The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporations certificate of incorporation |
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provides otherwise. Our restated certificate of incorporation and restated bylaws will not provide for cumulative voting. |
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Directors Removed Only for Cause. Our restated certificate of incorporation will provide that stockholders may remove directors only for cause and only by the affirmative vote of the holders of at least two-thirds of our outstanding common stock. |
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Amendment of Charter Provisions. Any amendment of the above expected provisions in our restated certificate of incorporation would require approval by holders of at least two-thirds of our outstanding common stock. |
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Issuance of Undesignated Preferred Stock. Our board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by merger, tender offer, proxy contest or other means. |
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Choice of Forum. Our restated certificate of incorporation will provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. Our restated bylaws will provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which we refer to as a Federal Forum Provision. Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal courts or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. While neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder also must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder. Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholders ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, executive officers or other employees, which may discourage lawsuits against us and our directors, executive officers, and other employees. |
Transfer Agent and Registrar
Upon the completion of this offering, the transfer agent and registrar for our common stock will be American Stock Transfer and Trust Company, LLC. The transfer agents address is 6201 15th Avenue, Brooklyn, New York 11219 and its telephone number is (800) 937-5449.
The Nasdaq Global Market Listing
We have applied to list our common stock on Nasdaq under the symbol IMPL.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options and warrants, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
Upon the completion of this offering, based on the number of shares of our capital stock outstanding as of December 31, 2020, we will have a total of 19,414,834 shares of our common stock outstanding, assuming (i) the automatic conversion of all outstanding shares of our convertible preferred stock as of December 31, 2020 into an aggregate of 12,605,800 shares of our common stock immediately prior to the completion of this offering, (ii) the automatic exchange of a warrant held by Avenue into 107,663 shares upon completion of this offering, (iii) the issuance of 52,974 shares of common stock pursuant to the net exercise of warrants to purchase 1,987,348 shares of redeemable convertible preferred stock outstanding as of December 31, 2020 that would otherwise expire upon completion of this offering, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, (iv) the automatic conversion of convertible notes we issued in March 2021 into 559,585 shares of common stock immediately prior to the completion of this offering and (v) the issuance of 5,333,334 shares of common stock, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range reflected on the cover of this prospectus. Of these outstanding shares, all of the shares of common stock sold in this offering will be freely tradable, except that any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act can only be sold in compliance with the Rule 144 limitations described below.
The remaining outstanding shares of our common stock will be deemed restricted securities as defined in Rule 144. Restricted securities may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act, which rules are summarized below. In addition, substantially all of our security holders have, or will have, entered into market standoff agreements with us or lock-up agreements with the underwriters under which they have agreed, subject to specific exceptions, not to sell any of our stock for at least 180 days following the date of this prospectus, as described below. As a result of these agreements and the provisions of our amended and restated investors rights agreement described above under the section titled Description of Capital StockRegistration Rights, subject to the provisions of Rule 144 or Rule 701, shares will be available for sale in the public market as follows:
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beginning on the date of this prospectus, all of the shares sold in this offering will be immediately available for sale in the public market, except for shares of common stock purchased by our affiliates, which sales may be limited pursuant to securities laws; and |
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beginning 181 days after the date of this prospectus, 13,114,355 additional shares will become eligible for sale in the public market, of which 11,488,173 shares will be held by affiliates and subject to the volume and other restrictions of Rule 144, as described below. |
Lock-Up/Market Standoff Agreements
All of our directors and officers and substantially all of our security holders are, or will be, subject to lock-up agreements or market standoff provisions that prohibit them from offering for sale, selling, contracting to sell, granting any option for the sale of, transferring or otherwise disposing of any shares of our common stock, options or warrants to acquire shares of our common stock or any security or
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instrument related to our common stock, or entering into any swap, hedge or other arrangement that transfers any of the economic consequences of ownership of our common stock, for a period of 180 days following the date of this prospectus without the prior written consent of Cowen and Company, LLC and Guggenheim Securities, LLC, subject to certain exceptions. See the section titled Underwriting.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the three months preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up and market standoff agreements described above, within any three-month period, a number of shares that does not exceed the greater of:
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1% of the number of shares of our common stock then outstanding, which will equal approximately 194,149 shares immediately after this offering; and |
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the average reported weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale. |
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 and notice requirements and to the availability of current public information about us.
Rule 701
Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding three months to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701 and are subject to the lock-up and market standoff agreements described above.
Form S-8 Registration Statement
In connection with this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering all of the shares of our common stock subject to outstanding options and the shares of our common stock reserved for issuance under our stock plans. We expect to file this registration statement as soon as permitted under the Securities Act. However, the shares registered on Form S-8 may be subject to the volume limitations and the manner of sale, notice and public information requirements of Rule 144 and will not be eligible for resale until expiration of the lock-up and market standoff agreements to which they are subject. Of the 2,441,889 shares of our common
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stock that were subject to options outstanding as of December 31, 2020, options to purchase 958,319 shares of common stock were vested as of December 31, 2020. Shares of our common stock underlying outstanding options will not be eligible for sale until expiration of the 180 day lock-up and market standoff agreements to which they are subject.
Registration Rights
We have granted demand, piggyback and Form S-3 registration rights to certain of our stockholders to sell our common stock. Registration of the sale of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. For a further description of these rights, see the section titled Description of Capital StockRegistration Rights.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following summary describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our common stock acquired in this offering by Non-U.S. Holders (as defined below). This discussion does not address all aspects of U.S. federal income taxes, does not discuss the potential application of the alternative minimum tax, the special tax accounting rules under Section 451(b) of the Code, or the Medicare Contribution tax on net investment income and does not deal with state or local tax laws, U.S. federal non-income tax laws, such as gift and estate tax laws, except to the limited extent provided below, or any non-U.S. tax laws that may be relevant to Non-U.S. Holders in light of their particular circumstances.
Special rules different from those described below may apply to certain Non-U.S. Holders that are subject to special treatment under the Internal Revenue Code of 1986, as amended, or the Code, such as:
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insurance companies, banks, investment funds and other financial institutions; |
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tax-exempt organizations (including private foundations) and tax-qualified retirement plans; |
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foreign governments and international organizations; |
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broker-dealers and traders in securities; |
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U.S. expatriates and certain former citizens or long-term residents of the United States; |
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qualified foreign pension funds as defined in Section 897(l)(2) of the Code and entities, all of the interests of which are held by qualified foreign pension funds; |
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persons that own, or are deemed to own, more than 5% of our capital stock; |
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controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax; |
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persons that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or integrated investment or other risk reduction strategy; |
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persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, for investment purposes); and |
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partnerships and other entities or arrangements treated as pass-through or disregarded entities for U.S. federal income tax purposes, and investors in such entities (regardless of their places of organization or formation). |
Such Non-U.S. Holders are urged to consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them.
Furthermore, the discussion below is based upon the provisions of the Code, and U.S. Treasury Regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified, possibly retroactively, or could be subject to differing interpretations which could result in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the Internal Revenue Service, or the IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will not take a contrary position regarding the tax consequences described herein, or that any such contrary position would not be sustained by a court.
PERSONS CONSIDERING THE PURCHASE OF OUR COMMON STOCK PURSUANT TO THIS OFFERING SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF OUR COMMON STOCK IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION, INCLUDING ANY STATE,
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LOCAL OR NON-U.S. TAX CONSEQUENCES OR ANY U.S. FEDERAL NON-INCOME TAX CONSEQUENCES, AND THE POSSIBLE APPLICATION OF TAX TREATIES.
For the purposes of this discussion, a Non-U.S. Holder is a beneficial owner of common stock, other than a partnership or other entity or arrangement treated as a pass-through entity, that is not, for U.S. federal income tax purposes, (a) an individual who is a citizen or resident of the United States, (b) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes), created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or (d) a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.
If you are an individual non-U.S. citizen, you may, in some cases, be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. Generally, for this purpose, all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year, are counted.
Resident aliens are generally subject to U.S. federal income tax as if they were U.S. citizens. Individuals who are uncertain of their status as resident or nonresident aliens for U.S. federal income tax purposes are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership or disposition of our common stock.
Distributions
We do not expect to make any distributions on our common stock in the foreseeable future. If we do make distributions on our common stock, however, such distributions will constitute dividends for U.S. tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a Non-U.S. Holders adjusted tax basis in our common stock. Any remaining excess will be treated as gain realized on the sale or exchange of our common stock as described below under the section entitled Gain on Disposition of Our Common Stock.
Subject to the discussions below under the sections entitled Backup Withholding and Information Reporting and Foreign Accounts, any distribution on our common stock that is treated as a dividend paid to a Non-U.S. Holder that is not effectively connected with the Non-U.S. Holders conduct of a trade or business in the United States will generally be subject to U.S. federal withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and the Non-U.S. Holders country of residence. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder generally will be required to provide the applicable withholding agent with a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate form, certifying the Non-U.S. Holders entitlement to benefits under that treaty. Such form must be provided prior to the payment of dividends and must be updated periodically. If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the holders behalf, the holder will be required to provide appropriate documentation to such agent. The holders agent may then be required to provide certification to the applicable withholding agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. withholding tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.
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We generally are not required to withhold tax on dividends paid to a Non-U.S. Holder that are effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment that the holder maintains in the United States) if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is furnished to the applicable withholding agent. In general, such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the same rates applicable to U.S. persons. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional branch profits tax, which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holders effectively connected earnings and profits, subject to certain adjustments.
See also the section below entitled Foreign Accounts for additional withholding rules that may apply to dividends paid to certain foreign financial institutions or non-financial foreign entities.
Gain on Disposition of Our Common Stock
Subject to the discussions below under the sections entitled Backup Withholding and Information Reporting and Foreign Accounts, a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain realized on a sale or other disposition of our common stock unless (a) the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that the holder maintains in the United States), (b) the Non-U.S. Holder is a nonresident alien who is an individual and is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, or (c) we are or have been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code at any time within the shorter of the five-year period preceding such disposition or the Non-U.S. Holders holding period in the common stock.
If you are a Non-U.S. Holder described in (a) above, you will be required to pay tax on the net gain derived from the sale at the same U.S. federal income tax rates applicable to U.S. persons. Corporate Non-U.S. Holders described in (a) above may also be subject to the additional branch profits tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. If you are an individual Non-U.S. Holder described in (b) above, you will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by certain U.S. source capital losses (even though you are not considered a resident of the United States), provided you have timely filed U.S. federal income tax returns with respect to such losses. With respect to (c) above, in general, we would be a United States real property holding corporation if our U.S. real property interests, as defined in the Code and the U.S. Treasury Regulations, comprised (by fair market value) at least half of our worldwide real property interests plus our other assets used or held for use in a trade or business. We believe that we are not, and do not anticipate becoming, a United States real property holding corporation. However, there can be no assurance that we will not become a United States real property holding corporation in the future. Even if we were to be treated as a United States real property holding corporation, gain realized by a Non-U.S. Holder on a disposition of our common stock would not be subject to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly or constructively, no more than five percent of our common stock at all times within the shorter of (i) the five-year period preceding the disposition or (ii) the Non-U.S. Holders holding period and (2) our common stock is regularly traded on an established securities market. There can be no assurance that our common stock will qualify as regularly traded on an established securities market.
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U.S. Federal Estate Tax
The estates of nonresident alien individuals generally are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a U.S. corporation, our common stock will be U.S. situs property and, therefore, will be included in the taxable estate of a nonresident alien decedent, unless an applicable estate tax treaty between the United States and the decedents country of residence provides otherwise. The terms resident and nonresident are defined differently for U.S. federal estate tax purposes than for U.S. federal income tax purposes. Investors are urged to consult their own tax advisors regarding the U.S. federal estate tax consequences of the ownership or disposition of our common stock.
Backup Withholding and Information Reporting
Generally, we or certain financial middlemen must report information to the IRS with respect to any dividends we pay on our common stock including the amount of any such dividends, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder to whom any such dividends are paid. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipients country of residence.
Dividends paid by us (or our paying agents) to a Non-U.S. Holder may also be subject to U.S. federal backup withholding. U.S. federal backup withholding generally will not apply to a Non-U.S. Holder who provides a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E, or other IRS Form W-8, as applicable, or otherwise establishes an exemption, provided that the applicable withholding agent does not have actual knowledge or reason to know the holder is a U.S. person.
Under U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the proceeds of a disposition of our common stock effected by or through a U.S. office of any broker, U.S. or non-U.S., unless the Non-U.S. Holder provides a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E, or other IRS Form W-8, as applicable, or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding requirements will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. Information reporting and backup withholding requirements may, however, apply to a payment of disposition proceeds if the broker has actual knowledge, or reason to know, that the holder is, in fact, a U.S. person. For information reporting purposes, certain brokers with substantial U.S. ownership or operations will generally be treated in a manner similar to U.S. brokers.
Backup withholding is not an additional tax. If backup withholding is applied to you, you should consult with your own tax advisor to determine whether you have overpaid your U.S. federal income tax, and whether you are able to obtain a tax refund or credit of the overpaid amount.
Foreign Accounts
In addition, U.S. federal withholding taxes may apply under the Foreign Account Tax Compliance Act, and the Treasury Regulations and other official IRS guidance issued thereunder, or FATCA, on certain types of payments, including dividends paid to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on 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 agrees to undertake 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. The 30% federal withholding tax described in this paragraph cannot be reduced under an income tax treaty with the United States. If the payee is a
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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 may be subject to different rules. Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally also would apply to payments of gross proceeds from the sale or other disposition of common stock. Under proposed regulations, however, no withholding will apply with respect to payments of gross proceeds. The preamble to the proposed regulations specifies that taxpayers are permitted to rely on such proposed regulations pending finalization.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS SUCH AS ESTATE AND GIFT TAX OR UNDER ANY APPLICABLE TAX TREATY.
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We and the underwriters for the offering named below have entered into an underwriting agreement with respect to the common stock being offered. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase from us the number of shares of our common stock set forth opposite its name below. Cowen and Company, LLC and Guggenheim Securities, LLC are the representatives of the underwriters.
Underwriter |
Number of
Shares |
|||
Cowen and Company, LLC |
||||
Guggenheim Securities, LLC |
||||
Wedbush Securities Inc. |
||||
|
|
|||
Total |
5,333,334 | |||
|
|
The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to certain conditions precedent and that the underwriters will agree, severally and not jointly, to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased, other than those shares covered by the overallotment option to purchase additional shares described below. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.
Certain of our existing stockholders, including stockholders affiliated with certain of our directors and stockholders who own more than 5% of our outstanding common stock before this offering, have indicated an interest in purchasing a substantial majority of the shares of our common stock offered in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, any of these entities may determine to purchase fewer shares than they indicate an interest in purchasing or not to purchase any shares in this offering. It also is possible that any of these entities could purchase more shares of our common stock than currently indicated. In addition, the underwriters could determine to sell fewer shares to any of these entities than these entities indicate an interest in purchasing or not to sell any shares to these entities. It is also possible that the underwriters could determine to sell more shares to any of these entities than currently indicated.
We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments the underwriters may be required to make in respect thereof.
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 and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
We have granted to the underwriters an option to purchase up to 800,000 additional shares of common stock at the public offering price, less the underwriting discounts and commissions. This option is exercisable for a period of 30 days. The underwriters may exercise this option solely for the purpose of covering overallotments, if any, made in connection with the sale of common stock offered hereby. To the extent that the underwriters exercise this option, the underwriters will purchase additional shares from us in approximately the same proportion as shown in the table above.
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The following table shows the public offering price, underwriting discounts and commissions and proceeds, before expenses to us. These amounts are shown assuming both no exercise and full exercise of the underwriters option to purchase additional shares.
We estimate that the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $3.0 million and are payable by us. We have agreed to reimburse the underwriters for up to $30,000 for their FINRA counsel fee. In accordance with FINRA Rule 5110, this reimbursed fee is deemed underwriting compensation for this offering.
Total | ||||||||||||
Per Share |
Without Over-
Allotment Option |
With Over
Allotment Option |
||||||||||
Public offering price |
||||||||||||
Underwriting discounts and commissions |
||||||||||||
Proceeds, before expenses, to us |
The underwriters propose to offer the shares of common stock to the public at the public offering price set forth on the cover of this prospectus. The underwriters may offer the shares of common stock to securities dealers at the public offering price less a concession not in excess of $ per share. If all of the shares are not sold at the public offering price, the underwriters may change the offering price and other selling terms.
The underwriters do not intend to confirm sales of the shares to any accounts over which they have discretionary authority.
Prior to this offering, there has been no public market for shares of our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In addition to prevailing market conditions, the factors to be considered in these negotiations will include:
∎ |
the history of, and prospects for, our company and the industry in which we compete; |
∎ |
our past and present financial information; |
∎ |
an assessment of our management; |
∎ |
its past and present operations, and the prospects for, and timing of, our future revenues; |
∎ |
the present state of our development; and |
∎ |
the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours. |
An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.
We have applied to list our common stock on The Nasdaq Global Market under the symbol IMPL.
In connection with this offering, the underwriters may engage in stabilizing transactions, overallotment transactions, syndicate covering transactions, penalty bids and purchases to cover positions created by short sales.
∎ |
Stabilizing transactions permit bids to purchase shares of common stock so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the common stock while the offering is in progress. |
∎ |
Overallotment transactions involve sales by the underwriters of shares of common stock in excess of the number of shares the underwriters are obligated to purchase. This creates a |
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syndicate short position which may be 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 overallotment option. In a naked short position, the number of shares involved is greater than the number of shares in the overallotment option. The underwriters may close out any short position by exercising their overallotment option and/or purchasing shares in the open market. |
∎ |
Syndicate covering transactions involve purchases of 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 with the price at which they may purchase shares through exercise of the overallotment option. If the underwriters sell more shares than could be covered by exercise of the overallotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market 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 that syndicate member is purchased in stabilizing or syndicate covering transactions to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may be effected on The Nasdaq Global Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
Pursuant to certain lock-up agreements, we, our officers and directors, and holders of substantially all of our capital stock and options have agreed that, subject to specified exceptions, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of Cowen and Company, LLC and Guggenheim Securities, LLC, dispose of or hedge any shares or any securities convertible into or exchangeable for our common stock. Cowen and Company, LLC and Guggenheim Securities, LLC, in their sole discretion, may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice.
Other Relationships
Certain of the underwriters and their affiliates have provided, and may in the future provide, various investment banking, commercial banking and other financial services for us and our affiliates for which they have received, and may in the future receive, customary fees.
Selling Restrictions
Canada
The common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant
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Obligations. Any resale of the common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Switzerland
The securities will not be offered, directly or indirectly, to the public in Switzerland and this prospectus does not constitute a public offering prospectus as that term is understood pursuant to article 652a or 1156 of the Swiss Federal Code of Obligations.
European Economic Area
In relation to each Member State of the European Economic Area (each, a Member State), no shares have been offered or will be offered pursuant to the offering to the public in that Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that shares may be offered to the public in that Member State at any time:
∎ |
to any legal entity which is a qualified investor as defined under Article 2 the Prospectus Regulation; |
∎ |
to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
∎ |
in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
provided that no such offer of the shares shall require us or any of the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
For the purposes of this provision, the expression an offer to the public in relation to shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression Prospectus Regulation means Regulation (EU) 2017/1129.
United Kingdom
No shares have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares which has been approved by the Financial Conduct Authority, except that the shares may be offered to the public in the United Kingdom at any time:
∎ |
to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation; |
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∎ |
to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
∎ |
in any other circumstances falling within Section 86 of the FSMA, |
provided that no such offer of the shares shall require the Issuer or any Manager to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation. For the purposes of this provision, the expression an offer to the public in relation to the shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares and the expression UK Prospectus Regulation means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
Hong Kong
The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to professional investors as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the SFO) of Hong Kong and any rules made thereunder; or (b) in other circumstances which do not result in the document being a prospectus as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong) (the CO), or which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made thereunder.
Singapore
Each underwriter has acknowledged that this prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each underwriter has represented and agreed that it has not offered or sold any shares or caused the shares to be made the subject of an invitation for subscription or purchase and will not offer or sell any shares or cause the shares to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares, whether directly or indirectly, to any person in Singapore other than:
∎ |
to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the SFA)) pursuant to Section 274 of the SFA; |
∎ |
to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; or |
∎ |
otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. |
∎ |
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is: |
∎ |
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
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∎ |
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, |
securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries rights and interest (however described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
∎ |
to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
∎ |
where no consideration is or will be given for the transfer; |
∎ |
where the transfer is by operation of law; |
∎ |
as specified in Section 276(7) of the SFA; or |
∎ |
as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018. |
Singapore SFA Product ClassificationIn connection with Section 309B of the SFA and the CMP Regulations 2018, unless otherwise specified before an offer of shares, we have determined, and hereby notify all relevant persons (as defined in Section 309A(1) of the SFA), that the shares are prescribed capital markets products (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Israel
In the State of Israel this prospectus shall not be regarded as an offer to the public to purchase shares of common stock under the Israeli Securities Law, 57281968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 57281968, including, inter alia, if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions (the Addressed Investors); or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 57281968, subject to certain conditions (the Qualified Investors). The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed Investors. The company has not and will not take any action that would require it to publish a prospectus in accordance with and subject to the Israeli Securities Law, 57281968. We have not and will not distribute this prospectus or make, distribute or direct an offer to subscribe for our common stock to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.
Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 57281968. In particular, we may request, as a condition to be offered common stock, that Qualified Investors will each represent, warrant and certify to us and/or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 57281968; (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 57281968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 57281968 and the regulations promulgated thereunder in connection with the offer to be issued common stock; (iv) that the shares of common stock that it will be issued are, subject to exemptions available under the Israeli Securities Law, 57281968: (a) for its own account; (b) for investment purposes only; and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 57281968; and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of
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their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investors name, address and passport number or Israeli identification number.
We have not authorized and do not authorize the making of any offer of securities through any financial intermediary on our behalf, other than offers made by the underwriters and their respective affiliates, with a view to the final placement of the securities as contemplated in this document. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of shares on our behalf or on behalf of the underwriters.
Electronic Offer, Sale and Distribution of Shares
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 than the prospectus in electronic format, the information on these websites is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.
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The validity of the shares of common stock offered by this prospectus will be passed upon for us by Fenwick & West LLP, Seattle, Washington. As of the date of this prospectus, individuals and entities associated with Fenwick & West LLP beneficially own equity interests collectively representing approximately 0.1% of our outstanding shares of capital stock as of December 31, 2020.
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Seattle, Washington, is representing the underwriters in connection with this offering.
Ernst & Young LLP, independent registered public accounting firm, has audited our financial statements as of December 31, 2019 and 2020 and for each of the two years in the period ended December 31, 2020, as set forth in their report (which contains an explanatory paragraph describing conditions that raise substantial doubt about the Companys ability to continue as a going concern as described in Note 1 to the consolidated financial statements). We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLPs report, given on their authority as experts in accounting and auditing.
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 filed therewith. For further information about us and the common stock offered hereby, reference is made to the registration statement and the exhibits 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 in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement.
We currently do not file periodic reports with the SEC. Upon the completion of this offering, we will be required to file periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.
We also maintain a website at http://impelnp.com. Upon completion of this offering, you may access these materials at our website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Impel NeuroPharma, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Impel NeuroPharma, Inc. (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, changes in redeemable convertible preferred stock and stockholders deficit and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
The Companys Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has recurring losses from operations, and has stated that substantial doubt exists about the Companys ability to continue as a going concern. Managements evaluation of the events and conditions and managements plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the 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 Companys 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 Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Companys auditor since 2017.
Seattle, Washington
March 23, 2021
Except for note 14(c), as to which the date is
April 19, 2021
F-2
IMPEL NEUROPHARMA, INC.
(In thousands, except share and per share data)
December 31, | ||||||||
2019 | 2020 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash |
$ | 37,001 | $ | 7,095 | ||||
Prepaid expenses and other current assets |
2,524 | 1,077 | ||||||
|
|
|
|
|||||
Total current assets |
39,525 | 8,172 | ||||||
Property and equipment, net |
2,740 | 3,700 | ||||||
Other assets |
| 187 | ||||||
|
|
|
|
|||||
Total assets |
$ | 42,265 | $ | 12,059 | ||||
|
|
|
|
|||||
Liabilities, redeemable convertible preferred stock and stockholders deficit |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 2,725 | $ | 4,314 | ||||
Accrued liabilities |
4,231 | 3,173 | ||||||
Redeemable convertible preferred stock warrant liabilities |
1,366 | 2,622 | ||||||
Short-term debt |
| 417 | ||||||
|
|
|
|
|||||
Total current liabilities |
8,322 | 10,526 | ||||||
|
|
|
|
|||||
Long-term debt |
| 7,994 | ||||||
|
|
|
|
|||||
Total liabilities |
8,322 | 18,520 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 5) |
||||||||
Redeemable convertible preferred stock, $0.001 par value; 204,198,489 shares authorized at December 31, 2019 and 2020; 201,335,862 and 202,009,981 shares issued and outstanding at December 31, 2019 and 2020, respectively; aggregate liquidation preference of $128,353 and $128,922 at December 31, 2019 and 2020, respectively, |
125,647 | 127,039 | ||||||
Stockholders deficit: |
||||||||
Common stock, $0.001 par value; 256,704,917 and 266,833,885 shares authorized at December 31, 2019 and 2020, respectively; 360,115 and 755,478 shares issued and outstanding at December 31, 2019 and 2020, respectively |
| | ||||||
Additional paid-in capital |
760 | 4,762 | ||||||
Accumulated deficit |
(92,464 | ) | (138,262 | ) | ||||
|
|
|
|
|||||
Total stockholders deficit |
(91,704 | ) | (133,500 | ) | ||||
|
|
|
|
|||||
Total liabilities, redeemable convertible preferred stock and stockholders deficit |
$ | 42,265 | $ | 12,059 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-3
IMPEL NEUROPHARMA, INC.
Consolidated Statement of Operations and Comprehensive Loss
(In thousands, except share and per share data)
Year Ended
December 31, |
||||||||
2019 | 2020 | |||||||
Operating expenses: |
||||||||
Research and development |
$ | 28,812 | $ | 27,285 | ||||
General and administrative |
12,754 | 18,049 | ||||||
|
|
|
|
|||||
Total operating expenses |
41,566 | 45,334 | ||||||
|
|
|
|
|||||
Loss from operations |
(41,566 | ) | (45,334 | ) | ||||
Interest income (expense), net |
417 | (55 | ) | |||||
Other expense, net |
(680 | ) | (408 | ) | ||||
|
|
|
|
|||||
Loss before income taxes |
(41,829 | ) | (45,797 | ) | ||||
Provision for income taxes |
(30 | ) | (1 | ) | ||||
|
|
|
|
|||||
Net loss and comprehensive loss |
(41,859 | ) | (45,798 | ) | ||||
Accretion on redeemable convertible preferred stock |
(505 | ) | (518 | ) | ||||
|
|
|
|
|||||
Net loss attributable to common stockholders |
$ | (42,364 | ) | $ | (46,316 | ) | ||
|
|
|
|
|||||
Net loss per share attributable to common stockholders, basic and diluted |
$ | (122.07 | ) | $ | (91.05 | ) | ||
|
|
|
|
|||||
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
347,042 | 508,668 | ||||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
IMPEL NEUROPHARMA, INC.
Consolidated Statement of Changes in Redeemable Convertible Preferred Stock and Stockholders Deficit
(In thousands, except share data)
Redeemable Convertible
Preferred Stock |
Common Stock |
Additional
Paid-In Capital |
Accumulated
Deficit |
Total
Stockholders Deficit |
||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||
BalanceDecember 31, 2018 |
201,335,862 | $ | 125,142 | 346,047 | $ | | $ | 450 | $ | (50,605 | ) | $ | (50,155 | ) | ||||||||||||||||||||||
Accretion to redemption value on redeemable convertible preferred stock |
| 505 | | | (505 | ) | | (505 | ) | |||||||||||||||||||||||||||
Stock-based compensation expense |
| | | | 794 | | 794 | |||||||||||||||||||||||||||||
Issuance of common stock upon the exercise of stock options |
| | 14,068 | | 21 | | 21 | |||||||||||||||||||||||||||||
Net loss and comprehensive loss |
| | | | | (41,859 | ) | (41,859 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
BalanceDecember 31, 2019 |
201,335,862 | $ | 125,647 | 360,115 | $ | | $ | 760 | $ | (92,464 | ) | $ | (91,704 | ) | ||||||||||||||||||||||
Accretion to redemption value on redeemable convertible preferred stock |
| 518 | | | (518 | ) | | (518 | ) | |||||||||||||||||||||||||||
Stock-based compensation expense |
| | | | 3,641 | | 3,641 | |||||||||||||||||||||||||||||
Issuance of common stock upon the exercise of stock options |
| | 395,363 | | 879 | | 879 | |||||||||||||||||||||||||||||
Issuance of Series A-2 redeemable convertible preferred stock upon exercise of Series A-2 warrants |
296,008 | 271 | | | | | | |||||||||||||||||||||||||||||
Issuance of Series B redeemable convertible preferred stock upon exercise of Series B warrants |
378,111 | 603 | | | | | | |||||||||||||||||||||||||||||
Net loss and comprehensive loss |
| | | | | (45,798 | ) | (45,798 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
BalanceDecember 31, 2020 |
202,009,981 | $ | 127,039 | 755,478 | $ | | $ | 4,762 | $ | (138,262 | ) | $ | (133,500 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
IMPEL NEUROPHARMA, INC.
Consolidated Statement of Cash Flows
(In thousands)
Year Ended
December 31, |
||||||||
2019 | 2020 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (41,859 | ) | $ | (45,798 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation and amortization |
722 | 1,077 | ||||||
Stock-based compensation |
794 | 3,641 | ||||||
Change in fair value of redeemable convertible preferred stock warrant liabilities |
642 | 153 | ||||||
Amortization of debt discount |
| 208 | ||||||
Changes in operating assets and liabilities: |
||||||||
Prepaid expenses and other current assets |
(960 | ) | 1,447 | |||||
Other assets |
325 | (187 | ) | |||||
Accounts payable |
1,424 | 1,498 | ||||||
Accrued liabilities |
2,425 | (1,222 | ) | |||||
|
|
|
|
|||||
Net cash used in operating activities |
(36,487 | ) | (39,183 | ) | ||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(1,523 | ) | (1,782 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(1,523 | ) | (1,782 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of common stock upon exercise of stock options |
21 | 879 | ||||||
Proceeds from issuance of debt |
| 9,701 | ||||||
Proceeds from issuance of redeemable convertible preferred stock upon the exercise of redeemable convertible preferred stock warrants |
| 479 | ||||||
Proceeds from Paycheck Protection Program loan |
| 1,100 | ||||||
Repayment of Paycheck Protection Program loan |
| (1,100 | ) | |||||
|
|
|
|
|||||
Net cash provided by financing activities |
21 | 11,059 | ||||||
|
|
|
|
|||||
Net decrease in cash |
(37,989 | ) | (29,906 | ) | ||||
CashBeginning of period |
74,990 | 37,001 | ||||||
|
|
|
|
|||||
CashEnd of period |
$ | 37,001 | $ | 7,095 | ||||
|
|
|
|
|||||
Supplemental disclosures of cash flow information: |
||||||||
Recognition of fair value of warrants issued in connection with issuance of debt |
$ | | $ | 1,498 | ||||
|
|
|
|
|||||
Property and equipment included in accounts payable and accrued liabilities |
$ | 114 | $ | 369 | ||||
|
|
|
|
|||||
Reclassification of redeemable convertible preferred stock warrant liability to redeemable convertible preferred stock upon exercise of warrants |
$ | | $ | 395 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
1. |
Organization and Description of Business |
Impel Neuropharma, Inc., or the Company, is a late-stage pharmaceutical company focused on the development and commercialization of transformative therapies for patients suffering from diseases with high unmet medical needs, with an initial focus on diseases of the central nervous system, or CNS. The Companys strategy is to pair its proprietary Precision Olfactory Delivery, or POD, upper nasal delivery technology with well-understood therapeutics or other therapeutics where rapid vascular absorption is preferred to drive therapeutic benefit, improve patient outcomes, reduce drug development risk and expand the commercial opportunity within its target diseases. The Company was incorporated under the laws of the State of Delaware on July 24, 2008, maintains its headquarters and principal operations in Seattle, Washington, and performs certain of its research and development activities in Australia.
Liquidity |
and Capital Resources |
The Company has incurred losses since its inception and had an accumulated deficit of $138.3 million as of December 31, 2020. The Company had a cash balance of $7.1 million as of December 31, 2020 and cash used in operations totaled $39.2 million for the year ended December 31, 2020. The Company believes that its cash as of December 31, 2020 will not be sufficient for the Company to continue as a going concern for at least one year from the issuance date of its financial statements. The Company believes that this raises substantial doubt about its ability to continue as a going concern. As a result, the Company will be required to raise additional capital. If sufficient funds on acceptable terms are not available when needed, the Company could be required to significantly reduce its operating expenses and delay, reduce the scope of or eliminate one or more of its development programs. Failure to manage discretionary spending or raise additional financing, as needed, may adversely impact the Companys ability to achieve its intended business objectives. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.
2. |
Summary of Significant Accounting Policies |
Basis |
of Presentation and Consolidation |
The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. The consolidated financial statements include the operations of Impel Neuropharma, Inc., and its wholly owned Australian subsidiary. All intercompany balances and transactions have been eliminated upon consolidation.
Use |
of Estimates |
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates such estimates and assumptions for continued reasonableness. In particular, management makes estimates with respect to the fair values of common stock, redeemable convertible preferred stock warrant liabilities, stock-based compensation expense, and income taxes. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. Actual results could differ from those estimates.
F-7
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
Segments |
|
The Companys chief operating decision maker is its Chief Executive Officer. The Chief Executive Officer reviews financial information on an aggregate basis for the purposes of evaluating financial performance and allocating the Companys resources. Accordingly, the Company has determined that it operates in one segment.
Cash |
|
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. At December 31, 2019 and 2020, cash consisted of cash in bank deposits held at financial institutions.
Concentration |
of Credit Risk |
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash. The Companys cash is deposited with high credit quality financial institutions. At times such deposits may be in excess of the Federal Depository Insurance Corporation insured limits.
Other |
Assets |
The Company generated $134,000 and $15,000 of fully refundable research and development credits in 2019 and 2020, respectively, based on 43.5% of qualified research and development expenditures of its Australian subsidiary. Amounts due are recorded as an offset to research and development expense in the accompanying consolidated statements of operations. The amount receivable of $39,000 as of December 31, 2019 and $57,000 as of December 31, 2020 is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets.
Property |
and Equipment, Net |
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets, ranging from three to four years. Property and equipment are primarily comprised of laboratory and platform equipment used to support research and development activities. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the statement of operations in the year of disposition. Additions and improvements that increase the value or extend the life of an asset are capitalized. Repairs and maintenance costs are expensed as incurred. Leasehold improvements are amortized over the remaining term of the lease or the assets useful life, whichever is shorter.
Impairment |
of Long-Lived Assets |
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group.
F-8
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
If the carrying amount of an asset or asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the estimated discounted future cash flows of the asset or asset group. There have been no such impairments of long-lived assets for any of the periods presented.
Fair |
Value Measurement |
Assets and liabilities recorded at fair value on a recurring basis in the 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active;
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.
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying amounts reflected in the accompanying consolidated balance sheets for cash, other current assets, accounts payable, and accrued liabilities approximate their fair values, due to their short-term nature.
Redeemable |
Convertible Preferred Stock Warrant Liabilities |
Freestanding warrants to purchase shares of the Companys redeemable convertible preferred stock are accounted for as liabilities at fair value, because the shares underlying the warrants contain contingent redemption features outside the control of the Company. Warrants classified as liabilities are recorded on the Companys consolidated balance sheets at their fair value on the date of issuance and remeasured to fair value on each subsequent reporting period, with the changes in fair value recognized as a component of other expense, net in the accompanying consolidated statements of operations. The Company will continue to adjust the liability for changes in the fair value of these warrants until the earlier of the exercise of the warrants, the expiration of the warrants, or until such time as the warrants are no longer considered liability instruments.
F-9
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
Leases |
|
The Company leases office space and laboratory facilities under non-cancelable operating leases. The Company recognizes rent expense on a straight-line basis over the noncancelable lease period and records the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. When leases contain escalation clauses, rent abatements and landlord or tenant incentives or allowances, these terms are applied in the determination of straight-line rent expense over the lease period.
Research |
and Development |
Research and development costs are expensed as incurred and consist primarily of salaries, benefits and other staff-related costs, including associated stock-based compensation, laboratory supplies, nonclinical and clinical studies and trials and related clinical manufacturing costs, costs related to manufacturing preparation, fees paid to other entities that conduct certain research and development activities on the Companys behalf. Non-refundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses until the related goods are delivered or services are performed. Such payments are evaluated for current or long-term classification based on when such services are expected to be received.
Advance |
Payments for Research and Development Services and Accruals |
As part of the process of preparing its consolidated financial statements, the Company is required to estimate its expenses resulting from its obligation under contracts with vendors and consultants and clinical site agreements in connection with its research and development efforts. The financial terms of these contracts are subject to negotiations which vary contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts.
The Companys objective is to reflect the appropriate research and development expenses in its consolidated financial statements by matching those expenses with the period in which services and efforts are expended. The Company accounts for these expenses according to the progress of its research and development efforts. The Company determines advance payments for research and development services and accrual estimates through discussion with applicable personnel and outside service providers as to the progress of clinical trials, or other services completed. The Company adjusts its rate of research and development expense recognition if actual results differ from its estimates. The Company makes estimates of its advance payments and accrued expenses as of each balance sheet date in its consolidated financial statements based on facts and circumstances known at that time. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in the Company reporting amounts that are too high or too low for any particular period. Through December 31, 2020, there had been no material adjustments to the Companys prior period estimates of advance payments and accruals for research and development expenses. The Companys research and development advance payments and accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.
F-10
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
General |
and Administrative Costs |
General and administrative costs are expensed as incurred and include employee-related expenses including salaries, benefits, travel and non-cash stock-based compensation for the Companys personnel in executive, legal, finance and accounting, human resources, and other administrative functions, as well as fees paid for accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expenses. Legal costs include general corporate legal fees and costs related to filing and pursuing patent applications.
Stock-Based |
Compensation |
The Company recognizes stock-based compensation expense for stock options and restricted stock unit awards on a straight-line basis over the requisite service period. The Companys stock-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes-Merton option pricing model. This model utilizes as inputs the estimated fair value of the underlying common stock at the measurement date, the estimated term of the stock options (weighted-average period of time that the options granted are expected to be outstanding), risk-free interest rates, expected dividends, and the expected volatility of the Companys common stock. The Company has elected to recognize forfeitures of share-based payment awards as they occur.
The Company recognizes stock-based compensation expense for stock options granted to nonemployees based on the estimated fair value of the award as it is more readily measurable than the fair value of the services received.
Income |
Taxes |
Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts or existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment. The Company records a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not.
The Company recognizes the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained upon examination by the tax authorities, based on the merits of the position. The Company does not believe any uncertain tax positions currently pending will have a material adverse effect on its consolidated financial statements nor does the Company expect any material change in its position in the next 12 months. The Companys policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.
Net |
Loss Per Share Attributable to Common Stockholders |
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company.
F-11
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
Comprehensive |
Loss |
Comprehensive loss represents the change in the Companys stockholders deficit from all sources other than investments by or distributions to stockholders. The Company has no items of other comprehensive loss; as such, net loss equals comprehensive loss.
Recent |
Accounting Pronouncements |
In February 2016, the FASB issued ASU No. 2016-02, Leases, or Topic 842, which supersedes the guidance in former ASC 840, Leases. This standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today. In May 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, which deferred the effective dates for non-public entities. Therefore, this standard is effective for annual reporting periods, and interim periods within those years, for public entities beginning after December 15, 2018 and for private entities beginning after December 15, 2021. Originally, a modified retrospective transition approach was required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued guidance to permit an alternative transition method for Topic 842, which allows transition to the new lease standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Entities may elect to apply either approach. There are also a number of optional practical expedients that entities may elect to apply. The Company is currently assessing the impact of this standard on its consolidated financial statements. The Company expects to record a material right-of-use asset and lease liability in connection with adopting this standard on January 1, 2022.
Recently |
Adopted Pronouncements |
In August 2018, the FASB issued ASU No. 2018-13, Disclosure FrameworkChanges to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The Company adopted this standard on January 1, 2020 and the adoption of the standard did not have a significant impact on its consolidated financial statements.
3. |
Fair Value Measurements |
The following table summarizes the fair value of the Companys financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
December 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: |
||||||||||||||||
Redeemable convertible preferred stock warrant liabilities |
$ | | $ | | $ | 1,366 | $ | 1,366 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total financial liabilities |
$ | | $ | | $ | 1,366 | $ | 1,366 | ||||||||
|
|
|
|
|
|
|
|
F-12
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: |
||||||||||||||||
Redeemable convertible preferred stock warrant liabilities |
$ | | $ | | $ | 2,622 | $ | 2,622 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total financial liabilities |
$ | | $ | | $ | 2,622 | $ | 2,622 | ||||||||
|
|
|
|
|
|
|
|
The following table summarizes the change in the fair value of the redeemable convertible preferred stock warrant liabilities for the years ended December 31, 2019 and 2020 (in thousands):
December 31, | ||||||||
2019 | 2020 | |||||||
Beginning balance |
$ | 724 | $ | 1,366 | ||||
Losses from changes in fair value |
642 | 153 | ||||||
Exercise of warrants |
| (395 | ) | |||||
Issuance of warrants |
| 1,498 | ||||||
|
|
|
|
|||||
Ending balance |
$ | 1,366 | $ | 2,622 | ||||
|
|
|
|
Fair values of the Companys redeemable convertible preferred stock warrant liabilities are based on significant inputs not observed in the market, and thus represent a Level 3 measurement. Refer to Note 7 for the valuation techniques and assumptions used in estimating the fair value of the warrants.
4. |
Balance Sheet Components |
Prepaid |
Expenses and Other Current Assets |
Prepaid expenses and other current assets consisted of the following (in thousands):
December 31, | ||||||||
2019 | 2020 | |||||||
Refundable clinical deposits |
$ | 1,891 | $ | 672 | ||||
Tax refund receivable |
201 | 229 | ||||||
Refundable security deposit |
187 | | ||||||
Prepaid insurance |
61 | 47 | ||||||
Other prepaids and current assets |
184 | 129 | ||||||
|
|
|
|
|||||
Total prepaid expenses and other current assets |
$ | 2,524 | $ | 1,077 | ||||
|
|
|
|
F-13
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
Property |
and Equipment, Net |
The cost and accumulated depreciation and amortization of property and equipment were as follows (in thousands):
December 31, | ||||||||
2019 | 2020 | |||||||
Laboratory and platform equipment |
$ | 3,500 | $ | 4,613 | ||||
Furniture and office equipment |
100 | 100 | ||||||
Leasehold improvements |
198 | 198 | ||||||
Construction in progress |
683 | 1,607 | ||||||
|
|
|
|
|||||
Total property and equipment, gross |
4,481 | 6,518 | ||||||
Less: accumulated depreciation and amortization |
(1,741 | ) | (2,818 | ) | ||||
|
|
|
|
|||||
Total property and equipment, net |
$ | 2,740 | $ | 3,700 | ||||
|
|
|
|
Depreciation and amortization expense totaled $722,000 and $1.1 million for the years ended December 31, 2019 and 2020, respectively.
Accrued |
Liabilities |
Accrued liabilities consisted of the following (in thousands):
December 31, | ||||||||
2019 | 2020 | |||||||
Accrued professional services |
$ | 2,187 | $ | 192 | ||||
Accrued compensation |
1,864 | 2,393 | ||||||
Accrued other liabilities |
180 | 333 | ||||||
Accrued construction in progress |
| 255 | ||||||
|
|
|
|
|||||
Total accrued liabilities |
$ | 4,231 | $ | 3,173 | ||||
|
|
|
|
5. |
Commitments and Contingencies |
Operating |
Leases |
The Company leases office and laboratory space in Seattle, Washington.
In September 2017, the Company entered into a non-cancelable operating lease for 11,256 square feet of office and laboratory space. Rent is payable monthly, increasing by approximately 3% each year. As of December 31, 2020, the remaining future minimum lease payments were $1.2 million through the expiration date of August 31, 2022.
Rent expense for the years ended December 31, 2019 and 2020 was $601,000 and $632,000, respectively.
Legal |
Proceedings |
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount.
F-14
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
On November 19, 2019, a lawsuit was filed in the King County Superior Court for the State of Washington against the Company. The plaintiff, a former investment advisor, alleged that he was entitled to payment in connection with the Companys December 2016 financing round. The lawsuit asserted, among other things, causes of action against the Company for breach of implied/quasi contract. Plaintiff sought monetary damages, attorneys fees, and equitable relief. On November 5, 2020, the Company and Plaintiff entered into a confidential settlement agreement that was not material.
Indemnifications |
|
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company intends to enter into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has directors and officers insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.
COVID-19 |
|
In March 2020, the COVID-19 disease was declared a pandemic by the World Health Organization. Management continues to evaluate the potential impacts of the COVID-19 pandemic on the development of its product candidates, and business. The Company is working closely with its manufacturing vendors to maintain adequate product supply and with healthcare providers as future studies are planned to mitigate risk to patients while adhering to regulatory, institutional and government guidance and policies. The Company remains committed to its development plans and acknowledges the potential risk for delays in the product supply chain and in anticipated timelines for its preclinical studies and clinical trials.
6. |
Debt |
Payroll |
Protection Program |
In April 2020, the Company borrowed $1.1 million from the U.S. Small Business Administration Payroll Protection Program, or PPP, as provided by the Coronavirus Aid, Relief, and Economic Security Act. The PPP loans are intended to assist companies impacted by the COVID-19 pandemic to fund certain types of expenditures, including payroll costs, rent and utility payments. The Company repaid the loan in full on May 5, 2020.
F-15
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
Term |
Loan |
On November 5, 2020 the Company entered into a debt and equity financing agreement with Avenue Venture Opportunities Fund, L.P., or Avenue. The agreement provides for a 36-month term loan of up to $20.0 million, of which $10.0 million was funded at close and (b) an additional $10.0 million is available at the Companys request until December 31, 2021, subject to (i) completion of an underwritten public offering with gross proceeds of at least $75.0 million, or a Qualified Public Offering, (ii) receipt of FDA approval of TRUDHESA and (iii) approval by Avenues investment committee. The term loan bears interest at the higher of the prime rate or 11%.
Under the agreement, Avenue also has the right to invest up to $10.0 million in a private placement concurrent with an IPO (at the IPO price) or special purpose acquisition company, or SPAC, transaction (at the effective price per share), in each case, subject to mutual agreement and Avenue investment committee approval.
Payments for the term loan are interest only for the initial 12 months and can be extended to (i) 24 months upon achieving a qualified IPO with gross proceeds of at least $75.0 million or (ii) 36 months upon achieving the first interest only period extension and FDA approval of TRUDHESA. The term loan will amortize in equal payments of principal from the end of the interest only period to the expiration of the 36-month term on November 1, 2023 and includes a final payment of $450,000 due upon the maturity of the term loan. In connection with the agreement, the Company granted Avenue warrants for the purchase of shares of 1,762,810 shares of Series D redeemable convertible preferred stock, as disclosed in Note 7. Avenue is eligible to receive additional warrants upon the draw down of the remaining $10.0 million under the agreement.
The Companys obligations are secured by a security interest in substantially all of the Companys assets. The agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens, including on intellectual property, guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes. The agreement provides for events of default customary for term loans of this type, including but not limited to non-payment, breaches or defaults in the performance of covenants, insolvency and bankruptcy.
The net proceeds from the issuance of the term loan were initially allocated to the warrants at an amount equal to their fair value of $1.5 million and the remainder to the term loan. The Company incurred financing costs of $299,000 which, together with the fair value of the warrants and the final payment, are recorded as a debt discount and are being amortized over the contractual term using the effective interest method. During the year ended December 31, 2020, the Company recorded interest expense of $303,000.
The term loan consists of the following (in thousands):
December 31,
2020 |
||||
Face value of term loan |
$ | 10,000 | ||
Final payment |
450 | |||
Unamortized debt discount associated with final payment, issuance date warrant fair value, and financing costs |
(2,039 | ) | ||
|
|
|||
Total debt, net |
8,411 | |||
Less: short-term debt |
417 | |||
|
|
|||
Long-term debt |
$ | 7,994 | ||
|
|
F-16
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
7. |
Redeemable Convertible Preferred Stock Warrant Liabilities |
The key terms of the outstanding redeemable convertible preferred stock warrant liabilities as of December 31, 2019 are summarized in the following table:
Number of shares
as of December 31, |
Exercise
Price |
Expiration | ||||||||||||||
Exercisable into: |
2019 | 2020 | ||||||||||||||
Series A-2 redeemable convertible preferred stock |
1,248,551 | 862,471 | $ | 0.4996 |
|
March 31, 2021 |
|
|||||||||
Series B redeemable convertible preferred stock |
378,111 | | 0.8737 | September 3, 2020 | ||||||||||||
Series C-1 redeemable convertible preferred stock |
1,124,877 | 1,124,877 | 0.5289 | November 16, 2021 | ||||||||||||
Series D redeemable convertible preferred stock |
| 1,762,810 | 0.7091 | October 31, 2030 | ||||||||||||
|
|
|
|
|||||||||||||
Total |
2,751,539 | 3,750,158 | ||||||||||||||
|
|
|
|
During 2020, warrants for the purchase of 296,008 shares of Series A-2 redeemable convertible preferred stock were exercised at various dates prior to expiring and 90,072 shares expired unexercised. Warrants for the purchase of 378,111 shares of Series B redeemable convertible preferred stock were exercised in August 2020 prior to expiring. Additionally, subsequent to the period end, warrants for the purchase of 862,471 shares of Series A-2 redeemable convertible preferred stock were extended through September 30, 2021.
The fair value of the warrants was determined using an option pricing model. Under this model, the estimated equity value of the Company as of the measurement date is allocated to various classes of financial instruments (such as common and redeemable convertible preferred stock and warrants to purchase redeemable convertible preferred stock) based on their rights and preferences in an assumed liquidity scenario, which was estimated to occur in two years. Other assumptions used included stock volatility ranging from 46% to 58% during 2019 and 46% to 116% during 2020, and risk-free interest rates ranging from 1.6% to 2.5% during 2019 and 0.1% to 2.8% during 2020. The Company will continue to adjust the redeemable convertible preferred stock warrant liabilities for changes in fair value until the earlier of the exercise, conversion or expiration of the warrants or the completion of a deemed liquidation event.
F-17
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
8. |
Redeemable Convertible Preferred Stock |
Redeemable convertible preferred stock as of December 31, 2019 consisted of the following (in thousands, except share amounts):
Redeemable Convertible Preferred Stock |
Shares
Authorized |
Shares Issued
and Outstanding |
Carrying
Value at December 31, 2019 |
Aggregate
Liquidation Preference |
||||||||||||
Series A-1 |
746,426 | 746,426 | $ | 238 | $ | 305 | ||||||||||
Series A-2 |
9,869,218 | 8,509,579 | 3,876 | 4,251 | ||||||||||||
Series B |
3,968,775 | 3,590,664 | 3,234 | 4,000 | ||||||||||||
Series C-1 |
43,278,699 | 42,153,822 | 20,648 | 22,297 | ||||||||||||
Series C-2 |
26,537,826 | 26,537,826 | 15,390 | 15,000 | ||||||||||||
Series C-3 |
24,605,790 | 24,605,790 | 14,965 | 15,000 | ||||||||||||
Series D |
95,191,755 | 95,191,755 | 67,296 | 67,500 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
204,198,489 | 201,335,862 | $ | 125,647 | $ | 128,353 | ||||||||||
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock as of December 31, 2020 consisted of the following (in thousands, except share amounts):
Redeemable Convertible Preferred Stock |
Shares
Authorized |
Shares Issued
and Outstanding |
Carrying
Value at December 31, 2020 |
Aggregate
Liquidation Preference |
||||||||||||
Series A-1 |
746,426 | 746,426 | $ | 238 | $ | 305 | ||||||||||
Series A-2 |
9,869,218 | 8,805,587 | 4,147 | 4,399 | ||||||||||||
Series B |
3,968,775 | 3,968,775 | 3,980 | 4,421 | ||||||||||||
Series C-1 |
43,278,699 | 42,153,822 | 20,975 | 22,297 | ||||||||||||
Series C-2 |
26,537,826 | 26,537,826 | 15,390 | 15,000 | ||||||||||||
Series C-3 |
24,605,790 | 24,605,790 | 14,973 | 15,000 | ||||||||||||
Series D |
95,191,755 | 95,191,755 | 67,336 | 67,500 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
204,198,489 | 202,009,981 | $ | 127,039 | $ | 128,922 | ||||||||||
|
|
|
|
|
|
|
|
The holders of redeemable convertible preferred stock have various rights and preferences as follows:
Conversion |
Rights |
Each share of redeemable convertible preferred stock is convertible into such number of fully paid shares of common stock as is determined by dividing the original issue price by the conversion price in effect at the time of conversion. As of December 31, 2019 and 2020, each share of Series A-1, A-2, C-1, C-2, C-3, and D preferred stock is convertible into one share of common stock. Each share of Series B preferred stock is convertible into 0.12863 shares of common stock. The conversion rates are subject to adjustment upon any future stock splits or stock combinations, reclassifications or exchanges of similar stock, or upon a reorganization, merger or consolidation of the Company. In addition, the conversion rate for each series of preferred stock will be reduced upon the issuance or sale by the Company of common shares or instruments convertible or exercisable into common shares, for consideration or with an exercise price that is less than the conversion price applicable to such series. Such reduction may result in recognition by the Company of a deemed dividend to preferred stockholders, if the resulting conversion price is less than the fair value per share of common stock as of the date preferred stock was issued.
F-18
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
Conversion can occur at any time at the option of each holder. In addition, all shares of preferred stock will convert automatically upon (1) the closing of a firm-commitment underwritten public offering, at a per share price of at least $1.0636, resulting in at least $50.0 million in net proceeds, or a Qualified Public Offering, or (2) by vote or written consent of the holders of a majority of the then outstanding shares of Series B, C-1, C-2, C-3 and D preferred stock.
Dividends |
|
The holders of shares of Series A-1, A-2, B, C-1, C-2, C-3 and D preferred stock are entitled to receive 8% dividends, when, if, and as declared by the Companys board of directors. Dividends are non-cumulative, and none were declared as of December 31, 2019. Preferred stockholders are also entitled to participate on an as-converted into common stock, pari-passu together with common stockholders, in distributions of any additional dividends.
Liquidation |
|
In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of Series C-1, C-2, C-3 and D preferred stock are entitled to receive, pro rata, prior and in preference to distributions to the holders of any other shares, an amount equal to the original issuance price ($0.5289, $0.5652, $0.6096 and $0.7091, respectively) per share plus all declared but unpaid dividends, if any. After the payment in full to the holders of Series C-1, C-2, C-3 and D preferred stock, the holders of Series B preferred stock are entitled to receive, pro rata, prior and in preference to distributions to the holders of any other shares, an amount equal to the original issuance price ($1.1140) per share plus all declared but unpaid dividends, if any. After the payment in full to the holders of Series B preferred stock, the holders of Series A-1 and Series A-2 preferred stock shares are entitled to receive, pro rata, prior and in preference to distributions to the holders of common shares, an amount equal to the original issuance price ($0.4091 for Series A-1 and $0.4996 for Series A-2) per share plus all declared but unpaid dividends, if any. In each case, the amounts to be distributed are subject to adjustment for stock splits, stock dividends or distributions, recapitalizations, and similar events. Upon completion of the payment of the full liquidation preference of preferred stock, the remaining assets of the Company, if any, will be distributed among the holders of preferred stock and common stock, pro rata on an as-converted basis, subject to maximum participation amounts for each class of preferred shares. A change in control of the Company or a sale of all or substantially all of its assets is deemed to be an event triggering payment of liquidation preferences.
Redemption |
|
Series B, C-1, C-2 and C-3 preferred stock can be redeemed upon election, at any time on or after December 3, 2023, by the holders of a majority, voting together as a single class on an as-converted basis, of the outstanding shares of Series B and Series C-1, C-2 and C-3 preferred stock. Series D preferred stock can be redeemed upon election, at any time on or after December 3, 2023, by the holders of a majority of the outstanding shares of Series D preferred stock. Redemption amounts will equal the original issue price of such shares, plus any declared but unpaid dividends, and will occur in three annual installments commencing not more than sixty days after the receipt by the Company of the redemption election.
Voting |
Rights |
Each share of preferred stock has a number of votes equal to the number of shares of common stock into which it is convertible. The holders of Series A-1 and Series A-2 preferred stock, voting together, are entitled to elect one member of the Companys board of directors. The holders of Series
F-19
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
C-1, C-2 and C-3 preferred stock, voting together, are entitled to elect three members of the Companys board of directors. The holders of Series D preferred stock are entitled to elect two members of the Companys board of directors. The holders of common stock have the right to elect one member of the Companys board of directors. The holders of common stock and preferred stock, voting together as a single class on an as-converted basis, are entitled to elect the remaining members of the board of directors.
Classification |
|
The Company has classified its redeemable convertible preferred stock as mezzanine equity on the consolidated balance sheets as the shares are contingently redeemable with passage of time or upon deemed liquidation events, such as a change in control. As only the passage of time is required for Series B, C-1, C-2, C-3, and D preferred stock to become redeemable, the Company is accreting the carrying value of the preferred stock shares to their redemption value, using the effective interest method, over the period from issuance to the earliest payment dates. With respect to Series A-1 and A-2, no accretion was recorded during 2019 and 2020, as a deemed liquidation event was not probable. Amounts recorded for the accretion of redeemable convertible preferred stock during the years ended December 31, 2019 and 2020 were $505,000 and $518,000, respectively. The accretion is recorded as a deemed dividend and a charge to additional paid-in capital.
9. |
Common Stock |
Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No cash dividends have been declared by the board of directors from inception.
The Company has reserved the following shares of common stock for issuance, on an as-converted basis, as follows:
December 31, | ||||||||
2019 | 2020 | |||||||
Stock incentive plans |
2,585,294 | 2,786,345 | ||||||
Redeemable convertible preferred stock |
12,539,109 | 12,605,800 | ||||||
Redeemable convertible preferred stock warrants |
193,583 | 229,034 | ||||||
|
|
|
|
|||||
Total |
15,317,986 | 15,621,179 | ||||||
|
|
|
|
10. |
Stock Incentive Plan |
2008 |
Plan |
In September 2008, the Companys board of directors adopted the 2008 Stock Incentive Plan, or the 2008 Plan, which provides for the granting of incentive stock options, nonqualified stock options, and restricted stock awards to its employees, directors and consultants. Options granted or shares issued under the 2008 Plan that were outstanding on the date the 2018 Equity Incentive Plan, or the 2018 Plan, became effective will remain subject to the terms of the 2008 Plan. The 2008 Plan terminated in 2018 as it reached its ten-year term. New grants issued after the termination of the 2008 plan will be under the 2018 plan. At December 31, 2019, and 2020, options to purchase 1,032,840 and 634,788 shares, respectively, under the 2008 plan remained outstanding.
F-20
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
2018 |
Plan |
In November 2018, the Companys board of directors adopted the 2018 Equity Incentive Plan. The 2018 Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock units, and other forms of stock awards to its employees, directors and consultants.
The 2018 Plan is administered by the board of directors or a committee appointed by the board of directors, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. The exercise price of incentive stock options and nonqualified stock options will be no less than 100% of the fair value per share of the Companys common stock on the date of grant. If an individual owns capital stock representing more than 10% of the voting shares and the grant is an incentive stock option, the price of each share will be at least 110% of the fair value on the date of grant. Options expire after 10 years (five years for incentive stock options granted to stockholders owning greater than 10% of the voting stock). The term and vesting periods for options granted under the 2018 Plan are determined by the Companys board of directors or a committee appointed by the board of directors. Options granted generally vest over four years. Options must be exercised within a 10-year period or sooner if so specified within the option agreement. Under the 2018 Plan, the Company initially reserved 753,645 shares of common stock for issuance. In addition, any authorized shares not issued or subject to outstanding grants under the 2008 Plan and any shares subject to outstanding stock options that are cancelled without being exercised or expire under the 2008 Plan are added to the shares authorized and reserved for issuance under the 2018 Plan. At December 31, 2019, and 2020, options to purchase 1,301,989 and 1,807,101 shares, respectively, under 2018 Plan remained outstanding. The Company had 250,464 and 344,456 shares available for future grant under the 2018 Plan as of December 31, 2019 and 2020, respectively.
Stock |
Option Activity |
A summary of the Companys stock option activity under its stock option plans was as follows (in thousands, except share and per share data and years):
Options Outstanding | ||||||||||||||||||||
Shares
Available for Grant |
Number of
Options |
Weighted-
Average Exercise Price |
Remaining
Contractual Term (Years) |
Aggregate
Intrinsic Value |
||||||||||||||||
BalanceDecember 31, 2019 |
250,464 | 2,334,830 | $ | 3.29 | 8.37 | $ | 11,441 | |||||||||||||
Authorized |
596,414 | | | |||||||||||||||||
Granted |
(902,544 | ) | 902,544 | $ | 7.94 | |||||||||||||||
Exercised |
| (395,363 | ) | $ | 2.23 | |||||||||||||||
Cancelled |
400,122 | (400,122 | ) | $ | 3.35 | |||||||||||||||
|
|
|
|
|||||||||||||||||
BalanceDecember 31, 2020 |
344,456 | 2,441,889 | $ | 5.17 | 8.02 | $ | 14,844 | |||||||||||||
|
|
|
|
|||||||||||||||||
ExercisableDecember 31, 2020 |
958,319 | $ | 3.01 | 9.76 | $ | 8,101 | ||||||||||||||
|
|
In May 2020, the Companys board of directors increased the pool of stock options available for future grant by 596,414 shares and appointed an existing member of the board of directors as the Companys Chief Executive Officer. In connection with this change, the Company granted 715,358 stock options to its Chief Executive Officer at an exercise price of $7.86 per share that will vest ratably over 48 months. Vesting of the Chief Executive Officers options accelerate upon a termination without
F-21
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
cause. The Company recognized $2.1 million of expense related to a modification upon the acceleration of the former Chief Executive Officers outstanding options upon his departure from the Company. The Company granted 276,843 stock options in total subsequent to the period end with an exercise price range of $11.47 to $13.76 per share.
The total intrinsic value of options exercised was $94,000 and $3.7 million during the years ended December 31, 2019 and 2020, respectively. The intrinsic value is the difference between the estimated fair value of the Companys common stock at the time of exercise, as determined by the board of directors, and the exercise price of the stock option.
The total fair value of options that vested during the years ended December 31, 2019 and 2020 was $451,000 and $1.1 million, respectively.
The grant date fair value of options granted during the years ended December 31, 2019 and 2020 was $3.1 million and $3.9 million, respectively. The weighted-average grant date fair value of employee options granted during the years ended December 31, 2019 and 2020 was $2.34 and $4.24 per share, respectively.
Stock-Based |
Compensation Expense |
Stock-based compensation expense recognized was as follows (in thousands):
Year Ended
December 31, |
||||||||
2019 | 2020 | |||||||
Research and development |
$ | 341 | $ | 488 | ||||
General and administrative |
453 | 3,153 | ||||||
|
|
|
|
|||||
Total stock-based compensation expense |
$ | 794 | $ | 3,641 | ||||
|
|
|
|
As of December 31, 2020, there was $5.3 million of total unrecognized compensation cost related to unvested options that are expected to vest. The cost is expected to be recognized over a weighted-average period of 3.0 years.
In determining the fair value of the stock options granted, the Company uses the Black-Scholes-Merton option-pricing model and assumptions discussed below. Each of these inputs is subjective.
Fair Value of Common StockGiven the absence of a public trading market, the Companys board of directors with input from management considered numerous objective and subjective factors to determine the fair value of common stock. The factors included, but were not limited to: (1) third-party valuations of the Companys common stock; (2) the Companys stage of development; (3) the status of research and development efforts; (4) the rights, preferences and privileges of the Companys preferred stock relative to those of the Companys common stock; (5) the Companys operating results and financial condition, including the Companys levels of available capital resources; and (6) equity market conditions affecting comparable public companies; (7) general U.S. market conditions; and (8) the lack of marketability of the Companys common stock.
Expected TermThe Companys expected term represents the period that the Companys stock-based awards are expected to be outstanding. The Company used the simplified method (based on the mid-point between the vesting date and the end of the contractual term) to determine the expected term.
F-22
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
Expected VolatilitySince the Company is privately held and does not have any trading history for its common stock, the expected volatility was estimated based on the average historical volatilities for comparable publicly traded pharmaceutical companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle and area of specialty. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.
Risk-Free Interest RateThe risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.
Expected DividendThe Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.
The fair value of stock option awards granted to employees was estimated at the date of grant using a Black-Scholes-Merton option pricing model with the following assumptions:
Year Ended
December 31, |
||||
2019 | 2020 | |||
Expected term (in years) |
6.1 | 6.1 | ||
Expected volatility |
54.3% 57.7% | 56.4% 60.9% | ||
Risk-free interest rate |
1.62% 2.44% | 0.27% 1.55% | ||
Expected dividends |
% | % |
11. |
Income Taxes |
The components of loss before taxes were as follows (in thousands):
Year Ended
December 31, |
||||||||
2019 | 2020 | |||||||
Domestic |
$ | (42,039 | ) | $ | (45,801 | ) | ||
Foreign |
210 | 4 | ||||||
|
|
|
|
|||||
Total loss before provision for income tax |
$ | (41,829 | ) | $ | (45,797 | ) | ||
|
|
|
|
The provision for income taxes consisted of the following (in thousands):
Year Ended
December 31, |
||||||||
2019 | 2020 | |||||||
Current: |
||||||||
Federal |
$ | | $ | | ||||
State |
1 | 1 | ||||||
Foreign |
29 | | ||||||
|
|
|
|
|||||
Total current tax expense |
$ | 30 | $ | 1 | ||||
|
|
|
|
F-23
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
Reconciliation of income tax computed at federal statutory rates to the reported provision for income taxes was as follows (in thousands):
Year Ended
December 31, |
||||||||
2019 | 2020 | |||||||
Tax provision at U.S. statutory rate |
$ | (8,784 | ) | $ | (9,617 | ) | ||
Permanent differences |
321 | 695 | ||||||
Change in valuation allowance |
9,609 | 9,374 | ||||||
Research and development credits |
(985 | ) | (849 | ) | ||||
Other |
(131 | ) | 398 | |||||
|
|
|
|
|||||
Provision for income taxes |
$ | 30 | $ | 1 | ||||
|
|
|
|
Significant components of the Companys deferred income taxes at December 31, 2019 and 2020 are shown below (in thousands):
December 31, | ||||||||
2019 | 2020 | |||||||
Deferred tax assets: |
||||||||
Net operating losses |
$ | 17,199 | $ | 25,239 | ||||
Research and development and other tax credits |
3,533 | 4,740 | ||||||
Other |
1,120 | 1,244 | ||||||
|
|
|
|
|||||
Gross deferred tax assets |
21,852 | 31,223 | ||||||
Less valuation allowance |
(21,849 | ) | (31,223 | ) | ||||
|
|
|
|
|||||
Total deferred tax assets |
3 | | ||||||
|
|
|
|
|||||
Deferred tax liabilities: |
||||||||
Fixed assets |
(3 | ) | | |||||
|
|
|
|
|||||
Gross deferred tax liabilities |
(3 | ) | | |||||
|
|
|
|
|||||
Net deferred tax asset |
$ | | $ | | ||||
|
|
|
|
In accordance with the authoritative guidance for income taxes under ASC 740, a deferred tax asset or liability is recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities.
At December 31, 2020, the Company had federal net operating loss, or NOL, and research and development credit carryforwards of approximately $21.4 million and $6.5 million, respectively. These carryforwards begin to expire in 2028 and 2029, respectively. In addition, the Company has $98.7 million of post 2017 federal NOL carryforwards that carry forward indefinitely. Utilization of the post 2017 federal NOL carryforwards is limited to eighty-percent of taxable income generated in a given tax year.
Under Sections 382 and 383 of the Internal Revenue Code of 1986 as amended, or IRC, the Companys NOL and research and development credit carryforwards and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50% within any rolling three-year period. The Company has not completed an IRC Section 382/383 analysis regarding the limitation of
F-24
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
NOL and credit carryforwards. If a change in ownership were to have occurred, the annual limitation may result in the expiration of NOL carryforwards and credits before utilization. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.
In evaluating its valuation allowance, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Due to uncertainty with respect to ultimate realizability of deferred tax assets, the Company has provided a valuation allowance against the U.S. deferred tax assets. The valuation allowance increased by $9.6 million and $9.4 million during the years ended December 31, 2019 and 2020, respectively, primarily due to NOLs incurred.
The following table presents a reconciliation of the changes in the unrecognized tax benefit (in thousands):
Balance as of December 31, 2018 |
$ | 892 | ||
Increases related to prior year tax positions |
94 | |||
Increases related to current year tax positions |
619 | |||
|
|
|||
Balance as of December 31, 2019 |
1,605 | |||
Increases related to prior year tax positions |
9 | |||
Increases related to current year tax positions |
534 | |||
|
|
|||
Balance as of December 31, 2020 |
$ | 2,148 | ||
|
|
The Company does not anticipate the amount of unrecognized tax benefits to significantly change within the next 12 months. Due to the valuation allowance recorded against the Companys deferred tax assets, none of the total unrecognized tax benefits as of December 31, 2019 and 2020, would reduce the effective tax rate if recognized. As of December 31, 2019 and 2020, there are no penalties or accrued interest recorded in the consolidated financial statements. The Companys policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit.
The Company files tax returns with the U.S. federal, California state, and Australian tax authorities. The Company currently has no years under examinations by any jurisdiction; however, the Company is subject to income tax examinations by Federal, California and Australian tax authorities for years beginning in 2016, 2017, and 2016, respectively. Further, to the extent allowed by law, the taxing authorities may have the right to examine prior originating periods when NOLs and tax credits are being utilized in the current year.
The Company has made the accounting policy election to recognize the impact of Global Intangible Low-Tax Income as a period cost.
12. |
Defined Contribution Plan |
The Company has a defined contribution retirement savings plan under Section 401(k) of the IRC. This plan allows eligible employees to defer a portion of their annual compensation on a pre-tax or after-tax basis. The Company makes discretionary matching contributions of up to 4% of a participating employees salary. For the years ended December 31, 2019 and 2020, the amount expensed under the plan was $197,000 and $277,000, respectively.
F-25
IMPEL NEUROPHARMA, INC.
Notes to Consolidated Financial Statements
13. |
Net Loss Per Share Attributable to Common Stockholders |
The following outstanding shares of potentially dilutive securities were excluded from the computation of the diluted net loss per share attributable to common stockholders for the periods presented because their effect would have been anti-dilutive:
Year Ended
December 31, |
||||||||
2019 | 2020 | |||||||
Redeemable convertible preferred stock on an as-converted basis |
12,539,109 | 12,605,800 | ||||||
Redeemable convertible preferred stock warrants on an as-converted basis |
193,583 | 229,034 | ||||||
Stock options to purchase common stock |
2,334,830 | 2,441,889 | ||||||
|
|
|
|
|||||
Total |
15,067,522 | 15,276,723 | ||||||
|
|
|
|
14. |
Subsequent Events |
For the year ended December 31, 2020, the Company evaluated its consolidated financial statements for subsequent events through March 23, 2021, the date the consolidated financial statements were issued. The Company has concluded that no events or transactions have occurred that require adjustment to or disclosure in the accompanying financial statements, other than the following:
a) |
In March 2021, the Company issued convertible promissory notes to various investors for an aggregate amount of $7.5 million. The notes bear interest at a rate of 5.0% per annum and mature on the earlier of (a) December 31, 2021 and (b) a change of control. The notes are (i) automatically convertible into shares of the Companys common stock upon a Qualified Public Offering or a SPAC transaction at 90% of the price per share in such transactions, (ii) convertible at the holders option or upon a change of control into shares of Series D redeemable convertible preferred stock at the Series D original issuance price, and (iii) convertible at the holders option upon a new redeemable convertible preferred stock financing into shares of redeemable preferred stock issued in such financing at 90% of the price per share. |
b) |
In the first quarter of 2021, the Company granted 276,843 stock options at exercise prices ranging from $11.47 to $13.76 that will vest over 48 months. |
c) |
In April 2021, the Companys board of directors and stockholders approved an amendment to the Companys certificate of incorporation to effect a reverse split of shares of the Companys common stock on an one-for-16.37332 basis, which was effected on April 16, 2021 (the Reverse Stock Split). The number of authorized shares and the par values of the common stock and redeemable convertible preferred stock were not adjusted as a result of the Reverse Stock Split. In connection with the Reverse Stock Split, the conversion ratio for the Companys outstanding redeemable convertible preferred stock was proportionately adjusted such that the common stock issuable upon conversion of such preferred stock was decreased in proportion to the Reverse Stock Split. All references to common stock and options to purchase common stock share data, per share data and related information contained in the consolidated financial statements have been retroactively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. |
F-26
5,333,334 Shares
Impel NeuroPharma, Inc.
Common Stock
PROSPECTUS
Joint Book-running Managers
Cowen | Guggenheim Securities |
Lead Manager
Wedbush PacGrow
, 2021
Until , 2021, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all costs and expenses, other than underwriting discounts and commissions, paid or payable by the registrant in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the Financial Industry Regulatory Approval, or FINRA, filing fee and Nasdaq listing fee:
Amount
Paid or To Be Paid |
||||
SEC registration fee |
$ | 10,707 | ||
FINRA filing fee |
15,220 | |||
Nasdaq listing fee |
150,000 | |||
Printing and engraving expenses |
605,000 | |||
Legal fees and expenses |
1,200,000 | |||
Accounting fees and expenses |
1,000,000 | |||
Transfer agent and registrar fees and expenses |
6,500 | |||
Miscellaneous expenses |
12,573 | |||
|
|
|||
Total |
$ | 3,000,000 | ||
|
|
Item 14. Indemnification of Directors and Officers.
Section 145 of the DGCL authorizes a court to award, or a corporations board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the DGCL are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
As permitted by the DGCL, the registrants restated certificate of incorporation to be effective in connection with the completion of this offering contains provisions that eliminate the personal liability of its directors for monetary damages for any breach of fiduciary duties as a director, except liability for the following:
∎ |
any breach of the directors duty of loyalty to the registrant or its stockholders; |
∎ |
acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; |
∎ |
under Section 174 of the DGCL (regarding unlawful dividends and stock purchases); or |
∎ |
any transaction from which the director derived an improper personal benefit. |
As permitted by the DGCL, the registrants restated bylaws to be effective in connection with the completion of this offering, provide that:
∎ |
the registrant is required to indemnify its directors and executive officers to the fullest extent permitted by the DGCL, subject to limited exceptions; |
∎ |
the registrant may indemnify its other employees and agents as set forth in the DGCL; |
∎ |
the registrant is required to advance expenses, as incurred, to its directors and executive officers in connection with a legal proceeding to the fullest extent permitted by the DGCL, subject to limited exceptions; and |
II-1
∎ |
the rights conferred in the restated bylaws are not exclusive. |
Prior to the completion of this offering, the registrant intends to enter into indemnification agreements with each of its current directors and executive officers to provide these directors and executive officers additional contractual assurances regarding the scope of the indemnification set forth in the registrants restated certificate of incorporation and restated bylaws and to provide additional procedural protections. There is no pending litigation or proceeding involving a director or executive officer of the registrant for which indemnification is sought. Reference is also made to the underwriting agreement to be filed as Exhibit 1.1 to this registration statement, which provides for the indemnification of executive officers, directors and controlling persons of the registrant against certain liabilities. The indemnification provisions in the registrants restated certificate of incorporation, restated bylaws and the indemnification agreements entered into or to be entered into between the registrant and each of its directors and executive officers may be sufficiently broad to permit indemnification of the registrants directors and executive officers for liabilities arising under the Securities Act.
The registrant has directors and officers liability insurance for securities matters.
Item 15. Recent Sales of Unregistered Securities.
The following lists set forth information regarding all securities sold or granted by the registrant from April 15, 2018 through April 15, 2021 that were not registered under the Securities Act, and the consideration, if any, received by the registrant for such securities:
(a) Stock Option Grants
From April 15, 2018 through April 15, 2021, the registrant granted to its employees, directors, consultants and other service providers options to purchase an aggregate of 2,517,764 shares of common stock under its 2008 Equity Incentive Plan, or 2008 Plan, and 2018 Equity Incentive Plan, or 2018 Plan, with exercise prices ranging from $2.46 to $13.76 per share.
From April 15, 2018 through April 15, 2021, employees, directors, consultants and other service providers of the registrant exercised options granted under the 2008 Plan and the 2018 Plan for an aggregate of 417,527 shares of common stock with exercise prices ranging from $1.31 to $8.19 per share for an aggregate exercise price of $918,801.67.
(b) Warrants to Purchase Preferred Stock
In October 2020, we entered into a debt and equity financing agreement with Avenue Venture Opportunities Fund, L.P., or Avenue. In connection with this agreement, we also granted Avenue a warrant to purchase 1,762,810 shares of our Series D redeemable convertible preferred stock at an exercise price of $0.709095 per share. The warrant has an expiration date of October 31, 2030. The warrant will be automatically exchanged for 107,663 shares upon our initial public offering.
(c) Exercise of Warrants to Purchase Preferred Stock
From April 15, 2018 through April 15, 2021, warrants to purchase 296,008 shares of Series A-2 Preferred stock were exercised at an exercise price of $0.4996 per share.
(d) Preferred Stock
In February 2018, the registrant issued and sold to four accredited investors an aggregate of 26,537,826 shares of C-2 convertible preferred stock at a purchase price of $0.5652 per share, for aggregate consideration of $14,999,999.
In February 2018, the registrant issued and sold to four accredited investors an aggregate of 24,605,790 shares of C-3 convertible preferred stock at a purchase price of $0.6096 per share, for aggregate consideration of $15,000,000.
II-2
In December 2018, the registrant issued and sold to six accredited investors an aggregate of 95,191,755 shares of D convertible preferred stock at a purchase price of $0.7091 per share, for aggregate consideration of $67,499,998.
(e) Convertible Notes
In March 2021, the registrant issued and sold to various accredited investors convertible promissory notes in an aggregate principal amount of $7.5 million.
Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed on the stock certificates issued in each of the foregoing transactions.
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions or any public offering, and the registrant believes each transaction was exempt from the registration requirements of the Securities Act as stated above. All recipients of the foregoing transactions either received adequate information about the registrant or had access, through their relationships with the registrant, to such information. Furthermore, the registrant affixed appropriate legends to the share certificates and instruments issued in each foregoing transaction setting forth that the securities had not been registered and the applicable restrictions on transfer.
II-3
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
* |
Previously filed. |
^ |
Registrant has omitted schedules and exhibits pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request. |
II-4
(b) Financial Statement Schedules.
No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or notes.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC 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:
(i) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-5
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 the City of Seattle, State of Washington, on the 19th day of April, 2021.
IMPEL NEUROPHARMA, INC. |
||
By: |
/s/ Adrian Adams |
|
Adrian Adams Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
Signature |
Title |
Date |
||
/s/ Adrian Adams Adrian Adams |
Chief Executive Officer and Director (Principal Executive Officer) |
April 19, 2021 | ||
/s/ John Leaman, M.D. John Leaman, M.D. |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
April 19, 2021 | ||
* John Hoekman, Ph.D. |
Chief Scientific Officer and Director | April 19, 2021 | ||
* David Allison, Ph.D. |
Director | April 19, 2021 | ||
* Robert Mittendorff, M.D. |
Director | April 19, 2021 | ||
* Timothy S. Nelson |
Director | April 19, 2021 | ||
* H. Stewart Parker |
Director | April 19, 2021 | ||
* Aaron Royston, M.D. |
Director | April 19, 2021 | ||
* Ali Satvat |
Director | April 19, 2021 | ||
* Mahendra G. Shah, Ph.D. |
Director | April 19, 2021 | ||
* Diane E. Wilfong |
Director | April 19, 2021 |
*By |
/s/ Adrian Adams |
|
Adrian Adams Attorney-in-fact |
Exhibit 1.1
Impel NeuroPharma, Inc.
[] Shares
Common Stock
($0.001 par value)
Underwriting Agreement
New York, New York
[], 2021
Cowen and Company, LLC
Guggenheim Securities, LLC
As Representatives of the several Underwriters,
c/o Cowen and Company, LLC
599 Lexington Avenue
New York, New York 10022
c/o Guggenheim Securities, LLC
330 Madison Avenue
New York, New York 10017
Ladies and Gentlemen:
Impel NeuroPharma, Inc., a corporation organized under the laws of Delaware (the Company), proposes to sell to the several underwriters named in Schedule I hereto (the Underwriters), for whom you (the Representatives) are acting as representatives, [] shares of common stock, $0.001 par value (Common Stock) of the Company (said shares to be issued and sold by the Company being hereinafter called the Underwritten Securities). The Company also proposes to grant to the Underwriters an option to purchase up to [] additional shares of Common Stock solely to cover overallotments, if any (the Option Securities; the Option Securities, together with the Underwritten Securities, being hereinafter called the Securities). To the extent there are no additional Underwriters listed on Schedule I other than you, the term Representatives as used herein shall mean you, as Underwriters, and the terms Representatives and Underwriters shall mean either the singular or plural as the context requires.
As used in this underwriting agreement (this Agreement), the Registration Statement means the registration statement referred to in paragraph 1(a) hereof, including the exhibits, schedules and financial statements and any prospectus supplement relating to the Securities that is filed with the Securities and Exchange Commission (the SEC) pursuant to Rule 424(b) under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the Securities Act) and deemed part of such registration statement pursuant to Rule 430A under the Securities Act (Rule 430A), as amended at the date and time that this Agreement is executed and delivered by the parties hereto (the Execution Time), and, in the event any post-effective amendment thereto or any registration statement and any amendments thereto filed pursuant to Rule 462(b) under the Securities Act (a Rule 462(b) Registration Statement) becomes effective prior to the Closing Date (as defined in Section 3 hereof), shall also mean such registration statement as so amended or such Rule 462(b) Registration Statement, as the case may be; the Effective Date means each date and time that the Registration Statement, any post-effective amendment or amendments thereto or any Rule 462(b) Registration Statement became or becomes effective; the Preliminary Prospectus means any preliminary prospectus referred to in paragraph 1(a) hereof and any preliminary prospectus included in the Registration Statement at the Effective Date that omits information with respect to the Securities and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A (the Rule 430A Information); and the Prospectus means the prospectus relating to the Securities that is first filed pursuant to Rule 424(b) under the Securities Act (Rule 424(b)) after the Execution Time.
As used in this Agreement, the Disclosure Package shall mean (i) the Preliminary Prospectus that is generally distributed to investors and used to offer the Securities (ii) any issuer free writing prospectus, as defined in Rule 433 under the Securities Act (an Issuer Free Writing Prospectus), identified in Schedule II hereto, and (iii) any other free writing prospectus, as defined in Rule 405 under the Securities Act (a Free Writing Prospectus), that the parties hereto shall hereafter expressly agree in writing to treat as part of the Disclosure Package.
1. Representations and Warranties. The Company represents and warrants to, and agrees with, each Underwriter as set forth below in this Section 1.
(a) The Company has prepared and filed with the SEC a registration statement (file number 333-254999) on Form S-1, including a related preliminary prospectus, for the registration under the Securities Act of the offering and sale of the Securities. Such Registration Statement, including any amendments thereto filed prior to the Execution Time, has become effective. The Company may have filed one or more amendments thereto, including a related preliminary prospectus, each of which has previously been furnished to you. The Company will file with the SEC the Prospectus relating to the Securities in accordance with Rule 424(b) after the Execution Time. As filed, such Prospectus shall contain all information required by the Securities Act and the rules thereunder and, except to the extent the Representatives shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the latest Preliminary Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein.
2
(b) On the Effective Date, the Registration Statement did, and when the Prospectus is first filed in accordance with Rule 424(b) and on the Closing Date (as defined herein) and on any date on which Option Securities are purchased, if such date is not the Closing Date (a settlement date), the Prospectus (and any supplement thereto) will, comply in all material respects with the applicable requirements of the Securities Act and the rules thereunder; on the Effective Date, at the Execution Time and on the Closing Date, the Registration Statement did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and on the date of any filing pursuant to Rule 424(b) and on the Closing Date and any settlement date, the Prospectus (together with any supplement thereto) will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the Registration Statement or the Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion in the Registration Statement or the Prospectus (or any supplement thereto), it being understood and agreed that the only such information furnished by or on behalf of any Underwriter consists of the information described as such in Section 8 hereof.
(c) (i) The Disclosure Package and the price to the public, the number of Underwritten Securities and the number of Option Securities to be included on the cover page of the Prospectus, when taken together as a whole, (ii) each electronic road show, when taken together as a whole with the Disclosure Package and the price to the public, the number of Underwritten Securities and the number of Option Securities to be included on the cover page of the Prospectus, and (iii) any individual Written Testing-the-Waters Communication, when taken together as a whole with the Disclosure Package and the price to the public, the number of Underwritten Securities and the number of Option Securities to be included on the cover page of the Prospectus, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Disclosure Package, any electronic road show or any Testing-the-Waters Communication based upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of any Underwriter consists of the information described as such in Section 8 hereof.
(d) (i) At the time of filing the Registration Statement and (ii) as of the Execution Time (with such date being used as the determination date for purposes of this clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405 under the Securities Act (Rule 405)), without taking account of any determination by the SEC pursuant to Rule 405 that it is not necessary that the Company be considered an Ineligible Issuer.
3
(e) From the time of initial confidential submission of the Registration Statement to the SEC (or, if earlier, the first date on which the Company engaged directly or through any Person authorized to act on its behalf in any Testing-the-Waters Communication) through the Execution Time, the Company has been and is an emerging growth company, as defined in Section 2(a) of the Securities Act (an Emerging Growth Company). Testing-the-Waters Communication means any oral or written communication with potential investors undertaken in reliance on Section 5(d) or 163B of the Securities Act.
(f) The Company (i) has not alone engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representatives with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule III hereto. Written Testing-the-Waters Communication means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405.
(g) Each Issuer Free Writing Prospectus does not include any information that conflicts with the information contained in the Registration Statement, including any document incorporated by reference therein that has not been superseded or modified. The foregoing sentence does not apply to statements in or omissions from any Issuer Free Writing Prospectus based upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of any Underwriter consists of the information described as such in Section 8 hereof.
(h) Each of the Company and its subsidiaries (i) has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized with full corporate power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Disclosure Package and the Prospectus, and (ii) is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification, except in the case of (ii), where such failure would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business (a Material Adverse Effect).
(i) All the outstanding shares of capital stock of each significant subsidiary (as such term is defined in Rule 1-02 of Regulation S-X promulgated under the Securities Act) (each a significant subsidiary) have been duly and validly authorized and issued and are fully paid and non-assessable, and, except as otherwise set forth in the Disclosure Package and the Prospectus, all outstanding shares of capital stock of the significant subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest or any other security interests, claims, liens or encumbrances, except to the extent that such security interests, claims, liens or encumbrances would not reasonably be expected to have a Material Adverse Effect.
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(j) There is no franchise, contract or other document of a character required to be described in the Registration Statement or Prospectus, or to be filed as an exhibit thereto, which is not described or filed as required; and the statements in the Preliminary Prospectus and the Prospectus under the headings Material U.S. Federal Income Tax Consequences to Non-U.S. Holders, Description of Capital Stock, Shares Eligible for Future Sale and Underwriting, insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings.
(k) This Agreement has been duly authorized, executed and delivered by the Company.
(l) The Company is not, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Disclosure Package and the Prospectus will not be, an investment company as defined in the Investment Company Act of 1940, as amended.
(m) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein, except (i) such as have been obtained under the Securities Act; (ii) such as may be required under the Financial Industry Regulatory Authority, Inc. (FINRA); and (iii) such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated herein and in the Disclosure Package and the Prospectus.
(n) Neither the issue and sale of the Securities nor the consummation of any other of the transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company or any of its subsidiaries, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which its or their property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries or any of its or their properties except in the case of clauses (ii) and (iii) for any such breach, violation or imposition as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
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(o) No holders of securities of the Company have rights to the registration of such securities under the Registration Statement, except for such registration rights disclosed in the Disclosure Package and the Prospectus and have been effectively waived in connection with this offering and the holders of outstanding shares of capital stock of the Company are not entitled to statutory preemptive or other similar contractual rights to subscribe for the Securities.
(p) The consolidated historical financial statements and schedules of the Company and its consolidated subsidiaries included in the Preliminary Prospectus, the Prospectus and the Registration Statement present fairly in all material respects the financial condition, results of operations and cash flows of the Company as of the dates and for the periods indicated, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein)
(q) No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property is pending or, to the knowledge of the Company, threatened that (i) would reasonably be expected to have a material adverse effect on the performance of this Agreement or the consummation of any of the transactions contemplated hereby or (ii) would reasonably be expected to have a Material Adverse Effect.
(r) Each of the Company and each of its subsidiaries owns or leases all such properties as are necessary to the conduct of its operations in all material respects as presently conducted.
(s) Neither the Company nor any subsidiary is in violation or default of (i) any provision of its charter or bylaws, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable, except with respect to clauses (ii) and (iii) where such violation or default would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(t) Ernst & Young LLP, who have certified certain financial statements of the Company and its consolidated subsidiaries and delivered their report with respect to the audited consolidated financial statements and schedules included in the Disclosure Package and the Prospectus, are independent public accountants with respect to the Company within the meaning of the Securities Act and the applicable published rules and regulations thereunder.
(u) There are no transfer taxes or other similar fees or charges under federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance by the Company or sale by the Company of the Securities.
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(v) The Company has filed all tax returns that are required to be filed or has requested extensions thereof (except in any case in which the failure so to file would not have a Material Adverse Effect, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto)) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty that is currently being contested in good faith or as would not have a Material Adverse Effect, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto).
(w) No labor problem or dispute with the employees of the Company or any of its subsidiaries exists or is threatened, and the Company is not aware of any existing or threatened labor disturbance by the employees of any of its or its subsidiaries principal suppliers, contractors or customers, that could have a Material Adverse Effect.
(x) The Company and its subsidiaries taken as a whole are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are generally maintained by companies engaged in the same or similar businesses and at the same or similar stage of development; all policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and to the knowledge of the Company, there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Material Adverse Effect.
(y) No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiarys capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiarys property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto).
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(z) The Company and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by all applicable authorities necessary to conduct their respective businesses as described in the Registration Statement, Disclosure Package and the Prospectus, except where the failure to possess such licenses, certificates, permits and other authorizations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto).
(aa) The Company has established a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with managements general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with managements general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and its subsidiaries internal controls over financial reporting are effective and the Company and its subsidiaries are not aware of any material weakness in their internal controls over financial reporting.
(bb) The Company has established disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act 1934, as amended, and the rules and regulations promulgated thereunder (the Exchange Act)) that are reasonably designed to comply with the applicable requirements of the Exchange Act and are effective.
(cc) The Company has not taken, directly or indirectly, without giving effect to the activities by the Underwriters, any action designed to or that would constitute or that would reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
(dd) The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (Environmental Laws), (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) have not received notice of any actual or potential liability under any environmental law, except where such non-compliance with Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto). Neither the Company nor any of the subsidiaries has been named as a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.
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(ee) None of the following events has occurred or exists: (i) a failure to fulfill the obligations, if any, under the minimum funding standards of Section 302 of the United States Employee Retirement Income Security Act of 1974, as amended (ERISA), and the regulations and published interpretations thereunder with respect to a Plan, determined without regard to any waiver of such obligations or extension of any amortization period; (ii) an audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other federal or state governmental agency or any foreign regulatory agency with respect to the employment or compensation of employees by any of the Company or any of its subsidiaries that would reasonably be expected to have a Material Adverse Effect; (iii) any breach of any contractual obligation, or any violation of law or applicable qualification standards, with respect to the employment or compensation of employees by the Company or any of its subsidiaries that would reasonably be expected to have a Material Adverse Effect. None of the following events has occurred or is reasonably likely to occur: (i) a material increase in the aggregate amount of contributions required to be made to all Plans in the current fiscal year of the Company and its subsidiaries compared to the amount of such contributions made in the most recently completed fiscal year of the Company and its subsidiaries; (ii) a material increase in the accumulated post-retirement benefit obligations (within the meaning of Statement of Financial Accounting Standards 106) of the Company and its subsidiaries compared to the amount of such obligations in the most recently completed fiscal year of the Company and its subsidiaries; (iii) any event or condition giving rise to a liability under Title IV of ERISA that would reasonably be expected to have a Material Adverse Effect; or (iv) the filing of a claim by one or more employees or former employees of the Company or any of its subsidiaries related to their employment that would reasonably be expected to have a Material Adverse Effect. For purposes of this paragraph, the term Plan means a plan (within the meaning of Section 3(3) of ERISA) subject to Title IV of ERISA with respect to which the Company or any of its subsidiaries may have any liability.
(ff) There is and has been no failure on the part of the Company and any of the Companys directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated in connection thereunder (the Sarbanes-Oxley Act) that are in effect and with which the Company is required to comply as of the effectiveness of the Registration Statement.
(gg) Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation or a sanction for violation by such persons of the Foreign Corrupt Practices Act of 1977 or the U.K. Bribery Act 2010, each as may be amended, or similar law of any other relevant jurisdiction, or the rules or regulations thereunder; and the Company and its subsidiaries have instituted and maintain policies and procedures reasonably designed to ensure compliance therewith. No part of the proceeds of the offering will be used, directly or indirectly, in violation of the Foreign Corrupt Practices Act of 1977 or the U.K. Bribery Act 2010, each as may be amended, or similar law of any other relevant jurisdiction, or the rules or regulations thereunder.
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(hh) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements and the money laundering statutes and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the Money Laundering Laws) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(ii) Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries (i) is, or is controlled or 50% or more owned in the aggregate by or is acting on behalf of, one or more individuals or entities that are currently the subject of any sanctions administered or enforced by the United States (including any administered or enforced by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State or the Bureau of Industry and Security of the U.S. Department of Commerce), the United Nations Security Council, the European Union, a member state of the European Union (including sanctions administered or enforced by Her Majestys Treasury of the United Kingdom) or other relevant sanctions authority (collectively, Sanctions and such persons, Sanctioned Persons and each such person, a Sanctioned Person), (ii) is located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions that broadly prohibit dealings with that country or territory (collectively, Sanctioned Countries and each, a Sanctioned Country) or (iii) will, directly or indirectly, use the proceeds of this offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other individual or entity in any manner that would result in a violation of any Sanctions by, or could result in the imposition of Sanctions against, any individual or entity (including any individual or entity participating in the offering, whether as underwriter, advisor, investor or otherwise).
(jj) Neither the Company nor any of its subsidiaries has engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, in the preceding three (3) years, nor does the Company or any of its subsidiaries have any plans to engage in dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country.
(kk) The subsidiaries listed on Annex A attached hereto are the only significant subsidiaries of the Company as defined by Rule 1-02 of Regulation S-X.
(ll) Except as described in the Registration Statement, the Disclosure Package and the Prospectus, as applicable, the Company (i) is and at all times has been in compliance with all statutes, rules and regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, advertising, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product manufactured or distributed by the Company including, without limitation the Federal Food, Drug and Cosmetic Act (21 U.S.C. §301 et seq.), the federal Anti-
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Kickback Statute (42 U.S.C. §1320a-7b(b)), the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Affordability Reconciliation Act of 2010, the regulations promulgated pursuant to such laws, and any successor government programs and comparable state laws, regulations relating to Good Clinical Practices and Good Laboratory Practices and all other local, state, federal, national, supranational and foreign laws, and regulations relating to the regulation of the Company (collectively, the Applicable Laws), except for such non-compliance as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (ii) has not received any written notice from any court or arbitrator or governmental or regulatory authority or third party alleging or asserting noncompliance with any Applicable Laws or any licenses, exemptions, certificates, approvals, clearances, authorizations, permits, registrations and supplements or amendments thereto required by any such Applicable Laws (Authorizations), except for such non-compliance as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) possesses all Authorizations and such Authorizations are valid and in full force and effect and are not in violation of any term of any such Authorizations, except for such violations as would not, individually or in the aggregate, have a Material Adverse Effect; (iv) has not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any court or arbitrator or governmental or regulatory authority or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations nor, to Companys knowledge, is any such claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action threatened; (v) has not received any written notice that any court or arbitrator or governmental or regulatory authority has taken, is taking or intends to take, action to limit, suspend, materially modify or revoke any Authorizations nor, to the Companys knowledge, is any such limitation, suspension, modification or revocation threatened; (vi) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and accurate in all material respects on the date filed (or were corrected or supplemented by a subsequent submission) , except where the failure to so file, obtain, maintain or submit or the failure of such reports, documents, forms, notices, applications, records, claims, submission and supplements or amendments would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and (vii) is not a party to any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders, or similar agreements with or imposed by any governmental or regulatory authority.
(mm) The Company possesses all licenses, certificates, permits and other authorizations (collectively, Permits) issued by, and has made all declarations and filings with, the applicable federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of its properties or the conduct of its business as described in the Registration Statement, the Disclosure Package and the
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Prospectus, or to permit all clinical and nonclinical studies and trials conducted by or on behalf of the Company, including, without limitation, all necessary FDA and applicable foreign regulatory agency approvals, except where the failure to possess such Permit or make such declaration or filing would not reasonably be expected, individually or in the aggregate, have a Material Adverse Effect; the Company is not in material violation of, or in default under, any such Permit and does not have any reason to believe that any such Permit will not be renewed in the ordinary course. The Company has not received any FDA Form 483, written notice of adverse finding, warning letter, untitled letter or other correspondence or written notice from any court or arbitrator or governmental or regulatory authority alleging or asserting non-compliance with (A) any Applicable Laws or (B) any Permits required by any such Applicable Laws.
(nn) The clinical trials and pre-clinical studies conducted by or on behalf of or sponsored by the Company, or in which the Company has participated, that are described in the Registration Statement, the Disclosure Package and the Prospectus or the results of which are referred to in the Registration Statement, the Disclosure Package and the Prospectus, as applicable, and are intended to be submitted to Regulatory Authorities as a basis for product approval, were and, if still pending, are being conducted in all material respects in accordance with standard medical and scientific research procedures and all applicable statutes, rules and regulations of the United States Food and Drug Administration and comparable drug regulatory agencies outside of the United States to which they are subject (collectively, the Regulatory Authorities), including, without limitation, 21 C.F.R. Parts 50, 54, 56, 58, and 312, and current Good Clinical Practices and Good Laboratory Practices; the descriptions in the Registration Statement, the Disclosure Package or the Prospectus of the results of such studies and trials are accurate and complete in all respects and fairly present the data derived from such studies and trials in all material respects; the Company has no knowledge of any other trials the results of which are inconsistent with or otherwise call into question the results described or referred to in the Registration Statement, Disclosure Package and the Prospectus; the Company has not received any written notices, correspondence or other communication from the Regulatory Authorities or any governmental authority which could lead to the termination or suspension of any clinical or pre-clinical trials that are described in the Registration Statement, the Disclosure Package and the Prospects or the results of which are referred to in the Registration Statement, Disclosure Package or the Prospectus, and, to the Companys knowledge, there are no reasonable grounds for same.
(oo) The manufacturing facilities and operations of its suppliers have operated in compliance in all material respects with all applicable statutes, rules, regulations and policies of the Regulatory Authorities.
(pp) Except as would not reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries own, possess, license or have other rights to use, on reasonable terms, all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the Intellectual Property) necessary for the conduct of the Companys business as now conducted or as proposed in the Disclosure Package and Prospectus to be conducted. Except as would
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not reasonably be expected to have a Material Adverse Effect (a) there are no rights of third parties to any such Intellectual Property; (b) to the Companys knowledge, there is no material infringement by third parties of any such Intellectual Property; (c) there is no pending or, to the Companys knowledge, threatened action, suit, proceeding or claim by others challenging the Companys rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (d) there is no pending or, to the Companys knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (e) there is no pending or, to the Companys knowledge, threatened action, suit, proceeding or claim by others that the Company infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim; (f) there is no U.S. patent or published U.S. patent application which contains claims that dominate or may dominate any Intellectual Property described in the Disclosure Package and the Prospectus as being owned by or licensed to the Company or that interferes with the issued or pending claims of any such Intellectual Property; and (g) there is no prior art of which the Company is aware that may render any U.S. patent held by the Company invalid or any U.S. patent application held by the Company un-patentable which has not been disclosed to the U.S. Patent and Trademark Office.
(qq) The Company and its subsidiaries comply, and at all times have complied, in all material respects, with all applicable laws, regulations, guidelines, industry standards and contractual obligations relating to privacy, data protection and data security with respect to the collection, use, disclosure, protection (including security of) and other processing of Personal Data (as defined below) (collectively, Data Protection Obligations) and have established procedures necessary to ensure continued compliance in all material respects with all Data Protection Obligations. Except as has not been and would not reasonably be expected to be material to the Company and its subsidiaries, taken as a whole, neither the Company nor any of its subsidiaries has received any claim, notice or allegation from any competent authority (including any information or enforcement notice, or any transfer prohibition notice) alleging that the Company or any of its subsidiaries has not complied with any Data Protection Obligation. No individual has claimed and, so far as the Company is aware, no reasonable grounds exist for an individual to claim, (i) any violation by the Company or any of its subsidiaries of any Data Protection Obligation or (ii) compensation from the Company or any of its subsidiaries for breaches of any Data Protection Obligation or for loss or unauthorized disclosure or other unauthorized processing of Personal Data (as defined below). Personal Data means (i) a natural persons name, street address, telephone number, e-mail address, photograph, passport number, credit card number, bank information, or customer or account number, and (ii) any other piece of information defined as personal data, personal information, personally identifiable information, protected health information, or nonpublic personal information under any applicable law or regulation or any applicable regulatory guidance regarding any such law or regulation.
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(rr) The information technology systems, equipment and software used in the business of the Company and its subsidiaries taken as a whole (the IT Assets) (i) operate and perform in accordance in all material respects with relevant specifications and otherwise as necessary in all material respects for the Companys and its subsidiaries respective businesses as currently conducted and (ii) have not malfunctioned or failed at any time in the past three (3) years in any material respect. Except as set forth in the Disclosure Package and the Prospectus, there has been no security breach, attack or other compromise or circumstance as a result of which any person has gained unauthorized access to any IT Asset in a manner that has had or would reasonably be expected to have a material impact on the Company and its subsidiaries, taken as a whole.
(ss) Except as would not reasonably be expected to be material to the Company and its subsidiaries, taken as a whole, (i) all IT Assets are either owned by, or properly licensed or leased to, the Company or its subsidiaries; (ii) the Company and its subsidiaries are not in default under any such licenses or leases, and there are no grounds on which they may reasonably be terminated; and (iii) the IT Assets have (and each part of them has) sufficient capacity and performance to meet the material processing and other business requirements of the Company and its subsidiaries.
(tt) The Company and its subsidiaries have taken precautions that they reasonably believe to be appropriate, including contingency plans, back-up facilities and disaster recovery technology processes and plans, to protect the computer systems (hardware and software) and information technologies and related systems (such as networks) implemented or used by the Company or its subsidiaries against (i) overload, failure, limitation of system capacities, manual misuses and other interruptions of regular business operations, (ii) fire, explosion, flood, any calamity or other interruptions of regular business operations and (iii) unauthorized access or manipulation by third parties.
(uu) Except as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, the company (i) does not have any material lending or other relationship with any bank or lending affiliate of the Underwriters and (ii) does not intend to use any of the proceeds from the sale of the Securities hereunder to repay any outstanding debt owed to any affiliate of the Underwriters.
Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Underwriter.
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $[] per share, the amount of the Underwritten Securities set forth opposite such Underwriters name in Schedule I hereto.
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(b) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to [] Option Securities at the same purchase price per share as the Underwriters shall pay for the Underwritten Securities, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Underwritten Securities but not payable on the Option Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time on or before the 30th day after the date of the Prospectus upon written or telegraphic notice by the Representatives to the Company setting forth the number of shares of the Option Securities as to which the several Underwriters are exercising the option and the settlement date. The number of Option Securities to be purchased by each Underwriter shall be the same percentage of the total number of shares of the Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Securities, subject to such adjustments as you in your absolute discretion shall make to eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the Underwritten Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on or before the second Business Day immediately preceding the Closing Date) shall be made at 10:00 A.M. (New York City time) on [], 2021, or at such time on such later date not more than three Business Days after the foregoing date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the Closing Date). As used herein, Business Day shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. Delivery of the Underwritten Securities and the Option Securities shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct. If the option provided for in Section 2(b) hereof is exercised after the second Business Day immediately preceding the Closing Date, the Company will deliver the Option Securities (at the expense of the Company) to the Representatives on the date specified by the Representatives (which shall be within three Business Days after exercise of said option) for the respective accounts of the several Underwriters, against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. If settlement for the Option Securities occurs after the Closing Date, the Company will deliver to the Representatives on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 6 hereof.
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4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters that:
(a) Prior to the termination of the offering of the Securities, the Company will not file any amendment of the Registration Statement or supplement to the Prospectus or any Rule 462(b) Registration Statement unless the Company has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. The Company will cause the Prospectus, properly completed, and any supplement thereto to be filed in a form approved by the Representatives with the SEC pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. The Company will promptly advise the Representatives (i) when the Prospectus, and any supplement thereto, shall have been filed (if required) with the SEC pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement shall have been filed with the SEC, (ii) when, prior to termination of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (iii) of any request by the SEC or its staff for any amendment of the Registration Statement, or any Rule 462(b) Registration Statement, or for any supplement to the Prospectus or for any additional information, (iv) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or of any notice objecting to its use or the institution or threatening of any proceeding for that purpose and (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the institution or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the occurrence of any such suspension or objection to the use of the Registration Statement and, upon such issuance, occurrence or notice of objection, to obtain as soon as possible the withdrawal of such stop order or relief from such occurrence or objection, including, if necessary, by filing an amendment to the Registration Statement or a new registration statement and using its best efforts to have such amendment or new registration statement declared effective as soon as practicable.
(b) If, at any time prior to the filing of the Prospectus pursuant to Rule 424(b), any event occurs as a result of which the Disclosure Package would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein in the light of the circumstances under which they were made or the circumstances then prevailing not misleading, the Company will (i) notify promptly the Representatives so that any use of the Disclosure Package may cease until it is amended or supplemented; (ii) amend or supplement the Disclosure Package to correct such statement or omission; and (iii) supply any amendment or supplement to you in such quantities as you may reasonably request.
(c) If, at any time when a prospectus relating to the Securities is required to be delivered under the Securities Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act (Rule 172)), any event occurs as a result of which the Prospectus as then supplemented would include any untrue
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statement of a material fact or omit to state any material fact necessary in order to make the statements therein in the light of the circumstances under which they were made or the circumstances then prevailing not misleading, or if it shall be necessary to amend the Registration Statement or supplement the Prospectus to comply with the Securities Act or the rules thereunder, the Company promptly will (i) notify the Representatives of any such event; (ii) prepare and file with the SEC, subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement which will correct such statement or omission or effect such compliance; and (iii) supply any supplemented Prospectus to you in such quantities as you may reasonably request.
(d) As soon as practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act; provided that the Company will be deemed to have satisfied such requirement to the extent such information is filed on the Commissions Electronic Data Gathering, Analysis and Retrieval system (EDGAR) or any successor thereto.
(e) The Company will furnish to the Representatives and counsel for the Underwriters, without charge, two signed copies of the Registration Statement (including exhibits thereto) and to each other Underwriter a copy of the Registration Statement (without exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Securities Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172), as many copies of each Preliminary Prospectus, the Prospectus and each Issuer Free Writing Prospectus and any supplement thereto as the Representatives may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering.
(f) The Company will arrange, if necessary, for the qualification of the Securities for sale under the laws of such jurisdictions as the Representatives may reasonably request and will maintain such qualifications in effect so long as required for the distribution of the Securities; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject.
(g) The Company will not, without the prior written consent of the Representatives, offer, sell, contract to sell, pledge, or otherwise dispose of, (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any controlled affiliate of the Company) directly or indirectly, including the filing (or participation in the filing) of a registration statement with the SEC in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, any other shares of Common Stock or any securities convertible into, or exercisable, or exchangeable for, shares of Common Stock; or publicly announce an
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intention to effect any such transaction, for a period of 180 days after the date of this Agreement, provided, however, that the foregoing restrictions shall not apply to (a) the Securities to be sold hereunder; (b) the issuance and sale of Common Stock pursuant to any employee stock option plan, stock ownership plan or dividend reinvestment plan of the Company in effect at the Execution Time; (c) the issuance of Common Stock issuable upon the conversion of securities or the exercise of warrants outstanding at the Execution Time; (d) the filing by the Company of any registration statement on Form S-8 or a successor form relating to the shares granted pursuant to or reserved for issuance under any employee stock option plan, stock ownership plan or dividend reinvestment plan of the Company in effect at the Execution Time, (e) the issuance of securities in connection with the acquisition by the Company or any of its subsidiaries of the securities, businesses, property or other assets of another person or entity or pursuant to any employee benefit plan assumed by the Company in connection with any such acquisition, or (f) the issuance of securities in connection with joint ventures, commercial relationships, or other strategic transactions; provided that, in the case of clauses (e) and (f), the aggregate number of shares issued in all such acquisitions and transactions taken together does not exceed 5% of the Companys outstanding common stock following the offering of Common Stock contemplated by this Agreement and, provided further that in the case of clauses (b), (c), (e) and (f), the Company shall cause each recipient of such securities to execute and deliver to the Representatives, on or prior to the issuance of such securities, a lock-up agreement on substantially the same terms as the lock-up agreement set forth in Exhibit A hereto for the remainder of the period from the date hereof until and including the date that is 180 days after the date of this Agreement and enter stop transfer instructions with the Companys transfer agent and registrar on such securities, which the Company agrees it will not waive or amend without the prior written consent of the Representatives.
(h) If the Representatives agree to release or waive the restrictions set forth in a lock-up letter described in Section 6(m) hereof for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three Business Days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two Business Days before the effective date of the release or waiver.
(i) The Company will not take, directly or indirectly, any action designed to or that would constitute or that would reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
(j) The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation, printing or reproduction and filing with the SEC of the Registration Statement (including financial statements and exhibits thereto), each Preliminary Prospectus, the Prospectus and each Issuer Free Writing Prospectus, and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each Preliminary Prospectus, the Prospectus
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and each Issuer Free Writing Prospectus, and all amendments or supplements to any of them, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Securities; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Securities, including any stamp or transfer taxes in connection with the original issuance and sale of the Securities; (iv) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Securities; (v) the registration of the Securities under the Exchange Act and the listing of the Securities on the Nasdaq Global Market; (vi) any registration or qualification of the Securities for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such registration and qualification); (vii) any filings required to be made with the FINRA (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such filings in an aggregate amount not to exceed $30,000); (viii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Securities; provided, however, that the Underwriters will pay all of the travel and lodging expenses of the Underwriters or any of their employees as incurred by them in connection with the road show, and provided further that the Company and the Underwriters will each pay 50% of the cost of any aircraft chartered in connection with any road show and used by both the Company and the Underwriters; (ix) the fees and expenses of the Companys accountants and the fees and expenses of the Companys counsel (including local and special counsel); and (x) all other costs and expenses incident to the performance by the Company of its obligations hereunder.
(k) The Company agrees that, unless it has or shall have obtained the prior written consent of the Representatives, and each Underwriter, severally and not jointly, agrees with the Company that, unless it has or shall have obtained, as the case may be, the prior written consent of the Company, it has not made and will not make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a Free Writing Prospectus required to be filed by the Company with the SEC or retained by the Company under Rule 433 under the Securities Act (Rule 433); provided that the prior written consent of the parties hereto shall be deemed to have been given in respect of the Free Writing Prospectuses included in Schedule II hereto and any electronic road show. Any such free writing prospectus consented to by the Representatives or the Company is hereinafter referred to as a Permitted Free Writing Prospectus. The Company agrees that (x) it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and (y) it has complied and will comply, as the case may be, with the requirements of Rule 164 under the Securities Act (Rule 164) and Rule 433 applicable to any Permitted Free Writing Prospectus, including in respect of timely filing with the SEC, legending and record keeping.
(l) The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (a) completion of the distribution of the Securities within the meaning of the Securities Act and (b) completion of the 180-day restricted period referred to in Section 5(g) hereof.
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(m) If at any time following the distribution of any Written Testing-the-Waters Communication, any event occurs as a result of which such Written Testing-the-Waters Communication would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein in the light of the circumstances under which they were made or the circumstances then prevailing not misleading, the Company will (i) notify promptly the Representatives so that use of the Written Testing-the-Waters Communication may cease until it is amended or supplemented; (ii) amend or supplement the Written Testing-the-Waters Communication to correct such statement or omission; and (iii) supply any amendment or supplement to the Representatives in such quantities as may be reasonably requested.
6. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Underwritten Securities and the Option Securities, as the case may be, shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, the Closing Date and any settlement date pursuant to Section 3 hereof, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions:
(a) The Prospectus, and any supplement thereto, have been filed in the manner and within the time period required by Rule 424(b); any other material required to be filed by the Company pursuant to Rule 433(d) shall have been filed with the SEC within the applicable time periods prescribed for such filings by Rule 433; and no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use shall have been issued and no proceedings for that purpose shall have been instituted or threatened.
(b) The Company shall have requested and caused Fenwick & West LLP, intellectual property counsel to the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, in form and substance reasonably satisfactory to the Representatives.
(c) The Company shall have requested and caused Hyman, Phelps & McNamara, P.C, regulatory counsel to the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, in form and substance reasonably satisfactory to the Representatives.
(d) The Company shall have requested and caused Fenwick & West LLP, counsel for the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, in form and substance reasonably satisfactory to the Representatives.
(e) The Representatives shall have received from Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for the Underwriters, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Registration Statement, the Disclosure Package, the Prospectus (together with any supplement thereto) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.
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(f) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Disclosure Package, the Prospectus and any amendment or supplement thereto, as well as each electronic road show used in connection with the offering of the Securities, and this Agreement and that:
(i) the representations and warranties of the Company in this Agreement are true and correct on and as of the Closing Date with the same effect as if made on the Closing Date and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use has been issued and no proceedings for that purpose have been instituted or, to the Companys knowledge, threatened; and
(iii) since the date of the most recent financial statements included in the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto), there has been no material adverse change in the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto).
(g) The Company shall have delivered to the Representatives, at the Execution Time and at the Closing Date, a certificate of the Chief Financial Officer of the Company, in form and substance satisfactory to the Representatives.
(h) Ernst & Young LLP shall have furnished to the Representatives, at the Execution Time and at the Closing Date, letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives, containing statements and information of the type customarily included in accountants comfort letters to underwriters with respect to the financial statements and certain financial information contained in each of the Disclosure Package and the Prospectus; provided, that the letter delivered on the Closing Date shall use a cut-off date no more than two Business Days prior to such Closing Date.
(i) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (g) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the
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Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof), the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto).
(j) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request.
(k) Subsequent to the Execution Time, there shall not have been any decrease in the rating of any of the Companys debt securities by any nationally recognized statistical rating organization (as defined for purposes of Rule 3(a)(62) under the Exchange Act) or any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.
(l) The Securities shall have been listed and admitted and authorized for trading on the Nasdaq Global Market, and satisfactory evidence of such actions shall have been provided to the Representatives.
(m) At the Execution Time, the Company, its directors and officers, and substantially all of its other stockholders and optionholders, shall have furnished to the Representatives a lock-up letter substantially in the form of Exhibit A hereto.
If any of the conditions specified in this Section 6 shall not have been fulfilled when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be delivered at the office of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for the Underwriters, at 701 Fifth Avenue, Suite 5100, Seattle, WA 98104, on the Closing Date.
7. Reimbursement of Underwriters Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof (other than termination resulting from the occurrence of any of the events set forth in clauses (i)(B), (ii), (iii) or (iv) of Section 10) or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally through Cowen and Company, LLC on demand for all documented expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities.
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8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter, the directors, officers, employees, affiliates and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in any Preliminary Prospectus, or the Prospectus, any Issuer Free Writing Prospectus, or any Written Testing-the-Waters Communication or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other documented expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with the written information furnished to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion therein, as set forth in the last sentence of Section 8(b). This indemnity agreement will be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Company within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to written information relating to such Underwriter furnished to the Company by or on behalf of such Underwriter through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. The Company acknowledges that the statements set forth (i) in the last paragraph of the cover page regarding delivery of the Securities and, under the heading Underwriting, (ii) the list of Underwriters and their respective participation in the sale of the Securities, (iii) the sentences related to concessions and reallowances and (iv) the paragraph related to stabilization, syndicate covering transactions and penalty bids in the Preliminary Prospectus and the Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in the Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus.
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(c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying partys choice at the indemnifying partys expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying partys election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel of the indemnified partys choice (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel (which, if the Company is the indemnifying party, shall be limited to one such separate counsel for the Underwriters together with all persons who control such Underwriters within the meaning of the Exchange Act or the Securities Act) if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.
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(d) In the event that the indemnity provided in paragraph (a), (b) or (c) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Underwriters severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending the same) (collectively, Losses) to which the Company and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Underwriters on the other from the offering of the Securities. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Underwriters severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Prospectus. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the offering of the Securities exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of either the Securities Act or the Exchange Act and each director, officer, employee, affiliate and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Company within the meaning of either the Securities Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters shall fail to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate amount of Securities set
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forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such non-defaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any non-defaulting Underwriter or the Company. In the event of a default by any Underwriter as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Registration Statement and the Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any non-defaulting Underwriter for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such delivery and payment (i)(A) trading in the Companys Common Stock shall have been suspended by the SEC or the Nasdaq Global Market or (B) trading in securities generally on the New York Stock Exchange or the Nasdaq Global Market shall have been suspended or limited or minimum prices shall have been established on either of such exchanges, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities, (iii) there shall have occurred a material disruption in commercial banking or securities settlement or clearance services or (iv) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Preliminary Prospectus or the Prospectus (exclusive of any amendment or supplement thereto).
11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors, employees, agents, affiliates or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, sent by mail, telex, facsimile transmission or email to Cowen and Company, LLC, Attention: Head of Equity Capital Markets, facsimile number 1 646-562-1249 with a copy to the General Counsel, facsimile number 646-562-1130, and to Guggenheim Securities, LLC, Attention: Head of Equity Capital Markets, facsimile number (212) 658-9689, with a copy (which shall not constitute notice) to Wilson Sonsini Goodrich & Rosati, Professional Corporation, 701 Fifth Avenue, Suite 5100, Seattle, WA 98104, Attention: Tony Jeffries, Michael Nordtvedt and Bryan King, facsimile number +1 (206) 883-2699; or, if sent to Impel NeuroPharma, Inc., will be mailed, delivered or telefaxed to 201 Elliott Avenue West, Suite 260, Seattle, WA 98119, Attention: John Leaman Attention: Chief Executive Officer, with a copy (which shall not constitute notice) to Fenwick & West LLP, 1191 Second Avenue, 10th Floor, Seattle, WA 98101, Attention: Alan Smith and Amanda Rose.
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13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors, employees, agents and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder.
14. Jurisdiction. The Company agrees that any suit, action or proceeding against the Company brought by any Underwriter, the directors, officers, employees, affiliates and agents of any Underwriter, or by any person who controls any Underwriter, arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in any State or U.S. federal court in The City of New York and County of New York, and waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or proceeding.
15. Recognition of the U.S. Special Resolution Regimes.
(a) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
As used in this Section 15, BHC Act Affiliate has the meaning assigned to the term affiliate in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k); Covered Entity means any of the following: (i) a covered entity as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b), (ii) a covered bank as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b) or (iii) a covered FSI as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b); Default Right has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable; and U.S. Special Resolution Regime means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
27
16. No Fiduciary Duty. The Company hereby acknowledges that (a) the purchase and sale of the Securities pursuant to this Agreement is an arms-length commercial transaction between the Company, on the one hand, and the Underwriters and any affiliate through which it may be acting, on the other, (b) the Underwriters are acting as principal and not as an agent or fiduciary of the Company and (c) the Companys engagement of the Underwriters in connection with the offering and the process leading up to the offering is as independent contractors and not in any other capacity. Furthermore, the Company agrees that it is solely responsible for making its own judgments in connection with the offering (irrespective of whether any of the Underwriters has advised or is currently advising the Company on related or other matters). The Company agrees that it will not claim that the Underwriters have rendered advisory services of any nature or respect, or owe an agency, fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.
17. Integration. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the Underwriters, or any of them, with respect to the subject matter hereof.
18. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York.
19. Waiver of Jury Trial. The Company hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
20. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement.
21. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof.
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If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the several Underwriters.
Very truly yours, |
||
Impel NeuroPharma, Inc. | ||
By: | ||
Name: Adrian Adams | ||
Title: Chief Executive Officer |
[Signature Page to Underwriting Agreement]
The foregoing Agreement is hereby confirmed and accepted as of the date first above written. | ||
Cowen and Company, LLC | ||
Guggenheim Securities, LLC | ||
By: Cowen and Company, LLC | ||
By: | ||
Name: | ||
Title: |
By: Guggenheim Securities, LLC | ||
By: | ||
Name: | ||
Title: | ||
For themselves and the other several Underwriters named in Schedule I to the foregoing Agreement. |
[Signature Page to Underwriting Agreement]
SCHEDULE I
Underwriters |
Number of Underwritten
Securities to be Purchased |
|||
Cowen and Company, LLC | ||||
Guggenheim Securities, LLC | ||||
Wedbush Securities Inc. | ||||
|
|
|||
Total |
||||
|
|
I-1
SCHEDULE II
Schedule of Free Writing Prospectuses included in the Disclosure Package
II-1
SCHEDULE III
Schedule of Written Testing-the-Waters Communication
III-1
[Form of Lock-Up Agreement] | EXHIBIT A |
Impel NeuroPharma, Inc.
Public Offering of Common Stock
______________, 2021
Cowen and Company, LLC
Guggenheim Securities, LLC
As Representatives of the several Underwriters,
c/o Cowen and Company, LLC
599 Lexington Avenue
New York, New York 10022
c/o Guggenheim Securities, LLC
330 Madison Avenue
New York, New York 10017
Ladies and Gentlemen:
This letter (this Letter Agreement) is being delivered to you in connection with the proposed underwriting agreement (the Underwriting Agreement), between Impel NeuroPharma, Inc., a Delaware corporation (the Company), and each of you as representatives (the Representatives) of a group of underwriters named therein (the Underwriters), relating to an underwritten public offering of Common Stock, $0.001 par value (the Common Stock), of the Company (the Offering).
In order to induce you and the other Underwriters to enter into the Underwriting Agreement, the undersigned will not, without the prior written consent of the Representatives, offer, sell, contract to sell, pledge or otherwise dispose of, (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or any affiliate of the undersigned or any person in privity with the undersigned or any affiliate of the undersigned), directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Securities and Exchange Commission (the SEC) in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations of the SEC promulgated thereunder with respect to, any shares of capital stock of the Company or any securities convertible into, or exercisable or exchangeable for such capital stock (collectively, the Lock-Up Securities), or
2
publicly announce an intention to effect any such transaction, for a period from the date hereof through 180 days after the date of the Underwriting Agreement (the Lock-Up Period). The undersigned represents and warrants that the undersigned is not, and has not caused or directed any of its affiliates to be or become, currently a party to any agreement or arrangement that is designed to or which reasonably could be expected to lead to or result in any of the prohibited activities described in this paragraph during the Lock-Up Period.
Notwithstanding the foregoing, the undersigned may transfer Lock-Up Securities:
(a) |
as a bona fide gift or gifts, or for bona fide estate planning purposes or charitable contribution; |
(b) |
to any member of the undersigneds immediate family or to any trust for the direct or indirect benefit of the undersigned or the undersigneds immediate family, or if the undersigned is a trust, to a trustor, trustee or beneficiary of the trust or to the estate of a trustor, trustee or beneficiary of such trust; |
(c) |
upon death or by will, testamentary document or intestate succession; |
(d) |
in transactions consisting of shares of Common Stock acquired by the undersigned (A) in the Offering or (B) in open market transactions after the completion of the Offering; |
(e) |
if the undersigned is a corporation, business trust, association, limited liability company, partnership, limited liability partnership or other entity (individually, an Entity), (A) to any Entity which is directly or indirectly controlled by, a wholly-owned subsidiary of, or is under common control with, the undersigned, or (B) as part of a disposition, transfer or distribution by the undersigned to its limited or general partners, members, stockholders or other equityholders or to the estate of any such partners, members, stockholders, or other equityholders; |
(f) |
to the Company in connection with the vesting or settlement of restricted stock units or the net or cashless exercise of options, warrants or other rights to purchase shares of Common Stock for purposes of exercising such options, warrants or rights, including any transfer for the payment of tax withholdings or remittance payments due as a result of the vesting, settlement, or exercise of such restricted stock units, options, warrants or other rights, so long as any such net or cashless exercise is effected solely by the surrender of outstanding options or warrants (or the Common Stock issuable upon the exercise thereof) to the Company and the Companys cancellation of all or a portion thereof to pay the exercise price and/or withholding tax and remittance obligations, but for the avoidance of doubt, excluding all methods of exercise that would involve a sale other than to the Company of any shares of Common Stock relating to options or warrants, whether to cover the applicable exercise price and/or withholding tax obligations or otherwise; |
3
(g) |
to the Company pursuant to (A) any contractual arrangement in effect on the date of the Underwriting Agreement that provides for the repurchase of the undersigneds securities by the Company at the lower of cost or fair market value or (B) a right of first refusal that the Company has with respect to transfers of such securities, in each case upon termination of employment or service of the undersigned with the Company; |
(h) |
pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the Companys board of directors and made to all holders of the Companys capital stock involving a Change of Control (as defined below) of the Company, provided, that, in the event that such tender offer, merger, consolidation or other similar transaction is not completed, the Lock-Up Securities held by the undersigned shall remain subject to the provisions of this Letter Agreement; |
(i) |
in connection with the conversion or reclassification of the outstanding preferred stock, other classes of capital stock or debt of the Company into shares of Common Stock in connection with the consummation of the Offering, in each case, in accordance with the Companys certificate of incorporation or other instrument governing conversion, provided, that, any such shares of Common Stock received upon such conversion or reclassification shall remain subject to the provisions of this Letter Agreement; |
(j) |
by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement or any other court order; |
(k) |
in connection with a transfer not involving a change in beneficial ownership; or |
(l) |
to the Representatives pursuant to the Underwriting Agreement, |
provided, that, (i) in the case of (a), (b), (c), (e) and (k) above, such transfer (A) shall not involve a disposition for value and (B) no filing under Section 16 of the Exchange Act, or other public filing, report or announcement reporting a reduction in beneficial ownership of shares of Common Stock shall be required or shall be voluntarily made during the Lock-Up Period (other than any required Form 5 filing, which may be made), (ii) in the case of (a), (b), (c), (e), (j) and (k) above, it shall be a condition to the transfer or distribution that the donee, transferee or distributee, as the case may be, agrees in writing to be bound by the restrictions set forth herein; (iii) in the case of (f) above, no filing under Section 16 of the Exchange Act, or other public filing, report or announcement reporting a reduction in beneficial ownership of shares of Common Stock shall be required or shall be voluntarily made on or before the 60th day after the date of the Underwriting Agreement and, after such 60th day, any such filing shall clearly indicate that the filing relates to the circumstances described in (f) above, no shares were sold by the reporting person and the shares received are subject to the restrictions set forth herein until the expiration of the Lock-Up Period; and (iv) in the case of (g) and (j) above, no filing under Section 16 of the Exchange Act, or other public filing, report or announcement reporting a reduction in beneficial ownership of shares of Common Stock shall be voluntarily made during the Lock-Up Period and, if the undersigned is required to file a report under Section 16 of the Exchange Act during the Lock-Up Period, the undersigned shall include a
4
clear statement in such report to the effect that such transfer is to the Company in connection with the repurchase of shares of Common Stock, to the Company pursuant to a right of first refusal, or by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement or any other court order, as the case may be.
For purposes of this Letter Agreement: immediate family shall mean any relationship by blood, marriage, domestic partnership or adoption, not more remote than first cousin; and Change of Control shall mean the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related transactions, to a person or group of affiliated persons, of the Companys voting securities if, after such transfer, the Companys stockholders as of immediately prior to such transfer do not hold a majority of the outstanding voting securities of the Company (or the surviving entity).
If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing restrictions shall be equally applicable to any issuer-directed shares of Common Stock the undersigned may purchase in the Offering. If the undersigned is an officer or director of the Company, (i) the Representatives agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, the Representatives will notify the Company of the impending release or waiver, and (ii) the Company has agreed or will agree in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by the Representatives hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this Letter Agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.
For avoidance of doubt, nothing in this Letter Agreement prohibits the undersigned from (i) receiving shares of Common Stock from the Company in connection with (A) the exercise of options or the vesting and settlement of restricted stock units or other rights granted under a stock incentive plan or other equity award plan and (B) the exercise of warrants, provided, that, in each case, (x) any shares of Common Stock issued upon exercise of such option, warrant or other rights or the vesting and settlement of restricted stock units shall continue to be subject to the restrictions set forth herein until the expiration of the Lock-Up Period and (y) no filing under Section 16 of the Exchange Act, or other public filing, report or announcement reporting a reduction in beneficial ownership of shares of Common Stock shall be required or shall be voluntarily made on or before the 60th day after the date of the Underwriting Agreement and, after such 60th day, any such filing shall clearly indicate that the filing relates to the circumstances described in this clause (i), no shares were sold by the reporting person and the shares received are subject to the restrictions set forth herein until the expiration of the Lock-Up Period or (ii) entering into a written plan meeting the requirements of Rule 10b5-1 under the Exchange Act after the date
5
of this Letter Agreement relating to the transfer of Lock-Up Securities, provided, that the securities subject to such plan may not be transferred until after the expiration of the Lock-Up Period and no filing with the SEC or other public announcement shall be required or voluntarily made during the Lock-Up Period in connection therewith.
In the event that either of the Representatives withdraws from or declines to participate in the Offering, all references to the Representatives contained in this Letter Agreement shall be deemed to refer to the sole Representative that continues to participate in the Offering (the Sole Representative), and, in such event, any written consent, waiver or notice given or delivered in connection with this Letter Agreement by Sole Representative shall be deemed to be sufficient and effective for all purposes under this Letter Agreement.
The undersigned hereby consents to receipt of this Letter Agreement in electronic form and understands and agrees that this Letter Agreement may be signed electronically. In the event that any signature is delivered by facsimile transmission, electronic mail, or otherwise by electronic transmission evidencing an intent to sign this Letter Agreement, such facsimile transmission, electronic mail or other electronic transmission shall create a valid and binding obligation of the undersigned with the same force and effect as if such signature were an original. Execution and delivery of this Letter Agreement by facsimile transmission, electronic mail or other electronic transmission is legal, valid and binding for all purposes.
Notwithstanding anything to the contrary contained herein, this Letter Agreement will automatically terminate and the undersigned will be released from all of his, her or its obligations hereunder upon the earliest to occur, if any, of (i) the date that the Company, on the one hand, or the Representatives, on the other hand, advises in writing that it has determined not to proceed with the Offering prior to the execution of the Underwriting Agreement, (ii) the date the Company files an application with the SEC to withdraw the registration statement related to the Offering, (iii) the date of the termination of the Underwriting Agreement (other than the provisions thereof which survive termination) prior to payment for and delivery of the shares of Common Stock to be sold thereunder, or (iv) October 31, 2021, in the event that the Underwriting Agreement has not been executed by such date; provided, that, that the Company may, in its sole discretion, by written notice to you prior to October 31, 2021, extend such date for a period of up to three additional months.
[Signature Page Follows]
6
Yours very truly, |
||
By: |
||
Name: |
||
Title: |
Address: | ||
A-1
[Form of Press Release] | EXHIBIT B |
Impel NeuroPharma, Inc.
[insert date]
Impel NeuroPharma, Inc. (the Company) announced today that Cowen and Company, LLC, and Guggenheim Securities, LLC, the joint book-running managers in the Companys recent public sale of [] shares of common stock, are [waiving] [releasing] a lock-up restriction with respect to [] shares of the Companys common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on [insert date], 20__, and the shares may be sold on or after such date.
This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.
B-1
[Form of Waiver of Lock-up] |
ADDENDUM |
[insert letterhead of Cowen and Company, LLC]
Impel NeuroPharma, Inc.
Public Offering of Common Stock
[insert date], 20__
[name and address of officer or director requesting waiver]
Dear Mr./Ms. [insert name]:
This letter is being delivered to you in connection with the offering by [name of issuer] (the Company) of [] shares of common stock, $0.001 par value (the Common Stock), of the Company and the lock-up letter dated [insert date], 20__ (the Lock-up Letter), executed by you in connection with such offering, and your request for a [waiver] [release] dated [insert date], 20__, with respect to [] shares of Common Stock (the Shares).
Cowen and Company, LLC and Guggenheim Securities, LLC hereby agree to [waive] [release] the transfer restrictions set forth in the Lock-up Letter, but only with respect to the Shares, effective [insert date], 20__; provided, however, that such [waiver] [release] is conditioned on the Company announcing the impending [waiver] [release] by press release through a major news service at least two business days before effectiveness of such [waiver] [release]. This letter will serve as notice to the Company of the impending [waiver] [release].
Except as expressly [waived] [released] hereby, the Lock-up Letter shall remain in full force and effect.
Yours very truly, | ||
Cowen and Company, LLC | ||
By: | ||
Name: | ||
Title: | ||
Guggenheim Securities, LLC | ||
By: | ||
Name: | ||
Title: |
cc: Impel NeuroPharma, Inc. |
Exhibit 3.1
IMPEL NEUROPHARMA, INC.
RESTATED CERTIFICATE OF INCORPORATION
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Impel NeuroPharma, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the General Corporation Law), does hereby certify as follows.
1. The name of this corporation is Impel NeuroPharma, Inc. This corporation was originally incorporated pursuant to the General Corporation Law on July 24, 2008.
2. This Restated Certificate of Incorporation of the corporation attached hereto as Exhibit A, which is incorporated herein by this reference, and which restates, integrates and further amends the provisions of the Certificate of Incorporation of this corporation as previously amended or supplemented, has been duly adopted by the corporations Board of Directors and stockholders holding the requisite majorities of shares in accordance with Sections 242 and 245 of the General Corporation Law, with the approval of the corporations stockholders having been given by written consent without a meeting in accordance with Section 228 of the General Corporation Law.
3. This Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporations Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 3rd day of December, 2018.
By: |
/s/ Jon Congleton |
|
Jon Congleton, Chief Executive Officer |
Exhibit A
IMPEL NEUROPHARMA, INC.
RESTATED CERTIFICATE OF INCORPORATION
ARTICLE I: NAME.
The name of this corporation is Impel NeuroPharma, Inc. (the Corporation).
ARTICLE II: REGISTERED OFFICE.
The address of the registered office of the Corporation in the State of Delaware is 160 Greentree Drive, Suite 101, in the City of Dover, County of Kent, Delaware 19904. The name of its registered agent at such address is National Registered Agents, Inc.
ARTICLE III: PURPOSE.
The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.
ARTICLE IV: AUTHORIZED SHARES.
The total number of shares of all classes of stock which the Corporation shall have authority to issue is 446,602,138 consisting of (a) 242,403,649 shares of Common Stock, $0.001 par value per share (Common Stock), and (b) 204,198,489 shares of Preferred Stock, $0.001 par value per share (Preferred Stock). As of the effective date of this Restated Certificate of Incorporation (this Restated Certificate), 746,426 shares of the authorized Preferred Stock of the Corporation are hereby designated Series A-1 Preferred Stock, 9,869,218 shares of the authorized Preferred Stock of the Corporation are hereby designated Series A-2 Preferred Stock (together with the Series A-1 Preferred Stock, the Series A Preferred Stock), 3,968,775 shares of the authorized Preferred Stock of the Corporation are hereby designated Series B Preferred Stock, 43,278,699 shares of the authorized Preferred Stock of the Corporation are hereby designated Series C-1 Preferred Stock, 26,537,826 shares of the authorized Preferred Stock of the Corporation are hereby designated Series C-2 Preferred Stock, 24,605,790 shares of the authorized Preferred Stock of the Corporation are hereby designated Series C-3 Preferred Stock (together with the Series C-1 Preferred Stock and Series C-2 Preferred Stock, the Series C Preferred Stock), and 95,191,755 shares of the authorized Preferred Stock of the Corporation are hereby designated Series D Preferred Stock.
The following is a statement of the designations and the rights, powers and preferences, and the qualifications, limitations or restrictions thereof, in respect of each class of capital stock of the Corporation.
1
A. |
COMMON STOCK |
1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.
2. Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Restated Certificate) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law and without a separate class vote of the holders of the Common Stock.
B. |
PREFERRED STOCK |
The following rights, powers and preferences, and restrictions, qualifications and limitations, shall apply to the Preferred Stock. Unless otherwise indicated, references to Sections in this Part B of this Article IV refer to sections of this Part B.
1. Dividends.
1.1 Preferred Stock Dividend Preference.
(a) Subject to Section 1.1(b) below, the holders of each series of Preferred Stock shall be entitled to receive dividends at the rate of eight percent (8%) of the Original Issue Price (as defined below) applicable for such series of Preferred Stock, per share of such Preferred Stock (as adjusted for any stock dividends, combinations, recapitalizations or splits with respect to such shares) per annum, payable out of funds legally available therefor. Such dividends shall be payable when, as and if declared by the board of directors of the Corporation (the Board) acting in its sole discretion and in accordance with Section 1.1(b) below. The right to receive dividends shall not be cumulative.
(b) No dividend shall be paid or declared and set aside in any period with respect to the Series A Preferred Stock, Series B Preferred Stock or the Common Stock (other than dividends on shares of Common Stock payable in shares of Common Stock) unless and until dividends have been paid or declared and set aside for payment in such period with respect to the Series C Preferred Stock and Series D Preferred Stock, in an amount equal to the applicable dividend rate pursuant to Section 1.1(a). No dividend shall be paid or declared and set aside in any period with respect to the Series A Preferred Stock or the Common Stock (other than dividends on shares of Common Stock payable in shares of Common Stock) unless and until dividends have been paid or declared and set aside for payment in such period with respect to the Series B Preferred Stock, in an amount equal to the applicable dividend rate pursuant to Section 1.1(a). No dividend shall be paid or declared and set aside in any period with respect to
2
the Common Stock (other than dividends on shares of Common Stock payable in shares of Common Stock) unless and until dividends have been paid or declared and set aside for payment in such period with respect to the Series A Preferred Stock, in an amount equal to the applicable dividend rate pursuant to Section 1.1(a).
(c) The Original Issue Price shall mean (i) $0.4091 per share for the Series A-1 Preferred Stock (the Series A-1 Original Issue Price), (ii) $0.4996 per share for the Series A-2 Preferred Stock (the Series A-2 Original Issue Price), (iii) $1.1140001 per share for the Series B Preferred Stock (the Series B Original Issue Price), (iv) $0.52894518 per share for the Series C-1 Preferred Stock (the Series C-1 Original Issue Price), (v) $0.56523089 per share for the Series C-2 Preferred Stock (the Series C-2 Original Issue Price), (vi) $0.6096126 per share for the Series C-3 Preferred Stock (the Series C-3 Original Issue Price), and (vii) $0.709095 per share for the Series D Preferred Stock (the Series D Original Issue Price) subject in each case to appropriate adjustment in the event of any stock splits and combinations of shares and for dividends paid on such series of Preferred Stock in shares of such stock.
1.2 Participation. If, after dividends in the full preferential amount specified in Section 1.1 for the Preferred Stock have been paid or set apart for payment in any calendar year of the Corporation, the Board shall declare additional dividends out of funds legally available therefor in that calendar year, then such additional dividends shall be declared pro rata on the Common Stock and the Preferred Stock on a pari passu basis according to the number of shares of Common Stock held by such holders. For this purpose each holder of shares of Preferred Stock is to be treated as holding the greatest whole number of shares of Common Stock then issuable upon conversion of all shares of Preferred Stock held by such holder pursuant to Sections 4 and 5.
1.3 Non-Cash Dividends. Whenever a dividend provided for in this Section 1 shall be payable in property other than cash, the value of such dividend shall be deemed to be the fair market value of such property as determined in good faith by the Board.
2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.
2.1 Preferential Payments to Holders of Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event (as defined below), the funds and assets that may be legally distributed to the Corporations stockholders (the Available Funds and Assets) shall be distributed in the following manner:
2.1.1 Prior and in preference to any payment or distribution (or any setting apart of any payment or distribution) of any Available Funds and Assets on any shares of Series B Preferred Stock, Series A Preferred Stock or Common Stock, (i) the holders of each share of Series C-1 Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, an amount per share equal to the Series C-1 Original Issue Price plus all declared but unpaid dividends on such Series C-1 Preferred Stock, (ii) the holders of each share of Series C-2 Preferred Stock then outstanding shall be entitled to be paid, out of the
3
Available Funds and Assets, an amount per share equal to the Series C-2 Original Issue Price plus all declared but unpaid dividends on such Series C-2 Preferred Stock, (iii) the holders of each share of Series C-3 Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, an amount per share equal to the Series C-3 Original Issue Price plus all declared but unpaid dividends on such Series C-3 Preferred Stock, and (iv) the holders of each share of Series D Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, an amount per share equal to the Series D Original Issue Price plus all declared but unpaid dividends on such Series D Preferred Stock. If upon any liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event, the Available Funds and Assets shall be insufficient to permit the payment to holders of the Series C Preferred Stock and Series D Preferred Stock of their full preferential amounts described in this subsection, then the entire Available Funds and Assets shall be distributed among the holders of the then outstanding Series C Preferred Stock and Series D Preferred Stock pro rata in proportion to the full preferential amounts that each holder is otherwise entitled to receive under this Section 2.1.1.
2.1.2 If there are any Available Funds and Assets remaining after the payment or distribution (or the setting aside for payment or distribution) to the holders of the Series C Preferred Stock and Series D Preferred Stock of their full preferential amounts described above in Section 2.1.1, the holders of each share of Series B Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, and prior and in preference to any payment or distribution (or any setting apart of any payment or distribution) of any Available Funds and Assets on any shares of Series A Preferred Stock or Common Stock, an amount per share equal to the Series B Original Issue Price plus all declared but unpaid dividends on such Series B Preferred Stock. If upon any liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event, the Available Funds and Assets remaining after the payment or distribution (or the setting aside for payment or distribution) to the holders of the Series C Preferred Stock and Series D Preferred Stock of their full preferential amounts described above in Section 2.1.1 shall be insufficient to permit the payment to holders of the Series B Preferred Stock of their full preferential amounts described in this subsection, then such Available Funds and Assets shall be distributed among the holders of the then outstanding Series B Preferred Stock pro rata in proportion to the full preferential amounts that each holder is otherwise entitled to receive under this Section 2.1.2.
2.1.3 If there are any Available Funds and Assets remaining after the payment or distribution (or the setting aside for payment or distribution) to the holders of the Series C Preferred Stock and Series D Preferred Stock of their full preferential amounts described above in Section 2.1.1 and the Series B Preferred Stock of their full preferential amounts described above in Section 2.1.2, prior and in preference to any payment or distribution (or any setting apart of any payment or distribution) of any Available Funds and Assets on any shares of Common Stock, (i) the holders of each share of Series A-1 Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, an amount per share equal to the Series A-1 Original Issue Price plus all declared but unpaid dividends on such Series A-1 Preferred Stock and (ii) the holders of each share of Series A-2 Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, an amount per share equal to the Series A-2 Original Issue Price plus all declared but unpaid dividends on such Series A-2 Preferred Stock. If upon any liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event, the Available Funds and Assets remaining after
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the payment or distribution (or the setting aside for payment or distribution) to the holders of the Series C Preferred Stock, Series D Preferred Stock and Series B Preferred Stock of their full preferential amounts described above in Sections 2.1.1 and 2.1.2 shall be insufficient to permit the payment to holders of the Series A Preferred Stock of their full preferential amounts described in this subsection, then such Available Funds and Assets shall be distributed among the holders of the then outstanding Series A Preferred Stock pro rata in proportion to the full preferential amounts that each holder is otherwise entitled to receive under this Section 2.1.3.
2.2 Participating Distribution of Remaining Assets. In the event of any voluntary or involuntary liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock as provided in Section 2.1, the Available Funds and Assets remaining after the payment or distribution (or the setting aside for payment or distribution) to the holders of the Preferred Stock shall be distributed among the holders of the shares of Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all shares of Preferred Stock as if they had been converted to Common Stock pursuant to the terms of this Restated Certificate immediately prior to such dissolution, liquidation, winding up or Deemed Liquidation Event of the Corporation; provided, however,
2.2.1 that if the aggregate amount the holders of Series D Preferred Stock are entitled to receive under Sections 2.1 and 2.2 shall exceed three times the Series D Original Issue Price (the Series D Maximum Participation Amount), each holder of Series D Preferred Stock shall only be entitled to receive upon such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation the greater of (a) the Series D Maximum Participation Amount or (b) the amount such holder would have received if all shares of Series D Preferred Stock had been converted into Common Stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation;
2.2.2 that if the aggregate amount the holders of Series C-1 Preferred Stock are entitled to receive under Sections 2.1 and 2.2 shall exceed three times the Series C-1 Original Issue Price (the Series C-1 Maximum Participation Amount), each holder of Series C-1 Preferred Stock shall only be entitled to receive upon such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation the greater of (a) the Series C-1 Maximum Participation Amount or (b) the amount such holder would have received if all shares of Series C-1 Preferred Stock had been converted into Common Stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation;
2.2.3 that if the aggregate amount the holders of Series C-2 Preferred Stock are entitled to receive under Sections 2.1 and 2.2 shall exceed three times the Series C-2 Original Issue Price (the Series C-2 Maximum Participation Amount), each holder of Series C-2 Preferred Stock shall only be entitled to receive upon such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation the greater of (a) the Series C-2 Maximum Participation Amount or (b) the amount such holder would have received if all shares of Series C-2 Preferred Stock had been converted into Common Stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation;
2.2.4 that if the aggregate amount the holders of Series C-3 Preferred Stock are entitled to receive under Sections 2.1 and 2.2 shall exceed three times the Series C-3
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Original Issue Price (the Series C-3 Maximum Participation Amount), each holder of Series C-3 Preferred Stock shall only be entitled to receive upon such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation the greater of (a) the Series C-3 Maximum Participation Amount or (b) the amount such holder would have received if all shares of Series C-3 Preferred Stock had been converted into Common Stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation;
2.2.5 that if the aggregate amount the holders of Series A-1 Preferred Stock are entitled to receive under Sections 2.1 and 2.2 shall exceed two times the Series A-1 Original Issue Price (the Series A-1 Maximum Participation Amount), each holder of Series A-1 Preferred Stock shall only be entitled to receive upon such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation the greater of (a) the Series A-1 Maximum Participation Amount or (b) the amount such holder would have received if all shares of Series A-1 Preferred Stock had been converted into Common Stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation;
2.2.6 that if the aggregate amount the holders of Series A-2 Preferred Stock are entitled to receive under Sections 2.1 and 2.2 shall exceed two times the Series A-2 Original Issue Price (the Series A-2 Maximum Participation Amount), each holder of Series A-2 Preferred Stock shall only be entitled to receive upon such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation the greater of (a) the Series A-2 Maximum Participation Amount or (b) the amount such holder would have received if all shares of Series A-2 Preferred Stock had been converted into Common Stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation; and
2.2.7 that if the aggregate amount the holders of Series B Preferred Stock are entitled to receive under Sections 2.1 and 2.2 shall exceed two times the Series B Original Issue Price (the Series B Maximum Participation Amount), each holder of Series B Preferred Stock shall only be entitled to receive upon such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation the greater of (a) the Series B Maximum Participation Amount or (b) the amount such holder would have received if all shares of Series B Preferred Stock had been converted into Common Stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation.
2.3 Deemed Liquidation Events.
2.3.1 Definition. Each of the following events shall be considered a Deemed Liquidation Event unless (i) solely with respect to the Series A Preferred Stock, the Series B Preferred Stock, and the Series C Preferred Stock, the holders of a majority of the then outstanding shares of Series B Preferred Stock and Series C Preferred Stock, consenting or voting together as a single class on an as-converted basis elect otherwise by written notice sent to the Corporation at least five days prior to the effective date of any such event and (ii) solely with respect to the Series D Preferred Stock, the holders of not less than a majority of the then outstanding shares of Series D Preferred Stock elect otherwise by written notice sent to the Corporation at least five days prior to the effective date of any such event:
(a) a merger or consolidation (each a Combination) in which (i) the Corporation is a constituent party or (ii) a subsidiary of the Corporation is a
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constituent party and the Corporation issues shares of its capital stock pursuant to such Combination (other than any such securities that are held by an Acquiring Stockholder, as defined below), except (A) any such Combination involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such Combination continue to represent, or are converted into or exchanged for equity securities that represent, immediately following such Combination, a majority, by voting power, of the equity securities of (1) the surviving or resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such Combination, the parent of such surviving or resulting party, including securities of such surviving or resulting party (or its parent) that are held by the Acquiring Stockholder, (B) a Combination effected exclusively to change the domicile of the Corporation, or (C) an equity financing transaction of the Corporation pursuant to which the Corporation sells equity securities for the primary purpose of raising working capital; provided that, for the purpose of this Section 2.3.1, all shares of Common Stock issuable upon exercise of Options (as defined in Section 5 below) outstanding immediately prior to such Combination or upon conversion of Convertible Securities (as defined in Section 5 below) outstanding immediately prior to such Combination shall be deemed to be outstanding immediately prior to such Combination and, if applicable, deemed to be converted or exchanged in such Combination on the same terms as the actual outstanding shares of Common Stock are converted or exchanged;
(b) the issuance, sale, exchange or transfer of shares of capital stock (by the Corporation or by holders of such capital stock) that represents, immediately following such issuance, sale, exchange or transfer, a majority, by voting power, of the capital stock of the Corporation, other than (i) any such issuance, sale, exchange or transfer of the Corporations capital stock effected exclusively to change the domicile of the Corporation, or (ii) an equity financing transaction of the Corporation pursuant to which the Corporation sells equity securities for the primary purpose of raising working capital; or
(c) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary or subsidiaries of the Corporation, of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole (or, if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by one or more subsidiaries, the sale or disposition (whether by consolidation, merger, conversion or otherwise) of such subsidiaries of the Corporation), except where such sale, lease, transfer, exclusive license, or other disposition is made to the Corporation or one or more wholly owned subsidiaries of the Corporation (an Asset Disposition).
For purposes of this Section 2.3.1, an Acquiring Stockholder means a stockholder or stockholders of the Corporation that (i) merges or combines with the Corporation in such Combination or (ii) owns or controls a majority of another corporation that merges or combines with the Corporation in such Combination.
2.3.2 Allocation of Escrow. In the event of a Deemed Liquidation Event, if any portion of the consideration payable to the stockholders of the Corporation is
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payable only upon satisfaction of contingencies (the Additional Consideration), the definitive transaction agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the Initial Consideration) shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Section 2.3.2, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.
2.3.3 Amount Deemed Paid or Distributed. The funds and assets deemed paid or distributed to the holders of capital stock of the Corporation upon any such Combination or Asset Disposition shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. If the amount deemed paid or distributed under this Section 2.3.3 is made in property other than in cash, the value of such distribution shall be the fair market value of such property, as determined in good faith by the Board; provided, however, that the following shall apply. For securities not subject to investment letters or other similar restrictions on free marketability:
(i) if traded on a securities exchange or the NASDAQ Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or market over the 30-day period ending three days prior to the closing of such transaction;
(ii) if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three days prior to the closing of such transaction; or
(iii) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board.
The method of valuation of securities subject to investment letters or other similar restrictions on free marketability (other than restrictions arising solely by virtue of a stockholders status as an affiliate or former affiliate) shall take into account an appropriate discount (as determined in good faith by the Board) from the market value as determined pursuant to clauses (i) or (ii) above so as to reflect the approximate fair market value thereof.
3. Voting.
3.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Fractional votes shall
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not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). Except as provided by law or by the other provisions of this Restated Certificate, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted basis, shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders meeting in accordance with the Bylaws of the Corporation.
3.2 Election of Directors.
3.2.1 Election. The Board shall be comprised of not less than nine (9) directors. For so long as at least 4,400,000 shares of Series A Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the holders of record of the shares of Series A Preferred Stock, exclusively and voting together as a separate class on an as-converted to Common Stock basis, shall be entitled to elect one (1) director of the Corporation. For so long as at least 10,000,000 shares of Series C Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the holders of record of the shares of Series C Preferred Stock, exclusively and as a separate class, shall be entitled to elect three (3) directors of the Corporation (the Series C Preferred Directors). For so long as at least 10,000,000 shares of Series D Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the holders of record of the shares of Series D Preferred Stock, exclusively and as a separate class, shall be entitled to elect two (2) directors of the Corporation (Series D Preferred Directors and, together with the Series C Preferred Directors, the Preferred Directors). The holders of record of the shares of Common Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation. The holders of record of the shares of Common Stock and of every other class or series of voting stock (including the Preferred Stock), voting together as a single class on an as-converted basis, shall be entitled to elect the remaining number of directors of the Corporation. For administrative convenience, the initial Series D Preferred Directors may also be appointed by the Board without a separate action by the holders of a majority of Series D Preferred Stock.
3.2.2 Vacancies Not Caused by Removal. If there is any vacancy, not due to the removal of a director, in the office of any director elected or to be elected by the holders of the outstanding shares of a specified class, classes or series of stock given the right to elect such director pursuant to Section 3.2.1 above (the Specified Stock), such vacancy may be filled (either contingently or otherwise) by either: (i) the remaining director or directors (if any) in office that were so elected by the holders of such Specified Stock by the affirmative vote of a majority of such directors or by the sole remaining director elected by the holders of such Specified Stock if there be but one or (ii) the required vote of holders of the shares of such Specified Stock specified in this Section 3.2 that are entitled to elect such director.
3.2.3 Vacancies Caused by Removal. Any director elected as provided in the preceding sentences may be removed without cause by, and any vacancy in the office of any such removed director may be filled by, and only by, the affirmative vote of the holders of the shares of the Specified Stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders.
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3.2.4 Procedure. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the Specified Stock entitled to elect such director shall constitute a quorum for the purpose of electing such director and the candidate or candidates to be elected by such Specified Stock shall be those who receive the highest number of affirmative votes (on an as-converted basis) of the outstanding shares of such Specified Stock. In the case of an action taken by written consent without a meeting, the candidate or candidates to be elected by such Specified Stock shall be those who are elected by the written consent of the holders of a majority of such Specified Stock.
3.3 Preferred Stock Protective Provisions. For so long as at least 10,000,000 shares of Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock in the aggregate remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent, or affirmative vote at a meeting and evidenced in writing, of the holders of a majority of the then outstanding shares of Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, consenting or voting together as a single class on an as-converted basis (the Requisite Holders) and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
(a) increase the authorized number of shares of Common Stock or Preferred Stock;
(b) amend, alter, restate, waive or repeal any provision of this Restated Certificate or the bylaws of the Corporation in a manner that adversely affects the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series C Preferred Stock or Series D Preferred Stock;
(c) authorize, create (by reclassification or otherwise) or issue any new class or series of capital stock having rights, powers or preferences set forth in the Restated Certificate, as then in effect, that are senior to or on a parity with the Series C Preferred Stock or Series D Preferred Stock, or authorize or create (by reclassification or otherwise) any security convertible into or exercisable for any such new class or series of capital stock;
(d) redeem or repurchase any shares of Common Stock or Preferred Stock, other than (1) pursuant to employee or consultant agreements giving the Corporation the right to repurchase shares at no greater than the original cost thereof upon the termination of services, (2) redemptions of shares as expressly authorized in Section 6 of this Restated Certificate, (3) an exercise of a right of first refusal in favor of the Corporation pursuant to an agreement with any person, which exercise has been approved by the Board, and (4) redemptions of shares of Series B Preferred Stock pursuant to a Compliance Put (as such term is defined in that certain Series B Preferred Stock Purchase Agreement dated September 3, 2015, as amended);
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(e) declare or pay any dividend or otherwise make a distribution to holders of Preferred Stock or Common Stock (other than dividends payable solely in shares of Common Stock);
(f) increase or decrease the authorized number of directors constituting the Board;
(g) other than equipment leases or bank loans or lines of credit, authorize or issue any debt security or incur any indebtedness for borrowed money if the aggregate indebtedness of the Corporation for borrowed money (other than intercompany indebtedness) following such issuance would exceed $1,000,000 in the aggregate;
(h) authorize or make any loan or guarantee any obligation of any other person in excess of $1,000,000;
(i) enter into any transaction with any stockholder, director, or officer of the Corporation or any associate (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended) of such person, other than employment agreements, equity incentive transactions, the transactions contemplated by the Purchase Agreement (as defined below), and transactions approved by a majority of the disinterested members of the Board;
(j) change the principal business activities of the Corporation from the development of drug-device combination pharmaceutical products;
(k) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent, agree or commit to any of the foregoing without conditioning such consent, agreement or commitment upon obtaining the approval required by this Section 3.3; or
(l) amend this Section 3.3.
3.4 Series B Stock Protective Provisions. For so long as at least at least 1,014,885 shares of Series B Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent, or affirmative vote at a meeting and evidenced in writing, of the holders of a majority of the then outstanding shares of Series B Preferred Stock and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
(a) increase or decrease the authorized number of shares of Series B Preferred Stock; or
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(b) amend, alter, restate, waive or repeal any provision of this Restated Certificate or the bylaws of the Corporation in a manner that adversely and disproportionately affects the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series B Preferred Stock, in each case different from the other series of Preferred Stock.
3.5 Series C Stock Protective Provisions. For so long as at least at least 10,000,000 shares of Series C Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent, or affirmative vote at a meeting and evidenced in writing, of the holders of a majority of the then outstanding shares of Series C-1 Preferred Stock and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
(a) increase or decrease the authorized number of shares of Series C Preferred Stock; or
(b) amend, alter, restate, waive or repeal any provision of this Restated Certificate or the bylaws of the Corporation in a manner that adversely and disproportionately affects the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series C Preferred Stock in each case different from the other series of Preferred Stock.
3.6 Series D Stock Protective Provisions. For so long as at least at least 10,000,000 shares of Series D Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent, or affirmative vote at a meeting and evidenced in writing, of the holders of a majority of the then outstanding shares of Series D Preferred Stock and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
(a) adversely affect the rights, preference or privileges of the holders of the Series D Preferred Stock in a manner different than the other classes of Preferred Stock;
(b) increase or decrease the authorized number of shares of Series D Preferred Stock;
(c) amend, alter, restate, waive or repeal any provision of this Restated Certificate or the bylaws of the Corporation in a manner that adversely and disproportionately affects the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series D Preferred Stock in each case different from the other series of Preferred Stock;
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(d) effect a Deemed Liquidation Event in which the holders of Series D Preferred Stock receive per share proceeds (consisting of cash and/or freely tradable securities) in connection with such Deemed Liquidation Event less than two times the Series D Original Issue Price or consent, agree or commit to such Deemed Liquidation Event; or
(e) authorize or issue any debt security or incur any indebtedness for borrowed money if the aggregate indebtedness of the Corporation for borrowed money (other than intercompany indebtedness) following such issuance would exceed $25,000,000 in the aggregate.
4. Conversion Rights. The holders of the Preferred Stock shall have conversion rights as follows (the Conversion Rights):
4.1 Right to Convert.
4.1.1 Conversion Ratio. Each share of a series of Preferred Stock shall be convertible, at the option of the holder thereof, at any time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price for such series of Preferred Stock by the Conversion Price (as defined below) for such series of Preferred Stock in effect at the time of conversion. The Conversion Price for the Series A-1 Preferred Stock shall initially mean the Series A-1 Original Issue Price, the Conversion Price for the Series A-2 Preferred Stock shall initially mean the Series A-2 Original Issue Price, the Conversion Price for the Series C-1 Preferred Stock shall initially mean the Series C-1 Original Issue Price, the Conversion Price for the Series C-2 Preferred Stock shall initially mean the Series C-2 Original Issue Price, the Conversion Price for the Series C-3 Preferred Stock shall initially mean the Series C-3 Original Issue Price, and the Conversion Price for the Series D Preferred Stock shall initially mean the Series D Original Issue Price. The Conversion Price for the Series B Preferred Stock shall initially mean $0.52894518. Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided in Section 5.
4.1.2 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that any such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent (a Contingency Event). Such notice shall state such holders name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the
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registered holder or such holders attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice (or, if later, the date on which all Contingency Events have occurred) shall be the time of conversion (the Conversion Time), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such time. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of Preferred Stock, or to such holders nominee(s), a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (b) pay in cash such amount as provided in Section 5.7.3 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (c) pay all declared but unpaid dividends on the shares of Preferred Stock converted.
4.1.3 Effect of Voluntary Conversion. All shares of Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 5.7.3 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued.
4.2 Mandatory Conversion.
4.2.1 Automatic Conversion. Upon (a) the closing of the Corporations first sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the Securities Act), at a per share offering price of at least $1.0636 (as adjusted for any stock dividends, combinations, recapitalizations or splits with respect to such shares), resulting in at least $50,000,000 of net proceeds to the Corporation (a Qualified Public Offering), or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the Requisite Holders (the time of such closing, the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the Mandatory Conversion Time), (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the applicable ratio described in Section 4.1.1 as the same may be adjusted from time to time in accordance with Section 5 and (ii) such shares may not be reissued by the Corporation. Notwithstanding the foregoing, (A) if the conversion is in connection with a Deemed Liquidation Event and the holders of Series B Preferred Stock would receive less in consideration for the shares of Common Stock issuable upon conversion of the Series B Preferred Stock than they would have received for their Series B Preferred Stock, the outstanding shares of Series B Preferred Stock shall not automatically be converted into shares of Common Stock pursuant to clause (b) of this Section 4.2.1 without the approval of the holders of a majority of the outstanding shares of the Series B Preferred Stock at the time of such vote or consent, (B) if the conversion is in connection with a Deemed Liquidation Event and the holders of Series C Preferred Stock would receive less in consideration for the shares of Common Stock
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issuable upon conversion of the Series C Preferred Stock than they would have received for their Series C Preferred Stock, the outstanding shares of Series C Preferred Stock shall not automatically be converted into shares of Common Stock pursuant to clause (b) of this Section 4.2.1 without the approval of the holders of a majority of the outstanding shares of the Series C Preferred Stock at the time of such vote or consent, and (C) the outstanding shares of Series D Preferred Stock shall not automatically be converted into shares of Common Stock pursuant to clause (b) of this Section 4.2.1 without the approval of the holders of a majority of the outstanding shares of the Series D Preferred Stock.
4.2.2 Mandatory Conversion Procedural Requirements.
(a) All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to Sections 4.2.1 and 10. Unless otherwise provided in this Restated Certificate, such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock shall surrender such holders certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section 4.2.
(b) If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or by such holders attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to this Section 4.2, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section 4.2.2(b). As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall issue and deliver to such holder, or to such holders nominee(s), a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 5.7.3 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock (and the applicable series thereof) accordingly.
4.3 Termination of Conversion Rights. In the event of a notice of redemption is given with respect to any shares of Series B Preferred Stock, Series C Preferred Stock, and
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Series D Preferred Stock pursuant to Section 6, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. Subject to Section 4.1.2 in the case of a Contingency Event, in the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the third day preceding the date fixed for the first payment of any funds and assets distributable on such event to the holders of Preferred Stock.
5. Adjustments to Conversion Price.
5.1 Adjustments for Diluting Issuances.
5.1.1 Special Definitions. For purposes of this Article IV, the following definitions shall apply:
(a) Option shall mean any right, option or warrant to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities from the Corporation.
(b) Original Issue Date for a series of Preferred Stock shall mean the date on which the first share of such series of Preferred Stock was issued.
(c) Convertible Securities shall mean any evidences of indebtedness, shares or other securities issued by the Corporation that are directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.
(d) Additional Shares of Common Stock with respect to a series of Preferred Stock shall mean all shares of Common Stock issued (or, pursuant to Section 5.1.2 below, deemed to be issued) by the Corporation after the Original Issue Date for the Series D Preferred Stock, other than the following shares of Common Stock and shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (collectively as to all such shares and shares deemed issued, Exempted Securities):
(i) shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on such series of Preferred Stock;
(ii) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on or subdivision of shares of Common Stock that is covered by Section 5.2, 5.3, 5.4, 5.5 or 5.6;
(iii) shares of Common Stock or Options to acquire shares of Common Stock, including but not limited to stock appreciation rights payable in shares of Common Stock or in Options or Convertible Securities, issued to service providers pursuant to a plan, agreement or arrangement approved by the Board, including a majority of the Preferred Directors, which such majority shall include at least one of the Series D Preferred Directors;
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(iv) shares of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option or Convertible Security;
(v) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions pursuant to a debt financing, commercial credit arrangement, equipment leasing or similar transaction approved by the Board, including a majority of the Preferred Directors, which such majority shall include at least one of the Series D Preferred Directors;
(vi) shares of Common Stock, Options or Convertible Securities issued pursuant to a bona fide acquisition of another entity by the Corporation by merger or consolidation with, purchase of substantially all of the assets of, or purchase of more than fifty percent of the outstanding equity securities of, the other entity, or issued pursuant to a bona fide joint venture agreement; provided, that such issuances are approved by the Board, including a majority of the Preferred Directors, which such majority shall include at least one of the Series D Preferred Directors;
(vii) shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board, including a majority of the Preferred Directors, which such majority shall include at least one of the Series D Preferred Directors;
(viii) shares of Common Stock, Options or Convertible Securities issued as a result of a decrease in the Conversion Price of any series of Preferred Stock resulting from the operation of Section 5.1.3;
(ix) shares of Common Stock issued in an offering to the public pursuant to a registration statement filed under the Securities Act with, and declared effective by, the Securities and Exchange Commission, in connection with which all outstanding shares of Preferred Stock are converted to Common Stock;
(x) with respect to the Conversion Price of the Series C Preferred Stock only, the issuance or deemed issuance of Common Stock if the Corporation receives written notice from the holders of at least 60% of the then outstanding shares of the Series C-1 Preferred Stock, Series C-2 Preferred Stock, or Series C-3 Preferred Stock, as applicable, on an as-converted basis agreeing that no adjustment shall be made to the Conversion Price of the Series C-1 Preferred Stock, Series C-2 Preferred Stock, or Series C-3 Preferred Stock, as applicable as a result of the issuance or deemed issuance;
(xi) with respect to the Conversion Price of the Series D Preferred Stock only, the issuance or deemed issuance of Common Stock if the
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Corporation receives written notice from the holders of at least a majority of the then outstanding shares of the Series D Preferred Stock agreeing that no adjustment shall be made to the Conversion Price of the Series D Preferred Stock as a result of the issuance or deemed issuance;
(xii) with respect to the Conversion Price of the Series B Preferred Stock only, the issuance or deemed issuance of Common Stock if the Corporation receives written notice from the holders of at least 66-2/3% of the then outstanding shares of Series B Preferred Stock on an as-converted basis agreeing that no adjustment shall be made to the Conversion Price of the Series B Preferred Stock as a result of the issuance or deemed issuance;
(xiii) with respect to the Conversion Price of the Series A Preferred Stock only, the issuance or deemed issuance of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Series A Preferred Stock on an as-converted basis agreeing that no adjustment shall be made to the applicable Conversion Price of the Series A Preferred Stock as a result of the issuance or deemed issuance; or
(xiv) shares of Series D Preferred Stock issued pursuant to that certain Series D Preferred Stock Purchase Agreement by and between the Corporation and the Purchasers identified therein, dated as of or about December 3, 2018 (the Purchase Agreement).
5.1.2 Deemed Issue of Additional Shares of Common Stock.
(a) If the Corporation at any time or from time to time after the date upon which this Restated Certificate is accepted for filing by the Secretary of State of the State of Delaware (the Filing Date) shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability (including the passage of time) but without regard to any provision contained therein for a subsequent adjustment of such number including by way of anti-dilution adjustment) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.
(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.3, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of
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any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issuance of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price of such series of Preferred Stock as would have obtained had such revised terms been in effect upon the original date of issue of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Section 5.1.2(b) shall have the effect of increasing the Conversion Price of a series of Preferred Stock to an amount which exceeds the lower of (1) the Conversion Price for such series of Preferred Stock in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (2) the Conversion Price for such series of Preferred Stock that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.
(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.3 (either because the consideration per share (determined pursuant to Section 5.1.4) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price of such series of Preferred Stock then in effect, or because such Option or Convertible Security was issued before the Original Issue Date of the Series D of Preferred Stock), are revised after such Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 5.1.2(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.3, the Conversion Price of such series of Preferred Stock shall be readjusted to such Conversion Price of such series of Preferred Stock as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price of a series of Preferred
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Stock provided for in this Section 5.1.2 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in Sections 5.1.2(b) and 5.1.2(c)). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to such Conversion Price that would result under the terms of this Section 5.1.2 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
5.1.3 Issuance of Additional Shares of Common Stock.
General Adjustments. In the event the Corporation shall at any time after the Original Issue Date of the Series D Preferred Stock issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 5.1.2, but excluding any Additional Shares of Common Stock issued pursuant to Section 5.1.3(b)), without consideration or for a consideration per share less than the Conversion Price for such series of Preferred Stock in effect immediately prior to such issue (a Triggering Issuance), then such Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-thousandth of a cent) determined in accordance with the following formula:
CP2 = CP1 × (A + B) ÷ (A + C).
For purposes of the foregoing formula, the following definitions shall apply:
CP2 shall mean the applicable Conversion Price in effect immediately after such issue or deemed issue of Additional Shares of Common Stock
CP1 shall mean the applicable Conversion Price in effect immediately prior to such issue or deemed issue of Additional Shares of Common Stock;
A shall mean the number of shares of Common Stock outstanding immediately prior to such issue or deemed issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);
B shall mean the number of shares of Common Stock that would have been issued or deemed issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and
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C shall mean the number of such Additional Shares of Common Stock actually issued or deemed issued in such transaction.
5.1.4 Determination of Consideration. For purposes of this Section 5.1, the consideration received by the Corporation for the issue or deemed issue of any Additional Shares of Common Stock shall be computed as follows:
(a) Cash and Property: Such consideration shall:
(i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;
(ii) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and
(iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board.
(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 5.1.2, relating to Options and Convertible Securities, shall be determined by dividing
(i) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.
5.1.5 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.2 and such issuance dates occur
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within a period of no more than 120 days after the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period that are a part of such transaction or series of related transaction).
5.2 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date for the Series D of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price for each series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date for the Series D Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price for each series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this section shall become effective at the close of business on the date the subdivision or combination becomes effective.
5.3 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date for the Series D Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price for any series of Preferred Stock in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying such Conversion Price then in effect by a fraction:
(a) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and
(b) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing, (i) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, such Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter such Conversion Price shall be adjusted pursuant to this section as of the time of actual payment of such dividends or distributions; and (ii) no such adjustment shall be made if the holders of such series of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.
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5.4 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date for the Series D Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock), then and in each such event the holders of any series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities in an amount equal to the amount of such securities as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.
5.5 Adjustment for Reclassification, Exchange and Substitution. If, at any time or from time to time after the Original Issue Date for the Series D Preferred Stock, the Common Stock issuable upon the conversion of any series of Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Corporation, whether by recapitalization, reclassification or otherwise (other than by a stock split or combination, dividend, distribution, merger or consolidation covered by Sections 5.2, 5.3, 5.4 or 5.6 or by Section 2.3 regarding a Deemed Liquidation Event), then in any such event each holder of such series of Preferred Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the number of shares of Common Stock into which such shares of Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change.
5.6 Adjustment for Merger or Consolidation. Subject to the provisions of Section 2.3, if there shall occur any consolidation or merger involving the Corporation in which the Common Stock (but not a series of Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 5.1, 5.3, 5.4 or 5.5), then, following any such consolidation or merger, provision shall be made that each share of such series of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of such series of Preferred Stock immediately prior to such consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in Section 4 and this Section 5 with respect to the rights and interests thereafter of the holders of such series of Preferred Stock, to the end that the provisions set forth in Section 4 and this Section 5 shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of such series of Preferred Stock.
5.7 General Conversion Provisions.
5.7.1 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of a series of Preferred Stock pursuant to this
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Section 5, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 15 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which such series of Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of any series of Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of Preferred Stock then in effect and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such series of Preferred Stock.
5.7.2 Reservation of Shares. The Corporation shall at all times while any share of Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Restated Certificate. Before taking any action that would cause an adjustment reducing the Conversion Price of a series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of such series of Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.
5.7.3 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair value of a share of Common Stock as determined in good faith by the Board. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
5.7.4 No Further Adjustment after Conversion. Upon any conversion of shares of Preferred Stock into Common Stock, no adjustment to the Conversion Price of the applicable series of Preferred Stock shall be made with respect to the converted shares for any declared but unpaid dividends on such series of Preferred Stock or on the Common Stock delivered upon conversion.
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6. Redemption.
6.1 General. Unless prohibited by Delaware law governing distributions to stockholders, (i) shares of Series B Preferred Stock shall be redeemed by the Corporation at a price per share equal to the Series B Original Issue Price, plus all declared but unpaid dividends thereon as of the date of the Companys receipt of the Redemption Request (the Series B Redemption Price), shares of Series C-1 Preferred Stock shall be redeemed by the Corporation at a price per share equal to the Series C-1 Original Issue Price, plus all declared but unpaid dividends thereon as of the date of the Companys receipt of the Redemption Request (the Series C-1 Redemption Price), shares of Series C-2 Preferred Stock shall be redeemed by the Corporation at a price per share equal to the Series C-2 Original Issue Price, plus all declared but unpaid dividends thereon as of the date of the Companys receipt of the Redemption Request (the Series C-2 Redemption Price), and shares of Series C-3 Preferred Stock shall be redeemed by the Corporation at a price per share equal to the Series C-3 Original Issue Price, plus all declared but unpaid dividends thereon as of the date of the Companys receipt of the Redemption Request (the Series C-3 Redemption Price) in three (3) annual installments commencing not more than sixty (60) days after receipt by the Corporation at any time on or after December 3, 2023 (but in no event prior to the expiration of the Series D Notice Period (as defined below)), from the holders of a majority of the then outstanding shares of Series B Preferred Stock and Series C Preferred Stock, voting together as a single class on an as-converted basis, of written notice requesting redemption of all shares of Series B Preferred Stock and Series C Preferred Stock (the Redemption Request) and (ii) shares of Series D Preferred Stock shall be redeemed by the Corporation at a price per share equal to the Series D Original Issue Price, plus all declared but unpaid dividends thereon as of the date of the Companys receipt of the Series D Redemption Request (the Series D Redemption Price, together, with the Series B Redemption Price, the Series C-1 Redemption Price, the Series C-2 Redemption Price, and the Series C-3 Redemption Price, the Redemption Price) in three (3) annual installments commencing not more than sixty (60) days after receipt by the Corporation at any time on or after December 3, 2023 (but in no event prior to the expiration of the Notice Period (as defined below)), from the holders of a majority of the outstanding shares of the Series D Preferred Stock of written notice requesting redemption of all shares of Series D Preferred Stock (the Series D Redemption Request). The date of each such installment shall be referred to as a Redemption Date. On each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock, Series C-3 Preferred Stock, and/or Series D Preferred Stock, as applicable, owned by each holder, that number of outstanding shares of Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock, Series C-3 Preferred Stock, and Series D Preferred Stock determined by dividing (i) the total number of shares of Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock, Series C-3 Preferred Stock, and/or Series D Preferred Stock, as applicable, outstanding immediately prior to such Redemption Date by (ii) the number of remaining Redemption Dates (including the Redemption Date to which such calculation applies). If on any Redemption Date Delaware law governing distributions to stockholders prevents the Corporation from redeeming all shares of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable, to be redeemed, the Corporation shall ratably redeem the maximum number of shares that it may redeem consistent with such law, and shall redeem the remaining shares as soon as it may lawfully do so under such law.
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6.2 Notice of Election.
(a) In the event that a Redemption Request is submitted, the Corporation shall send prompt written notice of such Redemption Request to the holders of record of Series D Preferred Stock as of the date of the Redemption Request. Such holders of Series D Preferred Stock shall have fifteen (15) days from receipt of such notice to provide the Corporation with a Series D Redemption Request (such period, the Series D Notice Period) in accordance with Subsection 6.1. In the event a Series D Redemption Request is made within the Series D Notice Period, the Corporation shall treat the Redemption Request and Series D Redemption Request to have been made on the same day and, accordingly, the Redemption Dates with respect to the Series B Preferred Stock and Series C Preferred Stock and the Series D Preferred Stock shall be the same.
(b) In the event that a Series D Redemption Request is submitted, the Corporation shall send prompt written notice of such Redemption Request to the holders of record of Series B Preferred Stock and Series C Preferred Stock as of the date of the Series D Redemption Request. Such holders of Series B Preferred Stock and Series C Preferred Stock shall have fifteen (15) days from receipt of such notice to provide the Corporation with a Redemption Request (such period, the Notice Period) in accordance with Subsection 6.1. In the event a Redemption Request is made within the Notice Period, the Corporation shall treat the Series D Redemption Request and Redemption Request to have been made on the same day and, accordingly, the Redemption Dates with respect to the Series D Preferred Stock and the Series B Preferred Stock and Series C Preferred Stock shall be the same.
6.3 Redemption Notice. The Corporation shall send written notice of the mandatory redemption (the Redemption Notice) to each holder of record of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable, not less than forty (40) days prior to each Redemption Date. Each Redemption Notice shall state:
(a) the number of shares of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable, held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;
(b) the Redemption Date and the Redemption Price;
(c) the date upon which the holders right to convert such shares terminates (as determined in accordance with Subsection 4.3); and
(d) for holders of shares in certificated form, that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable, to be redeemed.
6.4 Surrender of Certificates; Payment. On or before the applicable Redemption Date, each holder of shares of Series B Preferred Stock, Series C Preferred Stock,
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and/or Series D Preferred Stock, as applicable, to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4 or has provided written notice to the Company that he, she or it elects to retain his, her or its shares of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable (an Electing Holder), shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable, represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable, shall promptly be issued to such holder.
6.5 Rights Subsequent to Redemption. If the Redemption Notice or Series D Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable, to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that any certificates evidencing any of the shares of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable, so called for redemption (other than such shares held by Electing Holders) shall not have been surrendered, dividends with respect to such shares of Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, as applicable, shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of any such certificate or certificates therefor.
7. No Reissuance of Redeemed or Otherwise Acquired Preferred Stock. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights, powers and preferences granted to the holders of Preferred Stock following the close of business on the third day preceding the Redemption Date for such shares.
8. Waiver. Unless otherwise specified herein, any of the rights, powers, preferences and other terms of a series of the Preferred Stock or the Preferred Stock as a class that are set forth herein may be waived on behalf of all holders of such series of Preferred Stock or the Preferred Stock as a class by the affirmative written consent or vote of the holders of a majority of the shares of such series of Preferred Stock or such Preferred Stock as a class that are then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock.
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9. Notice of Record Date. In the event:
(a) the Corporation shall set a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or
(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,
then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or subscription right, and the amount and character of such dividend, distribution or subscription right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent (A) at least 20 days prior to the earlier of the record date or effective date for the event specified in such notice or (B) such fewer number of days as may be approved the holders of a majority of the outstanding shares of Preferred Stock acting as a single class on an as-converted basis.
10. Notices. Except as otherwise provided herein, any notice required or permitted by the provisions of this Article IV to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation for such holder, given by the holder to the Corporation for the purpose of notice or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission. If no such address appears or is given, notice shall be deemed given at the place where the principal executive office of the Corporation is located.
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ARTICLE V: PREEMPTIVE RIGHTS.
No stockholder of the Corporation shall have a right to purchase shares of capital stock of the Corporation sold or issued by the Corporation except to the extent that such a right may from time to time be set forth in a written agreement between the Corporation and any stockholder.
ARTICLE VI: BYLAW PROVISIONS.
A. AMENDMENT OF BYLAWS. Subject to any additional vote required by this Restated Certificate or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.
B. NUMBER OF DIRECTORS. Subject to Article IV, Part B, Section 3.2 and subject to any additional vote required by this Restated Certificate, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.
C. BALLOT. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
D. MEETINGS AND BOOKS. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation.
ARTICLE VII: DIRECTOR LIABILITY.
A. LIMITATION. To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article VII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article VII by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.
B. INDEMNIFICATION. To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.
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C. MODIFICATION. Any amendment, repeal or modification of the foregoing provisions of this Article VII shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.
ARTICLE VIII: CREDITOR AND STOCKHOLDER COMPROMISES
Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of §291 of Title 8 of the General Corporation Law or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under §279 of Title 8 of the General Corporation Law order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
ARTICLE IX: CORPORATE OPPORTUNITY
The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An Excluded Opportunity is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, Covered Persons), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Persons capacity as a director of the Corporation.
* * * * * * * * * * *
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CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
IMPEL NEUROPHARMA, INC.
(a Delaware corporation)
Pursuant to Section 242 of the General Corporation Law of the State of Delaware, Impel NeuroPharma, Inc., a corporation organized and existing under the General Corporation Law (the General Corporation Law) of the State of Delaware (the Corporation), does hereby certify that:
FIRST: The Corporation was incorporated pursuant to the General Corporation Law on July 24, 2008. The following amendment to the Corporations Restated Certificate of Incorporation, filed with the Delaware Secretary of State on December 3, 2018 (the Restated Certificate) has been duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law, with the approval of such amendment by the Corporations stockholders having been given by written consent without a meeting in accordance with Sections 228(d) and 242 of the Delaware General Corporation Law.
SECOND: The initial paragraph of Article IV of the Restated Certificate is hereby amended and restated to read in its entirety as follows:
The total number of shares of all classes of stock which the Corporation shall have authority to issue is 460,903,406 consisting of (a) 256,704,917 shares of Common Stock, $0.001 par value per share (Common Stock), and (b) 204,198,489 shares of Preferred Stock, $0.001 par value per share (Preferred Stock). As of the effective date of this Restated Certificate of Incorporation (this Restated Certificate), 746,426 shares of the authorized Preferred Stock of the Corporation are hereby designated Series A-1 Preferred Stock, 9,869,218 shares of the authorized Preferred Stock of the Corporation are hereby designated Series A-2 Preferred Stock (together with the Series A-1 Preferred Stock, the Series A Preferred Stock), 3,968,775 shares of the authorized Preferred Stock of the Corporation are hereby designated Series B Preferred Stock, 43,278,699 shares of the authorized Preferred Stock of the Corporation are hereby designated Series C-1 Preferred Stock, 26,537,826 shares of the authorized Preferred Stock of the Corporation are hereby designated Series C-2 Preferred Stock, 24,605,790 shares of the authorized Preferred Stock of the Corporation are hereby designated Series C-3 Preferred Stock (together with the Series C-1 Preferred Stock and Series C-2 Preferred Stock, the Series C Preferred Stock), and 95,191,755 shares of the authorized Preferred Stock of the Corporation are hereby designated Series D Preferred Stock.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, said Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer this 18th day of March, 2019 and the foregoing facts stated herein are true and correct.
IMPEL NEUROPHARMA, INC. | ||
By: |
/s/ Jon Congleton |
|
Name: | Jon Congleton | |
Title: | Chief Executive Officer |
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CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
IMPEL NEUROPHARMA, INC.
(a Delaware corporation)
Pursuant to Section 242 of the General Corporation Law of the State of Delaware, Impel NeuroPharma, Inc., a corporation organized and existing under the General Corporation Law (the General Corporation Law) of the State of Delaware (the Corporation), does hereby certify that:
FIRST: The Corporation was incorporated pursuant to the General Corporation Law on July 24, 2008. The following amendment to the Corporations Restated Certificate of incorporation, filed with the Delaware Secretary of State on December 3, 2018, as further amended by means of a Certificate of Amendment filed on March 18, 2019 (together, the Restated Certificate) has been duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law, with the approval of such amendment by the Corporations stockholders having been given by written consent without a meeting in accordance with Sections 228(d) and 242 of the Delaware General Corporation Law.
SECOND: The initial paragraph of Article IV of the Restated Certificate is hereby amended and restated to read in its entirety as follows:
The total number of shares of all classes of stock which the Corporation shall have authority to issue is 471,032,374 consisting of (a) 266,833,885 shares of Common Stock, $0.001 par value per share (Common Stock), and (b) 204,198,489 shares of Preferred Stock, $0.001 par value per share (Preferred Stock). As of the effective date of this Restated Certificate of Incorporation (this Restated Certificate), 746,426 shares of the authorized Preferred Stock of the Corporation are hereby designated Series A-1 Preferred Stock, 9,869,218 shares of the authorized Preferred Stock of the Corporation are hereby designated Series A-2 Preferred Stock (together with the Series A-1 Preferred Stock, the Series A Preferred Stock), 3,968,775 shares of the authorized Preferred Stock of the Corporation are hereby designated Series B Preferred Stock, 43,278,699 shares of the authorized Preferred Stock of the Corporation are hereby designated Series C-1 Preferred Stock, 26,537,826 shares of the authorized Preferred Stock of the Corporation are hereby designated Series C-2 Preferred Stock, 24,605,790 shares of the authorized Preferred Stock of the Corporation are hereby designated Series C-3 Preferred Stock (together with the Series C-1 Preferred Stock and Series C-2 Preferred Stock, the Series C Preferred Stock), and 95,191,755 shares of the authorized Preferred Stock of the Corporation are hereby designated Series D Preferred Stock.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, said Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer this 6th day of May, 2020 and the foregoing facts stated herein are true and correct.
IMPEL NEUROPHARMA, INC. | ||
By: | /s/ Adrian Adams | |
Name: | Adrian Adams | |
Title: | President and Chief Executive Officer |
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CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
IMPEL NEUROPHARMA, INC.
Impel NeuroPharma, Inc. (the Corporation), a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the DGCL), does hereby certify that the following amendment to the Corporations Restated Certificate of Incorporation, filed with the Delaware Secretary of State on December 3, 2018 (the Current Certificate), has been duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law, with the approval of such amendment by the Corporations stockholders having been given by written consent without a meeting in accordance with Sections 228(d) and 242 of the DGCL:
1. The following two paragraphs are hereby added to precede the first paragraph of Article IV of the Current Certificate:
Contingent and effective upon the filing of this Certificate of Amendment to the Restated Certificate of Incorporation (the Certificate of Amendment), every 16.37332 outstanding shares of Common Stock, will be combined into and automatically, without any further action by the Corporation or the stockholders thereof, become one outstanding share of Common Stock of the Corporation (the Reverse Stock Split). No fractional share shall be issued in connection with the foregoing combination of the shares pursuant to the Reverse Split. The Corporation will pay in cash the fair value of such fractional shares, without interest and as determined in good faith by the Board of Directors of the Corporation when those entitled to receive such fractional shares are determined.
The Reverse Stock Split shall occur automatically without any further action by the holders of Common Stock, and whether or not the certificates representing such shares have been surrendered to the Corporation; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable as a result of the Reverse Stock Split unless the existing certificates evidencing the applicable shares of stock prior to the Reverse Stock Split are either delivered to the Corporation, or the holder notifies the Corporation 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.
2. The foregoing amendment to the Current Certificate has been duly approved by the Corporations Board of Directors in accordance with Sections 141 and 242 of the DGCL.
3. The foregoing amendment to Current Certificate has been duly approved by the Corporations stockholders in accordance with Sections 228 and 242 of the DGCL.
4. This Certificate of Amendment shall be effective upon filing with the Delaware Secretary of State.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer this 16th day of April, 2021 and the foregoing facts stated herein are true and correct.
IMPEL NEUROPHARMA, INC. | ||
By: | /s/ Adrian Adams | |
Name: | Adrian Adams | |
Title: | Chief Executive Officer |
36
Exhibit 3.2
IMPEL NEUROPHARMA, INC.
RESTATED CERTIFICATE OF INCORPORATION
Impel NeuroPharma, Inc., a Delaware corporation (the Corporation), hereby certifies as follows:
1. The name of this corporation is Impel NeuroPharma, Inc. The date of the filing of the Corporations original Certificate of Incorporation with the Secretary of State of the State of Delaware was July 24, 2008 under the name Impel NeuroPharma, Inc.
2. The Restated Certificate of Incorporation of this Corporation attached hereto as Exhibit A, which is incorporated herein by this reference, and which restates, integrates and further amends the provisions of the Certificate of Incorporation of this Corporation as previously amended and/or restated, has been duly adopted by this Corporations Board of Directors and by the stockholders in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, with the approval of this Corporations stockholders having been given by written consent without a meeting in accordance with Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Corporation has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer and the foregoing facts stated herein are true and correct.
Dated: [] | IMPEL NEUROPHARMA, INC. | |||||
By: | ||||||
Name: | Adrian Adams | |||||
Title: | Chief Executive Officer |
1
EXHIBIT A
IMPEL NEUROPHARMA, INC.
RESTATED CERTIFICATE OF INCORPORATION
ARTICLE I: NAME
The name of the corporation is Impel NeuroPharma, Inc. (the Corporation).
ARTICLE II: AGENT FOR SERVICE OF PROCESS
The address of the Corporations registered office in the State of Delaware is 160 Greentree Drive, Suite 101, in the City of Dover, County of Kent, Delaware 19904. The name of the registered agent of the Corporation at that address is National Registered Agents, Inc.
ARTICLE III: PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the General Corporation Law).
ARTICLE IV: AUTHORIZED STOCK
1. Total Authorized. The total number of shares of all classes of stock that the Corporation has authority to issue is 310,000,000 shares, consisting of two classes: 300,000,000 shares of Common Stock, $0.001 par value per share (Common Stock), and 10,000,000 shares of Preferred Stock, $0.001 par value per share (Preferred Stock).
2. Designation of Additional Series.
2.1. The Board of Directors of the Corporation (the Board) is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by filing a Certificate of Designation pursuant to the applicable law of the State of Delaware (Certificate of Designation), to establish from time to time the number of shares to be included in each such series, to fix the designation, vesting, powers (including voting powers), preferences and relative, participating, optional or other special rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof, and, except where otherwise provided in the applicable Certificate of Designation, to thereafter increase (but not above the total number of authorized shares of the Preferred Stock) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The number of authorized shares of Preferred Stock may also be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of two-thirds of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class, without
2
a separate vote of the holders of the Preferred Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation; provided, however, that if two-thirds of the Whole Board (as defined below) has approved such increase or decrease of the number of authorized shares of Preferred Stock, then only the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, without a separate vote of the holders of the Preferred Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation, shall be required to effect such increase or decrease. For purposes of this Restated Certificate of Incorporation (as the same may be amended and/or restated from time to time, including pursuant to the terms of any Certificate of Designation designating a series of Preferred Stock, this Certificate of Incorporation), the term Whole Board shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.
2.2 Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, including, without limitation, voting powers, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, any series of Preferred Stock or any future class or series of capital stock of the Corporation.
2.3 Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock).
ARTICLE V: AMENDMENT OF BYLAWS
The Board shall have the power to adopt, amend or repeal the Bylaws of the Corporation (as the same may be amended and/or restated from time to time, the Bylaws). Any adoption, amendment or repeal of the Bylaws by the Board shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser or no vote, but in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock), the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders
3
to adopt, amend or repeal any provision of the Bylaws; provided further, that, in the case of any proposed adoption, amendment or repeal of any provisions of the Bylaws that is approved by the Board and submitted to the stockholders for adoption thereby, if two-thirds of the Whole Board has approved such adoption, amendment or repeal of any provisions of the Bylaws, then only the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class (in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Certificate of Incorporation (including any Preferred Stock issued pursuant to a Certificate of Designation)), shall be required to adopt, amend or repeal any provision of the Bylaws.
ARTICLE VI: MATTERS RELATING TO THE BOARD OF DIRECTORS
1. Director Powers. Except as otherwise provided by the General Corporation Law, the Bylaws of the Corporation or this Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board.
2. Number of Directors. Subject to the special rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the total number of directors constituting the Whole Board shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board.
3. Classified Board. Subject to the special rights of the holders of one or more series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided, with respect to the time for which they severally hold office, into three classes designated as Class I, Class II and Class III, respectively (the Classified Board). The Board may assign members of the Board already in office to the Classified Board, which assignments shall become effective at the same time that the Classified Board becomes effective. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board. The number of directors in each class shall be divided as nearly equal as is practicable. The initial term of office of the Class I directors shall expire at the Corporations first annual meeting of stockholders following the filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware (the Effective Date), the initial term of office of the Class II directors shall expire at the Corporations second annual meeting of stockholders following the Effective Date and the initial term of office of the Class III directors shall expire at the Corporations third annual meeting of stockholders following the Effective Date. At each annual meeting of stockholders following the Effective Date, directors elected to succeed those directors of the class whose terms then expire shall be elected for a term of office expiring at the third succeeding annual meeting of stockholders after their election.
4. Term and Removal. Each director shall hold office until the annual meeting at which such directors term expires and until such directors successor is duly elected and qualified, or until such directors earlier death, resignation, disqualification or removal. Any director may resign at any time by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Subject to the special rights of the holders of any series of Preferred Stock, no director may be removed from the Board except for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding shares of capital stock of
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the Corporation entitled to vote thereon, voting together as a single class. In the event of any increase or decrease in the authorized number of directors, (a) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member and (b) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board among the classes of directors so as to make all classes as nearly equal in number as is practicable, provided that no decrease in the number of directors constituting the Board shall shorten the term of any director.
5. Board Vacancies and Newly Created Directorships. Subject to the special rights of the holders of any series of Preferred Stock, any vacancy occurring in the Board for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall, unless (a) the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders or (b) as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which the director has been assigned expires and until such directors successor shall have been duly elected and qualified, or until such directors earlier death, resignation, disqualification or removal.
6. Vote by Ballot. Election of directors need not be by written ballot unless the Bylaws shall so provide.
7. Preferred Directors. If and for so long as the holders of any series of Preferred Stock have the special right to elect additional directors, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such directors successor shall have been duly elected and qualified, or until such directors right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her earlier death, resignation, retirement, disqualification or removal. Except as otherwise provided by the Board in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total authorized number of directors of the Corporation shall be reduced accordingly.
ARTICLE VII: DIRECTOR LIABILITY
1. Limitation of Liability. To the fullest extent permitted by law, no director of the Corporation shall be personally liable for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so amended.
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2. Change in Rights. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article VII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.
ARTICLE VIII: MATTERS RELATING TO STOCKHOLDERS
1. No Action by Written Consent of Stockholders. Subject to the rights of any series of Preferred Stock then outstanding, no action shall be taken by the stockholders of the Corporation except at a duly called annual or special meeting of stockholders and no action shall be taken by the stockholders of the Corporation by written consent in lieu of a meeting.
2. Special Meeting of Stockholders. Special meetings of the stockholders of the Corporation may be called only by the Chairperson of the Board, the Chief Executive Officer, the Lead Independent Director (as defined in the Bylaws), the President or the Board acting pursuant to a resolution adopted by a majority of the Whole Board and may not be called by the stockholders or any other person or persons.
3. Advance Notice of Stockholder Nominations and Business Transacted at Special Meetings. Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws. Business transacted at special meetings of stockholders shall be limited to the purpose or purposes stated in the notice of meeting.
ARTICLE IX: CHOICE OF FORUM
Unless the Corporation consents in writing to the selection of 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: (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any director, officer, stockholder, employee or agent of the Corporation to the Corporation or the Corporations stockholders; (c) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation arising pursuant to any provision of the General Corporation Law, this Certificate of Incorporation or the Bylaws or as to which the General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; (d) any action to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the Bylaws; or (e) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article IX.
ARTICLE X: AMENDMENT OF CERTIFICATE OF INCORPORATION
If any provision of this Certificate of Incorporation shall be held to be invalid, illegal, or unenforceable, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of this Certificate of Incorporation (including without limitation, all portions of any section of this Certificate of Incorporation containing any such provision held to be invalid, illegal, or unenforceable, which is not invalid, illegal, or unenforceable) shall remain in full force and effect.
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The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote (but subject to the rights of any series of Preferred Stock set forth in any Certificate of Designation), but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least two-thirds of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal any provision of this Certificate of Incorporation; provided, further, that if two-thirds of the Whole Board has approved such amendment or repeal this Article X or Article V, Article VI, Article VII or Article VIII of this Certificate of Incorporation;, then only the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class (in addition to any other vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation or any Certificate of Designation), shall be required to amend or repeal such provisions of this Certificate of Incorporation.
* * * * * * * * * * *
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IMPEL NEUROPHARMA, INC.
a Delaware Corporation
BYLAWS
TABLE OF CONTENTS
Page | ||||||
ARTICLE I: |
STOCKHOLDERS | 1 | ||||
Section 1.1: |
Annual Meetings | 1 | ||||
Section 1.2: |
Special Meetings | 1 | ||||
Section 1.3: |
Notice of Meetings | 1 | ||||
Section 1.4: |
Adjournments | 1 | ||||
Section 1.5: |
Quorum | 2 | ||||
Section 1.6: |
Organization | 2 | ||||
Section 1.7: |
Voting; Proxies | 2 | ||||
Section 1.8: |
Fixing Date for Determination of Stockholders of Record | 3 | ||||
Section 1.9: |
List of Stockholders Entitled to Vote | 3 | ||||
Section 1.10: |
Action by Written Consent of Stockholders | 4 | ||||
Section 1.11: |
Inspectors of Elections | 5 | ||||
ARTICLE II: |
BOARD OF DIRECTORS | 6 | ||||
Section 2.1: |
Number; Qualifications | 6 | ||||
Section 2.2: |
Election; Resignation; Removal; Vacancies | 6 | ||||
Section 2.3: |
Regular Meetings | 6 | ||||
Section 2.4: |
Special Meetings | 6 | ||||
Section 2.5: |
Remote Meetings Permitted | 6 | ||||
Section 2.6: |
Quorum; Vote Required for Action | 7 | ||||
Section 2.7: |
Organization | 7 | ||||
Section 2.8: |
Written Action by Directors | 7 | ||||
Section 2.9: |
Powers | 7 | ||||
Section 2.10: |
Compensation of Directors | 7 | ||||
ARTICLE III: |
COMMITTEES | 7 | ||||
Section 3.1: |
Committees | 7 | ||||
Section 3.2: |
Committee Rules | 8 | ||||
ARTICLE IV: |
OFFICERS | 8 | ||||
Section 4.1: |
Generally | 8 | ||||
Section 4.2: |
Chief Executive Officer | 8 | ||||
Section 4.3: |
Chairperson of the Board | 9 | ||||
Section 4.4: |
President | 9 | ||||
Section 4.5: |
Vice President | 9 | ||||
Section 4.6: |
Chief Financial Officer | 9 | ||||
Section 4.7: |
Treasurer | 9 | ||||
Section 4.8: |
Secretary | 9 | ||||
Section 4.9: |
Delegation of Authority | 9 | ||||
Section 4.10: |
Removal | 9 |
- i -
TABLE OF CONTENTS
(continued)
Page | ||||||
ARTICLE V: |
STOCK | 10 | ||||
Section 5.1: |
Certificates | 10 | ||||
Section 5.2: |
Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates | 10 | ||||
Section 5.3: |
Other Regulations | 10 | ||||
ARTICLE VI: |
INDEMNIFICATION | 10 | ||||
Section 6.1: |
Indemnification of Officers and Directors | 10 | ||||
Section 6.2: |
Advance of Expenses | 11 | ||||
Section 6.3: |
Non-Exclusivity of Rights | 11 | ||||
Section 6.4: |
Indemnification Contracts | 11 | ||||
Section 6.5: |
Right of Indemnitee to Bring Suit | 12 | ||||
Section 6.6: |
Nature of Rights | 12 | ||||
ARTICLE VII: |
NOTICES | 13 | ||||
Section 7.1: |
Notice. | 13 | ||||
Section 7.2: |
Waiver of Notice | 13 | ||||
ARTICLE VIII: |
INTERESTED DIRECTORS | 14 | ||||
Section 8.1: |
Interested Directors | 14 | ||||
Section 8.2: |
Quorum | 14 | ||||
ARTICLE IX: |
MISCELLANEOUS | 14 | ||||
Section 9.1: |
Fiscal Year | 14 | ||||
Section 9.2: |
Seal | 14 | ||||
Section 9.3: |
Form of Records | 14 | ||||
Section 9.4: |
Reliance upon Books and Records | 14 | ||||
Section 9.5: |
Certificate of Incorporation Governs | 15 | ||||
Section 9.6: |
Severability | 15 | ||||
ARTICLE X: |
AMENDMENT | 15 | ||||
ARTICLE X: |
EXCLUSIVE FORUM | 15 |
- ii -
IMPEL NEUROPHARMA, INC.
a Delaware Corporation
BYLAWS
As Adopted September 3, 2008
ARTICLE I: STOCKHOLDERS
Section 1.1: Annual Meetings. Unless members of the Board of Directors of the Corporation (the Board) are elected by written consent in lieu of an annual meeting, as permitted by Section 211 of the Delaware General Corporation Law (the DGCL) and these Bylaws, an annual meeting of stockholders shall be held for the election of directors at such date and time as the Board shall each year fix. The meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Any proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President, the holders of shares of the Corporation that are entitled to cast not less than ten percent (10%) of the total number of votes entitled to be cast by all stockholders at such meeting, or by a majority of the Whole Board, which shall mean the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships. Special meetings may not be called by any other person or persons. If a special meeting of stockholders is called by any person or persons other than by a majority of the members of the Board, then such person or persons shall request such meeting by delivering a written request to call such meeting to each member of the Board, and the Board shall then determine the time and date of such special meeting, which shall be held not more than one hundred twenty (120) days nor less than thirty-five (35) days after the written request to call such special meeting was delivered to each member of the Board. The special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine.
Section 1.3: Notice of Meetings. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by law (including, without limitation, as set forth in Section 7.1.1 of these Bylaws) stating the date, time and place, if any, of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation of the Corporation (the Certificate of Incorporation), such notice shall be given not less than ten (10), nor more than sixty (60), days before the date of the meeting to each stockholder of record entitled to vote at such meeting.
Section 1.4: Adjournments. The chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any). Any meeting of stockholders may adjourn from time to time, and notice need not be given of any such adjourned meeting if the time, date and 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
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adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, or if a new record date is fixed for the adjourned meeting, then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. To the fullest extent permitted by law, the Board may postpone or reschedule any previously scheduled special or annual meeting of stockholders before it is to be held, in which case notice shall be provided to the stockholders of the new date, time and place, if any, of the meeting as provided in Section 1.3 above.
Section 1.5: Quorum. At each meeting of stockholders the holders of a majority of the voting power of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, unless otherwise required by applicable law. If a quorum shall fail to attend any meeting, the chairperson of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporations stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporations stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum.
Section 1.6: Organization. Meetings of stockholders shall be presided over by such person as the Board may designate, or, in the absence of such a person, the Chairperson of the Board, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the voting power of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairperson of the meeting and, subject to Section 1.11 hereof, shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in such persons absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 1.7: Voting; Proxies. Each stockholder entitled to vote at a meeting of stockholders, or to take corporate action by written consent without a meeting, may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as may be required in the Certificate of Incorporation, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Unless otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter.
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Section 1.8: Fixing Date for Determination of Stockholders of Record.
1.8.1 Generally. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or to take corporate action by written consent without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, except as otherwise required by law, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60), nor less than ten (10), days before the date of such meeting, nor, except as provided in Section 1.8.2 below, more than sixty (60) days prior to any other action. If no record date is fixed by the Board, then the record date shall be as provided by applicable law. To the fullest extent provided by law, 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.
1.8.2 Stockholder Request for Action by Written Consent. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice to the Secretary of the Corporation, request the Board to fix a record date for such consent. Such request shall include a brief description of the action proposed to be taken. Unless a record date has previously been fixed by the Board for the written consent pursuant to this Section 1.8, the Board shall, within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. Such record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board within ten (10) days after the date on which such a request is received, then the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation as required by law. If no record date has been fixed by the Board and prior action by the Board is required by applicable law, then the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board adopts the resolution taking such prior action.
Section 1.9: List of Stockholders Entitled to Vote. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either on a reasonably accessible electronic network as permitted by law (provided that the information required to gain access to the list is provided with the notice of the meeting) or during ordinary business hours at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, the list shall also 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 at the meeting. If the meeting is held solely by means of remote communication, then the list shall 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 the list shall be provided with the notice of the meeting.
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Section 1.10: Action by Written Consent of Stockholders.
1.10.1 Procedure. Unless otherwise provided by the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed in the manner permitted by law by the holders of outstanding stock having not less than the number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, to its principal place of business or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the agent of the Corporations registered office in the State of Delaware shall be by hand or by certified or registered mail, return receipt requested. Written stockholder consents shall bear the date of signature of each stockholder who signs the consent in the manner permitted by law and shall be delivered to the Corporation as provided in Section 1.10.2 below. No written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered to the Corporation in the manner required by law, written consents signed by a sufficient number of stockholders to take the action set forth therein are delivered to the Corporation in the manner required by law.
1.10.2 Form of Consent. A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxy holder, or a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the Corporation can determine (a) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (b) the date on which such stockholder or proxy holder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a Corporations registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the Corporation or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the Board. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.
1.10.3 Notice of Consent. Prompt notice of the taking of corporate action by stockholders without a meeting by less than unanimous written consent of the stockholders shall be given to those stockholders who have not consented thereto 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 required by law. If the action which is consented to is such as would have required the filing of a certificate under the DGCL
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(the Certificate of Action) if such action had been voted on by stockholders at a meeting thereof, then if the DGCL so requires, the certificate so filed shall state, in lieu of any statement required by the DGCL concerning any vote of stockholders, that written stockholder consent has been given in accordance with Section 228 of the DGCL.
Section 1.11: Inspectors of Elections.
1.11.1 Applicability. Unless otherwise required by the Certificate of Incorporation or by the DGCL, the following provisions of this Section 1.11 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.11 shall be optional, and at the discretion of the Board.
1.11.2 Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.
1.11.3 Inspectors Oath. Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspectors ability.
1.11.4 Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.
1.11.5 Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.
1.11.6 Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with any information provided pursuant to Section 211(a)(2)(B)(i) of the DGCL, or Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other
5
reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.11 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors belief that such information is accurate and reliable.
ARTICLE II: BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board shall consist of not less than one or more than nine Directors, the specific number to be set by resolutions of the Board from time to time. The initial number of directors shall be three (3), and, thereafter, unless otherwise required by law or the Certificate of Incorporation, shall be fixed from time to time by resolution of a majority of the Whole Board or the stockholders of the Corporation holding at least a majority of the voting power of the Corporations outstanding stock then entitled to vote at an election of directors. No decrease in the authorized number of directors constituting the Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. The Board shall initially consist of the person or persons elected by the incorporator or named in the Corporations initial Certificate of Incorporation. Each director shall hold office until the next annual meeting of stockholders and until such directors successor is elected and qualified, or until such directors earlier death, resignation or removal. Any director may resign at any time upon written notice to the Corporation. Subject to the rights of any holders of Preferred Stock then outstanding: (a) 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 and (b) any vacancy occurring in the Board for any reason, and any newly created directorship resulting from any increase in the authorized number of directors to be elected by all stockholders having the right to vote as a single class, may be filled by the stockholders, by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
Section 2.3: Regular Meetings. Regular meetings of the Board may be held at such places, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.
Section 2.4: Special Meetings. Special meetings of the Board may be called by the Chairperson of the Board, the President or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.
Section 2.5: Remote Meetings Permitted. Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such 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 participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.
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Section 2.6: Quorum; Vote Required for Action. At all meetings of the Board a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time without further notice thereof. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.
Section 2.7: Organization. Meetings of the Board shall be presided over by the Chairperson of the Board, or in such persons absence by the President, or in such persons absence by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in such persons absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8: Written Action by Directors. 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 such 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, respectively, in the minute books of the Corporation. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 2.9: Powers. The Board may, except as otherwise required by law or the Certificate of Incorporation, exercise all such powers and manage and direct all such acts and things as may be exercised or done by the Corporation.
Section 2.10: Compensation of Directors. Members of the Board, as such, may receive, pursuant to a resolution of the Board, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board.
ARTICLE III: COMMITTEES
Section 3.1: Committees. 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 the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board, 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 in reference to the following matters: (a) approving, adopting, or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.
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Section 3.2: Committee Rules. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV: OFFICERS
Section 4.1: Generally. The officers of the Corporation shall consist of a Chief Executive Officer (who may be the Chairperson of the Board or the President), a Secretary and a Treasurer and may consist of such other officers, including a Chief Financial Officer and one or more Vice Presidents, as may from time to time be appointed by the Board. All officers shall be elected by the Board; provided, however, that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chairperson of the Board, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Each officer shall hold office until such persons successor is appointed or until such persons earlier resignation, death or removal. Any number of offices may be held by the same person. Any officer may resign at any time upon written notice to the Corporation. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board.
Section 4.2: Chief Executive Officer. Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:
(a) To act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;
(b) Subject to Article I, Section 1.6, to preside at all meetings of the stockholders;
(c) Subject to Article I, Section 1.2, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the Board shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board has not designated any other officer to be the Chief Executive Officer, then the Chairperson of the Board shall be the Chief Executive Officer.
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Section 4.3: Chairperson of the Board. The Chairperson of the Board shall have the power to preside at all meetings of the Board and shall have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive Officer of the Corporation unless the Board shall have designated another officer as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board to the Chairperson of the Board, and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board.
Section 4.5: Vice President. Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President, or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer in the event of the Chief Executive Officers absence or disability.
Section 4.6: Chief Financial Officer. The Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer.
Section 4.7: Treasurer. The Treasurer shall have custody of all moneys and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.8: Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.9: Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.
Section 4.10: Removal. Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any Vice Presidents of the Corporation, then such Vice Presidents may be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.
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ARTICLE V: STOCK
Section 5.1: Certificates. The shares of capital stock of the Corporation shall be represented by certificates; provided, however, that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock may be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation (or the transfer agent or registrar, as the case may be). Notwithstanding the adoption of such resolution by the Board, every holder of stock that is a certificated security 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 a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. 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 shall have 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 such person were an officer, transfer agent or registrar at the date of issue. If any holder of uncertificated shares elects to receive a certificate, the Corporation (or the transfer agent or registrar, as the case may be) shall, to the extent permitted under applicable law and rules, regulations and listing requirements of any stock exchange or stock market on which the Corporations shares are listed or traded, cease to provide annual statements indicating such holders holdings of shares in the Corporation.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock, or uncertificated shares, in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, , upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owners legal representative, to agree to indemnify the Corporation and/or 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.
Section 5.3: Other Regulations. The issue, transfer, conversion and registration of stock certificates and uncertificated securities shall be governed by such other regulations as the Board may establish.
ARTICLE VI: INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding), by reason of the fact that such person (or a person of whom such person is the legal representative), is or was a member of the Board or officer of the Corporation or a Reincorporated Predecessor (as defined below) or is or was serving at the request of the Corporation or a Reincorporated Predecessor as a member of the board of directors, officer or trustee of another corporation, or of
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a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (for purposes of this Article VI, an Indemnitee), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith, provided such Indemnitee acted in good faith and in a manner that the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe the Indemnitees conduct was unlawful. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of such Indemnitees heirs, executors and administrators. Notwithstanding the foregoing, the Corporation shall indemnify any such Indemnitee seeking indemnity in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board or such indemnification is authorized by an agreement approved by the Board. As used herein, the term the Reincorporated Predecessor means a corporation that is merged with and into the Corporation in a statutory merger where (a) the Corporation is the surviving corporation of such merger; (b) the primary purpose of such merger is to change the corporate domicile of the Reincorporated Predecessor to Delaware.
Section 6.2: Advance of Expenses. The Corporation shall pay all expenses (including attorneys fees) incurred by such an Indemnitee in defending any such Proceeding as they are incurred in advance of its final disposition; provided, however, that (a) if the DGCL then so requires, the payment of such expenses incurred by such an Indemnitee in advance of the final disposition of such Proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it should be determined ultimately by final judicial decision from which there is no appeal that such Indemnitee is not entitled to be indemnified under this Article VI or otherwise; and (b) the Corporation shall not be required to advance any expenses to a person against whom the Corporation directly brings a claim, in a Proceeding, alleging that such person has breached such persons duty of loyalty to the Corporation, committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VI.
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Section 6.5: Right of Indemnitee to Bring Suit. The following shall apply to the extent not in conflict with any indemnification contract provided for in Section 6.4 above.
6.5.1 Right to Bring Suit. If a claim under Section 6.1 or 6.2 of this Article VI is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (a) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Indemnitee has not met any applicable standard for indemnification set forth in applicable law.
6.5.2 Effect of Determination. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in applicable law, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.
6.5.3 Burden of Proof. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI, or otherwise, shall be on the Corporation.
Section 6.6: Nature of Rights. The rights conferred upon Indemnitees in this Article VI shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the Indemnitees heirs, executors and administrators. Any amendment, repeal or modification of any provision of this Article VI that adversely affects any right of an Indemnitee or an Indemnitees successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI and existing at the time of such amendment, repeal or modification.
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ARTICLE VII: NOTICES
Section 7.1: Notice.
7.1.1 Form and Delivery. Except as otherwise specifically required in these Bylaws (including, without limitation, Section 7.1.2 below) or by law, all notices required to be given pursuant to these Bylaws shall be in writing and may, (a) in every instance in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid telegram, cablegram, overnight express courier, facsimile, electronic mail or other form of electronic transmission and (b) be effectively be delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid or, if specifically consented to by the stockholder as described in Section 7.1.2 of this Article VII by sending such notice by telegram, cablegram, facsimile, electronic mail or other form of electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such persons address as it appears on the records of the Corporation. The notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the case of delivery by mail, upon deposit in the mail, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via telegram, cablegram, facsimile, electronic mail or other form of electronic transmission, when dispatched.
7.1.2 Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders, 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 in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 7.1.2 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 such posting and the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.
7.1.3 Affidavit of Giving Notice. 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 in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 7.2: 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 of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, 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, directors or members of a committee of directors need be specified in any waiver of notice.
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ARTICLE VIII: INTERESTED DIRECTORS
Section 8.1: Interested Directors. No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.
Section 8.2: Quorum. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.
ARTICLE IX: MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board.
Section 9.2: Seal. The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.
Section 9.3: Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, diskettes, CDs, or any other information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.
Section 9.4: Reliance upon Books and Records. A member of the Board, or a member of any committee designated by the Board shall, in the performance of such persons duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporations officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
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Section 9.5: Certificate of Incorporation Governs. In the event of any conflict between the provisions of the Certificate of Incorporation and Bylaws, the provisions of the Certificate of Incorporation shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.
ARTICLE X: AMENDMENT
Unless otherwise required by the Certificate of Incorporation, stockholders of the Corporation holding at least a majority of the voting power of the Corporations outstanding voting stock then entitled to vote at an election of directors shall have the power to adopt, amend or repeal Bylaws. To the extent provided in the Certificate of Incorporation, the Board shall also have the power to adopt, amend or repeal Bylaws of the Corporation.
ARTICLE XI: EXCLUSIVE FORUM
Unless the Corporation consents in writing to the selection of 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 the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any director, officer, employee or agent of the Corporation to the Corporation or the Corporations stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or the Corporations certificate of incorporation or Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or these Bylaws or (v) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to the provisions of Article XI.
The provisions of this Article X may only be amended or repealed by approval of (a) at least three-fifths of the Board of Directors or (b) stockholders of the Corporation holding at least two-thirds of the voting power of the Corporations outstanding voting stock then entitled to vote at an election of directors.
These Bylaws were originally adopted by the Board of Directors on September 3, 2008.
/s/ John D. Hoekman |
John D. Hoekman, Secretary |
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IMPEL NEUROPHARMA, INC.
(a Delaware corporation)
RESTATED BYLAWS
TABLE OF CONTENTS
Article I: STOCKHOLDERS
|
1 | |||||
Section 1.1: | Annual Meetings | 1 | ||||
Section 1.2: | Special Meetings | 1 | ||||
Section 1.3: | Notice of Meetings | 1 | ||||
Section 1.4: | Adjournments | 2 | ||||
Section 1.5: | Quorum | 2 | ||||
Section 1.6: | Organization | 2 | ||||
Section 1.7: | Voting; Proxies | 3 | ||||
Section 1.8: | Fixing Date for Determination of Stockholders of Record | 3 | ||||
Section 1.9: | List of Stockholders Entitled to Vote | 4 | ||||
Section 1.10: | Inspectors of Elections | 4 | ||||
Section 1.11: | Conduct of Meetings | 5 | ||||
Section 1.12: | Notice of Stockholder Business; Nominations | 6 | ||||
Article II: BOARD OF DIRECTORS
|
14 | |||||
Section 2.1: | Number; Qualifications | 14 | ||||
Section 2.2: | Election; Resignation; Removal; Vacancies | 15 | ||||
Section 2.3: | Regular Meetings | 15 | ||||
Section 2.4: | Special Meetings | 15 | ||||
Section 2.5: | Remote Meetings Permitted | 15 | ||||
Section 2.6: | Quorum; Vote Required for Action | 15 | ||||
Section 2.7: | Organization | 16 | ||||
Section 2.8: | Unanimous Action by Directors in Lieu of a Meeting | 16 | ||||
Section 2.9: | Powers | 16 | ||||
Section 2.10: | Compensation of Directors | 16 | ||||
Section 2.11: | Confidentiality | 16 | ||||
Article III: COMMITTEES
|
16 | |||||
Section 3.1: | Committees | 16 | ||||
Section 3.2: | Committee Rules | 17 | ||||
Article IV: OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR
|
17 | |||||
Section 4.1: | Generally | 17 | ||||
Section 4.2: | Chief Executive Officer | 18 | ||||
Section 4.3: | Chairperson of the Board | 18 | ||||
Section 4.4: | Lead Independent Director | 18 | ||||
Section 4.5: | President | 18 | ||||
Section 4.6: | Chief Financial Officer | 19 | ||||
Section 4.7: | Treasurer | 19 | ||||
Section 4.8: | Vice President | 19 | ||||
Section 4.9: | Secretary | 19 | ||||
Section 4.10: | Delegation of Authority | 19 | ||||
Section 4.11: | Removal | 19 |
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Article V: STOCK
|
20 | |||||
Section 5.1: | Certificates; Uncertificated Shares | 20 | ||||
Section 5.2: | Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares | 20 | ||||
Section 5.3: | Other Regulations | 20 | ||||
Article VI: INDEMNIFICATION
|
20 | |||||
Section 6.1: | Indemnification of Officers and Directors | 20 | ||||
Section 6.2: | Advancement of Expenses | 21 | ||||
Section 6.3: | Non-Exclusivity of Rights | 21 | ||||
Section 6.4: | Indemnification Contracts | 22 | ||||
Section 6.5: | Right of Indemnitee to Bring Suit | 22 | ||||
Section 6.6: | Nature of Rights | 22 | ||||
Section 6.7: | Amendment or Repeal | 22 | ||||
Section 6.8: | Insurance | 23 | ||||
Article VII: NOTICES
|
23 | |||||
Section 7.1: | Notice | 23 | ||||
Section 7.2: | Waiver of Notice | 24 | ||||
Article VIII: INTERESTED DIRECTORS
|
24 | |||||
Section 8.1: | Interested Directors | 24 | ||||
Section 8.2: | Quorum | 24 | ||||
Article IX: MISCELLANEOUS
|
24 | |||||
Section 9.1: | Fiscal Year | 24 | ||||
Section 9.2: | Seal | 24 | ||||
Section 9.3: | Form of Records | 25 | ||||
Section 9.4: | Reliance Upon Books and Records | 25 | ||||
Section 9.5: | Certificate of Incorporation Governs | 25 | ||||
Section 9.6: | Severability | 25 | ||||
Section 9.7: | Time Periods | 25 | ||||
Article X: AMENDMENT
|
25 | |||||
Article XI: EXCLUSIVE FORUM
|
26 |
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IMPEL NEUROPHARMA, INC.
(a Delaware corporation)
RESTATED BYLAWS
As Adopted [___], 2021 and
As Effective [___], 2021
ARTICLE I: STOCKHOLDERS
Section 1.1: Annual Meetings.
If required by applicable law, an annual meeting of stockholders shall be held for the election of directors at such date and time as the Board of Directors (the Board) of Impel NeuroPharma, Inc. (the Corporation) shall each year fix. The meeting may be held either at a place, within or without the State of Delaware as permitted by the Delaware General Corporation Law (the DGCL), or by means of remote communication as the Board in its sole discretion may determine. Any proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings.
Special meetings of stockholders for any purpose or purposes shall be called in the manner set forth in the Restated Certificate of Incorporation of the Corporation (as the same may be amended and/or restated from time to time, the Certificate of Incorporation). The special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of the meeting.
Section 1.3: Notice of Meetings.
Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by applicable law (including, without limitation, as set forth in Section 7.1.1 of these Bylaws) stating the date, time and place, if any, 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 the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting). In the case of a special meeting, such notice shall also set forth the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation, notice of any meeting of stockholders shall be given not less than ten (10), nor more than sixty (60), days before the date of the meeting to each stockholder of record entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.
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Section 1.4: Adjournments.
Notwithstanding Section 1.5 of these Bylaws, the chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any), regardless of whether a quorum is present, at any time and for any reason. Any meeting of stockholders, annual or special, may be adjourned from time to time, and notice need not be given of any such adjourned meeting if the time, date and place (if any) thereof and 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 adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If, after the adjournment, a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. If a quorum is present at the original meeting, it shall also be deemed present at the adjourned meeting. To the fullest extent permitted by law, the Board may postpone, reschedule or cancel at any time and for any reason any previously scheduled special or annual meeting of stockholders before it is to be held, regardless of whether any notice or public disclosure with respect to any such meeting has been sent or made pursuant to Section 1.3 hereof or otherwise, in which case notice shall be provided to the stockholders of the new date, time and place, if any, of the meeting as provided in Section 1.3 above.
Section 1.5: Quorum.
Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the holders of a majority of the voting power of the shares of stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business; provided, however, that where a separate vote by a class or classes or series of stock is required by applicable law or the Certificate of Incorporation, the holders of a majority of the voting power of the shares of such class or classes or series of the stock issued and outstanding and entitled to vote on such matter, present in person or represented by proxy at the meeting, shall constitute a quorum entitled to take action with respect to the vote on such matter. If a quorum shall fail to attend any meeting, the chairperson of the meeting or, if directed to be voted on by the chairperson of the meeting, the holders of a majority of the voting power of the shares entitled to vote who are present in person or represented by proxy at the meeting may adjourn the meeting. Shares of the Corporations stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporations stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum.
Section 1.6: Organization.
Meetings of stockholders shall be presided over by (a) such person as the Board may designate, or (b) in the absence of such a person, the Chairperson of the Board, or (c) in the absence of such person, the Lead Independent Director, or, (d) in the absence of such person, the Chief Executive Officer of the Corporation, or (e) in the absence of such person, the President of the Corporation, or (f) in the absence of such person, by a Vice President of the Corporation. The Secretary of the Corporation shall act as secretary of the meeting, but in such persons absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
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Section 1.7: Voting; Proxies.
Each stockholder of record entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as may be required in the Certificate of Incorporation, directors shall be elected by a plurality of the votes cast by the holders of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. At all meetings of stockholders at which a quorum is present, unless a different or minimum vote is required by applicable law, rule or regulation applicable to the Corporation or its securities, the rules or regulations of any stock exchange applicable to the Corporation, the Certificate of Incorporation or these Bylaws, in which case such different or minimum vote shall be the applicable vote on the matter, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each class or series, the holders of a majority of the voting power of the shares of stock of that class or series present in person or represented by proxy at the meeting voting for or against such matter).
Section 1.8: Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at 5:00 p.m. Eastern Time on the day next preceding the day on which notice is given, or, if notice is waived, at 5:00 p.m. Eastern Time on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or 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 shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60) days prior to such action. If no such record date is fixed by the Board, then the record date for determining stockholders for any such purpose shall be at 5:00 p.m. Eastern Time on the day on which the Board adopts the resolution relating thereto.
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Section 1.9: List of Stockholders Entitled to Vote.
The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date), arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting, either (a) on a reasonably accessible electronic network as permitted by applicable law (provided that the information required to gain access to the list is provided with the notice of the meeting), or (b) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, a list of stockholders entitled to vote at the meeting shall also 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 at the meeting. If the meeting is held solely by means of remote communication, then the list shall 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 the list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 1.9 or to vote in person or by proxy at any meeting of stockholders.
Section 1.10: Inspectors of Elections.
1.10.1 Applicability. Unless otherwise required by the Certificate of Incorporation or by applicable law, the following provisions of this Section 1.10 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.10 shall be optional, and at the discretion of the Board.
1.10.2 Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.
1.10.3 Inspectors Oath. Each inspector of election, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspectors ability.
1.10.4 Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.
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1.10.5 Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.
1.10.6 Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies pursuant to Section 211(a)(2)b.(i) of the DGCL, or in accordance with Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.10 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors belief that such information is accurate and reliable.
Section 1.11: Conduct of Meetings.
The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding person of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; (v) limitations on the time allotted to questions or comments by participants; (vi) restricting the use of audio/video recording devices and cell phones; and (vii) complying with any state and local laws and regulations concerning safety and security. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
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Section 1.12: Notice of Stockholder Business; Nominations.
1.12.1 Annual Meeting of Stockholders.
(a) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only: (i) pursuant to the Corporations notice of such meeting (or any supplement thereto), (ii) by or at the direction of the Board or any committee thereof or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 1.12 (the Record Stockholder), who is entitled to vote at such meeting and who complies with the notice and other procedures set forth in this Section 1.12 in all applicable respects. For the avoidance of doubt, the foregoing clause (iii) shall be the exclusive means for a stockholder to make nominations or propose business (other than business included in the Corporations proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the Exchange Act)), at an annual meeting of stockholders, and such stockholder must fully comply with the notice and other procedures set forth in this Section 1.12 to make such nominations or propose business before an annual meeting.
(b) For nominations or other business to be properly brought before an annual meeting by a Record Stockholder pursuant to Section 1.12.1(a) of these Bylaws:
(i) the Record Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and provide any updates or supplements to such notice at the times and in the forms required by this Section 1.12;
(ii) such other business (other than the nomination of persons for election to the Board) must otherwise be a proper matter for stockholder action;
(iii) if the Proposing Person (as defined below) has provided the Corporation with a Solicitation Notice (as defined below), such Proposing Person must, in the case of a proposal other than the nomination of persons for election to the Board, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporations voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporations voting shares reasonably believed by such Proposing Person to be sufficient to elect the nominee or nominees proposed to be nominated by such Record Stockholder, and must, in either case, have included in such materials the Solicitation Notice; and
(iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section 1.12, the Proposing Person proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 1.12.
To be timely, a Record Stockholders notice must be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than 5:00 p.m. Eastern Time on the seventy-fifth (75th) day nor earlier than 5:00 p.m. Eastern Time on the one hundred and fifth (105th) day prior to the first anniversary of the preceding years annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date or if no annual meeting was held in the preceding year, notice by the Record Stockholder to be timely must be so delivered (A) no earlier
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than 5:00 p.m. Eastern Time on the one hundred and fifth (105th) day prior to such annual meeting and (B) no later than 5:00 p.m. Eastern Time on the later of the seventy-fifth (75th) day prior to such annual meeting or 5:00 p.m. Eastern Time on the tenth (10th) day following the day on which Public Announcement (as defined below) of the date of such meeting is first made by the Corporation. In no event shall an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for providing the Record Stockholders notice.
(c) As to each person whom the Record Stockholder proposes to nominate for election or reelection as a director, in addition to the matters set forth in paragraph (e) below, such Record Stockholders notice shall set forth:
(i) the name, age, business address and residence address of such person;
(ii) the principal occupation or employment of such nominee;
(iii) the class, series and number of any shares of stock of the Corporation that are beneficially owned or owned of record by such person or any Associated Person (as defined in Section 1.12.4(c)), including any shares of any class or series of the Corporation as to which such person has a right to acquire beneficial ownership at any time in the future, as well as evidence of such ownership of such shares from one or more securities intermediaries in a form that the Board determines would be deemed acceptable for purposes of a shareholder proposal under Rule 14a-8(b)(2) under the Exchange Act (or any successor rule) to the extent applicable to the question;
(iv) the date or dates such shares were acquired and the investment intent of such acquisition;
(v) all other information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or would be otherwise required, in each case pursuant to and in accordance with Section 14(a) (or any successor provision) under the Exchange Act and the rules and regulations thereunder;
(vi) such persons written consent to being named in the Corporations proxy statement as a nominee, to the public disclosure of information regarding or related to such person provided to the Corporation by such person or otherwise pursuant to this Section 1.12 and to serving as a director if elected;
(vii) whether such person meets the independence requirements of the stock exchange upon which the Corporations Common Stock is primarily traded;
(viii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such Proposing Person or any of its respective affiliates and associates, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the Proposing Person or any of its respective affiliates and associates were the registrant for purposes of such rule and the nominee were a director or executive officer of such registrant;
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(ix) details of any position of such person as an officer or director of any competitor (that is, any entity that produces products or provides services that compete with or are alternatives to the products produced or services provided by the Corporation or its affiliates) of the Corporation or significant supplier or customer of the Corporation, within the three (3) years preceding the submission of the notice; and
(x) a completed and signed questionnaire, representation and agreement required by Section 1.12.2 of these Bylaws.
(d) As to any business other than the nomination of a director or directors that the Record Stockholder proposes to bring before the meeting, in addition to the matters set forth in paragraph (e) below, such Record Stockholders notice shall set forth:
(i) a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the text of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such Proposing Person, including any anticipated benefit to any Proposing Person therefrom;
(ii) a reasonably detailed description of all agreements, arrangements and understandings between or among any such Proposing Person and any of its respective affiliates or associates, on the one hand, and any other person or persons, on the other hand, (including their names) in connection with the proposal of such business by such Proposing Person; and
(iii) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business to be brought before the annual meeting pursuant to Section 14(a) of the Exchange Act; provided, however, that the disclosures required by this Section 1.12.1(d)(iii) shall not include any disclosures about any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner;
(e) As to each Proposing Person giving the notice, such Record Stockholders notice shall set forth:
(i) the current name and address of such Proposing Person, including, if applicable, their name and address as they appear on the Corporations stock ledger, if different;
(ii) the class or series and number of shares of stock of the Corporation that are directly or indirectly owned of record or beneficially owned by such Proposing Person, including any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future;
(iii) whether and the extent to which any derivative interest in the Corporations equity securities (including without limitation any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the
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Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of shares of the Corporation or otherwise, and any cash-settled equity swap, total return swap, synthetic equity position or similar derivative arrangement (any of the foregoing, a Derivative Instrument), as well as any rights to dividends on the shares of any class or series of shares of the Corporation that are separated or separable from the underlying shares of the Corporation) or any short interest in any security of the Corporation (for purposes of this Bylaw a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any increase or decrease in the value of the subject security, including through performance-related fees) is held directly or indirectly by or for the benefit of such Proposing Person, including without limitation whether and the extent to which any ongoing hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including without limitation any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such Proposing Person with respect to any share of stock of the Corporation (any of the foregoing, a Short Interest);
(iv) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such Proposing Person or any of its respective affiliates or associates is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership;
(v) any material pending or threatened legal proceeding in which such Proposing Person is a party or a material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation;
(vi) any direct or indirect material interest in any material contract or agreement with the Corporation, any affiliate of the Corporation or any Competitor (as defined below) (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement);
(vii) any significant equity interests or any Derivative Instruments or Short Interests in any Competitor held by such Proposing Person and/or any of its respective affiliates or associates;
(viii) any other material relationship between such Proposing Person, on the one hand, and the Corporation, any affiliate of the Corporation or any Competitor, on the other hand;
(ix) all information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a) or an amendment pursuant to Rule 13d-2(a) if such a statement were required to be filed under the Exchange Act and the rules and regulations promulgated thereunder by such Proposing Person and/or any of its respective affiliates or associates;
(x) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) (or any successor provision) under the Exchange Act and the rules and regulations thereunder;
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(xi) such Proposing Persons unconditional written consent to the public disclosure of information provided to the Corporation pursuant to this Section 1.12;
(xii) a complete written description of any agreement, arrangement or understanding (whether oral or in writing) (including any knowledge that another person or entity is Acting in Concert (as defined in Section 1.12.4(c)) with such Proposing Person) between or among such Proposing Person, any of its respective affiliates or associates and any other person Acting in Concert with any of the foregoing persons;
(xiii) a representation that the Record Stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination;
(xiv) An executed agreement, in a form deemed satisfactory by the Board, pursuant to which such Proposing Person agrees:
a. to comply with all applicable laws, rules and regulations in connection with the nomination, solicitation and election;
b. to file any written solicitation materials with the Corporations stockholders relating to one or more of the Corporations directors or director nominees or any other nominee with the SEC, regardless of whether any such filing is required under rule or regulation or whether any exemption from filing is available for such materials under any rule or regulation;
c. to assume all liability stemming from an action, suit or proceeding concerning any actual or alleged legal or regulatory violation arising out of any communication by such Proposing Person or any of its nominees with the Corporation, its stockholders or any other person in connection with the nomination or election of directors; and
d. to indemnify and hold harmless (jointly with all other group members, in the case of a group member) the Corporation and each of its directors, officers and employees individually promptly as incurred against any liability, loss, damages, expenses or other costs (including attorneys fees incurred in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of or relating to a failure or alleged failure of such Proposing Person to comply with, or any breach or alleged breach of, its or their obligations, agreements or representations under this Section; and (xv) a representation whether such Proposing Person intends (or is part of a group that intends) to deliver a proxy statement or form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporations voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporations voting shares to elect such nominee or nominees (an affirmative statement of such intent being a Solicitation Notice); and
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(xvi) any proxy, contract, arrangement, or relationship pursuant to which the Proposing Person has a right to vote, directly or indirectly, any shares of any security of the Corporation.
The disclosures to be made pursuant to the foregoing clauses (ii), (iii), (iv) and (vii) shall not include any information with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner.
(f) A stockholder providing written notice required by this Section 1.12 shall update such notice in writing, if necessary, so that the information provided or required to be provided in such notice is true and correct in all material respects as of (i) the record date for determining the stockholders entitled to notice of the meeting and (ii) 5:00 p.m. Eastern Time on the tenth (10th) business day prior to the meeting or any adjournment or postponement thereof. In the case of an update pursuant to clause (i) of the foregoing sentence, such update shall be received by the Secretary of the Corporation at the principal executive office of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to notice of the meeting, and in the case of an update and supplement pursuant to clause (ii) of the foregoing sentence, such update and supplement shall be received by the Secretary of the Corporation at the principal executive office of the Corporation not later than eight (8) business days prior to the date for the meeting and, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed). For the avoidance of doubt, the obligation to update as set forth in this paragraph shall not limit the Corporations rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or nomination or to submit any new proposal, including by changing or adding nominees, matters, business and/or resolutions proposed to be brought before a meeting of the stockholders.
(g) Notwithstanding anything in Section 1.12 or any other provision of these Bylaws to the contrary, any person who has been determined by a majority of the Whole Board to have violated Section 2.11 of these Bylaws or a Board Confidentiality Policy (as defined below) while serving as a director of the Corporation in the preceding five (5) years shall be ineligible to be nominated or be qualified to serve as a member of the Board, absent a prior waiver for such nomination or qualification approved by two-thirds of the Whole Board.
1.12.2 Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of any stockholder for election or reelection as a director of the Corporation, the person proposed to be nominated must deliver to the Secretary of the Corporation at the principal executive offices of the Corporation no later than five (5) Business Days after the request given by or on behalf of the Board a completed and signed questionnaire in the form required by the Corporation and provided by the Secretary of the Corporation with respect to the background and qualification of such person to serve as a director of the Corporation and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made and a signed representation and agreement (in the form available from the Secretary upon written request) that such person: (a) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a Voting Commitment) that has not been disclosed to the Corporation or (ii) any
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Voting Commitment that could limit or interfere with such persons ability to comply, if elected as a director of the Corporation, with such persons fiduciary duties under applicable law, (b) is not and will not become a party to any Compensation Arrangement (as defined below) that has not been disclosed therein, (c) if elected as a director of the Corporation, will comply with all informational and similar requirements of applicable insurance policies and laws and regulations in connection with service or action as a director of the Corporation, (d) if elected as a director of the Corporation, will comply with all corporate governance, conflict of interest, stock ownership requirements, confidentiality and trading policies and guidelines of the Corporation publicly disclosed from time to time, (e) if elected as a director of the Corporation, will act in the best interests of the Corporation and its stockholders and not in the interests of individual constituencies, (f) consents to being named as a nominee in the Corporations proxy statement pursuant to Rule 14a-4(d) under the Exchange Act and any associated proxy card of the Corporation and agrees to serve if elected as a director and (g) intends to serve as a director for the full term for which such individual is to stand for election.
1.12.3 Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporations notice of such meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporations notice of such meeting (a) by or at the direction of the Board or any committee thereof or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who meets the requirements of Section 1.12.1(a) and who fully complies with the notice and other procedures set forth in this Section 1.12 in all applicable respects. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporations notice of meeting, if the stockholders notice required by Section 1.12.1(b) of these Bylaws shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation (i) no earlier than the one hundred and fifth (105th) day prior to such special meeting and (ii) no later than 5:00 p.m. Eastern Time on the later of the seventy-fifth (75th) day prior to such special meeting or the tenth (10th) day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for providing such notice.
1.12.4 General.
(a) Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be eligible to be elected at a meeting of stockholders and serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.12. Except as otherwise provided by law or these Bylaws, the chairperson of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.12 and, if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 1.12, unless otherwise required by law, if the stockholder (or a Qualified Representative of the stockholder (as defined
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below)) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.
(b) Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 1.12 shall be deemed to affect any rights of (a) stockholders to request inclusion of proposals in the Corporations proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) the holders of any series of the Corporations Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.
(c) For purposes of these Bylaws the following definitions shall apply:
(A) a person shall be deemed to be Acting in Concert with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert or in substantial parallel with, or toward a common goal with such other person relating to the management, governance or control of the Corporation or in connection with or as a participant in any transaction having that purpose or effect where (1) each person is conscious of the other persons conduct or intent and this awareness is an element in their decision-making processes and (2) at least one additional factor suggests that such persons intend to act in concert or in substantial parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions or making or soliciting invitations to act in concert or in substantial parallel; provided that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) (or any successor provision) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person;
(B) affiliate and associate shall have the meanings ascribed thereto in Rule 405 under the Securities Act of 1933, as amended (the Securities Act); provided, however, that the term partner as used in the definition of associate shall not include any limited partner that is not involved in the management of the relevant partnership;
(C) Associated Person shall mean with respect to any subject stockholder or other person (including any proposed nominee) (1) any person directly or indirectly controlling, controlled by or under common control with such stockholder or other person, (2) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder or other person, (3) any associate of such stockholder or other person, and (4) any person directly or indirectly controlling, controlled by or under common control or Acting in Concert with any such Associated Person;
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(D) Compensation Arrangement shall mean any direct or indirect compensatory payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, including any agreement, arrangement or understanding with respect to any direct or indirect compensation, reimbursement or indemnification in connection with candidacy, nomination, service or action as a nominee or as a director of the Corporation;
(E) Competitor shall mean any entity that provides products or services that compete with or are alternatives to the principal products produced or services provided by the Corporation or its affiliates;
(F) Proposing Person shall mean (1) the Record Stockholder providing the notice of business proposed to be brought before an annual meeting or nomination of persons for election to the Board at a stockholder meeting, (2) the beneficial owner or beneficial owners, if different, on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made, and (3) any Associated Person on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made;
(G) Public Announcement shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act; and
(H) to be considered a Qualified Representative of a stockholder, a person must be, if the stockholder is (1) a general or limited partnership, any general partner or person who functions as a general partner of the general or limited partnership or who controls the general or limited partnership, (2) a corporation or a limited liability company, any officer or person who functions as the substantial equivalent of an officer of the corporation or limited liability company or any officer, director, general partner or person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (3) a trust, any trustee of such trust. The Secretary of the Corporation, or any other person who shall be appointed to serve as secretary of the meeting, may require, on behalf of the Corporation, reasonable and appropriate documentation to verify the status of a person purporting to be a Qualified Representative for purposes hereof.
ARTICLE II: BOARD OF DIRECTORS
Section 2.1: Number; Qualifications.
The total number of directors constituting the Whole Board shall be fixed from time to time in the manner set forth in the Certificate of Incorporation and the term Whole Board shall have the meaning specified in the Certificate of Incorporation. No decrease in the authorized number of directors constituting the Whole Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
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Section 2.2: Election; Resignation; Removal; Vacancies.
Election of directors need not be by written ballot. Each director shall hold office until the annual meeting at which such directors term expires and until such directors successor is elected and qualified or until such directors earlier death, resignation, disqualification or removal. Any director may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at a later time or upon the happening of an event. Subject to the special rights of holders of any series of the Corporations Preferred Stock to elect directors, directors may be removed only as provided by the Certificate of Incorporation and applicable law. All vacancies occurring in the Board and any newly created directorships resulting from any increase in the authorized number of directors shall be filled in the manner set forth in the Certificate of Incorporation.
Section 2.3: Regular Meetings.
Regular meetings of the Board may be held at such places, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.
Section 2.4: Special Meetings.
Special meetings of the Board may be called by the Chairperson of the Board, the Chief Executive Officer, the Lead Independent Director or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission; provided, however, that if, under the circumstances, the Chairperson of the Board, the Lead Independent Director or the Chief Executive Officer calling a special meeting deems that more immediate action is necessary or appropriate, notice may be delivered on the day of such special meeting. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.
Section 2.5: Remote Meetings Permitted.
Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such 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 participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action.
At all meetings of the Board, a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.
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Section 2.7: Organization.
Meetings of the Board shall be presided over by (a) the Chairperson of the Board, or (b) in the absence of such person, the Lead Independent Director, or (c) in such persons absence, by the Chief Executive Officer, or (d) in such persons absence, by a chairperson chosen by the Board at the meeting. The Secretary of the Corporation shall act as secretary of the meeting, but in such persons absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8: Unanimous Action by Directors in Lieu of a Meeting.
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 such 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, as applicable. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 2.9: Powers.
Except as otherwise provided by the Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board.
Section 2.10: Compensation of Directors.
Members of the Board, as such, may receive, pursuant to a resolution of the Board, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board.
Section 2.11: Confidentiality.
Each director shall maintain the confidentiality of, and shall not share with any third party person or entity (including third parties that originally sponsored, nominated or designated such director (the Sponsoring Party)), any non-public information learned in their capacities as directors, including communications among Board members in their capacities as directors. The Board may adopt a board confidentiality policy further implementing and interpreting this Section 2.11 (a Board Confidentiality Policy). All directors are required to comply with this Section 2.11 and any Board Confidentiality Policy unless such director or the Sponsoring Party for such director has entered into a specific written agreement with the Corporation, in either case as approved by the Board, providing otherwise with respect to such confidential information.
ARTICLE III: COMMITTEES
Section 3.1: Committees.
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 the committee, the member or members thereof present at any meeting of such committee who are not disqualified
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from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board, 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 in reference to the following matters: (a) approving, adopting, or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.
Section 3.2: Committee Rules.
Each committee shall keep records of its proceedings and make such reports as the Board may from time to time request. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws. Except as otherwise provided in the Certificate of Incorporation, these Bylaws or the resolution of the Board designating the committee, any committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and may delegate to any such subcommittee any or all of the powers and authority of the committee.
ARTICLE IV: OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR
Section 4.1: Generally.
The officers of the Corporation shall consist of a Chief Executive Officer (who may be the Chairperson of the Board or the President), a President, a Secretary and a Treasurer and may consist of such other officers, including, without limitation, a Chief Financial Officer, and one or more Vice Presidents, as may from time to time be appointed by the Board. All officers shall be elected by the Board; provided, however, that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, each officer shall hold office until such officers successor is duly elected and qualified or until such officers earlier resignation, death, disqualification or removal. Any number of offices may be held by the same person. Any officer may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board and the Board may, in its discretion, leave unfilled, for such period as it may determine, any offices. Each such successor shall hold office for the unexpired term of such officers predecessor and until a successor is duly elected and qualified or until such officers earlier resignation, death, disqualification or removal.
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Section 4.2: Chief Executive Officer.
Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:
(a) to act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;
(b) subject to Section 1.6 of these Bylaws, to preside at all meetings of the stockholders;
(c) subject to Section 1.2 of these Bylaws, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and
(d) to affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation (if any); and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.
The person holding the office of President shall be the Chief Executive Officer of the Corporation unless the Board shall designate another officer to be the Chief Executive Officer.
Section 4.3: Chairperson of the Board.
Subject to the provisions of Section 2.7 of these Bylaws, the Chairperson of the Board shall have the power to preside at all meetings of the Board and shall have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe. The Chairperson of the Board may or may not be an officer of the Corporation.
Section 4.4: Lead Independent Director.
The Board may, in its discretion, elect a lead independent director from among its members that are Independent Directors (as defined below) (such director, the Lead Independent Director). The Lead Independent Director shall preside at all meetings at which the Chairperson of the Board is not present and shall exercise such other powers and duties as may from time to time be assigned to him or her by the Board or as prescribed by these Bylaws. For purposes of these Bylaws, Independent Director has the meaning ascribed to such term under the rules of the exchange upon which the Corporations Common Stock is primarily traded.
Section 4.5: President.
The person holding the office of Chief Executive Officer shall be the President of the Corporation unless the Board shall have designated one individual as the President and a different individual as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board to the Chairperson of the Board, and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board.
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Section 4.6: Chief Financial Officer.
The person holding the office of Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.7: Treasurer.
The person holding the office of Treasurer shall be the Chief Financial Officer of the Corporation unless the Board shall have designated another officer as the Chief Financial Officer of the Corporation. The Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.8: Vice President.
Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer or President in the event of the Chief Executive Officers or Presidents absence or disability.
Section 4.9: Secretary.
The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.10: Delegation of Authority.
The Board may from time to time delegate the powers or duties of any officer of the Corporation to any other officers or agents of the Corporation, notwithstanding any provision hereof.
Section 4.11: Removal.
Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any officer of the Corporation, then such officer may also be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.
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ARTICLE V: STOCK
Section 5.1: Certificates; Uncertificated Shares.
The shares of capital stock of the Corporation shall be uncertificated shares; provided, however, that the resolution of the Board that the shares of capital stock of the Corporation shall be uncertificated shares shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation (or the transfer agent or registrar, as the case may be). Notwithstanding the foregoing, the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be certificated shares. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation, by any two authorized officers of the Corporation (it being understood that each of the Chairperson of the Board, the Vice-Chairperson of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary and any Assistant Secretary shall be an authorized officer for such purpose) , 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 shall have 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 such person were an officer, transfer agent or registrar at the date of issue.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares.
The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owners legal representative, to agree to indemnify the Corporation and/or 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.
Section 5.3: Other Regulations.
Subject to applicable law, the Certificate of Incorporation and these Bylaws, the issue, transfer, conversion and registration of shares represented by certificates and of uncertificated shares shall be governed by such other regulations as the Board may establish.
ARTICLE VI: INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors.
Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, legislative, investigative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution (including but not limited to giving testimony or responding to a subpoena) and including any appeal of any of the foregoing (a Proceeding), by reason of the fact that such person (or a person of whom such
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person is the legal representative), is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise, or non-profit entity, including service with respect to employee benefit plans (for purposes of this Article VI, an Indemnitee), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the DGCL as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expenses, costs, liability and loss (including attorneys fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith, provided such Indemnitee acted in good faith and in a manner that the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe the Indemnitees conduct was unlawful. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise or non-profit entity, including service with respect to employee benefit plans and shall inure to the benefit of such Indemnitees heirs, executors and administrators. Notwithstanding the foregoing, subject to Section 6.5 of these Bylaws, the Corporation shall indemnify any such Indemnitee seeking indemnity in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board or such indemnification is authorized by an agreement approved by the Board.
Section 6.2: Advancement of Expenses.
Notwithstanding any other provision of these Bylaws, the Corporation shall pay all expenses (including attorneys fees) incurred by an Indemnitee in defending any Proceeding as they are incurred in advance of its final disposition; provided, however, that if the DGCL then so requires, the advancement of such expenses (i.e., payment of such expenses as incurred or otherwise in advance of the final disposition of the Proceeding) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay such amounts if it shall ultimately be determined by a court of competent jurisdiction in a final judgment not subject to appeal that such Indemnitee is not entitled to be indemnified under this Article VI or otherwise.
Section 6.3: Non-Exclusivity of Rights.
The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.
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Section 6.4: Indemnification Contracts.
The Board is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust or other enterprise, or non-profit entity, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VI.
Section 6.5: Right of Indemnitee to Bring Suit. The following shall apply to the extent not in conflict with any indemnification contract provided for in Section 6.4 above.
6.5.1 Right to Bring Suit. If a claim under Section 6.1 or 6.2 of these Bylaws is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If the Indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee also shall be entitled to be paid, to the fullest extent permitted by law, the expense of prosecuting or defending such suit. In any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the Indemnitee has not met any applicable standard of conduct which makes it permissible under the DGCL (or other applicable law) for the Corporation to indemnify the Indemnitee for the amount claimed.
6.5.2 Effect of Determination. Neither the absence of a determination prior to the commencement of such suit that indemnification of or the providing of advancement to the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in applicable law, nor an actual determination that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.
6.5.3 Burden of Proof. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI, or otherwise, shall be on the Corporation.
Section 6.6: Nature of Rights.
The rights conferred upon Indemnitees in this Article VI shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of the Indemnitees heirs, executors and administrators.
Section 6.7: Amendment or Repeal.
Any amendment, repeal or modification of any provision of this Article VI that adversely affects any right of an Indemnitee or an Indemnitees successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI with respect to any Proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment, repeal or modification.
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Section 6.8: Insurance.
The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise or non-profit entity against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.
ARTICLE VII: NOTICES
Section 7.1: Notice.
7.1.1 Form and Delivery. Except as otherwise specifically required in these Bylaws (including, without limitation, Section 7.1.2 of these Bylaws) or by applicable law, all notices required to be given pursuant to these Bylaws may (a) in every instance in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by overnight express courier, facsimile, electronic mail or other form of electronic transmission and (b) be effectively delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid or, if specifically consented to by the stockholder as described in Section 7.1.2 of these Bylaws, by sending such notice by facsimile, electronic mail or other form of electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such persons address as it appears on the records of the Corporation. The notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the case of delivery by mail, upon deposit in the mail, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via facsimile, electronic mail or other form of electronic transmission, at the time provided in Section 7.1.2 of these Bylaws.
7.1.2 Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders, 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 in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 7.1.2 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 such posting and 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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7.1.3 Affidavit of Giving Notice. 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 in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 7.2: 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 of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, 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, directors or members of a committee of directors need be specified in any waiver of notice.
ARTICLE VIII: INTERESTED DIRECTORS
Section 8.1: Interested Directors.
No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.
Section 8.2: Quorum.
Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.
ARTICLE IX: MISCELLANEOUS
Section 9.1: Fiscal Year.
The fiscal year of the Corporation shall be determined by resolution of the Board.
Section 9.2: Seal.
The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.
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Section 9.3: Form of Records.
Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, any other information storage device, method or one or more electronic networks or databases (including one or more distributed electronic networks or databases), electronic or otherwise, provided that the records so kept can be converted into clearly legible paper form within a reasonable time and otherwise comply with the DGCL. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.
Section 9.4: Reliance Upon Books and Records.
A member of the Board, or a member of any committee designated by the Board shall, in the performance of such persons duties, be fully protected in relying in good faith upon the books and records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporations officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs.
In the event of any conflict between the provisions of the Certificate of Incorporation and these Bylaws, the provisions of the Certificate of Incorporation shall govern.
Section 9.6: Severability.
If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.
Section 9.7: Time Periods.
In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
ARTICLE X: AMENDMENT
Notwithstanding any other provision of these Bylaws, any alteration, amendment or repeal of these Bylaws, and any adoption of new Bylaws, shall require the approval of the Board or the stockholders of the Corporation as expressly provided in the Certificate of Incorporation.
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ARTICLE XI: EXCLUSIVE FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring or holding any interest in any security of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XI.
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CERTIFICATION OF RESTATED BYLAWS
OF
IMPEL NEUROPHARMA, INC.
a Delaware Corporation
I, [__], certify that I am Secretary of Impel NeuroPharma, Inc., a Delaware corporation (the Corporation), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and complete copy of the Restated Bylaws of the Corporation in effect as of the date of this certificate.
Dated: []
|
[__] |
[__] and Secretary |
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Exhibit 4.1
IN CUSIP 45258K 10 9 INCORPORATED UNDER THE LAWS OF THE STATE SEE REVERSE FOR CERTAIN OF DELAWARE DEFINITIONS AND LEGENDS This certifies that BY: AMERICAN COUNTERSIGNED is the record holder of STOCK AND FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $0.001 PAR VALUE PER SHARE, OF (BROOKLYN, IMPEL NEUROPHARMA, INC. TRANSFER transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate properly NY)& endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.TRUST REGISTERED: WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: AUTHORIZED AND COMPANY, ROPHATRANSFER N E U O RM RP RA A L O T , LLC P E C E I N SIGNATURE REGISTRAR AGENT M C CHIEF EXECUTIVE OFFICER I SEAL . CHIEF FINANCIAL OFFICER July 24, 2008 HD EH EL AWAR
The Corporation shall furnish without charge to each stockholder who so requests a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock of the Corporation or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Such requests shall be made to the Corporations Secretary at the principal office of the Corporation. KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED THE CORPORATION WILL REQUIRE A BOND INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM as tenants in common UNIF GIFT MIN ACT ......................... Custodian ......................... TEN ENT as tenants by the entireties (Cust) (Minor) JT TEN as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants Act.............................................................................. (State) in common COM PROP as community property UNIF TRF MIN ACT ................. Custodian (until age ..................) (Cust) ..................................... (Minor) under Uniform Transfers to Minors Act............................................................ (State) Additional abbreviations may also be used though not in the above list. FOR VALUE RECEIVED, _____________________________________________________ hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) shares of the capital stock represented by within Certificate, and do hereby irrevocably constitute and appoint attorney-in-fact to transfer the said stock on the books of the within named Corporation with full power of the substitution in the premises. Dated X X Signature(s) Guaranteed: NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. By THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. GUARANTEES BY A NOTARY PUBLIC ARE NOT ACCEPTABLE. SIGNATURE GUARANTEES MUST NOT BE DATED.
Exhibit 5.1
April 19, 2021
Impel NeuroPharma, Inc.
201 Elliott Avenue West, Suite 260
Seattle, WA 98119
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-1 (File Number 333-254999) (the Registration Statement) initially filed by Impel NeuroPharma, Inc., a Delaware corporation (the Company), with the Securities and Exchange Commission (the Commission) on April 2, 2021, as subsequently amended on April 19, 2021, in connection with the registration under the Securities Act of 1933, as amended (Securities Act), of the issuance of an aggregate of 6,133,334 shares of the Companys Common Stock (the Stock).
In connection with our opinion expressed below we have examined originals or copies of the underwriting agreement pursuant to which the Stock will be sold to the underwriters, the Registration Statement, the prospectus prepared in connection with the Registration Statement (the Prospectus), the Companys certificate of incorporation, as amended (the Certificate) and the Companys bylaws (the Bylaws), certain minutes and consents of the Companys board of directors (the Board) or a committee or committees thereof and the Companys stockholders relating to the Registration Statement, the Certificate and the Bylaws, and such other agreements, documents, certificates and statements of the Company, its transfer agent and public or government officials, as we have deemed advisable, and have examined such questions of law as we have considered necessary. In giving our opinion, we have also relied upon a good standing certificate regarding the Company issued by the Secretary of State of the State of Delaware and a management certificate addressed to us and dated of even date herewith executed by the Company containing certain factual representations by the Company.
In our examination of documents for purposes of this opinion, we have assumed, and express no opinion as to, the genuineness of all signatures on original documents, the authenticity and completeness of all documents submitted to us as originals, the conformity to originals and completeness of all documents submitted to us as copies, the legal capacity of all persons or entities executing the same (other than the Company), the lack of any undisclosed termination, modification, waiver or amendment to any document reviewed by us.
We render this opinion only with respect to, and express no opinion herein concerning the application or effect of the laws of any jurisdiction other than, the existing Delaware General Corporation Law.
In connection with our opinion expressed in paragraph below, we have assumed that, at or prior to the time of the delivery of any shares of Stock, the Registration Statement will have been declared effective under the Securities Act that the registration will apply to the offer and sale of such shares of Stock and will not have been modified or rescinded and that there will not have occurred any change in law affecting the validity of the issuance of such shares of Stock.
Based upon the foregoing, we are of the opinion that the up to 6,133,334 shares of Stock that may be issued and sold by the Company, when issued, sold and delivered in the manner and for the consideration stated in the Registration Statement and the Prospectus and in accordance with the resolutions adopted by the Board and to be adopted by the pricing committee of the Board, will be validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to all references to us, if any, in the Registration Statement, the Prospectus constituting a part thereof and any amendments thereto.
This opinion is intended solely for use in connection with issuance and sale of shares of Stock subject to the Registration Statement and is not to be relied upon for any other purpose. This opinion is rendered as of the date first written above and is based solely on our understanding of facts in existence as of such date after the aforementioned examination. In rendering the opinions above, we are opining only as to the specific legal issues expressly set forth therein, and no opinion shall be inferred as to any other matter or matters. We assume no obligation to advise you of any fact, circumstance, event or change in the law or the facts that may hereafter be brought to our attention whether or not such occurrence would affect or modify any of the opinions expressed herein.
Very truly yours, |
/s/ Fenwick & West LLP |
FENWICK & WEST LLP |
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Exhibit 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of [____________________ ____], 2021 is made by and between Impel NeuroPharma, Inc., a Delaware corporation (the Company), and [_______________________________________], a director, officer or key employee of the Company or one of the Companys subsidiaries or other service provider who satisfies the definition of Indemnifiable Person set forth below (Indemnitee).
RECITALS
A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as representatives of corporations unless they are protected by comprehensive liability insurance and indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no relationship to the compensation of such representatives;
B. The members of the Board of Directors of the Company (the Board) have concluded that to retain and attract talented and experienced individuals to serve as representatives of the Company and its Subsidiaries and Affiliates and to encourage such individuals to take the business risks necessary for the success of the Company and its Subsidiaries and Affiliates, it is necessary for the Company to contractually indemnify certain of its representatives and the representatives of its Subsidiaries and Affiliates, and to assume for itself maximum liability for Expenses and Other Liabilities in connection with claims against such representatives in connection with their service to the Company and its Subsidiaries and Affiliates;
C. Section 145 of the Delaware General Corporation Law (Section 145), empowers the Company to indemnify by agreement its officers, directors, employees and agents, and persons who serve, at the request of the Company, as directors, officers, employees or agents of other corporations, partnerships, joint ventures, trusts or other enterprises, and expressly provides that the indemnification provided thereby is not exclusive; and
D. The Company desires and has requested Indemnitee to serve or continue to serve as a representative of the Company and/or the Subsidiaries or Affiliates of the Company free from undue concern about inappropriate claims for damages arising out of or related to such services to the Company and/or the Subsidiaries or Affiliates of the Company.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions.
(a) Affiliate. For purposes of this Agreement, Affiliate of the Company means any corporation, partnership, limited liability company, joint venture, trust or other enterprise in respect of which Indemnitee is or was or will be serving as a director, officer, trustee, manager, member, partner, employee, agent, attorney, consultant, member of the entitys governing body (whether constituted as a board of directors, board of managers, general partner or otherwise), fiduciary, or in any other similar capacity at the request, election or direction of the Company, and including, but not limited to, any employee benefit plan of the Company or a Subsidiary or Affiliate of the Company.
(b) Change in Control. For purposes of this Agreement, Change in Control means (i) any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a Subsidiary or a trustee or other fiduciary holding securities under an employee benefit plan of the Company or Subsidiary, is or becomes the Beneficial Owner (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Companys then outstanding capital stock or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Companys stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the outstanding capital stock of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into capital stock of the surviving entity) at least 80% of the total voting power represented by the capital stock of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Companys assets.
(c) Expenses. For purposes of this Agreement, Expenses means all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys fees and related disbursements, and other out-of-pocket costs), paid or incurred by Indemnitee in connection with either the investigation, defense or appeal of, or being a witness in, a Proceeding (as defined below), or establishing or enforcing a right to indemnification under this Agreement, Section 145 or otherwise; provided, however, that Expenses shall not include any judgments, fines, ERISA excise taxes or penalties or amounts paid in settlement of a Proceeding.
(d) Indemnifiable Event. For purposes of this Agreement, Indemnifiable Event means any event or occurrence related to Indemnitees service for the Company or any Subsidiary or Affiliate as an Indemnifiable Person (as defined below), or by reason of anything done or not done, or any act or omission, by Indemnitee in any such capacity.
(e) Indemnifiable Person. For the purposes of this Agreement, Indemnifiable Person means any person who is or was a director, officer, trustee, manager, member, partner, employee, attorney, consultant, member of an entitys governing body (whether constituted as a board of directors, board of managers, general partner or otherwise) or other agent or fiduciary of the Company or a Subsidiary or Affiliate of the Company.
(f) Independent Counsel. For purposes of this Agreement, Independent Counsel means legal counsel that has not performed services for the Company or Indemnitee in the five years preceding the time in question and that would not, under applicable standards of professional conduct, have a conflict of interest in representing either the Company or Indemnitee.
(g) Independent Director. For purposes of this Agreement, Independent Director means a member of the Board who is not a party to the Proceeding for which a claim is made under this Agreement.
(h) Other Liabilities. For purposes of this Agreement, Other Liabilities means any and all liabilities of any type whatsoever (including, but not limited to, judgments, fines, penalties, ERISA (or other benefit plan related) excise taxes or penalties, and amounts paid in settlement and all interest, taxes, assessments and other charges paid or payable in connection with or in respect of any such judgments, fines, ERISA (or other benefit plan related) excise taxes or penalties, or amounts paid in settlement).
(i) Proceeding. For the purposes of this Agreement, Proceeding means any threatened, pending, or completed action, suit or other proceeding, whether civil, criminal, administrative, investigative, legislative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution and including any appeal of any of the foregoing.
(j) Subsidiary. For purposes of this Agreement, Subsidiary means any entity of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an Indemnifiable Person in the capacity or capacities in which Indemnitee currently serves the Company as an Indemnifiable Person, and any additional capacity in which Indemnitee may agree to serve, until such time as Indemnitees service in a particular capacity shall end according to the terms of an agreement, the Companys Certificate of Incorporation or Bylaws, governing law, or otherwise. Nothing contained in this Agreement is intended to create any right to continued employment or other form of service for the Company or a Subsidiary or Affiliate of the Company by Indemnitee.
3. Mandatory Indemnification.
(a) Agreement to Indemnify. In the event Indemnitee is a person who was or is a party to or witness in or is threatened to be made a party to or witness in any Proceeding by reason of an Indemnifiable Event, the Company shall indemnify Indemnitee from and against any and all Expenses and Other Liabilities incurred by Indemnitee in connection with (including in preparation for) such Proceeding to the fullest extent not prohibited by the provisions of the Companys Bylaws and the Delaware General Corporation Law (DGCL), as the same may be amended from time to time (but only to the extent that such amendment permits the Company to provide broader indemnification rights than the Bylaws or the DGCL permitted prior to the adoption of such amendment).
(b) Exception for Amounts Covered by Insurance and Other Sources. Notwithstanding the foregoing, the Company shall not be obligated to indemnify Indemnitee for Expenses or Other Liabilities of any type whatsoever (including, but not limited to judgments, fines, penalties, ERISA excise taxes or penalties and amounts paid in settlement) to the extent such have been paid directly to Indemnitee (or paid directly to a third party on Indemnitees behalf) by any directors and officers, or other type, of insurance maintained by the Company; provided, however, that payment made to Indemnitee pursuant to an insurance policy purchased and maintained by Indemnitee at his or her own expense of any amounts otherwise indemnifiable or obligated to be made pursuant to this Agreement shall not reduce the Companys obligations to Indemnitee pursuant to this Agreement.
(c) Company Obligations Primary. The Company hereby acknowledges that Indemnitee may have rights to indemnification for Expenses and Other Liabilities provided by a venture capital firm or other sponsoring organization (Other Indemnitor). The Company agrees with Indemnitee that the Company is the indemnitor of first resort of Indemnitee with respect to matters for which indemnification is provided under this Agreement and that the Company will be obligated to make all payments due to or for the benefit of Indemnitee under this Agreement without regard to any rights that Indemnitee may have against the Other Indemnitor. The Company hereby waives any equitable rights to contribution or indemnification from the Other Indemnitor in respect of any amounts paid to indemnitee hereunder. The Company further agrees that no reimbursement of Other Liabilities or payment of Expenses by the Other Indemnitor to or for the benefit of Indemnitee shall affect the obligations of the Company hereunder, and that the Company shall be obligated to repay the Other Indemnitor for all amounts so paid or reimbursed to the extent that the Company has an obligation to indemnify Indemnitee for such Expenses or Other Liabilities hereunder.
4. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses or Other Liabilities but not entitled, however, to indemnification for the total amount of such Expenses or Other Liabilities, the Company shall nevertheless indemnify Indemnitee for such total amount except as to the portion thereof for which indemnification is prohibited by the provisions of the Companys Bylaws or the DGCL. In any review or Proceeding to determine the extent of indemnification, the Company shall bear the burden to establish, by clear and convincing evidence, the lack of a successful resolution of a particular claim, issue or matter and which amounts sought in indemnity are allocable to claims, issues or matters which were not successfully resolved.
5. Liability Insurance. So long as Indemnitee shall continue to serve the Company or a Subsidiary or Affiliate of the Company as an Indemnifiable Person and thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding as a result of an Indemnifiable Event, the Company shall use reasonable efforts to maintain in full force and effect for the benefit of Indemnitee as an insured (i) liability insurance issued by one or more reputable insurers and having the policy amount and deductible deemed appropriate by the Board and providing in all respects coverage at least comparable to and in the same amount as that provided to the Chairman of the Board or the Chief Executive Officer of the Company and (ii) any replacement or substitute policies issued by one or more reputable insurers providing in all respects coverage at least comparable to and in the same amount as that being provided to the Chairman of the Board or the Chief Executive Officer of the Company. The purchase, establishment and maintenance of any such insurance or other arrangements shall not
in any way limit or affect the rights and obligations of the Company or of Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such insurance or other arrangement. In the event of a Change in Control subsequent to the date of this Agreement, or the Companys becoming insolvent, including being placed into receivership or entering the federal bankruptcy process, the Company shall maintain in force any and all insurance policies then maintained by the Company in providing insurancedirectors and officers liability, fiduciary, employment practices or otherwisein respect of the individual directors and officers of the Company, for a fixed period of six years thereafter. Such coverage shall be non-cancelable and shall be placed and serviced by the Companys incumbent insurance broker or a broker selected by a majority of the Independent Directors.
6. Mandatory Advancement of Expenses. If requested by Indemnitee, the Company shall advance prior to the final disposition of the Proceeding all Expenses reasonably incurred by Indemnitee in connection with (including in preparation for) a Proceeding related to an Indemnifiable Event within (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. The right to advances under this section shall in all events continue until final disposition of any Proceeding, including any appeal therein. Indemnitee hereby undertakes to repay such amounts advanced if, and only if and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Companys Bylaws or the DGCL, and no additional form of undertaking with respect to such obligation to repay shall be required. Indemnitees undertaking to repay any Expenses advanced to Indemnitee hereunder shall be unsecured and shall not be subject to the accrual or payment of any interest thereon. In the event that Indemnitees request for the advancement of expenses shall be accompanied by an affidavit of counsel to Indemnitee to the effect that such counsel has reviewed such Expenses and that such Expenses are reasonable in such counsels view, then such expenses shall be deemed reasonable in the absence of clear and convincing evidence to the contrary.
7. Notice and Other Indemnification Procedures.
(a) Notification. Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding, unless the Company is a named co-defendant with Indemnitee, Indemnitee shall, if Indemnitee believes that indemnification or advancement of Expenses with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof. However, a failure so to notify the Company promptly following Indemnitees receipt of such notice shall not relieve the Company from any liability that it may have to Indemnitee except to the extent that the Company is materially prejudiced in its defense of such Proceeding as a result of such failure.
(b) Insurance and Other Matters. If, at the time of the receipt of a notice of the commencement of a Proceeding pursuant to Section 7(a) above, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the issuers in accordance with the procedures set forth in the respective
policies. The Company shall thereafter take all reasonable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such insurance policies. In addition, the Company will instruct the insurers and the Companys insurance broker that they may communicate directly with Indemnitee regarding such claim.
(c) Assumption of Defense. In the event the Company shall be obligated to advance the Expenses for any Proceeding against Indemnitee, the Company, if deemed appropriate by the Company, shall be entitled to assume the defense of such Proceeding as provided herein. Such defense by the Company may include the representation of two or more parties by one attorney or law firm as permitted under the ethical rules and legal requirements related to joint representations. Following delivery of written notice to Indemnitee of the Companys election to assume the defense of such Proceeding, the approval by Indemnitee (which approval shall not be unreasonably withheld) of counsel designated by the Company and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees and expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. If (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have notified the Board in writing that Indemnitee has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, (C) the Company fails to employ counsel to assume the defense of such Proceeding, or (D) after a Change in Control, the employment of counsel by Indemnitee has been approved by the Independent Counsel, the Expenses related to work conducted by Indemnitees counsel shall be subject to indemnification and/or advancement pursuant to the terms of this Agreement. Nothing herein shall prevent Indemnitee from employing counsel for any such Proceeding at Indemnitees expense. Indemnitee agrees that any such separate counsel retained by Indemnitee will be a member of any approved list of panel counsel under the Companys applicable directors and officers insurance policy, should the applicable policy provide for a panel of approved counsel.
(d) Settlement. The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Companys written consent; provided, however, that if a Change in Control has occurred subsequent to the date of this Agreement, the Company shall be liable for indemnification of Indemnitee for amounts paid in settlement if the Independent Counsel has approved the settlement. Neither the Company nor any Subsidiary or Affiliate shall enter into a settlement of any Proceeding that might result in the imposition of any Expense, Other Liability, penalty, limitation or detriment on Indemnitee, whether indemnifiable under this Agreement or otherwise, without Indemnitees written consent. Neither the Company nor Indemnitee shall unreasonably withhold consent from any settlement of any Proceeding. The Company shall promptly notify Indemnitee upon the Companys receipt of an offer to settle, or if the Company makes an offer to settle, any Proceeding, and provide Indemnitee with a reasonable amount of time to consider such settlement, in the case of any such settlement for which the consent of Indemnitee would be required hereunder. The Company shall not, on its own behalf, settle any part of any Proceeding to which Indemnitee is a party with respect to other parties (including the Company) without the written consent of Indemnitee if any portion of the settlement is to be funded from insurance proceeds unless approved by a majority of the Independent Directors, provided that this sentence shall cease to be of any force and effect if it has been determined in accordance with this Agreement that Indemnitee is not entitled to indemnification hereunder with respect to such Proceeding or if the Companys obligations hereunder to Indemnitee with respect to such Proceeding have been fully discharged.
8. Determination of Right to Indemnification.
(a) Success on the Merits or Otherwise. To the extent that Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 3(a) above or in the defense of any claim, issue or matter described therein, the Company shall indemnify Indemnitee against Expenses actually and reasonably incurred in connection therewith.
(b) Indemnification in Other Situations. In the event that Section 8(a) is inapplicable, the Company shall also indemnify Indemnitee if Indemnitee has not failed to meet the applicable standard of conduct for indemnification.
(c) Forum. Indemnitee shall be entitled to select the forum in which determination of whether or not Indemnitee has met the applicable standard of conduct shall be decided, and such election will be made from among the following:
a. Those members of the Board who are Independent Directors even though less than a quorum;
b. A committee of Independent Directors designated by a majority vote of Independent Directors, even though less than a quorum; or
c. Independent Counsel selected by Indemnitee and approved by the Board, which approval may not be unreasonably withheld, which counsel shall make such determination in a written opinion.
If Indemnitee is an officer or a director of the Company at the time that Indemnitee is selecting the forum, then Indemnitee shall not select Independent Counsel as such forum unless there are no Independent Directors or unless the Independent Directors agree to the selection of Independent Counsel as the forum.
The selected forum shall be referred to herein as the Reviewing Party. Notwithstanding the foregoing, following any Change in Control subsequent to the date of this Agreement, the Reviewing Party shall be Independent Counsel selected in the manner provided in c. above.
(d) Decision Timing and Expenses. As soon as practicable, and in no event later than thirty (30) days after receipt by the Company of written notice of Indemnitees choice of forum pursuant to Section 8(c) above, the Company and Indemnitee shall each submit to the Reviewing Party such information as they believe is appropriate for the Reviewing Party to consider. The Reviewing Party shall arrive at its decision within a reasonable period of time following the receipt of all such information from the Company and Indemnitee, but in no event later than thirty (30) days following the receipt of all such information, provided that the time by which the Reviewing Party must reach a decision may be extended by mutual agreement of the Company and Indemnitee. All Expenses associated with the process set forth in this Section 8(d), including but not limited to the Expenses of the Reviewing Party, shall be paid by the Company.
(e) Delaware Court of Chancery. Notwithstanding a final determination by any Reviewing Party that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, Indemnitee shall have the right to apply to the Court of Chancery, for the purpose of enforcing Indemnitees right to indemnification pursuant to this Agreement.
(f) Expenses. The Company shall indemnify Indemnitee against all Expenses incurred by Indemnitee in connection with any hearing or Proceeding under this Section 8 involving Indemnitee and against all Expenses and Other Liabilities incurred by Indemnitee in connection with any other Proceeding between the Company and Indemnitee involving the interpretation or enforcement of the rights of Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims of Indemnitee in any such Proceeding was frivolous or made in bad faith.
(g) Determination of Good Faith. For purposes of any determination of whether Indemnitee acted in good faith or acted in bad faith, Indemnitee shall be deemed to have acted in good faith or not acted in bad faith if in taking or failing to take the action in question Indemnitee relied on the records or books of account of the Company or a Subsidiary or Affiliate, including financial statements, or on information, opinions, reports or statements provided to Indemnitee by the officers or other employees of the Company or a Subsidiary or Affiliate in the course of their duties, or on the advice of legal counsel for the Company or a Subsidiary or Affiliate, or on information or records given or reports made to the Company or a Subsidiary or Affiliate by an independent certified public accountant or by an appraiser or other expert selected by the Company or a Subsidiary or Affiliate, or by any other person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Company or a Subsidiary or Affiliate. In connection with any determination as to whether Indemnitee is entitled to be indemnified hereunder, or to advancement of Expenses, the Reviewing Party or court shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification or advancement of Expenses, as the case may be, and the burden of proof shall be on the Company to establish, by clear and convincing evidence, that Indemnitee is not so entitled. The provisions of this Section 8(g) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failures to act, of any other person serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person shall not be imputed to Indemnitee for purposes of determining the right to indemnification hereunder.
9. Exceptions. Any other provision herein to the contrary notwithstanding,
(a) Claims Initiated by Indemnitee. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except (1) with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement, any other statute or law, as permitted under Section 145, or otherwise, (2) where the Board has consented to the initiation of such Proceeding, or (3) with respect to Proceedings brought to discharge Indemnitees fiduciary responsibilities, whether under ERISA or otherwise, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board finds it to be appropriate; or
(b) Actions Based on Federal Statutes Regarding Profit Recovery and Return of Bonus Payments. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of (i) any suit in which judgment is rendered against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of l934 and amendments thereto or similar provisions of any federal, state or local statutory law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); or
(c) Unlawful Indemnification. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee for Other Liabilities if such indemnification is prohibited by law as determined by a court of competent jurisdiction in a final adjudication not subject to further appeal.
10. Non-exclusivity. The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may have under any provision of law, the Companys Certificate of Incorporation or Bylaws, the vote of the Companys stockholders or disinterested directors, other agreements, or otherwise, both as to acts or omissions in his or her official capacity and to acts or omissions in another capacity while serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and Indemnitees rights hereunder shall continue after Indemnitee has ceased serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and shall inure to the benefit of the heirs, executors and administrators of Indemnitee.
11. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
12. Supersession, Modification and Waiver. This Agreement supersedes any prior indemnification agreement between the Indemnitee and the Company, its Subsidiaries or its Affiliates. If the Company and Indemnitee have previously entered into an indemnification agreement providing for the indemnification of Indemnitee by the Company, parties entry into this Agreement shall be deemed to amend and restate such prior agreement to read in its entirety as, and be superseded by, this Agreement. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) and except as expressly provided herein, no such waiver shall constitute a continuing waiver.
13. Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. In addition, the Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement and indemnify Indemnitee to the fullest extent permitted by law.
14. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and a receipt is provided by the party to whom such communication is delivered, (ii) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the signing by the recipient of an acknowledgement of receipt form accompanying delivery through the U.S. mail, (iii) by personal service by a process server, or (iv) by delivery to the recipients address by overnight delivery (e.g., FedEx, UPS or DHL) or other commercial delivery service. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice complying with the provisions of this Section 14. Delivery of communications to the Company with respect to this Agreement shall be sent to the attention of the Companys Chief Executive Officer.
15. No Presumptions. For purposes of this Agreement, the termination of any Proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law or otherwise. In addition, neither the failure of the Company or a Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Company or a Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of Proceedings by Indemnitee to secure a judicial determination by exercising Indemnitees rights under Section 8(e) of this Agreement shall be a defense to Indemnitees claim or create a presumption that Indemnitee has failed to meet any particular standard of conduct or did not have any particular belief or is not entitled to indemnification under applicable law or otherwise.
16. Survival of Rights. The rights conferred on Indemnitee by this Agreement shall continue after Indemnitee has ceased to serve the Company or a Subsidiary or Affiliate of the Company as an Indemnifiable Person and shall inure to the benefit of Indemnitees heirs, executors and administrators.
17. Subrogation and Contribution.
(a) Except as otherwise expressly provided in this Agreement, in the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
(b) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by or on behalf of Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
18. Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so elects, to institute Proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as Indemnitee may elect to pursue.
19. Counterparts. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
20. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
21. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely with Delaware.
22. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any Proceeding which arises out of or relates to this Agreement.
[Signature Page Follows]
The parties hereto have entered into this Indemnity Agreement effective as of the date first above written.
IMPEL NEUROPHARMA, INC.: |
By: | ||
Its: |
INDEMNITEE: |
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Address: |
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SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT
Exhibit 10.4
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain, and motivate eligible persons whose present and potential contributions are important to the success of the Company, and any Parents, Subsidiaries, and Affiliates that exist now or in the future, by offering them an opportunity to participate in the Companys future performance through the grant of Awards. Capitalized terms not defined elsewhere in the text are defined in Section 29.
2. SHARES SUBJECT TO THE PLAN.
2.1. Number of Shares Available. Subject to Sections 2.6 and 22 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan as of the date of adoption of the Plan by the Board, is 2,205,000 Shares, plus (a) any reserved Shares not issued or subject to outstanding awards granted under the Companys 2018 Equity Incentive Plan, as amended (the 2018 Plan) on the Effective Date (as defined below), (b) Shares that are subject to awards granted under the 2018 Plan and the Companys 2008 Equity Incentive Plan, as amended (collectively with the 2018 Plan, the Prior Plans) that cease to be subject to such awards by forfeiture or otherwise after the Effective Date, (c) Shares issued under the Prior Plans before or after the Effective Date pursuant to the exercise of stock options that are, after the Effective Date, forfeited, (d) Shares issued under the Prior Plans that are repurchased by the Company at the original purchase price or are otherwise forfeited, and (e) Shares that are subject to stock options or other awards under the Prior Plans that are used to pay the exercise price of a stock option or withheld to satisfy the tax withholding obligations related to any award.
2.2. Lapsed, Returned Awards. Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR, (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price, (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used to pay the exercise price of an Award or withheld to satisfy the tax withholding obligations related to an Award will become available for grant and issuance in connection with subsequent Awards under this Plan. For the avoidance of doubt, Shares that otherwise become available for grant and issuance because of the provisions of this Section 2.2 will not include Shares subject to Awards that initially became available because of the substitution clause in Section 22.2 hereof.
2.3. Minimum Share Reserve. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all outstanding Awards granted under this Plan.
2.4. Automatic Share Reserve Increase. The number of Shares available for grant and issuance under the Plan will be increased on January 1st of each of 2022 through 2031 by the lesser of (a) five percent (5%) of the total number of shares of all classes of the Companys common stock issued and outstanding on each December 31st immediately prior to the date of increase (rounded down to the nearest whole share) and (b) such number of Shares determined by the Board.
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2.5. ISO Limitation. No more than 6,615,000 Shares will be issued pursuant to the exercise of ISOs granted under the Plan.
2.6. Adjustment of Shares. If the number or class of outstanding Shares is changed by a stock dividend, extraordinary dividend or distribution (whether in cash, shares, or other property, other than a regular cash dividend), recapitalization, stock split, reverse stock split, subdivision, combination, consolidation, reclassification, spin-off, or similar change in the capital structure of the Company, without consideration, then (a) the number and class of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, including Shares reserved under sub-clauses (a)-(e) of Section 2.1, (b) the Exercise Prices of and number and class of Shares subject to outstanding Options and SARs, (c) the number and class of Shares subject to other outstanding Awards and (d) the maximum number and class of Shares that may be issued as ISOs set forth in Section 2.5, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities or other laws, provided that fractions of a Share will not be issued.
If, by reason of an adjustment pursuant to this Section 2.6, a Participants Award Agreement or other agreement related to any Award, or the Shares subject to such Award, covers additional or different shares of stock or securities, then such additional or different shares, and the Award Agreement or such other agreement in respect thereof, will be subject to all of the terms, conditions, and restrictions which were applicable to the Award or the Shares subject to such Award prior to such adjustment.
3. ELIGIBILITY. ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors, and Non-Employee Directors, provided that such Consultants, Directors, and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction.
4. ADMINISTRATION.
4.1. Committee Composition; Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms, and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board will establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement, and any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend, and rescind rules and regulations relating to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the Exercise Price, the time or times when Awards may vest and be exercised (which may be based on performance criteria) or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;
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(e) determine the number of Shares or other consideration subject to Awards;
(f) determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary;
(g) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent, Subsidiary, or Affiliate;
(h) grant waivers of Plan or Award conditions;
(i) determine the vesting, exercisability, and payment of Awards;
(j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;
(k) determine whether an Award has been vested and/or earned;
(l) determine the terms and conditions of any, and to institute any Exchange Program;
(m) reduce, waive, or modify any criteria with respect to Performance Factors;
(n) adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events, or circumstances to avoid windfalls or hardships;
(o) adopt terms and conditions, rules, and/or procedures (including the adoption of any subplan under this Plan) relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States or to qualify Awards for special tax treatment under laws of jurisdictions other than the United States;
(p) exercise discretion with respect to Performance Awards;
(q) make all other determinations necessary or advisable for the administration of this Plan; and
(r) delegate any of the foregoing to a subcommittee or to one or more executive officers pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law.
4.2. Committee Interpretation and Discretion. Any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination will be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement will be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee will be final and binding on the Company and the Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution will be final and binding on the Company and the Participant.
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4.3. Section 16 of the Exchange Act. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more non-employee directors (as defined in the regulations promulgated under Section 16 of the Exchange Act).
4.4. Documentation. The Award Agreement for a given Award, the Plan, and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.
4.5. Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company, its Subsidiaries, and Affiliates operate or have Employees or other individuals eligible for Awards, the Committee, in its sole discretion, will have the power and authority to: (a) determine which Subsidiaries and Affiliates will be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan, which may include individuals who provide services to the Company, Subsidiary or Affiliate under an agreement with a foreign nation or agency; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs, and practices; (d) establish subplans and modify exercise procedures, vesting conditions, and other terms and procedures to the extent the Committee determines such actions to be necessary or advisable (and such subplans and/or modifications will be attached to this Plan as appendices, if necessary); and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals, provided, however, that no action taken under this Section 4.5 will increase the Share limitations contained in Section 2.1 hereof. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards will be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
5. OPTIONS. An Option is the right but not the obligation to purchase a Share, subject to certain conditions, if applicable. The Committee may grant Options to eligible Employees, Consultants, and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (ISOs) or Nonqualified Stock Options (NSOs), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option, subject to the following terms of this section.
5.1. Option Grant. Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participants individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length, and starting date of any Performance Period for each Option; and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.
5.2. Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, or a specified future date. The Award Agreement will be delivered to the Participant within a reasonable time after the granting of the Option.
5.3. Exercise Period. Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option, provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or
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of any Parent or Subsidiary (Ten Percent Stockholder) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.
5.4. Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted, provided that: (a) the Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant, and (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 12 and the Award Agreement and in accordance with any procedures established by the Company.
5.5. Method of Exercise. Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option (and/or via electronic execution through the authorized third-party administrator), and (b) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. 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 stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will 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 2.6 of the Plan. Exercising an Option in any manner will decrease 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.
5.6. Termination of Service. If the Participants Service terminates for any reason except for Cause or the Participants death or Disability, then the Participant may exercise such Participants Options only to the extent that such Options would have been exercisable by the Participant on the date Participants Service terminates no later than three (3) months after the date Participants Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond three (3) months after the date Participants employment terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options.
(a) Death. If the Participants Service terminates because of the Participants death (or the Participant dies within three (3) months after Participants Service terminates other than for Cause or because of the Participants Disability), then the Participants Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participants Service terminates and must be exercised by the Participants legal representative, or authorized assignee, no later than twelve (12) months after the date Participants Service terminates (or such shorter or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options.
(b) Disability. If the Participants Service terminates because of the Participants Disability, then the Participants Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participants Service terminates and must be exercised by the Participant (or the Participants legal representative or authorized assignee) no later than twelve (12)
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months after the date Participants Service terminates (or such shorter time period not less than six (6) months or longer time period as may be determined by the Committee, with any exercise beyond (a) three (3) months after the date Participants employment terminates when the termination of Service is for a Disability that is not a permanent and total disability as defined in Section 22(e)(3) of the Code or (b) twelve (12) months after the date Participants employment terminates when the termination of Service is for a Disability that is a permanent and total disability as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options.
(c) Cause. Unless otherwise determined by the Committee, if the Participants Service terminates for Cause, then Participants Options (whether or not vested) will expire on the date of termination of Participants Service if the Committee has reasonably determined in good faith that such cessation of Services has resulted in connection with an act or failure to act constituting Cause (or such Participants Services could have been terminated for Cause (without regard to the lapsing of any required notice or cure periods in connection therewith) at the time such Participant terminated Service), or at such later time and on such conditions as are determined by the Committee, but in any event no later than the expiration date of the Options. Unless otherwise provided in an employment agreement, Award Agreement, or other applicable agreement, Cause will have the meaning set forth in the Plan.
5.7. Limitations on ISOs. With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 5.7, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
5.8. Modification, Extension or Renewal. The Committee may modify, extend, or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participants rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed, or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 19 of this Plan, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants, provided, however, that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce the Exercise Price.
5.9. No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended, or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.
6. RESTRICTED STOCK UNITS. A Restricted Stock Unit (RSU) is an award to an eligible Employee, Consultant, or Director covering a number of Shares that may be settled by issuance of those Shares (which may consist of Restricted Stock) or in cash. All RSUs will be made pursuant to an Award Agreement.
6.1. Terms of RSUs. The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU, (b) the time or times during which the RSU may be settled, (c) the consideration to be distributed on settlement, and (d) the effect of the Participants
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termination of Service on each RSU, provided that no RSU will have a term longer than ten (10) years. An RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participants Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length, and starting date of any Performance Period for the RSU; (ii) select from among the Performance Factors to be used to measure the performance, if any; and (iii) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and Participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.
6.2. Form and Timing of Settlement. Payment of earned RSUs will be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSUs in cash, Shares, or a combination of both. The Committee may also permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned, provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
6.3. Termination of Service. Except as may be set forth in the Participants Award Agreement, vesting ceases on such date Participants Service terminates (unless determined otherwise by the Committee).
7. RESTRICTED STOCK AWARDS. A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant, or Director Shares that are subject to restrictions (Restricted Stock). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the Plan.
7.1. Restricted Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer of such Restricted Stock Award will terminate, unless the Committee determines otherwise.
7.2. Purchase Price. The Purchase Price for a Restricted Stock Award will be determined by the Committee and may be less than Fair Market Value on the date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 12 of the Plan, and the Award Agreement and in accordance with any procedures established by the Company.
7.3. Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified period of Service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participants Award Agreement. Prior to the grant of a Restricted Stock Award, the Committee will: (a) determine the nature, length, and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.
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7.4. Termination of Service. Except as may be set forth in the Participants Award Agreement, vesting ceases on such date Participants Service terminates (unless determined otherwise by the Committee).
8. STOCK BONUS AWARDS. A Stock Bonus Award is an award to an eligible Employee, Consultant, or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any Parent, Subsidiary, or Affiliate. All Stock Bonus Awards will be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.
8.1. Terms of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified period of Service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participants Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee will: (a) determine the nature, length, and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.
8.2. Form of Payment to Participant. Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee.
8.3. Termination of Service. Except as may be set forth in the Participants Award Agreement, vesting ceases on such date Participants Service terminates (unless determined otherwise by the Committee).
9. STOCK APPRECIATION RIGHTS. A Stock Appreciation Right (SAR) is an award to an eligible Employee, Consultant, or Director that may be settled in cash or Shares (which may consist of Restricted Stock) having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs will be made pursuant to an Award Agreement.
9.1. Terms of SARs. The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject to the SAR, (b) the Exercise Price and the time or times during which the SAR may be settled, (c) the consideration to be distributed on settlement of the SAR, and (d) the effect of the Participants termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted and may not be less than Fair Market Value of the Shares on the date of grant. A SAR may be awarded upon satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participants individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length, and starting date of any Performance Period for each SAR; and (ii) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.
9.2. Exercise Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing
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such SAR. The SAR Agreement will set forth the expiration date, provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participants Award Agreement, vesting ceases on the date Participants Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 5.6 also will apply to SARs.
9.3. Form of Settlement. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price, by (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
9.4. Termination of Service. Except as may be set forth in the Participants Award Agreement, vesting ceases on the date Participants Service terminates (unless determined otherwise by the Committee).
10. PERFORMANCE AWARDS.
10.1. Types of Performance Awards. A Performance Award is an award to an eligible Employee, Consultant, or Director that is based upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee, and may be settled in cash, Shares (which may consist of, without limitation, Restricted Stock), other property, or any combination thereof. Grants of Performance Awards will be made pursuant to an Award Agreement that cites Section 10 of the Plan.
(a) Performance Shares. The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded, and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares will consist of a unit valued by reference to a designated number of Shares, the value of which may be paid to the Participant by delivery of Shares or, if set forth in the instrument evidencing the Award, of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee will determine in its sole discretion.
(b) Performance Units. The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded, and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units will consist of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.
(c) Cash-Settled Performance Awards. The Committee may also grant cash-based Performance Awards to Participants under the terms of this Plan. Such awards will be based on the attainment of performance goals using the Performance Factors within this Plan that are established by the Committee for the relevant performance period.
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10.2. Terms of Performance Awards. The Committee will determine, and each Award Agreement will set forth, the terms of each Performance Award including, without limitation: (a) the amount of any cash bonus, (b) the number of Shares deemed subject to an award of Performance Shares, (c) the Performance Factors and Performance Period that will determine the time and extent to which each award of Performance Shares will be settled, (d) the consideration to be distributed on settlement, and (e) the effect of the Participants termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (i) determine the nature, length, and starting date of any Performance Period; (ii) select from among the Performance Factors to be used; and (iii) determine the number of Shares deemed subject to the award of Performance Shares. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. Prior to settlement the Committee will determine the extent to which Performance Awards have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria.
10.3. Termination of Service. Except as may be set forth in the Participants Award Agreement, vesting ceases on the date Participants Service terminates (unless determined otherwise by the Committee).
11. CASH AWARDS. A Cash Award (Cash Award) is an award that is denominated in, or payable to an eligible Participant solely in, cash, as deemed by the Committee to be consistent with the purposes of the Plan. Cash Awards shall be subject to the terms, conditions, restrictions and limitations determined by the Committee, in its sole discretion, from time to time. Awards granted pursuant to this Section 11 may be granted with value and payment contingent upon the achievement of Performance Factors.
12. PAYMENT FOR SHARE PURCHASES. Payment from a Participant for Shares purchased pursuant to this Plan may be made in cash or by check or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares of the Company held by the Participant that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Award will be exercised or settled;
(c) by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or Subsidiary;
(d) by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan;
(e) by any combination of the foregoing; or
(f) by any other method of payment as is permitted by applicable law.
The Committee may limit the availability of any method of payment, to the extent the Committee determines, in its discretion, such limitation is necessary or advisable to comply with applicable law or facilitate the administration of the Plan.
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13. GRANTS TO NON-EMPLOYEE DIRECTORS.
13.1. General. Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Section 13 may be automatically made pursuant to policy adopted by the Board, or made from time to time as determined in the discretion of the Board. No Non-Employee Director may receive Awards under the Plan that, when combined with cash compensation received for service as a Non-Employee Director, exceed seven hundred fifty thousand dollars ($750,000) in value (as described below) in any fiscal year or one million dollars ($1,000,000) in value (as described below) in the fiscal year of his or her election to the Board. The value of Awards for purposes of complying with this maximum will be determined as follows: (a) for Options and SARs, grant date fair value will be calculated using the Companys regular valuation methodology for determining the grant date fair value of Options for reporting purposes, and (b) for all other Awards other than Options and SARs, grant date fair value will be determined by either (i) calculating the product of the Fair Market Value per Share on the date of grant and the aggregate number of Shares subject to the Award, or (ii) calculating the product using an average of the Fair Market Value over a number of trading days and the aggregate number of Shares subject to the Award as determined by the Committee. Awards granted to an individual while he or she was serving in the capacity as an Employee or while he or she was a Consultant but not a Non-Employee Director will not count for purposes of the limitations set forth in this Section 13.1.
13.2. Eligibility. Awards pursuant to this Section 13 will be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Section 13.
13.3. Vesting, Exercisability and Settlement. Except as set forth in Section 22, Awards will vest, become exercisable, and be settled as determined by the Board. With respect to Options and SARs, the exercise price granted to Non-Employee Directors will not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.
13.4. Election to Receive Awards in Lieu of Cash. A Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, if permitted, and as determined, by the Committee. Such Awards will be issued under the Plan. An election under this Section 13.4 will be filed with the Company on the form prescribed by the Company.
14. WITHHOLDING TAXES.
14.1. Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or a tax event occurs, the Company may require the Participant to remit to the Company, or to the Parent, Subsidiary, or Affiliate, as applicable, employing the Participant an amount sufficient to satisfy applicable U.S. federal, state, local, and international income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items (the Tax-Related Items) legally due from the Participant prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable withholding obligations for Tax-Related Items. Unless otherwise determined by the Committee, the Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares will be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous trading day.
14.2. Stock Withholding. The Committee, or its delegate(s), as permitted by applicable law, in its sole discretion and pursuant to such procedures as it may specify from time to time and to limitations of local law, may require or permit a Participant to satisfy such Tax Related Items legally due from the
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Participant, in whole or in part by (without limitation) (a) paying cash, (b) having the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned shares having a Fair Market Value equal to the Tax-Related Items to be withheld, or (d) withholding from the proceeds of the sale of otherwise deliverable Shares acquired pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company. The Company may withhold or account for these Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory tax rate for the applicable tax jurisdiction, to the extent consistent with applicable laws.
15. TRANSFERABILITY. Unless determined otherwise by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including, without limitation, by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate. All Awards will be exercisable: (a) during the Participants lifetime only by the Participant or the Participants guardian or legal representative; (b) after the Participants death, by the legal representative of the Participants heirs or legatees; and (c) in the case of all awards except ISOs, by a Permitted Transferee.
16. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
16.1. Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant, except for any Dividend Equivalent Rights permitted by an applicable Award Agreement. Any Dividend Equivalent Rights will be subject to the same vesting or performance conditions as the underlying Award. In addition, the Committee may provide that any Dividend Equivalent Rights permitted by an applicable Award Agreement will be deemed to have been reinvested in additional Shares or otherwise reinvested. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to such stock dividends or stock distributions with respect to Unvested Shares, and any such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. The Committee, in its discretion, may provide in the Award Agreement evidencing any Award that the Participant will be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Shares underlying an Award during the period beginning on the date the Award is granted and ending, with respect to each Share subject to the Award, on the earlier of the date on which the Award is exercised or settled or the date on which it is forfeited provided, that no Dividend Equivalent Right will be paid with respect to the Unvested Shares, and such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. Such Dividend Equivalent Rights, if any, will be credited to the Participant in the form of additional whole Shares as of the date of payment of such cash dividends on Shares.
16.2. Restrictions on Shares. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a Right of Repurchase) a portion of any or all Unvested Shares held by a Participant following such Participants termination of Service at any time within ninety (90) days (or such longer or shorter time determined by the Committee) after the later of the date Participants Service terminates and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participants Purchase Price or Exercise Price, as the case may be.
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17. CERTIFICATES. All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends, and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state, or foreign securities law, or any rules, regulations, and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted, and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject.
18. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participants Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participants obligation to the Company under the promissory note, provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participants Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
19. REPRICING; EXCHANGE AND BUYOUT OF AWARDS. Without prior stockholder approval, the Committee may (a) reprice Options or SARs (and where such repricing is a reduction in the Exercise Price of outstanding Options or SARs, the consent of the affected Participants is not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them arising from the repricing), and (b) with the consent of the respective Participants (unless not required pursuant to Section 5.9 of the Plan), pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.
20. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable U.S. federal and state and foreign securities and exchange control and other laws, rules, and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable and/or (b) completion of any registration or other qualification of such Shares under any state, federal, or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification, or listing requirements of any foreign or state securities laws, exchange control laws, stock exchange, or automated quotation system, and the Company will have no liability for any inability or failure to do so.
21. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent, Subsidiary, or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary, or Affiliate to terminate Participants employment or other relationship at any time.
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22. CORPORATE TRANSACTIONS.
22.1. Assumption or Replacement of Awards by Successor. In the event that the Company is subject to a Corporate Transaction, outstanding Awards acquired under the Plan shall be subject to the agreement evidencing the Corporate Transaction, which need not treat all outstanding Awards in an identical manner. Such agreement, without the Participants consent, shall provide for one or more of the following with respect to all outstanding Awards as of the effective date of such Corporate Transaction:
(a) The continuation of an outstanding Award by the Company (if the Company is the successor entity).
(b) The assumption of an outstanding Award by the successor or acquiring entity (if any) of such Corporate Transaction (or by its parents, if any), which assumption, will be binding on all selected Participants; provided that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable.
(c) The substitution by the successor or acquiring entity in such Corporate Transaction (or by its parents, if any) of equivalent awards with substantially the same terms for such outstanding Awards (except that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable).
(d) The full or partial acceleration of exercisability or vesting and accelerated expiration of an outstanding Award and lapse of the Companys right to repurchase or re-acquire shares acquired under an Award or lapse of forfeiture rights with respect to shares acquired under an Award.
(e) The settlement of the full value of such outstanding Award (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity (or its parent, if any) with a fair market value equal to the required amount, followed by the cancellation of such Awards; provided however, that such Award may be cancelled if such Award has no value, as determined by the Committee, in its discretion. Subject to Section 409A of the Code, such payment may be made in installments and may be deferred until the date or dates the Award would have become exercisable or vested. Such payment may be subject to vesting based on the Participants continued service, provided that the vesting schedule shall not be less favorable to the Participant than the schedule under which the Award would have become vested or exercisable. For purposes of this Section 22.1(e), the fair market value of any security shall be determined without regard to any vesting conditions that may apply to such security.
(f) The cancellation of outstanding Awards in exchange for no consideration.
The Board shall have full power and authority to assign the Companys right to repurchase or re-acquire or forfeiture rights to such successor or acquiring corporation. In addition, in the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participant in writing or electronically that such Participants Award will, if exercisable, be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the expiration of such period. Awards need not be treated similarly in a Corporate Transaction and treatment may vary from Award to Award and/or from Participant to Participant.
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22.2. Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either: (a) granting an Award under this Plan in substitution of such other companys award, or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards will not reduce the number of Shares authorized for grant under the Plan or authorized for grant to a Participant in a calendar year.
22.3. Non-Employee Directors Awards. Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Non-Employee Directors will accelerate and such Awards will become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines.
23. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will be submitted for the approval of the Companys stockholders, consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.
24. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder will be governed by and construed in accordance with the laws of the State of Delaware (excluding its conflict of laws rules).
25. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan, provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval, provided further that a Participants Award will be governed by the version of this Plan then in effect at the time such Award was granted. No termination or amendment of the Plan will affect any then-outstanding Award unless expressly provided by the Committee. In any event, no termination or amendment of the Plan or any outstanding Award may adversely affect any then outstanding Award without the consent of the Participant, unless such termination or amendment is necessary to comply with applicable law, regulation, or rule.
26. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
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27. INSIDER TRADING POLICY. Each Participant who receives an Award will comply with any policy adopted by the Company from time to time covering transactions in the Companys securities by Employees, officers, and/or Directors of the Company, as well as with any applicable insider trading or market abuse laws to which the Participant may be subject.
28. ALL AWARDS SUBJECT TO COMPANY CLAWBACK OR RECOUPMENT POLICY. All Awards, subject to applicable law, will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participants employment or other service with the Company that is applicable to officers, Employees, Directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.
29. DEFINITIONS. As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:
29.1. Affiliate means (a) any entity that, directly or indirectly, is controlled by, controls, or is under common control with, the Company, and (b) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
29.2. Award means any award under the Plan, including any Option, Performance Award, Cash Award, Restricted Stock, Stock Bonus, Stock Appreciation Right, or Restricted Stock Unit.
29.3. Award Agreement means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which will be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award agreements that are not used for Insiders, the Committees delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.
29.4. Board means the Board of Directors of the Company.
29.5. Cash Award means an award as defined in Section 11 and granted under the Plan.
29.6. Cause means a determination by the Company that the Participant has committed an act or acts constituting any of the following: (i) dishonesty, fraud, misconduct or negligence in connection with Participants duties to the Company, (ii) unauthorized disclosure or use of the Companys confidential or proprietary information, (iii) misappropriation of a business opportunity of the Company, (iv) materially aiding Company competitor, (v) a felony conviction, (vi) failure or refusal to attend to the duties or obligations of the Participants position (vii) violation or breach of, or failure to comply with, the Companys code of ethics or conduct, any of the Companys rules, policies or procedures applicable to the Participant or any agreement in effect between the Company and the Participant or (viii) other conduct by such Participant that could be expected to be harmful to the business, interests or reputation of the Company. The determination as to whether Cause for a Participants termination exists will be made in good faith by the Company and will be final and binding on the Participant. This definition does not in any way limit the Companys or any Parents or Subsidiarys ability to terminate a Participants employment or services at any time as provided in Section 21 above. Notwithstanding the foregoing, the foregoing definition of Cause may, in part or in whole, be modified or replaced in each individual employment agreement, Award Agreement, or other applicable agreement with any Participant, provided that such document supersedes the definition provided in this Section 29.8.
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29.7. Code means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
29.8. Committee means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.
29.9. Common Stock means the common stock of the Company.
29.10. Company means Impel NeuroPharma, Inc., a Delaware corporation, or any successor corporation.
29.11. Consultant means any natural person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary, or Affiliate to render services to such entity.
29.12. Corporate Transaction means the occurrence of any of the following events: (a) 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 more than fifty percent (50%) of the total voting power represented by the Companys then-outstanding voting securities, provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Companys assets; (c) 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; (d) any other transaction which qualifies as a corporate transaction under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of capital stock of the Company), or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase, or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount will become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
29.13. Director means a member of the Board.
29.14. Disability means in the case of incentive stock options, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.
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29.15. Dividend Equivalent Right means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash, stock, or other property dividends in amounts equal equivalent to cash, stock, or other property dividends for each Share represented by an Award held by such Participant.
29.16. Effective Date means the day immediately prior to the Companys IPO Registration Date, subject to approval of the Plan by the Companys stockholders.
29.17. Employee means any person, including officers and Directors, providing services as an employee to the Company or any Parent, Subsidiary, or Affiliate. Neither service as a Director nor payment of a directors fee by the Company will be sufficient to constitute employment by the Company.
29.18. Exchange Act means the United States Securities Exchange Act of 1934, as amended.
29.19. Exchange Program means a program pursuant to which (a) outstanding Awards are surrendered, cancelled, or exchanged for cash, the same type of Award, or a different Award (or combination thereof); or (b) the exercise price of an outstanding Award is increased or reduced.
29.20. Exercise Price means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.
29.21. Fair Market Value means, as of any date, the value of a Share, determined as follows:
(a) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(b) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(c) in the case of an Option or SAR grant made on the IPO Registration Date, the price per share at which Shares are initially offered for sale to the public by the Companys underwriters in the initial public offering of Shares as set forth in the Companys final prospectus included within the registration statement on Form S-1 filed with the SEC under the Securities Act; or
(d) by the Board or the Committee in good faith.
29.22. Insider means an officer or Director of the Company or any other person whose transactions in the Companys Common Stock are subject to Section 16 of the Exchange Act.
29.23. IPO Registration Date means the date on which the Companys registration statement on Form S-1 in connection with its initial public offering of common stock is declared effective by the SEC under the Securities Act.
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29.24. IRS means the United States Internal Revenue Service.
29.25. Non-Employee Director means a Director who is not an Employee of the Company or any Parent, Subsidiary, or Affiliate.
29.26. Option means an award of an option to purchase Shares pursuant to Section 5.
29.27. Parent means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
29.28. Participant means a person who holds an Award under this Plan.
29.29. Performance Award means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
29.30. Performance Factors means any of the factors selected by the Committee and specified in an Award Agreement, from among the following measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively, or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied:
(a) profit before tax;
(b) billings;
(c) revenue;
(d) net revenue;
(e) earnings (which may include earnings before interest and taxes, earnings before taxes, net earnings, stock-based compensation expenses, depreciation, and amortization);
(f) operating income;
(g) operating margin;
(h) operating profit;
(i) controllable operating profit or net operating profit;
(j) net profit;
(k) gross margin;
(l) operating expenses or operating expenses as a percentage of revenue;
(m) net income;
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(n) earnings per share;
(o) total stockholder return;
(p) market share;
(q) return on assets or net assets;
(r) the Companys stock price;
(s) growth in stockholder value relative to a pre-determined index;
(t) return on equity;
(u) return on invested capital;
(v) cash flow (including free cash flow or operating cash flows);
(w) cash conversion cycle;
(x) economic value added;
(y) individual confidential business objectives;
(z) contract awards or backlog;
(aa) overhead or other expense reduction;
(bb) credit rating;
(cc) strategic plan development and implementation;
(dd) succession plan development and implementation;
(ee) improvement in workforce diversity;
(ff) customer indicators and/or satisfaction;
(gg) new product invention or innovation;
(hh) attainment of research and development milestones;
(ii) improvements in productivity;
(jj) bookings;
(kk) attainment of objective operating goals and employee metrics;
(ll) sales;
(mm) expenses;
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(nn) balance of cash, cash equivalents, and marketable securities;
(oo) completion of an identified special project;
(pp) completion of a joint venture or other corporate transaction;
(qq) employee satisfaction and/or retention;
(rr) research and development expenses;
(ss) working capital targets and changes in working capital; and
(tt) any other metric that is capable of measurement as determined by the Committee.
The Committee may provide for one or more equitable adjustments to the Performance Factors to preserve the Committees original intent regarding the Performance Factors at the time of the initial award grant, such as but not limited to, adjustments in recognition of unusual or non-recurring items such as acquisition related activities or changes in applicable accounting rules. It is within the sole discretion of the Committee to make or not make any such equitable adjustments.
29.31. Performance Period means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Factors will be measured for the purpose of determining a Participants right to, and the payment of, a Performance Award.
29.32. Performance Share means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
29.33. Performance Unit means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
29.34. Permitted Transferee means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employees household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests.
29.35. Plan means this Impel NeuroPharma, Inc., 2021 Equity Incentive Plan.
29.36. Purchase Price means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.
29.37. Restricted Stock Award means an Award as defined in Section 6 and granted under the Plan, or issued pursuant to the early exercise of an Option.
29.38. Restricted Stock Unit means an Award as defined in Section 9 and granted under the Plan.
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29.39. SEC means the United States Securities and Exchange Commission.
29.40. Securities Act means the United States Securities Act of 1933, as amended.
29.41. Service will mean service as an Employee, Consultant, Director, or Non-Employee Director, to the Company or a Parent, Subsidiary, or Affiliate, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence approved by the Company, provided that such leave is for a period of not more than three (3) months unless reemployment upon the expiration of such leave is guaranteed by contract or statute. Notwithstanding anything to the contrary, an Employee will not be deemed to have ceased to provide Service if a formal policy adopted from time to time by the Company and issued and promulgated to employees in writing provides otherwise. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension or modification of vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary, or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military or other protected leave, if required by applicable laws, vesting will continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participants returning from military leave, he or she will be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide Service to the Company throughout the leave on the same terms as he or she was providing Service immediately prior to such leave. An employee will have terminated employment as of the date he or she ceases to provide Service (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment will not be extended by any notice period or garden leave mandated by local law, provided, however, that a change in status from an Employee to a Consultant or Non-Employee Director (or vice versa) will not terminate the Participants Service, unless determined by the Committee, in its discretion. The Committee will have sole discretion to determine whether a Participant has ceased to provide Service and the effective date on which the Participant ceased to provide Service.
29.42. Shares means shares of the Common Stock and the common stock of any successor entity of the Company.
29.43. Stock Appreciation Right means an Award defined in Section 8 and granted under the Plan.
29.44. Stock Bonus means an Award defined in Section 7 and granted under the Plan.
29.45. Subsidiary means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
29.46. Treasury Regulations means regulations promulgated by the United States Treasury Department.
29.47. Unvested Shares means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).
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NOTICE OF PERFORMANCE SHARES AWARD
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
Unless otherwise defined herein, the terms defined in the Impel NeuroPharma, Inc. (the Company) 2021 Equity Incentive Plan (the Plan) shall have the same meanings in this Notice of Performance Shares Award (the Notice) and the attached Performance Shares Award Agreement (the Performance Shares Agreement). You have been granted an award of Shares (the Performance Shares Award) under the Plan subject to the terms and conditions of the Plan, this Notice and the attached Performance Shares Agreement.
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Name: |
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Address: |
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Number of Shares: |
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Date of Grant: |
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Fair Market Value on Date of Grant: |
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Vesting Commencement Date: | ||||||
Vesting Schedule: | Subject to the limitations set forth in this Notice, the Plan and the Performance Shares Agreement, the Shares will vest in accordance with the following schedule: [INSERT VESTING SCHEDULE] |
This Notice may be executed and delivered electronically, whether via the Companys intranet or the Internet site of a third party or via email or any other means of electronic delivery specified by the Company. By accepting the Performance Shares Award, you consent to the electronic delivery and acceptance as further set forth in the Performance Shares Agreement. You acknowledge that the vesting of the Shares subject to the Performance Shares Award pursuant to this Notice is earned only by continuing Service and meeting the performance factors enumerated under the Vesting Schedule above, but you understand that your employment or consulting relationship with the Company or a Parent or Subsidiary is for an unspecified duration and can be terminated at any time, and that nothing in this Notice, the Performance Shares Agreement or the Plan changes the nature of that relationship. By accepting the Performance Shares Award, you and the Company agree that the Performance Shares Award is granted under and governed by the terms and conditions of the Plan, the Notice and the Performance Shares Agreement
PARTICIPANT
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IMPEL NEUROPHARMA, INC.
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Print Name: | By: | |||||||
Signature: | Its: |
PERFORMANCE SHARES AGREEMENT
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
You have been granted a Performance Shares Award (Performance Shares Award) by Impel NeuroPharma, Inc. (the Company), subject to the terms, restrictions and conditions of the Companys 2021 Equity Incentive Plan (the Plan), the Notice of Performance Shares Award (Notice) and this Performance Shares Agreement (this Agreement).
1. Settlement. Your Performance Shares Award shall be settled in Shares and the Companys transfer agent shall record ownership of such Shares in your name as soon as reasonably practicable after achievement of the performance factors enumerated under the Vesting Schedule in the Notice.
2. No Stockholder Rights. Unless and until you are recorded as the holder of such Shares on the stock records of the Company and its transfer agent, you shall have no right to dividends or to vote Shares.
3. No-Transfer. Your interest in this Performance Shares Award shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of by you or any person whose interest derives from your interest.
4. Restrictions on Resale. By signing this Agreement, you agree not to sell any Shares acquired pursuant to the Plan and this Agreement at a time when applicable laws, regulations or Company or underwriter trading policies prohibit exercise or sale. This restriction will apply as long as you are providing Service to the Company or a Subsidiary of the Company.
5. Termination. If your Service terminates for any reason, all of your rights under the Plan, this Agreement and the Notice in respect of this Award shall immediately terminate. In case of any dispute as to whether a termination of Service has occurred, the Committee shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.
6. Tax Consequences. YOU SHOULD CONSULT A TAX ADVISER BEFORE ACQUIRING THE SHARES IN THE JURISDICTION IN WHICH YOU ARE SUBJECT TO TAX. Shares shall not be issued under this Agreement unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the acquisition or vesting of Shares.
7. Responsibility for Taxes. Regardless of any action the Company or, if different, your employer (the Employer) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to your participation in the Plan and legally applicable to you (Tax-Related Items), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer. You further acknowledge that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Performance Shares Award, including the grant of the Performance Shares Award, the issuance of the Shares subject to the Performance Shares Award, the vesting of such Shares, the subsequent sale of such Shares and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the Performance Shares Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
The Company will only recognize you as a record holder of Shares subject to the Performance Shares Award if you have paid or made, prior to any relevant taxable or tax withholding event, as applicable, adequate arrangements satisfactory to the Company and/or the Employer to satisfy any withholding obligation the
Company and/or the Employer may have for Tax-Related Items. In this regard, you authorize the Company and/or the Employer, and their respective agents, at their discretion, to withhold all applicable Tax-Related Items from your wages or other cash compensation paid to you by the Company and/or the Employer or by withholding from proceeds of the sale of the Shares subject to the Performance Shares Award either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sale pursuant to this authorization). The Committee may also authorize one or a combination of the following methods to satisfy Tax-Related Items: (a) payment by you to the Company or the Employer of an amount equal to the Tax-Related Items in cash, (b) having the Company withhold Shares subject to the Performance Shares Award that would otherwise be issued to you when they vest having a value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned Shares having a value equal to the Tax-Related Items to be withheld, or (d) any other arrangement approved by the Company and permissible under applicable law; in all cases, under such rules as may be established by the Committee and in compliance with the Companys Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided, however, that if you are a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale (unless the Committee shall establish an alternate method prior to the taxable or withholding event). You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or the issuance of Shares subject to this Performance Shares Award or vesting thereof that cannot be satisfied by the means previously described.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Shares subject to the Performance Shares Award that would otherwise be released when they vest. If the obligation for Tax-Related Items is satisfied by withholding in Shares that would otherwise be subject to release when they vest, for tax purposes, you are deemed to have been issued the full number of such Shares, notwithstanding that a number of the such Shares are held back solely for the purpose of paying the Tax-Related Items.
Finally, you acknowledge that the Company has no obligation to deliver Shares subject to the Performance Shares Award to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.
8. Acknowledgement. The Company and you agree that the Performance Shares Award is granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions and the provisions of the Notice and this Agreement, and (iii) hereby accept the Performance Shares Award subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and this Agreement.
9. Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
10. Stop Transfer Orders.
(a) Stop-Transfer Notices. You agree 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.
(b) 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 the owner 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.
11. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Companys common stock may be listed or quoted at the time of such issuance or transfer. The Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.
12. Governing Law; Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of Washington and agree that any such litigation shall be conducted only in the courts of the State of Washington in King County, Washington or the federal courts of the United States for the State of Washington and no other courts.
10. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.
11. Consent to Electronic Delivery of All Plan Documents and Disclosures. By acceptance of this Performance Shares Award, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Performance Shares Award. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Companys discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.
12. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, Performance Shares Award shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Performance Shares Award (whether vested or unvested) and the recoupment of any gains realized with respect to your Performance Shares Award.
BY ACCEPTING THE PERFORMANCE SHARES AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
NOTICE OF RESTRICTED STOCK AWARD
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
Unless otherwise defined herein, the terms defined in the Impel NeuroPharma, Inc. (the Company) 2021 Equity Incentive Plan (the Plan) shall have the same meanings in this Notice of Restricted Stock Award (the Notice) and the attached Restricted Stock Agreement (the Restricted Stock Agreement).
You have been granted the opportunity to purchase Shares that are subject to restrictions (the Restricted Shares) and the terms and conditions of the Plan, this Notice and the attached Restricted Stock Agreement.
Name of Purchaser: |
Total Number of Restricted Shares Awarded: | ||
Fair Market Value per Restricted Share: | $ | |
Total Fair Market Value of Award: | $ | |
Purchase Price per Restricted Share: | $ | |
Total Purchase Price for all Restricted Shares: | $ | |
Date of Grant: | ||
Vesting Commencement Date: | ||
Vesting Schedule: | [Sample vesting language:] [Subject to the limitations set forth in this Notice, the Plan and the Restricted Stock Agreement, 25% of the total number of Restricted Shares will vest when you complete 12 months of continuous Service from the Vesting Commencement Date. Thereafter, an additional 1/16th of the total number of Restricted Shares will vest when you complete each quarter of Service.] [Note: actual vesting language to match vesting schedule approved by the Board or Committee] |
This Notice may be executed and delivered electronically, whether via the Companys intranet or the Internet site of a third party or via email or any other means of electronic delivery specified by the Company. By purchasing the Restricted Shares, you consent to the electronic delivery and acceptance as further set forth in the Restricted Stock Agreement. You acknowledge that the vesting of the Restricted Shares pursuant to this Notice is earned only by continuing Service, but you understand that your employment or consulting relationship with the Company or a Parent or Subsidiary is for an unspecified duration and can be terminated at any time, and that nothing in this Notice, the Restricted Stock Agreement or the Plan changes the nature of that relationship. By accepting the Restricted Shares, you and the Company agree that the Restricted Shares are granted under and governed by the terms and
conditions of the Plan, this Notice and the Restricted Stock Agreement. If the Restricted Stock Agreement is not executed by you within thirty (30) days of the Companys delivery of this Agreement to you, then this award shall be void.
PARTICIPANT:
|
IMPEL NEUROPHARMA, INC.
|
Signature | By: | |||||||
Date: | Its: |
RESTRICTED STOCK AGREEMENT
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
THIS RESTRICTED STOCK AGREEMENT (this Agreement) is made by and between Impel NeuroPharma, Inc., a Delaware corporation (the Company), and the purchaser (you) named on the Notice of Restricted Stock Award (the Notice) pursuant to the Companys 2021 Equity Incentive Plan (the Plan) as of the date you have executed the Notice. Unless otherwise defined herein, the terms defined in the Plan shall have the same meanings in this Agreement.
1. Sale of Stock. Subject to the terms and conditions of this Agreement, on the Purchase Date (as defined below) the Company will issue and sell to you, and you agree to purchase from the Company, the number of Restricted Shares shown on the Notice at the Purchase Price per Restricted Share set forth on the Notice. The term Restricted Shares refers to the purchased Restricted Shares and all securities received in replacement of or in connection with the Restricted Shares pursuant to stock dividends or splits, all securities received in replacement of the Restricted Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to which you are entitled by reason of your ownership of the Restricted Shares.
2. Time and Place of Purchase. The purchase and sale of the Restricted Shares under this Agreement shall occur at the principal office of the Company simultaneously with the execution of this Agreement by the parties, or on such other date as the Company and you shall agree (the Purchase Date). On the Purchase Date, the Company will issue a stock certificate registered in your name, or uncertificated shares designated for you in book entry form on the records of the Companys transfer agent, representing the Restricted Shares to be purchased by you against payment of the purchase price therefor by you by (a) check or wire transfer made payable to the Company, (b) cancellation of indebtedness of the Company to you, (c) your personal Services that the Committee has determined have already been or will be rendered to the Company, or (d) a combination of the foregoing.
3. Restrictions on Resale. By signing this Agreement, you agree not to sell any Restricted Shares acquired pursuant to the Plan and this Agreement at a time when applicable laws, regulations or Company or underwriter trading policies prohibit exercise or sale. This restriction will apply as long as you are providing Service to the Company or a Subsidiary of the Company.
4. Companys Repurchase Right for Unvested Shares. The Company, or (subject to Section 4.4) its assignee, shall have the right (but not the obligation) to repurchase a portion of the Restricted Shares that are Unvested Shares (as defined below) at the times and on the terms and conditions set forth in this Section (the Repurchase Right) if your Service terminates for any reason, or no reason, including without limitation, death, Disability (as defined in the Plan), voluntary resignation or termination by the Company with or without Cause.
4.1 Termination of Service. In case of any dispute as to whether your Service has terminated, the Committee shall have discretion to determine in good faith whether your Service has been terminated and the effective date of your termination of Service.
4.2 Vested and Unvested Shares. Restricted Shares that are vested pursuant to the Vesting Schedule set forth in the Notice are Vested Shares. Restricted Shares that are not vested pursuant to the Vesting Schedule set forth in the Notice are Unvested Shares. On the Date of Grant, all of the Restricted Shares will be Unvested Shares. No fractional Restricted Shares shall be issued. No
Restricted Shares will become Vested Shares after your termination of Service unless as set forth in the Vesting Schedule in the Notice of Grant. The number of the Restricted Shares that are Vested Shares or Unvested Shares will be proportionally adjusted to reflect any stock split, reverse stock split or similar change in the capital structure of the Company as set forth in Section 2.6 of the Plan occurring after the Date of Grant.
4.3 Exercise of Repurchase Right. Unless the Company provides written notice to you within 90 days from the date of termination of your Service to the Company that the Company does not intend to exercise its Repurchase Right with respect to some or all of the Unvested Shares, the Repurchase Right shall be deemed automatically exercised by the Company as of the 90th day following such termination, provided that the Company may notify you that it is exercising its Repurchase Right as of a date prior to such 90th day. Unless you are otherwise notified by the Company pursuant to the preceding sentence that the Company does not intend to exercise its Repurchase Right as to some or all of the Unvested Shares, execution of this Agreement by you constitutes written notice to you of the Companys intention to exercise its Repurchase Right with respect to all Unvested Shares to which such Repurchase Right applies at the time of your termination of Service. The Company, at its choice, may satisfy its payment obligation to you with respect to exercise of the Repurchase Right by either (A) delivering a check to you or wiring funds in the amount of the purchase price for the Unvested Shares being repurchased, or (B) in the event you are indebted to the Company, canceling an amount of such indebtedness equal to the purchase price for the Unvested Shares being repurchased, or (C) by a combination of (A) and (B) so that the combined payment and cancellation of indebtedness equals such purchase price. In the event of any deemed automatic exercise of the Repurchase Right by canceling an amount of such indebtedness equal to the purchase price for the Unvested Shares being repurchased, such cancellation of indebtedness shall be deemed automatically to occur as of the date of termination of your Service unless the Company otherwise satisfies its payment obligations. As a result of any repurchase of Unvested Shares pursuant to the Repurchase Right, the Company shall become the legal and beneficial owner of the Unvested Shares being repurchased and shall have all rights and interest therein or related thereto, and the Company shall have the right to transfer to its own name the number of Unvested Shares being repurchased by the Company, without further action by you.
4.4 Assignment. The Repurchase Right may be assigned by the Company in whole or in part to any persons or organization.
4.5 Additional or Exchanged Securities and Property. Subject to the provisions of Section 4.2 above, in the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed or issued with respect to, any Unvested Shares shall immediately be subject to the Repurchase Right. Appropriate adjustments shall be made to the price per share to be paid for Unvested Shares upon the exercise of the Repurchase Right (by allocating such price among the Unvested Shares and such other securities or property), provided that the aggregate purchase price payable for the Unvested Shares and all such other securities and property shall remain the same price that was original payable under the Repurchase Right to repurchase such Unvested Shares. Subject to the provisions of Section 4.2 above, in the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Repurchase Right may be exercised by the Companys successor.
5. Non-Transferability of Unvested Shares. In addition to any other limitation on transfer created by applicable securities laws or any other agreement between the Company and you, you may not transfer any Unvested Shares, or any interest therein, unless consented to in writing by a duly authorized
representative of the Company. Any purported transfer is void and of no effect, and no purported transferee thereof will be recognized as a holder of the Unvested Shares for any purpose whatsoever. Should such a transfer purport to occur, the Company may refuse to carry out the transfer on its books, set aside the transfer, or exercise any other legal or equitable remedy. In the event the Company consents to a transfer of Unvested Shares, all transferees of Restricted Shares or any interest therein will receive and hold such Restricted Shares or interest subject to the provisions of this Agreement, including, insofar as applicable, the Repurchase Right. In the event of any purchase by the Company hereunder where the Restricted Shares or interest are held by a transferee, the transferee shall be obligated, if requested by the Company, to transfer the Restricted Shares or interest you for consideration equal to the amount to be paid by the Company hereunder. In the event the Repurchase Right is deemed exercised by the Company, the Company may deem any transferee to have transferred the Restricted Shares or interest to you prior to their purchase by the Company, and payment of the purchase price by the Company to such transferee shall be deemed to satisfy your obligation to pay such transferee for such Restricted Shares or interest, and also to satisfy the Companys obligation to pay you for such Restricted Shares or interest.
6. Acceptance of Restrictions. Purchase of the Restricted Shares shall constitute your agreement to such restrictions and the legending of your certificates or the notation in the Companys direct registration system for stock issuance and transfer of such restrictions and accompanying legends set forth in Section 7.1 with respect thereto. Notwithstanding such restrictions, however, so long as you are the holder of the Restricted Shares, or any portion thereof, he or she shall be entitled to receive all dividends declared on and to vote the Restricted Shares and to all other rights of a stockholder with respect thereto.
7. Stop Transfer Orders.
7.1 Stop-Transfer Notices. You agree 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.
7.2 Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Restricted Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as the owner or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Restricted Shares shall have been so transferred.
8. No Rights as Employee, Director or Consultant. You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is at-will), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.
9. Miscellaneous.
9.1 Acknowledgement. The Company and you agree that the Restricted Shares are granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions and the provisions of the Notice and this Agreement, and (iii) hereby accept the Restricted Shares subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and the Restricted Stock Agreement.
9.2 Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Restricted Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
9.3 Compliance with Laws and Regulations. The issuance of Restricted Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Companys common stock may be listed or quoted at the time of such issuance or transfer. The Restricted Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.
9.4 Governing Law; Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of Washington and agree that any such litigation shall be conducted only in the courts of Washington in King County, Washington or the federal courts of the United States for the State of Washington and no other courts.
9.5 Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.
9.6 Notices. Any notice to be given under the terms of the Plan shall be addressed to the Company in care of its principal office, and any notice to be given to you shall be addressed to you at the address maintained by the Company for such person or at such other address as you may specify in writing to the Company. Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (a) at the time of personal delivery, if delivery is in person; (b) at the time of transmission by facsimile, addressed to the other party at its facsimile number specified herein (or hereafter modified by subsequent notice to the parties hereto), with confirmation of receipt made by both telephone and printed confirmation sheet verifying successful transmission of the facsimile; (c) one (1) business day after deposit with an express overnight courier for United States deliveries, or two (2) business days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; or (d) three (3) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries. All notices for delivery outside the United States will be sent by facsimile or by express courier. All notices not
delivered personally or by facsimile will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address or facsimile number set forth below the signature lines of this Agreement, or at such other address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto. Notices to the Company will be marked Attention: [title].
9.7 U.S. Tax Consequences. Unless an Election (defined below) is made, upon vesting of Restricted Shares, you will include in taxable income the difference between the fair market value of the vesting Restricted Shares, as determined on the date of their vesting, and the price paid for the Restricted Shares. This will be treated as ordinary income by you and will be subject to withholding by the Company when required by applicable law. In the absence of an Election, the Company shall satisfy the withholding requirements as set forth in Section 10 below. If you make an Election, then you must, prior to making the Election, pay in cash (or cash equivalent) to the Company an amount equal to the amount the Company is required to withhold for income and employment taxes.
10. Responsibility for Taxes. Regardless of any action the Company or, if different, your employer (the Employer) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to your participation in the Plan and legally applicable to you (Tax-Related Items), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer. You further acknowledge that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Restricted Shares purchased under this award, including the issuance of the Restricted Shares or vesting of such Restricted Shares, the subsequent sale of Restricted Shares and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the award or any aspect of the Restricted Shares to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
The Company will only recognize you as a record holder of Restricted Shares if you have paid or made, prior to any relevant taxable or tax withholding event, as applicable, adequate arrangements satisfactory to the Company and/or the Employer to satisfy any withholding obligation the Company and/or the Employer may have for Tax-Related Items. In this regard, you authorize the Company and/or the Employer, and their respective agents, at their discretion, to withhold all applicable Tax-Related Items from your wages or other cash compensation paid to you by the Company and/or the Employer or by one or a combination of the following methods: (a) payment by you to the Company or the Employer of an amount equal to the Tax-Related Items in cash, (b) having the Company withhold otherwise deliverable Restricted Shares that would otherwise be released from the Repurchase Right when they vest having a value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned Shares having a value equal to the Tax-Related Items to be withheld, (d) withholding from proceeds of the sale of the Restricted Shares either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sale pursuant to this authorization), or (e) any other arrangement approved by the Company and permissible under applicable law; in all cases, under such rules as may be established by the Committee and in compliance with the Companys Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided, however, that if you are a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale under (d) above (unless the Committee shall establish an alternate method prior to the taxable or withholding event). You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your Participation in the Plan or your purchase of Restricted Shares that cannot be satisfied by the means previously described.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Restricted Shares that would otherwise be released from the Repurchase Right when they vest. If the obligation for Tax-Related Items is satisfied by withholding in Restricted Shares that would otherwise be released from the Repurchase Right when they vest, for tax purposes, you are deemed to have been issued the full number of Restricted Shares, notwithstanding that a number of the Restricted Shares are held back solely for the purpose of paying the Tax-Related Items.
Finally, you acknowledge that the Company has no obligation to deliver Restricted Shares or proceeds from the sale of Restricted Shares to you or to release Restricted Shares from the Repurchase Right when they vest until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.
11. Section 83(b) Election. You hereby acknowledge that you have been informed that, with respect to the purchase of the Restricted Shares, an election may be filed by you with the Internal Revenue Service, within 30 days of the purchase of the Restricted Shares, electing for United States tax purposes pursuant to Section 83(b) of the Code to be taxed currently on any difference between the purchase price of the Restricted Shares and their Fair Market Value on the date of purchase (the Election). Making the Election will result in recognition of taxable income to you on the date of purchase, measured by the excess, if any, of the Fair Market Value of the Restricted Shares over the purchase price for the Restricted Shares. Absent such an Election, taxable income will be measured and recognized by you at the time or times on which the Companys Repurchase Right lapses. You are strongly encouraged to seek the advice of your own tax advisors in connection with the purchase of the Restricted Shares and the advisability of filing of the Election. YOU ACKNOWLEDGE THAT IT IS SOLELY YOUR RESPONSIBILITY, AND NOT THE COMPANYS RESPONSIBILITY, TO TIMELY FILE THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF YOU REQUEST THE COMPANY, OR ITS REPRESENTATIVE, TO MAKE THIS FILING ON YOUR BEHALF.
12. Consent to Electronic Delivery and Acceptance of All Plan Documents and Disclosures. By acceptance of this Restricted Stock Award, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Restricted Stock Award. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Companys discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.
13. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the Restricted Shares shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Restricted Shares (whether vested or unvested) and the recoupment of any gains realized with respect to your Restricted Shares.
BY ACCEPTING THIS RESTRICTED STOCK AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
RECEIPT
Impel NeuroPharma, Inc. hereby acknowledges receipt of (check as applicable):
☐ A check or wire transfer in the amount of $_______________
☐ The cancellation of indebtedness in the amount of $_______________
☐ Given by _____________________ as consideration for the book entry in your name or Certificate No. -__ for ____________ shares of Common Stock of Impel NeuroPharma, Inc.
☐ Other method as permitted by the Plan and specifically approved by the Board or Committee, and described here: ____________________________________________________________________________________
Dated: _____________________
IMPEL NEUROPHARMA, INC. |
By: |
Its: |
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD
You (the Participant) have been granted an award of Restricted Stock Units (RSUs) under the Impel NeuroPharma, Inc. (the Company) 2021 Equity Incentive Plan (the Plan), subject to the terms and conditions of the Plan, this Notice of Restricted Stock Unit Award (the Notice) and the attached Restricted Stock Unit Award Agreement (the Agreement).
Unless otherwise defined herein, the terms defined in the Plan will have the same meanings in this Notice and the electronic representation of this Notice established and maintained by the Company or a third party designated by the Company.
By accepting (whether in writing, electronically or otherwise) the RSUs, Participant acknowledges and agrees to the following:
1) |
Participant understands that Participants Service is for an unspecified duration, can be terminated at any time (i.e., is at-will), except where otherwise prohibited by applicable law, and that nothing in this Notice, the Agreement, or the Plan changes the nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice is subject to Participants continuing Service. To the extent permitted by applicable law, Participant agrees and acknowledges that the Vesting Schedule may change prospectively in the event that Participants Service status changes between full- and part-time and/or in the event the Participant is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee. |
2) |
This grant is made under and governed by the Plan, the Agreement, and this Notice, and this Notice is subject to the terms and conditions of the Agreement and the Plan, both of which are incorporated herein by reference. Participant has read the Notice, the Agreement, and the Plan. |
3) |
Participant has read the Companys Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Companys securities. |
4) |
By accepting the RSUs, Participant consents to electronic delivery and participation as set forth in the Agreement. |
PARTICIPANT | IMPEL NEUROPHARMA, INC. |
Signature: | By: | |||||||
Print Name: | Its: |
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
Unless otherwise defined in this Restricted Stock Unit Award Agreement (this Agreement), any capitalized terms used herein will have the same meaning ascribed to them in the Impel NeuroPharma, Inc. 2021 Equity Incentive Plan (the Plan).
Participant has been granted Restricted Stock Units (RSUs) subject to the terms, restrictions, and conditions of the Plan, the Notice of Restricted Stock Unit Award (the Notice), and this Agreement. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of the Notice or this Agreement, the terms and conditions of the Plan will prevail.
1. Settlement. Settlement of RSUs shall be made in the same calendar year as the applicable date of vesting under the vesting schedule set forth in the Notice; provided, however, that if a vesting date under the vesting schedule set forth in the Notice occurs in December, then settlement of any RSUs that vest in December shall be made within 30 days of vesting. Settlement of RSUs shall be in Shares. Settlement means the delivery to Participant of the Shares vested under the RSUs. No fractional RSUs or rights for fractional Shares will be created pursuant to this Agreement.
2. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant will have no ownership of the Shares allocated to the RSUs and will have no rights to dividends or to vote such Shares.
3. Dividend Equivalents. Dividend equivalents, if any (whether in cash or Shares), will not be credited to Participant, except as permitted by the Committee.
4. Non-Transferability of RSUs. The RSUs and any interest therein will not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any manner other than by will or by the laws of descent or distribution or court order or unless otherwise permitted by the Committee on a case-by-case basis.
5. Termination; Leave of Absence; Change in Status. If Participants Service terminates for any reason, all unvested RSUs will be forfeited to the Company immediately, and all rights of Participant to such RSUs automatically terminate without payment of any consideration to Participant. Participants Service will be considered terminated as of the date Participant is no longer providing services (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participants employment agreement, if any) and will not, subject to the laws applicable to Participants Award, be extended by any notice period mandated under local laws (e.g., Service would not include a period of garden leave or similar period mandated under employment laws in the jurisdiction where Participant is employed or the terms of Participants employment agreement, if any). Participant acknowledges and agrees that the Vesting Schedule may change prospectively in the event Participants service status changes between full- and part-time status and/or in the event Participant is on an approved leave of absence in accordance the Companys policies relating to work schedules and vesting of awards or as determined by the Committee. Participant acknowledges that the vesting of the Shares pursuant to this Notice and Agreement is subject to Participants continued Service. In case of any dispute as to whether termination of Service has occurred, the Committee will have sole discretion to determine whether such termination of Service has occurred and the effective date of such termination (including whether Participant may still be considered to be providing services while on an approved leave of absence).
6. Taxes.
(a) Responsibility for Taxes. To the extent permitted by applicable law, Participant acknowledges that, regardless of any action taken by the Company or, if different, a Parent, Subsidiary or Affiliate employing or retaining Participant (the Employer), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to Participants participation in the Plan and legally applicable to Participant (Tax-Related Items) is and remains Participants responsibility and may exceed the amount actually withheld by the Company or the Employer, if any. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant, vesting or settlement of the RSUs and the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends, and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate Participants liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. PARTICIPANT SHOULD CONSULT A TAX ADVISER APPROPRIATELY QUALIFIED IN THE COUNTRY OR COUNTRIES IN WHICH PARTICIPANT RESIDES OR IS SUBJECT TO TAXATION.
(b) Withholding. Prior to any relevant taxable or tax withholding event, to the extent permitted by applicable law and as applicable, Participant agrees to make arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any withholding obligations for Tax-Related Items by one or a combination of the following:
(i) |
withholding from Participants wages or other cash compensation paid to Participant by the Company and/or the Employer; or |
(ii) |
withholding from proceeds of the sale of Shares acquired upon settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on Participants behalf pursuant to this authorization and without further consent); |
(iii) |
withholding Shares to be issued upon settlement of the RSUs, provided the Company only withholds the number of Shares necessary to satisfy no more than the maximum applicable statutory withholding amounts; |
(iv) |
Participants payment of a cash amount (including by check representing readily available funds or a wire transfer); or |
(v) |
any other arrangement approved by the Committee and permitted under applicable law; |
all under such rules as may be established by the Committee and in compliance with the Companys Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale (unless the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish an alternate method prior to the taxable or withholding event).
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory rate for Participants tax jurisdiction(s) in which case Participant will have no entitlement to the equivalent amount in Shares and will receive a refund of any over-withheld amount in cash in accordance with applicable law. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of satisfying the withholding obligation for Tax-Related Items.
Finally, Participant agrees to pay to the Company and/or the Employer any amount of Tax-Related Items that the Company and/or the Employer may be required to withhold or account for as a result of Participants participation in the Plan that cannot be satisfied by the means previously described. The Company has no obligation to deliver Shares or proceeds from the sale of Shares to Participant until Participant has satisfied the obligations in connection with the Tax-Related Items as described in this Section.
7. Nature of Grant. By accepting the RSUs, Participant acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the RSUs is exceptional, voluntary, and occasional, and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;
(c) all decisions with respect to future RSUs or other grants, if any, will be at the sole discretion of the Company;
(d) Participant is voluntarily participating in the Plan;
(e) the RSUs and Participants participation in the Plan will not create a right to employment or be interpreted as forming or amending an employment or service contract with the Company or the Employer and will not interfere with the ability of the Company or the Employer, as applicable, to terminate Participants employment or service relationship (if any);
(f) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not intended to replace any pension rights or compensation;
(g) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement, or welfare benefits or similar payments;
(h) unless otherwise agreed with the Company, the RSUs, and the Shares subject to the RSUs, and the income and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of a Parent, Subsidiary, or Affiliate;
(i) the future value of the underlying Shares is unknown, indeterminable, and cannot be predicted with certainty;
(j) no claim or entitlement to compensation or damages will arise from forfeiture of the RSUs resulting from Participants termination of Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participants employment agreement, if any), and in consideration of the grant of the RSUs to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Employer, the Company, and any Parent, Subsidiary or Affiliate; waives his or her ability, if any, to bring any such claim; and releases the Employer, the Company, and any Parent, Subsidiary, or Affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant will be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(k) unless otherwise provided in the Plan or by the Company in its discretion, the RSUs and the benefits evidenced by this Agreement do not create any entitlement to have the RSUs or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any Corporate Transaction affecting the Shares; and
(l) the following provisions apply only if Participant is providing services outside the United States:
(i) |
the RSUs and the Shares subject to the RSUs are not part of normal or expected compensation or salary for any purpose; |
(ii) |
Participant acknowledges and agrees that neither the Company, the Employer nor any Parent or Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Participants local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement. |
8. No Advice Regarding Grant. The Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendations regarding Participants participation in the Plan, or Participants acquisition or sale of the underlying Shares. Participant acknowledges, understands and agrees he or she should consult with his or her own personal tax, legal, and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
9. Language. If Participant has received this Agreement or any other document related to the RSU and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
10. Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participants participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
11. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by the Notice, this Agreement, and the Plan (incorporated herein by reference). Participant: (a) acknowledges receipt of a copy of the Plan and the Plan prospectus, (b) represents that Participant has carefully read and is familiar with their provisions, and (c) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
12. Entire Agreement; Enforcement of Rights. This Agreement, the Plan, and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments, or negotiations concerning the purchase of the Shares hereunder are superseded. No adverse modification of or adverse amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the parties to this Agreement (which writing and signing may be electronic). The failure by either party to enforce any rights under this Agreement will not be construed as a waiver of any rights of such party.
13. Compliance with Laws and Regulations. The issuance of Shares and the sale of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state, federal, local and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Companys Shares may be listed or quoted at the time of such issuance or transfer. Participant understands that the Company is under no obligation to register or qualify the Common Stock with any state, federal, or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, Participant agrees that the Company will have unilateral authority to amend the Plan and this RSU Agreement without Participants consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this RSU Agreement will be endorsed with appropriate legends, if any, determined by the Company.
14. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision will be excluded from this Agreement, (b) the balance of this Agreement will be interpreted as if such provision were so excluded and (c) the balance of this Agreement will be enforceable in accordance with its terms.
15. Governing Law and Venue. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed, and interpreted in accordance with the laws of the State of Delaware, without giving effect to such states conflict of laws rules.
Any and all disputes relating to, concerning or arising from this Option Agreement, or relating to, concerning or arising from the relationship between the parties evidenced by the Plan or this Option Agreement, will be brought and heard exclusively in the United States District Court for the State of Washington or the Superior Court in King County, Washington. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning, or arising from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning, or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
16. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall create a right to employment or other Service or be interpreted as forming or amending an employment, service contract or relationship with the Company and this Agreement shall not affect in any manner whatsoever any right or power of the Company, or a Parent, Subsidiary or Affiliate, to terminate Participants Service, for any reason, with or without Cause.
17. Consent to Electronic Delivery of All Plan Documents and Disclosures. By Participants acceptance of the Notice (whether in writing or electronically), Participant and the Company agree that the RSUs are granted under and governed by the terms and conditions of the Plan, the Notice, and this Agreement. Participant has reviewed the Plan, the Notice, and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and Agreement, and fully understands all provisions of the Plan, the Notice, and this Agreement. Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice, and this Agreement. Participant further agrees to notify the Company upon any change in Participants residence address. By acceptance of the RSUs, Participant agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements), or other communications or information related to the RSUs and current or future participation in the Plan. Electronic delivery may include the delivery of a link to the Company intranet or the internet site of a third
party involved in administering the Plan, the delivery of the document via e-mail, or such other delivery determined at the Companys discretion. Participant acknowledges that Participant may receive from the Company a paper copy of any documents delivered electronically at no cost if Participant contacts the Company by telephone, through a postal service, or electronic mail to Stock Administration. Participant further acknowledges that Participant will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Participant understands that Participant must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Participant understands that Participants consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Participant has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service, or electronic mail to Stock Administration. Finally, Participant understands that Participant is not required to consent to electronic delivery if local laws prohibit such consent.
18. Insider Trading Restrictions/Market Abuse Laws. Participant acknowledges that, depending on Participants country of residence, Participant may be subject to insider trading restrictions and/or market abuse laws, which may affect Participants ability to, directly or indirectly, acquire or sell the Shares or rights to Shares under the Plan during such times as Participant is considered to have inside information regarding the Company (as defined by the laws in Participants country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Participant acknowledges that it is Participants responsibility to comply with any applicable restrictions and understands that Participant should consult his or her personal legal advisor on such matters. In addition, Participant acknowledges that he or she read the Companys Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Companys securities.
19. Code Section 409A. For purposes of this Agreement, a termination of employment will be determined consistent with the rules relating to a separation from service as defined in Section 409A of the Internal Revenue Code and the regulations thereunder (Section 409A). Notwithstanding anything else provided herein, to the extent any payments provided under this RSU Agreement in connection with Participants termination of employment constitute deferred compensation subject to Section 409A, and Participant is deemed at the time of such termination of employment to be a specified employee under Section 409A, then such payment will not be made or commence until the earlier of (a) the expiration of the six (6) month period measured from Participants separation from service to the Employer or the Company, or (b) the date of Participants death following such a separation from service; provided, however, that such deferral will only be effected to the extent required to avoid adverse tax treatment to Participant including, without limitation, the additional tax for which Participant would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral. To the extent any payment under this RSU Agreement may be classified as a short-term deferral within the meaning of Section 409A, such payment will be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
20. Lock-Up Agreement. In connection with the initial public offering of the Companys securities and upon request of the Company or the underwriters managing any underwritten offering of the Companys securities, Participant hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company however and whenever acquired (other than those included in the registration), except pursuant to a transfer for no consideration in accordance with Section 4 above, without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the public offering; provided however that, if during the last seventeen (17) days of the restricted period the Company
issues an earnings release or material news or a material event relating to the Company occurs, or prior to the expiration of the restricted period the Company announces that it will release earnings results during the sixteen (16)-day period beginning on the last day of the restricted period, then, upon the request of the managing underwriter, to the extent required by any Financial Industry Regulatory Authority rules, the restrictions imposed by this Section shall continue to apply until the end of the third trading day following the expiration of the fifteen (15)-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In no event will the restricted period extend beyond two hundred sixteen (216) days after the effective date of the registration statement.
21. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the RSUs will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participants employment or other Service that is applicable to Participant. In addition to any other remedies available under such policy and applicable law, the Company may require the cancellation of Participants RSUs (whether vested or unvested) and the recoupment of any gains realized with respect to Participants RSUs.
BY ACCEPTING THIS AWARD OF RSUS, PARTICIPANT AGREES TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
NOTICE OF STOCK APPRECIATION RIGHT AWARD
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
Unless otherwise defined herein, the terms defined in the Impel NeuroPharma, Inc. (the Company) 2021 Equity Incentive Plan (the Plan) shall have the same meanings in this Notice of Stock Appreciation Right Award (the Notice of Grant) and the attached Stock Appreciation Right Agreement (the SAR Agreement).
You have been granted an award of Stock Appreciation Rights (the SAR) of the Company under the Plan subject to the terms and conditions of the Plan, this Notice of Grant and the SAR Agreement.
Name: |
Address: |
Date of Grant: |
Vesting Commencement Date: |
Exercise Price: |
Total Number of Shares: |
Expiration Date: |
Vesting Schedule: | [Sample vesting language:] [The SAR becomes vested and exercisable with respect to the first 25% of the Shares subject to the SAR when you complete 12 months of continuous Service from the Vesting Commencement Date. Thereafter, the SAR becomes vested and exercisable with respect to an additional 1/16th of the Shares subject to the SAR when you complete each quarter of Service.] [Note: actual vesting language to match vesting schedule approved by the Board or Committee] |
This Notice of Grant may be executed and delivered electronically, whether via the Companys intranet or the Internet site of a third party or via email or any other means of electronic delivery specified by the Company. By accepting the SAR, you consent to the electronic delivery and acceptance as further set forth in the SAR Agreement. You acknowledge that the vesting of the SAR pursuant to this Notice of Grant is earned only by continuing Service, but you understand that your employment or consulting relationship with the Company or a Parent or Subsidiary is for an unspecified duration and can be terminated at any time and that nothing in this Notice of Grant, the SAR Agreement or the Plan changes the nature of that relationship. By accepting the SAR, you and the Company agree that the SAR is granted under and governed by the terms and conditions of the Plan, the Notice of Grant and the SAR Agreement.
PARTICIPANT
|
IMPEL NEUROPHARMA, INC.
|
Signature: | By: | |||||||
Print Name: | Its: |
STOCK APPRECIATION RIGHT AWARD AGREEMENT
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
You have been granted an award of Stock Appreciation Rights (the SAR) by Impel NeuroPharma, Inc. (the Company) under the Companys 2021 Equity Incentive Plan (the Plan), subject to the terms and conditions of the Plan, the Notice of Stock Appreciation Right Award (the Notice of Grant), and this Stock Appreciation Right Agreement (the Agreement).
1. Grant of SAR. You have been granted a SAR for the number of Shares set forth in the Notice of Grant with the Exercise Price set forth in the Notice of Grant. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail.
2. Termination Period.
(a) General Rule. If your Service terminates for any reason except death or Disability, and other than for Cause, then this SAR will expire at the close of business at Company headquarters on the date three months after your termination of Service (subject to the expiration detailed in Section 5 or as provided in the Plan). In no event shall this SAR be exercised later than the Expiration Date set forth in the Notice of Grant. If your Service is terminated for Cause, this SAR will expire upon the date of such termination. The Company determines when your Service terminates for all purposes under this Agreement.
You acknowledge and agree that the vesting schedule set forth in the Notice of Grant may change prospectively in the event that your service status changes between full and part-time status in accordance with Company policies relating to work schedules and vesting of awards. You acknowledge that the vesting of the SARs pursuant to this Agreement is earned only by continuing Service.
(b) Death; Disability. If you die before your Service terminates (or you die within three months of your termination of Service other than for Cause), then this SAR will expire at the close of business at Company headquarters on the date 12 months after the date of death (subject to the expiration detailed in Section 5 or as provided in the Plan). If your Service terminates because of your Disability, then this SAR will expire at the close of business at Company headquarters on the date 12 months after your termination date (subject to the expiration detailed in Section 5 or as provided in the Plan).
(c) No Notice. You are responsible for keeping track of these exercise periods following your termination of Service for any reason. The Company will not provide further notice of such periods. In no event shall this SAR be exercised later than the Expiration Date set forth in the Notice of Grant.
3. Exercise of SAR.
(a) Right to Exercise. Subject to the applicable provisions of the Plan and this Agreement, this SAR is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice of Grant and the applicable provisions of the Plan and this Agreement. In the event of your death, Disability, or other cessation of Service, the exercisability of the SAR is governed by the applicable provisions of the Plan, the Notice of Grant and this Agreement. This SAR may not be exercised for a fraction of a Share.
(b) Method of Exercise. This SAR is exercisable by delivery of an exercise notice in a form specified by the Company (the Exercise Notice), which shall state the election to exercise the SAR, the number of Shares in respect of which the SAR is being exercised, and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. This SAR shall be deemed to be exercised upon receipt by the Company of a fully executed Exercise Notice and any applicable withholding of Tax-Related Items that are required to be withheld as detailed in Section 7 below.
(c) No Shares shall be issued pursuant to the exercise of this SAR unless such issuance and exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed. Assuming such compliance, for income tax purposes the exercised Shares shall be considered transferred to you on the date the SAR is exercised with respect to such exercised Shares.
4. Non-Transferability of SAR. This SAR may not be transferred in any manner other than by will or by the laws of descent or distribution or court order and may be exercised during your lifetime only by you unless otherwise permitted by the Committee on a case-by-case basis. The terms of the Plan and this Agreement shall be binding upon your executors, administrators, heirs, successors and assigns.
5. Term of SAR. This SAR shall in any event expire on the Expiration Date set forth in the Notice of Grant, which date is ten years after the Date of Grant. You are responsible for keeping track of the Expiration Date. The Company is not obligated to provide notice of the Expiration Date and you should not depend on the Company providing any such notice (even if such notices have been provided in the past or are provided in some but not all circumstances).
6. Tax Consequences. You should consult a tax adviser for tax consequences relating to this SAR in the jurisdiction in which you are subject to tax. YOU SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS SAR OR DISPOSING OF THE SHARES. You will not be allowed to exercise this SAR unless you make arrangements acceptable to the Company to pay Tax-Related Items that are required to be withheld as further described in Section 7 below.
7. Responsibility for Taxes. Regardless of any action the Company or, if different, your employer (the Employer) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to your participation in the Plan and legally applicable to you (Tax-Related Items), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer. You further acknowledge that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this SAR, including the grant, vesting or exercise of this SAR, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the SAR to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to any relevant taxable or tax withholding event, as applicable, you shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy any withholding obligation the Company and/or the Employer may have for Tax-Related Items. In this regard, you authorize the Company and/or the Employer, and their respective agents, at their discretion, to withhold all applicable Tax-Related Items from your wages or other cash compensation paid to you by the Company and/or the Employer or by one or a combination of the following methods: (a) payment by you to the Company or the Employer of an amount equal to the Tax-Related Items in cash, (b) having the Company withhold otherwise deliverable cash or Shares having a value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned Shares having a value equal to the Tax-Related Items to be withheld, (d) withholding from proceeds of the sale of the Shares either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sale pursuant to this authorization), or (e) any other arrangement approved by the Company and permissible under applicable law; in all cases, under such rules as may be established by
the Committee and in compliance with the Companys Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided, however, that if you are a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale under (d) above (unless the Committee shall establish an alternate method prior to the taxable or withholding event). You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or your issuance of Shares upon exercise of the SARs that cannot be satisfied by the means previously described.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent in Shares. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested SARs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.
Finally, you acknowledge that the Company has no obligation to deliver Shares or proceeds from the sale of Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.
8. Acknowledgement. The Company and you agree that the SAR is granted under and governed by the Notice of Grant, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions and the provisions of the Notice of Grant and this Agreement, and (iii) hereby accept the SAR subject to all of the terms and conditions set forth in this SAR Agreement and those set forth in the Plan and the Notice of Grant. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant and the SAR Agreement.
9. Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice of Grant constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning this SAR are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
10. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Companys common stock may be listed or quoted at the time of such issuance or transfer. The Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.
11. Governing Law; Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice of Grant and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of Washington and agree that any such litigation shall be conducted only in the courts of Washington in King County, Washington or the federal courts of the United States for the State of Washington and no other courts.
12. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.
13. Consent to Electronic Delivery and Acceptance of All Plan Documents and Disclosures. By your acceptance of this SAR, you consent to the electronic delivery of the Notice of Grant, this Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the SAR. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Companys discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.
14. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the SAR shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your SAR (whether vested or unvested) and the recoupment of any gains realized with respect to your SAR.
BY ACCEPTING THIS SAR, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
NOTICE OF STOCK BONUS AWARD
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
Unless otherwise defined herein, the terms defined in the Impel NeuroPharma, Inc. (the Company) 2021 Equity Incentive Plan (the Plan) shall have the same meanings in this Notice of Stock Bonus Award (the Notice) and the attached Stock Bonus Award Agreement (the Stock Bonus Agreement).
You have been granted an award of Shares under the Plan (the Stock Bonus Award) subject to the terms and conditions of the Plan, this Notice and the attached Stock Bonus Agreement.
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Number of Shares: | ||||
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Fair Market Value on Date of Grant: |
This Notice may be executed and delivered electronically, whether via the Companys intranet or the Internet site of a third party or via email or any other means of electronic delivery specified by the Company. By accepting the Stock Bonus Award, you consent to the electronic delivery and acceptance as further set forth in the Stock Bonus Agreement. You understand that your employment or consulting relationship with the Company or a Parent or Subsidiary is for an unspecified duration and can be terminated at any time, and that nothing in this Notice, the Stock Bonus Agreement or the Plan changes the nature of that relationship. By accepting this Stock Bonus Award, you and the Company agree that this Stock Bonus Award is granted under and governed by the terms and conditions of the Plan, the Notice and the Stock Bonus Agreement.
PARTICIPANT
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IMPEL NEUROPHARMA, INC.
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Signature: | By: | |||||||
Date: | Its: |
STOCK BONUS AWARD AGREEMENT
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
You have been granted a Stock Bonus Award (Stock Bonus Award) by Impel Neuropharma, Inc. (the Company), subject to the terms, restrictions and conditions of the Companys 2021 Equity Incentive Plan (the Plan), the Notice of Stock Bonus Award (the Notice) and this Stock Bonus Award Agreement (this Agreement).
1. Issuance. Your Stock Bonus Award shall be issued in Shares, and the Companys transfer agent shall record ownership of such Shares in your name as soon as reasonably practicable.
2. No Stockholder Rights. Unless and until you are recorded as the holder of such Shares on the stock records of the Company and its transfer agent, you shall have no right to dividends or to vote Shares.
3. Restrictions on Resale. By signing this Agreement, you agree not to sell any Shares acquired pursuant to the Plan and this Agreement at a time when applicable laws, regulations or Company or underwriter trading policies prohibit exercise or sale. This restriction will apply as long as you are providing Service to the Company or a Subsidiary of the Company.
4. Tax Consequences. YOU SHOULD CONSULT A TAX ADVISER BEFORE ACQUIRING THE SHARES IN THE JURISDICTION IN WHICH YOU ARE SUBJECT TO TAX. Shares shall not be issued under this Agreement unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the acquisition of Shares.
5. Responsibility for Taxes. Regardless of any action the Company or, if different, your employer (the Employer) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to your participation in the Plan and legally applicable to you (Tax-Related Items), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer. You further acknowledge that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Stock Bonus Award, including the grant of the Stock Bonus Award, the issuance of the Shares subject to the Stock Bonus Award, the subsequent sale of such Shares and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the Stock Bonus Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
The Company will only recognize you as a record holder of Shares subject to the Stock Bonus Award if you have paid or made, prior to any relevant taxable or tax withholding event, as applicable, adequate arrangements satisfactory to the Company and/or the Employer to satisfy any withholding obligation the Company and/or the Employer may have for Tax-Related Items. In this regard, you authorize the Company and/or the Employer, and their respective agents, at their discretion, to withhold all applicable Tax-Related Items from your wages or other cash compensation paid to you by the Company and/or the Employer or by one or a combination of the following methods: (a) payment by you to the Company or the Employer of an amount equal to the Tax-Related Items in cash, (b) having the Company withhold Shares subject to the Stock Bonus Award having a value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned Shares having a value equal to the Tax-Related Items to be withheld, (d) withholding from proceeds of the sale of the Shares subject to the Stock Bonus Award either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sale pursuant to this authorization), or (e) any other arrangement approved by the Company and permissible under applicable law; in
all cases, under such rules as may be established by the Committee and in compliance with the Companys Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided, however, that if you are a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale under (d) above (unless the Committee shall establish an alternate method prior to the taxable or withholding event). You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or the issuance of Shares subject to this Stock Bonus Award that cannot be satisfied by the means previously described.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Shares subject to the Stock Bonus Award that would otherwise be issued to you. If the obligation for Tax-Related Items is satisfied by withholding in Shares subject to the Stock Bonus Award that would otherwise be issued to you, for tax purposes, you are deemed to have been issued the full number of such Shares, notwithstanding that a number of the such Shares are held back solely for the purpose of paying the Tax-Related Items.
Finally, you acknowledge that the Company has no obligation to deliver Shares subject to the Stock Bonus Award to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.
6. Acknowledgement. The Company and you agree that the Stock Bonus Award is granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions and the provisions of the Notice and this Agreement, and (iii) hereby accept the Stock Bonus Award subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and the Stock Bonus Award.
7. Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
8. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Companys common stock may be listed or quoted at the time of such issuance or transfer. The Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.
9. Stop Transfer Orders.
(a) Stop-Transfer Notices. You agree 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.
(b) 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 the owner 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.
10. Governing Law; Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of Washington and agree that any such litigation shall be conducted only in the courts of Washington in King County, Washington or the federal courts of the United States for the State of Washington and no other courts.
10. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.
11. Consent to Electronic Delivery and Acceptance of All Plan Documents and Disclosures. By acceptance of this Stock Bonus Award, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Stock Bonus Award. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Companys discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.
12. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the Stock Bonus Award shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Stock Bonus Award and the recoupment of any gains realized with respect to your Stock Bonus Award.
BY ACCEPTING THE STOCK BONUS AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT
You (the Optionee) have been granted an option to purchase shares of Common Stock of the Company (the Option) under the Impel NeuroPharma, Inc. (the Company) 2021 Equity Incentive Plan (the Plan) subject to the terms and conditions of the Plan, this Notice of Stock Option Grant (this Notice)., and the Stock Option Agreement (the Option Agreement).
Unless otherwise defined herein, the terms defined in the Plan will have the same meanings in this Notice and the electronic representation of this Notice established and maintained by the Company or a third party designated by the Company.
By accepting (whether in writing, electronically, or otherwise) the Option, Optionee acknowledges and agrees to the following:
1) |
Optionee understands that Optionees Service is for an unspecified duration, can be terminated at any time (i.e., is at-will) except where otherwise prohibited by applicable law, and that nothing in this Notice, the Option Agreement, or the Plan changes the nature of that relationship. Optionee acknowledges that the vesting of the Option pursuant to this Notice is subject to Optionees continuing Service. Optionee agrees and acknowledges that the Vesting Schedule may change prospectively in the event that Optionees Service status changes between full- and part-time and/or in the event the Optionee is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee. |
2) |
This grant is made under and governed by the Plan, the Agreement, and this Notice, and this Notice is subject to the terms and conditions of the Agreement and the Plan, both of which are incorporated herein by reference. Optionee has read the Notice, the Option Agreement and, the Plan. |
3) |
Optionee has read the Companys Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Optionee acquires or disposes of the Companys securities. |
4) |
By accepting the Option, Optionee consents to electronic delivery and participation as set forth in the Option Agreement. |
OPTIONEE | IMPEL NEUROPHARMA, INC. |
Signature: | By: | |||||||
Print Name: | Its: | |||||||
IMPEL NEUROPHARMA, INC.
2021 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined in this Stock Option Agreement (this Option Agreement), any capitalized terms used herein will have the same meaning ascribed to them in the Impel NeuroPharma, Inc. 2021 Equity Incentive Plan (the Plan).
Optionee has been granted an option to purchase Shares (the Option) of Impel NeuroPharma, Inc. (the Company), subject to the terms, restrictions, and conditions of the Plan, the Notice of Stock Option Grant (the Notice), and this Option Agreement. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of the Notice or this Option Agreement, the terms and conditions of the Plan will prevail.
1. Vesting. Subject to the applicable provisions of the Plan and this Option Agreement, the Option may be exercised, in whole or in part, in accordance with the Vesting Schedule set forth in the Notice. Optionee acknowledges and agrees that the Vesting Schedule may change prospectively in the event Optionees Service status changes between full and part-time and/or in the event Optionee is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee. Optionee acknowledges that the vesting of the Option pursuant to this Notice and Agreement is subject to Optionees continuing Service.
2. Grant of Option. Optionee has been granted an Option for the number of Shares set forth in the Notice at the exercise price per Share in U.S. Dollars set forth in the Notice (the Exercise Price). If designated in the Notice as an Incentive Stock Option (ISO), the Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if the Option is intended to be an ISO, to the extent that it exceeds the U.S. $100,000 rule of Code Section 422(d) it will be treated as a Nonqualified Stock Option (NSO).
3. Termination Period.
(a) General Rule. If Optionees Service terminates for any reason except death or Disability, and other than for Cause, then the Option will expire at the close of business at Company headquarters on the date three (3) months after Optionees Termination Date (as defined below) (with any exercise beyond three (3) months after the date Optionees employment terminates deemed to be the exercise of an NSO). The Company determines when Optionees Service terminates for all purposes under this Option Agreement.
(b) Death; Disability. If Optionee dies before Optionees Service terminates (or Optionee dies within three (3) months of Optionees termination of Service other than for Cause), then the Option will expire at the close of business at Company headquarters on the date twelve (12) months after the date of death (subject to the expiration details in Section 7). If Optionees Service terminates because of Optionees Disability, then the Option will expire at the close of business at Company headquarters on the date twelve (12) months after Optionees Termination Date (subject to the expiration details in Section 7).
(c) Cause. Unless otherwise determined by the Committee, the Option (whether or not vested) will terminate immediately upon the Optionees cessation of Services if the Company reasonably determines in good faith that such cessation of Services has resulted in connection with an act or failure to act constituting Cause (or the Optionees Services could have been terminated for Cause (without regard to the lapsing of any required notice or cure periods in connection therewith) at the time the Optionee terminated Services).
(d) No Notification of Exercise Periods. Optionee is responsible for keeping track of these exercise periods following Optionees termination of Service for any reason. The Company will not provide further notice of such periods. In no event will the Option be exercised later than the Expiration Date set forth in the Notice.
(e) Termination. For purposes of this Option, Optionees Service will be considered terminated as of the date Optionee is no longer providing Service to the Company, its Parent or one of its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Optionee is employed or the terms of Optionees employment agreement, if any) (the Termination Date). The Committee will have the exclusive discretion to determine when Optionee is no longer actively providing services for purposes of Optionees Option (including whether Optionee may still be considered to be providing services while on an approved leave of absence). Unless otherwise provided in this Option Agreement or determined by the Company, Optionees right to vest in this Option under the Plan, if any, will terminate as of the Termination Date and will not be extended by any notice period (e.g., Optionees period of Service would not include any contractual notice period or any period of garden leave or similar period mandated under employment laws in the jurisdiction where Optionee is employed or the terms of Optionees employment agreement, if any). Following the Termination Date, Optionee may exercise the Option only as set forth in the Notice and this Section, provided that the period (if any) during which Optionee may exercise the Option after the Termination Date, if any, will commence on the date Optionee ceases to provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Optionee is employed or terms of Optionees employment agreement, if any. If Optionee does not exercise this Option within the termination period set forth in the Notice or the termination periods set forth above, the Option will terminate in its entirety. In no event, may any Option be exercised after the Expiration Date of the Option as set forth in the Notice.
4. Exercise of Option.
(a) Right to Exercise. The Option is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice and the applicable provisions of the Plan and this Option Agreement. In the event of Optionees death, Disability, termination for Cause, or other cessation of Service, the exercisability of the Option is governed by the applicable provisions of the Plan, the Notice, and this Option Agreement. The Option may not be exercised for a fraction of a Share.
(b) Method of Exercise. The Option is exercisable by delivery of an exercise notice in a form specified by the Company (the Exercise Notice), which will state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the Exercised Shares), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice will be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. The Exercise Notice will be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares together with any applicable Tax-Related Items (as defined in Section 8 below). The Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price and payment of any applicable Tax-Related Items. No Shares will be issued pursuant to the exercise of the Option unless such issuance and exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed. Assuming such compliance, for United States income tax purposes the Exercised Shares will be considered transferred to Optionee on the date the Option is exercised with respect to such Exercised Shares.
(c) Exercise by Another. If another person wants to exercise the Option after it has been transferred to him or her in compliance with this Option Agreement, that person must prove to the Companys satisfaction that he or she is entitled to exercise the Option. That person must also complete the proper Exercise Notice form (as described above) and pay the Exercise Price (as described below) and any applicable Tax-Related Items (as described below).
5. Method of Payment. Payment of the aggregate Exercise Price will be by any of the following, or a combination thereof, at the election of Optionee:
(a) Optionees personal check (or readily available funds), wire transfer, or a cashiers check;
(b) certificates for shares of Company stock that Optionee owns, along with any forms needed to effect a transfer of those shares to the Company; the value of the shares, determined as of the effective date of the Option exercise, will be applied to the Exercise Price. Instead of surrendering shares of Company stock, Optionee may attest to the ownership of those shares on a form provided by the Company and have the same number of shares subtracted from the Option shares issued to Optionee. However, Optionee may not surrender, or attest to the ownership of, shares of Company stock in payment of the Exercise Price of Optionees Option if Optionees action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes;
(c) cashless exercise through irrevocable directions to a securities broker approved by the Company to sell all or part of the Shares covered by the Option and to deliver to the Company from the sale proceeds an amount sufficient to pay the Exercise Price and any applicable Tax-Related Items. The balance of the sale proceeds, if any, will be delivered to Optionee. The directions must be given by signing a special notice of exercise form provided by the Company; or
(d) any other method authorized by the Company;
provided, however, that the Company may restrict the available methods of payment to facilitate compliance with applicable law or administration of the Plan.
6. Non-Transferability of Option. In general, except as provided below, only Optionee may exercise this Option prior to Optionees death. Optionee may not transfer or assign this Option, except as provided below. For instance, Optionee may not sell this Option or use it as security for a loan. If Optionee attempts to do any of these things, this Option will immediately become invalid. However, if Optionee is a U.S. taxpayer, Optionee may dispose of this Option in Optionees will. If Optionee is a U.S. taxpayer and this Option is designated as a NSO in the Notice of Grant, then the Committee may, in its sole discretion, allow Optionee to transfer this Option as a gift to one or more family members. For purposes of this Agreement, family member means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in- law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law (including adoptive relationships), any individual sharing Optionees household (other than a tenant or employee), a trust in which one or more of these individuals have more than 50% of the beneficial interest, a foundation in which Optionee or one or more of these persons control the management of assets, and any entity in which Optionee or one or more of these persons own more than 50% of the voting interest. In addition, if Optionee is a U.S. taxpayer and this Option is designated as a NSO in the Notice of Grant, then the Committee may, in its sole discretion, allow Optionee to transfer this Option to Optionees spouse or former spouse pursuant to a domestic relations order in settlement of marital property rights. The Committee will allow Optionee to transfer this Option only if both Optionee and the transferee(s) execute the forms prescribed by the Committee, which include the consent of the transferee(s) to be bound by this Agreement. This Option may not be transferred in any manner other than by will or by the laws of descent or distribution or court order and may be exercised during Optionees lifetime only by Optionee, Optionees guardian, or legal representative, as permitted in the Plan and applicable local laws. The terms of the Plan and this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee.
7. Term of Option. The Option will in any event expire on the expiration date set forth in the Notice, which date is no more than ten (10) years after the Date of Grant (five (5) years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 5.3 of the Plan applies).
8. Taxes.
(a) Responsibility for Taxes. Optionee acknowledges that, regardless of any action taken by the Company or, if different, a Parent, Subsidiary, or Affiliate employing or retaining Optionee (the Employer), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account, or other tax related items related to Optionees participation in the Plan and legally applicable to Optionee (Tax-Related Items) is and remains Optionees responsibility and may exceed the amount actually withheld by the Company or the Employer, if any. Optionee further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Option, including, but not limited to, the grant, vesting, or exercise of this Option; the subsequent sale of Shares acquired pursuant to such exercise; and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of this Option to reduce or eliminate Optionees liability for Tax-Related Items or achieve any particular tax result. Further, if Optionee is subject to Tax-Related Items in more than one jurisdiction, Optionee acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. OPTIONEE SHOULD CONSULT A TAX ADVISER APPROPRIATELY QUALIFIED IN THE COUNTRY OR COUNTRIES IN WHICH OPTIONEE RESIDES OR IS SUBJECT TO TAXATION.
(b) Withholding. Prior to any relevant taxable or tax withholding event, as applicable, Optionee agrees to make arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Optionee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any withholding obligations for Tax-Related Items by one or a combination of the following, all under such rules as may be established by the Committee and in compliance with the Companys Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable:
(i) |
withholding from Optionees wages or other cash compensation paid to Optionee by the Company and/or the Employer; or |
(ii) |
withholding from proceeds of the sale of Shares acquired at exercise of this Option either through a voluntary sale or through a mandatory sale arranged by the Company (on Optionees behalf pursuant to this authorization and without further consent); |
(iii) |
withholding Shares to be issued upon exercise of the Option, provided the Company only withholds the number of Shares necessary to satisfy no more than applicable statutory withholding amounts; |
(iv) |
Optionees payment of a cash amount (including by check representing readily available funds or a wire transfer); or |
(v) |
any other arrangement approved by the Committee and permitted under applicable law; |
provided, however, that if Optionee is a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale (unless the Committee as constituted in accordance with Rule 16b-3 of the Exchange Act shall establish an alternate method from alternatives (i) (v) above prior to the Tax-Related Items withholding event).
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory rate for Optionees tax jurisdiction(s) in which case Optionee will have no entitlement to the equivalent amount in Shares and will receive a refund of any over-withheld amount in cash in accordance with applicable law. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Optionee is deemed to have been issued the full number of Exercised Shares; notwithstanding that a number of the Shares are held back solely for the purpose of satisfying the withholding obligation for Tax-Related Items.
Finally, Optionee agrees to pay to the Company and/or the Employer any amount of Tax-Related Items that the Company and/or the Employer may be required to withhold or account for as a result of Optionees participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if Optionee fails to comply with Optionees obligations in connection with the Tax-Related Items.
(c) Notice of Disqualifying Disposition of ISO Shares. If Optionee is subject to Tax-Related Items in the United States and sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i) two (2) years after the grant date, or (ii) one (1) year after the exercise date, Optionee will immediately notify the Company in writing of such disposition. Optionee agrees that he or she may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out any wages or other cash compensation paid to Optionee by the Company and/or the Employer.
9. Nature of Grant. By accepting the Option, Optionee acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature, and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the Option is exceptional, voluntary, and occasional, and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
(c) all decisions with respect to future options or other grants, if any, will be at the sole discretion of the Company;
(d) Optionee is voluntarily participating in the Plan;
(e) the Option and Optionees participation in the Plan will not create a right to employment or be interpreted as forming or amending an employment or service contract with the Company or the Employer, and will not interfere with the ability of the Company or the Employer, as applicable, to terminate Optionees employment or service relationship (if any);
(f) the Option and the Shares subject to the Option, and the income and value of same, are not intended to replace any pension rights or compensation;
(g) the Option and the Shares subject to the Option, and the income and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement, or welfare benefits or similar payments;
(h) unless otherwise agreed with the Company, the Option, and the Shares subject to the Option, and the income and value of same, are not granted as consideration for, or in connection with, the service Optionee may provide as a director of a Parent, Subsidiary, or Affiliate;
(i) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted with certainty; if the underlying Shares do not increase in value, the Option will have no value; if Optionee exercises the Option and acquires Shares, the value of such Shares may increase or decrease, even below the Exercise Price;
(j) no claim or entitlement to compensation or damages will arise from forfeiture of the Option resulting from Optionees termination of Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Optionee is employed or the terms of Optionees employment agreement, if any), and in consideration of the grant of the Option to which Optionee is otherwise not entitled, Optionee irrevocably agrees never to institute any claim against the Employer, the Company, and any Parent, Subsidiary, or Affiliate; waives his or her ability, if any, to bring any such claim; and releases the Employer, the Company, and any Parent, Subsidiary, or Affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Optionee will be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(k) unless otherwise provided in the Plan or by the Company in its discretion, the Option and the benefits evidenced by this Option Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any Corporate Transaction affecting the Shares; and
(l) neither the Employer, the Company, or any Parent, Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Optionees local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Optionee pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.
(m) the following provisions apply only if Optionee is providing services outside the United States:
(i) |
the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purpose; and |
(ii) |
Optionee acknowledges and agrees that neither the Company, the Employer nor any Parent or Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Optionees local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Optionee pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercised |
10. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Optionees participation in the Plan or Optionees acquisition or sale of the underlying Shares. Optionee acknowledges, understands, and agrees that he or she should consult with his or her own personal tax, legal, and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
11. Language. If Optionee has received this Option Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
12. Imposition of Other Requirements. The Company reserves the right to impose other requirements on Optionees participation in the Plan, on the Option, and on any Shares purchased upon exercise of the Option, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Optionee to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
13. Acknowledgement. The Company and Optionee agree that the Option is granted under and governed by the Notice, this Option Agreement and the Plan (incorporated herein by reference). Optionee: (a) acknowledges receipt of a copy of the Plan and the Plan prospectus, (b) represents that Optionee has carefully read and is familiar with their provisions, and (c) hereby accepts the Option subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
14. Entire Agreement; Enforcement of Rights. This Option Agreement, the Plan, and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments, or negotiations concerning the purchase of the Shares hereunder are superseded. No adverse modification of, or adverse amendment to, this Option Agreement, nor any waiver of any rights under this Option Agreement, will be effective unless in writing and signed by the parties to this Option Agreement (which writing and signing may be electronic). The failure by either party to enforce any rights under this Option Agreement will not be construed as a waiver of any rights of such party.
15. Compliance with Laws and Regulations. The issuance of Shares and the sale of Shares will be subject to and conditioned upon compliance by the Company and Optionee with all applicable state, federal, local and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Companys Shares may be listed or quoted at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Common Stock with any state, federal, or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, Optionee agrees that the Company will have unilateral authority to amend the Plan and this Option Agreement without Optionees consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Option Agreement will be endorsed with appropriate legends, if any, determined by the Company.
16. Severability. If one or more provisions of this Option Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision will be excluded from this Option Agreement, (b) the balance of this Option Agreement will be interpreted as if such provision were so excluded and (c) the balance of this Option Agreement will be enforceable in accordance with its terms.
17. Governing Law and Venue. This Option Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to such states conflict of laws rules.
Any and all disputes relating to, concerning or arising from this Option Agreement, or relating to, concerning or arising from the relationship between the parties evidenced by the Plan or this Option Agreement, will be brought and heard exclusively in the United States District Court for the State of Washington or the Superior Court, King County, Washington. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning, or arising from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning, or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
18. No Rights as Employee, Director or Consultant. Nothing in this Option Agreement will affect in any manner whatsoever any right or power of the Employer or the Company to terminate Optionees Service, for any reason, with or without Cause.
19. Lock-Up Agreement. In connection with the initial public offering of the Companys securities and upon request of the Company or the underwriters managing any underwritten offering of the Companys securities, Optionee hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company however and whenever acquired (other than those included in the registration), except pursuant to a transfer for no consideration in accordance with Section 6 above, without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute
an agreement reflecting the foregoing as may be requested by the underwriters at the time of the public offering; provided however that, if during the last seventeen (17) days of the restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs, or prior to the expiration of the restricted period the Company announces that it will release earnings results during the sixteen (16)-day period beginning on the last day of the restricted period, then, upon the request of the managing underwriter, to the extent required by any Financial Industry Regulatory Authority rules, the restrictions imposed by this Section shall continue to apply until the end of the third trading day following the expiration of the fifteen (15)-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In no event will the restricted period extend beyond two hundred sixteen (216) days after the effective date of the registration statement.
20. Consent to Electronic Delivery of All Plan Documents and Disclosures. By Optionees acceptance of the Notice (whether in writing or electronically), Optionee and the Company agree that the Option is granted under and governed by the terms and conditions of the Plan, the Notice, and this Option Agreement. Optionee has reviewed the Plan, the Notice, and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Notice and Agreement, and fully understands all provisions of the Plan, the Notice, and this Option Agreement. Optionee hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice, and this Option Agreement. Optionee further agrees to notify the Company upon any change in Optionees residence address. By acceptance of the Option, Optionee agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Option Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements), or other communications or information related to the Option and current or future participation in the Plan. Electronic delivery may include the delivery of a link to the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail, or such other delivery determined at the Companys discretion. Optionee acknowledges that Optionee may receive from the Company a paper copy of any documents delivered electronically at no cost if Optionee contacts the Company by telephone, through a postal service, or electronic mail to Stock Administration. Optionee further acknowledges that Optionee will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Optionee understands that Optionee must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Optionee understands that Optionees consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Optionee has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service, or electronic mail to Stock Administration. Finally, Optionee understands that Optionee is not required to consent to electronic delivery if local laws prohibit such consent.
21. Insider Trading Restrictions/Market Abuse Laws. Optionee acknowledges that, depending on Optionees country, Optionee may be subject to insider trading restrictions and/or market abuse laws, which may affect Optionees ability to acquire or sell the Shares or rights to Shares under the Plan during such times as Optionee is considered to have inside information regarding the Company (as defined by the laws in Optionees country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Optionee acknowledges that it is Optionees responsibility to comply with any applicable restrictions and understands that Optionee should consult his or her personal legal advisor on such matters. In addition, Optionee acknowledges that he or she has read the Companys Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Optionee acquires or disposes of the Companys securities.
22. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the Option will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Optionees employment or other Service that is applicable to Optionee. In addition to any other remedies available under such policy and applicable law, the Company may require the cancellation of Optionees Option (whether vested or unvested) and the recoupment of any gains realized with respect to Optionees Option.
BY ACCEPTING THIS OPTION, OPTIONEE AGREES TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
Exhibit 10.5
IMPEL NEUROPHARMA, INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. Impel NeuroPharma, Inc. adopted the Plan effective as of the Effective Date. The purpose of this Plan is to provide eligible employees of the Company and the Participating Corporations with a means of acquiring an equity interest in the Company, to enhance such employees sense of participation in the affairs of the Company. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2. ESTABLISHMENT OF PLAN. The Company proposes to grant rights to purchase shares of Common Stock to eligible employees of the Company and its Participating Corporations pursuant to this Plan. The Company intends this Plan to qualify as an employee stock purchase plan under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed, although the Company makes no undertaking or representation to maintain such qualification. Any term not expressly defined in this Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. In addition, with regard to offers of options to purchase shares of Common Stock under the Plan to employees working for a Subsidiary or an Affiliate outside the United States, this Plan authorizes the grant of options under a Non-Section 423 Component that is not intended to meet Section 423 requirements, provided, to the extent necessary under Section 423 of the Code, the other terms and conditions of the Plan are met.
Subject to Section 14, a total of 276,000 shares of Common Stock is reserved for issuance under this Plan. In addition, on each January 1 of each fiscal year following the fiscal year that contains the first Offering Date, the aggregate number of shares of Common Stock reserved for issuance under the Plan shall be increased automatically by the number of shares equal to one percent (1%) of the total number of shares of all classes of the Companys common stock issued and outstanding on each December 31st immediately prior to the date of increase (rounded down to the nearest whole share); provided, that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year. Subject to Section 14, no more than 5,520,000 shares of Common Stock may be issued over the term of this Plan. The number of shares initially reserved for issuance under this Plan and the maximum number of shares that may be issued under this Plan shall be subject to adjustments effected in accordance with Section 14. Any or all such shares may be granted under the Section 423 Component.
3. ADMINISTRATION. The Plan will be administered by the Committee. Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all eligible employees and Participants. The Committee will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility, to designate the Participating Corporations, to determine whether Participating Corporations shall participate in the Section 423 Component or Non-Section 423 Component and to decide upon any and all claims filed under the Plan. Every finding, decision and determination made by the Committee will, to the full extent permitted by law, be final and binding upon all parties. Notwithstanding any provision to the contrary in this Plan, the Committee may adopt rules, sub-plans, and/or procedures relating to the operation and administration of the Plan designed to comply with local laws, regulations or customs or to achieve tax, securities law or other objectives for eligible employees outside of the United States. The Committee will have the authority to determine the Fair Market Value of the Common Stock (which determination shall be final, binding and conclusive for all purposes) in accordance with Section 8 below and to interpret Section 8 of the Plan in connection with circumstances that impact the Fair Market Value. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from
time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company. For purposes of this Plan, the Committee may designate separate offerings under the Plan (the terms of which need not be identical) in which eligible employees of one or more Participating Corporations will participate, and the provisions of the Plan will separately apply to each such separate offering even if the dates of the applicable Offering Periods of each such offering are identical. To the extent permitted by Section 423 of the Code, the terms of each separate offering under the Plan need not be identical, provided that the rights and privileges established with respect to a particular offering are applied in an identical manner to all employees of every Participating Corporation whose employees are granted options under that particular offering. The Committee may establish rules to govern the terms of the Plan and the offering that will apply to Participants who transfer employment between the Company and Participating Corporations or between Participating Corporations, in accordance with requirements under Section 423 of the Code to the extent applicable.
4. ELIGIBILITY.
(a) Any employee of the Company or the Participating Corporations is eligible to participate in an Offering Period under this Plan, except that one or more of the following categories of employees may be excluded from coverage under the Plan by the Committee (other than where such exclusion is prohibited by applicable law):
(i) employees who do not meet eligibility requirements that the Committee may choose to impose (within the limits permitted by the Code); and
(ii) individuals who provide services to the Company or any of its Participating Corporations who are reclassified as common law employees for any reason except for federal income and employment tax purposes.
The foregoing notwithstanding, an individual shall not be eligible if his or her participation in the Plan is prohibited by the law of any country that has jurisdiction over him or her, if complying with the laws of the applicable country would cause the Plan to violate Section 423 of the Code, or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan.
(b) No employee who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, owns stock or holds options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary shall be granted an option to purchase Common Stock under the Plan. Notwithstanding the foregoing, the rules of Section 424(d) of the Code shall apply in determining share ownership and the extent to which shares held under outstanding equity awards are to be treated as owned by the employee.
5. OFFERING DATES.
(a) Each Offering Period of this Plan may be of up to twenty-seven (27) months duration and shall commence and end at the times designated by the Committee. Each Offering Period shall consist of one or more Purchase Periods during which Contributions made by Participants are accumulated under this Plan.
(b) The initial Offering Period under this Plan shall commence on such date selected by the Committee, with such Offering Period consisting of one to four separate six (6)-month Purchase Periods, except as otherwise provided by an applicable sub-plan. Thereafter, a new Offering Period shall
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commence on such date selected by the Committee, with each such Offering Period also consisting of one to four separate six (6)-month Purchase Periods, except as otherwise provided by an applicable sub-plan. The Committee may at any time establish a different duration for an Offering Period or Purchase Period to be effective after the next scheduled Purchase Date, up to a maximum duration of twenty-seven (27) months.
6. PARTICIPATION IN THIS PLAN.
(a) With respect to any Offering Period under this Plan, any eligible employee determined in accordance with Section 4 will be eligible to participate in this Plan, subject to the requirement of Section 6(b) hereof and the other terms and provisions of this Plan.
(b) Participants may elect to participate in this Plan by submitting an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.
(c) Once an employee becomes a Participant in an Offering Period, then such Participant will automatically participate in each subsequent Offering Period commencing immediately following the last day of the prior Offering Period unless the Participant withdraws or is deemed to withdraw from this Plan or terminates further participation in an Offering Period as set forth in Section 11 below. A Participant who is continuing participation pursuant to the preceding sentence is not required to file any additional enrollment agreement in order to continue participation in this Plan; a Participant who is not continuing participation pursuant to the preceding sentence is required to file an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.
7. GRANT OF OPTION ON ENROLLMENT. Becoming a Participant with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such Participant of an option to purchase on the Purchase Date up to that number of shares of Common Stock determined by a fraction, the numerator of which is the amount accumulated for such Participants Contribution book account during such Purchase Period and the denominator of which is the lower of (i) eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Offering Date (but in no event less than the par value of a share of the Common Stock), or (ii) eighty-five percent (85%) of the Fair Market Value of a share of the Common Stock on the Purchase Date; provided, however, that the number of shares of Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (x) the maximum number of shares set by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date, or (y) the maximum number of shares which may be purchased pursuant to Section 10(a) below with respect to the applicable Purchase Date.
8. PURCHASE PRICE. The Purchase Price per share at which a share of Common Stock will be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:
(a) The Fair Market Value on the Offering Date; or
(b) The Fair Market Value on the Purchase Date.
9. PAYMENT OF PURCHASE PRICE; CONTRIBUTION CHANGES; SHARE ISSUANCES.
(a) The Purchase Price shall be accumulated by regular payroll deductions made during each Offering Period, unless the Committee determines that contributions may be made in another form (including but not limited to with respect to categories of Participants outside the United States that Contributions may be made in another form due to local legal requirements). The Contributions are made as a percentage of the Participants Compensation in one percent (1%) increments not less than one
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percent (1%), nor greater than fifteen percent (15%) or such lower limit set by the Committee. Compensation shall mean base salary or regular hourly wages; however, the Committee shall have discretion to adopt a definition of Compensation from time to time of all cash compensation reported on the employees Form W-2 or corresponding local country tax return, including without limitation base salary or regular hourly wages, bonuses, incentive compensation, commissions, overtime, shift premiums, pay during leaves of absence, and draws against commissions (or in foreign jurisdictions, equivalent cash compensation). For purposes of determining a Participants Compensation, any election by such Participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code (or in foreign jurisdictions, equivalent deductions) shall be treated as if the Participant did not make such election. Contributions shall commence on the first payday following the last Purchase Date and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in this Plan. Notwithstanding the foregoing, the terms of any sub-plan may permit matching shares without the payment of any purchase price.
(b) A Participant may decrease the rate of Contributions during an Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions, with the new rate to become effective no later than the second payroll period commencing after the Companys receipt of the authorization and continuing for the remainder of the Offering Period unless changed as described below. A decrease in the rate of Contributions may be made once during any Offering Period, or more frequently under rules determined by the Committee. A Participant may increase or decrease the rate of Contributions for any subsequent Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions prior to the beginning of such Offering Period, or such other time period as specified by the Committee.
(c) A Participant may reduce his or her Contribution percentage to zero during an Offering Period by filing with the Company or a third party designated by the Company a request for cessation of Contributions. Such reduction shall be effective beginning no later than the second payroll period after the Companys receipt of the request and no further Contributions will be made for the duration of the Offering Period. Contributions credited to the Participants account prior to the effective date of the request shall be used to purchase shares of Common Stock in accordance with Subsection (e) below. A reduction of the Contribution percentage to zero shall be treated as such Participants withdrawal from such Offering Period and the Plan, effective as of the day after the next Purchase Date following the filing date of such request with the Company.
(d) All Contributions made for a Participant are credited to his or her book account under this Plan and are deposited with the general funds of the Company, except to the extent local legal restrictions outside the United States require segregation of such Contributions. No interest accrues on the Contributions, except to the extent required due to local legal requirements. All Contributions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions, except to the extent necessary to comply with local legal requirements outside the United States.
(e) On each Purchase Date, so long as this Plan remains in effect and provided that the Participant has not submitted a signed and completed withdrawal form before that date which notifies the Company that the Participant wishes to withdraw from that Offering Period under this Plan and have all Contributions accumulated in the account maintained on behalf of the Participant as of that date returned to the Participant, the Company shall apply the funds then in the Participants account to the purchase of whole shares of Common Stock reserved under the option granted to such Participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The Purchase Price per share shall be as specified in Section 8 of this Plan. Any fractional share, as calculated under this Subsection (e), shall be rounded down to the next lower whole share, unless the Committee determines with respect to all Participants that any fractional share shall be credited as a fractional share. Any amount remaining in a Participants account on a Purchase Date which is less than the amount necessary to purchase a full share of the Common Stock shall be carried forward without interest (except
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to the extent necessary to comply with local legal requirements outside the United States) into the next Purchase Period or Offering Period, as the case may be; however, the Committee may determine that such amounts should be refunded without interest. In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the Participant, without interest (except to the extent required due to local legal requirements outside the United States). No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date, except to the extent required due to local legal requirements outside the United States.
(f) As promptly as practicable after the Purchase Date, the Company shall issue shares for the Participants benefit representing the shares purchased upon exercise of his or her option.
(g) During a Participants lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The Participant will have no interest or voting right in shares covered by his or her option until such option has been exercised.
(h) To the extent required by applicable federal, state, local or foreign law, a Participant shall make arrangements satisfactory to the Company and the Participating Corporation employing the Participant for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company or any Subsidiary or Affiliate, as applicable, may withhold, by any method permissible under the applicable law, the amount necessary for the Company or Subsidiary or Affiliate, as applicable, to meet applicable withholding obligations, including any withholding required to make available to the Company or Subsidiary or Affiliate, as applicable, any tax deductions or benefits attributable to the sale or early disposition of shares of Common Stock by a Participant. The Company shall not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) Any other provision of the Plan notwithstanding, no Participant shall purchase Common Stock with a Fair Market Value in excess of the following limit:
(i) In the case of Common Stock purchased during an Offering Period that commenced in the current calendar year, the limit shall be equal to (A) $25,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased in the current calendar year (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary).
(ii) In the case of Common Stock purchased during an Offering Period that commenced in the immediately preceding calendar year, the limit shall be equal to (A) $50,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary) in the current calendar year and in the immediately preceding calendar year.
(iii) In the case of Common Stock purchased during an Offering Period that commenced two calendar years prior, the limit shall be equal to (A) $75,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary) in the current calendar year and in the two immediately preceding calendar years.
For purposes of this Subsection (a), the Fair Market Value of Common Stock shall be determined in each case as of the beginning of the Offering Period in which such Common Stock is purchased. Employee stock purchase plans not described in Section 423 of the Code shall be disregarded. If a Participant is precluded by this Subsection (a) from purchasing additional Common Stock under the Plan, then his or her Contributions shall automatically be discontinued and shall automatically resume at the beginning of the earliest Purchase Period that will end in the next calendar year (if he or she then is an eligible employee), provided that when the Company automatically resumes such Contributions, the Company must apply the rate in effect immediately prior to such suspension.
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(b) In no event shall a Participant be permitted to purchase more than one thousand (1,000) shares on any one Purchase Date or such lesser number as the Committee shall determine. If a lower limit is set under this Subsection (b), then all Participants will be notified of such limit prior to the commencement of the next Offering Period for which it is to be effective.
(c) If the number of shares to be purchased on a Purchase Date by all Participants exceeds the number of shares then available for issuance under this Plan, then the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company will give notice of such reduction of the number of shares to be purchased under a Participants option to each Participant affected.
(d) Any Contributions accumulated in a Participants account which are not used to purchase stock due to the limitations in this Section 10, and not covered by Section 9(e), shall be returned to the Participant as soon as practicable after the end of the applicable Purchase Period, without interest (except to the extent required due to local legal requirements outside the United States).
11. WITHDRAWAL.
(a) Each Participant may withdraw from an Offering Period under this Plan pursuant to a method specified for such purpose by the Company. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee.
(b) Upon withdrawal from this Plan, the accumulated Contributions shall be returned to the withdrawn Participant, without interest (except to the extent required due to local legal requirements outside the United States), and his or her interest in this Plan shall terminate. In the event a Participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for Contributions in the same manner as set forth in Section 6 above for initial participation in this Plan.
(c) To the extent applicable, if the Fair Market Value on the first day of the current Offering Period in which a participant is enrolled is higher than the Fair Market Value on the first day of any subsequent Offering Period, the Company will automatically enroll such participant in the subsequent Offering Period. Any funds accumulated in a Participants account prior to the first day of such subsequent Offering Period will be applied to the purchase of shares on the Purchase Date immediately prior to the first day of such subsequent Offering Period, if any.
12. TERMINATION OF EMPLOYMENT. Termination of a Participants employment for any reason, including retirement, death, disability, or the failure of a Participant to remain an eligible employee of the Company or of a Participating Corporation, immediately terminates his or her participation in this Plan (except as required due to local legal requirements outside the United States). In such event, accumulated Contributions credited to the Participants account will be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest (except to the extent required due to local legal requirements outside the United States). For purposes of this Section 12, an employee will not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Corporation in the case of sick leave, military leave, or any other leave of absence approved by the Company; provided that such leave is for a period of not more than three (3) months or reemployment upon the expiration of such leave is guaranteed by contract or statute. The Company will have sole discretion to determine whether a Participant has terminated employment and the effective date on which the Participant terminated employment, regardless of any notice period or garden leave required under local law.
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13. RETURN OF CONTRIBUTIONS. In the event a Participants interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the Participant all accumulated Contributions credited to such Participants account. No interest shall accrue on the Contributions of a Participant in this Plan (except to the extent required due to local legal requirements outside the United States).
14. CAPITAL CHANGES. If the number of outstanding shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the Committee shall adjust the number and class of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Sections 2 and 10 shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with the applicable securities laws; provided that fractions of a share will not be issued.
15. NONASSIGNABILITY. Neither Contributions credited to a Participants account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 below) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.
16. USE OF PARTICIPANT FUNDS AND REPORTS. The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be required to segregate Participant Contributions (except to the extent required due to local legal requirements outside the United States). Until shares are issued, Participants will only have the rights of an unsecured creditor unless otherwise required under local law. Each Participant shall receive, or have access to, promptly after the end of each Purchase Period a report of his or her account setting forth the total Contributions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each U.S. taxpayer Participant shall notify the Company in writing if the Participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the Notice Period). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Companys transfer agent to notify the Company of any transfer of the shares. The obligation of the Participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Corporation, or restrict the right of the Company or any Participating Corporation to terminate such employees employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees granted an option under the Section 423 Component of this Plan shall have equal rights and privileges with respect to this Plan or within any separate offering under the Plan so that this Plan qualifies as an employee stock purchase plan within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code, without further act or amendment by the Company, the Committee or the Board, shall be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in this Plan.
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20. NOTICES. All notices or other communications by a Participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. This Plan will become effective on the Effective Date. This Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan is adopted by the Board. No purchase of shares that are subject to such stockholder approval before becoming available under this Plan shall occur prior to stockholder approval of such shares and the Board or Committee may delay any Purchase Date and postpone the commencement of any Offering Period subsequent to such Purchase Date as deemed necessary or desirable to obtain such approval (provided that if a Purchase Date would occur more than six (6) months after commencement of the Offering Period to which it relates, then such Purchase Date shall not occur and instead such Offering Period shall terminate without the purchase of such shares and Participants in such Offering Period shall be refunded their Contributions without interest). This Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time pursuant to Section 25 below), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) the tenth anniversary of the Effective Date.
22. DESIGNATION OF BENEFICIARY.
(a) If authorized by the Committee, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participants account under this Plan in the event of such Participants death prior to a Purchase Date. Such form shall be valid only if it was filed with the Company at the prescribed location before the Participants death.
(b) If authorized by the Company, such designation of beneficiary may be changed by the Participant at any time by written notice filed with the Company at the prescribed location before the Participants death. In the event of the death of a Participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such Participants death, the Company shall deliver such cash to the executor or administrator of the estate of the Participant or to the legal heirs of the Participant.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the U.S. Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, exchange control restrictions and/or securities law restrictions outside the United States, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Shares may be held in trust or subject to further restrictions as permitted by any subplan.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.
25. AMENDMENT OR TERMINATION. The Committee, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason. Unless otherwise required by applicable law, if the Plan is terminated, the Committee, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of
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shares of Common Stock on the next Purchase Date (which may be sooner than originally scheduled, if determined by the Committee in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 14). If an Offering Period is terminated prior to its previously-scheduled expiration, all amounts then credited to Participants book accounts for such Offering Period, which have not been used to purchase shares of Common Stock, shall be returned to those Participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable. Further, the Committee will be entitled to change the Purchase Periods and Offering Periods, limit the frequency and/or number of changes in the amount contributed during an Offering Period, establish the exchange ratio applicable to amounts contributed in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the administration of the Plan, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts contributed from the Participants base salary and other eligible compensation, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistent with the Plan. Such actions will not require stockholder approval or the consent of any Participants. However, no amendment shall be made without approval of the stockholders of the Company (obtained in accordance with Section 21 above) within twelve (12) months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under this Plan; or (b) change the designation of the employees (or class of employees) eligible for participation in this Plan. In addition, in the event the Board or Committee determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board or Committee may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequences including, but not limited to: (i) amending the definition of compensation, including with respect to an Offering Period underway at the time; (ii) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (iii) shortening any Offering Period by setting a Purchase Date, including an Offering Period underway at the time of the Committees action; (iv) reducing the maximum percentage of Compensation a participant may elect to set aside as Contributions; and (v) reducing the maximum number of shares a Participant may purchase during any Offering Period. Such modifications or amendments will not require approval of the stockholders of the Company or the consent of any Participants.
26. CORPORATE TRANSACTIONS. In the event of a Corporate Transaction, the Offering Period for each outstanding right to purchase Common Stock will be shortened by setting a new Purchase Date and will end on the new Purchase Date. The new Purchase Date shall occur on or prior to the consummation of the Corporate Transaction, as determined by the Board or Committee, and the Plan shall terminate on the consummation of the Corporate Transaction.
27. CODE SECTION 409A; TAX QUALIFICATION.
(a) Options granted under the Plan generally are exempt from the application of Section 409A of the Code. However, options granted to U.S. taxpayers which are not intended to meet the Code Section 423 requirements are intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. Subject to Subsection (b), options granted to U.S. taxpayers outside of the Code Section 423 requirements shall be subject to such terms and conditions that will permit such options to satisfy the requirements of the short-term deferral exception available under Section 409A of the Code, including the requirement that the shares of Common Stock subject to an option be delivered within the short-term deferral period. Subject to Subsection (b), in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Committee determines that an option or the exercise, payment, settlement or deferral thereof is subject to Section 409A of the Code, the option shall be granted, exercised, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including Treasury regulations and other interpretive guidance issued thereunder, including without
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limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto.
(b) Although the Company may endeavor to (i) qualify an option for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Subsection (a). The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.
28. DEFINITIONS.
(a) Affiliate means any entity, other than a Subsidiary or Parent, (i) that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
(b) Board shall mean the Board of Directors of the Company.
(c) Code shall mean the U.S. Internal Revenue Code of 1986, as amended.
(d) Committee shall mean the Compensation Committee of the Board that consists exclusively of one or more members of the Board appointed by the Board.
(e) Common Stock shall mean the common stock of the Company.
(f) Company shall mean Impel NeuroPharma, Inc.
(g) Contributions means payroll deductions taken from a Participants Compensation and used to purchase shares of Common Stock under the Plan and, to the extent payroll deductions are not permitted by applicable laws (as determined by the Committee in its sole discretion) contributions by other means, provided, however, that allowing such other contributions does not jeopardize the qualification of the Plan as an employee stock purchase plan under Section 423 of the Plan.
(h) Corporate Transaction 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 Companys then outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Companys 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.
(i) Effective Date shall mean the date on which the Registration Statement covering the initial public offering of the shares of Common Stock is declared effective by the U.S. Securities and Exchange Commission.
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(j) Exchange Act means the U.S. Securities Exchange Act of 1934, as amended.
(k) Fair Market Value shall mean, as of any date, the value of a share of Common Stock determined as follows:
i. if such Common Stock is then quoted on the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (collectively, the Nasdaq Market), its closing price on the Nasdaq Market on the date of determination, or if there are no sales for such date, then the last preceding business day on which there were sales, as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
ii. if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
iii. if such Common Stock is publicly traded but is neither quoted on the Nasdaq Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; or
iv. if none of the foregoing is applicable, by the Board or the Committee in good faith.
(l) Non-Section 423 Component means the part of the Plan which is not intended to meet the requirements set forth in Section 423 of the Code.
(m) Notice Period shall mean within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased.
(n) Offering Date shall mean the first business day of each Offering Period.
(o) Offering Period shall mean a period with respect to which the right to purchase Common Stock may be granted under the Plan, as determined by the Committee pursuant to Section 5(a).
(p) Parent shall have the same meaning as parent corporation in Sections 424(e) and 424(f) of the Code.
(q) Participant shall mean an eligible employee who meets the eligibility requirements set forth in Section 4 and who elects to participate in this Plan pursuant to Section 6(b).
(r) Participating Corporation shall mean any Parent, Subsidiary or Affiliate that the Committee designates from time to time as eligible to participate in this Plan. For purposes of the Section 423 Component, only the Parent and Subsidiaries may be Participating Corporations, provided, however, that at any given time a Parent or Subsidiary that is a Participating Corporation under the Section 423 Component shall not be a Participating Corporation under the Non-Section 423 Component. The Committee may provide that any Participating Corporation shall only be eligible to participate in the Non-Section 423 Component.
(s) Plan shall mean this Impel NeuroPharma, Inc. 2021 Employee Stock Purchase Plan, as may be amended from time to time.
(t) Purchase Date shall mean the last business day of each Purchase Period.
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(u) Purchase Period shall mean a period during which Contributions may be made toward the purchase of Common Stock under the Plan, as determined by the Committee pursuant to Section 5(b).
(v) Purchase Price shall mean the price at which Participants may purchase shares of Common Stock under the Plan, as determined pursuant to Section 8.
(w) Section 423 Component means the part of the Plan, which excludes the Non-Section 423 Component, pursuant to which options to purchase shares of Common Stock under the Plan that satisfy the requirements for employee stock purchase plans set forth in Section 423 of the Code may be granted to eligible employees.
(x) Subsidiary shall have the same meaning as subsidiary corporation in Sections 424(e) and 424(f) of the Code.
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IMPEL NEUROPHARMA, INC. (THE COMPANY) 2021 EMPLOYEE STOCK PURCHASE PLAN
Capitalized terms used but not otherwise defined herein shall have the meaning given to them in the ESPP. |
ENROLLMENT / CHANGE FORM |
SECTION 1:
ACTIONS |
CHECK DESIRED ACTION:
☐ Enroll in the ESPP ☐ Elect / Change Contribution Percentage ☐ Withdraw from ESPP |
AND COMPLETE SECTIONS:
2 + 3 + 4 + 9 2 + 4 + 9 2 + 5 + 9 |
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SECTION 2:
PERSONAL DATA |
Name: _______________________________________________
Home Address: ________________________________________
_
Employee ID: _________________________________________
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SECTION 3:
ENROLL |
☐ I hereby elect to participate in the Companys 2021 Employee Stock Purchase Plan (the ESPP), effective at the beginning of the next Purchase Period. I elect to purchase shares of Common Stock of the Company pursuant to the terms and conditions of the ESPP and this Enrollment/Change Form. I understand that the shares purchased on my behalf will be issued in street name and deposited directly into my brokerage account. I hereby agree to take all steps, and sign all forms, required to establish an account with the Companys broker for this purpose.
My participation will continue as long as I remain eligible, unless I withdraw from the ESPP by filing a new Enrollment/Change Form with the Company or any third party designated by the Company. I understand that I must notify the Company of any disposition of shares purchased under the ESPP.
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SECTION 4:
ELECT/CHANGE CONTRIBUTION PERCENTAGE |
I hereby authorize the Company to withhold from each of my paychecks such amount as is necessary to equal at the end of the applicable Purchase Period ___% of my compensation (base salary) paid during such Purchase Period, as long as I continue to participate in the ESPP. My contributions, plus any accumulated contributions thus far during the current Purchase Period if this is a change, will be applied to the purchase of shares of Common Stock pursuant to the ESPP. The percentage must be a whole number (from 1% up to a maximum of 15% contribution).
If this is a change to my current enrollment, this represents an ☐-increase ☐-decrease to my contribution percentage.
Note:You may not increase your contributions at any time within an ongoing Offering Period. An increase in your contribution percentage can only take effect with the next Offering Period. You may decrease your contribution percentage to a percentage other than 0% only once within an Offering Period to be effective during that Offering Period. A change will become effective as soon as reasonably practicable after the form is received by the Company.
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SECTION 5:
WITHDRAW FROM ESPP / DISCONTINUE CONTRIBUTIONS |
DO NOT CHECK THE BOX BELOW IF YOU WISH TO CONTINUE TO PARTICIPATE IN THE ESPP
☐ I hereby elect to withdraw from the ESPP and stop my contributions under the ESPP, effective as soon as reasonably practicable after this form is received by the Company. Accumulated contributions will be returned to me without interest, pursuant to Section 11 of the ESPP.
Note:No future contributions will be made if you elect to withdraw from the ESPP. You may enroll in subsequent Offering Periods. |
SECTION 6:
COMPLIANCE WITH LAW |
Unless there is an available exemption from any registration, qualification or other legal requirement applicable to the shares of Common Stock the Company shall not be required to deliver any shares under the ESPP prior to the completion of any registration or qualification of the shares under any applicable law, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable. I agree that the Company shall have unilateral authority to amend the ESPP and this Agreement without my consent to the extent necessary to comply with securities or other laws applicable to the issuance of shares.
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SECTION 7:
NO ADVICE REGARDING GRANT |
The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding my participation in the ESPP or my acquisition or sale of shares of Common Stock. I understand that I should consult with my own personal tax, legal and financial advisors regarding my participation in the ESPP before taking any action related to the ESPP.
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SECTION 8:
ELECTRONIC DELIVERY AND ACCEPTANCE |
The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the ESPP by electronic means. I hereby consent to receive such documents by electronic delivery and agree to participate in the ESPP through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
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SECTION 9:
ACKNOWLEDGMENT AND SIGNATURE |
I acknowledge that I have received a copy of the ESPP and the ESPP Prospectus (which summarizes the major features of the ESPP). I have read the ESPP and the ESPP Prospectus and my signature below indicates that I hereby agree to be bound by the terms of the ESPP.
Signature: ________________________________ Date: _______________
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Exhibit 10.6
IMPEL NEUROPHARMA, INC.
April 15, 2021
Adrian Adams
Sent via email
Dear Adrian:
Impel NeuroPharma, Inc. (the Company) is pleased to continue your employment with the Company on the following terms, effective as of the date on which the Companys registration statement on Form S-1 in connection with its initial public offering of common stock (the IPO) is declared effective by the Securities Exchange Commission (the Effective Date). Prior to the Effective Date and in the event that the IPO does not occur, your employment with the Company will continue to be subject to the terms of the offer letter between you and the Company dated as of May 4, 2020.
1. Position. Your title will remain Chairman of the Board of Directors and Chief Executive Officer (CEO), and you will report to the Companys Board of Directors (the Board). Your service to the Company is to be full-time. While you render services to the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company or be competitive with the Company. You may continue as a board member of companies that have previously been approved by the Board, so long as these companies are not competitive with the Company and your positions do not interfere with your duties and responsibilities to the Company or create a conflict of interest with the Company. By signing this employment agreement, you re-affirm to the Company that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.
2. Base Salary; Expenses. The Company will pay you a salary at the rate of $575,000 per year (Base Salary), payable in accordance with the Companys standard payroll schedule. This salary may be increased to reflect performance achievements, as determined by the Board or the Compensation Committee of the Board (the Compensation Committee) from time to time and in its sole discretion. Subject to your timely presentation of invoices and in accordance with the Companys policies and provisions, the Company will also reimburse you in an amount not to exceed $55,000 in the aggregate on an annual basis (the Reimbursement Amount), grossed up for any income taxes (if applicable), for reasonable expenses for coach airfare travel and housing accommodations for travel between your home town and Seattle, Washington. You will not receive any specific cash compensation for your services as the Companys Chairman or Board member.
3. Cash Incentive. In addition, you will be eligible to earn an annual target cash bonus equal to 60% of your Base Salary (your Target Bonus). The actual bonus amount awarded to you (your Annual Bonus) will be determined based upon the Companys achievement and your performance, as determined by the Board or the Compensation Committee. Each Annual Bonus will be paid no later than two and one half months following the end of the applicable performance year to which it relates, and otherwise in accordance with the Companys standard payroll schedule.
4. Equity Awards. You and the Company acknowledge and agree that the Company has previously granted you options to purchase shares of the Companys common stock, which are subject to the terms and conditions of the documents evidencing such options, as amended by this Section and Section 6 below. If, upon the occurrence of a Corporate Transaction, you are in employment with the Company and the Board determines that any equity or equity derivative awards granted to you prior to such Corporate Transaction are not continued, assumed, converted, replaced, or substituted by the successor to the Company in a Corporate Transaction, the time-based and service-based vesting conditions subject to any such equity then held by you will accelerate in full immediately prior to the consummation of the Corporate Transaction regardless of whether there occurs an Involuntary Termination and to the extent that any such equity that would be subject to vesting acceleration pursuant to this Section 4 are subject to performance-based vesting conditions, such conditions will be deemed to be met at target, as of the date of such the Corporate Transaction.
5. Employee Benefits.
(a) In connection with your service, you will remain eligible to receive employee benefits, bonus plan participation and perquisites commensurate with those provided to the Companys senior executives, which include the Companys 401(k) plan, its life insurance, hospitalization, major medical and other similar employee benefit plans, as may be in effect from time to time.
(b) You will remain entitled to paid vacation in an amount commensurate with that of other senior executives, which, in any event, will not be less than four weeks annually, plus any paid holidays and other paid leave, as set forth in the Companys policies, as in effect from time to time.
6. Termination.
(a) Upon the termination of your employment with the Company at any time for any reason, you will be paid your salary through your termination date and any other benefits or payments, including any accrued and unused vacation, which must be provided to you under applicable law.
(b) If you are subject to an Involuntary Termination at any time other than upon or within 12 months following a Corporate Transaction, then subject to Section 9, you will be entitled to receive the following benefits (collectively, the Severance):
i. the value of all accrued and vested payments under any benefit plans not otherwise described in this Section 6 that have not been paid or otherwise used through your termination date, which benefits will be paid to you on the Companys first regular payroll date following the end of the Release Period;
ii. 12 months of your then-current Base Salary to be paid in equal installments on the Companys regular payroll dates for a 12-month period from the date of the Involuntary Termination, provided that the first payment will commence on the first regular payroll date following the end of the Release Period and include any amounts that would have been payable during the Release Period but for this sentence;
iii. a lump sum payment equal to your Target Bonus in the year of the Involuntary Termination, as such Target Bonus shall be pro-rated on a daily basis for the number of days of service in the performance year in which your employment terminated, which payment will be made to you at the time such bonuses are paid to other participants, or, if earlier, by March 15 of the year following the year of the Involuntary Termination;
iv. vesting acceleration as to that number of then unvested shares subject to all equity then held by you, which would have vested in the twelve (12) month period following your termination date had you remained in employment with the Company; to the extent that any such equity are subject to performance-based vesting conditions, the treatment of such equity shall be governed exclusively by the terms set forth in the applicable award agreements and equity incentive plan;
v. subject to your timely and proper election of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), continuation of your life insurance coverage and, for both you and your eligible dependents, continuation of your then-effective group medical and dental coverage, at Company cost, for 12 months following the Involuntary Termination. The Companys obligations under this section (v) shall not apply once you become eligible for medical, dental, or life insurance coverage from another entity where the cost to you is consistent with similarly situated participants under such plans and you agree to provide prompt notice to the Company if you become so eligible.
(c) If you are subject to an Involuntary Termination upon or within 12 months following a Corporate Transaction then, subject to Section 9 and in lieu of the benefits set forth in Section 6(b), you will be entitled to receive the following benefits (collectively, the CIC Severance):
i. the value of all accrued and vested payments under any benefit plans not otherwise described in this Section 6 that have not been paid or otherwise used through your termination date, which benefits will be paid to you on the first regular payroll date following the end of the Release Period;
ii. 18 months of your then-current Base Salary plus 12 months of the amount of your then-current Target Bonus (assuming 100% achievement) to be paid in equal installments on the Companys regular payroll dates for an 18-month period from the date of the Involuntary Termination, provided that the first payment will commence on the first regular payroll date following the end of the Release Period and include any amounts that would have been payable during the Release Period but for this sentence;
iii. a lump sum payment equal to your Target Bonus in the year of the Involuntary Termination, as such Target Bonus shall be pro-rated on a daily basis for the number of days of service in the performance year in which your employment terminated, which payment shall be made to you at the time such bonuses are paid to other participants, or, if earlier, by March 15 of the year following the year of the Involuntary Termination;
iv. full vesting acceleration as to all equity then held by you;
v. subject to your timely and proper election of coverage under COBRA, continuation of your life insurance coverage and, for both you and your eligible dependents, continuation of your then-effective group medical and dental coverage, at Company cost, for 18 months following the Involuntary Termination. The Companys obligations under this section (v) will not apply once you become eligible for medical, dental, or life insurance coverage from another entity where the cost to you is consistent with similarly situated participants under such plans and you agree to provide prompt notice to the Company if you become so eligible.
(d) Receipt of the Severance or the CIC Severance, as applicable, will be conditioned in its entirety upon your execution of a release of claims in a form prescribed by the Company, without alterations (the Release) and your continued compliance with the terms thereof, which Release must be executed and become irrevocable, within 60 days of your Involuntary Termination (this 60-day period, the Release Period). Any acceleration effected by Section 6(b)(iv) or Section 6(c)(iv) will be effective as of the Separation and the resulting vested equity cancelled without consideration if the Release does not become effective by its terms and within the Release Period.
7. Proprietary Information and Inventions Agreement. The Companys standard Proprietary Information and Inventions Agreement, which you have signed, remains in full force and effect.
8. Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will remain at will, meaning that either you or the Company may terminate your employment at any time and for any reason, with or without Cause or notice. Any contrary representations that may have been made to you are superseded by this employment agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Companys personnel policies and procedures, may change from time to time, the at will nature of your employment may only be changed in an express written agreement signed by you and a duly authorized member of the Board (other than you).
9. Tax Matters.
(a) Withholding. All forms of compensation referred to in this employment agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.
(b) Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (Section 409A), each salary continuation payment under Section 6 is hereby designated as a separate payment. If the Company determines that you are a specified employee under Section 409A(a)(2)(B)(i) at the time of your Separation, then (i) the benefits under Section 6, to the extent that they are subject to Section 409A, will commence on the first business day following (A) expiration of the six month period measured from your Separation or (B) the date of your death and (ii) the installments that otherwise would have been paid prior to such date will be paid in a lump sum when the salary continuation payments commence. Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this employment agreement (or otherwise referenced herein) is determined to be subject to (and not exempt from) Section 409A, (x) the amount of any such expenses eligible for
reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other calendar year; (y) in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which you incurred such expenses; and (z) in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit. Further, to the extent any nonqualified deferred compensation subject to Section 409A payable to you hereunder could be paid in one or more taxable years depending upon you completing certain employment-related actions (such as resigning after a failure to cure a Good Reason event and/or returning an effective release), then any such payments will commence or occur in the later taxable year to the extent required by Section 409A.
(c) Tax Advice. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will not make any claim against the Company or the Board related to tax liabilities arising from your compensation.
(d) Section 280G. In the event that any payment or benefit received or to be received by you pursuant to this employment agreement or otherwise (any Payment) would (i) constitute a parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the Code) and (ii) but for this subsection (d), be subject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (Excise Tax), then, subject to the provisions of subsection (b), such Payments will be either (A) provided in full pursuant to the terms of this employment agreement or any other applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax (the Reduced Amount), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and other taxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in your receipt, on an after-tax basis, of the greatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject to the Excise Tax. Unless you and the Company otherwise agree in writing, any determination required under this subsection will be made by independent tax counsel designated by the Company and reasonably acceptable to you (Independent Tax Counsel), whose determination will be conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations required under this subsection, Independent Tax Counsel may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code; provided that Independent Tax Counsel will assume that you pay all taxes at the highest marginal rate. You and the Company will furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request in order to make a determination under this subsection. The Company will bear all costs that Independent Tax Counsel may reasonably incur in connection with any calculations contemplated by this Section. In the event that Section 9(d)(ii)(B) above applies, then such reduction shall be made in the following order: (i) first, any future cash payments (if any) shall be reduced (if necessary, to zero, with the payment farthest in the future being so reduced first); (ii) second, any current cash payments shall be reduced (if necessary, to zero); (iii) third, all non-cash payments (other than equity or equity derivative related payments) shall be reduced (if necessary, to zero); and (iv) fourth, all equity or equity derivative payments shall be reduced. If the Internal Revenue Service (the IRS) determines that any Payment is subject to the Excise Tax, then Section 9(e) hereof will apply, and the enforcement of Section 9(e) will be the exclusive remedy to the Company.
(e) Adjustments. If, notwithstanding any reduction described in Section 9(d) hereof (or in the absence of any such reduction), the IRS determines that you are liable for the Excise Tax as a result of the receipt of one or more Payments, then you will be obligated to surrender or pay back to the Company, within one-hundred twenty (120) days after a final IRS determination, an amount of such payments or benefits equal to the Repayment Amount. The Repayment Amount with respect to such Payments will be the smallest such amount, if any, as will be required to be surrendered or paid to the Company so that your net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) will be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments will be zero (0) if a Repayment Amount of more than zero (0) would not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received by you from the Payments. If the Excise Tax is not eliminated pursuant to this Section 9(e), then you will pay the Excise Tax.
10. Interpretation, Amendment and Miscellaneous. Upon the Effective Date, this employment agreement supersedes and replaces any prior or contemporaneous agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company and constitutes the complete agreement between you and the Company regarding the subject matter set forth herein. This employment agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized member of the Board (other than you). This employment agreement shall be governed by and construed in accordance with the laws of the State of Washington. If any term, covenant, condition or provision of this employment agreement or the application thereof to any person or circumstance shall, at any time, or to any extent, be determined invalid or unenforceable, the remaining provisions of this employment agreement shall not be affected thereby and shall be deemed valid and fully enforceable to the extent permitted by law. This employment agreement may be executed in any number of counterparts, and each such counterpart hereof will be deemed to be an original instrument, but all such counterparts together will constitute but one agreement. Signature pages delivered by electronic signature or facsimile or electronic mail will be treated as originals. If court proceedings are required to enforce any provision of this employment agreement, the substantially prevailing or successful party shall be entitled to an award of the reasonable and necessary expenses of litigation, including reasonable attorneys fees. The rights and obligations of the Company under this employment agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company. Your rights and obligations hereunder are non-assignable. The Company may assign its rights and obligations to any entity in which the Company or an entity affiliated with the Company, has a majority ownership interest. Any notice required by this employment agreement shall be sufficient if in writing and delivered to the party or sent by electronic or certified mail, return receipt requested and addressed to the partys last business or residential address, or otherwise delivered in person or through a reliable electronic delivery system. Either party may change the specified address by giving written notice of such change.
11. Arbitration. You and the Company agree to submit to mandatory binding arbitration any and all claims arising out of or related to your employment with the Company and the termination thereof, including, but not limited to, claims for unpaid wages, wrongful termination, torts, stock or stock options or other ownership interest in the Company, and/or discrimination (including harassment) based upon any federal, state or local ordinance, statute, regulation or constitutional provision except that each party may, at its, his or her option, seek injunctive relief in court related to the improper use, disclosure or misappropriation of a partys private, proprietary, confidential or trade secret information (collectively, Arbitrable Claims). THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS.
This employment agreement does not restrict your right to file administrative claims you may bring before any government agency where, as a matter of law, the parties may not restrict the employees ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor). However, the parties agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims.
The arbitration shall be conducted in King County, Washington through the American Arbitration Association (AAA) before a single neutral arbitrator, in accordance with the AAA employment arbitration rules then in effect. The AAA rules may be found and reviewed at www.adr.org under the Rules & Forms tab. The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based. If, for any reason, any term of this Arbitration provision is held to be invalid or unenforceable, all other valid terms and conditions herein shall be severable in nature, and remain fully enforceable.
12. Definitions. The following terms have the meaning set forth below wherever they are used in this employment agreement:
Cause means (a) your unauthorized use or disclosure of the Companys confidential information or trade secrets, which use or disclosure causes material harm to the Company, (b) your material breach of any agreement between you and the Company, (c) your material failure to comply with the Companys written policies or rules, (d) your conviction of, or your plea of guilty or no contest to, a felony under the laws of the United States or any State, (e) your gross negligence or willful misconduct, (f) your continuing failure to perform assigned duties after receiving written notification of the failure from the Board or (g) your failure to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested your cooperation.
Corporate Transaction means the occurrence of any of the following events: (a) any Person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (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 more than fifty percent (50%) of the total voting power represented by the Companys then-outstanding voting securities, provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Companys assets; (c) 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; (d) any other transaction which qualifies as a corporate transaction under Section 424(a) of the Internal Revenue Code of 1986, as amended (the Code) wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of capital stock of the Company), or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase, or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this employment agreement by reason of a Corporate Transaction, such amount will become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
Involuntary Termination means you experience a Separation due to your Termination Without Cause or your resignation for Good Reason.
Good Reason means any of the following conditions has come into existence without your consent:
(a) a material reduction of your Base Salary; or
(b) a material diminution of your authority, duties or responsibilities, provided that that a reduction in your authority, duties or responsibilities following a Corporate Transaction shall not constitute Good Reason if (i) there is no material demotion in your authority, duties or responsibilities within that division of the acquiring company comprised of the Company, (ii) you merely experience a change in your title, or (iii) the reduction is due to your failure to be elected or reelected to the Board or any committee thereof, to the extent applicable.
A resignation for Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within 30 days after the condition comes into existence, the Company fails to cure the condition within 30 days after receiving your written notice, and you immediately terminate your employment upon the Companys failure to cure or the Companys notice to you that it will decline to cure.
Separation means a separation from service, as defined in the regulations under Section 409A of the Code.
Termination Without Cause means a Separation as a result of a termination of your employment by the Company without Cause, provided you are willing and able to continue performing services within the meaning of Treasury Regulation 1.409A-1(n)(1).
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We hope that you will accept our offer of continued employment with the Company. You may indicate your agreement with these terms and accept this offer by signing and dating the enclosed duplicate original of this employment agreement and returning it to me.
Very truly yours, | ||
IMPEL NEUROPHARMA, INC. | ||
By: | /s/ David Allison | |
Name: | David Allison | |
Title: | Lead Independent Director |
I have read and accept this employment offer:
/s/ Adrian Adams | ||
Signature of Adrian Adams | ||
Dated: | 4/15/2021 |
Exhibit 10.7
IMPEL NEUROPHARMA, INC.
April 15, 2021
Stephen Shrewsbury
Sent via email
Dear Stephen:
Impel NeuroPharma, Inc. (the Company) is pleased to continue your employment with the Company on the following terms, effective as of the date on which the Companys registration statement on Form S-1 in connection with its initial public offering of common stock (the IPO) is declared effective by the Securities Exchange Commission (the Effective Date). Prior to the Effective Date and in the event that the IPO does not occur, your employment with the Company will continue to be subject to the terms of the offer letter between you and the Company dated as of February 8, 2017 and the amendment thereto dated September 5, 2017.
1. Position. Your title will remain Chief Medical Officer (CMO), and you will report to the Companys Chief Executive Officer. Your service to the Company is to be full-time. While you render services to the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company or be competitive with the Company. By signing this employment agreement, you re-affirm to the Company that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.
2. Base Salary; Expenses. The Company will pay you a salary at the rate of $410,000 per year (Base Salary), payable in accordance with the Companys standard payroll schedule. This salary may be increased to reflect performance achievements, as determined by the Companys Board of Directors (the Board) or the Compensation Committee of the Board (the Compensation Committee) from time to time and in its sole discretion.
3. Cash Incentive. In addition, you will be eligible to earn an annual target cash bonus equal to 40% of your Base Salary (your Target Bonus). The actual bonus amount awarded to you (your Annual Bonus) will be determined based upon the Companys achievement and your performance, as determined by the Board or the Compensation Committee. Each Annual Bonus will be paid no later than two and one half months following the end of the applicable performance year to which it relates, and otherwise in accordance with the Companys standard payroll schedule.
4. Equity Awards. You and the Company acknowledge and agree that the Company has previously granted you options to purchase shares of the Companys common stock, which are subject to the terms and conditions of the documents evidencing such options, as amended by Section 6 below. If, upon the occurrence of a Corporate Transaction, you are in employment with the Company and the Board determines that any equity or equity derivative awards granted to you prior to such Corporate Transaction are not continued, assumed, converted, replaced, or substituted by the successor to the Company in a Corporate Transaction, the time-based and service-based vesting conditions subject to any such equity then held by you will accelerate in full immediately prior to
the consummation of the Corporate Transaction regardless of whether there occurs an Involuntary Termination and to the extent that any such equity that would be subject to vesting acceleration pursuant to this Section 4 are subject to performance-based vesting conditions, such conditions will be deemed to be met at target, as of the date of such the Corporate Transaction.
5. Employee Benefits.
(a) In connection with your service, you will remain eligible to receive employee benefits, bonus plan participation and perquisites commensurate with those provided to the Companys senior executives, which include the Companys 401(k) plan, its life insurance, hospitalization, major medical and other similar employee benefit plans, as may be in effect from time to time.
(b) You will remain entitled to paid vacation in an amount commensurate with that of other senior executives, which, in any event, will not be less than four weeks annually, plus any paid holidays and other paid leave, as set forth in the Companys policies, as in effect from time to time.
6. Termination.
(a) Upon the termination of your employment with the Company at any time for any reason, you will be paid your salary through your termination date and any other benefits or payments, including any accrued and unused vacation, which must be provided to you under applicable law.
(b) If you are subject to an Involuntary Termination at any time other than upon or within 12 months following a Corporate Transaction, then subject to Section 9, you will be entitled to receive the following benefits (collectively, the Severance):
i. the value of all accrued and vested payments under any benefit plans not otherwise described in this Section 6 that have not been paid or otherwise used through your termination date, which benefits will be paid to you on the Companys first regular payroll date following the end of the Release Period;
ii. 9 months of your then-current Base Salary to be paid in equal installments on the Companys regular payroll dates for a 9-month period from the date of the Involuntary Termination, provided that the first payment will commence on the first regular payroll date following the end of the Release Period and include any amounts that would have been payable during the Release Period but for this sentence;
iii. subject to your timely and proper election of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), continuation of your life insurance coverage and, for both you and your eligible dependents, continuation of your then-effective group medical and dental coverage, at Company cost, for 9 months following the Involuntary Termination. The Companys obligations under this section (iii) shall not apply once you become eligible for medical, dental, or life insurance coverage from another entity where the cost to you is consistent with similarly situated participants under such plans and you agree to provide prompt notice to the Company if you become so eligible.
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(c) If you are subject to an Involuntary Termination upon or within 12 months following a Corporate Transaction then, subject to Section 9 and in lieu of the benefits set forth in Section 6(b), you will be entitled to receive the following benefits (collectively, the CIC Severance):
i. the value of all accrued and vested payments under any benefit plans not otherwise described in this Section 6 that have not been paid or otherwise used through your termination date, which benefits will be paid to you on the first regular payroll date following the end of the Release Period;
ii. 12 months of your then-current Base Salary plus 12 months of the amount of your then-current Target Bonus (assuming 100% achievement) to be paid in equal installments on the Companys regular payroll dates for an 12-month period from the date of the Involuntary Termination, provided that the first payment will commence on the first regular payroll date following the end of the Release Period and include any amounts that would have been payable during the Release Period but for this sentence;
iii. a lump sum payment equal to your Target Bonus in the year of the Involuntary Termination, as such Target Bonus shall be pro-rated on a daily basis for the number of days of service in the performance year in which your employment terminated, which payment shall be made to you at the time such bonuses are paid to other participants, or, if earlier, by March 15 of the year following the year of the Involuntary Termination;
iv. full vesting acceleration as to all equity then held by you.
v. subject to your timely and proper election of coverage under COBRA, continuation of your life insurance coverage and, for both you and your eligible dependents, continuation of your then-effective group medical and dental coverage, at Company cost, for 12 months following the Involuntary Termination. The Companys obligations under this section (v) will not apply once you become eligible for medical, dental, or life insurance coverage from another entity where the cost to you is consistent with similarly situated participants under such plans and you agree to provide prompt notice to the Company if you become so eligible.
(d) Receipt of the Severance or the CIC Severance, as applicable, will be conditioned in its entirety upon your execution of a release of claims in a form prescribed by the Company, without alterations (the Release) and your continued compliance with the terms thereof, which Release must be executed and become irrevocable, within 60 days of your Involuntary Termination (this 60-day period, the Release Period). Any acceleration effected by Section 6(b)(iv) or Section 6(c)(iv) will be effective as of the Separation and the resulting vested equity cancelled without consideration if the Release does not become effective by its terms and within the Release Period.
7. Proprietary Information and Inventions Agreement. The Companys standard Proprietary Information and Inventions Agreement, which you have signed, remains in full force and effect.
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8. Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will remain at will, meaning that either you or the Company may terminate your employment at any time and for any reason, with or without Cause or notice. Any contrary representations that may have been made to you are superseded by this employment agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Companys personnel policies and procedures, may change from time to time, the at will nature of your employment may only be changed in an express written agreement signed by you and a duly authorized member of the Board (other than you).
9. Tax Matters.
(a) Withholding. All forms of compensation referred to in this employment agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.
(b) Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (Section 409A), each salary continuation payment under Section 6 is hereby designated as a separate payment. If the Company determines that you are a specified employee under Section 409A(a)(2)(B)(i) at the time of your Separation, then (i) the benefits under Section 6, to the extent that they are subject to Section 409A, will commence on the first business day following (A) expiration of the six month period measured from your Separation or (B) the date of your death and (ii) the installments that otherwise would have been paid prior to such date will be paid in a lump sum when the salary continuation payments commence. Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this employment agreement (or otherwise referenced herein) is determined to be subject to (and not exempt from) Section 409A, (x) the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other calendar year; (y) in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which you incurred such expenses; and (z) in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit. Further, to the extent any nonqualified deferred compensation subject to Section 409A payable to you hereunder could be paid in one or more taxable years depending upon you completing certain employment-related actions (such as resigning after a failure to cure a Good Reason event and/or returning an effective release), then any such payments will commence or occur in the later taxable year to the extent required by Section 409A.
(c) Tax Advice. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will not make any claim against the Company or the Board related to tax liabilities arising from your compensation.
(d) Section 280G. In the event that any payment or benefit received or to be received by you pursuant to this employment agreement or otherwise (any Payment) would (i) constitute a parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the Code) and (ii) but for this subsection (d), be subject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (Excise Tax), then, subject to the provisions of subsection (b), such
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Payments will be either (A) provided in full pursuant to the terms of this employment agreement or any other applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax (the Reduced Amount), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and other taxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in your receipt, on an after-tax basis, of the greatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject to the Excise Tax. Unless you and the Company otherwise agree in writing, any determination required under this subsection will be made by independent tax counsel designated by the Company and reasonably acceptable to you (Independent Tax Counsel), whose determination will be conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations required under this subsection, Independent Tax Counsel may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code; provided that Independent Tax Counsel will assume that you pay all taxes at the highest marginal rate. You and the Company will furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request in order to make a determination under this subsection. The Company will bear all costs that Independent Tax Counsel may reasonably incur in connection with any calculations contemplated by this Section. In the event that Section 9(d)(ii)(B) above applies, such reduction shall be made in the following order: (i) first, any future cash payments (if any) shall be reduced (if necessary, to zero, with the payment farthest in the future being so reduced first); (ii) second, any current cash payments shall be reduced (if necessary, to zero); (iii) third, all non-cash payments (other than equity or equity derivative related payments) shall be reduced (if necessary, to zero); and (iv) fourth, all equity or equity derivative payments shall be reduced. If the Internal Revenue Service (the IRS) determines that any Payment is subject to the Excise Tax, then Section 9(e) hereof will apply, and the enforcement of Section 9(e) will be the exclusive remedy to the Company.
(e) Adjustments. If, notwithstanding any reduction described in Section 9(d) hereof (or in the absence of any such reduction), the IRS determines that you are liable for the Excise Tax as a result of the receipt of one or more Payments, then you will be obligated to surrender or pay back to the Company, within one-hundred twenty (120) days after a final IRS determination, an amount of such payments or benefits equal to the Repayment Amount. The Repayment Amount with respect to such Payments will be the smallest such amount, if any, as will be required to be surrendered or paid to the Company so that your net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) will be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments will be zero (0) if a Repayment Amount of more than zero (0) would not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received by you from the Payments. If the Excise Tax is not eliminated pursuant to this Section 9(e), then you will pay the Excise Tax.
10. Interpretation, Amendment and Miscellaneous. Upon the Effective Date, this employment agreement supersedes and replaces any prior or contemporaneous agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company and constitutes the complete agreement between you and the Company regarding the subject matter set forth herein. This employment agreement may not be amended or modified, except
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by an express written agreement signed by both you and a duly authorized member of the Board (other than you). This employment agreement shall be governed by and construed in accordance with the laws of the State of Washington. If any term, covenant, condition or provision of this employment agreement or the application thereof to any person or circumstance shall, at any time, or to any extent, be determined invalid or unenforceable, the remaining provisions of this employment agreement shall not be affected thereby and shall be deemed valid and fully enforceable to the extent permitted by law. This employment agreement may be executed in any number of counterparts, and each such counterpart hereof will be deemed to be an original instrument, but all such counterparts together will constitute but one agreement. Signature pages delivered by electronic signature or facsimile or electronic mail will be treated as originals. If court proceedings are required to enforce any provision of this employment agreement, the substantially prevailing or successful party shall be entitled to an award of the reasonable and necessary expenses of litigation, including reasonable attorneys fees. The rights and obligations of the Company under this employment agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company. Your rights and obligations hereunder are non-assignable. The Company may assign its rights and obligations to any entity in which the Company or an entity affiliated with the Company, has a majority ownership interest. Any notice required by this employment agreement shall be sufficient if in writing and delivered to the party or sent by electronic or certified mail, return receipt requested and addressed to the partys last business or residential address, or otherwise delivered in person or through a reliable electronic delivery system. Either party may change the specified address by giving written notice of such change.
11. Arbitration. You and the Company agree to submit to mandatory binding arbitration any and all claims arising out of or related to your employment with the Company and the termination thereof, including, but not limited to, claims for unpaid wages, wrongful termination, torts, stock or stock options or other ownership interest in the Company, and/or discrimination (including harassment) based upon any federal, state or local ordinance, statute, regulation or constitutional provision except that each party may, at its, his or her option, seek injunctive relief in court related to the improper use, disclosure or misappropriation of a partys private, proprietary, confidential or trade secret information (collectively, Arbitrable Claims). THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS.
This employment agreement does not restrict your right to file administrative claims you may bring before any government agency where, as a matter of law, the parties may not restrict the employees ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor). However, the parties agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims.
The arbitration shall be conducted in King County, Washington through the American Arbitration Association (AAA) before a single neutral arbitrator, in accordance with the AAA employment arbitration rules then in effect. The AAA rules may be found and reviewed at www.adr.org under the Rules & Forms tab. The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based. If, for any reason, any term of this Arbitration provision is held to be invalid or unenforceable, all other valid terms and conditions herein shall be severable in nature, and remain fully enforceable.
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12. Definitions. The following terms have the meaning set forth below wherever they are used in this employment agreement:
Cause means (a) your unauthorized use or disclosure of the Companys confidential information or trade secrets, which use or disclosure causes material harm to the Company, (b) your material breach of any agreement between you and the Company, (c) your material failure to comply with the Companys written policies or rules, (d) your conviction of, or your plea of guilty or no contest to, a felony under the laws of the United States or any State, (e) your gross negligence or willful misconduct, (f) your continuing failure to perform assigned duties after receiving written notification of the failure from the Board or (g) your failure to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested your cooperation.
Corporate Transaction means the occurrence of any of the following events: (a) any Person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (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 more than fifty percent (50%) of the total voting power represented by the Companys then-outstanding voting securities, provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Companys assets; (c) 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; (d) any other transaction which qualifies as a corporate transaction under Section 424(a) of the Internal Revenue Code of 1986, as amended (the Code) wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of capital stock of the Company), or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase, or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this employment agreement by reason of a Corporate Transaction, such amount will become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
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Involuntary Termination means you experience a Separation due to your Termination Without Cause or your resignation for Good Reason.
Good Reason means any of the following conditions has come into existence without your consent:
(a) a material reduction of your Base Salary; or
(b) a material diminution of your authority, duties or responsibilities, provided that that a reduction in your authority, duties or responsibilities following a Corporate Transaction shall not constitute Good Reason if (i) there is no material demotion in your authority, duties or responsibilities within that division of the acquiring company comprised of the Company, (ii) you merely experience a change in your title, or (iii) the reduction is due to your failure to be elected or reelected to the Board or any committee thereof, to the extent applicable.
A resignation for Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within 30 days after the condition comes into existence, the Company fails to cure the condition within 30 days after receiving your written notice, and you immediately terminate your employment upon the Companys failure to cure or the Companys notice to you that it will decline to cure.
Separation means a separation from service, as defined in the regulations under Section 409A of the Code.
Termination Without Cause means a Separation as a result of a termination of your employment by the Company without Cause, provided you are willing and able to continue performing services within the meaning of Treasury Regulation 1.409A-1(n)(1).
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We hope that you will accept our offer of continued employment with the Company. You may indicate your agreement with these terms and accept this offer by signing and dating the enclosed duplicate original of this employment agreement and returning it to me.
Very truly yours, |
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IMPEL NEUROPHARMA, INC. |
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By: | /s/ Adrian Adams | |
Name: | Adrian Adams | |
Title: | Chief Executive Officer |
I have read and accept this employment offer:
/s/ Stephen Shrewsbury |
Signature of Stephen Shrewsbury |
Dated: 4/15/2021 |
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Exhibit 10.8
IMPEL NEUROPHARMA, INC.
April 15, 2021
John Leaman
Sent via email
Dear John:
Impel NeuroPharma, Inc. (the Company) is pleased to continue your employment with the Company on the following terms, effective as of the date on which the Companys registration statement on Form S-1 in connection with its initial public offering of common stock (the IPO) is declared effective by the Securities Exchange Commission (the Effective Date). Prior to the Effective Date and in the event that the IPO does not occur, your employment with the Company will continue to be subject to the terms of the offer letter between you and the Company dated as of June 19, 2019.
1. Position. Your title will remain Chief Financial Officer (CFO), and you will report to the Companys Chief Executive Officer. Your service to the Company is to be full-time. While you render services to the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company or be competitive with the Company. By signing this employment agreement, you re-affirm to the Company that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.
2. Base Salary; Expenses. The Company will pay you a salary at the rate of $440,000 per year (Base Salary), payable in accordance with the Companys standard payroll schedule. This salary may be increased to reflect performance achievements, as determined by the Companys Board of Directors (the Board) or the Compensation Committee of the Board (the Compensation Committee) from time to time and in its sole discretion.
3. Cash Incentive. In addition, you will be eligible to earn an annual target cash bonus equal to 40% of your Base Salary (your Target Bonus). The actual bonus amount awarded to you (your Annual Bonus) will be determined based upon the Companys achievement and your performance, as determined by the Board or the Compensation Committee. Each Annual Bonus will be paid no later than two and one half months following the end of the applicable performance year to which it relates, and otherwise in accordance with the Companys standard payroll schedule.
4. Equity Awards. You and the Company acknowledge and agree that the Company has previously granted you options to purchase shares of the Companys common stock, which are subject to the terms and conditions of the documents evidencing such options, as amended by Section 6 below. If, upon the occurrence of a Corporate Transaction, you are in employment with the Company and the Board determines that any equity or equity derivative awards granted to you prior to such Corporate Transaction are not continued, assumed, converted, replaced, or substituted by the successor to the Company in a Corporate Transaction, the time-based and service-based vesting conditions subject to any such equity then held by you will accelerate in full immediately prior to
the consummation of the Corporate Transaction regardless of whether there occurs an Involuntary Termination and to the extent that any such equity that would be subject to vesting acceleration pursuant to this Section 4 are subject to performance-based vesting conditions, such conditions will be deemed to be met at target, as of the date of such the Corporate Transaction.
5. Employee Benefits.
(a) In connection with your service, you will remain eligible to receive employee benefits, bonus plan participation and perquisites commensurate with those provided to the Companys senior executives, which include the Companys 401(k) plan, its life insurance, hospitalization, major medical and other similar employee benefit plans, as may be in effect from time to time.
(b) You will remain entitled to paid vacation in an amount commensurate with that of other senior executives, which, in any event, will not be less than four weeks annually, plus any paid holidays and other paid leave, as set forth in the Companys policies, as in effect from time to time.
6. Termination.
(a) Upon the termination of your employment with the Company at any time for any reason, you will be paid your salary through your termination date and any other benefits or payments, including any accrued and unused vacation, which must be provided to you under applicable law.
(b) If you are subject to an Involuntary Termination at any time other than upon or within 12 months following a Corporate Transaction, then subject to Section 9, you will be entitled to receive the following benefits (collectively, the Severance):
i. the value of all accrued and vested payments under any benefit plans not otherwise described in this Section 6 that have not been paid or otherwise used through your termination date, which benefits will be paid to you on the Companys first regular payroll date following the end of the Release Period;
ii. 9 months of your then-current Base Salary to be paid in equal installments on the Companys regular payroll dates for a 9-month period from the date of the Involuntary Termination, provided that the first payment will commence on the first regular payroll date following the end of the Release Period and include any amounts that would have been payable during the Release Period but for this sentence;
iii. subject to your timely and proper election of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), continuation of your life insurance coverage and, for both you and your eligible dependents, continuation of your then-effective group medical and dental coverage, at Company cost, for 9 months following the Involuntary Termination. The Companys obligations under this section (iii) shall not apply once you become eligible for medical, dental, or life insurance coverage from another entity where the cost to you is consistent with similarly situated participants under such plans and you agree to provide prompt notice to the Company if you become so eligible.
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(c) If you are subject to an Involuntary Termination upon or within 12 months following a Corporate Transaction then, subject to Section 9 and in lieu of the benefits set forth in Section 6(b), you will be entitled to receive the following benefits (collectively, the CIC Severance):
i. the value of all accrued and vested payments under any benefit plans not otherwise described in this Section 6 that have not been paid or otherwise used through your termination date, which benefits will be paid to you on the first regular payroll date following the end of the Release Period;
ii. 12 months of your then-current Base Salary plus 12 months of the amount of your then-current Target Bonus (assuming 100% achievement) to be paid in equal installments on the Companys regular payroll dates for an 12-month period from the date of the Involuntary Termination, provided that the first payment will commence on the first regular payroll date following the end of the Release Period and include any amounts that would have been payable during the Release Period but for this sentence;
iii. a lump sum payment equal to your Target Bonus in the year of the Involuntary Termination, as such Target Bonus shall be pro-rated on a daily basis for the number of days of service in the performance year in which your employment terminated, which payment shall be made to you at the time such bonuses are paid to other participants, or, if earlier, by March 15 of the year following the year of the Involuntary Termination;
iv. full vesting acceleration as to all equity then held by you.
v. subject to your timely and proper election of coverage under COBRA, continuation of your life insurance coverage and, for both you and your eligible dependents, continuation of your then-effective group medical and dental coverage, at Company cost, for 12 months following the Involuntary Termination. The Companys obligations under this section (v) will not apply once you become eligible for medical, dental, or life insurance coverage from another entity where the cost to you is consistent with similarly situated participants under such plans and you agree to provide prompt notice to the Company if you become so eligible.
(d) Receipt of the Severance or the CIC Severance, as applicable, will be conditioned in its entirety upon your execution of a release of claims in a form prescribed by the Company, without alterations (the Release) and your continued compliance with the terms thereof, which Release must be executed and become irrevocable, within 60 days of your Involuntary Termination (this 60-day period, the Release Period). Any acceleration effected by Section 6(b)(iv) or Section 6(c)(iv) will be effective as of the Separation and the resulting vested equity cancelled without consideration if the Release does not become effective by its terms and within the Release Period.
7. Proprietary Information and Inventions Agreement. The Companys standard Proprietary Information and Inventions Agreement, which you have signed, remains in full force and effect.
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8. Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will remain at will, meaning that either you or the Company may terminate your employment at any time and for any reason, with or without Cause or notice. Any contrary representations that may have been made to you are superseded by this employment agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Companys personnel policies and procedures, may change from time to time, the at will nature of your employment may only be changed in an express written agreement signed by you and a duly authorized member of the Board (other than you).
9. Tax Matters.
(a) Withholding. All forms of compensation referred to in this employment agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.
(b) Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (Section 409A), each salary continuation payment under Section 6 is hereby designated as a separate payment. If the Company determines that you are a specified employee under Section 409A(a)(2)(B)(i) at the time of your Separation, then (i) the benefits under Section 6, to the extent that they are subject to Section 409A, will commence on the first business day following (A) expiration of the six month period measured from your Separation or (B) the date of your death and (ii) the installments that otherwise would have been paid prior to such date will be paid in a lump sum when the salary continuation payments commence. Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this employment agreement (or otherwise referenced herein) is determined to be subject to (and not exempt from) Section 409A, (x) the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other calendar year; (y) in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which you incurred such expenses; and (z) in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit. Further, to the extent any nonqualified deferred compensation subject to Section 409A payable to you hereunder could be paid in one or more taxable years depending upon you completing certain employment-related actions (such as resigning after a failure to cure a Good Reason event and/or returning an effective release), then any such payments will commence or occur in the later taxable year to the extent required by Section 409A.
(c) Tax Advice. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will not make any claim against the Company or the Board related to tax liabilities arising from your compensation.
(d) Section 280G. In the event that any payment or benefit received or to be received by you pursuant to this employment agreement or otherwise (any Payment) would (i) constitute a parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the Code) and (ii) but for this subsection (d), be subject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (Excise Tax), then, subject to the provisions of subsection (b), such
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Payments will be either (A) provided in full pursuant to the terms of this employment agreement or any other applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax (the Reduced Amount), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and other taxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in your receipt, on an after-tax basis, of the greatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject to the Excise Tax. Unless you and the Company otherwise agree in writing, any determination required under this subsection will be made by independent tax counsel designated by the Company and reasonably acceptable to you (Independent Tax Counsel), whose determination will be conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations required under this subsection, Independent Tax Counsel may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code; provided that Independent Tax Counsel will assume that you pay all taxes at the highest marginal rate. You and the Company will furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request in order to make a determination under this subsection. The Company will bear all costs that Independent Tax Counsel may reasonably incur in connection with any calculations contemplated by this Section. In the event that Section 9(d)(ii)(B) above applies, such reduction shall be made in the following order: (i) first, any future cash payments (if any) shall be reduced (if necessary, to zero, with the payment farthest in the future being so reduced first); (ii) second, any current cash payments shall be reduced (if necessary, to zero); (iii) third, all non-cash payments (other than equity or equity derivative related payments) shall be reduced (if necessary, to zero); and (iv) fourth, all equity or equity derivative payments shall be reduced. If the Internal Revenue Service (the IRS) determines that any Payment is subject to the Excise Tax, then Section 9(e) hereof will apply, and the enforcement of Section 9(e) will be the exclusive remedy to the Company.
(e) Adjustments. If, notwithstanding any reduction described in Section 9(d) hereof (or in the absence of any such reduction), the IRS determines that you are liable for the Excise Tax as a result of the receipt of one or more Payments, then you will be obligated to surrender or pay back to the Company, within one-hundred twenty (120) days after a final IRS determination, an amount of such payments or benefits equal to the Repayment Amount. The Repayment Amount with respect to such Payments will be the smallest such amount, if any, as will be required to be surrendered or paid to the Company so that your net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) will be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments will be zero (0) if a Repayment Amount of more than zero (0) would not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received by you from the Payments. If the Excise Tax is not eliminated pursuant to this Section 9(e), then you will pay the Excise Tax.
10. Interpretation, Amendment and Miscellaneous. Upon the Effective Date, this employment agreement supersedes and replaces any prior or contemporaneous agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company and constitutes the complete agreement between you and the Company regarding the subject matter set forth herein. This employment agreement may not be amended or modified, except
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by an express written agreement signed by both you and a duly authorized member of the Board (other than you). This employment agreement shall be governed by and construed in accordance with the laws of the State of Washington. If any term, covenant, condition or provision of this employment agreement or the application thereof to any person or circumstance shall, at any time, or to any extent, be determined invalid or unenforceable, the remaining provisions of this employment agreement shall not be affected thereby and shall be deemed valid and fully enforceable to the extent permitted by law. This employment agreement may be executed in any number of counterparts, and each such counterpart hereof will be deemed to be an original instrument, but all such counterparts together will constitute but one agreement. Signature pages delivered by electronic signature or facsimile or electronic mail will be treated as originals. If court proceedings are required to enforce any provision of this employment agreement, the substantially prevailing or successful party shall be entitled to an award of the reasonable and necessary expenses of litigation, including reasonable attorneys fees. The rights and obligations of the Company under this employment agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company. Your rights and obligations hereunder are non-assignable. The Company may assign its rights and obligations to any entity in which the Company or an entity affiliated with the Company, has a majority ownership interest. Any notice required by this employment agreement shall be sufficient if in writing and delivered to the party or sent by electronic or certified mail, return receipt requested and addressed to the partys last business or residential address, or otherwise delivered in person or through a reliable electronic delivery system. Either party may change the specified address by giving written notice of such change.
11. Arbitration. You and the Company agree to submit to mandatory binding arbitration any and all claims arising out of or related to your employment with the Company and the termination thereof, including, but not limited to, claims for unpaid wages, wrongful termination, torts, stock or stock options or other ownership interest in the Company, and/or discrimination (including harassment) based upon any federal, state or local ordinance, statute, regulation or constitutional provision except that each party may, at its, his or her option, seek injunctive relief in court related to the improper use, disclosure or misappropriation of a partys private, proprietary, confidential or trade secret information (collectively, Arbitrable Claims). THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS.
This employment agreement does not restrict your right to file administrative claims you may bring before any government agency where, as a matter of law, the parties may not restrict the employees ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor). However, the parties agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims.
The arbitration shall be conducted in King County, Washington through the American Arbitration Association (AAA) before a single neutral arbitrator, in accordance with the AAA employment arbitration rules then in effect. The AAA rules may be found and reviewed at www.adr.org under the Rules & Forms tab. The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based. If, for any reason, any term of this Arbitration provision is held to be invalid or unenforceable, all other valid terms and conditions herein shall be severable in nature, and remain fully enforceable.
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12. Definitions. The following terms have the meaning set forth below wherever they are used in this employment agreement:
Cause means (a) your unauthorized use or disclosure of the Companys confidential information or trade secrets, which use or disclosure causes material harm to the Company, (b) your material breach of any agreement between you and the Company, (c) your material failure to comply with the Companys written policies or rules, (d) your conviction of, or your plea of guilty or no contest to, a felony under the laws of the United States or any State, (e) your gross negligence or willful misconduct, (f) your continuing failure to perform assigned duties after receiving written notification of the failure from the Board or (g) your failure to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested your cooperation.
Corporate Transaction means the occurrence of any of the following events: (a) any Person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (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 more than fifty percent (50%) of the total voting power represented by the Companys then-outstanding voting securities, provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Companys assets; (c) 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; (d) any other transaction which qualifies as a corporate transaction under Section 424(a) of the Internal Revenue Code of 1986, as amended (the Code) wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of capital stock of the Company), or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase, or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this employment agreement by reason of a Corporate Transaction, such amount will become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
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Involuntary Termination means you experience a Separation due to your Termination Without Cause or your resignation for Good Reason.
Good Reason means any of the following conditions has come into existence without your consent:
(a) a material reduction of your Base Salary; or
(b) a material diminution of your authority, duties or responsibilities, provided that that a reduction in your authority, duties or responsibilities following a Corporate Transaction shall not constitute Good Reason if (i) there is no material demotion in your authority, duties or responsibilities within that division of the acquiring company comprised of the Company, (ii) you merely experience a change in your title, or (iii) the reduction is due to your failure to be elected or reelected to the Board or any committee thereof, to the extent applicable.
A resignation for Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within 30 days after the condition comes into existence, the Company fails to cure the condition within 30 days after receiving your written notice, and you immediately terminate your employment upon the Companys failure to cure or the Companys notice to you that it will decline to cure.
Separation means a separation from service, as defined in the regulations under Section 409A of the Code.
Termination Without Cause means a Separation as a result of a termination of your employment by the Company without Cause, provided you are willing and able to continue performing services within the meaning of Treasury Regulation 1.409A-1(n)(1).
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We hope that you will accept our offer of continued employment with the Company. You may indicate your agreement with these terms and accept this offer by signing and dating the enclosed duplicate original of this employment agreement and returning it to me.
Very truly yours, | ||
IMPEL NEUROPHARMA, INC. | ||
By: | /s/ Adrian Adams | |
Name: | Adrian Adams | |
Title: | Chief Executive Officer |
I have read and accept this employment offer:
/s/ John Leaman |
Signature of John Leaman |
Dated: 4/15/2021 |
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Exhibit 23.1
Consent of Ernst & Young LLP, 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 March 23, 2021, except for note 14(c) as to which the date is April 19, 2021, in Amendment No.1 to the Registration Statement on Form S-1 (333-254999) and related Prospectus of Impel NeuroPharma, Inc. for the registration of its common stock.
/s/ Ernst & Young LLP
Seattle, Washington
April 19, 2021