Table of Contents
As filed with the Securities and Exchange Commission on
January 9, 2008
Registration
No. 333-
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Omeros Corporation
(Exact name of registrant as
specified in its charter)
| Washington | 2834 | 91-1663741 | ||
|
(State or other jurisdiction
of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
1420 Fifth Avenue, Suite
2600
Seattle, Washington
98101
(206) 676-5000
(Address, including zip code,
and telephone number, including area code, of registrant’s
principal executive offices)
Gregory A.
Demopulos, M.D.
President, Chief Executive
Officer,
Chief Medical Officer
and
Chairman of the Board of
Directors
Omeros Corporation
1420 Fifth Avenue,
Suite 2600
Seattle, Washington
98101
(206) 676-5000
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Please send copies of all communications
to:
|
Craig E. Sherman, Esq.
Mark J. Handfelt, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 701 Fifth Avenue, Suite 5100 Seattle, Washington 98104 (206) 883-2500 |
Marcia S. Kelbon, Esq. Alex F. Sutter, Esq. Omeros Corporation 1420 Fifth Avenue, Suite 2600 Seattle, Washington 98101 (206) 676-5000 |
James R. Tanenbaum, Esq. Jonathan E. Kahn, Esq. Morrison & Foerster LLP 1290 Avenue of the Americas New York, New York 10104 (212) 468-8000 |
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this
Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION OF
REGISTRATION FEE
|
Proposed Maximum |
||||||
|
Title of Each Class of |
Aggregate Offering |
Amount of |
||||
| Securities to be Registered | Price (1)(2) | Registration Fee | ||||
|
Common Stock, $0.01 par value
|
$115,000,000 | $4,519.50 | ||||
| (1) | Estimated solely for the purpose of computing the amount of registration fee pursuant to Rule 457(o) of the Securities Act of 1933. | |
| (2) | Includes the offering price of shares the underwriters have an option to buy to cover over-allotments, if any. |
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
Table of Contents
|
The
information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is declared effective. This preliminary prospectus is
not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or
sale is not permitted. |
Subject to Completion, Dated
January 9, 2008
Omeros Corporation
Shares
Common Stock
This is the initial public offering of Omeros Corporation. We
are
offering shares
of our common stock. We anticipate that the initial public
offering price will be between $
and $ per share. We have applied
to list our common stock on the NASDAQ Global Market under the
symbol “OMER.”
Investing in our common stock involves risk. See “Risk
Factors” beginning on page 9.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
| Per Share | Total | |||
|
Public offering price
|
$ | $ | ||
|
Underwriting discounts and commissions
|
$ | $ | ||
|
Proceeds, before expenses, to Omeros Corporation
|
$ | $ |
We have granted the underwriters the right to purchase up
to additional
shares of common stock to cover over-allotments.
Deutsche Bank
Securities
Pacific Growth Equities, LLC
| Leerink Swann | Needham & Company, LLC |
The date of this prospectus
is ,
2008.
TABLE OF
CONTENTS
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. We
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where offers and sales are
permitted. The information in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of
delivery of this prospectus or any sale of shares of our common
stock. Except where the context requires otherwise, in this
prospectus the “Company,” “Omeros,”
“we,” “us” and “our” refer to
Omeros Corporation, a Washington corporation, and, where
appropriate, its subsidiary.
For investors outside the United States: Neither we nor any of
the underwriters have done anything that would permit this
offering or possession or distribution of this prospectus in any
jurisdiction where action for that purpose is required, other
than in the United States. Persons outside the United States who
come into possession of this prospectus must inform themselves
about, and observe any restrictions relating to, the offering of
shares of common stock and the distribution of this prospectus
outside of the United States.
Market
Data
This prospectus contains market data regarding the healthcare
industry that we obtained from Sharon O’Reilly Consulting,
or SOR Consulting, Thomson Healthcare and The Reimbursement
Group. The market data regarding the number of arthroscopic
operations, including knee arthroscopy operations, performed in
the United States in 2006 is from SOR Consulting.
Ms. O’Reilly is the founder of Medtech Insight, a
market research firm that she left in 2007. Medtech Insight did
not provide any of the data used in this prospectus. The market
data regarding the number of cataract and uroendscopic
operations performed in the United States in 2006 is from
Thomson Healthcare. In addition, our conclusions regarding the
potential reimbursement of our
PharmacoSurgeryTM
product candidates are based on reports that we commissioned
from The Reimbursement Group, or TRG. Market data publications
and reports generally indicate that their information has been
obtained from sources believed to be reliable, but do not
guarantee the accuracy and completeness of their information.
Although we believe that all of these reports and data are
reliable, we have not independently verified any of this
information.
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This summary highlights information contained elsewhere in
this prospectus and does not contain all of the information you
should consider in making your investment decision. You should
read this summary together with the more detailed information,
including our financial statements and the related notes,
elsewhere in this prospectus. You should carefully consider,
among other things, the matters discussed in “Risk
Factors.”
Omeros
Corporation
We are a clinical-stage biopharmaceutical company committed to
discovering, developing and commercializing products focused on
inflammation and disorders of the central nervous system. Our
most clinically advanced product candidates are derived from our
proprietary
PharmacoSurgerytm
platform designed to improve the clinical outcomes of patients
undergoing arthroscopic, ophthalmological, urological and other
surgical and medical procedures. Our PharmacoSurgery platform is
based on low-dose proprietary combinations of therapeutic agents
delivered directly to the surgical site throughout the duration
of the procedure to preemptively inhibit inflammation and other
problems caused by surgical trauma and to provide clinical
benefits both during and after surgery. We currently have three
ongoing PharmacoSurgery clinical development programs, two in
arthroscopy and one in uroendoscopy. The most advanced of these,
OMS103HP for use in arthroscopy, is in Phase 3 clinical
trials. We expect to initiate a fourth clinical program in
ophthalmology in the first half of 2008. In addition to our
PharmacoSurgery platform, we have leveraged our expertise in
inflammation and the central nervous system, or CNS, to build a
pipeline of preclinical programs targeting large markets. By
combining our late-stage PharmacoSurgery product candidates with
our deep and diverse pipeline of preclinical development
programs, we believe that we create multiple opportunities for
commercial success. For each of our product candidates and
programs, we have retained all manufacturing, marketing and
distribution rights.
Our
PharmacoSurgery Platform
Limitations of
Current Treatments
Current standards of care for the management and treatment of
surgical trauma are limited in effectiveness. Surgical trauma
causes a complex cascade of molecular signaling and biochemical
changes, resulting in inflammation, pain, spasm, loss of
function and other problems. As a consequence, multiple
pharmacologic actions are required to manage the complexity and
inherent redundancy of the cascade. Accordingly, we believe that
single-agent treatments acting on single targets do not result
in optimal therapeutic benefit. Further, current pre-operative
treatments are not optimally effective because the
administration of standard irrigation solution during the
surgical procedure washes out pre-operatively delivered drugs.
In addition, current postoperative therapies are not optimally
effective because the cascade and resultant inflammation, pain,
spasm, loss of function and other problems have already begun,
and are difficult to reverse and manage after surgical trauma
has occurred. Also, drugs that currently are systemically
delivered, such as by oral or intravenous administration, to
target these problems are frequently associated with adverse
side effects.
Advantages of our
PharmacoSurgery Platform
In contrast, we generate from our PharmacoSurgery platform
proprietary product candidates that are combinations of
therapeutic agents designed to act simultaneously at multiple
discrete targets to preemptively block the molecular-signaling
and biochemical cascade caused by surgical trauma and to provide
clinical benefits both during and after surgery. Supplied in
pre-dosed, pre-formulated, single-use containers, our
PharmacoSurgery
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product candidates are added to standard surgical irrigation
solutions and delivered intra-operatively to the site of tissue
trauma throughout the surgical procedure. This results in the
delivery of low concentrations of agents with minimal systemic
uptake and reduced risk of adverse side effects, and does not
require a surgeon to change his or her operating procedure. In
addition to ease of use, we believe that the clinical benefits
of our product candidates could provide surgeons a competitive
marketing advantage and may facilitate third-party payor
acceptance, all of which we expect will drive adoption and
market penetration. Our patent portfolio covers all
arthroscopic, ophthalmological, urological, cardiovascular and
other types of surgical and medical procedures, and includes
both method and composition claims broadly directed to
combinations of agents drawn from distinct classes of
therapeutic agents delivered to the procedural site
intra-operatively, regardless of whether the agents are generic
or proprietary. Our current PharmacoSurgery product candidates
are specifically comprised of active pharmaceutical ingredients,
or APIs, contained in generic drugs already approved by the U.S.
Food and Drug Administration, or FDA, with established profiles
of safety and pharmacologic activities, and are eligible for
submission under the potentially less-costly and time-consuming
Section 505(b)(2) New Drug Application, or NDA, process.
Market
Opportunity
According to market data from SOR Consulting and Thomson
Healthcare, approximately a total of: 4.0 million
arthroscopic operations, including 2.6 million knee
arthroscopy operations; 2.9 million cataract operations;
and 4.3 million uroendoscopic operations were performed in
the United States in 2006. We expect the number of these
operations to grow as the population and demand for minimally
invasive procedures increases and endoscopic technologies
improve. In addition, based on reports that we commissioned from
a reimbursement consulting firm, we anticipate that each of our
current PharmacoSurgery product candidates will be favorably
reimbursed both to the surgical facility and to the surgeon. As
a result, we estimate that there are large markets for each of
our PharmacoSurgery product candidates and believe that OMS103HP
alone provides a multi-billion dollar market opportunity.
Our Lead Product
Candidate OMS103HP
OMS103HP, our lead PharmacoSurgery product candidate, is in two
Phase 3 clinical programs. The first program is evaluating
OMS103HP’s safety and ability to improve postoperative
joint function and reduce pain following arthroscopic anterior
cruciate ligament, or ACL, reconstruction surgery. The second
program is evaluating OMS103HP’s safety and ability to
reduce pain and improve postoperative joint function following
arthroscopic meniscectomy surgery. OMS103HP is a proprietary
combination of APIs with known anti-inflammatory, analgesic and
vasoconstrictive activities. Each of the APIs in OMS103HP are
components of generic, FDA-approved drugs that have been
marketed in the United States as over-the-counter or
prescription drug products for over 15 years and have
established and well-characterized safety profiles. We believe
that OMS103HP will, if approved, be the first commercially
available drug product for the improvement of function following
arthroscopic surgery, and will, based on the data from our
OMS103HP Phase 1/Phase 2 clinical program,
provide additional postoperative clinical benefits, including
improved range of motion, reduced pain and earlier return to
work.
OMS103HP selectively targets multiple and discrete
pro-inflammatory mediators and pathways within the inflammatory
and pain cascade. Added to standard irrigation solutions,
OMS103HP is delivered to the joint at the initiation of surgical
trauma to preemptively inhibit the inflammatory and pain
cascade. Continuous intra-operative delivery to the joint
creates a constant concentration of OMS103HP, bathing and
replenishing the joint with drug throughout the duration of the
surgical procedure. Because OMS103HP is delivered locally to,
and acts directly at, the site of tissue injury, it can be
delivered in low concentration, and will not be
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subject to the substantial interpatient variability in
pharmacokinetics that is associated with systemic delivery. By
delivering low-concentration OMS103HP locally and only during
the arthroscopic procedure, systemic absorption of the APIs will
be minimized or avoided, thereby reducing the risk of adverse
side effects.
We expect to complete the Phase 3 clinical trials in
patients undergoing ACL reconstruction surgery by the end of
2008 and intend to submit, during the first half of 2009, an NDA
to the FDA under the Section 505(b)(2) process. We expect
to complete our first Phase 3 clinical trial, and begin our
second Phase 3 clinical trial, in patients undergoing
meniscectomy surgery in the second half of 2008.
Our Other
PharmacoSurgery Product Candidates
OMS302
OMS302 is our PharmacoSurgery product candidate being developed
for use during ophthalmological procedures, including cataract
and other lens replacement surgery. OMS302 is a proprietary
combination of an anti-inflammatory API and an API that causes
pupil dilation, or mydriasis, each with well-known safety and
pharmacologic profiles. FDA-approved drugs containing each of
these APIs have been used in ophthalmological clinical practice
for more than 15 years, and both APIs are contained in
generic, FDA-approved drugs.
OMS302 is added to standard irrigation solution used in cataract
and other lens replacement surgery, and is delivered directly
into the anterior chamber of the eye to induce and maintain
mydriasis, to prevent surgically induced pupil constriction, or
miosis, and to reduce postoperative pain and irritation.
Mydriasis is an essential prerequisite for these procedures and,
if not maintained throughout the surgical procedure or if miosis
occurs, risk of damaging structures within the eye increases as
does the operating time required to perform the procedure.
In the first half of 2008, we plan to submit an Investigational
New Drug Application, or IND, to the FDA for OMS302, and expect
to begin enrolling patients into a Phase 1/Phase 2
clinical trial to evaluate the efficacy and safety of OMS302 in
patients undergoing cataract surgery.
OMS201
OMS201 is our PharmacoSurgery product candidate being developed
for use during urological surgery, including uroendoscopic
procedures of the bladder, ureter, urethra and other urinary
tract structures. OMS201 is a proprietary combination of an
anti-inflammatory API and a smooth muscle relaxant API. Both
APIs are contained in generic, FDA-approved drugs with
well-known profiles of safety and pharmacologic activities, and
each has been individually prescribed to manage the symptoms of
ureteral and renal stones. Each of the APIs in OMS201 is
contained in drugs that have been marketed in the United States
for more than 15 years.
Added to standard irrigation solutions in urological surgery,
OMS201 is delivered directly to the surgical site during
uroendoscopic procedures, such as bladder endoscopy, minimally
invasive prostate surgery and ureteroscopy, to inhibit
surgically induced inflammation, pain and smooth muscle spasm,
or contractility. We are currently conducting a Phase 1 clinical
trial to evaluate the safety and systemic absorption of OMS201
added to standard irrigation solution and delivered to patients
undergoing ureteroscopy for removal of ureteral or renal stones.
We expect to complete the Phase 1 clinical trial of OMS201 in
the first half of 2008.
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Our Preclinical
Development Programs
MASP-2
Program
In our mannan-binding lectin-associated serine protease-2, or
MASP-2, program, we are developing antibody therapies to treat
disorders caused by complement activated inflammation. MASP-2 is
a novel pro-inflammatory protein target in the complement
system, an important component of the immune system. MASP-2
appears to be required for the function of the lectin pathway,
one of the principal complement activation pathways. Our
preclinical data suggest that MASP-2 plays a significant role in
macular degeneration, ischemia-reperfusion injury associated
with myocardial infarction, renal disease and rheumatoid
arthritis. We have generated several fully human, high-affinity,
blocking antibodies to MASP-2, and from these or others expect
to select a clinical product candidate in 2008.
Chondroprotective
Program
In our cartilage protective, or Chondroprotective, program, we
are developing drug therapies to treat cartilage disorders, such
as osteoarthritis and rheumatoid arthritis. While cartilage
health requires a balance between cartilage breakdown and
synthesis, current drugs approved for the treatment of arthritis
are focused only on inhibiting breakdown. Our drug therapies in
development combine an inhibitor of cartilage breakdown with an
agent that promotes cartilage synthesis. We believe that our
issued and pending patents broadly cover any drug inhibiting
cartilage breakdown, including those drugs already approved, in
combination with any promoter of cartilage synthesis to treat
cartilage disorders.
PDE10
Program
In our Phosphodiesterase 10, or PDE10, program, we are
developing compounds that inhibit PDE10 for the treatment of
schizophrenia. PDE10 is an enzyme that is expressed in areas of
the brain strongly linked to schizophrenia and other psychotic
disorders and has been recently identified as a target for the
development of new anti-psychotic drugs. Results from
preclinical studies suggest that PDE10 inhibitors may address
the limitations of currently used anti-psychotic drugs by
avoiding the associated weight gain and improving cognition.
GPCR
Program
Members of our scientific team were the first to identify and
characterize the full family of all 357 G protein-coupled
receptors, or GPCRs, common to mice and humans, with the
exception of those GPCRs linked to smell, taste and pheromone
functions. Located in the brain and in peripheral tissues, GPCRs
are involved in numerous physiological processes, including the
regulation of the nervous system, metabolism, behavior,
reproduction, development and hormonal homeostasis. Using our
expertise in GPCRs, our 61 proprietary strains of
knock-out
mice, our in-house battery of behavioral assays and available
libraries of compounds, we have discovered what we believe to be
previously unknown links between specific molecular targets in
the brain and a series of CNS disorders. We have filed
corresponding patent applications and are developing compounds
to treat several of these disorders.
Our Other CNS
Programs
In our other CNS programs, we have discovered what we believe to
be previously unknown links between specific molecular targets
and a series of CNS disorders. We have filed patent applications
directed to our discoveries broadly claiming any agents that act
at these molecular targets for use in the treatment of these CNS
disorders. Based on promising preclinical data in animal models,
we are developing compounds for several of these CNS disorders.
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Our
Strategy
Our objective is to become a leading biopharmaceutical company,
discovering, developing and successfully commercializing a large
portfolio of diverse products. The key elements of our strategy
are to:
| • | obtain regulatory approval for our PharmacoSurgery product candidates OMS103HP, OMS302 and OMS201; | |
| • | maximize commercial opportunity for our PharmacoSurgery product candidates OMS103HP, OMS302 and OMS201; | |
| • | continue to leverage our business model to mitigate risk by combining our multiple late-stage PharmacoSurgery product candidates with our deep and diverse pipeline of preclinical development programs; | |
| • | further expand our broad patent portfolio; and | |
| • | manage our business with continued efficiency and discipline, while continuing to evaluate opportunities and acquire technologies that meet our business objectives. |
Risks Related to
our Business
The risks set forth under the section entitled “Risk
Factors” beginning on page 9 of this prospectus
reflect risks and uncertainties that could significantly and
adversely affect our business and our ability to execute our
business strategy. For example:
| • | We are largely dependent on the success of our PharmacoSurgery product candidates, particularly our lead product candidate, OMS103HP, and our clinical trials may fail to adequately demonstrate the safety and efficacy of OMS103HP or our other PharmacoSurgery product candidates. If a clinical trial fails, if regulatory approval is delayed or if additional clinical trials are required, our development costs may increase and we will not have the anticipated revenue from that product candidate to fund our operations. | |
| • | We are a clinical-stage company with no product revenue and no products approved for marketing. The regulatory approval process is expensive, time-consuming and uncertain, and our product candidates have not been, and may not be, approved for sale by regulatory authorities. Even if approved for sale by the appropriate regulatory authorities, our products may not achieve market acceptance and we may never achieve profitability. | |
| • | Our preclinical development programs may not generate product candidates that are suitable for clinical testing or that can be successfully commercialized. | |
| • | Our patents may not adequately protect our present and future product candidates or permit us to gain or keep a competitive advantage. Our pending patents for our present and future product candidates may not be issued. |
Corporate
Information
We were incorporated as a Washington corporation on
June 16, 1994. Our principal executive offices are located
at 1420 Fifth Avenue, Suite 2600, Seattle, Washington
98101, and our telephone number is
(206) 676-5000.
Our web site address is www.omeros.com. The information on, or
that can be accessed through, our web site is not part of this
prospectus.
Omeros®,
the Omeros
logo®,
nura®,
and
PharmacoSurgerytm
are trademarks of Omeros Corporation in the United States and
other countries. This prospectus also includes trademarks of
other persons.
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The
Offering
| Shares of common stock offered by us | shares | |
| Shares of common stock to be outstanding after this offering | shares | |
| Use of proceeds | We plan to use the net proceeds of this offering to fund (1) the completion of our Phase 3 clinical trials for OMS103HP and the submission of the related NDA(s) to the FDA, (2) the launch and commercialization of OMS103HP, (3) the clinical development of OMS302 and OMS201, (4) the development of our pipeline of preclinical programs and (5) working capital, capital expenditures, potential acquisitions of products or technologies and general corporate purposes. See “Use of Proceeds.” | |
| Proposed NASDAQ Global Market symbol | OMER |
The number of shares of common stock that will be outstanding
after this offering is based on the number of shares outstanding
at September 30, 2007, and excludes:
| • | 5,257,413 shares of common stock issuable upon the exercise of options outstanding at September 30, 2007, at a weighted-average exercise price of $0.56 per share; | |
| • | 843,233 shares of common stock issuable upon exercise of options granted from October 1, 2007 to January 9, 2008, at a weighted-average exercise price of $1.25 per share; | |
| • | 512,029 shares of common stock issuable upon exercise of warrants outstanding at September 30, 2007, which will automatically terminate upon the closing of this offering if not exercised, at a weighted-average exercise price of $5.15 per share; and | |
| • | 22,613 shares of common stock issuable upon exercise of warrants outstanding at September 30, 2007, which will not automatically terminate upon the closing of this offering, at a weighted-average exercise price of $4.66 per share. | |
| • | shares of common stock available for future issuance under our 2008 Equity Incentive Plan. |
Unless otherwise indicated, all information in this
prospectus assumes:
| • | the automatic conversion of all outstanding shares of our convertible preferred stock into 22,327,407 shares of common stock, effective upon the completion of this offering; | |
| • | the conversion of all outstanding warrants to purchase shares of our convertible preferred stock into warrants to purchase 534,642 shares of common stock, effective upon the completion of this offering; | |
| • | the issuance of shares of common stock pursuant to the cashless net exercise of warrants that will automatically terminate upon the closing of this offering based on the assumed initial public offering price of $ (the mid-point of the range set forth on the cover page of this prospectus); and | |
| • | no exercise by the underwriters of their right to purchase additional shares of common stock to cover over-allotments, if any. |
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Summary
Consolidated Financial Data
The following tables summarize consolidated financial data
regarding our business and should be read together with
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our consolidated
financial statements and the related notes included elsewhere in
this prospectus. The consolidated statements of operations data
for the years ended December 31, 2006, 2005 and 2004 are
derived from our audited consolidated financial statements
included elsewhere in this prospectus. The consolidated
statements of operations data for the nine months ended
September 30, 2007, and the nine months ended
September 30, 2006, and for the period from June 16,
1994 (inception) to September 30, 2007 and the consolidated
balance sheet data as of September 30, 2007 are derived
from our unaudited consolidated financial statements included
elsewhere in this prospectus. The unaudited consolidated
financial statements have been prepared on a basis consistent
with our audited consolidated financial statements included in
this prospectus and include, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of the financial information
in those statements. Our historical results are not necessarily
indicative of the results to be expected in any future period,
and the results for the nine months ended September 30,
2007 are not necessarily indicative of the results to be
expected for the full year ending December 31, 2007. We
acquired nura, inc., or nura, on August 11, 2006, and the
results of nura are included in the consolidated financial
statements from that date. The pro forma basic and diluted net
loss per common share data are computed using the
weighted-average number of shares of common stock outstanding,
after giving effect to the conversion (using the as if-converted
method) of all shares of our convertible preferred stock into
common stock.
|
Period from June 16, |
||||||||||||||||||||||||
|
1994 |
||||||||||||||||||||||||
|
Nine Months Ended |
(Inception) to |
|||||||||||||||||||||||
| September 30, | Year Ended December 31, |
September 30, |
||||||||||||||||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | 2007 | |||||||||||||||||||
| (in thousands, except share and per share data) | ||||||||||||||||||||||||
|
Consolidated Statements of Operations Data:
|
||||||||||||||||||||||||
|
Grant revenue
|
$ 650 | $ 200 | $ 200 | $ — | $ — | $ 950 | ||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||||||
|
Research and development
|
11,173 | 6,230 | 9,637 | 5,803 | 2,670 | 39,635 | ||||||||||||||||||
|
Acquired in-process research and development
|
— | 10,891 | 10,891 | — | — | 10,891 | ||||||||||||||||||
|
General and administrative
|
8,619 | 1,893 | 3,625 | 1,904 | 2,079 | 22,859 | ||||||||||||||||||
|
Total operating expenses
|
19,792 | 19,014 | 24,153 | 7,707 | 4,749 | 73,385 | ||||||||||||||||||
|
Loss from operations
|
(19,142 | ) | (18,814 | ) | (23,953 | ) | (7,707 | ) | (4,749 | ) | (72,435 | ) | ||||||||||||
|
Investment income
|
1,173 | 722 | 1,088 | 333 | 171 | 4,093 | ||||||||||||||||||
|
Other income (expense)
|
(355 | ) | 108 | 179 | 8 | — | (168 | ) | ||||||||||||||||
|
Interest expense
|
(123 | ) | (38 | ) | (91 | ) | — | — | (266 | ) | ||||||||||||||
|
Net loss
|
$ | (18,447 | ) | $ | (18,022 | ) | $ | (22,777 | ) | $ (7,366) | $ (4,578) | $ | (68,776 | ) | ||||||||||
|
Denominator for basic and diluted net loss per common share
|
4,184,919 | 3,653,537 | 3,694,388 | 3,468,886 | 3,416,197 | |||||||||||||||||||
|
Basic and diluted net loss per common share
|
$ (4.41) | $ (4.93) | $ (6.17) | $ (2.12) | $ (1.34) | |||||||||||||||||||
|
Pro forma basic and diluted net loss per common share (unaudited)
|
$ (0.66) | $ (1.10) | ||||||||||||||||||||||
|
Weighted-average shares used to compute pro forma basic and
diluted net loss per common share (unaudited)
|
27,005,598 | 20,843,076 | ||||||||||||||||||||||
7
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The pro forma consolidated balance sheet data in the table below
reflect (a) the automatic conversion of all outstanding
shares of our convertible preferred stock into 22,327,407 shares
of our common stock upon the closing of this offering and
(b) the automatic conversion of all outstanding warrants to
purchase convertible preferred stock into warrants to purchase
534,642 shares of our common stock upon the closing of this
offering, resulting in the reclassification of $1.7 million
from preferred stock warrant liability to shareholders’
equity (deficit), and (c) the repayment of $239,000 in
notes receivable from a related party. The pro forma as adjusted
consolidated balance sheet data in the table below adjust the
pro forma information to reflect (a) our sale
of shares
of our common stock in this offering at an assumed initial
public offering price of $ per
share (the mid-point of the range set forth on the cover page of
this prospectus), after deducting estimated underwriting
discounts and commissions and estimated offering expenses
payable by us and (b) the issuance
of
shares of common stock pursuant to the cashless net exercise of
warrants that will automatically terminate upon the closing of
this offering based on the assumed initial public offering price.
| As of September 30, 2007 | ||||||||||||
|
Pro Forma |
||||||||||||
|
Pro |
As |
|||||||||||
| Actual | Forma | Adjusted (1) | ||||||||||
| (in thousands) | ||||||||||||
|
Consolidated Balance Sheet Data:
|
||||||||||||
|
Cash, cash equivalents and short-term investments
|
$ | 27,171 | $ | 27,410 | ||||||||
|
Working capital
|
21,793 | 22,032 | ||||||||||
|
Total assets
|
28,959 | 29,198 | ||||||||||
|
Total debt
|
1,270 | 1,270 | ||||||||||
|
Preferred stock warrant liability
|
1,674 | — | ||||||||||
|
Convertible preferred stock
|
89,168 | — | ||||||||||
|
Deficit accumulated during the development stage
|
(68,776 | ) | (68,776 | ) | ||||||||
|
Total shareholders’ equity (deficit)
|
(66,246 | ) | 24,835 | |||||||||
| (1) | A $1.00 increase (decrease) in the assumed public offering price of $ would increase (decrease) each of cash, cash equivalents and short-term investments, working capital, total assets and total shareholders’ equity (deficit) by $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
8
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You should carefully consider the risks described below
before making an investment decision. Our business, prospects,
financial condition or operating results could be materially
adversely affected by any of these risks, as well as other risks
not currently known to us or that we currently deem immaterial.
The trading price of our common stock could decline due to any
of these risks and you may lose all or part of your investment.
In assessing the risks described below, you should also refer to
the other information contained in this prospectus, including
our consolidated financial statements and the related notes,
before deciding to purchase any shares of our common stock.
Risks Related to
Our Product Candidates and Operations
Our success
largely depends on the success of our lead
PharmacoSurgerytm
product candidate, OMS103HP, and we cannot be certain that it
will receive regulatory approval or be successfully
commercialized. If we are unable to commercialize OMS103HP, or
experience significant delays in doing so, our business will be
materially harmed.
We are a biopharmaceutical company with no products approved for
commercial sale and we have not generated any revenue from
product sales. We have incurred, and will continue to incur,
significant costs relating to the clinical development and
commercialization of our lead product candidate, OMS103HP, for
use during arthroscopic anterior cruciate ligament, or ACL,
reconstruction surgery as well as arthroscopic meniscectomy
surgery. We have not yet obtained regulatory approval to market
this product candidate for ACL reconstruction surgery,
arthroscopic meniscectomy surgery or any other indication in any
jurisdiction and we may never be able to obtain approval or, if
approvals are obtained, to commercialize this product candidate
successfully. If OMS103HP does not receive regulatory approval
for ACL reconstruction surgery or arthroscopic meniscectomy
surgery, or if it is not successfully commercialized for one or
both uses, we may not be able to generate revenue, become
profitable, fund the development of our other product candidates
or preclinical development programs or continue our operations.
We do not know whether our clinical trials for OMS103HP will be
completed on schedule or result in regulatory approval or in a
marketable product. If approved for commercialization, we do not
anticipate that OMS103HP will reach the market until 2010 at the
earliest.
Our success is
also dependent on the success of our additional PharmacoSurgery
product candidates, OMS302 and OMS201, and we cannot be certain
that either will advance through clinical testing, receive
regulatory approval or be successfully commercialized.
In addition to OMS103HP, our success will depend on the
successful commercialization of one or both of two additional
PharmacoSurgery product candidates, OMS302 and OMS201. We have
begun preparation of an Investigational New Drug Application, or
IND, to be submitted to the U.S. Food and Drug
Administration, or the FDA, to begin a clinical study of OMS302
evaluating the safety and efficacy of OMS302 in patients
undergoing cataract surgery. In addition, we are currently
conducting a Phase 1 clinical trial evaluating the safety
and systemic absorption of OMS201 when used during ureteroscopy
for removal of ureteral or renal stones. We have incurred and
will continue to incur significant costs relating to the
clinical development and commercialization of these
PharmacoSurgery product candidates. We have not obtained
regulatory approval to market these product candidates for any
indication in any jurisdiction and we may never be able to
obtain approval or, if approvals are obtained, to commercialize
these product candidates successfully. If OMS302 and OMS201 do
not receive
9
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regulatory approval, or if they are not successfully
commercialized, we may not be able to generate revenue, become
profitable, fund the development of our other product candidates
or our preclinical programs or continue our operations.
We do not know whether our planned and current clinical trials
for OMS302 and OMS201 will be completed on schedule, if at all.
In addition, we do not know whether any of our clinical trials
will be successful or result in approval of either product for
marketing.
We have a history
of operating losses and we may not achieve or maintain
profitability.
We have not been profitable and have generated substantial
operating losses since we were incorporated in June 1994. We had
net losses of approximately $18.4 million for the nine
months ended September 30, 2007, and $22.8 million,
$7.4 million and $4.6 million for the years ended
December 31, 2006, 2005 and 2004, respectively. As of
September 30, 2007, we had an accumulated deficit of
approximately $68.8 million. We expect to incur additional
losses for at least the next several years and cannot be certain
that we will ever achieve profitability. As a result, our
business is subject to all of the risks inherent in the
development of a new business enterprise, such as the risks that
we may be unable to obtain additional capital needed to support
the preclinical and clinical expenses of development and
commercialization of our product candidates, to develop a market
for our potential products, to successfully transition from a
company with a research and development focus to a company
capable of commercializing our product candidates and to attract
and retain qualified management as well as technical and
scientific staff.
We are subject to
extensive government regulation, including the requirement of
approval before our products may be manufactured or
marketed.
Both before and after approval of our product candidates, we,
our product candidates, and our suppliers and contract
manufacturers are subject to extensive regulation by
governmental authorities in the United States and other
countries, covering, among other things, testing, manufacturing,
quality control, labeling, advertising, promotion, distribution,
and import and export. Failure to comply with applicable
requirements could result in, among other things, one or more of
the following actions: warning letters; fines and other monetary
penalties; unanticipated expenditures; delays in approval or
refusal to approve a product candidate; product recall or
seizure; interruption of manufacturing or clinical trials;
operating restrictions; injunctions; and criminal prosecution.
We or the FDA may suspend or terminate human clinical trials at
any time on various grounds, including a finding that the
patients are being exposed to an unacceptable health risk.
Our product candidates cannot be marketed in the United States
without FDA approval. The FDA has not approved any of our
product candidates for sale in the United States. All of our
product candidates are in development, and will have to be
approved by the FDA before they can be marketed in the United
States. Obtaining FDA approval requires substantial time,
effort, and financial resources, and may be subject to both
expected and unforeseen delays, and there can be no assurance
that any approval will be granted on a timely basis, if at all.
The FDA may decide that our data are insufficient for approval
of our product candidates and require additional preclinical,
clinical or other studies. As we develop our product candidates,
we periodically discuss with the FDA clinical, regulatory and
manufacturing matters, and our views may, at times, differ from
those of the FDA. For example, the FDA has questioned whether
our studies evaluating OMS103HP in patients undergoing ACL
reconstruction surgery are adequately designed to evaluate
efficacy. If these studies fail to demonstrate efficacy, we will
be required to provide additional information, including
possibly the results of additional clinical trials. Also, the
FDA regulates those of our product candidates consisting of two
or more active ingredients as combination drugs under its
Combination Drug
10
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Policy. The Combination Drug Policy requires that we demonstrate
that each active ingredient in a drug product contributes to the
product’s effectiveness. The FDA has questioned the means
by which we intend to demonstrate such contribution and whether
available data and information demonstrate contribution for each
active ingredient in OMS103HP. If we are unable to resolve these
questions, we may be required to provide additional information,
which may include the results of additional preclinical studies
or clinical trials.
If we are required to conduct additional clinical trials or
other testing of our product candidates beyond those that we
currently contemplate for regulatory approval, if we are unable
to successfully complete our clinical trials or other testing,
or if the results of these and other trials or tests fail to
demonstrate efficacy or raise safety concerns, we may be delayed
in obtaining marketing approval for our product candidates, or
may never be able to obtain marketing approval.
Even if regulatory approval of a product candidate is obtained,
such approval may be subject to significant limitations on the
indicated uses for which that product may be marketed,
conditions of use,
and/or
significant post approval obligations, including additional
clinical trials. These regulatory requirements may, among other
things, limit the size of the market for the product. Even after
approval, discovery of previously unknown problems with a
product, manufacturer, or facility, such as previously
undiscovered side effects, may result in restrictions on any
product, manufacturer, or facility, including, among other
things, a possible withdrawal of approval of the product.
If our clinical
trials are delayed, we may be unable to develop our product
candidates on a timely basis, which may increase our development
costs and could delay the potential commercialization of our
products and the subsequent receipt of revenue from sales, if
any.
We cannot predict whether we will encounter problems with any of
our completed, ongoing or planned clinical trials that will
cause regulatory agencies, institutional review boards or us to
delay our clinical trials or suspend or delay the analysis of
the data from those trials. Clinical trials can be delayed for a
variety of reasons, including:
| • | discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials; | |
| • | delays or the inability to obtain required approvals from institutional review boards or other governing entities at clinical sites selected for participation in our clinical trials; | |
| • | delays in enrolling patients into clinical trials; | |
| • | lower than anticipated retention rates of patients in clinical trials; | |
| • | the need to repeat or conduct additional clinical trials as a result of problems such as inconclusive or negative results, poorly executed testing or unacceptable design; | |
| • | an insufficient supply of product candidate materials or other materials necessary to conduct our clinical trials; | |
| • | the need to qualify new suppliers of product candidate materials for FDA and foreign regulatory approval; | |
| • | an unfavorable FDA inspection or review of a clinical trial site or records of any clinical investigation; | |
| • | the occurrence of drug-related side effects or adverse events experienced by participants in our clinical trials; or | |
| • | the placement of a clinical hold on a trial. |
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In addition, a clinical trial may be suspended or terminated by
us, the FDA or other regulatory authorities due to a number of
factors, including:
| • | failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols; | |
| • | inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold; | |
| • | unforeseen safety issues or any determination that a trial presents unacceptable health risks; or | |
| • | lack of adequate funding to continue the clinical trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and increased expenses associated with the services of our contract research organizations, or CROs, and other third parties. |
Changes in regulatory requirements and guidance may occur and we
may need to amend clinical trial protocols to reflect these
changes. Amendments may require us to resubmit our clinical
trial protocols to institutional review boards for
reexamination, which may impact the costs, timing or successful
completion of a clinical trial. If the results of our clinical
trials are not available when we expect or if we encounter any
delay in the analysis of data from our clinical trials, we may
be unable to file for regulatory approval or conduct additional
clinical trials on the schedule we currently anticipate. Any
delays in completing our clinical trials may increase our
development costs, would slow down our product development and
approval process, would delay our receipt of product revenue and
would make it difficult to raise additional capital. Many of the
factors that cause, or lead to, a delay in the commencement or
completion of clinical trials may also ultimately lead to the
denial of regulatory approval of a product candidate. In
addition, significant clinical trial delays also could allow our
competitors to bring products to market before we do and impair
our ability to commercialize our future products and may harm
our business.
If we fail to
obtain additional financing, we may be unable to complete the
development and commercialization of OMS103HP and our other
product candidates, or continue our other preclinical
development programs.
Our operations have consumed substantial amounts of cash since
inception. We expect to continue to spend substantial amounts to:
| • | complete the Phase 3 clinical trials of OMS103HP for use in arthroscopic ACL reconstruction surgery; | |
| • | conduct and complete the Phase 3 clinical trials of OMS103HP for use in arthroscopic meniscectomy surgery; | |
| • | initiate, conduct and complete clinical trials of OMS302 for use during lens replacement surgery; | |
| • | conduct and complete the clinical trials of OMS201 for use in endoscopic surgery of the urological tract; | |
| • | continue our research and development; | |
| • | initiate and conduct clinical trials for other product candidates; and | |
| • | launch and commercialize any product candidates for which we receive regulatory approval. |
Our clinical trials for OMS103HP may be delayed for many of the
reasons discussed in these “Risk Factors,” which would
increase the development expenses of OMS103HP and may
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require us to raise additional capital to complete the clinical
development and commercialization of OMS103HP and to decrease
spending on our other clinical and preclinical development
programs. We cannot be certain that additional funding will be
available on acceptable terms, if at all. To the extent that we
raise additional funds by issuing equity securities, our
shareholders may experience significant dilution. Any debt
financing, if available, may require us to pledge our assets as
collateral or involve restrictive covenants, such as limitations
on our ability to incur additional indebtedness, limitations on
our ability to acquire or license intellectual property rights
and other operating restrictions that could negatively impact
our ability to conduct our business. If we are unable to raise
additional capital when required or on acceptable terms, we may
have to significantly delay, scale back or discontinue the
development or commercialization of one or more of our product
candidates or one or more of our other research and development
initiatives. We also could be required to seek collaborators for
one or more of our current or future product candidates at an
earlier stage than otherwise would be desirable or on terms that
are less favorable than otherwise might be available; or
relinquish or license on unfavorable terms our rights to
technologies or product candidates that we otherwise would seek
to develop or commercialize ourselves. Any of these events could
significantly harm our business and prospects and could cause
our stock price to decline.
Our lead product
candidate OMS103HP or future product candidates may never
achieve market acceptance even if we obtain regulatory
approvals.
Even if we receive regulatory approvals for the commercial sale
of our lead product candidate OMS103HP or future product
candidates, the commercial success of these product candidates
will depend on, among other things, their acceptance by
physicians, patients, third-party payors and other members of
the medical community. If our product candidates fail to gain
market acceptance, we may be unable to earn sufficient revenue
to continue our business. Market acceptance of, and demand for,
any product candidate that we may develop and commercialize will
depend on many factors, including:
| • | our ability to provide acceptable evidence of safety and efficacy; | |
| • | availability, relative cost and relative efficacy of alternative and competing treatments; | |
| • | the effectiveness of our marketing and distribution strategy to, among others, hospitals, surgery centers, physicians and/or pharmacists; | |
| • | prevalence of the surgical procedure or condition for which the product is approved; |
| • acceptance by physicians of each product as a safe and effective treatment; |
| • | perceived advantages over alternative treatments; | |
| • | relative convenience and ease of administration; | |
| • | the availability of adequate reimbursement by third parties; | |
| • | the prevalence and severity of adverse side effects; | |
| • | publicity concerning our products or competing products and treatments; and | |
| • | our ability to obtain sufficient third-party insurance coverage. |
The number of operations in which our PharmacoSurgery products,
if approved, would be used may be significantly less than the
total number of operations performed according to the market
data obtained from industry sources. If our lead product
candidate OMS103HP or future product candidates do not become
widely accepted by physicians, patients, third-party payors and
other members of the medical community, it is unlikely that we
will ever become profitable, and if we are unable to increase
market penetration of OMS103HP or our other product candidates,
our growth will be significantly harmed.
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We rely on third
parties to conduct our preclinical research and clinical trials.
If these third parties do not perform as contractually required
or otherwise expected, we may not be able to obtain regulatory
approval for or commercialize our product candidates.
We rely on third parties, such as CROs and research
institutions, to conduct a portion of our preclinical research.
We also rely on third parties, such as medical institutions,
clinical investigators and CROs, to assist us in conducting our
clinical trials. Nonetheless, we are responsible for confirming
that our preclinical research is conducted in accordance with
applicable regulations, and that our clinical trials are
conducted in accordance with applicable regulations, the
relevant protocol and within the context of approvals by an
institutional review board. Our reliance on these third parties
does not relieve us of responsibility for ensuring compliance
with FDA regulations and standards for conducting, monitoring,
recording and reporting the results of preclinical research and
clinical trials to assure that data and reported results are
credible and accurate and that the trial participants are
adequately protected. If these third parties do not successfully
carry out their contractual duties or regulatory obligations or
meet expected deadlines, if the third parties need to be
replaced or if the quality or accuracy of the data they obtain
is compromised due to their failure to adhere to our clinical
protocols or regulatory requirements or for other reasons, our
preclinical and clinical development processes may be extended,
delayed, suspended or terminated, and we may not be able to
obtain regulatory approval for our product candidates.
If we are unable
to establish sales and marketing capabilities or enter into
agreements with third parties to market and sell our product
candidates, we may be unable to generate product
revenue.
We do not have a sales and marketing organization and have no
experience in the sales, marketing and distribution of
biopharmaceutical products. Developing an internal sales force
is expensive and time-consuming and could delay any product
launch. If we enter into arrangements with third parties to
perform sales, marketing and distribution services, our product
revenues are likely to be lower than if we market and sell any
approved product candidates that we develop ourselves. Factors
that may inhibit our efforts to commercialize our approved
product candidates without collaboration partners include:
| • | our inability to recruit and retain adequate numbers of effective sales and marketing personnel; | |
| • | the inability of sales personnel to obtain access to or persuade adequate numbers of hospitals, surgery centers, physicians and/or pharmacists to purchase, use or prescribe our approved product candidates; | |
| • | the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and | |
| • | unforeseen costs and expenses associated with creating an independent sales and marketing organization. |
If we are unsuccessful in building a sales and marketing
infrastructure or unable to partner with one or more third
parties to perform sales and marketing services for our product
candidates, we will have difficulty commercializing our product
candidates, which would adversely affect our business and
financial condition.
14
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We have no
ability to manufacture clinical or commercial supplies of our
product candidates and currently intend to rely solely on third
parties to manufacture clinical and commercial supplies of all
of our product candidates.
We currently do not intend to manufacture our product candidates
for our clinical trials or on a commercial scale and intend to
rely on third parties to do so. OMS103HP is currently
manufactured in a freeze-dried, or lyophilized, form by Catalent
Pharma Solutions, Inc. in its Albuquerque, New Mexico facility.
We have not entered into a binding agreement with Catalent for
the commercial supply of lyophilized OMS103HP, and cannot be
certain that we will be able to do so on commercially reasonable
terms. Qualification of any other facility to manufacture
lyophilized OMS103HP would require transfer of manufacturing
methods, the production of an additional registration batch of
lyophilized OMS103HP and the generation of additional stability
data, which could delay the availability of commercial supplies
of lyophilized OMS103HP.
We have also formulated OMS103HP as a liquid solution and have
entered into an agreement with Hospira Worldwide, Inc. for the
commercial supply of liquid OMS103HP. We do not believe that the
inactive ingredients in liquid OMS103HP, which are included in
the FDA’s Inactive Ingredient Guide due to being present in
drug products previously approved for parenteral use, impact its
safety or effectiveness. The FDA will require us to provide
comparative information and complete a stability study and may
require us to conduct additional studies, which we expect would
be nonclinical and/or pharmacokinetic studies, to demonstrate
that liquid OMS103HP is as safe and effective as lyophilized
OMS103HP. Delays or unexpected results in these studies could
delay the commercial availability of liquid OMS103HP. Any
significant delays in the manufacture of clinical or commercial
supplies could materially harm our business and prospects.
If the contract
manufacturers that we rely on experience difficulties with
manufacturing our product candidates or fail FDA inspections,
our clinical trials, regulatory submissions and ability to
commercialize our product candidates and generate revenue may be
significantly delayed.
Contract manufacturers that we select to manufacture our product
candidates for clinical testing or for commercial use may
encounter difficulties with the small- and large-scale
formulation and manufacturing processes required for such
manufacture. These difficulties could result in delays in
clinical trials, regulatory submissions, or commercialization of
our product candidates. Once a product candidate is approved and
being marketed, these difficulties could also result in the
later recall or withdrawal of the product from the market or
failure to have adequate supplies to meet market demand. Even if
we are able to establish additional or replacement
manufacturers, identifying these sources and entering into
definitive supply agreements and obtaining regulatory approvals
may require a substantial amount of time and cost and such
supply arrangements may not be available on commercially
reasonable terms, if at all.
In addition, we and our contract manufacturers must comply with
current good manufacturing practice, or cGMP, requirements
strictly enforced by the FDA through its facilities inspection
program. These requirements include quality control, quality
assurance and the maintenance of records and documentation. We
or our contract manufacturers may be unable to comply with cGMP
requirements or with other FDA, state, local and foreign
regulatory requirements. We have little control over our
contract manufacturers’ compliance with these regulations
and standards or with their quality control and quality
assurance procedures. Large-scale manufacturing processes have
been developed only for lyophilized OMS103HP. For the liquid
formulation of OMS103HP and our other product candidates,
development of large-scale manufacturing processes will require
validation studies, which the FDA must review and approve.
Failure to comply with these requirements by our contract
manufacturers could result in the issuance of untitled letters
and/or
warning letters from
15
Table of Contents
authorities, as well as sanctions being imposed on us, including
fines and civil penalties, suspension of production, suspension
or delay in product approval, product seizure or recall or
withdrawal of product approval. If the safety of any product
candidate supplied by contract manufacturers is compromised due
to their failure to adhere to applicable laws or for other
reasons, we may not be able to obtain or maintain regulatory
approval for or successfully commercialize one or more of our
product candidates, which would harm our business and prospects
significantly.
If one or more of our contract manufacturers were to encounter
any of these difficulties or otherwise fail to comply with its
contractual obligations, our ability to provide product
candidates to patients in our clinical trials or on a commercial
scale would be jeopardized. Any delay or interruption in the
supply of clinical trial supplies could delay the completion of
our clinical trials, increase the costs associated with
maintaining our clinical trial programs and, depending on the
period of delay, require us to commence new trials at
significant additional expense or terminate the trials
completely. If we need to change to other commercial
manufacturers, the FDA and comparable foreign regulators must
first approve these manufacturers’ facilities and
processes, which would require new testing and compliance
inspections, and the new manufacturers would have to be educated
in or independently develop the processes necessary for the
production of our product candidates.
Ingredients
necessary to manufacture our PharmacoSurgery product candidates
may not be available on commercially reasonable terms, if at
all, which may delay the development and commercialization of
our product candidates.
We must purchase from third-party suppliers the ingredients
necessary for our contract manufacturers to produce our
PharmacoSurgery product candidates for our clinical trials and,
if approved, for commercial distribution. Suppliers may not sell
these ingredients to us at the time we need them or on
commercially reasonable terms, if at all. Although we intend to
enter into agreements with third-party suppliers that will
guarantee the availability and timely delivery of ingredients
for our PharmacoSurgery product candidates, we may be unable to
secure any such agreements or guarantees and even if we were
able to secure such agreements or guarantees, our suppliers may
be unable or choose not to provide us the ingredients in a
timely manner or in the minimum guaranteed quantities. If we are
unable to obtain and then supply these ingredients to our
contract manufacturer for our clinical trials, potential
regulatory approval of our product candidates would be delayed,
significantly impacting our ability to develop our product
candidates, which would materially affect our ability to
generate revenue from the sale of our product candidates.
We may need
licenses for active ingredients from third parties so that we
can develop and commercialize some products from some of our
current preclinical programs, which could increase our
development costs and delay our ability to commercialize
products.
Should we decide to use active ingredients in any of our product
candidates that are proprietary to one or more third parties, we
would need to obtain licenses to those active ingredients from
those third parties. For example, we may elect to use
proprietary active ingredients in some product candidates that
we develop from our PharmacoSurgery platform, Chondroprotective
program or some of our CNS programs. If we are unable to access
rights to these active ingredients, we may need to develop
alternate product candidates from these programs by either
accessing or developing alternate active ingredients, resulting
in increased development costs and delays in commercialization
of these product candidates. If we are unable to access rights
to the desired active ingredients on commercially reasonable
terms or develop suitable alternate active ingredients, we may
not be able to commercialize product candidates from these
programs.
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Our ability to
pursue the development and commercialization of product
candidates from our
MASP-2
program depends on the continuation of licenses from third
parties.
Our MASP-2
program is based in part on intellectual property rights that we
licensed on a worldwide exclusive basis from the University of
Leicester and from the UK Medical Research Council, or MRC. The
continued maintenance of these agreements requires us to
undertake development activities if and when a clinical
candidate has been selected and, if regulatory approval for
marketing is obtained, to pay royalties to the University of
Leicester and MRC upon commercialization of a
MASP-2
product candidate. Our ability to continue development and
commercialization of product candidates from our
MASP-2
program depends on our maintaining these exclusive licenses,
which cannot be assured.
Our ability to
pursue the development and commercialization of product
candidates from our
MASP-2
program could be jeopardized by third-party patent
rights.
Our MASP-2 program is based in part on the results of research
conducted by collaborators at MRC, the University of Leicester
and Aarhus Universitet, and on intellectual property rights that
we licensed on a worldwide exclusive basis from the University
of Leicester and from MRC stemming from that collaborative
research and from subsequent research performed by the
University of Leicester and by MRC. Researchers at Aarhus
Universitet have obtained a U.S. Patent that claims
antibodies that bind MASP-2, and have filed other patents and
patent applications related to MASP-2. While we do not hold any
direct license from Aarhus Universitet or its researchers, our
license from MRC includes MRC’s joint ownership interest in
this U.S. Patent claiming antibodies that bind MASP-2,
which joint ownership interest arises from an MRC employee
having been added as a named inventor in this patent by the
U.S. Patent and Trademark Office, or USPTO. We also believe
that we hold lawful rights to other patents and patent
applications related to MASP-2 filed by researchers at Aarhus
Universitet by virtue of our licenses with MRC and the
University of Leicester. Our ability to commercialize any
anti-MASP-2 antibody product candidate depends on the exclusive
licenses we hold from MRC and the University of Leicester to at
least joint ownership interest in the patents and patent
applications filed by researchers at Aarhus Universitet. We do
not know and cannot be certain that researchers at Aarhus
Universitet or parties associated with them will not contest our
licensed rights to these patents and patent applications filed
by researchers at Aarhus Universitet, or that researchers at
Aarhus Universitet or parties associated with them will not seek
through legal action to block the commercialization of any
antibody product candidate from our MASP-2 program. Perfecting,
asserting or defending our rights to this intellectual property
may be costly and time-consuming and, if unsuccessful, may limit
our ability to pursue the development and commercialization of
product candidates from our MASP-2 program.
Our ability to
pursue the development and commercialization of product
candidates from our
MASP-2
program depends on third-party antibody developers and
manufacturers.
Any product candidates from our
MASP-2
program would be antibodies and we do not have the internal
capability to sequence, hybridize or clone antibodies or to
produce antibodies for use in clinical trials or on a commercial
scale. We do not have agreements in place with antibody
developers or manufacturers and cannot be certain that such
agreements could be entered into on commercially reasonable
terms, if at all. There are only a limited number of antibody
manufacturers. If we are unable to obtain clinical supplies of
MASP-2
antibody product candidates, clinical trials or the development
of any such product candidate could be substantially delayed
until we can find and qualify a manufacturer, which may increase
our development costs, slow down our product development and
approval process, delay receipt of product revenue and make it
difficult to raise additional capital.
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Our preclinical
programs may not produce product candidates that are suitable
for clinical trials or that can be successfully
commercialized.
Any product candidates from our preclinical programs, including
our MASP-2, Chondroprotective, PDE10, GPCR and other CNS
programs, must successfully complete preclinical testing, which
may include demonstrating efficacy and the lack of toxicity in
established animal models, before entering clinical trials. Many
pharmaceutical and biological product candidates do not
successfully complete preclinical testing and, even if
preclinical testing is successfully completed, may fail in
clinical trials. We cannot be certain that any of our
preclinical product development programs will generate product
candidates that are suitable for clinical testing, nor can we be
certain that any product candidates from our preclinical
programs that do advance into clinical trials will successfully
demonstrate safety and efficacy in clinical trials.
Because we have a
number of development programs and are considering a variety of
product candidates, we may expend our limited resources to
pursue a particular candidate or candidates and fail to
capitalize on candidates or indications that may be more
profitable or for which there is a greater likelihood of
success.
Because we have limited resources, we must focus on preclinical
development programs and product candidates that we believe are
the most promising. As a result, we may forego or delay pursuit
of opportunities with other product candidates or other
indications that later prove to have greater commercial
potential. Our resource allocation decisions may cause us to
fail to capitalize on viable commercial products or profitable
market opportunities. Further, if we do not accurately evaluate
the commercial potential or target market for a particular
product candidate, we may relinquish valuable rights to that
product candidate through collaboration, license or other
royalty arrangements in cases in which it would have been
advantageous for us to retain sole development and
commercialization rights.
It is difficult
and costly to protect our intellectual property and our
proprietary technologies, and we may not be able to ensure their
protection.
Our commercial success will depend in part on obtaining and
maintaining patent protection and trade secret protection of the
use, formulation and structure of our product candidates, and
the methods used to manufacture them, as well as successfully
defending these patents against potential third-party
challenges. Our ability to protect our product candidates from
unauthorized making, using, selling, offering to sell or
importing by third parties is dependent upon the extent to which
we have rights under valid and enforceable patents that cover
these activities.
The patent positions of pharmaceutical, biotechnology and other
life sciences companies can be highly uncertain and involve
complex legal and factual questions for which important legal
principles remain unresolved. No consistent policy regarding the
breadth of claims allowed in biotechnology patents has emerged
to date in the United States, and tests used for determining the
patentability of patent claims in all technologies are in flux.
The pharmaceutical, biotechnology and other life sciences patent
situation outside the United States is even more uncertain.
Changes in either the patent laws or in interpretations of
patent laws in the United States and other countries may
diminish the value of our intellectual property. Further, the
determination that a patent application or patent claim meets
all of the requirements for patentability is a subjective
determination based on the application of law and jurisprudence.
For example, in the United States, a determination of
patentability by the USPTO or validity by a court or other trier
of fact requires a determination that the claimed invention has
utility and is both novel and non-obvious to those of ordinary
skill in the art in view of prior known publications and public
information, and that the patent specification supporting the
claim adequately describes the claimed invention, discloses the
best mode known to the inventors for practicing the invention,
and discloses the invention in a manner
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that enables one of ordinary skill in the art to make and use
the invention. The ultimate determination by the USPTO or by a
court of other trier of fact in the United States, or
corresponding foreign national patent offices or courts, on
whether a claim meets all requirements of patentability cannot
be assured. Although we have conducted searches for third-party
publications, patents and other information that may impact the
patentability of claims in our various patent applications and
patents, we cannot be certain that all relevant information has
been identified. Accordingly, we cannot predict the breadth of
claims that may be allowed or enforced in our patents or patent
applications, our licensed patents or patent applications or in
third-party patents.
Our issued PharmacoSurgery patents have terms that will expire
December 12, 2014 and, if our pending PharmacoSurgery
patent applications issue as patents, October 20, 2019 for
OMS103HP, July 30, 2023 for OMS302 and March 17, 2026
for OMS201, not taking into account any extensions due to
potential adjustment of patent terms resulting from USPTO
delays. We cannot assure you that any of these patent
applications will issue as patents or of the scope of any claims
that may issue from these pending and future patent
applications, or the outcome of any proceedings by any potential
third parties that could challenge the patentability, validity
or enforceability of our patents and patent applications in the
United States or foreign jurisdictions, which could limit patent
protection for our product candidates and materially harm our
business.
The degree of future protection for our proprietary rights is
uncertain, because legal means afford only limited protection
and may not adequately protect our rights or permit us to gain
or keep our competitive advantage. For example:
| • | we might not have been the first to make the inventions covered by any of our patents, if issued, or our pending patent applications; | |
| • | we might not have been the first to file patent applications for these inventions; | |
| • | others may independently develop similar or alternative technologies or products or duplicate any of our technologies or products; | |
| • | it is possible that none of our pending patent applications will result in issued patents or, if issued, these patents may not be sufficient to protect our technology or provide us with a basis for commercially viable products and may not provide us with any competitive advantages; | |
| • | if our pending applications issue as patents, they may be challenged by third parties as not infringed, invalid or unenforceable under U.S. or foreign laws; | |
| • | if issued, the patents under which we hold rights may not be valid or enforceable; or | |
| • | we may develop additional proprietary technologies or products that are not patentable and which are unlikely to be adequately protected through trade secrets if, for example, a competitor were to independently develop duplicative, similar or alternative technologies or products. |
In addition, to the extent we are unable to obtain and maintain
patent protection for one of our product candidates or in the
event such patent protection expires, it may no longer be
cost-effective to extend our portfolio by pursuing additional
development of a product candidate for follow-on indications.
We also may rely on trade secrets to protect our technologies or
products, especially where we do not believe patent protection
is appropriate or obtainable. However, trade secrets are
difficult to protect. Although we use reasonable efforts to
protect our trade secrets, our employees, consultants,
contractors, outside scientific collaborators and other advisors
may unintentionally or willfully disclose our information to
competitors. Enforcing a claim that a third-party entity
illegally obtained and is using any of our trade secrets is
expensive and time-consuming, and the outcome is unpredictable.
In addition, courts outside the United States are
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sometimes less willing to protect trade secrets. Moreover, our
competitors may independently develop equivalent knowledge,
methods and know-how.
We may incur
substantial costs as a result of litigation or other proceedings
relating to patent and other intellectual property
rights.
If we choose to go to court to stop someone else from using our
inventions, that individual or company has the right to ask the
court to rule that the underlying patents are invalid or should
not be enforced against that third party. These lawsuits are
expensive and would consume time and other resources even if we
were successful in stopping the infringement of these patents.
There is also the risk that, even if the validity of these
patents is upheld, the court will refuse to stop the other party
on the ground that such other party’s activities do not
infringe the patents.
Further, a third party may claim that we or our contract
manufacturers are using inventions covered by the third
party’s patent rights and may go to court to stop us from
engaging in the alleged infringing activity, including making,
using or selling our product candidates. These lawsuits are
costly and could affect our results of operations and divert the
attention of managerial and technical personnel. There is a risk
that a court would decide that we or our contract manufacturers
are infringing the third party’s patents and would order us
or our partners to stop the activities covered by the patents.
In addition, there is a risk that a court will order us or our
contract manufacturers to pay the other party damages for having
violated the other party’s patents. We have indemnified our
contract manufacturers against certain patent infringement
claims and thus may be responsible for any of their costs
associated with such claims and actions. The pharmaceutical,
biotechnology and other life sciences industry has produced a
proliferation of patents, and it is not always clear to industry
participants, including us, which patents cover various types of
products or methods of use. The coverage of patents is subject
to interpretation by the courts and the interpretation is not
always uniform. If we were sued for patent infringement, we
would need to demonstrate that our products or methods of use
either do not infringe the patent claims of the relevant patent
or that the patent claims are invalid, and we may not be able to
do this. Proving invalidity, in particular, is difficult since
it requires clear and convincing evidence to overcome the
presumption of validity enjoyed by issued patents.
Although we have conducted searches of third-party patents with
respect to our OMS103HP, OMS302, OMS201, MASP-2,
Chondroprotective, PDE10, GPCR and other CNS programs, these
searches may not have identified all third-party patents
relevant to these product candidates. Consequently, we cannot
assure you that third-party patents containing claims covering
our product candidates, programs, technologies or methods do not
exist, have not been filed, or could not be filed or issued.
Because some patent applications in the United States may be
maintained in secrecy until the patents are issued, because
patent applications in the United States and many foreign
jurisdictions are typically not published until eighteen months
after filing, and because publications in the scientific
literature often lag behind actual discoveries, we cannot be
certain that others have not filed patent applications for
technology covered by our patents, our licensors’ patents,
our pending applications or our licensors’ pending
applications, or that we or our licensors were the first to
invent the technology. Our competitors may have filed, and may
in the future file, patent applications covering technologies
similar to ours. Any such patent application may have priority
over our or our licensors’ patent applications and could
further require us to obtain rights to issued patents covering
such technologies. If another party has filed a U.S. patent
application on inventions similar to ours, we may have to
participate in an interference proceeding declared by the USPTO
to determine priority of invention in the United States.
The costs of these proceedings could be substantial, and it is
possible that such efforts would be unsuccessful, resulting in a
loss of our U.S. patent position with respect to such
inventions.
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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. In addition, any
uncertainties resulting from the initiation and continuation of
any litigation could have a material adverse effect on our
ability to raise the capital necessary to continue our
operations.
We use hazardous
materials in our business and must comply with environmental
laws and regulations, which can be expensive.
Our research operations produce hazardous waste products, which
include chemicals and radioactive and biological materials. We
are subject to a variety of federal, state and local regulations
relating to the use, handling, storage and disposal of these
materials. Although we believe that our safety procedures for
handling and disposing of these materials comply with applicable
legal regulations, the risk of accidental contamination or
injury from these materials cannot be eliminated. We generally
contract with third parties for the disposal of such substances
and store our low-level radioactive waste at our facilities
until the materials are no longer considered radioactive. We may
be required to incur further costs to comply with current or
future environmental and safety regulations. In addition, in the
event of accidental contamination or injury from these
materials, we could be held liable for any damages that result
and any such liability could exceed our resources.
The loss of
members of our management team could substantially disrupt our
business operations.
Our success depends to a significant degree on the continued
individual and collective contributions of our management team.
The members of our management team are at-will employees, and we
do not maintain any key-person life insurance policies except
for on the life of Gregory Demopulos, M.D., our president,
chief executive officer, chief medical officer and chairman of
the board of directors. We have agreed to enter into a new
employment agreement with Dr. Demopulos by May 1,
2009. If we do not enter into a new agreement by that date
because of our actions or omissions, we could be in material
breach of his current employment agreement, which may entitle
Dr. Demopulos to severance benefits described below in
“Management — Executive Compensation —
Potential Payment upon Termination or Change in Control.”
Losing the services of any key member of our management team,
whether from death or disability, retirement, competing offers
or other causes, could delay execution of our business strategy,
cause us to lose a strategic partner, or otherwise materially
affect our operations.
We rely on highly
skilled personnel and, if we are unable to retain or motivate
key personnel or hire qualified personnel, we may not be able to
maintain our operations or grow effectively.
Our performance is largely dependent on the talents and efforts
of highly skilled individuals. Our future success depends on our
continuing ability to identify, hire, develop, motivate and
retain highly skilled personnel for all areas of our
organization. In this regard, in anticipation of increased
development and commercialization activities, we plan to
increase the total number of our full-time employees from 62 as
of December 31, 2007 to approximately 70 to 80 by the end
of 2008. If we are unable to hire and train a sufficient number
of qualified employees for any reason, we may not be able to
implement our current initiatives or grow effectively. We have
in the past maintained a rigorous, highly selective and
time-consuming hiring process. We believe that our approach to
hiring has significantly contributed to our success to date. If
we do not succeed in attracting qualified personnel and
retaining and motivating existing personnel, our existing
operations may suffer and we may be unable to grow effectively.
To manage our anticipated future growth, we must continue to
implement and improve our managerial, operational and financial
systems and continue to recruit and train additional qualified
personnel. Due to our limited financial resources, we may not be
able to effectively
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manage the expansion of our operations or recruit and train
additional qualified personnel. The physical expansion of our
operations may lead to significant costs and may divert our
management and business development resources. Any inability to
manage growth could delay the execution of our business plans or
disrupt our operations.
We will incur
increased costs and demands on management as a result of
complying with the laws and regulations affecting public
companies, which could affect our operating results.
As a public company we will incur significant legal, accounting
and other expenses that we did not incur as a private company,
including costs associated with public company reporting
requirements. We also have incurred and will continue to incur
costs associated with recently adopted corporate governance
requirements, including requirements under the Sarbanes-Oxley
Act, as well as new rules implemented by the SEC and the NASDAQ
Stock Market. We expect these rules and regulations to increase
our legal and financial compliance costs and to make some
activities more time-consuming and costly. We also expect that
these new 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 accept reduced policy
limits and coverage or incur substantially higher costs to
obtain the same or similar coverage than used to be available.
As a result, it may be more difficult for us to attract and
retain qualified individuals to serve on our board of directors
or as our executive officers.
Our management
has identified material weaknesses in our internal controls
that, if not properly remediated, could result in material
misstatements in our financial statements and the inability of
our management to conclude that our internal controls are
effective as required by the Sarbanes-Oxley Act of 2002 for the
second annual report following our initial public offering,
either of which could cause investors to lose confidence in our
reported financial information and have a negative effect on the
trading price of our stock.
We are currently not required to comply with Section 404 of
the Sarbanes-Oxley Act of 2002, and are therefore not required
to make an assessment of the effectiveness of our internal
controls over financial reporting. Further, our independent
registered public accounting firm has not been engaged to
express, nor has it expressed, an opinion on the effectiveness
of our internal controls over financial reporting. However, in
connection with our fiscal 2006 and 2005 financial statement
audits, we identified material weaknesses in our internal
controls as defined by the American Institute of Certified
Public Accountants. A material weakness is a deficiency, or
combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a
material misstatement of the company’s annual or interim
financial statements will not be prevented or detected on a
timely basis.
The material weaknesses that we have identified relate to our
periodic financial statement close process and inadequate
segregation of duties in both the accounting and information
systems areas. We are taking remediation measures to improve the
effectiveness of our internal controls. Specifically, we:
| • | have hired a chief financial officer and an assistant controller and continue to strengthen our internal staffing and technical expertise in financial and Securities Exchange Commission, or SEC, accounting and reporting; | |
| • | are further segregating duties within our accounting and finance department; | |
| • | have hired an information technology manager and are revising our policies and procedures regarding accounting software-user access rights and software upgrade management; and | |
| • | are evaluating whether to upgrade our accounting software systems. |
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We plan to continue to assess our internal controls and
procedures and intend to take further action as necessary or
appropriate to address any other matters that we identify,
including to effect compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 when we are required to make an
assessment of our internal controls under Section 404.
However, the existence of a material weakness is an indication
that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will
not be prevented or detected on a timely basis, and the process
of designing and implementing effective internal controls and
procedures is a continuous effort that requires us to anticipate
and react to changes in our business and the economic and
regulatory environments, and to expend significant resources to
maintain a system of internal controls that is adequate to
satisfy our reporting obligations as a public company. We cannot
be certain that the measures taken to date or to be taken in the
future will fully remediate the material weaknesses or that we
will implement and maintain adequate controls over our financial
processes and reporting in the future. In addition, we cannot
assure you that additional material weaknesses or significant
deficiencies in our internal controls will not be discovered in
the future.
The standards required for a Section 404 analysis under the
Sarbanes-Oxley Act of 2002 are significantly more stringent than
those for a similar analysis for non-public companies. These
more stringent standards require that our audit committee be
advised and regularly updated on management’s review of
internal controls. Our management may not be able to effectively
and timely implement controls and procedures that adequately
respond to the increased regulatory compliance and reporting
requirements that will be applicable to us as a public company.
If we are not able to timely remedy the material weaknesses
identified in connection with our fiscal 2006 and 2005 audits,
or if we are not able to implement the requirements of
Section 404 in a timely manner or with adequate compliance,
management may not be able to assess whether our internal
controls over financial reporting are effective, which may
subject us to adverse regulatory consequences and could result
in a negative reaction in the financial markets due to a loss of
confidence in the reliability of our financial statements. In
addition, if we fail to develop and maintain effective controls
and procedures, we may be unable to provide the required
financial information in a timely and reliable manner or
otherwise comply with the standards applicable to us as a public
company. Any failure by us to provide the required financial
information in a timely manner could materially and adversely
impact our financial condition and the market value of our
securities.
Risks Related to
Our Industry
Our competitors
may develop products that are less expensive, safer or more
effective, or which may otherwise diminish or eliminate the
commercial success of any potential products that we may
commercialize.
If our competitors market products that are less expensive,
safer or more effective than our future products developed from
our product candidates, that reach the market before our product
candidates, or that otherwise negatively affect the market, we
may not achieve commercial success. For example, we are
developing PDE10 inhibitors to identify a product candidate for
use in the treatment of schizophrenia. Other pharmaceutical
companies, many with significantly greater resources than we
have, are also developing PDE10 inhibitors for the treatment of
schizophrenia and these companies may be further along in
development. The failure of a PDE10 inhibitor product candidate
from any of our competitors to demonstrate safety or efficacy in
clinical trials may negatively reflect on the ability of our
PDE10 inhibitor product candidates under development to
demonstrate safety and efficacy. Further, the failure of any
future products developed from our product candidates to
effectively compete with products marketed by our competitors
would impair our ability to generate revenue, which would have a
material adverse effect on our future business, financial
condition and results of operations.
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We expect to compete with other biopharmaceutical and
biotechnology companies, and our competitors may:
| • | develop and market products that are less expensive or more effective than any future products developed from our product candidates; | |
| • | commercialize competing products before we can launch any products developed from our product candidates; | |
| • | operate larger research and development programs, possess commercial-scale manufacturing operations or have substantially greater financial resources than we do; | |
| • | initiate or withstand substantial price competition more successfully than we can; | |
| • | have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent; | |
| • | more effectively negotiate third-party licenses and strategic relationships; and | |
| • | take advantage of acquisition or other opportunities more readily than we can. |
We expect to compete for market share against large
pharmaceutical and biotechnology companies, smaller companies
that are collaborating with larger pharmaceutical companies, new
companies, academic institutions, government agencies and other
public and private research organizations. In addition, the
pharmaceutical and biotechnology industry is characterized by
rapid technological change. Because our research approach
integrates many technologies, it may be difficult for us to
remain current with rapid changes in each technology. If we fail
to stay at the forefront of technological change, we may be
unable to compete effectively. Our competitors may render our
technologies obsolete by advances in existing technological
approaches or the development of new or different approaches,
potentially eliminating the advantages in our product discovery
process that we believe we derive from our research approach and
proprietary technologies and programs. In addition, physicians
may continue with their respective current treatment practices,
including the use of current preoperative and postoperative
treatments, rather than adopt our PharmacoSurgery product
candidates.
Our product
candidates could be subject to restrictions or withdrawal from
the market and we may be subject to penalties if we fail to
comply with regulatory requirements, or if we experience
unanticipated problems with our product candidates, if and when
any of them are approved.
Any product candidate for which we obtain marketing approval,
together with the manufacturing processes, post-approval
clinical data, and advertising and promotional activities for
such product candidate, will be subject to continued regulation
by the FDA and other regulatory agencies. Even if regulatory
approval of a product candidate is granted, the approval may be
subject to limitations on the indicated uses for which the
product candidate may be marketed or to the conditions of
approval, or contain requirements for costly post-marketing
testing and surveillance to monitor the safety or efficacy of
the product candidate. Later discovery of previously unknown
problems with our product candidates or their manufacture, or
failure to comply with regulatory requirements, may result in:
| • | restrictions on such product candidates or manufacturing processes; | |
| • | withdrawal of the product candidates from the market; | |
| • | voluntary or mandatory recalls; | |
| • | fines; | |
| • | suspension of regulatory approvals; | |
| • | product seizures; or | |
| • | injunctions or the imposition of civil or criminal penalties. |
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If we are slow to adapt, or unable to adapt, to changes in
existing regulatory requirements or adoption of new regulatory
requirements or policies, we may lose marketing approval for our
product candidates when and if any of them are approved.
Failure to obtain
regulatory approval in foreign jurisdictions would prevent us
from marketing our products internationally.
We intend to have our product candidates marketed outside the
United States. In order to market our products in the European
Union and many other
non-U.S. jurisdictions,
we must obtain separate regulatory approvals and comply with
numerous and varying regulatory requirements. We may be unable
to file for regulatory approvals and may not receive necessary
approvals to commercialize our products in any market. The
approval procedure varies among countries and can involve
additional testing and data review. The time required to obtain
foreign regulatory approval may differ from that required to
obtain FDA approval. The foreign regulatory approval process may
include all of the risks associated with obtaining FDA approval
discussed in these “Risk Factors.” We may not obtain
foreign regulatory approvals on a timely basis, if at all.
Approval by the FDA does not ensure approval by regulatory
agencies in other countries, and approval by one foreign
regulatory authority does not ensure approval by regulatory
agencies in other foreign countries or by the FDA. The failure
to obtain these approvals could harm our business.
If we are unable
to obtain adequate reimbursement from governments or third-party
payors for any products that we may develop or if we are unable
to obtain acceptable prices for those products, they may not be
purchased or used and, as a result, our revenue and prospects
for profitability could suffer.
Our future revenue and profit will depend heavily upon the
availability of adequate reimbursement for the use of our
approved product candidates from governmental and other
third-party payors, both in the United States and in other
countries. Even if we are successful in bringing one or more
product candidates to market, these products may not be
considered cost-effective, and the amount reimbursed for any
product candidates may be insufficient to allow us to sell our
product candidates profitably. Reimbursement by a third-party
payor may depend on a number of factors, including the
third-party payor’s determination that use of a product is:
| • | a covered benefit under its health plan; | |
| • | safe, effective and medically necessary; | |
| • | appropriate for the specific patient; | |
| • | cost-effective; and | |
| • | neither experimental nor investigational. |
Obtaining reimbursement approval for a product from each
government or third-party payor is a time-consuming and costly
process that will require the build-out of a sufficient staff
and could require us to provide supporting scientific, clinical
and cost-effectiveness data for the use of our products to each
payor. Because none of our product candidates have been approved
for marketing, we can provide you no assurances at this time
regarding their cost-effectiveness and the amount, if any, or
method of reimbursement. There may be significant delays in
obtaining reimbursement coverage for newly approved product
candidates and we may not be able to provide data sufficient to
gain acceptance with respect to reimbursement. Even when a payor
determines that a product is eligible for reimbursement,
coverage may be more limited than the purposes for which the
product candidate is approved by the FDA or foreign regulatory
agencies. Increasingly, third-party payors who reimburse
healthcare costs, such as government and private payors, are
requiring that companies provide them with predetermined
discounts from list prices, and are challenging the prices
charged for medical products. Moreover, eligibility for coverage
does not mean that any product candidate will be
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reimbursed at a rate that allows us to make a profit in all
cases, or at a rate that covers our costs, including research,
development, manufacturing, sale and distribution. In non-U.S.
jurisdictions, we must obtain separate reimbursement approvals
and comply with related foreign legal and regulatory
requirements. In some countries, including those in the European
Union, our product candidates may be subject to government price
controls. Pricing negotiations with governmental authorities can
take a considerable amount of time after the receipt of
marketing approval for a product candidate. If the reimbursement
we are able to obtain for any product candidate we develop is
inadequate in light of our development and other costs or is
significantly delayed, our business could be materially harmed.
Product liability
claims may damage our reputation and, if insurance proves
inadequate, these claims may harm our business.
We may be exposed to the risk of product liability claims that
is inherent in the biopharmaceutical industry. A product
liability claim may damage our reputation by raising questions
about our product candidate’s safety and efficacy and could
limit our ability to sell one or more product candidates, if
approved, by preventing or interfering with commercialization of
our product candidates. In addition, product liability insurance
for the biopharmaceutical industry is generally expensive to the
extent it is available at all. There can be no assurance that we
will be able to obtain and maintain such insurance on acceptable
terms or that we will be able to secure increased coverage if
the commercialization of our product candidates progresses, or
that future claims against us will be covered by our product
liability insurance. Although we currently have product
liability insurance coverage for our clinical trials, our
insurance coverage may not reimburse us or may be insufficient
to reimburse us for any or all expenses or losses we may suffer.
A successful claim against us with respect to uninsured
liabilities or in excess of insurance coverage could have a
material adverse effect on our business, financial condition and
results of operations.
Risks Related to
the Offering
An active, liquid
and orderly trading market for our common stock may not
develop.
Prior to this offering, there has been no public market for
shares of our common stock. We and the representative of the
underwriters will determine the initial public offering price of
our common stock through negotiation. This price will not
necessarily reflect the price at which investors in the market
will be willing to buy and sell our shares following this
offering. In addition, the trading price of our common stock
following this offering is likely to be highly volatile and
could be subject to wide fluctuations in response to various
factors, some of which are beyond our control. These factors
include:
| • | results from our clinical trial programs, including our ongoing Phase 3 clinical trials for OMS103HP, our planned Phase 1/Phase 2 clinical trial for OMS302, and our ongoing Phase 1 clinical trial for OMS201; | |
| • | FDA or international regulatory actions, including failure to receive regulatory approval for any of our product candidates; | |
| • | failure of any of our product candidates, if approved, to achieve commercial success; | |
| • | quarterly variations in our results of operations or those of our competitors; | |
| • | our ability to develop and market new and enhanced product candidates on a timely basis; | |
| • | announcements by us or our competitors of acquisitions, regulatory approvals, clinical milestones, new products, significant contracts, commercial relationships or capital commitments; | |
| • | third-party coverage and reimbursement policies; |
26
Table of Contents
| • | additions or departures of key personnel; | |
| • | commencement of, or our involvement in, litigation; | |
| • | changes in governmental regulations or in the status of our regulatory approvals; | |
| • | changes in earnings estimates or recommendations by securities analysts; | |
| • | any major change in our board or management; | |
| • | general economic conditions and slow or negative growth of our markets; and | |
| • | political instability, natural disasters, war and/or events of terrorism. |
From time to time, we estimate the timing of the accomplishment
of various scientific, clinical, regulatory and other product
development goals or milestones. These milestones may include
the commencement or completion of scientific studies and
clinical trials and the submission of regulatory filings. Also,
from time to time, we expect that we will publicly announce the
anticipated timing of some of these milestones. All of these
milestones are based on a variety of assumptions. The actual
timing of these milestones can vary dramatically compared to our
estimates, in some cases for reasons beyond our control. If we
do not meet these milestones as publicly announced, our stock
price may decline and the commercialization of our product and
product candidates may be delayed.
In addition, the stock market has experienced extreme price and
volume fluctuations that have often been unrelated or
disproportionate to the operating performance of publicly traded
companies. Broad market and industry factors may seriously
affect the market price of companies’ stock, including
ours, regardless of actual operating performance. These
fluctuations may be even more pronounced in the trading market
for our stock shortly following this offering. In addition, in
the past, following periods of volatility in the overall market
and the market price of a particular company’s securities,
securities class action litigation has often been instituted
against these companies. This litigation, if instituted against
us, could result in substantial costs and a diversion of our
management’s attention and resources.
Purchasers in
this offering will experience immediate and substantial dilution
in the book value of their investment.
The initial public offering price of our common stock is
substantially higher than the net tangible book value per share
of our common stock immediately after this offering. Therefore,
if you purchase our common stock in this offering, you will
incur an immediate dilution of $
in net tangible book value per share from the price you paid,
based on an assumed initial public offering price of
$ per share (the mid-point of the
range set forth on the cover page of this prospectus). In
addition, investors who purchase shares in this offering will
contribute approximately % of the
total amount of equity capital raised through the date of this
offering, but will only own
approximately % of the outstanding
share capital and approximately %
of the voting rights. The exercise of outstanding options and
warrants will result in further dilution. For a further
description of the dilution that you will experience immediately
after this offering, see “Dilution.”
Future sales of
shares by existing shareholders could cause our stock price to
decline.
If our existing shareholders sell, or indicate an intention to
sell, substantial amounts of our common stock in the public
market after the
lock-up and
other legal restrictions on resale discussed in this prospectus
lapse, the trading price of our common stock could decline.
Based on shares outstanding as of December 31, 2007, upon
completion of this offering, we will have outstanding a total
of shares
of common stock, assuming no exercise of the underwriters’
over-allotment option. Of these shares, only the shares of
common stock sold in this offering by us will be freely
tradable, without restriction, in the public market. The
representative of the underwriters may, in its sole discretion,
release our officers, directors and
27
Table of Contents
other current shareholders from these contractual
lock-up
agreements prior to the expiration of these agreements.
We expect that the
lock-up
agreements pertaining to this offering will expire 180 days
from the date of this prospectus, although those
lock-up
agreements may be extended for up to an additional 34 days
under certain circumstances. After the
lock-up
agreements expire, up to an
additional
shares of common stock issuable upon conversion of outstanding
shares of our convertible preferred stock will be eligible for
sale in the public
market,
of which shares of common stock are held by directors, executive
officers and other affiliates and will be subject to volume
limitations under Rule 144 under the Securities Act and
various vesting agreements. In
addition,
shares of common stock that are either subject to outstanding
options or reserved for future issuance under our employee
benefit plans will become eligible for sale in the public market
to the extent permitted by the provisions of various vesting
agreements, the
lock-up
agreements and Rules 144 and 701 under the Securities Act.
If these additional shares are sold, or if it is perceived that
they will be sold, in the public market, the trading price of
our common stock could decline.
If securities or
industry analysts do not publish research reports or publish
unfavorable research about our business, our stock price and
trading volume could decline.
The trading market for our common stock will depend in part on
the research and reports that securities or industry analysts
publish about us or our business. If one or more of the analysts
who covers us downgrades our stock, our stock price would likely
decline. If one or more of these analysts ceases to cover us or
fails to publish regular reports on us, interest in the purchase
of our stock could decrease, which could cause our stock price
or trading volume to decline.
Anti-takeover
provisions in our charter documents and under Washington law
could make an acquisition of us, which may be beneficial to our
shareholders, more difficult and prevent attempts by our
shareholders to replace or remove our current
management.
Provisions in our articles of incorporation and bylaws and under
Washington law may delay or prevent an acquisition of us or a
change in our management. These provisions include a classified
board of directors, a prohibition on shareholder actions by less
than unanimous written consent, restrictions on the ability of
shareholders to fill board vacancies and the ability of our
board of directors to issue preferred stock without shareholder
approval. In addition, because we are incorporated in
Washington, we are governed by the provisions of
Chapter 23B.19 of the Washington Business Corporation Act,
which, among other things, restricts the ability of shareholders
owning ten percent or more of our outstanding voting stock from
merging or combining with us. Although we believe these
provisions collectively provide for an opportunity to receive
higher bids by requiring potential acquirors to negotiate with
our board of directors, they would apply even if an offer may be
considered beneficial by some shareholders. In addition, these
provisions may frustrate or prevent any attempts by our
shareholders to replace or remove our current management by
making it more difficult for shareholders to replace members of
our board of directors, which is responsible for appointing the
members of our management.
We have broad
discretion in the use of the net proceeds from this offering and
may not use the net proceeds effectively.
We will have broad discretion in the application of the net
proceeds from this offering and could spend the proceeds in ways
that do not improve our results of operations or enhance the
value of our common stock. Our failure to apply these funds
effectively could have a material adverse effect on our
business, delay the development of our product candidates and
cause the price of our common stock to decline.
28
Table of Contents
This prospectus includes forward-looking statements. All
statements other than statements of historical facts contained
in this prospectus, including statements regarding our future
results of operations and financial position, business strategy
and plans and objectives of management for future operations,
are forward-looking statements. The words “believe,”
“may,” “will,” “estimate,”
“continue,” “anticipate,”
“intend,” “expect” and similar expressions
are intended to identify forward-looking statements. We have
based these forward-looking statements largely on our current
expectations and projections about future events and trends that
we believe may affect our financial condition, results of
operations, business strategy, short-term and long-term business
operations and objectives, and financial needs. These
forward-looking statements are subject to a number of risks,
uncertainties and assumptions, including those described in
“Risk Factors.” In light of these risks, uncertainties
and assumptions, the forward-looking events and trends 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 in the prospectus include statements
about:
| • | our ability to complete the Phase 3 clinical trials of OMS103HP in patients undergoing ACL reconstruction surgery by the end of 2008 and our ability to submit a related NDA to the FDA during the first half of 2009; | |
| • | our ability to complete the first Phase 3 clinical trial, and begin the second Phase 3 clinical trial, of OMS103HP in patients undergoing arthroscopic meniscectomy surgery in the second half of 2008; | |
| • | our ability to market OMS103HP by 2010; | |
| • | our ability to initiate a Phase 1/Phase 2 clinical trial of OMS302 in patients undergoing cataract surgery during the first half of 2008; | |
| • | our ability to complete the Phase 1 clinical trial of OMS201 in patients undergoing ureteroscopic removal or ureteral or renal stones in the first half of 2008; | |
| • | our ability to achieve the expected near-term milestones in our pipeline of preclinical development programs and the size of target markets; | |
| • | our expectations regarding the growth in the number of arthroscopic, cataract and uroendoscopic operations, the rates at which each of our PharmacoSurgery product candidates will be reimbursed to the surgical facility for its utilization and to the surgeon for its use, the size of the markets for our PharmacoSurgery product candidates, in particular, the market opportunity for OMS103HP, and the rate and degree of adoption and market penetration of our PharmacoSurgery product candidates; | |
| • | our ability to obtain commercial supplies of our Pharmaco Surgery product candidates, our competition and, if approved, our ability to successfully commercialize our PharmacoSurgery product candidates with a limited, hospital-based marketing and sales force; | |
| • | our expectations regarding the clinical benefits of our PharmacoSurgery product candidates; |
29
Table of Contents
| • | the extent of protection that our patents provide and our pending patent applications may provide, if patents issue from such applications, to our technologies and programs; | |
| • | our estimate regarding how long our existing cash, cash equivalents and short-term investments, along with the net proceeds from this offering, will be sufficient to fund our anticipated operating expenses and capital expenditures, the factors impacting our future capital expenditures and our expected number of full-time employees by the end of 2008; and | |
| • | our estimates regarding the use of the net proceeds from this offering and our future net losses, revenues, expenses and net operating loss carryforwards and research and development tax credit carryforwards. |
You should read this prospectus and the registration statement
of which this prospectus is a part completely and with the
understanding that our actual future results may be materially
different from what we expect. Given these uncertainties, you
should not place undue reliance on these forward-looking
statements. These forward-looking statements represent our
estimates and assumptions only as of the date of this prospectus
and, except as required by law, we undertake no obligation to
update or revise publicly any forward-looking statements,
whether as a result of new information, future events or
otherwise after the date of this prospectus. The forward-looking
statements contained in this prospectus are excluded from the
safe harbor protection provided by the Private Securities
Litigation Reform Act of 1995 and Section 27A of the
Securities Act of 1933, as amended.
30
Table of Contents
We estimate that we will receive net proceeds of approximately
$ from our sale of shares of
common stock in this offering, or approximately
$ if the underwriters exercise
their over-allotment option in full, based upon an assumed
initial public offering price of $
per share (the mid-point of the range set forth on the cover
page of this prospectus), after deducting estimated underwriting
discounts and commissions and estimated offering expenses
payable by us. A $1.00 increase (decrease) in the assumed
initial public offering price of $
per share would increase (decrease) the net proceeds to us from
this offering by $ , assuming the
number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same, after deducting the
estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
We anticipate that the net proceeds from this offering, together
with our existing cash, cash equivalents and short-term
investments, will allow us to complete our Phase 3 clinical
trials and to submit the related NDA(s) for our lead
PharmacoSurgery product candidate, OMS103HP. We currently expect
to use the net proceeds from this offering as follows:
| • | approximately $ to fund the completion of our Phase 3 clinical trials and our submission of the related NDA(s) to the FDA for our lead PharmacoSurgery product candidate, OMS103HP; | |
| • | approximately $ to fund the launch and commercialization of OMS103HP; | |
| • | approximately $ to fund the clinical development of our other PharmacoSurgery product candidates, OMS302 and OMS201; and | |
| • | the remainder to continue to fund our pipeline of preclinical product development programs focused on inflammation and CNS disorders, and to fund working capital, capital expenditures, potential acquisitions of products or technologies and general corporate purposes. |
The expected uses of the net proceeds from this offering
represents our current intentions based on our present plans and
business conditions. As of the date of this prospectus, we
cannot specify with certainty all of the particular uses for the
net proceeds to be received from this offering. The amounts and
timing of our actual expenditures will depend on numerous
factors including the progress in, and costs of, our clinical
trials and other preclinical development programs. Accordingly,
our management will have broad discretion in the application of
the net proceeds, and investors will be relying on the judgement
of management regarding the application of the net proceeds from
the offering. We may find it necessary or advisable to use the
net proceeds for other purposes. Pending such uses set forth
above, we plan to invest the net proceeds in highly liquid,
investment grade securities.
We have never declared or paid any cash dividends on our capital
stock and we do not currently intend to pay any cash dividends
on our common stock in the foreseeable future. We expect to
retain all available funds and future earnings, if any, to fund
the development and growth of our business. Any future
determination to pay dividends, if any, on our common stock will
be at the discretion of our board of directors and will depend
on, among other factors, our results of operations, financial
condition, capital requirements and contractual restrictions.
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Table of Contents
The following table sets forth our cash, cash equivalents and
short-term investments and our capitalization as of
September 30, 2007, as follows:
| • | on an actual basis; | |
| • | on a pro forma basis reflecting (a) the automatic conversion of all outstanding shares of our convertible preferred stock into 22,327,407 shares of our common stock upon the closing of this offering and (b) the automatic conversion of all outstanding warrants to purchase convertible preferred stock into warrants to purchase 534,642 shares of our common stock upon the closing of this offering, resulting in the reclassification of $1.7 million from preferred stock warrant liability to additional paid-in capital, and (c) the repayment of $239,000 in related-party notes receivable; and | |
| • | on a pro forma as adjusted basis to give effect (a) to the issuance and sale by us of shares of common stock in this offering and the receipt of the net proceeds from our sale of these shares at an assumed initial public offering price of $ per share (the mid-point of the range set forth on the cover page of this prospectus), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and (b) to the issuance of shares of common stock pursuant to the cashless net exercise of warrants that will automatically terminate upon the closing of this offering based on the assumed initial public offering price. |
You should read this table together with the sections of this
prospectus entitled “Selected Consolidated Financial
Data” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our
consolidated financial statements and the related notes included
elsewhere in this prospectus.
| As of September 30, 2007 | ||||||||||||
|
Pro Forma |
||||||||||||
| Actual | Pro Forma | As Adjusted | ||||||||||
|
(in thousands, except share |
||||||||||||
|
and per share data) |
||||||||||||
|
Cash, cash equivalents and short-term investments
|
$ | 27,171 | $ | 27,410 | $ | |||||||
|
Total debt
|
$ | 1,270 | $ | 1,270 | ||||||||
|
Preferred stock warrant liability
|
1,674 | — | ||||||||||
|
Convertible preferred stock, par value $0.01 per share;
Authorized shares—26,314,511; issued and outstanding
shares—22,327,407 at September 30, 2007; no shares
issued and outstanding, pro forma or pro forma as adjusted
|
89,168 | — | ||||||||||
|
Shareholders’ deficit:
|
||||||||||||
|
Common stock, par value $0.01: Authorized
shares—40,000,000; issued and outstanding
shares—5,399,890 at September 30, 2007;
27,727,297 shares issued and outstanding pro
forma; shares
issued and outstanding, pro forma as adjusted
|
53 | 277 | ||||||||||
|
Additional paid-in capital
|
2,698 | 93,316 | ||||||||||
|
Accumulated other comprehensive income
|
34 | 34 | ||||||||||
|
Deferred stock-based compensation
|
(16 | ) | (16 | ) | ||||||||
|
Notes receivable from related party
|
(239 | ) | — | |||||||||
|
Deficit accumulated during the development stage
|
(68,776 | ) | (68,776 | ) | ||||||||
|
Total shareholders’ equity (deficit)
|
(66,246 | ) | 24,835 | |||||||||
|
Total capitalization
|
$ | 25,866 | $ | 26,105 | $ | |||||||
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Table of Contents
A $1.00 increase (decrease) in the assumed initial public
offering price of $ per share
would increase (decrease) each of cash, cash equivalents and
short-term investments, additional paid-in capital, total
shareholders’ equity (deficit) and total capitalization by
$ , assuming that the number of
shares offered by us, as set forth on the cover page of this
prospectus, remains the same, and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
The outstanding share information set forth in the table above
excludes the following shares:
| • | 5,257,413 shares of common stock issuable upon the exercise of options outstanding at September 30, 2007, at a weighted-average exercise price of $0.56 per share; | |
| • | 843,233 shares of common stock issuable upon exercise of options granted from October 1, 2007 to January 9, 2008, at a weighted-average exercise price of $1.25 per share; | |
| • | 512,029 shares of common stock issuable upon exercise of warrants outstanding at September 30, 2007, which will automatically terminate upon the closing of this offering if not exercised, at a weighted-average exercise price of $5.15 per share; | |
| • | 22,613 shares of common stock issuable upon exercise of warrants outstanding at September 30, 2007, which will not automatically terminate upon the closing of this offering, at a weighted-average exercise price of $4.66 per share; and | |
| • | shares of common stock available for future issuance under our 2008 Equity Incentive Plan. |
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Table of Contents
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share of our common stock and the
pro forma net tangible book value per share of our common
stock immediately after this offering.
Our pro forma net tangible book value as of September 30,
2007 was $24.4 million, or $0.88 per share of common stock.
Our pro forma net tangible book value per share represents the
amount of our total tangible assets reduced by the amount of our
total liabilities and divided by the total number of shares of
our common stock outstanding as of September 30, 2007,
after giving effect (a) to the automatic conversion of all
outstanding shares of our convertible preferred stock into
common stock upon the closing of this offering and (b) to
the automatic conversion of all outstanding warrants to purchase
convertible preferred stock into warrants to purchase common
stock upon the closing of this offering.
After giving effect (a) to our issuance and sale in this
offering
of shares
of common stock at an assumed initial public offering price of
$ per share (the midpoint of the
range set forth on the cover page of this prospectus), after
deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, and (b) to the
issuance
of
shares of common stock pursuant to the cashless net exercise of
warrants that will automatically terminate upon the closing of
this offering based on the assumed initial public offering
price, our pro forma net tangible book value as of
September 30, 2007 would have been approximately
$ , or
$ per share of common stock. This
represents an immediate increase in pro forma net tangible book
value of $ per share to our
existing shareholders and an immediate dilution of
$ per share to investors
purchasing shares in this offering. The following table
illustrates this per share dilution:
|
Assumed initial public offering price per share
|
$ | |||||||
|
Historical net tangible book value per common share at
September 30, 2007
|
$ | (12.30 | ) | |||||
|
Pro forma increase in net tangible book value per common share
attributable to conversion of all outstanding convertible
preferred stock
|
13.18 | |||||||
|
Pro forma net tangible book value per share as of
September 30, 2007
|
0.88 | |||||||
|
Pro forma increase in net tangible book value per share
attributable to investors participating in this offering
|
||||||||
|
Pro forma net tangible book value per share after this offering
|
||||||||
|
Dilution in pro forma net tangible book value per share to
investors purchasing shares in this offering
|
$ | |||||||
A $1.00 increase (decrease) in the assumed initial public
offering price of $ per share
would increase (decrease) our pro forma net tangible book value
per share after this offering by $
and the dilution in pro forma net tangible book value per share
to investors purchasing shares in this offering by
$ , assuming that the number of
shares offered by us, as set forth on the cover page of this
prospectus, remains the same, and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
If the underwriters exercise their over-allotment option in
full, at an assumed initial public offering price of
$ per share, the pro forma net
tangible book value per share after this offering would be
approximately $ per share, and the
dilution in pro forma net tangible book value per share to
investors purchasing shares in this offering would be
approximately $ per share.
34
Table of Contents
The following table sets forth on an as adjusted basis, as of
September 30, 2007, the number of shares of common stock
purchased or to be purchased from us, the total consideration
paid or to be paid and the average price per share paid or to be
paid by existing holders of common stock and by the new
investors purchasing shares in this offering, before deducting
estimated underwriting discounts and estimated offering expenses
payable by us.
|
Average |
||||||||||||||||||||
| Shares Purchased | Total Consideration |
Price Per |
||||||||||||||||||
| Number | Percent | Amount | Percent | Share | ||||||||||||||||
|
Existing shareholders
|
27,727,297 | % | $ | 89,907,000 | % | $ | 3.24 | |||||||||||||
|
New investors
|
||||||||||||||||||||
|
Total
|
% | $ | % | $ | ||||||||||||||||
A $1.00 increase (decrease) in the assumed initial public
offering price of $ per share
would increase (decrease) total consideration paid by new
investors by $ , assuming that the
number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same, and after deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
If the underwriters exercise their over-allotment option in
full, our existing shareholders would
own % and our new investors would
own % of the total number of shares
of our common stock outstanding after this offering.
The discussion and tables above are based on the number of
shares of common stock outstanding at September 30, 2007.
The discussion and tables above exclude the following shares:
| • | 5,257,413 shares of common stock issuable upon the exercise of options outstanding at September 30, 2007, at a weighted-average exercise price of $0.56 per share; | |
| • | 843,233 shares of common stock issuable upon exercise of options granted from October 1, 2007 to January 9, 2008, at a weighted-average exercise price of $1.25 per share; | |
| • | 512,029 shares of common stock issuable upon exercise of warrants outstanding at September 30, 2007, which will automatically terminate upon the closing of this offering if not exercised, at a weighted-average exercise price of $5.15 per share; | |
| • | 22,613 shares of common stock issuable upon exercise of warrants outstanding at September 30, 2007, which will not automatically terminate upon the closing of this offering, at a weighted-average exercise price of $4.66 per share; and | |
| • | shares of common stock available for future issuance under our 2008 Equity Incentive Plan. |
To the extent outstanding options or warrants are exercised, new
investors will experience further dilution.
35
Table of Contents
The following selected consolidated financial data should be
read in conjunction with “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
and our consolidated financial statements and the accompanying
notes included elsewhere in this prospectus. The consolidated
statements of operations data for the years ended
December 31, 2006, 2005 and 2004 and the consolidated
balance sheet data as of December 31, 2006 and 2005 are
derived from our audited consolidated financial statements
included elsewhere in this prospectus. The consolidated
statements of operations data for the years ended
December 31, 2003 and 2002 and the consolidated balance
sheet data as of December 31, 2004, 2003 and 2002 are
derived from our consolidated financial statements not included
in this prospectus. The consolidated statements of operations
data for the nine months ended September 30, 2007 and the
nine months ended September 30, 2006, and for the period
from June 16, 1994 (inception) to September 30, 2007
and the consolidated balance sheet data as of September 30,
2007 are derived from our unaudited consolidated financial
statements included elsewhere in this prospectus. The unaudited
consolidated financial statements have been prepared on a basis
consistent with our audited consolidated financial statements
included in this prospectus and include, in the opinion of
management, all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the
financial information in those statements. Our historical
results are not necessarily indicative of the results to be
expected in any future period, and the results for the nine
months ended September 30, 2007 are not necessarily
indicative of the results to be expected for the full year
ending December 31, 2007. We acquired nura on
August 11, 2006, and the results of nura are included in
the consolidated financial statements from that date.
|
Period from |
||||||||||||||||||||||||||||||||
|
Nine Months |
June 16, 1994 |
|||||||||||||||||||||||||||||||
|
Ended |
(inception) to |
|||||||||||||||||||||||||||||||
| September 30, | Years Ended December 31, |
September 30, |
||||||||||||||||||||||||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | 2007 | |||||||||||||||||||||||||
| (in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||
|
Consolidated Statements of Operations Data:
|
||||||||||||||||||||||||||||||||
|
Grant revenue
|
$ 650 | $ 200 | $ 200 | $ — | $ — | $ — | $ — | $ 950 | ||||||||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||||||||||||||
|
Research and development
|
11,173 | 6,230 | 9,637 | 5,803 | 2,670 | 2,146 | 1,915 | 39,635 | ||||||||||||||||||||||||
|
Acquired in-process research and development
|
— | 10,891 | 10,891 | — | — | — | — | 10,891 | ||||||||||||||||||||||||
|
General and administrative
|
8,619 | 1,893 | 3,625 | 1,904 | 2,079 | 2,021 | 1,506 | 22,859 | ||||||||||||||||||||||||
|
Total operating expenses
|
19,792 | 19,014 | 24,153 | 7,707 | 4,749 | 4,167 | 3,421 | 73,385 | ||||||||||||||||||||||||
|
Loss from operations
|
(19,142 | ) | (18,814 | ) | (23,953 | ) | (7,707 | ) | (4,749 | ) | (4,167 | ) | (3,421 | ) | (72,435 | ) | ||||||||||||||||
|
Investment income
|
1,173 | 722 | 1,088 | 333 | 171 | 109 | 270 | 4,093 | ||||||||||||||||||||||||
|
Other income (expense)
|
(355 | ) | 108 | 179 | 8 | — | — | — | (168 | ) | ||||||||||||||||||||||
|
Interest expense
|
(123 | ) | (38 | ) | (91 | ) | — | — | (1 | ) | (1 | ) | (266 | ) | ||||||||||||||||||
|
Net loss
|
$ | (18,447 | ) | $ | (18,022 | ) | $ | (22,777 | ) | $ (7,366 | ) | $ (4,578 | ) | $ (4,059 | ) | $ (3,152 | ) | $ | (68,776 | ) | ||||||||||||
|
Denominator for basic and diluted net loss per common share
|
4,184,919 | 3,653,537 | 3,694,388 | 3,468,886 | 3,416,197 | 3,349,148 | 3,287,923 | |||||||||||||||||||||||||
|
Basic and diluted net loss per common share
|
$ (4.41) | $ (4.93) | $ (6.17) | $ (2.12) | $ (1.34) | $ (1.21) | $ (0.96) | |||||||||||||||||||||||||
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|
As of |
||||||||||||||||||||||||
|
September 30, |
As of December 31, | |||||||||||||||||||||||
| 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
|
Consolidated Balance Sheet Data:
|
||||||||||||||||||||||||
|
Cash, cash equivalents and short-term investments
|
$ | 27,171 | $ | 35,885 | $ | 12,372 | $ | 14,008 | $ 1,238 | $ 4,937 | ||||||||||||||
|
Working capital
|
21,793 | 32,277 | 10,672 | 13,664 | 680 | 4,378 | ||||||||||||||||||
|
Total assets
|
28,959 | 38,432 | 13,109 | 14,600 | 1,826 | 5,532 | ||||||||||||||||||
|
Total debt
|
1,270 | 2,015 | — | — | 3 | 21 | ||||||||||||||||||
|
Preferred stock warrant liability
|
1,674 | 1,037 | 483 | — | — | — | ||||||||||||||||||
|
Convertible preferred stock
|
89,168 | 85,742 | 40,888 | 35,203 | 16,842 | 16,921 | ||||||||||||||||||
|
Deficit accumulated in the development stage
|
(68,776 | ) | (50,329 | ) | (27,553 | ) | (20,187 | ) | (15,609 | ) | (11,549 | ) | ||||||||||||
|
Total shareholders’ deficit
|
(66,246 | ) | (53,363 | ) | (29,743 | ) | (21,114 | ) | (15,702 | ) | (12,015 | ) | ||||||||||||
37
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The following discussion and analysis should be read in
conjunction with our audited annual and unaudited interim
consolidated financial statements and the related notes that
appear elsewhere in this prospectus. This discussion contains
forward-looking statements reflecting our current expectations
that involve risks and uncertainties. Actual results may differ
materially from those discussed in these forward-looking
statements due to a number of factors, including those set forth
in the section entitled “Risk Factors” and elsewhere
in this prospectus.
Overview
Background
We are a clinical-stage biopharmaceutical company committed to
discovering, developing and commercializing products focused on
inflammation and disorders of the central nervous system. Our
most clinically advanced product candidates are derived from our
proprietary
PharmacoSurgerytm
platform designed to improve clinical outcomes of patients
undergoing arthroscopic, ophthalmological, urological and other
surgical and medical procedures. Our PharmacoSurgery platform is
based on low-dose combinations of therapeutic agents delivered
directly to the surgical site throughout the duration of the
procedure to preemptively inhibit inflammation and other
problems caused by surgical trauma and to provide clinical
benefits both during and after surgery. We currently have three
ongoing PharmacoSurgery clinical development programs, the most
advanced of which is in Phase 3 clinical trials, and we expect
to initiate a fourth clinical program in the first half of 2008.
In addition to our PharmacoSurgery platform, we have leveraged
our expertise in inflammation and the central nervous system, or
CNS, to build a deep and diverse pipeline of preclinical
programs targeting large markets. For each of our product
candidates and programs, we have retained all manufacturing,
marketing and distribution rights.
OMS103HP, our lead PharmacoSurgery product candidate, is in two
Phase 3 clinical programs. The first program is evaluating
OMS103HP’s safety and ability to improve postoperative
joint function and reduce pain following arthroscopic anterior
cruciate ligament, or ACL, reconstruction surgery. The second
program is evaluating OMS103HP’s safety and ability to
reduce pain and improve postoperative joint function following
arthroscopic meniscectomy surgery. We expect to complete the
Phase 3 clinical program for ACL reconstruction surgery by the
end of 2008 and intend to submit, during the first half of 2009,
a New Drug Application, or NDA, to the U.S. Food and Drug
Administration, or FDA, under the Section 505(b)(2) NDA
process. We believe that OMS103HP will, if approved, be the
first commercially available drug product for the improvement of
function following arthroscopic surgery. We expect to complete
our first Phase 3 clinical trial, and begin our second
Phase 3 clinical trial, in patients undergoing meniscectomy
surgery in the second half of 2008.
Our other current PharmacoSurgery product candidates are OMS302,
being developed for use during ophthalmological procedures,
including cataract and other lens replacement surgery, and
OMS201, being developed for use during urological surgery,
including uroendoscopic procedures. We expect to begin a Phase
1/Phase 2 clinical trial of OMS302 in patients undergoing
cataract surgery during the first half of 2008, and are
currently conducting a Phase 1 clinical trial of OMS201 in
patients undergoing ureteroscopic removal of ureteral or renal
stones. We own and exclusively control a U.S. and
international portfolio of issued patents and pending patent
applications that we believe protects our PharmacoSurgery
platform.
In addition to our PharmacoSurgery platform, we have a deep and
diverse pipeline of preclinical product development programs
targeting large market opportunities in
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inflammation and CNS covered by a broad intellectual property
portfolio. In our mannan-associated serine protease-2, or
MASP-2, program, we are developing proprietary
MASP-2
antibody therapies to treat disorders caused by
complement-activated inflammation. In our cartilage protective,
or Chondroprotective, program, we are developing proprietary
combinations of inhibitors of cartilage breakdown and promoters
of cartilage synthesis to treat cartilage disorders, such as
osteoarthritis and rheumatoid arthritis. Our CNS pipeline
includes our Phosphodiesterase 10, or PDE10, program, our
G protein-coupled
receptors, or GPCR, program and our other CNS programs. In our
PDE10 program, we are optimizing proprietary compounds to treat
schizophrenia. In our GPCR program, we have discovered what we
believe to be previously unknown links between specific
molecular targets in the brain and a series of CNS disorders,
and are developing compounds to treat several of these
disorders. In our other CNS programs, we have discovered what we
believe to be additional unknown links between specific
molecular targets and CNS disorders, and are developing
compounds to treat several of these disorders.
We have incurred significant losses since our inception. As of
September 30, 2007, our accumulated deficit was
$68.8 million and total shareholders’ deficit was
$66.2 million. We recognized net losses of
$18.4 million, $22.8 million, $7.4 million and
$4.6 million for the nine months ended September 30,
2007 and the years ended December 31, 2006, 2005 and 2004,
respectively. These losses have resulted principally from
expenses incurred in connection with research and development
activities, consisting primarily of preclinical studies,
manufacturing services, and clinical trials associated with our
current product candidates. We expect our net losses to increase
as we continue to advance our clinical trials, expand our
research and development efforts, and add personnel as well as
laboratory and office space for our anticipated growth. We plan
to increase the total number of our full-time employees from 62
as of December 31, 2007 to approximately 70 to 80 by the
end of 2008.
Revenue
We have recognized $950,000 of revenue from inception through
September 30, 2007, consisting of grant funding from third
parties. Other than grant funding, we do not expect to receive
any revenue from our product candidates until we receive
regulatory approval and commercialize the products or until we
potentially enter into collaborative agreements with third
parties for the development and commercialization of our product
candidates. We continue to pursue government and private grant
funding for our product candidates and research programs. If our
development efforts for any of our product candidates result in
clinical success and regulatory approval or collaboration
agreements with third parties, we could generate revenue from
those product candidates.
Research and
Development Expenses
The majority of our operating expenses to date have been for
research and development activities. Research and development
expenses consist of costs associated with research activities,
as well as costs associated with our product development
efforts, which include clinical trials and third party
manufacturing services. Internal research and development costs
are recognized as incurred. Third-party research and development
costs are expensed at the earlier of when the contracted work
has been performed or as upfront and milestone payments are
made. Research and development expenses include:
| • | employee and consultant-related expenses, which include salaries and benefits; | |
| • | external research and development expenses incurred pursuant to agreements with third-party manufacturing organizations, contract research organizations and clinical trial sites; |
39
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| • | facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities and depreciation of leasehold improvements and equipment; and | |
| • | third-party supplier expenses including laboratory and other supplies. |
At any time, we have many ongoing research and development
projects. Our internal resources, employees and infrastructure
are not directly tied to any individual research project and are
typically deployed across multiple projects. Through our
clinical development programs, we are advancing our product
candidates in parallel for multiple therapeutic indications and,
through our preclinical development programs, we are seeking to
develop potential product candidates for additional disease
indications. Due to the number of ongoing projects and our
ability to utilize resources across several projects, we do not
record or maintain information regarding the costs incurred for
our research and development programs on a program-specific
basis. In addition, we believe that allocating costs on the
basis of time incurred by our employees does not reflect the
actual costs of a project.
Our research and development expenses can be divided into
research and preclinical development activities and clinical
development and regulatory activities. The following table
illustrates our expenses associated with these activities:
|
Nine Months Ended |
Years Ended |
|||||||||||||||||||
| September 30, | December 31, | |||||||||||||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
|
Research and preclinical development
|
$ | 5,106 | $ | 2,678 | $ | 4,514 | $ | 2,560 | $ | 1,400 | ||||||||||
|
Clinical development and regulatory
|
6,067 | 3,552 | 5,123 | 3,243 | 1,270 | |||||||||||||||
|
Total
|
$ | 11,173 | $ | 6,230 | $ | 9,637 | $ | 5,803 | $ | 2,670 | ||||||||||
Research and preclinical development costs consist of our
research activities, preclinical studies, and related personnel
costs, laboratory supplies and indirect costs such as rent,
utilities and depreciation. Clinical development and regulatory
costs consist of clinical trials, manufacturing services, and
related personnel costs and indirect costs such as rent,
utilities and depreciation.
At this time, due to the inherently unpredictable nature of
preclinical and clinical development processes and given the
early stage of our preclinical product development programs, we
are unable to estimate with any certainty the costs we will
incur in the continued development of our product candidates for
potential commercialization. Clinical development timelines, the
probability of success and development costs can differ
materially from expectations. While we are currently focused on
advancing each of our product development programs, our future
research and development expenses will depend on the clinical
success of each product candidate, as well as ongoing
assessments of each product candidate’s commercial
potential. In addition, we cannot forecast with any degree of
certainty which product candidates may be subject to future
collaborations, when such arrangements will be secured, if at
all, and to what degree such arrangements would affect our
development plans and capital requirements.
We expect our research and development expenses to increase in
the future as we continue the advancement of our clinical trials
and preclinical product development programs. The lengthy
process of completing clinical trials and seeking regulatory
approval for our product candidates requires expenditure of
substantial resources. Any failure or delay in completing
clinical trials, or in obtaining regulatory approvals, could
cause a delay in generating product revenue and cause our
research and development expense to increase and, in turn, have
a material adverse effect on our operations. We do not expect
any of our current product candidates to be commercially
available before 2010, if at all.
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Table of Contents
General and
Administrative Expenses
General and administrative expenses consist principally of
salaries and related costs for personnel in executive, legal,
finance, accounting, information technology and human resource
functions. Other general and administrative expenses include
facility costs not otherwise included in research and
development expenses, patent costs and professional fees for
legal, consulting and audit services.
Investment
Income
Investment income consists of interest earned on our cash, cash
equivalents, and short-term investments.
Other Income
(Expense)
Other income (expense) consists primarily of rental income
received under subleases for use of a portion of our vivarium
and laboratory facility and changes in the fair value of our
preferred stock warrant liability.
Income
Taxes
As of December 31, 2006, we had federal net operating loss
carryforwards and research and development tax credit
carryforwards of approximately $35.7 million and
$1.2 million, respectively. Our net operating loss and
research and development tax credit carryforwards will expire
between 2009 and 2025 unless utilized prior to such dates. Our
ability to utilize our net operating loss and tax credit
carryforwards may be limited in the event a change in ownership,
as defined in Section 382 of the Internal Revenue Code of
1986, as amended, or the Code, has occurred or may occur in the
future. In each period since our inception, we have recorded a
100% valuation allowance for the full amount of our deferred tax
asset, as the realization of the deferred tax asset is
uncertain. As a result, we have not recorded any federal tax
benefit in our statement of operations.
Critical
Accounting Policies and Significant Judgments and
Estimates
Our discussion and analysis of our financial condition and
results of operations are based on our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States.
The preparation of our financial statements requires us to make
estimates and judgments that affect the reported amounts of
assets and liabilities and the disclosure of any contingent
assets and liabilities at the date of the financial statements,
as well as reported revenue and expenses during the reporting
periods. We base our estimates on historical experience and on
various other factors that we believe are reasonable under the
circumstances. An accounting policy is considered critical if it
is important to a company’s financial condition and results
of operations, and if it requires the exercise of significant
judgment and the use of estimates on the part of management in
its application. Although we believe that our judgments and
estimates are appropriate, actual results may differ from our
estimates.
We believe the following to be our critical accounting policies
because they are both important to the portrayal of our
financial condition and results of operations and they require
critical management judgment and estimates about matters that
are uncertain:
| • | revenue recognition; | |
| • | research and development expenses, primarily clinical trial expenses; | |
| • | stock-based compensation; and | |
| • | preferred stock warrant liability. |
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If actual results or events differ materially from those
contemplated by us in making these estimates, our reported
financial condition and results of operations for future periods
could be materially affected.
Revenue
Recognition
Our revenue since inception relates to grant funding from third
parties. We recognize grant funding as revenue when the related
qualified research and development expenses are incurred up to
the limit of the approved funding amounts.
Revenue arrangements are accounted for in accordance with the
provisions of Securities and Exchange Commission Staff
Accounting Bulletin, or SAB, No. 104, Revenue
Recognition, and Emerging Issues Task Force, or EITF,
No. 00-21,
Revenue Arrangements with Multiple Deliverables. A
variety of factors are considered in determining the appropriate
method of revenue recognition under these arrangements, such as
whether the various elements can be considered separate units of
accounting, whether there is objective and reliable evidence of
fair value for these elements and whether there is a separate
earnings process associated with a particular element of an
agreement.
Research and
Development
Research and development expenses are comprised primarily of
employee and consultant-related expenses, which include salaries
and benefits; external research and development expenses
incurred pursuant to agreements with third-party manufacturing
organizations, contract research organizations and clinical
trial sites; facilities, depreciation and other allocated
expenses, which include direct and allocated expenses for rent
and maintenance of facilities and depreciation of leasehold
improvements and equipment; and third-party supplier expenses
including laboratory and other supplies. Clinical trial expenses
for investigational sites require certain estimates. We estimate
these costs based on a cost per patient which varies depending
on the site of the clinical trial. As actual costs become known
to us, we adjust our accrual; these changes in estimates may
result in understated or overstated expenses at a given point in
time. To date, our estimates have not differed significantly
from actual costs. Internal research and development expenses
are expensed as incurred. Third-party research and development
expenses are expensed at the earlier of when the contracted work
has been performed or as upfront and milestone payments are made.
Stock-Based
Compensation
Prior to January 1, 2006, we adopted the disclosure-only
provisions of Statement of Financial Accounting Standards, or
SFAS, No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation —
Transition and Disclosure, and applied Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees , and related interpretations in accounting for
stock options. Accordingly, through December 31, 2005,
employee stock-based compensation expense was recognized based
on the intrinsic value of the option at the date of grant.
Effective January 1, 2006, we adopted the fair value
recognition provisions of SFAS No. 123(revised), or
SFAS 123R, Share-Based Payment, under the
prospective method, which requires that the measurement and
recognition of compensation expense for all future share-based
payments made to employees and directors be based on estimated
fair values. We are using the straight-line method to allocate
compensation cost to reporting periods over each optionee’s
requisite service period (generally the vesting period). We
estimate the fair value of our share-based awards to employees
and directors using the Black-Scholes option-valuation model.
The Black-Scholes model requires the input of subjective
assumptions, including the
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expected stock price volatility, the calculation of expected
term, and the fair value of the underlying common stock on the
date of grant, among other inputs.
The following table summarizes our assumptions as of:
|
Nine Months Ended |
||||||||||
| September 30, | Years Ended December 31, | |||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | ||||||
|
Expected volatility
|
60% | 60% | 60% | 0% | 0% | |||||
|
Expected term (in years)
|
6.08 | 5.00-6.08 | 5.00-6.08 | 5.00 | 5.00 | |||||
|
Risk-free interest rate
|
4.42% - 4.78% | 4.63% - 5.04% | 4.57% - 5.04% | 4.58% | 4.00% | |||||
|
Expected dividend yield
|
0% | 0% | 0% | 0% | 0% | |||||
Expected Volatility. The expected volatility
rate used to value stock option grants made during the nine
months ended September 30, 2007, the nine months ended
September 30, 2006 and year ended December 31, 2006 is
based on historical volatilities of a peer group of similar
pharmaceutical and biotechnology companies whose share prices
are publicly available. The peer group includes companies in the
industry in similar stages of development as are we. Stock
options granted during the years ended December 31, 2005
and 2004, were valued utilizing the minimum value method whereby
the expected volatility is not a factor.
Expected Term. We elected to utilize the
“simplified” method for “plain vanilla”
options as provided for in SAB No. 107 to value stock
option grants made during the nine months ended
September 30, 2007, the nine months ended
September 30, 2006 and the year ended December 31,
2006. Under this approach, the weighted-average expected life is
presumed to be the average of the vesting term and the
contractual term of the option. For stock options granted during
the years ended December 31, 2005 and 2004, we estimated
the expected term of stock options based on the expected term of
options granted by a peer group of similar companies.
Risk-free Interest Rate. The risk-free
interest rate assumption was based on zero coupon
U.S. Treasury instruments whose term was consistent with
the expected term of our stock option grants.
Expected Dividend Yield. We used an expected
dividend yield of zero because we have never declared or paid
any cash dividends and do not presently plan to pay cash
dividends in the foreseeable future.
SFAS 123R requires forfeitures to be estimated at the time
of grant and revised, if necessary, in subsequent periods if
actual forfeitures differ from estimates. We estimate
forfeitures based on our historical experience; separate groups
of employees that have similar historical forfeiture behavior
are considered separately for expense recognition. Prior to the
adoption of SFAS 123R, we accounted for forfeitures as they
occurred.
Common Stock Fair Value. Due to the absence of
an active market for our common stock, the fair value of our
common stock for purposes of determining the exercise price for
stock option grants was determined by our board of directors in
good faith based on a number of objective and subjective factors
including the factors described below:
| • | the prices of our convertible preferred stock sold to outside investors in arms-length transactions, and the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock; | |
| • | our results of operations, financial position, and the status of our research and product development efforts; | |
| • | our stage of development and business strategy; | |
| • | the composition of and changes to our management team; |
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Table of Contents
| • | the market value of a comparison group of publicly traded pharmaceutical and biotechnology companies that are in a similar stage of development to us; | |
| • | the lack of liquidity of our common stock as a private company; and | |
| • | the likelihood of achieving a liquidity event for the shares of our common stock underlying stock options, such as an initial public offering, or IPO, given prevailing market conditions. |
For purposes of estimating the fair value of our common stock
for stock option grants under SFAS 123R, we reassessed the
estimated fair value of our common stock for the year ended
December 31, 2006 and for the quarterly periods ended
March 31, 2007, June 30, 2007, and September 30,
2007 by performing valuation analyses as of each of these dates.
There are significant judgments and estimates inherent in the
determination of reassessed fair values. Based on the
valuations, the stock options we granted in 2006 and 2007 had an
exercise price less than the estimated fair value of the common
stock at the date of grant. We used these fair value estimates
derived from the valuations to determine the SFAS 123R
stock compensation expense recorded in our financial statements.
The valuations were prepared using a methodology that first
estimated the fair value of the company as a whole, or
enterprise value, and then allocated a portion of the enterprise
value to our common stock. This approach is consistent with the
methods outlined in the AICPA Practice Aid Valuation of
Privately-Held-Company Equity Securities Issued as
Compensation. The valuation methodology utilized in the 2006
reassessment of fair value relied primarily on the “market
approach” to estimate enterprise value giving consideration
to the total financing amount received by us, the implied
enterprise value of the company based on the convertible
preferred stock transactions and market-based industry initial
public offering valuations. The “income approach” was
considered as a secondary concurring approach and involved
projecting future cash flows and discounting them to present
value. Our enterprise value was allocated to our different
classes of equity using the option pricing method. The option
pricing method involves making certain other assumptions
regarding the anticipated timing of a potential liquidity event
and the expected volatility of our equity securities.
The valuation methodology utilized in the 2007 quarterly
reassessments of fair value also relied primarily on the
“market approach” to estimate enterprise value and
then allocated the enterprise value to our different classes of
equity using the probability-weighted expected return, or PWER,
method whereby the value of our common stock was estimated based
on an analysis of future values for the equity assuming various
future outcomes including liquidity events. Our estimated share
value is based on the probability-weighted present value of
expected investment returns, considering each of the possible
future outcomes available to us. In our situation, the future
outcomes included three alternatives: (1) we complete an
IPO at the high end of the range for recent IPO transactions for
comparable companies, (2) we complete an IPO at the low end
of the range for recent IPO transactions for comparable
companies, and (3) we have an event in which no liquidity
accrues for common shareholders. For the first two alternatives,
collectively the “IPO scenario,” the estimated future
and present values of our common stock were calculated using
assumptions including: the expected pre-money or sale valuations
based on the market approach, the expected dates of the future
expected IPO or sale, and an appropriate risk-adjusted discount
rate. For the scenario where we have an event in which no
liquidity accrues for common shareholders, the estimated value
of our common stock was calculated using the cumulative
liquidation preferences of the outstanding convertible preferred
stock. Finally, the present value calculated for our common
stock under each scenario was probability-weighted based on our
estimate of the relative probability occurrence of each scenario.
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Table of Contents
Summary of Stock Option Grants. We made the
following stock option grants during 2006 and 2007:
|
Estimated |
||||||||||||||||
|
Number of |
Fair Value of |
|||||||||||||||
|
Shares |
Common |
|||||||||||||||
|
Subject to |
Exercise |
Stock per |
Intrinsic |
|||||||||||||
|
Options |
Price per |
Share at |
Value per Share |
|||||||||||||
|
Grant Date
|
Granted | Share | Date of Grant | at Date of Grant | ||||||||||||
|
July 2006
|
23,000 | $ | 0.50 | $ | 0.89 | $ | 0.39 | |||||||||
|
September 2006
|
28,000 | 0.50 | 0.89 | 0.39 | ||||||||||||
|
December 2006
|
4,274,853 | 0.50 | 0.89 | 0.39 | ||||||||||||
|
March 2007
|
308,500 | 1.00 | 1.05 | 0.05 | ||||||||||||
|
May 2007
|
350,000 | 1.00 | 3.63 | 2.63 | ||||||||||||
|
October 2007
|
275,733 | 1.25 | 6.23 | 4.98 | ||||||||||||
For purposes of determining stock-based compensation expense,
the fair market value of stock options granted in 2006 was based
on the estimated fair value as of December 31, 2006. Stock
options granted in March 2007 and May 2007 were valued based on
the estimated fair value determined as of March 31, 2007
and June 30, 2007, respectively. There were no stock
options granted during the quarterly period ended
September 30, 2007. Stock options granted in October 2007
were valued based on the estimated fair value determined as of
September 30, 2007.
The estimated per share fair value of our common stock from
December 31, 2006 to March 31, 2007 increased from
$0.89 to $1.05. The change in estimated fair value primarily
reflects continued advancement in our research and development
programs, including additional patient enrollment in our Phase 3
clinical trials evaluating OMS103HP’s safety and ability to
improve postoperative joint function following ACL
reconstruction surgery, or our Phase 3 ACL study.
The estimated per share fair value of our common stock from
March 31, 2007 to June 30, 2007 increased from $1.05
to $3.63. The change in estimated fair value reflects the
following:
| • | continued advancement in our development programs, including additional patient enrollment in our Phase 3 ACL study and advancement of additional product candidates through preclinical development; | |
| • | expanded activities in preparation for an IPO; and | |
| • | an increase in the probability of a liquidity event. |
The estimated per share fair value of our common stock from
June 30, 2007 to September 30, 2007 increased from
$3.63 to $6.23. The change in estimated fair value reflects the
following:
| • | positive efficacy data in a preclinical study evaluating OMS302, our PharmacoSurgery product candidate for use during ophthalmological surgery, and its components in a primate model of lens replacement surgery; | |
| • | filing of an IND for OMS201, our PharmacoSurgery product candidate being developed for use during urological surgery; | |
| • | continued advancement in our development programs, including additional patient enrollment in our Phase 3 ACL study; | |
| • | continued advancement of activities in preparation for an IPO; and | |
| • | an increase in the probability of a liquidity event. |
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Table of Contents
Stock Options and Note Receivable from Related
Party. In conjunction with the exercise of
certain stock options by Gregory A. Demopulos, M.D., our
president, chief executive officer, chief medical officer and
chairman of the board of directors, we received promissory notes
from Dr. Demopulos totaling $239,000. The promissory notes
accrue interest at rates ranging from 3% to 6.25% and are
secured by pledges of the underlying common stock. Based on the
terms of the notes, the notes are treated as stock options and
are subject to variable accounting whereby changes in the
estimated fair value of the underlying option is reported as an
increase or decrease, as applicable, in stock-based compensation
expense (credit) until such time that the notes are repaid.
Stock-based compensation expense (credit) related to these notes
and common stock was $5.0 million for the nine months ended
September 30, 2007, and $361,000, $(534,000), and $264,000
for the years ended December 31, 2006, 2005 and 2004,
respectively. The notes and accrued interest were repaid in full
in December 2007.
Stock-Based Compensation Summary. Stock-based
compensation expense includes variable awards, amortization of
deferred stock compensation, and awards accounted for under
SFAS 123R and have been reported in our consolidated
statements of operations as follows:
|
Nine Months Ended |
||||||||||||||||||||
| September 30, | Years Ended December 31, | |||||||||||||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
|
Research and development
|
$ | 245 | $ | 3 | $ | 309 | $ | — | $ | — | ||||||||||
|
General and administrative
|
5,300 | 283 | 1,130 | (507 | ) | 273 | ||||||||||||||
|
Total
|
$ | 5,545 | $ | 286 | $ | 1,439 | $ | (507 | ) | $ | 273 | |||||||||
A total of up to $1.3 million will be recognized as
compensation expense for the unvested 2,735,086 options
outstanding as of December 31, 2006. This expense will be
recognized over a weighted-average period of 2.7 years.
This excludes non-employee options and variable awards.
Preferred Stock
Warrant Liability
We adopted the provisions of Financial Accounting Standards
Board, or FASB, Staff Position
150-5,
Issuer’s Accounting under FASB Statement No. 150
for Freestanding Warrants and Other Similar Instruments on
Shares That Are Redeemable, or
FSP 150-5,
on July 1, 2005. In accordance with
FSP 150-5,
we estimated the fair value of all outstanding convertible
preferred stock warrants at July 1, 2005 and reclassified
this amount from equity to a liability. The warrant obligation
is adjusted to fair value at the end of each reporting period.
Such fair values were estimated using the Black-Scholes
option-pricing model and an estimated term equal to each
warrant’s contractual life. We will continue to adjust the
warrant liability for changes in fair value until the earlier of
the exercise of the warrants or the completion of a liquidation
event, including the completion of this offering, at which time
the liability will be reclassified to shareholders’ equity
(deficit).
Results of
Operations
Effect of nura,
inc. Acquisition
Our August 2006 acquisition of nura, inc., or nura, a private
biotechnology company, which expanded and diversified our CNS
pipeline and strengthened our discovery research capabilities,
caused a significant change in our business and results of
operations. The acquisition of nura was accounted for as an
asset purchase and the results of nura have been included in our
results of operations since August 11, 2006. The inclusion
of nura for a portion
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of 2006 impacts the comparability of our 2007 and 2006 financial
information with the financial information for previous periods.
We acquired nura through the issuance of 3.4 million shares
of Series E convertible preferred stock and
36,246 shares of common stock, and the assumption of a
$2.4 million promissory note, for a total purchase price
value of $14.4 million. Since nura was a development-stage
company, the acquisition was treated as an asset purchase in
accordance with
EITF 98-3,
Determining Whether a Nonmonetary Transaction Involves
Receipt of Productive Assets or of a Business. Of the
aggregate purchase price of $14.4 million,
$3.2 million was allocated to the net tangible assets
acquired based on the estimated fair values at the acquisition
date, $310,000 was allocated to intangible assets and
$10.9 million was allocated to in-process research and
development as the acquired research projects had not reached
technological feasibility and had no alternative use at the
acquisition date. We believe that the fair values assigned to
the assets acquired and liabilities assumed are based on
reasonable assumptions given available facts and circumstances
at the acquisition date.
The value of the acquired in-process research and development
was determined by estimating the future net cash flows of
development programs using a present value risk-adjusted
discount rate of 40%. The projected cash flows from the acquired
in-process research and development were based on estimates
considering the stage of development, the time and resources
needed to complete product development and the associated risks,
including the inherent difficulties and uncertainties in
developing drug compounds such as obtaining FDA and other
regulatory approvals. The value of acquired in-process research
and development of $10.9 million was recorded as an
operating expense in 2006.
Selected nura financial information for the period
January 1, 2006 to August 11, 2006, the date of the
acquisition, and the year ended December 31, 2005 is as
follows:
|
Period from |
||||||||
|
January 1, |
||||||||
|
2006 |
Year Ended |
|||||||
|
to August 11, |
December 31, |
|||||||
| 2006 | 2005 | |||||||
| (in thousands) | ||||||||
|
Grant revenue
|
$ | 200 | $ | — | ||||
|
Research and development expenses
|
2,394 | 4,612 | ||||||
|
General and administrative expenses
|
957 | 1,517 | ||||||
|
Net loss
|
3,219 | 5,787 | ||||||
Comparison of
Nine Months Ended September 30, 2007 to the Nine Months
Ended September 30, 2006
Revenue. Revenue was $650,000 for the nine
months ended September 30, 2007 compared with $200,000 for
the nine months ended September 30, 2006. Revenue in both
periods represents grant funding from third parties related
primarily to our PDE10 program.
Research and Development Expenses. Research
and development expenses were $11.2 million for the nine
months ended September 30, 2007 compared with
$6.2 million for the nine months ended September 30,
2006. The $5.0 million increase was due primarily to
additional personnel, which included 13 staff from our
acquisition of nura in August 2006, additional facility and
research costs subsequent to the nura acquisition, increased
clinical trial and manufacturing service costs associated with
our Phase 3 clinical trial program for our lead product
candidate, OMS103HP, and increased preclinical research study
costs associated with advancing additional product candidates,
OMS302 and OMS201, toward IND submissions. We expect research
and development expenses to increase in the future due to an
increased number of product candidates in preclinical studies
and clinical trials, as well as the related expansion of our
research and development staff.
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Acquired In-Process Research and
Development. Acquired in-process research and
development of $10.9 million for the nine months ended
September 30, 2006 resulted from our acquisition of nura in
August 2006.
General and Administrative Expenses. General
and administrative expenses were $8.6 million, including
$5.3 million in stock-based compensation expense, for the
nine months ended September 30, 2007 compared with
$1.9 million, including $283,000 in stock-based
compensation expense, for the nine months ended
September 30, 2006. The $5.3 million in stock-based
compensation relates primarily to
related-party
notes receivable that are treated as variable option awards. An
increase in the fair value of our common stock during the period
resulted in this expense. Excluding stock-based compensation
expense, the increase in general and administrative expenses
primarily reflects personnel, consulting, and professional
services costs in preparation of an IPO, and higher patent legal
costs as we continue to broaden our intellectual property
portfolio. We expect our general and administrative expenses to
increase in the future as we add additional employees and office
space to support our anticipated growth.
Investment Income. Investment income was
$1.2 million for the nine months ended September 30,
2007 compared with $722,000 for the nine months ended
September 30, 2006. The increase is due to interest earned
on higher cash balances resulting from net proceeds of
$3.2 million and $34.2 million received from sales of
Series E convertible preferred stock for the nine months
ended September 30, 2007 and the nine months ended
September 30, 2006, respectively.
Interest expense. Interest expense was
$123,000 for the nine months ended September 30, 2007
compared with $38,000 for the nine months ended
September 30, 2006. In connection with our acquisition of
nura in August 2006, we assumed a note payable of
$2.4 million. This note bears interest at the lender’s
prime rate, which was 9.69% at September 30, 2007.
Comparison of
Years Ended December 31, 2006 and December 31,
2005
Revenue. We recorded $200,000 of revenue in
2006 and $0 revenue in 2005. Revenue in 2006 represents grant
funding from a third party.
Research and Development Expenses. Research
and development expenses were $9.6 million in 2006 compared
with $5.8 million in 2005. The increase was due primarily
to additional personnel, including 13 staff from our acquisition
of nura in August 2006, additional facility and research costs
subsequent to the nura acquisition, increased clinical trial
costs related to our lead product candidate, OMS103HP, and
increased research and development studies and manufacturing
service costs associated with OMS302 and OMS201.
Acquired In-Process Research and
Development. Acquired in-process research and
development of $10.9 million in 2006 resulted from our
acquisition of nura in August 2006.
General and Administrative Expenses. General
and administrative expenses were $3.6 million in 2006
compared with $1.9 million in 2005. The increase was due
primarily to higher personnel and consulting costs, and an
increase in stock-based compensation expense. Stock-based
compensation expense was $1.1 million in 2006 and a credit
of $506,000 in 2005. The credit in 2005 was related to a
reduction in the fair value of our common stock.
Investment Income. Investment income was
$1.1 million in 2006 compared with $333,000 in 2005. The
increase is due to a higher average cash balance in 2006
resulting from net proceeds of $34.2 million from the sale
of Series E convertible preferred stock during 2006.
Interest expense. Interest expense was $91,000
in 2006 compared with $0 in 2005. In connection with our
acquisition of nura in August 2006, we assumed a note payable of
$2.4 million. nura’s results for periods prior to the
acquisition are not included in our results.
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Comparison of
Years Ended December 31, 2005 and December 31,
2004
Revenue. We recorded $0 of revenue in 2005 or
2004.
Research and Development Expenses. Research
and development expenses were $5.8 million in 2005 compared
with $2.7 million in 2004. The increase was due primarily
to additional personnel, clinical trial costs for additional
study sites for the Phase 3 studies of OMS103HP, and for
preclinical development activities related to OMS201.
General and Administrative Expenses. General
and administrative expenses were $1.9 million in 2005
compared with $2.1 million in 2004. The overall decrease
was due to an increase in costs associated with additional
personnel during 2005 offset by stock-based compensation which
was a credit of $506,000 in 2005 and expense of $273,000 in
2004. The credit in 2005 related to a reduction in the fair
value of our common stock during 2005, which caused decreased
stock-based
compensation expense for certain variable option awards.
Investment Income. Investment income was
$333,000 in 2005 compared with $171,000 in 2004. The increase is
due to a higher average cash balance in 2005 resulting from net
proceeds of $5.3 million and $17.2 million from the
sale of Series E convertible preferred stock during 2005
and 2004, respectively.
Liquidity and
Capital Resources
Since inception, we have financed our operations primarily
through private placements of equity securities. Through
September 30, 2007, we received net proceeds of
$76.4 million from the sale of shares of our convertible
preferred stock as follows:
| • | in 1994, we issued and sold a total of 875,000 shares of Series A convertible preferred stock for aggregate net proceeds of $868,000; | |
| • | in 1998, we issued and sold a total of 2,663,244 shares of Series B convertible preferred stock for aggregate net proceeds of $4.4 million; | |
| • | in 2000, we issued and sold a total of 2,825,291 shares of Series C convertible preferred stock for aggregate net proceeds of $7.2 million; | |
| • | in 2002, we issued and sold a total of 972,580 shares of Series D convertible preferred stock for aggregate net proceeds of $3.7 million; and | |
| • | from 2004 to 2007, we issued and sold a total of 12,655,208 shares of Series E convertible preferred stock for aggregate net proceeds of $60.0 million. |
As of September 30, 2007, we had $27.2 million in
cash, cash equivalents and short-term investments, consisting of
$6.5 million in cash and cash equivalents and
$20.7 million in short-term investments. Our cash, cash
equivalents and short-term investment balances are held in a
variety of interest-bearing instruments, including
mortgage-backed securities issued by or fully collateralized by
U.S. government or federal agencies, high credit rating
corporate borrowers and money market accounts. Cash in excess of
immediate requirements is invested in accordance with
established guidelines to preserve principal and maintain
liquidity.
Net cash used in operating activities of $11.1 million for
the nine months ended September 30, 2007 was primarily due
to the net loss for the period of $18.4 million, offset in
part by $5.5 million of non-cash stock-based compensation
expense. Net cash used in operating activities was
$10.2 million, $6.6 million, and $4.2 million in
2006, 2005 and 2004, respectively. Net cash used in each of
these periods was primarily a result of the net loss for these
periods.
Net cash used in investing activities for the nine months ended
September 30, 2007 was $8.5 million. Net cash used in
investing activities was $579,000 and $13.0 million in the
years
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ended December 31, 2006 and 2004, respectively, and net
cash provided by investing activities was $1.2 million in
the year ended December 31, 2005. Investing activities
consist primarily of purchases and sales of marketable
securities, and property and equipment purchases. Purchases of
property and equipment were $477,000 in the nine months ended
September 30, 2007, and $166,000, $278,000, $124,000 in the
years ended December 31, 2006, 2005 and 2004, respectively.
Net cash provided by financing activities was $2.7 million
in the nine months ended September 30, 2007. Net cash
provided by financing activities was $33.9 million,
$5.4 million and $17.3 million in the years ended
December 31, 2006, 2005 and 2004, respectively. Net
proceeds from these financing activities were primarily related
to the sale of our convertible preferred stock.
In connection with our acquisition of nura in August 2006, we
assumed a note payable of $2.4 million. At
September 30, 2007, the note payable balance was
$1.3 million with an interest rate of 9.69%. We pay $96,000
per month for principal and interest on the note and we expect
that the note will be fully repaid in November 2008. The lender
under this note has a security interest in all of nura’s
assets including intellectual property.
In October 2007, we received cash totaling $980,000 from Small
Business Innovation Research grants awarded by the National
Institute of Health.
We have a funding agreement with The Stanley Medical Research
Institute, or SMRI, to develop a proprietary product candidate
that inhibits PDE10 for the treatment of schizophrenia. Under
the agreement, we may receive grant and equity funding upon
achievement of product development milestones through
Phase I clinical trials totaling $9.0 million, subject
to our mutual agreement with SMRI. As of September 30,
2007, we have received $2.6 million, 50% of which was grant
funding and 50% of which was equity funding, under the funding
agreement with SMRI. As part of the funding agreement, we are
obligated to provide SMRI notice of the filing of a registration
statement related to our IPO with the Securities and Exchange
Commission. Within 30 days following notice to SMRI, SMRI
has the right to provide up to the remaining $6.4 million
aggregate grant and equity funding to us in exchange for
SMRI’s right to purchase shares of our Series E
convertible preferred stock at $5.00 per share.
Funding
Requirements
We believe that our existing cash, cash equivalents and
short-term investments, along with the net proceeds of this
offering, will be sufficient to fund our anticipated operating
expenses and capital expenditures for at least the next
24 months. We have based this estimate on assumptions that
may prove to be wrong and we could use our available capital
resources sooner than we currently expect. Because of the
numerous risks and uncertainties associated with the development
and commercialization of our product candidates, and to the
extent that we may or may not enter into collaborations with
third parties to participate in development and
commercialization, we are unable to estimate the amounts of
increased capital requirements and operating expenditures
associated with our currently anticipated clinical trials.
Our future capital requirements will depend on many factors,
including:
| • | the progress and results of our clinical trials for OMS103HP, OMS302 and OMS201; | |
| • | costs related to manufacturing services; | |
| • | whether the hiring of a number of new employees to support our continued growth during this period will occur at salary levels consistent with our estimates; | |
| • | the scope, rate of progress, results and costs of our preclinical testing, clinical trials and other research and development activities for additional product candidates; |
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| • | the terms and timing of payments of any collaborative or licensing agreements that we may establish; | |
| • | market acceptance of our approved product candidates; | |
| • | the cost, timing and outcomes of the regulatory processes for our product candidates; | |
| • | the costs of commercialization activities, including product manufacturing, marketing, sales and distribution; | |
| • | the number and characteristics of product candidates that we pursue; | |
| • | the cost of establishing clinical and commercial supplies of our product candidates; | |
| • | the cost of preparing, filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; | |
| • | the extent to which we acquire or invest in businesses, products or technologies, although we currently have no commitments or agreements relating to any of these types of transactions; and | |
| • | our degree of success in commercializing OMS103HP and other product candidates. |
We do not anticipate generating revenue from the sale of our
product candidates for the next few years. In the absence of
additional funding, we expect our continuing operating losses to
result in increases in our cash used in operations over the next
several years. To the extent our capital resources are
insufficient to meet our future capital requirements, we will
need to finance our future cash needs through public or private
equity offerings, debt financings or corporate collaboration and
licensing arrangements. We currently do not have any commitments
for future external funding. Additional equity or debt financing
or corporate collaboration and licensing arrangements may not be
available on acceptable terms, if at all. If adequate funds are
not available, we may be required to delay, reduce the scope of
or eliminate our research and development programs, reduce our
planned commercialization efforts or obtain funds through
arrangements with collaborators or others that may require us to
relinquish rights to certain product candidates that we might
otherwise seek to develop or commercialize independently, or
enter into corporate collaborations at a later stage of
development. In addition, any future equity funding will dilute
the ownership of our equity investors.
Contractual
Obligations and Commitments
The following table presents a summary of our contractual
obligations and commitments as of December 31, 2006.
| Payments Due Within | ||||||||||||||||||||
| 1 Year | 2-3 Years | 4-5 Years | More Than 5 Years | Total | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
|
Operating leases (1)
|
$ | 1,333 | $ | 1,555 | $ | 706 | $ | — | $ | 3,594 | ||||||||||
|
License maintenance fees
|
5 | 10 | 10 | 50 | 75 | |||||||||||||||
|
Notes payable (principal and interest)
|
1,156 | 1,060 | — | — | 2,216 | |||||||||||||||
|
Total
|
$ | 2,494 | $ | 2,625 | $ | 716 | $ | 50 | $ | 5,885 | ||||||||||
| (1) | We are contracted to receive sublease income of $252,000 and $69,000 in 2007 and 2008, respectively. In September 2007, we extended our lease agreements related to 25,000 square feet of laboratory space in Seattle, Washington. The annual lease payments for this space are approximately $1.4 million. The lease expires in September 2011, after which we may extend the term to one year. |
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Related-Party
Transactions
We conduct research using the services of one of our founders.
Costs associated with this research are included in research and
development. Costs associated with this research totaled $0,
$41,000, $41,000, and $41,000 for the nine months ended
September 30, 2007 and the years ended December 31, 2006,
2005, and 2004, respectively, and $435,000 for the period from
inception (June 16, 1994) through December 31,
2006.
In conjunction with the exercise of certain stock options by
Gregory A. Demopulos, M.D., our president, chief executive
officer, chief medical officer and chairman of the board of
directors, we received promissory notes from Dr. Demopulos
totaling $239,000. The promissory notes accrued interest at
rates ranging from 3% to 6.25% and were secured by pledges of
the underlying common stock. Based on the terms of the notes,
the notes were treated as options subject to variable accounting
whereby changes in the estimated fair value of the underlying
deemed options were reported as increases or decreases, as
applicable, in stock-based compensation expense until such time
that the notes were repaid. The notes and accrued interest were
repaid in full in December 2007.
For a description of additional related-party transactions, see
“Certain Relationships and Related-Party Transactions.”
Recent Accounting
Pronouncements
We adopted FASB Interpretation No. 48, Accounting for
Uncertainties in Income Taxes — an interpretation of
FASB Statement No. 109, or FIN 48, effective
January 1, 2007. FIN 48 requires that we recognize the
financial statement effects of a tax position when it is more
likely than not, based on the technical merits, that the
position will be sustained upon examination. No cumulative
adjustment to our accumulated deficit was required upon adoption
of FIN 48.
As of January 1, 2007, we had no unrecognized tax benefits,
and expected no unrecognized tax benefits in the next
12 months.
We file our income tax return in the United States, which
typically provides for a
three-year
statute of limitations on assessments. However, because of net
operating loss carryforwards, substantially all of our tax years
remain open to examination by the Internal Revenue Service.
Our policy is to recognize interest and penalties related to the
underpayment of income taxes as a component of income tax
expense. To date, there have been no interest or penalties
charged to us in relation to the underpayment of income taxes.
In September 2006, the SEC issued SAB No. 108,
Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial
Statements, or SAB 108. SAB 108 provides guidance
on the consideration of the effects of prior-year misstatements
in quantifying current-year misstatements for the purpose of a
materiality assessment. SAB 108 establishes an approach
that requires quantification of financial statement errors based
on the effects on our balance sheets and statement of operations
and the related financial statement disclosures. We adopted
SAB 108 in the first quarter of 2007. We have determined
that the adoption of SAB 108 had no material effect on our
results of operations and financial position.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements, or SFAS 157. SFAS 157
provides guidance for using fair value to measure assets and
liabilities. It also responds to investors’ requests for
expanded information about the extent to which companies measure
assets and liabilities at fair value, the information used to
measure fair value, and the effect of fair value measurements on
earnings. SFAS 157 applies whenever other standards
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require, or permit, assets or liabilities to be measured at fair
value, and does not expand the use of fair value in any new
circumstances. SFAS 157 is effective for financial
statements issued for fiscal years beginning after
November 15, 2007 and we will be required to adopt this
effective January 1, 2008. We are currently evaluating the
effect that the adoption of SFAS 157 will have on our
results of operations and financial position.
In February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities — Including an amendment of FASB Statement
No. 115, or SFAS 159. SFAS 159 provides
companies with an option to report selected financial assets and
liabilities at fair value. The objective of SFAS 159 is to
reduce both complexity in accounting for financial instruments
and the volatility in earnings caused by measuring related
assets and liabilities differently. Most of the provisions in
SFAS 159 are elective; however, the amendment to FASB
Statement No. 115, Accounting for Certain Investments in
Debt and Equity Securities, applies to all entities with
available-for-sale and trading securities. SFAS 159 is
effective as of the beginning of an entity’s first fiscal
year beginning after November 15, 2007. We are currently
evaluating the effect that the adoption of SFAS 159 will
have on our results of operations and financial position.
In June 2007, the FASB ratified EITF Issue
No. 07-3,
Accounting for Nonrefundable Advance Payments for Goods or
Services to Be Used in Future Research and Development
Activities, or
EITF 07-3.
The scope of
EITF 07-3
is limited to nonrefundable advance payments for goods and
services to be used or rendered in future research and
development activities.
EITF 07-3
provides that nonrefundable advance payments for goods or
services that will be used or rendered for future research and
development activities should be deferred and capitalized. Such
amounts should be recognized as an expense as the related goods
are delivered or the related services are performed. We intend
to adopt EITF
Issue 07-3
effective January 1, 2008. The impact of applying this
consensus will depend on the terms of future research and
development contractual arrangements entered into on or after
December 15, 2007.
Off-Balance Sheet
Arrangements
Since our inception, we have not engaged in any off-balance
sheet arrangements.
Quantitative and
Qualitative Disclosures About Market Risk
Our exposure to market risk is primarily confined to our
investment securities and note payable. The primary objective of
our investment activities is to preserve our capital to fund
operations. We also seek to maximize income from our investments
without assuming significant risk. To achieve our objectives, we
maintain a portfolio of investments in a variety of securities
of high credit quality. As of September 30, 2007, we had
cash, cash equivalents and short-term investments of
$27.2 million. The securities in our investment portfolio
are not leveraged and are classified as available for sale. We
currently do not hedge interest rate exposure. Because of the
short-term maturities of our investments, we do not believe that
an increase in market rates would have a material negative
impact on the realized value of our investment portfolio. We
actively monitor changes in interest rates. While our investment
portfolio includes mortgage-backed securities, we do not hold
sub-prime mortgages. Our investments in mortgage-backed
securities are issued by, or fully collateralized by, the
U.S. government or federal agencies.
Our note payable bears interest at the lender’s prime rate.
We do not believe that an increase in such rates would have a
material negative impact on our interest expense under this
note, which is scheduled for repayment in November 2008.
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Overview
We are a clinical-stage biopharmaceutical company committed to
discovering, developing and commercializing products focused on
inflammation and disorders of the central nervous system. Our
most clinically advanced product candidates are derived from our
proprietary
PharmacoSurgerytm
platform designed to improve clinical outcomes of patients
undergoing arthroscopic, ophthalmological, urological and other
surgical and medical procedures. Our PharmacoSurgery platform is
based on low-dose combinations of therapeutic agents delivered
directly to the surgical site throughout the duration of the
procedure to preemptively inhibit inflammation and other
problems caused by surgical trauma and to provide clinical
benefits both during and after surgery. We currently have three
ongoing PharmacoSurgery clinical development programs, the most
advanced of which is in Phase 3 clinical trials, and we expect
to initiate a fourth clinical program in the first half of 2008.
In addition to our PharmacoSurgery platform, we have leveraged
our expertise in inflammation and the central nervous system, or
CNS, to build a deep and diverse pipeline of preclinical
programs targeting large markets. For each of our product
candidates and programs, we have retained all manufacturing,
marketing and distribution rights.
OMS103HP, our lead PharmacoSurgery product candidate, is in two
Phase 3 clinical programs. The first program is evaluating
OMS103HP’s safety and ability to improve postoperative
joint function and reduce pain following arthroscopic anterior
cruciate ligament, or ACL, reconstruction surgery. The second
program is evaluating OMS103HP’s safety and ability to
reduce pain and improve postoperative joint function following
arthroscopic meniscectomy surgery. We expect to complete the
Phase 3 clinical program for ACL reconstruction surgery by the
end of 2008 and intend to submit, during the first half of 2009,
a New Drug Application, or NDA, to the U.S. Food and Drug
Administration, or FDA, under the Section 505(b)(2) NDA
process. We believe that OMS103HP will, if approved, be the
first commercially available drug product for the improvement of
function following arthroscopic surgery. We expect to complete
our first Phase 3 clinical trial, and begin our second Phase 3
clinical trial, in patients undergoing meniscectomy surgery in
the second half of 2008. Our other current PharmacoSurgery
product candidates are OMS302, being developed for use during
ophthalmological procedures, including cataract and other lens
replacement surgery, and OMS201, being developed for use during
urological surgery, including uroendoscopic procedures. We
expect to begin a Phase 1/Phase 2 clinical trial of OMS302 in
patients undergoing cataract surgery during the first half of
2008, and are currently conducting a Phase 1 clinical trial
of OMS201 in patients undergoing ureteroscopic removal of
ureteral or renal stones.
According to market data from SOR Consulting and Thomson
Healthcare, approximately a total of: 4.0 million
arthroscopic operations, including 2.6 million knee
arthroscopy operations; 2.9 million cataract operations;
and 4.3 million uroendoscopic operations were performed in
the United States in 2006. We expect the number of these
operations to grow as the population and demand for minimally
invasive procedures increase and endoscopic technologies
improve. Based on reports that we commissioned from a
reimbursement consulting firm, we anticipate that each of our
current PharmacoSurgery product candidates will be favorably
reimbursed both to the surgical facility and to the surgeon. As
a result, we estimate that there are large markets for each of
our PharmacoSurgery product candidates and believe that OMS103HP
alone provides a multi-billion dollar market opportunity. We own
and exclusively control a U.S. and international portfolio
of issued patents and pending patent applications that we
believe protects our PharmacoSurgery platform. Our patent
portfolio covers all arthroscopic, ophthalmological, urological,
cardiovascular and other types of surgical and medical
procedures, and includes both method and composition claims
broadly directed to combinations of agents drawn from distinct
classes of therapeutic agents delivered to the procedural site
intra-operatively, regardless of whether the agents are generic
or proprietary.
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From this intellectual property estate, we are able to develop a
series of proprietary follow-on PharmacoSurgery product
candidates.
Limitations of
Current Treatments
Current standards of care for the management and treatment of
surgical trauma are limited in effectiveness. Surgical trauma
causes a complex cascade of molecular signaling and biochemical
changes, resulting in inflammation, pain, spasm, loss of
function and other problems. As a consequence, multiple
pharmacologic actions are required to manage the complexity and
inherent redundancy of the cascade. Accordingly, we believe that
single-agent treatments acting on single targets do not result
in optimal therapeutic benefit. Further, current pre-operative
treatments are not optimally effective because the
administration of standard irrigation solution during the
surgical procedure washes out pre-operatively delivered drugs.
In addition, current postoperative therapies are not optimally
effective because the cascade and resultant inflammation, pain,
spasm, loss of function and other problems have already begun
and are difficult to reverse and manage after surgical trauma
has occurred. Also, drugs that currently are systemically
delivered, such as by oral or intravenous administration, to
target these problems are frequently associated with adverse
side effects.
Advantages of our
PharmacoSurgery Platform
In contrast, we generate from our PharmacoSurgery platform
proprietary product candidates that are combinations of
therapeutic agents designed to act simultaneously at multiple
discrete targets to preemptively block the molecular-signaling
and biochemical cascade caused by surgical trauma and to provide
clinical benefits both during and after surgery. Supplied in
pre-dosed, pre-formulated, single-use containers, our
PharmacoSurgery product candidates are added to standard
surgical irrigation solutions and delivered intra-operatively to
the site of tissue trauma throughout the surgical procedure.
This results in the delivery of low concentrations of agents
with minimal systemic uptake and reduced risk of adverse side
effects, and does not require a surgeon to change his or her
operating procedure. In addition to ease of use, we believe that
the clinical benefits of our product candidates could provide
surgeons a competitive marketing advantage and may facilitate
third-party payor acceptance, all of which we expect will drive
adoption and market penetration. Our current PharmacoSurgery
product candidates are specifically comprised of active
pharmaceutical ingredients, or APIs, contained in generic drugs
already approved by the FDA, with established profiles of safety
and pharmacologic activities, and are eligible for submission
under the potentially less-costly and time-consuming
Section 505(b)(2) NDA process.
Our Preclinical
Development Programs
In addition to our PharmacoSurgery platform, we have a deep and
diverse pipeline of preclinical product development programs
targeting large market opportunities in inflammation and CNS
covered by a broad intellectual property portfolio. In our
mannan-associated serine protease-2, or MASP-2, program, we are
developing proprietary MASP-2 antibody therapies to treat
disorders caused by complement-activated inflammation. Our
preclinical data suggest that MASP-2 plays a significant role in
macular degeneration, ischemia-reperfusion injury associated
with myocardial infarction, renal disease and rheumatoid
arthritis, and we have generated several fully human,
high-affinity, blocking antibodies to MASP-2. In our cartilage
protective, or Chondroprotective, program, we are developing
proprietary combinations of inhibitors of cartilage breakdown
and promoters of cartilage synthesis to treat cartilage
disorders, such as osteoarthritis and rheumatoid arthritis.
Our CNS pipeline includes our Phosphodiesterase 10, or PDE10,
program, our G protein-coupled receptors, or GPCR, program
and our other CNS programs. In our PDE10 program, we are
optimizing proprietary compounds to treat schizophrenia. Results
from preclinical studies suggest that PDE10 inhibitors may
address the limitations of currently used anti-psychotic drugs
by avoiding the associated weight gain and improving cognition.
Our GPCR program
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has been built around our scientific expertise in the field of
GPCRs. Members of our scientific team were the first to identify
and characterize the full family of all 357 GPCRs common to mice
and humans, with the exception of those GPCRs linked to smell,
taste and pheromone functions. Using our expertise in GPCRs, our
61 proprietary strains of knock-out mice, our in-house
battery of behavioral assays and available libraries of
compounds, we have discovered what we believe to be previously
unknown links between specific molecular targets in the brain
and a series of CNS disorders, have filed corresponding patent
applications, and are developing compounds to treat several of
these disorders. In our other CNS programs, we have discovered
what we believe to be additional unknown links between specific
molecular targets and a series of CNS disorders. We have filed
patent applications directed to our discoveries broadly claiming
any agents that act at these molecular targets for use in the
treatment of these CNS disorders. Based on promising preclinical
data in animal models, we are developing compounds for several
of these disorders.
Our Product
Candidates and Preclinical Development Programs
Our clinical product candidates and pipeline of preclinical
development programs consist of the following:
|
Product |
Targeted |
Development |
Expected Near- |
Worldwide |
||||
|
Candidate/Program
|
Procedure/Disease | Status | Term Milestone (1) | Rights | ||||
|
Inflammation
|
||||||||
|
OMS103HP — Arthroscopy
|
Arthroscopic ACL reconstruction | Phase 3 |
Complete Phase 3 trials by end of 2008 |
Omeros | ||||
|
OMS103HP — Arthroscopy
|
Arthroscopic meniscectomy | Phase 3 | Complete first/begin second Phase 3 trial in second half of 2008 | Omeros | ||||
|
OMS302 — Ophthalmology
|
Cataract surgery |
Initiating Phase 1/ Phase 2 |
Begin enrollment in first half of 2008 |
Omeros | ||||
|
OMS201 — Urology
|
Ureteroscopy | Phase 1 |
Complete Phase 1 trial in first half of 2008 |
Omeros | ||||
|
MASP-2
|
Macular degeneration, ischemia-reperfusion injury, rheumatoid arthritis |
Preclinical |
Select clinical candidate in 2008 |
In-licensed(2) | ||||
|
Chondroprotective
|
Osteoarthritis, rheumatoid arthritis |
Preclinical |
Select clinical candidate |
Omeros | ||||
|
Central Nervous System
|
||||||||
|
PDE10
|
Schizophrenia | Preclinical |
Select clinical candidate |
Omeros | ||||
|
GPCR
|
Multiple CNS Disorders | Preclinical | Select clinical candidate(s) | Omeros | ||||
|
Other CNS Programs
|
Multiple CNS Disorders | Preclinical |
Select clinical candidate(s) |
Omeros |
| (1) | Following selection of a clinical candidate, we must conduct additional studies, including in vivo toxicity studies of the clinical candidate. We must submit the results of these studies, together with manufacturing information and analytical results related to the clinical candidate, to the FDA as part of an IND, which must become effective before we may commence clinical trials. Submission of an IND does not always result in the FDA allowing clinical trials to commence. Depending on the nature of information that we must obtain and include in an IND, it may take from 12 to 24 months from selection of the clinical candidate to IND submission, if it occurs at all. All of these expected near-term milestones are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors,” and may not occur in the timelines set forth above or at all. | |
| (2) | We hold worldwide exclusive licenses to rights in connection with MASP-2, the antibodies targeting MASP-2 and the therapeutic applications for those antibodies from the University of Leicester and from its collaborator, Medical Research Council at Oxford University. |
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Strategy
Our objective is to become a leading biopharmaceutical company,
discovering, developing and successfully commercializing a large
portfolio of diverse products. The key elements of our strategy
are to:
| • | Obtain regulatory approval for our PharmacoSurgery product candidates OMS103HP, OMS302 and OMS201. We are conducting Phase 3 clinical trials for OMS103HP and we plan to submit an NDA for OMS103HP in the first half of 2009. In addition, we expect to begin a Phase 1/Phase 2 clinical trial for OMS302 in the first half of 2008 and are in a Phase 1 clinical trial for OMS201. Each of these PharmacoSurgery product candidates are specifically comprised of APIs contained in generic, FDA-approved drugs with established safety and pharmacological profiles, and are delivered to the surgical site in low concentrations with minimal systemic uptake and reduced risk of adverse side effects. All of these product candidates are eligible for submission under the potentially less-costly and time-consuming Section 505(b)(2) NDA process. | |
| • | Maximize commercial opportunity for our PharmacoSurgery product candidates OMS103HP, OMS302 and OMS201. Our PharmacoSurgery product candidates target large surgical markets with significant unmet medical needs. For each of our product candidates, we have retained all manufacturing, marketing and distribution rights. Our product candidates do not require a surgeon to change his or her operating procedure. In addition to ease of use, we believe that the clinical benefits of our product candidates could provide surgeons a competitive marketing advantage and may facilitate third-party payor acceptance, all of which we expect will drive adoption and market penetration. Because accessing the surgeons who perform the procedures targeted by our PharmacoSurgery product candidates requires a limited, hospital-based marketing and sales force, we believe that we are well positioned to successfully commercialize these product candidates independently or through third-party partnerships. | |
| • | Continue to leverage our business model to mitigate risk by combining our multiple late-stage PharmacoSurgery product candidates with our deep and diverse pipeline of preclinical development programs. Our lead PharmacoSurgery product is in Phase 3 clinical trials for two distinct therapeutic indications, providing two potential paths for commercialization. We are also advancing two additional PharmacoSurgery product candidates into clinical trials, and from our intellectual property estate we are able to develop a series of proprietary follow-on product candidates. Further, all of these current product candidates consist of generic APIs and are eligible for submission under the potentially less-costly and time-consuming Section 505(b)(2) NDA process. We believe that these attributes collectively mitigate the typical risks of late-stage clinical programs. Leveraging our clinical development experience and our expertise in inflammation and the CNS, we have built multiple development programs targeting large markets. By combining our late-stage PharmacoSurgery product candidates with this deep and diverse pipeline of preclinical development programs, we believe that our business model creates multiple opportunities for commercial success. | |
| • | Further expand our broad patent portfolio. We have made a significant investment in the development of our patent portfolio to protect our technologies and programs, and will continue to do so. We own a total of 21 issued or allowed patents and 28 pending patent applications in the United States, 60 issued or allowed patents and 86 pending patent applications in commercially significant foreign markets, and we also hold worldwide exclusive licenses to two pending United States patent applications, an issued foreign patent and two pending foreign patent applications. Our patent portfolio for our PharmacoSurgery platform is directed to locally delivered compositions and treatment methods using agents selected from broad therapeutic classes such as pain and inflammation inhibitory agents, spasm inhibitory agents, restenosis inhibitory agents, tumor cell adhesion inhibitory agents, mydriatic agents and agents that reduce |
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| intraocular pressure. We intend to continue to maintain an aggressive intellectual property strategy in the United States and other commercially significant markets and plan to seek additional patent protection for our existing programs as they advance, for our new inventions and for new products that we develop or acquire. |
| • | Manage our business with continued efficiency and discipline. We have efficiently utilized our capital and human resources to develop and acquire our product candidates and programs, build a modern research facility and vivarium and create a broad intellectual property portfolio. We operate cross-functionally and are led by an experienced management team. We use rigorous project management techniques to assist us in making disciplined strategic program decisions and to limit the risk profile of our product pipeline. In addition, we plan to continue to seek and access external sources of grant funding to support the development of our pipeline programs. We will continue to evaluate opportunities and, as appropriate, acquire technologies that meet our business objectives. We successfully implemented this strategy with our acquisition of nura, inc., a private biotechnology company, in 2006, which expanded and diversified our CNS pipeline and strengthened our discovery research capabilities. In addition, we will also consider strategic partnerships to maximize commercial opportunities for our product candidates. |
Inflammation
Programs
PharmacoSurgery
Platform
OMS103HP —
Arthroscopy
Background. OMS103HP, our lead PharmacoSurgery
product candidate, is in two Phase 3 clinical programs. The
first program is evaluating OMS103HP’s safety and ability
to improve postoperative joint function and reduce pain
following ACL reconstruction surgery. The second program is
evaluating OMS103HP’s safety and ability to reduce pain and
improve postoperative joint function following arthroscopic
meniscectomy surgery. We expect to complete the Phase 3 clinical
program for ACL reconstruction surgery by the end of 2008 and
intend to submit, during the first half of 2009, an NDA to the
FDA under the Section 505(b)(2) NDA process. We expect to
complete our first Phase 3 clinical trial, and begin our second
Phase 3 clinical trial, in patients undergoing meniscectomy
surgery in the second half of 2008.
Arthroscopy is a surgical procedure in which a miniature camera
lens is inserted into an anatomic joint, such as the knee,
through a small incision in the skin. Through similar incisions,
surgical instruments are also introduced and manipulated within
the joint. During any arthroscopic procedure, an irrigation
solution, such as lactated Ringer’s solution or saline
solution, is flushed through the joint to distend the joint
capsule, allowing better visualization with the arthroscope, and
to remove debris resulting from the operation.
One of the major challenges facing orthopedic surgeons in
performing arthroscopic procedures is adequately controlling the
local inflammatory response to surgical trauma, particularly the
pain, swelling, and functional loss. The inflammation associated
with arthroscopic surgery, or any other procedure resulting in
tissue trauma, is a complex reaction to tissue injury with
multiple pathways, mechanisms and pro-inflammatory mediators,
such as
PGE2,
involving three major components:
| • | alterations in vascular caliber, or vasodilation, that lead to an increase in blood flow; | |
| • | structural changes in the microvasculature that permit plasma proteins to leave the circulation, or plasma extravasation; and | |
| • | white cell migration from the microcirculation to the site of tissue injury. |
The key cellular events involved in these components include the
synthesis and release of multiple pro-inflammatory mediators.
Consequently, multiple pharmacologic actions are required to
manage the complexity and inherent redundancy of the
inflammatory cascade.
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Added to standard irrigation solutions, OMS103HP is delivered
directly to the joint throughout arthroscopy, and is designed to
act simultaneously at multiple distinct targets to preemptively
block the inflammatory cascade induced by arthroscopic surgery.
OMS103HP contains the following three APIs, each of which are
known to interact with different, discrete molecular targets
that are involved in the acute inflammatory and pain response:
| • | Ketoprofen, a non-steroidal anti-inflammatory drug, or NSAID, is a non-selective inhibitor of the pro-inflammatory mediators COX-1 and COX-2, with potent anti-inflammatory and analgesic actions that result from inhibiting the synthesis of the pro-inflammatory mediator PGE2, and antagonizing the effects of bradykinin, another inflammatory mediator; |
| • | Amitriptyline is a compound with analgesic activity that inhibits the pro-inflammatory actions of histamine and serotonin released locally at the site of tissue trauma; and |
| • | Oxymetazoline is a vasoconstrictor and also activates serotonin receptors, located on a group of nerve fibers called primary afferents, that can inhibit the release of pro-inflammatory mediators such as substance P and calcitonin gene-related peptide, or CGRP. |
In combination, these APIs inhibit
PGE2
production, decrease inflammation-induced vasodilation and
prevent increased vascular permeability, as well as block the
release of pro-inflammatory mediators from primary afferent
nerve endings, or neurogenic inflammation, at the site of
surgical trauma. Using an in vivo joint model of acute
inflammation-induced plasma extravasation, preclinical studies
showed that the combined activity of all three APIs in OMS103HP
produced significant inhibition of plasma extravasation and was
more effective than any of the two-API combinations or any
single API administered alone, demonstrating that each API
contributed to the effect of OMS103HP.
Each of the APIs in OMS103HP are components of generic,
FDA-approved drugs that have been marketed in the United States
as over-the-counter, or OTC, or prescription drug products for
over 15 years and have established and well-characterized
safety profiles. Ketoprofen is available as oral OTC and
prescription medications, amitriptyline is available as
prescription oral and intramuscular medications and
oxymetazoline is available as OTC nasal sprays and ophthalmic
solutions.
Market Opportunity. According to
SOR Consulting, approximately a total of: 4.0 million
arthroscopic operations were performed in the United States in
2006, including 2.6 million knee arthroscopy operations.
Based on a report that we commissioned from TRG, we believe that
OMS103HP will be favorably reimbursed both to the surgical
facility for its utilization and to the surgeon for its
administration and delivery. We believe that OMS103HP will, if
approved, be the first commercially available drug product for
the improvement of function following arthroscopic surgery.
Also, use of OMS103HP does not require a surgeon to change his
or her operating procedure. In addition to ease of use, we
believe that the clinical benefits of OMS103HP could provide
surgeons a competitive marketing advantage and may facilitate
third-party payor acceptance, all of which we expect will drive
adoption and market penetration.
Shortcomings of Current Treatments. There is
no drug product currently approved to improve postoperative
function following arthroscopic surgery. There are numerous pre-
and postoperative approaches to reduce postoperative pain and
inflammation such as systemically or intra-articularly delivered
NSAIDS, opioids, local anesthetics and steroids. Current
pre-operative treatments are not optimally effective because the
administration of standard irrigation solution during the
surgical procedure washes out pre-operatively delivered drugs.
Intra-articular injections of local anesthetics at the
concentrations routinely used, while reducing intra-and
immediate postoperative pain, have minimal effect on the local
inflammatory cascade. In addition, current postoperative
therapies are not optimally effective because the cascade and
resultant inflammation, pain, loss of function and other
problems have already begun and are difficult to reverse and
manage after surgical trauma has occurred. Also, drugs that
currently are
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systemically delivered, such as by oral or intravenous
administration, to target these problems are frequently
associated with adverse side effects. For example, despite the
fact that both COX-1 and COX-2 are drivers of acute
inflammation, non-selective COX-1/COX-2 inhibitors are
infrequently delivered systemically in the perioperative setting
due to risk of increased bleeding associated with
COX-1
inhibition.
Advantages of OMS103HP. We developed OMS103HP
to improve postoperative joint function following arthroscopic
surgery by reducing postoperative inflammation and pain. We
believe that OMS103HP will provide a number of advantages over
current treatments, including:
| • | If approved, OMS103HP will be the first commercially available drug product for the improvement of function following arthroscopic surgery. | |
| • | OMS103HP will provide additional postoperative clinical benefits, including improved range of motion, reduced pain and earlier return to work. | |
| • | OMS103HP selectively targets multiple and discrete pro-inflammatory mediators and pathways within the inflammatory and pain cascade. | |
| • | By delivering OMS103HP to the joint at the initiation of surgical trauma, the inflammatory and pain cascade will be preemptively inhibited. | |
| • | Intra-operative delivery to the joint creates a constant concentration of OMS103HP, bathing and replenishing the joint with drug throughout the duration of the surgical procedure. | |
| • | Because OMS103HP is delivered locally to, and acts directly at, the site of tissue injury, it can be delivered in low concentration, and will not be subject to the substantial interpatient variability in pharmacokinetics that is associated with systemic delivery. | |
| • | By delivering low-concentration OMS103HP locally and only during the arthroscopic procedure, systemic absorption of the APIs will be minimized or avoided, thereby reducing the risk of adverse side effects. |
Development Plan. We are conducting a Phase 3
clinical program evaluating the efficacy and safety of OMS103HP
in patients undergoing arthroscopic ACL reconstruction surgery.
The Phase 3 program consists of three multi-center trials, two
evaluating efficacy and safety and a third evaluating safety
only. Two trials, each evaluating efficacy and safety of
OMS103HP, are being conducted in patients receiving grafts from
cadavers or their own tissue, respectively. The safety trial
includes patients receiving either graft type. Efficacy
endpoints include assessments of postoperative knee function and
range of motion, pain reduction and return to work.
We are conducting a second Phase 3 clinical program to evaluate
the efficacy and safety of OMS103HP in patients undergoing
arthroscopic meniscectomy surgery. Efficacy endpoints focus on
the reduction of postoperative pain and improvement in
postoperative joint function. The endpoints of this OMS103HP
meniscectomy clinical trial were determined at the outset of the
clinical trial. Assuming a successful outcome of this first
clinical trial, we plan to conduct a second pivotal trial of
similar design. Should the results of the first trial indicate
that one or more changes in trial design are appropriate, we
intend to modify our trial design accordingly and conduct two
pivotal trials in parallel.
By concurrently conducting these two Phase 3 clinical programs
for OMS103HP, one in patients undergoing arthroscopic ACL
reconstruction surgery with improvement in postoperative joint
function as the primary endpoint and the second in patients
undergoing arthroscopic meniscectomy surgery with pain reduction
as the primary endpoint, we believe that we are reducing the
overall risk profile of the OMS103HP clinical program.
Clinical Trial Results. We conducted a
double-blind, vehicle-controlled, parallel-group, randomized
Phase 1/Phase 2 clinical trial of OMS103HP in a total of
35 patients undergoing arthroscopic cadaveric, or
allograft, ACL reconstruction surgery. 34 patients
comprised the intent-
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to-treat population, 18 patients in the OMS103HP group and
16 patients in the vehicle group. 30 patients, 14
OMS103HP and 16 vehicle patients, were included in the efficacy
evaluable population. The intent-to-treat population consisted
of all patients who were randomized into the study, received
OMS103HP or vehicle control, and had at least one recovery room
evaluation. The OMS103HP and vehicle groups showed no
significant differences in demographics, or pre-or
intra-operative findings. Patients were adults scheduled to
undergo primary ACL reconstruction surgery, using patellar
tendon-bone or Achilles tendon allografts, for an ACL tear
occurring from two weeks to one year prior to the day of
arthroscopic surgery. Patients were followed for 30
postoperative days and instructed to complete a patient diary
each day.
Efficacy endpoints included assessments of range of motion, knee
function, pain management, quadriceps and hamstring muscle
strength, and return to work. Assessments were collected during
clinic and rehabilitation visits and in the patient diary. At
each clinic visit, a Visual Analog Scale, or VAS, pain score was
obtained and passive range of motion measurements were taken. At
the end of the
30-day
evaluation period, physical and orthopedic examinations were
also performed and quadriceps and hamstring strength testing was
conducted. At each study rehabilitation visit, knee function and
range of motion were assessed.
Patients treated with OMS103HP demonstrated statistically
significant: (1) improvement in postoperative knee range of
motion, (2) improvement in postoperative knee function,
(3) better pain management and (4) earlier return to
work.
Clinical Trial Results —
Efficacy. Key results in the efficacy evaluable
population of the Phase 1/Phase 2 clinical trial are as follows:
|
Figure 1: OMS103HP-Treated Patients Required Fewer
Median Number of Days to Maximum Passive Flexion 90°
without Pain
|
Figure 2: Median Last Day of Continuous Passive Motion Machine Use was Earlier for OMS103HP-Treated Patients | |
|
|
|
|
*p = 0.016, log-rank
|
*p = 0.007, log rank | |
| Figure 1 depicts the median number of days to maximum passive flexion 90° without pain, which is a knee range of motion test, as measured in the clinic. | Figure 2 depicts the number of days until the continuous passive motion, or CPM, machine was discontinued. CPM machines are often used postoperatively to move the knee through a range of motion. CPM usage, recorded in the patient diary, was discontinued at the direction of either the surgeon or rehabilitation therapist based on the patient’s progress, usually at the time the patient reproducibly attained at least 90° of flexion of the operated knee. CPM machine usage was significantly less for OMS103HP. |
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|
Figure 3: OMS103HP-Treated Patients Demonstrated Better
Quadriceps Strength Testing at Day 30
|
Figure 4: OMS103HP-Treated Patients Demonstrated Better
Hamstring Strength Testing at Day 30
|
|
|
|
|
|
*p = 0.040, FET
|
*p = 0.026, FET |
Figures 3 and 4 depict the strength of the quadriceps and
hamstring muscle groups of the operated leg as evaluated by the
surgeon at the end of the
30-day
evaluation period. Quadricep and hamstring strength testing was
evaluated on a scale of 0/5 (no contraction) to 5/5 (normal
strength). This was a qualitative clinical evaluation of muscle
function and strength. Pre-operative quadriceps and hamstring
muscle strength ratings were similar for both patient groups.
|
Figure 5: A Greater Percentage of OMS103HP-Treated
Patients Demonstrated Successful Recovery of Knee Function as
Defined by Knee Function Composite
|
Figure 6: A Greater Percentage of OMS103HP-Treated
Patients Demonstrated Very Good and Good Ratings on the Knee Function Composite—Straight-Leg Raise |
|
|
|
|
|
*p = 0.026, FET
|
*p = 0.009, Wilcoxon rank sum test | |
| Figure 5 depicts the study’s primary endpoint, the Knee Function Composite, or KFC. The KFC is composed of the straight-leg raise, one-leg stance, shuttle press, and two-leg squat. Each test is a direct measure of knee function, and all four are routinely used by orthopedic surgeons and rehabilitation therapists to measure improvement in knee function during the early postoperative period following ACL reconstruction surgery. Success on the KFC requires success on all four of the component tests by the end of the 30-day evaluation period. |
Very Good: Achievement of the KFC by the end of the 30-day evaluation period and achievement of the highest level of straight-leg raise, or SLR, by the 13th day after surgeryGood: Achievement of the KFC by the end of the 30-day evaluation period without achievement of the highest level of SLR by the 13th day after surgeryPoor: Failure to achieve the KFC by the end of the 30-day evaluation period |
|
| Figure 6 depicts the Knee Function Composite — Straight-Leg Raise, or KFC-SLR, which combines the successful achievement of the KFC with a second key rehabilitation milestone, the ability to perform the highest level of the straight-leg raise by the 13th day after surgery following ACL reconstruction surgery. While the KFC accurately assesses knee function throughout the first 30-day period of postoperative rehabilitation therapy, an evaluation of postoperative function within the first two weeks also is important because early functional return is considered a key driver in successful post-arthroscopy outcomes. Of the four tests comprising the KFC, the straight-leg raise is the most important in the first two weeks following ACL reconstruction because it is used to determine the pace to progress exercises. |
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|
Figure 7: A Greater Percentage of OMS103HP-Treated
Patients Achieved Successful Pain Management at Postoperative
Week 1
|
Figure 8: OMS103HP-Treated Patients Demonstrated a Lower Median Number of Days to Return to Work | |
|
|
|
| *p = 0.031, FET | *p = 0.048; log-rank test | |
| Figure 7 depicts the percentage of patients achieving Successful Pain Management, or SPM, which is a composite of pain assessment and narcotic usage based on data from clinic visits and the patient diary. The SPM composite sets two criteria that the patient must meet in order to be considered a responder. During the first postoperative week, at all clinic visits, the VAS pain score must be not greater than 20 mm with the operated knee at rest. A maximum of two narcotic tablets could be self-administered on each day during the first postoperative week. VAS pain scores of 20 mm or less are considered to be indicative of good to excellent pain control not requiring analgesic medication. The SPM allows pain assessments and narcotic use to be evaluated together, and provides a more complete evaluation of pain management than either VAS pain scores or narcotic usage considered individually because a low VAS pain score recorded by a patient taking high doses of opioid pain medications does not reflect the same level of pain management as that same low VAS pain score recorded in the absence of narcotic pain medications. | Figure 8 depicts results related to patients’ ability to return to work following ACL reconstruction surgery. Patients were considered to have returned to work if they reported in the patient diary that they had gone to work outside of the home on two consecutive work days excluding weekends and holidays. Return to work was considered to have begun on the first of the two consecutive days. Patients who were unemployed or not working for pay were excluded from the analysis. |
Clinical Trial Results — Safety. No
adverse events were determined to be related to the delivery of
OMS103HP and there was no evidence of OMS103HP having any
detrimental effect with respect to healing, either in soft
tissue or bone.
Intellectual Property Position. OMS103HP is
protected by our PharmacoSurgery patent portfolio. The relevant
patents and patent applications in this portfolio cover
combinations of agents, generic
and/or
proprietary to us or others, drawn from therapeutic classes such
as pain and inflammation inhibitory agents and vasoconstrictive
agents, delivered locally and intra-operatively to the site of
medical or surgical procedures, including arthroscopy. We
currently own four issued U.S. Patents, two pending
U.S. Patent Applications, and 11 issued patents and nine
pending patent applications in key foreign markets that cover
OMS103HP.
OMS302 —
Ophthalmology
Background. OMS302 is our PharmacoSurgery
product candidate being developed for use during
ophthalmological procedures including cataract and other lens
replacement surgery. OMS302 is a proprietary combination of an
anti-inflammatory API and an API that causes pupil dilation, or
mydriasis, each with well-known safety and pharmacologic
profiles. FDA-approved drugs containing each of these APIs have
been used in ophthalmological clinical practice for more than
15 years, and both APIs are contained in generic,
FDA-approved drugs.
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Cataract and other lens replacement surgery involves replacement
of the original lens of the eye with an artificial intraocular
lens. These procedures are typically performed to replace a lens
opacified by a cataract or to correct a refractive error of the
lens. Added to standard irrigation solution used in cataract and
other lens replacement surgery, OMS302 is being developed for
delivery into the anterior chamber of the eye, or intracameral
delivery, to induce and maintain mydriasis, to prevent
surgically induced pupil constriction, or miosis, and to reduce
postoperative pain and irritation. Mydriasis is an essential
prerequisite for these procedures and, if not maintained
throughout the surgical procedure or if miosis occurs, risk of
damaging structures within the eye increases as does the
operating time required to perform the procedure.
During lens replacement surgery, a small ultrasonic probe, or a
phacoemulsifier, is typically used to help remove the lens. In
these procedures, the surgeon first places a small incision at
the edge of the cornea and then creates an opening in the
membrane, or capsule, surrounding the damaged lens. Through the
small corneal incision, the surgeon inserts the phacoemulsifier,
breaking the lens into tiny fragments that are suctioned out of
the capsule by the phacoemulsifier. After the lens fragments are
removed, an artificial intraocular lens is implanted with a
small injector that is inserted through the same corneal
incision.
Market Opportunity. According to Thomson
Healthcare, approximately a total of 2.9 million cataract
operations were performed in the United States in 2006. Based on
a report that we commissioned from TRG, we believe that OMS302
will be favorably reimbursed both to the surgical facility for
its utilization and to the surgeon for its administration and
delivery. Also, use of OMS302 does not require a surgeon to
change his or her operating procedure. In addition to ease of
use, we believe that the clinical benefits of OMS302 could
provide surgeons a competitive marketing advantage and may
facilitate third-party payor acceptance, all of which we expect
will drive adoption and market penetration. We also believe that
use of OMS302 will decrease the cost and surgical staff time
associated with preoperative patient care as well as streamline
workflow and increase patient throughput for both the surgeon
and the surgical facility.
Shortcomings of Current
Treatments. Anti-inflammatory topical drops
containing NSAIDs, such as
Acular-LS®,
Acular®,
Voltaren®
and
Xibrom®,
or steroids are routinely used postoperatively, and less
frequently pre-operatively, to prevent or manage the intra- and
postoperative pain and inflammation associated with lens
replacement surgery. Pre-operatively, these topical drops are
not optimally effective because the continuous administration of
standard surgical irrigation solution washes out pre-operatively
delivered drugs. Postoperatively, these anti-inflammatory
topical drops typically cannot be delivered until at least
24 hours following surgery due to practical constraints and
safety concerns. Further, surgical trauma results in the
generation of prostaglandins, which cause miosis during lens
replacement surgery. NSAIDs have an inhibitory effect on
prostaglandin synthesis and, if this inhibitory effect is not
present during the trauma of lens replacement surgery, the risk
of miosis increases.
Cataract and other lens replacement surgery requires that the
pupil be dilated for the surgeon to perform the procedure
efficiently and safely. Topical mydriatic drops are usually
delivered by surgical staff to the patient in a pre-operative
holding area. Pre-operative delivery of mydriatic drops requires
patient care and monitoring, resulting in increased labor and
facility utilization costs. In addition, patients vary in time
to pupil dilation in response to topical mydriatic drops, which
results in inefficient allocation of facilities and personnel.
Also, if mydriasis is not maintained throughout the surgical
procedure or if miosis occurs, risk of damaging structures
within the eye increases as does the operating time required to
perform the procedure. Further, many patients who undergo
cataract surgery also take alpha adrenergic antagonists, such as
FLOMAX®,
to reduce urinary frequency and other signs and symptoms
associated with prostate enlargement. These patients often
demonstrate a reduced response to topically applied mydriatic
drops, causing the pupil to not fully dilate and leaving the
iris, or
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the pigmented ring in the eye that surrounds the pupil, flaccid.
Referred to as intra-operative floppy iris syndrome, this
complicates and decreases the safety of cataract surgery, and
puts the iris at risk of surgical tear and other damage.
Advantages of OMS302. We developed OMS302 for
use during cataract and other lens replacement surgery to induce
and maintain mydriasis, to prevent surgical miosis and to reduce
postoperative pain and irritation. We believe that OMS302 will
provide a number of advantages over current treatments,
including:
| • | The anti-inflammatory API in OMS302 inhibits miosis by blocking the synthesis of prostaglandins caused by surgical trauma. | |
| • | By delivering OMS302 intra-operatively, inflammation and discomfort will be reduced during the first 24 hours following surgery, the time during which anti-inflammatory topical drops are not commonly administered, as well as after this initial postoperative period. | |
| • | Intra-operative delivery of the mydriatic API in OMS302 will maintain pupil dilation throughout the surgical procedure, decreasing the risk of surgical damage to structures within the eye. | |
| • | Because the mydriatic API in OMS302 rapidly achieves pupil dilation, OMS302 will eliminate the need for pre-operative delivery of mydriatic drops, reducing the need for pre-operative patient care and monitoring and resulting in savings in labor and facility costs. | |
| • | The mydriatic API in OMS302 prevents intra-operative floppy iris syndrome in many patients taking alpha adrenergic antagonists, such as FLOMAX®. | |
| • | Because OMS302 is delivered intracamerally in standard irrigation solution at a constant, defined concentration, maintaining a more consistent local tissue exposure during the surgical procedure, it will provide superior efficacy relative to topical drug products containing either API. | |
| • | OMS302 is delivered locally to, and acts directly at, the site of tissue injury and, therefore, can be delivered in low concentrations, and will not be subject to the substantial interpatient variability in pharmacokinetics that is associated with systemic delivery. |
Development Plan. In the first half of 2008,
we plan to submit an IND to the FDA for OMS302, and expect to
begin enrolling patients into a Phase 1/Phase 2 clinical trial
evaluating the efficacy and safety of OMS302 in patients
undergoing cataract surgery. The trial design is expected to
compare OMS302 to a control arm consisting of the mydriatic API
and a control arm of a standard preoperatively applied topical
mydriatic agent. These two control arms are designed to allow us
to assess the efficacy and safety of OMS302 relative to the
standard topical mydriatic agent. The trial will serve as the
basis for a limited set of additional trials intended to
demonstrate the contribution to clinical benefit of each API and
establish OMS302 as an effective and safe replacement for
currently used pre- and/or postoperative drugs.
Preclinical Study Results —
Efficacy. We performed preclinical in vivo
studies evaluating OMS302, including lens replacement surgery,
in primates. In these studies, OMS302 rapidly dilated the pupil,
maintained dilation throughout the surgical procedure and
reduced postoperative cellular debris, or flare, in the anterior
chamber of the eye, a measure of inflammation. Primates
administered OMS302 intracamerally achieved sufficient pupil
dilation to allow initiation of surgery within approximately 30
seconds of administration. Continuous irrigation with OMS302 led
to additionally increased pupil diameter that was maintained
throughout the course of the lens replacement surgery. In
contrast, the control group treated with standard topical
mydriatic drops demonstrated a progressive reduction in pupil
diameter
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during surgery, which increases the risk of intra-operative
injury. Pupil diameter returned to baseline within 24 hours
in all primates. The OMS302 treatment group demonstrated less
postoperative intracameral flare. Excluding an outlier that had
excessive surgical trauma, flare in the treatment group was
approximately 50% to 70% lower than in the control group over
repeated time measures during the first
48-hour
postoperative period.
Figure 1: Effect of
Intra-Operative
OMS302 Irrigation vs.
Preoperative Tropicamide on Primate Mydriasis
p = < 0.05 for t = 0 and all
time points from 3:30 to 13:00 minutes, inclusive.
Figure 1 depicts that primates
administered OMS302 intracamerally achieved approximately 6-7 mm
pupil dilation in approximately 30 seconds of irrigation
initiation. Pupil dilation of 5-6 mm is sufficient to begin
surgery.
Preclinical Study Results — Safety. We
evaluated OMS302 for potential toxicity during lens replacement
surgery in primates. In that study, we delivered OMS302 at
concentrations ten-fold greater than those expected to be used
clinically and measured minimal peak levels of the APIs in
OMS302 in circulating blood sampled at multiple time points
throughout the postoperative period, illustrating that the local
anti-inflammatory and mydriatic effects of OMS302 can be
achieved with minimal systemic exposure. In this toxicity study,
OMS302 administered at concentrations ten-fold greater than
those anticipated to be used clinically demonstrated no local or
systemic toxicity.
Intellectual Property. OMS302 is protected by
our PharmacoSurgery patent portfolio. The relevant patents and
patent applications in this portfolio cover combinations of
agents, generic
and/or
proprietary to us or others, drawn from therapeutic classes such
as pain and inflammation inhibitory agents, mydriatic agents and
agents that reduce intraocular pressure, delivered locally and
intra-operatively to the site of ophthalmological procedures,
including cataract and lens replacement surgery. We currently
own two pending U.S. Patent Applications and six pending
patent applications in key foreign markets that cover OMS302.
OMS201 —
Urology
Background. OMS201 is our PharmacoSurgery
product candidate being developed for use during urological
surgery, including uroendoscopic procedures. OMS201 is a
proprietary combination of an anti-inflammatory API and a smooth
muscle relaxant API, and is intended for local delivery to the
bladder, ureter, urethra, and other urinary tract structures
during urological procedures. Both of the APIs in OMS201 are
contained in generic, FDA-approved drugs with well-known
profiles of safety and pharmacologic activities, and each has
been individually prescribed to manage the symptoms of ureteral
and renal stones. Each of the APIs
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in OMS201 is contained in drugs that have been marketed in the
United States for more than 15 years.
Added to standard irrigation solutions in urological surgery,
OMS201 is being developed for delivery directly to the surgical
site during uroendoscopic procedures, such as bladder endoscopy,
or cystoscopy, minimally invasive prostate surgery and
ureteroscopy, to inhibit surgically induced inflammation, pain
and smooth muscle spasm, or contractility. Uroendoscopic
procedures are performed within the urinary tract using a
flexible camera device, or endoscope, and cause tissue injury
that activates local mediators of pain and inflammation, which
results in inflamed tissue, pain, smooth muscle spasm and lower
urinary tract symptoms including frequency, urgency and painful
urination, and can prolong recovery.
Ureteroscopy, or uroendoscopy of the ureter, is performed for a
variety of indications including localizing the source of
positive urine culture or cytology results, treating upper
urinary tract tumors and obstructions, and removing ureteral and
renal stones, particularly in those patients for whom
non-surgical procedures are insufficient or unsuitable.
Irrigation fluid is used continuously during the procedure.
Because ureteroscopic trauma and inflammation can result in
constrictive scar tissue, or stricture, and occlusion due to
smooth muscle spasm and swelling within the lumen of the ureter,
most surgeons routinely place ureteral stents in patients
following ureteroscopy to prevent ureteral strictures and
occlusion. In addition, during ureteroscopy, surgeons commonly
place a ureteral access sheath, or UAS, which helps to protect
the lining of the urethra and ureter while facilitating the
passage of surgical instruments.
Market Opportunity. According to Thomson
Healthcare, approximately a total of 4.3 million
uroendoscopic operations were performed in the United States in
2006. Based on a report that we commissioned from TRG, we
believe that OMS201 will be favorably reimbursed both to the
surgical facility for its utilization and to the surgeon for its
administration and delivery. Also, use of OMS201 does not
require a surgeon to change his or her operating procedure. In
addition to ease of use, we believe that the clinical benefits
of OMS201 could provide surgeons a competitive marketing
advantage and may facilitate third-party payor acceptance, all
of which we expect will drive adoption and market penetration.
Shortcomings of Current Treatments. Standard
irrigation solutions currently delivered during uroendoscopic
procedures do not address problems resulting from surgically
induced inflammation, pain and smooth muscle spasm, or
contractility. In addition, routine placement of stents
following ureterscopy to prevent ureteral strictures and
occlusion adds to procedural costs, and is itself traumatic,
increasing postoperative inflammation and ureteral spasm.
Further, patients with stents resident within the ureter
experience significantly more flank and bladder pain, increased
lower urinary tract symptoms and increased narcotic usage.
In addition, during ureteroscopy, the selection of UAS size is
based on the diameter and muscle tone of a patient’s
ureter. The benefits of UAS usage are in large part a direct
function of increased UAS circumference; however, there are no
routinely used intra-operative treatments to increase ureteral
diameter or decrease ureteral muscle tone. Many patients are
unable to accommodate a larger-sized UAS, requiring that the
surgeon use a smaller-sized UAS or none at all, putting those
patients at increased risk for intra- and postoperative problems.
Advantages of OMS201. We developed OMS201 for
use during uroendoscopic procedures such as cystoscopy,
minimally invasive prostate surgery and ureteroscopy, to
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inhibit surgically induced inflammation, pain and smooth muscle
spasm. We believe that OMS201 will provide a number of
advantages over current treatments, including:
| • | By delivering OMS201 intra-operatively, it will reduce inflammation, pain, smooth muscle spasm and lower urinary tract symptoms including frequency, urgency and painful urination, and improve patient outcomes. | |
| • | OMS201 will save health care costs and increase patient comfort by reducing the incidence of ureteral occlusion and the routine need for ureteral stents. | |
| • | By targeting inflammation and smooth muscle spasm, OMS201 will permit surgeons to more frequently place a standard larger-sized UAS, decreasing intra-operative trauma and shortening operative time, thereby saving costs. | |
| • | OMS201 is delivered locally to, and acts directly at, the site of tissue injury and, therefore, can be delivered in low concentrations, and will not be subject to the substantial interpatient variability in pharmacokinetics that is associated with systemic delivery. | |
| • | By delivering OMS201 locally and only during the uroendoscopic procedure, systemic absorption of the APIs will be minimized or avoided, thereby reducing the risk of adverse side effects. |
Development Plan. We are conducting a Phase 1
clinical trial evaluating the safety and systemic absorption of
OMS201 added to standard irrigation solution and delivered to
patients undergoing UAS-assisted ureteroscopy for removal of
ureteral or renal stones. In addition, to assist in designing
the Phase 2 clinical protocol, we are evaluating efficacy
endpoints of postoperative pain and lower urinary tract
symptoms, as well as the size of the UAS that can be used during
the procedure.
Preclinical Study Results —
Efficacy. Preclinical studies demonstrated the
benefits of delivering OMS201 locally in multiple models of
urological inflammation and smooth muscle contractility,
including inhibition of pro-inflammatory mediators caused by
tissue trauma, reduction of ureteral and bladder contractility
and improvement of other bladder function parameters. The
anti-inflammatory API in OMS201 was shown to inhibit the
production of the pro-inflammatory mediator
PGE2
in a porcine model of ureteroscopy and in rat models of bladder
trauma. The smooth muscle relaxant API in OMS201 was shown to
inhibit bladder tissue contractility induced by a variety of
pro-inflammatory mediators and to fully inhibit wave-like
contractions, or peristalsis, in porcine ureters. The
anti-inflammatory API in OMS201 had no significant effect on
porcine ureteral peristalsis while the smooth muscle relaxant
API in OMS201 had no significant inhibitory effect on
PGE2
production, thereby demonstrating the distinct pharmacologic
activities of the two APIs in urological models.
Preclinical Study Results — Safety.
We also evaluated OMS201 for potential toxicity in a
large mammal study consisting of both ureteral and bladder
irrigation. In this urological toxicity study, OMS201,
administered at concentrations ten-fold greater than those
anticipated to be used clinically, demonstrated no local or
systemic toxicity.
Intellectual Property. OMS201 is protected by
our PharmacoSurgery patent portfolio. The relevant patents and
patent applications in this portfolio cover combinations of
agents, generic
and/or
proprietary to us or others, drawn from therapeutic classes such
as pain and inflammation inhibitory agents and spasm inhibitory
agents, delivered locally and intra-operatively to the site of
medical or surgical procedures, including uroendoscopy. We
currently own three issued U.S. Patents, two pending
U.S. Patent Applications, and nine issued patents and 15
pending patent applications in key foreign markets that cover
OMS201.
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MASP-2
Program
A discovery by researchers at the University of Leicester led to
the identification of mannan-binding lectin-associated serine
protease-2, or MASP-2, a novel pro-inflammatory protein target
in the complement system. We hold worldwide exclusive licenses
to rights related to MASP-2, the antibodies targeting MASP-2 and
the therapeutic applications for those antibodies from the
University of Leicester and from its collaborator, Medical
Research Council at Oxford University. MASP-2 is a key protein
involved in activation of the complement system, which is an
important component of the immune system. The complement system
plays a role in the inflammatory response and becomes activated
as a result of tissue damage or trauma or microbial pathogen
invasion. MASP-2 appears to be unique to, and required for the
function of, one of the principal complement activation
pathways, known as the lectin pathway. Importantly, inhibition
of MASP-2 does not appear to interfere with the
antibody-dependent classical complement activation pathway,
which is a critical component of the acquired immune response to
infection, and its abnormal function is associated with a wide
range of autoimmune disorders.
In our MASP-2 program, we are developing MASP-2 antibody
therapies to treat disorders caused by complement-activated
inflammation. We have completed a series of in vivo studies
using proprietary MASP-2 knock-out mice in established models of
disease previously linked to activation of the complement
system. We evaluated the role of MASP-2 in wet age-related
macular degeneration, or wet AMD, using a mouse model of
laser-induced choroidal neovascularization, or CNV. CNV refers
to the growth of blood vessels into the light-sensing cell
layers of the eye and is a pathologic event underlying the
severe vision loss associated with wet AMD. In comparison to
wild-type control mice, MASP-2 knock-out mice displayed an
approximately 30% reduction in CNV, and levels of vascular
endothelial growth factor, or VEGF, were significantly increased
in the wild-type mice following laser-induced injury but
remained at low levels in MASP-2 knock-out mice. Our findings
suggest that antibody-blockade of MASP-2 may have a preventive
or therapeutic effect in the treatment of wet AMD, and that
MASP-2 may play an important role in the induction of
intraocular VEGF following complement activation.
Another set of studies evaluated the role of MASP-2 in
ischemia-reperfusion injury. Ischemia is the interruption of
blood flow to tissue, and reperfusion of the ischemic tissue
results in inflammation and oxidative stress leading to tissue
damage. Ischemia-reperfusion injury occurs, for example,
following myocardial infarction, coronary artery bypass
grafting, aortic aneurysm repair, stroke, organ transplantation
or gastrointestinal vascular injury. In a mouse model of
myocardial ischemia-reperfusion injury, we compared the outcomes
of coronary artery occlusion followed by reperfusion in both
MASP-2 knock-out mice and wild-type mice. The MASP-2 knock-out
mice displayed a statistically significant reduction in
myocardial tissue injury versus the wild-type mice, indicating a
protective effect from myocardial ischemia-reperfusion damage in
the MASP-2 knock-out mice in this model. An additional study in
a model of renal ischemia-reperfusion injury also demonstrated a
protective effect in MASP-2 knock-out mice. Promising data were
also obtained in a mouse model of rheumatoid arthritis. We are
continuing to evaluate the role of MASP-2 in other
complement-mediated
disorders.
MASP-2 is generated by the liver and is then released into the
circulation. Adult humans who are genetically deficient in one
of the proteins that activate MASP-2 do not appear to be
detrimentally affected by the deficiency. Therefore, we believe
that it may be possible to deliver anti-MASP-2 antibodies
systemically. We have undertaken the development of anti-MASP-2
antibodies and expect to select a clinical product candidate in
2008. Working with an external antibody development company
under license for research use, we have generated several fully
human anti-MASP-2 antibody fragments, or Fab2s, that show high
affinity for
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MASP-2. We demonstrated functional blockade of the lectin
complement activation pathway in normal human serum by several
of these human Fab2s with picomolar potency.
Figure 1:
Mouse Retinal Tissue in Laser-Induced Macular
Degeneration
Figure 1 depicts that the MASP-2
knock-out mice displayed an approximately 30% reduction in the
area of CNV, a significant pathological component of wet
AMD, compared to wild-type control mice seven days following
laser-induced damage. Figure 1 also shows that VEGF levels were
significantly increased in the wild-type mice three days
following laser-induced injury but remained at baseline levels
in MASP-2 knock-out mice. Anti-VEGF therapy is a clinically
proven treatment for wet AMD, and the absence of any significant
VEGF induction indicates that MASP-2 activity is a prerequisite
for VEGF induction following laser-induced injury, suggesting
that blockade of MASP-2 may inhibit VEGF induction in AMD. The
reduction in CNV and VEGF in the MASP-2 knock-out mice compared
to wild-type mice suggests that blockade of MASP-2 may have a
preventive or therapeutic effect in the treatment of macular
degeneration.
Chondroprotective
Program
In our Chondroprotective program, we are developing drug
therapies to treat cartilage disorders, such as osteoarthritis
and rheumatoid arthritis. While cartilage health requires a
balance between cartilage breakdown and synthesis, current drugs
approved for the treatment of arthritis are focused only on
inhibiting breakdown. Our drug therapies in development combine
an inhibitor of cartilage breakdown with an agent that promotes
cartilage synthesis. We believe that our issued and pending
patents broadly cover any drug inhibiting cartilage breakdown,
including those drugs already approved, in combination with any
promoter of cartilage synthesis to treat cartilage disorders. We
are conducting in vitro and in vivo preclinical studies to
evaluate API combinations of cartilage breakdown inhibitors and
cartilage synthesis promoters.
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Figure 1: Effects
of IL-1, IL-1Ra and IGF on Col2 Production
Figure 1 demonstrates that the combination of an anabolic growth
factor,
IGF-1, and a
catabolic inhibitor,
IL-1
receptor antagonist, or IL-1Ra, may be more effective than
either agent alone at restoring normal matrix homeostasis to an
arthritic joint. Treatment of primary bovine chondrocytes with
IGF-1 increased the production of type II collagen, or
Col2, one of the major components of the cartilage matrix.
However, IL-1, an inflammatory cytokine whose expression is
elevated in the arthritic joint, completely blocked this
anabolic effect of IGF-1. The addition of IL-1Ra restored the
ability of IGF-1 to stimulate Col2 production, even in the
presence of IL-1. Also shown in Figure 1 are examples of classes
of cartilage synthesis promoters and cartilage breakdown
inhibitors covered by our issued and pending patents.
Central Nervous
System Programs
PDE10
Program
We are developing compounds that inhibit PDE10 for the treatment
of schizophrenia. PDE10 is an enzyme that is expressed in areas
of the brain strongly linked to schizophrenia and other
psychotic disorders and has been recently identified as a target
for the development of anti-psychotic therapeutics. In multiple
animal models of psychotic behavior, PDE10 inhibitors have been
shown to be as effective as current anti-psychotic drugs. In
addition, results from preclinical studies suggest that PDE10
inhibitors may address the limitations of currently used
anti-psychotic drugs by avoiding the associated weight gain and
improving cognition.
We have synthesized a series of chemical classes yielding
multiple proprietary compounds that demonstrate promising
preclinical results in pharmacokinetic, pharmacodynamic and
behavioral studies. We are in late-stage optimization and plan
to select a clinical product candidate once the appropriate
preclinical profile is achieved. Our preclinical development is
supported by funds from The Stanley Medical Research Institute,
a non-profit corporation that supports research on the causes
and treatment of schizophrenia and bipolar disorder.
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Figure 1:
Preclinical Efficacy Studies of one of our PDE10
Compounds
Figure 1 demonstrates that administration of one of our
PDE10 inhibitors, N179249, in mice treated with phencyclidine,
or PCP, improved the response in the prepulse inhibition test,
one of the commonly used assays that assess neuronal gating, a
process known to be deficient in schizophrenia patients and to
be improved by currently used antipsychotic drugs.
GPCR
Program
We have scientific expertise in the field of G protein-coupled
receptors, or GPCRs, and members of our scientific team were the
first to identify and characterize the full family of all 357
GPCRs common to mice and humans, with the exception of those
GPCRs linked to smell, taste and pheromone functions. Located in
the brain and in peripheral tissues, GPCRs are involved in
numerous physiological processes, including the regulation of
the nervous system, metabolism, behavior, reproduction,
development and hormonal homeostasis.
We have identified a subset of GPCRs expressed exclusively or
preferentially in brain regions involved in the regulation of
specific behaviors and, using our patented viral vector, have
created 61 strains of knock-out mice over five years, each
lacking one of these GPCRs. We have the capability to run a
battery of behavioral assays, including 30 tests assessing ten
different behaviors, to elucidate the specific role of GPCRs.
Using our expertise in GPCRs, these behavioral assays and
available libraries of compounds, we have discovered what we
believe to be previously unknown links between specific
molecular targets in the brain and a series of CNS disorders. We
have filed corresponding patent applications and are developing
compounds to treat several of these disorders.
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Figure 1:
Our GPCR Discovery Platform
Figure 1 depicts our in-house discovery platform, which
involves target discovery, compound discovery and preclinical
development. We first identify those GPCRs with favorable
profiles and eliminate the corresponding gene in mice. These
knock-out mice are then evaluated through a battery of tests to
identify GPCRs linked to CNS disorders. GPCRs of interest are
subjected to assay development and high-throughput screening
with small molecule libraries to identify compounds as potential
clinical candidates. Identified compounds are then optimized in
order to select clinical candidates.
Our Other CNS
Programs
In our other CNS programs, we have discovered what we believe to
be previously unknown links between specific molecular targets
and a series of CNS disorders. We have filed patent applications
directed to our discoveries broadly claiming any agents that act
at these molecular targets for use in the treatment of these CNS
disorders. Based on promising preclinical data in animal models,
we are developing compounds for several of these disorders.
Sales and
Marketing
We have retained all marketing and distribution rights to our
product candidates and programs, which provides us the
opportunity to market and sell any of our product candidates
independently, make arrangements with third parties to perform
these services for us, or both. For the commercial launch of our
lead product candidate, OMS103HP, we intend to build an internal
sales and marketing organization to market OMS103HP in North
America and rely on third parties to perform these services for
us in markets outside of North America. Because OMS103HP, if
approved, will be used principally by surgeons in hospital-based
and free-standing ambulatory surgery centers, we believe that
commercializing OMS103HP will only require a limited sales and
marketing force.
We expect that an OMS103HP sales and marketing force is
potentially scalable for both of our other PharmacoSurgery
product candidates, OMS302 and OMS201. For the sales and
marketing of other product candidates, we generally expect to
retain marketing and
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distribution rights in those for which we believe that it will
be possible to access markets through an internal sales and
marketing force. If we do not believe that we can
cost-effectively access markets for any approved product
candidate through an internal sales and marketing force, we
expect that we will make arrangements with third parties to
perform these services for us.
Manufacturing
We utilize both in-house capabilities and outside contract
manufacturers to produce sufficient quantities of product
candidates for use in preclinical studies. We have laboratories
in-house for analytical method development, bioanalytical
testing, formulation, stability testing and small-scale
compounding of laboratory supplies of product candidates, which
need not be manufactured in compliance with current Good
Manufacturing Practices, or cGMPs.
We rely on third-party manufacturers to produce, store and
distribute our product candidates for clinical use and currently
do not own or operate manufacturing facilities. We require that
these manufacturers produce APIs and finished drug products in
accordance with cGMP and all other applicable laws and
regulations. We anticipate that we will rely on contract
manufacturers to develop and manufacture our products for
commercial sale. We maintain agreements with potential and
existing manufacturers that include confidentiality and
intellectual property provisions to protect our proprietary
rights related to our product candidates.
We contracted with Catalent Pharma Solutions, Inc. to
manufacture three registration batches of OMS103HP in
freeze-dried, or lyophilized, form. Ongoing stability programs
for these batches will be used to support the planned filing of
a New Drug Application, or NDA, for OMS103HP. Sufficient
quantities of lyophilized OMS103HP have been manufactured to
support the ongoing Phase 3 clinical program through completion.
We have received guidance from the FDA that submission of three
months of stability data from one registration batch of
lyophilized OMS103HP would be sufficient to qualify any other
facility for commercial manufacturing purposes.
We have also formulated OMS103HP as a liquid solution to take
advantage of the reduced cost of goods for manufacturing a
liquid as compared to a lyophilized drug product. We have
entered into agreements with Hospira Worldwide, Inc., pursuant
to which Hospira has agreed to manufacture a registration batch
of liquid OMS103HP at its facility in McPherson, Kansas, and to
manufacture and supply commercial supplies of liquid OMS103HP,
if approved for marketing. Although we do not believe that the
inactive ingredients in liquid OMS103HP, which are included in
the FDA’s Inactive Ingredient Guide due to being present in
drug products previously approved for parenteral use, impact its
safety or effectiveness, the FDA will require us to provide
comparative information and complete a stability study and may
require us to conduct additional studies, which we expect would
be non-clinical, to demonstrate that liquid OMS103HP is as safe
and effective as lyophilized OMS103HP. The manufacturing
facilities of Hospira have been inspected and approved by the
FDA for the commercial manufacture of several third-party drug
products.
We utilize three suppliers for the three APIs used in OMS103HP.
We have not yet signed commercial agreements with these
suppliers for the supply of commercial quantities of these APIs,
although we intend to do so. Given the large amount of these
APIs manufactured annually by these and other suppliers, we
anticipate that we will be capable of attaining our commercial
API supply needs for OMS103HP.
We have contracted with Althea Technologies, Inc. for the
manufacture, release testing, and stability testing of clinical
supplies of OMS302 and OMS201. The APIs included in OMS302 and
OMS201 are available from commercial suppliers.
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We plan to enter into an agreement for the generation of a
potential anti-MASP-2 monoclonal antibody product candidate in
2008 and are evaluating proposals from several antibody
developers for this purpose. Thereafter we intend to enter into
an agreement with a third-party contract manufacturer for the
scale-up and production of an anti-MASP-2 monoclonal antibody
product candidate for clinical testing and commercial supply.
Competition
The pharmaceutical industry is highly competitive and
characterized by a number of established, large pharmaceutical
companies, as well as smaller companies like ours. If our
competitors market products that are less expensive, safer or
more effective than any future products developed from our
product candidates, or that reach the market before our approved
product candidates, we may not achieve commercial success. We
are not aware of any products that directly compete with our
PharmacoSurgery product candidates that are approved for
intra-operative delivery in irrigation solutions during surgical
procedures. If approved, we expect that the primary constraint
to market acceptance of our PharmacoSurgery product candidates
will be surgeons who continue with their respective current
treatment practices and do not adopt the use of these product
candidates. Adoption of our PharmacoSurgery product candidates,
if approved, may reduce the use of current preoperative and
postoperative treatments.
Our preclinical product candidates may face competing products.
For example, we are developing PDE10 inhibitors for use in the
treatment of schizophrenia. Other pharmaceutical companies, many
with significantly greater resources than us, are also
developing PDE10 inhibitors for the treatment of schizophrenia
and these companies may be further along in development.
We expect to compete with other pharmaceutical and biotechnology
companies, and our competitors may:
| • | develop and market products that are less expensive, more effective or safer than our future products; | |
| • | commercialize competing products before we can launch any products developed from our product candidates; | |
| • | operate larger research and development programs, possess greater manufacturing capabilities or have substantially greater financial resources than we do; | |
| • | initiate or withstand substantial price competition more successfully than we can; | |
| • | have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent; | |
| • | more effectively negotiate third-party licenses and strategic relationships; and | |
| • | take advantage of acquisition or other opportunities more readily than we can. |
We expect to compete for market share against large
pharmaceutical and biotechnology companies, smaller companies
that are collaborating with larger pharmaceutical companies, new
companies, academic institutions, government agencies and other
public and private research organizations. In addition, the
pharmaceutical and biotechnology industry is characterized by
rapid technological change. Because our research approach
integrates many technologies, it may be difficult for us to
remain current with the rapid changes in each technology. If we
fail to stay at the forefront of technological change, we may be
unable to compete effectively. Our competitors may render our
technologies obsolete by advancing their existing technological
approaches or developing new or different approaches.
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Intellectual
Property
We have made a significant investment in the development of a
patent portfolio to protect our technologies and programs, and
intend to continue to do so. We own a total of 21 issued or
allowed patents and 28 pending patent applications in the United
States and 60 issued or allowed patents and 86 pending patent
applications in commercially significant foreign markets
directed to therapeutic compositions and methods related to our
PharmacoSurgery platform and preclinical development programs.
We also hold worldwide exclusive licenses to four pending
U.S. Patent applications, an issued foreign patent and six
pending foreign patent applications.
Our patent portfolio for our PharmacoSurgery technology is
directed to locally delivered compositions and treatment methods
using agents selected from broad therapeutic classes. These
patents cover combinations of agents, generic
and/or
proprietary to us or others, delivered locally and
intra-operatively to the site of any medical or surgical
procedure. Our patent portfolio includes 14 U.S. and 40
foreign issued or allowed patents, and 12 U.S. and 33
foreign pending patent applications, directed to our
PharmacoSurgery product candidates and development programs. Our
issued PharmacoSurgery patents have terms that will expire
December 12, 2014 and, assuming issuance of currently
pending patent applications, October 20, 2019 for OMS103HP,
July 30, 2023 for OMS302 and March 17, 2026 for
OMS201, which potentially may be extended as a result of
adjustment of patent terms resulting from USPTO delays. We will
file additional patent applications directed to our specific
drug products which, if issued, are expected to provide patent
terms ending 2029 or later.
Our initial issued patents in our PharmacoSurgery portfolio are
directed to combinations of agents, drawn from therapeutic
classes such as pain and inflammation inhibitory agents, spasm
inhibitory agents, restenosis inhibitory agents and tumor cell
adhesion inhibitory agents. We expanded and further strengthened
our initial patent position with a series of patent applications
directed to what we believe are the key physiological and
technical elements of selected surgical procedures, and to the
therapeutic classes that provide opportunities to improve
clinical benefit during and after these procedures. Accordingly,
our pending PharmacoSurgery patent applications are directed to
combinations of agents, drawn from therapeutic classes such as
pain and inflammation inhibitory agents, spasm inhibitory
agents, vasoconstrictive agents, mydriatic agents and agents
that reduce intraocular pressure, that are preferred for use in
arthroscopic procedures, ophthalmologic procedures including
intraocular procedures, and urologic procedures including
ureteroscopy, for OMS103HP, OMS302 and OMS201, respectively, as
well as covering the specific combinations of agents included in
each of these product candidates.
| • | OMS103HP — Arthroscopy. OMS103HP is protected by our PharmacoSurgery patent portfolio. The relevant patents and patent applications in this portfolio cover combinations of agents, generic and/or proprietary to us or others, drawn from therapeutic classes such as pain and inflammation inhibitory agents and vasoconstrictive agents, delivered locally and intra-operatively to the site of medical or surgical procedures, including arthroscopy. We currently own four issued U.S. Patents, two pending U.S. Patent Applications, and 11 issued patents and nine pending patent applications in key foreign markets that cover OMS103HP. |
| • | OMS302 — Ophthalmology. OMS302 is protected by our PharmacoSurgery patent portfolio. The relevant patents and patent applications in this portfolio cover combinations of agents, generic and/or proprietary to us or others, drawn from therapeutic classes such as pain and inflammation inhibitory agents, mydriatic agents and agents that reduce intraocular pressure, delivered locally and intra-operatively to the site of ophthalmological procedures, including cataract and lens replacement surgery. We currently own two |
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| pending U.S. Patent Applications and six pending patent applications in key foreign markets that cover OMS302. |
| • | OMS201 — Urology. OMS201 is protected by our PharmacoSurgery patent portfolio. The relevant patents and patent applications in this portfolio cover combinations of agents, generic and/or proprietary to us or others, drawn from therapeutic classes such as pain and inflammation inhibitory agents and spasm inhibitory agents, delivered locally and intra-operatively to the site of medical or surgical procedures, including uroendoscopy. We currently own three issued U.S. Patents, two pending U.S. Patent Applications, and an additional nine issued patents and 15 pending patent applications in key foreign markets that cover OMS201. | |
| • | MASP-2 Program. We hold worldwide exclusive licenses to rights in connection with MASP-2, the antibodies targeting MASP-2 and the therapeutic applications for those antibodies from the University of Leicester and from its collaborator, Medical Research Council at Oxford University. These licenses include what we believe to be each institution’s joint ownership rights in patent applications and patents related to MASP-2 antibodies initially filed by researchers at Aarhus Universitet, Denmark. We currently exclusively control three pending U.S. Patent Applications, one pending International PCT Patent Application and seven pending patent applications in key foreign markets related to our MASP-2 program. | |
| • | Chondroprotective Program. We are building intellectual property protection around developments in our Chondroprotective program. We currently own one issued U.S. Patent, two pending U.S. Patent Applications, and an additional three issued patents and 19 pending patent applications in key foreign markets directed to our chondroprotective technology. These patent applications include claims that are broadly directed to combinations of one or more agents that inhibit cartilage breakdown, or catabolic inhibitory agents, with one or more agents that promote cartilage growth, or anabolic agents. | |
| • | PDE10 Program. Medicinal chemistry developments in our PDE10 program have resulted in a pending U.S. and a pending International Patent Cooperation Treaty, or PCT, Patent Application that claim what we believe to be novel chemical structures, as well as claiming the use of a broader set, or genus, of chemical structures as inhibitors of PDE10 for the treatment of schizophrenia and other psychotic disorders. | |
| • | GPCR Program. We own one issued U.S. Patent, three pending U.S. Patent Applications, one international PCT Patent Application and an additional two issued patents and four pending patent applications in key foreign markets, which are directed to previously unknown links between specific molecular targets in the brain and a series of CNS disorders, and to research tools that are used in our GPCR program. | |
| • | Our Other CNS Programs. We own and exclusively control three pending U.S. Patent Applications and four pending foreign patent applications that are directed to additional preclinical CNS programs. We intend to file additional patent applications in the United States and key foreign markets directed to what we believe to be previously unknown links between specific molecular targets and a series of CNS disorders, broadly claiming any agents that act at these molecular targets for use in the treatment of these CNS disorders. |
All of our employees enter into our standard Employee
Proprietary Information and Inventions Agreement, which includes
confidentiality provisions and provides us ownership of all
inventions and other intellectual property made by our employees
that pertain to our business or that relate to our
employees’ work for us or result from the use of our
resources. Our commercial success will depend in part on
obtaining and maintaining patent protection and trade secret
protection of the use, formulation and structure of our product
candidates,
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and the methods used to manufacture them, as well as
successfully defending these patents against third-party
challenges. Our ability to protect our product candidates from
unauthorized making, using, selling, offering to sell or
importing by third parties is dependent on the extent to which
we have rights under valid and enforceable patents that cover
these activities.
The patent positions of pharmaceutical, biotechnology and other
life sciences companies can be highly uncertain and involve
complex legal and factual questions for which important legal
principles remain unresolved. No consistent policy regarding the
breadth of claims allowed in biotechnology patents has emerged
to date in the United States, and tests used for determining the
patentability of patent claims in all technologies are in flux.
The pharmaceutical, biotechnology and other life sciences patent
situation outside the United States is even more uncertain.
Changes in either the patent laws or in interpretations of
patent laws in the United States and other countries may
diminish the value of our intellectual property. Accordingly, we
cannot predict the breadth of claims that may be allowed or
enforced in the patents that we own or have licensed or in
third-party patents.
Government
Regulation
Government authorities in the United States and other countries
extensively regulate, among other things, the research,
development, testing, manufacture, labeling, promotion,
advertising, distribution, marketing, and export and import of
drug products such as those we are developing. Failure to comply
with applicable requirements, both before and after approval,
may subject us, our third-party manufacturers, and other
partners to administrative and judicial sanctions, such as a
delay in approving or refusal to approve pending applications,
warning letters, product recalls, product seizures, civil and
other monetary penalties, total or partial suspension of
production or distribution, injunctions,
and/or
criminal prosecutions.
In the United States, our products are regulated by the FDA as
drugs under the Federal Food, Drug, and Cosmetic Act, or the
FDCA, and implementing regulations. Before our drug products may
be marketed in the United States, each must be approved by the
FDA. Our product candidates are in various stages of testing and
none have been approved.
The steps required before a drug product may be approved by the
FDA generally include the following:
| • | preclinical laboratory and animal tests, and formulation studies; | |
| • | submission to the FDA of an Investigational New Drug Application, or IND, for human clinical testing, which must become effective before human clinical trials may begin in the United States; | |
| • | adequate and well-controlled human clinical trials to establish the efficacy and safety of the product candidate for each indication for which approval is sought; | |
| • | submission to the FDA of a New Drug Application, or NDA; | |
| • | satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with cGMP; and | |
| • | FDA review and approval of an NDA. |
Preclinical Tests. Preclinical tests include
laboratory evaluations of product chemistry, toxicity,
formulation, and stability, as well as animal studies to assess
the potential efficacy and safety of the product candidate. The
results of the preclinical tests, together with manufacturing
information, analytical data, and other available information
are submitted to the FDA as part of an IND.
The IND Process. An IND must become effective
before human clinical trials may begin. An IND will
automatically become effective 30 days after receipt by the
FDA, unless before that time
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the FDA raises concerns or questions and imposes a clinical
hold. In such a case, the IND sponsor and the FDA must resolve
any outstanding FDA concerns or questions before clinical trials
can proceed. There can be no assurance that submission of an IND
will result in FDA authorization to commence clinical trials.
Once an IND is in effect, the protocol for each clinical trial
to be conducted under the IND must be submitted to the FDA,
which may or may not allow the trial to proceed.
Clinical Trials. Clinical trials involve the
administration of the investigational drug to human subjects
under the supervision of qualified personnel. Clinical trials
are conducted under protocols detailing, for example, the
parameters to be used in monitoring patient safety, and the
efficacy criteria, or end points, to be evaluated. Each trial
must be reviewed and approved by an independent Institutional
Review Board or Ethics Committee before it can begin. Clinical
trials are typically conducted in three defined phases, but the
phases may overlap or be combined:
| • | Phase 1 usually involves the initial administration of the investigational drug product to human subjects to evaluate its safety, dosage tolerance, pharmacodynamics and, if possible, to gain an early indication of its effectiveness. | |
| • | Phase 2 usually involves trials in a limited patient population, with the disease or condition for which the product candidate is being developed, to evaluate dosage tolerance and appropriate dosage, identify possible adverse side effects and safety risks, and preliminarily evaluate the effectiveness of the drug for specific indications. | |
| • | Phase 3 trials usually further evaluate effectiveness and test further for safety by administering the drug in its final form in an expanded patient population. |
We, our product development partners, or the FDA may suspend
clinical trials at any time on various grounds, including a
belief that the subjects are being exposed to an unacceptable
health risk.
The NDA Process. If the necessary clinical
trials are successfully completed, the results of the
preclinical trials and the clinical trials, together with other
detailed information, including information on the manufacture
and composition of the product, are submitted to the FDA in the
form of an NDA requesting approval to market the product for one
or more indications. Before approving an NDA, the FDA usually
will inspect the facility(ies) at which the product is
manufactured, and will not approve the product unless it finds
that cGMP compliance is satisfactory. If the FDA determines the
NDA is not acceptable, the FDA may outline the deficiencies in
the NDA and often will request additional information.
Notwithstanding the submission of any requested additional
testing or information, the FDA ultimately may decide that the
application does not satisfy the criteria for approval. After
approval, certain changes to the approved product, such as
adding new indications, manufacturing changes, or additional
labeling claims will require submittal of a new NDA or, in some
instances, an NDA supplement, for further FDA review and
approval. Post-approval marketing of products in larger patient
populations than were studied during development can lead to new
findings about the safety or efficacy of the products. This
information can lead to a product sponsor’s requesting
approval for
and/or the
FDA requiring changes in the labeling of the product or even the
withdrawal of the product from the market. The testing and
approval process requires substantial time, effort, and
financial resources, and we cannot be sure that any approval
will be granted on a timely basis, if at all.
Some of our drug products may be eligible for submission of
applications for approval under the Section 505(b)(2)
process. Section 505(b)(2) applications may be submitted
for drug products that represent a modification, such as a new
indication or new dosage form, of a previously approved drug.
Section 505(b)(2) applications may rely on the FDA’s
previous findings for the safety and effectiveness of the
previously approved drug as well as
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information obtained by the 505(b)(2) applicant to support the
modification of the previously approved drug. Preparing
Section 505(b)(2) applications may be less-costly and
time-consuming than preparing an NDA based entirely on new data
and information.
The FDA regulates certain of our candidate products as
combination drugs under its Combination Drug Policy because they
are comprised of two or more active ingredients. The FDA’s
Combination Drug Policy requires that we demonstrate that each
active ingredient in a drug product contributes to the
product’s effectiveness.
In addition, we, our suppliers, and our contract manufacturers
are required to comply with extensive FDA requirements both
before and after approval. For example, we are required to
report certain adverse reactions and production problems, if
any, to the FDA, and to comply with certain requirements
concerning advertising and promotion for our products. Also,
quality control and manufacturing procedures must continue to
conform to cGMP after approval, and the FDA periodically
inspects manufacturing facilities to assess compliance with
cGMP. Accordingly, manufacturers must continue to expend time,
money, and effort in all areas of regulatory compliance,
including production and quality control to comply with cGMP. In
addition, discovery of problems such as safety problems may
result in changes in labeling or restrictions on a product
manufacturer or NDA holder, including removal of the product
from the market.
Outside of the United States, our ability to market our products
will also depend on receiving marketing authorizations from the
appropriate regulatory authorities. The foreign regulatory
approval process includes similar requirements and many of the
risks associated with the FDA approval process described above.
The requirements governing marketing authorization and the
conduct of clinical trials vary widely from country to country.
Research and
Development
We have built a research and development organization that
includes expertise in discovery research, preclinical
development, product formulation, analytical and medicinal
chemistry, manufacturing, clinical development and regulatory
and quality assurance. We operate cross-functionally and are led
by an experienced research and development management team. We
use rigorous project management techniques to assist us in
making disciplined strategic research and development program
decisions and to limit the risk profile of our product pipeline.
We also access relevant market information and key opinion
leaders in creating target product profiles and, when
appropriate, as we advance our programs to commercialization.
Employees
As of December 31, 2007, we had 62 full-time employees, 50
of whom are in research and development and 12 of whom are in
finance, legal, and administration, including four with M.D.s
and 18 with Ph.D.s. None of our employees is represented by a
labor union and we consider our employee relations to be good.
Facilities
We lease approximately 13,200 square feet for our principal
administrative facility under a lease that expires
August 31, 2011, and we lease approximately
24,600 square feet for our research and development
facility, which includes a modern vivarium, under a lease that
expires September 30, 2011. Our two facilities are located
in separate buildings in Seattle, Washington. The annual lease
payments for these facilities, including common area maintenance
and related operating expenses, are approximately
$1.8 million.
Legal
Proceedings
We are not currently engaged in any material legal proceedings.
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Executive
Officers, Key Employees and Directors
The following table provides information regarding our current
executive officers, key employees and directors:
| Name |
Age
|
Position(s) | ||||
|
Executive Officers:
|
||||||
|
Gregory A. Demopulos, M.D.
|
48 | President, Chief Executive Officer, Chief Medical Officer and Chairman of the Board of Directors | ||||
|
Marcia S. Kelbon, Esq.
|
48 | Vice President, Patent and General Counsel and Secretary | ||||
|
Richard J. Klein
|
45 | Chief Financial Officer and Treasurer | ||||
|
Key Employees:
|
||||||
|
George A. Gaitanaris, M.D., Ph.D.
|
50 | Vice President, Science | ||||
|
Wayne R. Gombotz, Ph.D.
|
48 | Vice President, Pharmaceutical Operations | ||||
|
J. Greg Perkins, Ph.D.
|
62 | Vice President, Regulatory Affairs | ||||
|
Paul C. Strauss, M.D.
|
63 | Vice President, Clinical Development | ||||
|
Clark E. Tedford, Ph.D.
|
48 | Vice President, Research | ||||
|
Directors:
|
||||||
|
Ray Aspiri (2)
|
71 | Director | ||||
|
Thomas J. Cable (1)(2)
|
68 | Director | ||||
|
Peter A. Demopulos, M.D., FACC
|
53 | Director | ||||
|
Leroy E. Hood, M.D, Ph.D.
|
69 | Director | ||||
|
David A. Mann (1)
|
48 | Director | ||||
|
Jean-Philippe Tripet
|
44 | Director | ||||
| (1) | Member of our audit committee. | |
| (2) | Member of our compensation committee. | |
| (3) | Member of our nominating and corporate governance committee. |
Gregory A. Demopulos, M.D. is one of our founders
and has served as our president, chief executive officer, chief
medical officer and chairman of the board of directors since
June 1994. Prior to founding Omeros, Dr. Demopulos
completed his residency in orthopedic surgery at Stanford
University and his fellowship training at Duke University.
Dr. Demopulos is a named inventor on 19 issued and allowed
U.S. patents and 28 issued and allowed foreign patents.
Dr. Demopulos currently serves on the board of directors of
Onconome, Inc., a privately held company developing biomarkers
for early cancer detection. Dr. Demopulos received his M.D.
from the Stanford University School of Medicine and his B.S.
from Stanford University.
Marcia S. Kelbon, Esq. has served as our vice
president, patent and general counsel since October 2001 and as
our secretary since September 2007. Prior to joining us,
Ms. Kelbon was a partner with the firm of Christensen
O’Connor Johnson & Kindness, PLLC, where she
specialized in U.S. and international intellectual property
procurement, management, licensing and enforcement issues.
Ms. Kelbon received her J.D. and her M.S. in chemical
engineering from the University of Washington and her B.S. from
The Pennsylvania State University.
Richard J. Klein has served as our chief financial
officer since May 2007 and as our treasurer since September
2007. From 2004 to 2007, Mr. Klein provided financial
consulting services to life science and technology companies.
From 1996 to 2004, Mr. Klein served in various positions at
Sonus Pharmaceuticals, Inc., a publicly traded biotechnology
company, most recently as senior vice president and chief
financial officer. From 1988 to 1995, Mr. Klein
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was director of finance at ATL Ultrasound Inc., a publicly
traded manufacturer of medical ultrasound equipment that was
acquired by Phillips Medical Systems. Mr. Klein received
his B.S. in business administration from Washington State
University.
George A. Gaitanaris, M.D., Ph.D. has served as
our vice president, science since August 2006. From August 2003
to our acquisition of nura, inc. in August 2006,
Dr. Gaitanaris served as the chief scientific officer of
nura, a company that he co-founded and that developed treatments
for central nervous system disorders. From 2000 to 2003,
Dr. Gaitanaris served as president and chief scientific
officer of Primal, Inc., a biotechnology company that was
acquired by nura in 2003. Prior to co-founding Primal,
Dr. Gaitanaris served as staff scientist at the National
Cancer Institute. Dr. Gaitanaris received his Ph.D. in
cellular, molecular and biophysical studies and his M.Ph. and
M.A. from Columbia University in New York and his M.D. from the
Aristotelian University of Greece.
Wayne R. Gombotz, Ph.D. has served as our vice
president, pharmaceutical operations since March 2005. From 2002
to 2005, Dr. Gombotz served as vice president, process
science and pharmaceutical development at Corixa Corporation, a
company that developed immunotherapeutic products and which was
acquired by GlaxoSmithKline plc in July 2005. From 1995 to 2002,
Dr. Gombotz served as senior director, analytical chemistry
and formulation at Immunex Corporation, a company that developed
immunotherapeutic products and was acquired by Amgen, Inc. in
July 2002. Dr. Gombotz received his Ph.D. and M.S. in
bioengineering from the University of Washington and his B.A.
from Colby College.
J. Greg Perkins, Ph.D. has served as our vice
president, regulatory affairs since April 2006. From 2004 to
2005, Dr. Perkins served as president of Bioderm Sciences,
Inc., a company engaged in the development of wound management,
first aid and sports medicine products. From 1994 to 2004,
Dr. Perkins served in various positions at Solvay
Pharmaceuticals, Inc., a pharmaceutical company, most recently
as senior vice president, global scientific affairs and
milestone review. Dr. Perkins received his Ph.D. in
biochemistry and B.S. from Indiana University and completed a
postdoctoral fellowship in neurochemistry at the University of
Iowa.
Paul C. Strauss, M.D. has served as our vice
president, clinical development since August 2006. From 2003 to
2006, Dr. Strauss served as a consultant in the
pharmaceutical industry. From 2000 to 2003, Dr. Strauss
served in various positions at Pharmacia Corporation, a
pharmaceutical company that was acquired by Pfizer, Inc. in
April 2003, most recently as therapeutic area vice president
project leader — arthritis, inflammation, pain.
Dr. Strauss received his M.D. from the University of
Stellenbosch in South Africa and his specialist degree in
medical dermatology, internal medicine and dermatopathology from
the University of Cape Town.
Clark E. Tedford, Ph.D. has served as our vice
president, research since July 2003. From 2002 to 2003,
Dr. Tedford served as president and chief executive officer
of Solentix, Inc., a company that developed treatments for
disorders of the central nervous system and inflammatory
diseases. From 1993 to 2003, Dr. Tedford worked for
Gliatech Inc., a company that developed biosurgery and
pharmaceutical products, most recently as executive vice
president, research and development. Prior to Gliatech, Dr.
Tedford served in various positions at Schering Plough.
Dr. Tedford received his Ph.D. in pharmacology and his B.A.
from the University of Iowa and completed his post-doctoral work
in the Department of Pharmacology at the Loyola University
Medical School.
Ray Aspiri has served on our board of directors since
January 1995 and as our treasurer from January 1999 to September
2007. Mr. Aspiri is the chairman of the board of Tempress
Technologies, Inc., a research and development company
specializing in high-pressure fluid dynamics for the oil and gas
industry, which he joined in 1997. From 1980 to 1997,
Mr. Aspiri served as the chairman of the board and chief
executive officer of Tempress, Inc., a company specializing in
products for the truck, marine and sporting goods industries.
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Thomas J. Cable has served on our board of directors
since January 1995. Mr. Cable is the chairman of the board
of the Washington Research Foundation, a technology transfer and
early stage venture capital organization affiliated with the
University of Washington, which he co-founded in 1980.
Mr. Cable also founded Cable & Howse Ventures, a
venture capital firm, and Cable, Howse & Ragen, an
investment banking firm. Mr. Cable also co-founded
Montgomery Securities, an investment banking firm acquired by
Bank of America. A former U.S. Navy submarine officer,
Mr. Cable received his M.B.A. from the Stanford Graduate
School of Business and his B.A. from Harvard University.
Peter A. Demopulos, M.D., FACC has served on our
board of directors since January 1995. Dr. Demopulos is a
board certified cardiologist and the Medical Director at Seattle
Cardiology, a cardiology clinic he joined in 2005. From 1989 to
2005, Dr. Demopulos practiced cardiology at
Minor & James Medical PLLC. Dr. Demopulos is also
a clinical assistant professor of cardiology at the University
of Washington School of Medicine, a position that he has held
since 1989, and he participates as an investigator in clinical
trials evaluating interventional cardiology devices and drug
therapies at Seattle Cardiovascular Research and Swedish
Cardiovascular Research. Dr. Demopulos received his M.D.
from the Stanford University School of Medicine and his B.S.
from Stanford University.
Leroy E. Hood, M.D., Ph.D. has served on our
board of directors since March 2001. Dr. Hood is the
president of the Institute for Systems Biology, a non-profit
research institute dedicated to the study and application of
systems biology, which he co-founded in 2000. Previously,
Dr. Hood was founder and chairman of the Department of
Molecular Biotechnology at the University of Washington School
of Medicine. Dr. Hood also co-founded Amgen, Inc., Applied
Biosystems, Inc., Darwin Molecular Technologies, Inc., Rosetta
Inpharmatics, Inc. and SyStemix, Inc. Dr. Hood is a member
of the National Academy of Sciences, the American Philosophical
Society, the American Association of Arts and Sciences, the
Institute of Medicine and the National Academy of Engineering.
Dr. Hood received his Ph.D. and B.S. from the California
Institute of Technology and his M.D. from The John Hopkins
School of Medicine.
David A. Mann has served on our board of directors since
December 2007. From 1999 to 2002, Mr. Mann served as
executive vice president and chief financial officer at Immunex
Corporation. From 1995 to 1999, he served as vice president and
controller at Immunex. Prior to Immunex, Mr. Mann held the
position of controller at the Fred Hutchinson Cancer Research
Center from 1986 to 1995. Mr. Mann serves on the board of
directors of Trubion Pharmaceuticals, Inc., a biotechnology
company. He also serves on the Advisory Board of the Western
Washington University College of Business and Economics and the
Western Washington University Foundation Board. Mr. Mann
received an M.B.A. from the University of Washington and a B.A.
from Western Washington University. Mr. Mann received his
Certified Public Accountant Certification from the State of
Washington; however, he is no longer an active CPA.
Jean-Philippe Tripet has served on our board of directors
since September 2006. Mr. Tripet served on the board of
directors of nura, inc. from September 2003 to August 2006.
Mr. Tripet is the chairman and managing partner of Aravis
Venture, a venture capital firm that he founded in 2001.
Previously, Mr. Tripet served as executive vice president
of Lombard Odier & Cie, a commercial bank, where he
headed the Lombard Odier Immunology Fund, and as vice president
equity research of Union Bank of Switzerland. Mr. Tripet
received his degree in business administration from the
University of Geneva.
Board of
Directors
Our business and affairs are organized under the direction of
our board of directors, which currently consists of seven
members. The primary responsibilities of our board of directors
are to provide oversight, strategic guidance, counseling and
direction to our management. Our
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board of directors meets on a regular basis and additionally as
required. Our board of directors has determined that
Mr. Aspiri, Mr. Cable, Dr. Hood, Mr. Mann
and Mr. Tripet each meet NASDAQ requirements for
independence.
Effective upon the completion of this offering, our articles of
incorporation will provide for a classified board of directors
consisting of three classes of directors, each serving staggered
three-year terms, as follows:
| • | Class I, which will consist of , and , and whose term will expire at our first annual meeting of shareholders to be held following the completion of this offering; | |
| • | Class II, which will consist of , and , and whose term will expire at our second annual meeting of shareholders to be held following the completion of this offering; and | |
| • | Class III, which will consist of , and , and whose term will expire at our third annual meeting of shareholders to be held following the completion of this offering. |
At each annual shareholders meeting to be held after the initial
classification, the successors to directors whose terms then
expire will serve until the third annual meeting following their
election and until their successors are duly elected and
qualified.
The authorized size of our board is currently nine members. The
authorized number of directors may be changed only by resolution
of the board of directors. Any additional directorships
resulting from an increase in the number of directors will be
distributed between the three classes so that, as nearly as
possible, each class will consist of one-third of the directors.
This classification of the board of directors may have the
effect of delaying or preventing changes in our control or
management.
Peter A. Demopulos, M.D., FACC and Gregory A.
Demopulos, M.D. are brothers. There are no other family
relationships among any of our directors or executive officers.
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 has the composition and responsibilities described below
as of the completion of this offering.
Audit
Committee
The members of our audit committee are Mr. Cable and
Mr. Mann. Mr. Mann is the chairman of our audit
committee. Our board has determined that each member of our
audit committee meets current SEC and NASDAQ requirements for
independence. Our board of directors has also determined that
Mr. Mann is an “audit committee financial expert”
as defined in SEC rules. The audit committee is responsible for,
among other things:
| • | selecting and hiring our independent auditors, and approving the audit and non-audit services to be performed by our independent registered public accounting firm; | |
| • | evaluating the qualifications, performance and independence of our independent registered public accounting firm; | |
| • | monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters; | |
| • | reviewing with our independent registered public accounting firm and management significant issues that arise regarding accounting principles and financial statement |
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| presentation, and matters concerning the scope, adequacy and effectiveness of our financial controls; |
| • | reviewing the adequacy and effectiveness of our internal control policies and procedures; | |
| • | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters; | |
| • | reviewing and approving in advance any proposed related-party transactions and monitoring compliance with our code of business conduct and ethics; and | |
| • | preparing the audit committee report that the SEC requires in our annual proxy statement. |
Compensation
Committee
The members of our compensation committee are Ray Aspiri and
Thomas J. Cable. Mr. Aspiri is the chairman of our
compensation committee. Our board has determined that each
member of our compensation committee meets current NASDAQ
requirements for independence. The compensation committee is
responsible for, among other things:
| • | evaluating and recommending to our board of directors the compensation and other terms of employment of our executive officers and reviewing and approving corporate performance goals and objectives relevant to such compensation; | |
| • | evaluating and recommending to our board of directors the type and amount of compensation to be paid or awarded to board members; | |
| • | evaluating and recommending to our board of directors the equity incentive plans, compensation plans and similar programs advisable for us; | |
| • | administering our equity incentive plans; | |
| • | reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for our executive officers; and | |
| • | preparing the compensation committee report that the SEC requires in our annual proxy statement. |
Nominating and
Governance Committee
The members of our nominating and governance committee
are , and .
Mr.
is the chairman of our nominating and governance committee. Our
board has determined that each member of our nominating and
governance committee meets current NASDAQ requirements for
independence. The nominating and governance committee is
responsible for, among other things:
| • | assisting the board in identifying prospective director nominees and recommending director nominees to our board for each annual meeting of shareholders; | |
| • | evaluating nominations by shareholders of candidates for election to our board; | |
| • | recommending governance principles to our board; | |
| • | overseeing the evaluation of our board of directors and management; | |
| • | reviewing shareholder proposals for our annual meetings; | |
| • | evaluating proposed changes to our charter documents and board committee charters; | |
| • | reviewing and assessing our senior management succession plan; and | |
| • | recommending to our board the members for each board committee. |
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Compensation
Committee Interlocks and Insider Participation
None of the members of our compensation committee is an officer
or employee of our company. None of our executive officers
currently serves, or in the past year has served, as a member of
the board of directors or compensation committee of any entity
that has one or more executive officers serving on our board of
directors or compensation committee.
Non-Employee
Director Compensation
In the past, we have granted option awards to our non-employee
directors in consideration for serving on our board of
directors. We have not provided cash compensation to any
directors for serving on our board of director or committees of
our board of directors. We have reimbursed and will continue to
reimburse our non-employee directors for their reasonable
expenses incurred in attending meetings of our board of
directors and committees of our board of directors.
The following table sets forth summary information concerning
the type and total compensation paid or accrued for services
rendered to us in all capacities to our non-employee directors
for the fiscal year ended December 31, 2007.
2007 Director
Compensation
|
Option Awards |
Total |
|||||||
|
Name
|
($)(1) (2)(3) | ($) | ||||||
|
Ray Aspiri
|
— | — | ||||||
|
Thomas J. Cable
|
— | — | ||||||
|
Peter A. Demopulos, M.D.
|
— | — | ||||||
|
Leroy E. Hood, M.D, Ph.D.
|
— | — | ||||||
|
David A. Mann
|
* | * | ||||||
|
Jean-Philippe Tripet
|
— | — | ||||||
| (1) | Our directors did not receive any cash compensation during 2007. Amounts shown in this column represent the compensation cost for the year ended December 31, 2007 of option awards granted to each of our non-employee directors as determined in accordance with Statement of Financial Accounting Standards No. 123(revised), or SFAS 123R, using the Black-Scholes option valuation model. The assumptions used to calculate the value of option awards are set forth in Note 10 to our consolidated financial statements included elsewhere in this prospectus. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeiture related to service-based vesting conditions. | |
| (2) | During the year ended December 31, 2007, we granted to Mr. Mann an option award to purchase 25,000 shares of our common stock with an exercise price of $1.25 per share that vests over a three-year period in equal annual installments. This option award had a grant date fair value of $ *. | |
| (3) | As of December 31, 2007, Mr. Aspiri, Mr. Cable, Dr. Hood and Mr. Mann held option awards to purchase 30,000, 65,000, 50,000 and 25,000 shares of our common stock, respectively. All of these option awards, other than Mr. Mann’s option award as further described above in footnote 2, were fully vested and exercisable as of December 31, 2007. | |
| * | To be completed by amendment. |
Following the completion of this offering, all of our directors
will be eligible to participate in our 2008 Equity Incentive
Plan. For a more detailed description of these plans, see
“Management — Executive Compensation —
Employee Benefit Plans.”
Compensation
Discussion and Analysis
The compensation committee of our board of directors is
responsible for establishing and implementing our compensation
philosophy and programs for executive officers. The objectives
of our executive compensation program are to attract and retain
individuals with the
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skills necessary to help us achieve our business goals, to
reward those individuals who help us achieve those goals and to
align their interests with those of our shareholders by tying a
portion of executive compensation to shareholder value creation.
Executive compensation is comprised of the following elements:
base salary, annual merit increases, discretionary cash bonuses,
stock option awards, severance and change of control benefits,
and general benefits that are available to all full-time
employees. We do not have any policies for allocating
compensation among the elements of our executive compensation
program, nor is the level of one element of compensation
substantially dependent on the level of any other element of
compensation. However, while we must offer base salaries at
competitive rates to attract and retain individuals with the
skills necessary to achieve our business goals, we believe that
stock option awards are more effective than base salaries at
aligning the interests of our executive officers with those of
our shareholders. Our goal in setting executive compensation is
to motivate our executive officers to achieve our business
objectives and, as a result, stock option awards are an
important component of an executive’s overall compensation.
We determine the level for each element of compensation based on
the contributions that each executive officer has made and are
expected to make to our success, the experience and knowledge of
our management and members of our compensation committee, the
relative compensation paid to other members of our senior
management, general economic factors and executive compensation
surveys of, and public disclosures made by, biotechnology and
pharmaceutical companies that we believe are comparable to us
based on their location, stage of development and resources.
Historically, our compensation committee has conducted periodic
reviews of executive compensation. Upon completion of this
offering, our compensation committee intends to perform at least
annually a review of our executive officers’ compensation
to determine whether it meets the objectives of our executive
compensation program and to determine whether each element of
our executive compensation program is competitive with
comparable pharmaceutical and biotechnology companies.
The compensation of Gregory A. Demopulos, M.D., our
president, chief executive officer, chief medical officer and
chairman of the board of directors, has been determined by our
compensation committee. Dr. Demopulos does not participate
in the deliberations of the compensation committee regarding his
compensation, although he does participate in negotiations with
members of the compensation committee regarding his
compensation. The compensation of our other executive officers
has been determined by Dr. Demopulos in consultation with
our compensation committee, provided that our compensation
committee approves all stock option awards granted to executive
officers. We have not engaged third-party consultants with
respect to executive compensation matters but expect to do so in
the future. Upon completion of this offering, our compensation
committee will determine and review the compensation of our
executive officers with the input and advice of our chief
executive officer and other members of management; however, an
executive officer will not be present during portions of
meetings of the compensation committee at which his or her
compensation is discussed and approved. In addition, our
compensation committee will have the authority to engage
third-party consultants to assist it in determining the elements
and levels of our executive compensation program.
Base Salary. We fix the base salaries of our
executive officers at levels that we believe enable us to
attract and retain individuals with the skills necessary to
achieve our business goals and that we believe are competitive
with the base salaries paid by comparable pharmaceutical and
biotechnology companies.
Effective as of January 1, 2007, we increased
Dr. Demopulos’ annual base salary by $25,000 to
$475,000, an increase of 6%. We increased his base salary to
keep it at a level that is competitive with the base salary
levels of similar positions paid by comparable pharmaceutical
and biotechnology companies. The annual base salaries of Marcia
S. Kelbon, our vice
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president, patent and general counsel and Richard J. Klein, our
chief financial officer and treasurer, are currently $285,000
and $250,000, respectively. We believe that the base salaries of
Ms. Kelbon and Mr. Klein are competitive with the base
salaries paid by comparable pharmaceutical and biotechnology
companies to executive officers with similar positions and
experience.
Discretionary Cash Bonuses. We have from time
to time paid cash bonuses to reward performance achievements,
but we have not implemented any plan or policy for awarding cash
bonuses to our executive officers.
In 2007, as recognition of Dr. Demopulos’ leadership
and the role he has played in our business since our founding in
1994, we approved payments to Dr. Demopulos in the amount
of $278,000, which was approximately equal to the amount of
Dr. Demopulos’ indebtedness to us, and a tax
gross-up
amount related to these payments of $159,000. Dr. Demopulos
incurred this indebtedness to pay the exercise price of option
awards with terms of only five years that he exercised between
2002 and 2005. Dr. Demopulos repaid all of his indebtedness
to us in December 2007. In December 2007, we also approved a
payment to Dr. Demopulos in the amount of $2,000 as a tax
gross-up amount related to $3,500 in legal fees he incurred in
connection with the negotiation of his employment agreement. We
reimbursed Dr. Demopulos for these legal fees in 2007
pursuant to the terms of his prior employment agreement. We did
not pay cash bonuses to Ms. Kelbon or to Mr. Klein in
2007.
Option Awards. We grant option awards to our
executive officers as a means of aligning their interests with
shareholder value creation and to reward long-term performance.
In determining the size of grants of option awards to executive
officers, our compensation committee considers the current
equity ownership position of the executive officer, if any, the
option awards granted to other senior managers in comparable
positions both within our company and at comparable
pharmaceutical and biotechnology companies, and the expected
impact that the executive officer will have on meeting our
business goals and increasing shareholder value. Our option
awards to new employees vest over a four-year period beginning
on an employee’s start date, with 1/4th of the shares
vesting on the one-year anniversary of his or her start date and
1/48th of the total shares subject to the option award
vesting each month thereafter. In addition to option awards for
new employees, we typically grant additional options after an
employee has fully vested in all of his or her previously
granted option awards that generally vest ratably over
48 months beginning on or near the last vesting date of any
previously granted option awards. We have also granted option
awards to one of our executive officers with vesting tied to the
achievement of defined business goals.
Because we grant option awards to our executive officers with
exercise prices equal to the fair market value of our common
stock on the date of grant, our option awards are only valuable
to our executive officers if the price of our common stock
increases after the date of grant. Our board of directors has
historically determined the value of our common stock based on
the consideration of several factors applicable to common stock
of privately held companies including, among other things, the
prices of our convertible preferred stock sold to outside
investors, the rights of our convertible preferred stock
relative to those of our common stock, our financial position,
the status of our research and development efforts, our stage of
development and business strategy, the composition of our
management team, the market value of similar companies, the lack
of liquidity of our common stock and our likelihood of achieving
a liquidity event given prevailing market conditions. We do not
have any program, plan or obligation that requires us to grant
equity compensation on specified dates and, because we have not
been a public company, we have not made equity grants in
connection with the release or withholding of material
non-public information. As a public company, we intend to grant
equity awards at the closing public trading price of our common
stock on the date of the grant.
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To date, a substantial majority of our outstanding option awards
have been granted under our Second Amended and Restated 1998
Stock Option Plan and the nura, inc. 2003 Stock Option Plan.
Effective upon completion of this offering, we will only grant
option awards under our 2008 Equity Incentive Plan. Please see
“Management — Executive Compensation —
Employee Benefit Plans” for a description of these plans.
The 2008 Equity Incentive Plan will afford us greater
flexibility in granting to our executive officers and other
employees a wide variety of equity and equity-related awards,
including option awards, stock appreciation rights, restricted
stock awards, restricted stock units and performance units and
shares.
Upon joining us in May 2007, we granted Mr. Klein one
option award to purchase 250,000 shares of our common
stock, or the base award, and another option award to purchase
25,000 shares of our common stock, or the performance
award, each with an exercise price of $1.00 per share. The base
award vests over a four-year period beginning on his start date
with 1/4th of the shares subject to the base award vesting
on May 14, 2008 and 1/48th of the shares subject to
the base award vesting each month thereafter. The performance
award is not eligible to commence vesting unless by May 14,
2008, the one-year anniversary of Mr. Klein’s start
date, we close a public or private equity financing (1) in
which the number of shares of stock sold in the financing
represents no more than 20% of the shares of our stock
outstanding, on an as-converted basis, as of immediately
following the closing of the financing, in each case excluding
any shares of stock sold in an initial public offering to
underwriters to cover any over-allotments or (2) which
meets other parameters associated with such financing determined
by our board of directors. If we close a public or private
financing that meets either of those targets by May 14,
2008, the performance option will vest on the same schedule as
the base award. If we do not meet at least one of those targets
by May 14, 2008, the performance award will be
automatically cancelled. In determining the size of
Mr. Klein’s option awards, the compensation committee
reviewed option awards granted by comparable pharmaceutical and
biotechnology companies to chief financial officers and
determined that the size of Mr. Klein’s option awards
was competitive to the option awards granted by those comparable
companies.
In December 2007, our compensation committee granted option
awards to Dr. Demopulos, Ms. Kelbon and Mr. Klein
to purchase 200,000, 10,000 and 10,000 shares of our common
stock, respectively. Each of these grants has an exercise price
of $1.25 per share and vests over a four-year period, with
1/4th of the shares vesting on the one-year anniversary of
the grant date and 1/48th of the shares subject to the
award vesting each month thereafter. We granted these option
awards in connection with company-wide grants that we made to
all of our employees. The size of the option awards granted to
our executive officers were based on their positions and the
contributions that each of them has made to our business.
Severance and Change of Control Benefits. We
have entered into an employment agreement with
Dr. Demopulos that provides him severance benefits if we
terminate his employment without cause or if he terminates his
employment with us for good reason. In addition, pursuant to the
terms of our Second Amended and Restated 1998 Stock Option Plan,
all option awards granted under that plan to our executive
officers will accelerate as to 50% of the unvested shares upon a
change of control and 100% of the unvested shares if the
acquirer does not assume or replace an executive officer’s
option awards or if, within one year of the change of control,
an executive officer is terminated without cause or
constructively terminated. See “Management —
Executive Compensation — Potential Payment upon
Termination or Change in Control” below for a more detailed
description and quantification of all of these severance
benefits.
We believe that the severance and change of control benefits we
provide to Dr. Demopulos are competitive with the benefits
offered by comparable pharmaceutical and biotechnology companies
to chief executive officers and founders with
Dr. Demopulos’ tenure, experience and performance. In
addition, we believe that these benefits help us to retain
Dr. Demopulos
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because they mitigate some of the risks associated with working
at a smaller company like ours versus other less risky and
better cash remunerated job alternatives that Dr. Demopulos
may have. In addition, because of the significant acquisition
activity among pharmaceutical and biotechnology companies of our
size, the critical role that executive officers play in the
successful closing of an acquisition and the risk that an
executive officer’s employment will be terminated as part
of the acquisition, we believe that the change of control
benefits that we provide to our executive officers under our
Second Amended and Restated 1998 Stock Option Plan are necessary
to attract and retain qualified individuals to serve as
executive officers and to provide an incentive to contribute to
the successful completion of an acquisition.
General Benefits. Executive officers are
eligible to participate in all of our employee benefit plans,
such as medical, dental, vision, life and disability insurance
and our 401(k) plan, in each case on the same basis as other
employees, subject to applicable law. We also provide vacation
and other paid holidays to all employees, including our
executive officers, which are comparable to those provided at
peer companies.
Summary
Compensation Table
The following table shows all of the compensation awarded to,
earned by, or paid to our principal executive officer, principal
financial officer and our other executive officer for the year
ended December 31, 2007. The officers listed in the table
below are referred to in this prospectus as the “named
executive officers.”
2007 Summary
Compensation Table
|
Option |
All Other |
|||||||||||||||||||||||
|
Salary |
Bonus |
Awards |
Compensation |
Total |
||||||||||||||||||||
|
Name and Principal Position
|
Year | ($) | ($) | ($) (1) | ($) | ($) | ||||||||||||||||||
|
Gregory A. Demopulos, M.D.
|
2007 | 474,940 | 278,011 | * | (2) | 178,755 | (3) | * | ||||||||||||||||
|
President, Chief Executive Officer, Chief Medical Officer and
Chairman of the Board of Directors
|
||||||||||||||||||||||||
|
Marcia S. Kelbon, Esq.
|
2007 | 285,000 | — | * | 93 | * | ||||||||||||||||||
|
Vice President, Patent and General Counsel and Secretary
|
||||||||||||||||||||||||
|
Richard J. Klein
|
2007 | 157,091 | (4) | — | * | 77 | * | |||||||||||||||||
|
Chief Financial Officer and Treasurer
|
||||||||||||||||||||||||
| (1) | Amounts shown do not reflect compensation actually received by the named executive officers. Instead, the dollar amounts shown in this column represent the compensation cost for the year ended December 31, 2007 of option awards granted to each of our named executive officers as determined pursuant to SFAS 123R using the Black-Scholes option valuation model. The assumptions used to calculate the value of option awards are set forth in Note 10 to our consolidated financial statements included elsewhere in this prospectus. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeiture related to service-based vesting conditions. | |
| (2) | Represents $ * of compensation cost for the year ended December 31, 2007 of option awards granted and determined pursuant to SFAS 123R using the Black-Scholes option valuation model and $ * of stock compensation under a variable stock compensation arrangement as described in Note 12 to our consolidated financial statements included elsewhere in this prospectus. | |
| (3) | Includes (a) $159,457 of tax gross-up payments related to bonuses we paid to Dr. Demopulos during 2007 and (b) $17,161 in perquisites and other personal benefits, which included payments for medical malpractice insurance, parking expenses, legal fees, medical practice fees and travel expenses. | |
| (4) | Mr. Klein’s employment with us began in May 2007. His current annual base salary is $250,000. | |
| * | To be completed by amendment. |
Grant of
Plan-Based Awards Table
The following table shows certain information regarding grants
of plan-based awards to the named executive officers during the
year ended December 31, 2007. All option awards
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shown in the table below were granted pursuant to our Second
Amended and Restated 1998 Stock Option Plan.
2007 Grant of
Plan-Based Awards
|
All Other |
||||||||||||||||
|
Option Awards: |
||||||||||||||||
|
Number of |
Grant Date Fair |
|||||||||||||||
|
Securities |
Exercise or Base |
Value of Stock |
||||||||||||||
|
Underlying |
Price of Option |
and Option |
||||||||||||||
|
Options |
Awards |
Awards |
||||||||||||||
|
Name
|
Grant Date | (#) | ($/Share) | ($) | ||||||||||||
|
Gregory A. Demopulos, M.D.
|
12/30/07 | 200,000 | 1.25 | * | ||||||||||||
|
Marcia S. Kelbon, Esq.
|
12/30/07 | 10,000 | 1.25 | * | ||||||||||||
|
Richard J. Klein
|
5/14/07 | 250,000 | 1.00 | 742,675 | ||||||||||||
|
Richard J. Klein
|
5/14/07 | 25,000 | 1.00 | 74,268 | ||||||||||||
|
Richard J. Klein
|
12/30/07 | 10,000 | 1.25 | * | ||||||||||||
| * | To be completed by amendment. |
Executive
Employment Agreements
Gregory A. Demopulos, M.D. We have
entered into an employment agreement with Dr. Demopulos
dated as of December 30, 2007. Pursuant to the terms of his
employment agreement, Dr. Demopulos is an at-will employee
and is entitled to receive an annual base salary of $475,000,
which our compensation committee will review at least annually.
We may not reduce Dr. Demopulos’ annual base salary
without his consent, except for a reduction that is consistent
with an across-the-board reduction in base compensation payable
to other employees with the title of director or higher. In
addition, pursuant to the terms of the agreement, in December
2007 we approved a payment to Dr. Demopulos of $159,000 as
a tax
gross-up
amount related to $278,000 in payments that we made to him that
he used to repay indebtedness to us. He incurred this
indebtedness to pay the exercise price of option awards with
terms of only five years. See “Management —
Executive Compensation — Outstanding Equity Awards at
Fiscal Year-End” below for a description of the outstanding
equity awards held by Dr. Demopulos.
Dr. Demopulos is entitled to participate in any bonus and
incentive plans or programs that we may establish from time to
time for our employees and is eligible to participate in any
employee benefit and fringe plans that we make available to our
employees with the title of director or higher, such as
participation in our 401(k) plan, life insurance and
company-paid health insurance. We have also agreed to allow
Dr. Demopulos to maintain his status as a board-eligible
orthopedic and hand and microvascular surgeon, which includes
his performance of surgical procedures on a limited basis, and
have agreed to pay related malpractice insurance and
professional fees, which were $9,200 in 2007.
The employment agreement prohibits Dr. Demopulos from
competing with us, directly or indirectly, or soliciting our
employees to terminate their employment with us or to work with
one of our competitors during his employment and for a period of
up to two years following termination of his employment. In
addition, the employment agreement prohibits him from soliciting
or attempting to influence any of our customers or clients to
purchase products from our competitors rather than our products.
We have agreed to enter into a new employment agreement with
Dr. Demopulos by May 1, 2009. If we do not enter into
a new agreement by that date because of our actions or
omissions, we could be in material breach of his current
employment agreement, which may entitle Dr. Demopulos to
termination benefits. For a description of the termination
provisions
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of Dr. Demopulos’ employment agreement, see
“Management — Executive Compensation —
Potential Payment upon Termination or Change in Control”
below.
Marcia S. Kelbon, Esq. We have not
entered into an employment agreement with Ms. Kelbon, and
she is an at-will employee. Pursuant to the terms of her
employment offer letter, Ms. Kelbon received an initial
annual base salary of $188,300, was granted one option award to
purchase 210,000 shares of our common stock with an
exercise price of $0.265 per share and is eligible to
participate in our employee benefit plans. This option award
vested over a four-year period beginning on October 1,
2001. As of December 31, 2007, Ms. Kelbon’s
annual base salary was $285,000. See
“Management — Executive Compensation —
Outstanding Equity Awards at Fiscal Year-End” below for a
description of the outstanding equity awards held by
Ms. Kelbon.
Richard J. Klein. We have not entered into an
employment agreement with Mr. Klein, and he is an at-will
employee. Pursuant to the terms of his employment offer letter,
Mr. Klein receives an annual base salary of $250,000, is
eligible to participate in our employee benefit plans and was
granted one option award to purchase 250,000 shares of our
common stock, or the base award, and another option award to
purchase 25,000 shares of our common stock, or the
performance award, each with an exercise price of $1.00 per
share. The base award vests over a four-year period beginning
May 14, 2007 as follows: 1/4th of the shares subject
to the base award vest on May 14, 2008 and 1/48th of
the shares subject to the base award vest each month thereafter.
The performance award is not eligible to commence vesting unless
by May 14, 2008, the one-year anniversary of
Mr. Klein’s start date, we close a public or private
equity financing (1) in which the number of shares of stock
sold in the financing represents no more than 20% of the shares
of our stock outstanding, on an as-converted basis, as of the
date immediately following the closing of the financing, in each
case excluding any shares of stock sold in an initial public
offering to underwriters to cover any over-allotments or
(2) which meets other parameters associated with such
financing determined by our board of directors. If we close a
public or private financing that meets either of those targets
by May 14, 2008, the performance option will vest on the
same schedule as the base award. If we do not meet at least one
of those targets by May 14, 2008, the performance award
will be automatically cancelled.
Pursuant to the terms of both of these option awards,
Mr. Klein has the right to exercise these option awards for
shares that he is not vested in, provided that if
Mr. Klein’s employment with us terminates for any
reason prior to him vesting into any of shares that he
exercised, we have the right, but not the obligation, to
repurchase at the original purchase price any shares that
Mr. Klein exercised and that he is not vested in as of the
date of his termination. In addition, if Mr. Klein
exercises the performance award and by May 14, 2008 we have
not met either of the targets necessary for the performance
award to begin vesting, we will have the right, but not the
obligation, to repurchase, at the original purchase price, any
shares he purchased pursuant to the exercise of the performance
award. As of December 31, 2007, Mr. Klein had
exercised a portion of the base award by purchasing
150,000 shares of our common stock at a purchase price of
$150,000. See “Management — Executive
Compensation — Outstanding Equity Awards at Fiscal
Year-End” below for a description of the outstanding equity
awards held by Mr. Klein.
Potential
Payments upon Termination or Change in Control
We have entered into an employment agreement with
Dr. Demopulos that requires us to make payments to him upon
termination of his employment in the circumstances described
below. In addition, under the terms of our Second Amended and
Restated 1998 Stock Option Plan, all of our named executive
officers are entitled to acceleration of vesting of their option
awards upon our change in control. These arrangements are
discussed below.
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Employment
Agreement with Gregory A. Demopulos, M.D.
The compensation due to Dr. Demopulos pursuant to his
employment agreement in the event of the termination of his
employment with us varies depending upon the nature of the
termination.
Termination Without Cause or for Good
Reason. Dr. Demopulos’ employment
agreement provides that if we terminate him without
“cause,” as defined below, or if he terminates his
employment with us for “good reason,” as defined
below, then until the earlier of (1) two years from the
date of his termination and (2) his start date with a new
employer that pays him an annual base salary at least equal to
the annual base salary we paid to him prior to his termination
(provided that if he terminates his employment for good reason
because of a reduction in his annual base salary, then the
annual base salary that will be measured will be the annual base
salary we paid him prior to such reduction), we will be
obligated to pay him on our regularly scheduled payroll dates on
an annualized basis:
| • | the annual base salary he was receiving as of his termination, provided that if he terminates his employment for good reason because of a reduction in his annual base salary, then the annual base salary we will be obligated to pay him will be his annual base salary in effect prior to such reduction; plus | |
| • | the greater of (1) the average annual bonus he received in the preceding two calendar years and (2) any bonus he would have been entitled to in the year of his termination as determined by our board of directors in good faith. |
In addition, if we terminate Dr. Demopulos without cause or
if he terminates his employment with us for good reason, all of
his unvested option awards will immediately vest and become
exercisable until the maximum term of the respective option
awards and all unvested restricted shares he holds will
immediately vest. Dr. Demopulos and his eligible dependents
may also continue to participate in all health plans we provide
to our employees on the same terms as our employees, unless his
new employer provides comparable coverage.
“Cause” is defined under Dr. Demopulos’
employment agreement to mean:
| • | his willful misconduct or gross negligence in performance of his duties, including his refusal to comply in any material respect with the legal directives of our board of directors so long as such directives are not inconsistent with his position and duties, and such refusal to comply is not remedied within ten working days after written notice from the board of directors; | |
| • | dishonest or fraudulent conduct that materially discredits us, a deliberate attempt to do an injury to us, or conduct that materially discredits us or is materially detrimental to the reputation of us, including conviction of a felony; or | |
| • | his material breach, if incurable, of any element of his confidential information and invention assignment agreement with us, including without limitation, his theft or other misappropriation of our proprietary information. |
Dr. Demopulos may terminate his employment for “good
reason” if he terminates his employment with us within
120 days of the occurrence of any of the following events:
| • | any material diminution in his authority, duties or responsibilities; | |
| • | any material diminution in his base salary; | |
| • | we relocate his principal work location to a place that is more than 50 miles from our current location; or |
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| • | we materially breach his employment agreement, which may include, for example, our failure to enter into a new employment agreement by May 1, 2009 because of our actions or omissions. |
If any of the above events have occurred as a result of our
action, we will have 30 days from notice of such event from
Dr. Demopulos to remedy the situation, in which case
Dr. Demopulos will not be entitled to terminate his
employment for good reason related to the event.
If Dr. Demopulos had been terminated without cause or if he
had terminated his employment with good reason on
December 31, 2007, Dr. Demopulos would have been
entitled to receive an annual base salary of $475,000 and an
annual bonus amount of $235,700, payable on a bi-monthly basis
over a period of up to two years from the date of termination.
In addition, option awards with a value of
$ would automatically vest upon
his termination, which is the difference between the exercise
price of the option awards held by Dr. Demopulos and the
assumed initial public offering price of
$ (the mid-point of the range set
forth on the cover page of this prospectus), multiplied by the
number of shares that would have vested on December 31,
2007 as the result of his termination. Dr. Demopulos and
his eligible dependents would also be entitled to participate in
the health plans we provide to our employees for a period of up
to two years from the date of his termination at a cost to us of
approximately $10,500.
Termination for Cause, Voluntary Termination, Death or
Disability. If we terminate Dr. Demopulos
for cause, if other than for good reason he voluntarily
terminates his employment or if his employment is terminated as
a result of his death or “disability,” as defined
below, Dr. Demopulos will be entitled to receive payments
for all earned but unpaid salary bonuses and vacation time, but
he will not be entitled to any severance benefits.
“Disability” is defined under his employment agreement
as his inability to perform his duties as the result of his
incapacity due to physical or mental illness, and such
inability, which continues for at least 120 consecutive calendar
days or 150 calendar days during any consecutive twelve-month
period, if shorter, after its commencement, is determined to be
total and permanent by a physician selected by us and our
insurers and acceptable to Dr. Demopulos.
Second Amended
and Restated 1998 Stock Option Plan
Pursuant to our Second Amended and Restated 1998 Stock Option
Plan, or 1998 Stock Plan, in the event of a “change in
control,” as defined below, the vesting of option awards
issued pursuant to the 1998 Stock Plan, including those held by
Dr. Demopulos, Ms. Kelbon, and Mr. Klein, will be
accelerated to the extent of 50% of the remaining unvested
shares. If there is no assumption or substitution of outstanding
option awards by the successor corporation in the change in
control, the option awards will become fully vested and
exercisable immediately prior to the change in control. In
addition, pursuant to the terms of the 1998 Stock Plan, if
within 12 months following a change in control
Dr. Demopulos, Ms. Kelbon or Mr. Klein is
terminated without “cause” or as a result of a
“constructive termination,” as such terms are defined
below, any outstanding option awards held by him or her that we
issued pursuant to the 1998 Stock Plan will become fully vested
and exercisable.
The following terms have the following definitions under the
1998 Stock Plan:
| • | a “change in control” means proposed sale of all or substantially all of the assets of us, or the merger of us with or into another corporation, or other change in control; | |
| • | a termination for “cause” means a termination of an employee for any of the following reasons: (1) his or her willful failure to substantially perform his or her duties and responsibilities to us or a deliberate violation of a company policy; (2) his or her commission of any act of fraud, embezzlement, dishonesty or any other willful |
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| misconduct that has caused or is reasonably expected to result in material injury to us; (3) unauthorized use or disclosure by him or her of any proprietary information or trade secrets of ours or any other party to whom he or she owes an obligation of nondisclosure as a result of his or her relationship with us; or (4) his or her willful breach of any of his or her obligations under any written agreement or covenant with us; and |
| • | a “constructive termination” means the occurrence of any of the following events: (1) there is a material adverse change in an employee’s position causing such position to be of materially reduced stature or responsibility; (2) a reduction of more than 30% of an employee’s base compensation unless in connection with similar decreases of other similarly situated employees; or (3) an employee’s refusal to comply with our request to relocate to a facility or location more than 50 miles from our current location; provided that in order for an employee to be constructively terminated, he or she must voluntarily terminate his or her employment within 30 days of the applicable material change or reduction. |
The following table summarizes the benefits that
Dr. Demopulos, Ms. Kelbon and Mr. Klein would
have been entitled to receive pursuant to the terms of the 1998
Stock Plan had a change in control occurred on December 31,
2007. The amounts below represent the difference between the
exercise price of the option awards issued under the 1998 Stock
Plan and held by these employees and the assumed initial public
offering price of $
(the mid-point of the range set forth on the cover page of this
prospectus), multiplied by the number of shares that would have
vested on December 31, 2007 upon the occurrence of each of
the events identified in the table below.
|
Successor in |
Successor in |
Employee is Terminated |
||||||||||
|
Change in Control |
Change in Control |
Without Cause or |
||||||||||
|
Assumes or |
does not Assume |
Constructively Terminated |
||||||||||
|
Replaces Option |
or Replace Option |
within Twelve Months of |
||||||||||
|
Name
|
Awards ($) | Awards ($) | Change in Control ($) | |||||||||
|
Gregory A. Demopulos, M.D.
|
||||||||||||
|
Marcia S. Kelbon, Esq.
|
||||||||||||
|
Richard J. Klein
|
||||||||||||
Employee Benefit
Plans
Second Amended
and Restated 1998 Stock Option Plan
Our board of directors adopted our 1998 Stock Plan in February
1998 and our shareholders approved it in February 1998. Our 1998
Stock Plan provides for the grant of incentive stock options,
within the meaning of Section 422 of the Internal Revenue
Code of 1986, or the Code, to our employees, and for the grant
of nonstatutory stock options to our employees, directors and
consultants.
Share Reserve. We have reserved a total of
8,311,516 shares of our common stock for issuance pursuant
to our 1998 Stock Plan. As of December 31, 2007, option
awards to purchase 5,843,306 shares of common stock were
outstanding, 221,529 shares were available for future grant
under this plan and 2,246,681 shares had been issued upon
the exercise of option awards granted pursuant to this plan. We
will not grant any additional option awards under our 1998 Stock
Plan following this offering and will instead grant options
under our 2008 Equity Incentive Plan. However, the 1998 Stock
Plan will continue to govern the terms and conditions of the
outstanding awards previously granted thereunder.
Administration. Our board of directors or a
committee appointed by our board of directors administers our
1998 Stock Plan. Our compensation committee will be responsible
for administering all of our equity compensation plans upon the
completion of this offering. Under our 1998 Stock Plan, the plan
administrator has the power to determine the terms of the
awards, including the employees and consultants who will receive
awards, the exercise price
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of each award, the number of shares subject to each award, the
vesting schedule and exercisability of each award and the form
of consideration payable upon exercise.
Stock Options. The exercise price of incentive
stock options must be at least equal to the fair market value of
our common stock on the date of grant, and their terms may not
exceed ten years. The exercise price of nonstatutory stock
options may be determined by the plan administrator provided
that, if the grantee is our chief executive officer or one of
our four most highly compensated executive officers other than
our chief executive officer, the per share price may be no less
than 100% of the fair market value. With respect to incentive
stock options granted to any participant who owns 10% or more of
the voting power of all classes of our outstanding stock as of
the grant date, the term must not exceed five years and the
exercise price must equal at least 110% of the fair market value
on the grant date.
Effect of Termination of Service. Upon
termination of a participant’s service with us or with a
subsidiary of ours, he or she may exercise his or her option
award for the period of time stated in the option agreement, to
the extent his or her option award is vested on the date of
termination. In the absence of a stated period in the award
agreement, if termination is due to disability, the option award
will remain exercisable for up to twelve months following
termination or, if termination is due to death or death occurs
within 30 days of termination, the option award will remain
exercisable for up to 12 months following the date of
death. If termination is for cause, the option award will
immediately terminate in its entirety. For all other
terminations, unless otherwise stated in the award agreement,
the option award will remain exercisable for 30 days. An
option award may never be exercised after the expiration of its
term.
Effect of a Change of Control. Our 1998 Stock
Plan provides that, in the event of certain change of control
transactions, including our merger with or into another
corporation or the sale of all or substantially all of our
assets, the vesting of the awards will be accelerated to the
extent of 50% of the remaining unvested shares. If there is no
assumption or substitution of outstanding awards by the
successor corporation, the awards will become fully vested and
exercisable immediately prior to the change in control unless
otherwise determined by the plan administrator at the time of
grant. Our 1998 Stock Plan provides that, for certain officers
of the company who are terminated without cause or
constructively terminated within the twelve months after a
change of control transaction, any outstanding award held by
them will become fully vested and exercisable.
Transferability. Unless otherwise determined
by the plan administrator, the 1998 Stock Plan generally does
not allow for the sale or transfer of awards under the 1998
Stock Plan other than by will or the laws of descent and
distribution, and may be exercised only during the lifetime of
the participant and only by that participant.
Additional Provisions. Our board of directors
has the authority to amend, suspend or terminate the 1998 Stock
Plan provided that action does not impair the rights of any
participant without the written consent of that participant.
Plan Amendments and Termination. Our 1998
Stock Plan will automatically terminate in February 2008, unless
we terminate it sooner. In addition, our board of directors has
the authority to amend, suspend or terminate the 1998 Stock Plan
provided such action does not impair the rights of any
participant. The 1998 Stock Plan will be terminated upon the
completion of this offering but will continue to govern the
terms and conditions of outstanding awards previously granted
thereunder.
nura, inc. 2003
Stock Option Plan
In connection with our acquisition of nura in August 2006, we
assumed the nura, inc. 2003 Stock Option Plan, or 2003 Stock
Plan, and all of the option awards issued pursuant to the
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2003 Stock Plan that were outstanding as of the date of the
acquisition. Our 2003 Stock Plan provides for the grant of
incentive stock options, within the meaning of Section 422
of the Code, to our employees, and for the grant of nonstatutory
stock options to our employees, directors and consultants. The
2003 Stock Plan also allows for the award of stock purchase
rights.
Share Reserve. A total of 15,192 shares
of our common stock are reserved for issuance pursuant to our
2003 Stock Plan. As of December 31, 2007, options to
purchase 6,070 shares of common stock were outstanding. We
will not grant any additional awards under our 2003 Stock Plan.
However, the 2003 Stock Plan will continue to govern the terms
and conditions of the outstanding awards previously granted
thereunder.
Administration. Our board of directors or a
committee appointed by our board of directors administers our
2003 Stock Plan. Our compensation committee will be responsible
for administering all of our equity compensation plans upon the
completion of this offering. Under the nura 2003 Stock Plan, the
plan administrator has the power to determine the terms of the
awards, including the employees and consultants who will receive
awards, the exercise price of the award, the number of shares
subject to each award, the vesting schedule and exercisability
of each award and the form of consideration payable upon
exercise.
Stock Options. The exercise price of incentive
stock options must be at least equal to the fair market value of
our common stock on the date of grant, and their terms may not
exceed ten years. The exercise price of nonstatutory stock
options may be determined by the plan administrator. With
respect to incentive stock options granted to any participant
who owns 10% or more of the voting power of all classes of our
outstanding stock as of the grant date, the term must not exceed
five years and the exercise price must equal at least 110% of
the fair market value on the grant date.
Effect of Termination of Service. Upon
termination of a participant’s service with us or with a
subsidiary of ours, he or she may exercise his or her option
award for the period of time stated in the option agreement, to
the extent his or her option award is vested on the date of
termination. In the absence of a stated period in the award
agreement, if termination is due to death or disability, the
option award will remain exercisable for up to twelve months.
For all other terminations, unless otherwise stated in the award
agreement, the option award will remain exercisable for three
months. An option award may never be exercised after the
expiration of its term.
Effect of a Change of Control. Our 2003 Stock
Plan provides that in the event of our merger with or into
another corporation or our “change in control,” the
successor corporation will assume or substitute an equivalent
award for each outstanding award under the plan. If there is no
assumption, substitution or replacement of outstanding awards,
such awards will become fully vested and exercisable immediately
prior to the merger or change in control, and the administrator
will provide notice to the recipient that he or she has the
right to exercise such outstanding awards for a period of
15 days from the date of the notice. The awards will
terminate upon the expiration of the
15-day
period.
Transferability. Unless otherwise determined
by the plan administrator, the 2003 Stock Plan generally does
not allow for the sale or transfer of awards under the 2003
Stock Plan other than by will or the laws of descent and
distribution, and may be exercised only during the lifetime of
the participant and only by that participant.
Additional Provisions. Our board of directors
has the authority to amend, suspend or terminate the 2003 Stock
Plan without the written consent of a participant, provided that
the action does not impair the rights of that participant.
Plan Amendments and Termination. Our 2003
Stock Plan will automatically terminate in 2013, unless we
terminate it sooner. In addition, our board of directors has the
authority to
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amend, suspend or terminate the 2003 Stock Plan provided such
action does not impair the rights of any participant. We will
not grant any additional awards under our 2003 Stock Plan and
this plan will be terminated upon the completion of this
offering but will continue to govern the terms and conditions of
outstanding awards previously granted thereunder.
2008 Equity
Incentive Plan
Our board of directors adopted our 2008 Equity Incentive Plan
in 2008,
and our shareholders approved the 2008 Equity Incentive Plan
in 2008.
Our 2008 Equity Incentive Plan provides for the grant of
incentive stock options, within the meaning of Section 422
of the Code, to our employees and any parent and subsidiary
corporations’ employees, and for the grant of nonstatutory
stock options, restricted stock, restricted stock units, stock
appreciation rights, performance units and performance shares to
our employees, directors and consultants and our parent and
subsidiary corporations’ employees and consultants.
Share Reserve. We have reserved a total
of shares
of our common stock for issuance pursuant to the 2008 Equity
Incentive Plan plus (a) the number of shares that we have
reserved but not issued under our 1998 Stock Plan upon
completion of this offering, which as of December 31, 2007
was 221,529 shares, and (b) any shares returned to the
1998 Stock Plan as a result of termination of options or
repurchase of shares issued pursuant to such plans.
In addition, our 2008 Equity Incentive Plan provides for annual
increases in the number of shares available for issuance
thereunder on the first day of each fiscal year, beginning with
our 2008 fiscal year, equal to the lesser of:
| • | of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year; | |
| • | shares; and | |
| • | such other amount as our board of directors may determine. |
Administration. Our board of directors or a
committee of our board administers our 2008 Equity Incentive
Plan. Our compensation committee will be responsible for
administering all of our equity compensation plans upon the
completion of this offering. In the case of option awards
intended to qualify as “performance based
compensation” within the meaning of Section 162(m) of
the Code, the committee will consist of two or more
“outside directors” within the meaning of
Section 162(m) of the Code. The administrator has the power
to determine the terms of the awards, including the exercise
price, the number of shares subject to each such award, the
exercisability of the awards and the form of consideration
payable upon exercise. The administrator also has the authority
to institute an exchange program whereby the exercise prices of
outstanding awards may be reduced, outstanding awards may be
surrendered in exchange for awards with a lower exercise price,
or outstanding awards may be transferred to a third party.
Option Awards. The exercise price of option
awards granted under our 2008 Equity Incentive Plan must
generally at least be equal to the fair market value of our
common stock on the date of grant. The term of an incentive
stock option may not exceed ten years, except that with respect
to any participant who owns more than 10% of the voting power of
all classes of our outstanding stock as of the grant date, the
term must not exceed five years and the exercise price must
equal at least 110% of the fair market value on the grant date.
The administrator determines the term of all other option awards.
After termination of an employee, director or consultant, he or
she may exercise his or her option award for the period of time
stated in the option agreement. Generally, if termination is due
to death or disability, the option will remain exercisable for
twelve months. In all other
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cases, the option will generally remain exercisable for three
months. However, an option may not be exercised later than the
expiration of its term.
Stock Appreciation Rights. Stock appreciation
rights may be granted under our 2008 Equity Incentive Plan.
Stock appreciation rights allow the recipient to receive the
appreciation in the fair market value of our common stock
between the exercise date and the date of grant. The
administrator determines the terms of stock appreciation rights,
including when such rights become exercisable and whether to pay
the increased appreciation in cash or with shares of our common
stock, or a combination thereof. Stock appreciation rights
expire under the same rules that apply to stock options.
Restricted Stock Awards. Restricted stock may
be granted under our 2008 Equity Incentive Plan. Restricted
stock awards are shares of our common stock that vest in
accordance with terms and conditions established by the
administrator. The administrator will determine the number of
shares of restricted stock granted to any employee. The
administrator may impose whatever conditions to vesting it
determines to be appropriate. For example, the administrator may
set restrictions based on the achievement of specific
performance goals. Shares of restricted stock that do not vest
are subject to our right of repurchase or forfeiture.
Restricted Stock Units. Restricted stock units
may be granted under our 2008 Equity Incentive Plan. Restricted
stock units are awards of restricted stock, performance shares
or performance units that are paid out in installments or on a
deferred basis. The administrator determines the terms and
conditions of restricted stock units including the vesting
criteria and the form and timing of payment.
Performance Units and Shares. Performance
units and performance shares may be granted under our 2008
Equity Incentive Plan. Performance units and performance shares
are awards that will result in a payment to a participant only
if performance goals established by the administrator are
achieved or the awards otherwise vest. The administrator will
establish organizational or individual performance goals in its
discretion, which, depending on the extent to which they are
met, will determine the number
and/or the
value of performance units and performance shares to be paid out
to participants. Performance units shall have an initial dollar
value established by the administrator prior to the grant date.
Performance shares shall have an initial value equal to the fair
market value of our common stock on the grant date. Payment for
performance units and performance shares may be made in cash or
in shares of our common stock with equivalent value, or in some
combination, as determined by the administrator.
Transferability of Awards. Unless the
administrator provides otherwise, our 2008 Equity Incentive Plan
does not allow for the transfer of awards and only the recipient
of an award may exercise an award during his or her lifetime.
Change in Control Transactions. Our 2008
Equity Incentive Plan provides that in the event of our
“change in control,” the successor corporation or its
parent or subsidiary will assume or substitute an equivalent
award for each outstanding award. If there is no assumption or
substitution of outstanding awards, the awards will fully vest,
all restrictions shall lapse and become fully exercisable. The
administrator will provide notice to the recipient that he or
she has the right to exercise the option and stock appreciation
right as to all of the shares subject to the award, all
restrictions on restricted stock will lapse, and all performance
goals or other vesting requirements for performance shares and
units will be deemed achieved, and all other terms and
conditions met. The option or stock appreciation right will
terminate upon the expiration of the period of time the
administrator provides in the notice. In the event the service
of an outside director is terminated on or following a change in
control, other than pursuant to a voluntary resignation, his or
her options and stock appreciation rights will fully vest and
become immediately exercisable, all restrictions on restricted
stock will lapse, and all performance goals or other vesting
requirements for performance shares and units will be deemed
achieved, and all other terms and conditions met.
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Plan Amendments and Termination. Our 2008
Equity Incentive Plan will automatically terminate in 2018,
unless we terminate it sooner. In addition, our board of
directors has the authority to amend, suspend or terminate the
2008 Equity Incentive Plan provided such action does not impair
the rights of any participant.
Individual Option
Awards
On December 11, 2001 we granted individual option awards to
purchase an aggregate of 148,906 shares of our common stock
to two of our founders, including Gregory A.
Demopulos, M.D., our president, chief executive officer,
chief medical officer and chairman of the board of directors.
These option awards were fully vested upon grant and are
exercisable until December 11, 2011. As of
December 31, 2007, option awards to purchase an aggregate
of 58,806 shares of our common stock, with an exercise
price of $0.265 per share, were outstanding under these
individual option awards.
401(k)
Plan
We maintain a 401(k) Plan that is intended to be a tax-qualified
retirement plan. The 401(k) Plan covers all of our employees who
meet eligibility requirements. Currently, employees may elect to
defer up to 75% of their compensation, or the statutorily
prescribed limit, if less, to the 401(k) Plan. Under the 401(k)
Plan, we may elect to make a discretionary contribution or match
a discretionary percentage of employee contributions but we
currently do not make any contributions nor have we matched any
employee contributions. The 401(k) Plan has a discretionary
profit sharing component, which to date we have not implemented,
whereby we can make a contribution in an amount to be determined
annually by our board of directors. An employee’s interests
in his or her deferrals are 100% vested when contributed. The
401(k) Plan is intended to qualify under Sections 401(a)
and 501(a) of the Code. As such, contributions to the 401(k)
Plan and earnings on those contributions are not taxable to the
employees until distributed from the 401(k) Plan, and all
contributions are deductible by us when made.
Outstanding
Equity Awards at Fiscal Year-End Table
The following table shows certain information regarding
outstanding equity awards held by each of the named executive
officers as of December 31, 2007.
2007 Outstanding
Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards | |||||||||||||||||||||||
|
Number of |
||||||||||||||||||||||||
|
Number of |
Securities |
|||||||||||||||||||||||
|
Securities |
Underlying |
Number of |
Market Value of |
|||||||||||||||||||||
|
Underlying |
Unexercised |
Option |
Shares of Units |
Shares or Units |
||||||||||||||||||||
|
Unexercised |
Options |
Exercise |
Option |
of Stock That |
of Stock That |
|||||||||||||||||||
|
Options |
(#) |
Price |
Expiration |
Have Not |
Have Not |
|||||||||||||||||||
|
Name
|
(#) Exercisable | Unexercisable(1) | ($) | Date | Vested (#) | Vested ($)(2) | ||||||||||||||||||
|
Gregory A. Demopulos, M.D.
|
3,025 | — | 0.265 | 12/10/11 | — | — | ||||||||||||||||||
| 566,666 | 233,334 | (3) | 0.50 | 12/11/16 | — | — | ||||||||||||||||||
| 850,000 | 350,000 | (3) | 0.50 | 12/11/16 | — | — | ||||||||||||||||||
| — | 200,000 | (4) | 1.25 | 12/30/17 | — | — | ||||||||||||||||||
|
Marcia S. Kelbon, Esq.
|
205,833 | 174,167 | (5) | 0.50 | 12/11/16 | — | — | |||||||||||||||||
| — | 10,000 | (4) | 1.25 | 12/30/17 | — | — | ||||||||||||||||||
|
Richard J. Klein
|
100,000 | (6) (7) | — | 1.00 | 05/14/17 | 150,000 | (6) (7) | |||||||||||||||||
| 25,000 | (6) (8) | — | 1.00 | 05/14/17 | — | — | ||||||||||||||||||
| — | 10,000 | (4) | 1.25 | 12/30/17 | — | — | ||||||||||||||||||
| (1) | These option awards were granted pursuant to the 1998 Stock Plan, which provides for the automatic vesting of at least a portion of any unvested options upon a change of control transaction as described under the section of this prospectus entitled “Management — Employee Benefit Plans — Second Amended and Restated 1998 Stock Option Plan.” |
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| (2) | The market value of shares of stock that have not vested has been calculated using the assumed initial public offering price of $ per share (the mid-point of the range set forth on the cover page of this prospectus). | |
| (3) | The shares subject to the option award vest on a monthly basis in equal amounts over a four-year period that began on February 28, 2005. | |
| (4) | 1/4th of the shares subject to the option award vest on December 30, 2008 and 1/48th of the shares subject to the option award vest each month thereafter | |
| (5) | The shares subject to the option award vest on a monthly basis in equal amounts over a four-year period that began on October 1, 2005. | |
| (6) | Mr. Klein was not vested in these shares as of December 31, 2007. Pursuant to the terms of the option award, Mr. Klein has the right to purchase unvested shares, provided that if his employment terminates for any reason prior to him vesting into any shares that he exercised, we have the right, but not the obligation, to repurchase at the original purchase price any shares that he exercised and is not vested in as of the date of his termination. | |
| (7) | A total of 250,000 shares are subject to this option award. 1/4th of the shares subject to the option vest on May 14, 2008 and 1/48th of the shares vest each month thereafter. As of December 31, 2007, Mr. Klein had purchased 150,000 of these shares, none of which were vested. | |
| (8) | 1/4th of the shares subject to the option award vest on May 14, 2008 and 1/48th of the shares vest each month thereafter, provided that if we do not meet the performance targets described in “Management — Executive Compensation — Executive Employment Agreements — Richard J. Klein,” this option shall automatically terminate on May 14, 2008. |
Option Exercises
and Stock Vested Table
The following table shows certain information regarding option
exercises by each of the named executive officers during the
year ended December 31, 2007.
2007 Option
Exercises and Stock Vested
| Option Awards | ||||||||
|
Number of |
||||||||
|
Shares Acquired |
Value Realized |
|||||||
|
on Exercise |
on Exercise |
|||||||
|
Name
|
(#) | (#)(1) | ||||||
|
Gregory A. Demopulos, M.D.
|
20,000 | |||||||
|
Marcia S. Kelbon, Esq.
|
70,000 | |||||||
|
Richard J. Klein (2)
|
— | — | ||||||
| (1) | The value realized on exercise has been calculated using the assumed initial public offering price of $ per share (the mid-point of the range set forth on the cover page of this prospectus). | |
| (2) | During the year ended December 31, 2007, Mr. Klein purchased 150,000 shares of our common stock pursuant to the exercise of an option award. Because none of these shares were vested as of December 31, 2007, they are not reflected in the table above. |
Pension
Benefits
None of our named executive officers participates in or has
account balances in qualified or non-qualified benefit plans
sponsored by us.
Nonqualified
Deferred Compensation
None of our named executive officers participates in or has
account balances in nonqualified defined contribution plans or
other deferred compensation plans maintained by us.
Limitation of
Liability and Indemnification
Our articles of incorporation contain provisions that limit the
liability of our directors for monetary damages to the fullest
extent permitted by Washington law. Consequently, our
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directors will not be personally liable to us or our
shareholders for monetary damages for any breach of fiduciary
duties as directors, except liability for:
| • | acts or omissions that involve intentional misconduct or a knowing violation of law; | |
| • | unlawful distributions; or | |
| • | any transaction from which the director will personally receive a benefit in money, property or services to which the director is not legally entitled. |
Our articles of incorporation and our bylaws provide that we are
required to indemnify our directors and officers, in each case
to the fullest extent permitted by Washington law. Any repeal of
or modification to our articles of incorporation or bylaws may
not adversely affect any right or protection of a director or
officer for or with respect to any acts or omissions of such
director or officer occurring prior to such amendment or repeal.
Our bylaws will also provide that we shall advance expenses
incurred by a director or officer in advance of the final
disposition of any action or proceeding, and permit us to secure
insurance on behalf of any officer, director, employee or other
agent for any liability arising out of his or her actions in
that capacity regardless of whether we would otherwise be
permitted to indemnify him or her under the provisions of
Washington law.
We have entered and expect to continue to enter into agreements
to indemnify our directors, executive officers and other
employees as determined by the board of directors. With certain
exceptions, these agreements provide for indemnification for
related expenses including, among other things, attorneys’
fees, judgments, fines and settlement amounts incurred by any of
these individuals in any action or proceeding. We believe that
these charter provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors
and officers. We also maintain directors’ and
officers’ liability insurance.
The limitation of liability and indemnification provisions
contained in our articles of incorporation and bylaws may
discourage shareholders from bringing a lawsuit against our
directors 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 shareholders. Further, a
shareholder’s investment may be adversely affected to the
extent that we pay the costs of settlement and damage awards
against directors and officers as required by these
indemnification provisions. At present, there is no pending
litigation or proceeding involving any of our directors,
officers or employees for which indemnification is sought, and
we are not aware of any threatened litigation that may result in
claims for indemnification.
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The following is a summary of transactions since January 1,
2005 to which we have been a party in which the amount involved
exceeded $120,000 and in which any of our executive officers,
directors or beneficial holders of more than five percent of our
capital stock had or will have a direct or indirect material
interest, other than compensation arrangements which are
described under the section of this prospectus entitled
“Management—Non-Employee Director Compensation”
and “Management — Executive Compensation.”
Stock
Issuances
Option Award
Exercises
Since January 1, 2005, Gregory A. Demopulos, M.D., our
president, chief executive officer, chief medical officer and
chairman of the board of directors and holder of more than five
percent of our capital stock, has purchased 20,000 and
559,917 shares of our common stock at prices of $0.175 and
$0.2915 per share, respectively, by exercising option awards
granted pursuant to our 1998 Stock Plan, resulting in an
aggregate purchase price of $166,716.
Since January 1, 2005, Marcia S. Kelbon, our vice
president, patent and general counsel and secretary, has
purchased 157,500 shares of our common stock at a price of
$0.265 per share by exercising an option award granted pursuant
to our 1998 Stock Plan, resulting in an aggregate purchase price
of $41,738.
In June 2007, Richard J. Klein, our chief financial officer and
treasurer, purchased 150,000 shares of our common stock at
a price of $1.00 per share by exercising an option award granted
pursuant to our 1998 Stock Plan, resulting in an aggregate
purchase price of $150,000. Pursuant to the terms of his option
award, Mr. Klein has the right to exercise his option award
for shares that he is not vested in. As of December 31,
2007, Mr. Klein had not vested in any shares of common
stock that he purchased by exercising his option award. If
Mr. Klein’s employment terminates before he fully
vests in the shares that he purchased, we will have the right,
but not the obligation, to repurchase the unvested shares at a
price of $1.00 per share.
Common Stock
Warrant Exercises
In December 2007, Thomas J. Cable, Gregory
A. Demopulos, M.D., Peter A. Demopulos, M.D., FACC and
Aspiri Enterprises, LLC, of which Ray Aspiri is the managing
partner and a member, each purchased 17,857 shares of our
common stock at a price of $1.75 per share by exercising common
stock warrants granted to them in December 1997 in connection
with their agreements to guarantee a loan made to us by a third
party that we have repaid.
Acquisition of
nura, inc.
On August 11, 2006, we issued to the related persons named
in the table below the following number of shares of our
Series E convertible preferred stock and common stock in
connection with our acquisition of nura, inc.
|
Series E Convertible |
||||||||
|
Preferred Stock |
Common Stock |
|||||||
|
Name
|
(#)(1) | (#) | ||||||
|
Aravis Venture I, L.P.(2)
|
559,551 | 6,925 | ||||||
|
Entities affiliated with ARCH Venture Partners (3)
|
839,326 | 7,741 | ||||||
| (1) | Of these shares of Series E convertible preferred stock, 83,932, 125,068 and 830 shares are being held in escrow until February 11, 2008 on behalf of Aravis Venture I, L.P., ARCH Venture Fund V, L.P. and ARCH V Entrepreneurs Fund V, L.P., respectively, to secure claims we may bring for indemnification pursuant to the agreement and plan of reorganization with nura. |
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| (2) | Jean-Philippe Tripet, a member of our board of directors, is managing partner of Aravis Venture I, L.P. Mr. Tripet holds the title of Director of Aravis General Partner Ltd., which serves as general partner of Aravis Venture I, L.P. Mr. Tripet disclaims beneficial ownership of the shares held by Aravis Venture I, L.P., except to the extent of his proportionate pecuniary interest therein. | |
| (3) | Represents (a) 833,787 and 7,690 shares of Series E convertible preferred stock and common stock, respectively, held by ARCH Venture Fund V, L.P. and (b) 5,539 and 51 shares of Series E convertible preferred stock and common stock, respectively, held by ARCH V Entrepreneurs Fund V, L.P. These two associated partnerships together hold more than five percent of our capital stock. |
Private Placement
of Series E Convertible Preferred Stock
On August 21, 2006, we issued and sold to the related
persons named in the table below the following number of shares
of our Series E convertible preferred stock at a price of
$5.00 per share.
|
Series E Convertible |
Aggregate Purchase |
|||||||
|
Preferred Stock |
Price |
|||||||
|
Name
|
(#) | ($) | ||||||
|
Aravis Venture I, L.P.
|
400,000 | 2,000,000 | ||||||
|
Entities affiliated with ARCH Venture Partners (1)
|
600,000 | 3,000,000 | ||||||
| (1) | Represents 595,984 and 4,016 shares of Series E convertible preferred stock that we issued and sold to ARCH Venture Fund V, L.P. and ARCH V Entrepreneurs Fund V, L.P., respectively. |
Agreement and
Plan of Reorganization with nura, inc.
In connection with our acquisition of nura on August 11,
2006, we entered into an agreement and plan of reorganization
with nura that provides for the issuance of our capital stock in
exchange for all of the outstanding capital stock of nura. In
connection with this agreement, 15% of the shares of
Series E convertible preferred stock that we issued to the
former holders of nura capital stock were placed into escrow
until February 11, 2008 to secure claims we may bring for
indemnification pursuant to the agreement, including 83,932,
125,068 and 830 shares issued to Aravis Venture I,
L.P., ARCH Venture Fund V, L.P. and ARCH V Entrepreneurs
Fund V, L.P., respectively. These shares of Series E
convertible preferred stock will automatically convert into an
equivalent number of shares of common stock upon the completion
of this offering. In addition, ARCH Venture Corporation, which
is affiliated with ARCH Venture Partners, is named as the agent
of the former stockholders of nura, inc. under the agreement and
plan of reorganization.
Amended and
Restated Investors’ Rights Agreement
We have entered into an amended and restated investors’
rights agreement with the purchasers of our convertible
preferred stock and certain holders of our common stock,
including entities affiliated with ARCH Venture Partners, Aravis
Venture I, L.P., Aspiri Enterprises, LLC, Thomas
J. Cable, Gregory A. Demopulos, M.D., Peter
A. Demopulos, M.D., FACC and Leroy E. Hood, M.D.,
Ph.D. The holders of 26,022,263 shares of our common stock,
including the shares of common stock issuable upon conversion of
all outstanding shares of our convertible preferred stock, are
entitled to registration rights with respect to these shares
under the Securities Act of 1933, as amended. For a more
detailed description of these registration rights, including the
limitations on these rights related to this offering, see
“Description of Capital Stock — Registration
Rights.”
Loans
On December 31, 2002, March 13, 2003,
December 31, 2003 and December 31, 2005 we made loans
to Gregory A. Demopulos, M.D. with principal amounts of
$65,000, $28,116, $58,300 and $87,450, respectively, that accrue
interest on the principal amounts at annual rates of 4.5%, 4.5%,
3.0% and 6.25%, respectively. Dr. Demopulos used the
proceeds from these loans to exercise option awards that had
terms of five years. Each of these loans was secured by our
common stock held by Dr. Demopulos. On September 30,
2007, an aggregate of $275,069 of principal and accrued interest
was outstanding under these loans, of which
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$238,866 represented principal and $36,203 represented accrued
interest. Dr. Demopulos repaid all of the principal and
interest due on these loans in December 2007.
Policies and
Procedures for Related-Party Transactions
We intend to adopt a formal policy that our executive officers,
directors, and principal shareholders, including their immediate
family members, are not permitted to enter into a related-party
transaction with us without the approval of our audit committee.
Any request for us to enter into a transaction with an executive
officer, director, principal shareholder, or any of such
persons’ immediate family members, in which the amount
involved exceeds $120,000, other than transactions involving
compensation for services provided to us as an executive officer
or director, must be presented to our audit committee for
review, consideration and approval. All of our directors and
executive officers are required to report to our audit committee
any such related-party transaction. In approving or rejecting
the proposed related-party transaction, our audit committee
shall consider the relevant facts and circumstances available
and deemed relevant to the audit committee, including, whether
the transaction is fair to us and whether the terms of the
transaction would be similar if the transaction did not involve
a related party, whether the transaction would impair the
independence of a non-employee director, the materiality of the
transaction and whether the transaction would present an
improper conflict of interest between us and the related party.
This policy will become effective upon completion of this
offering and is intended to meet NASDAQ listing requirements.
All of the transactions described above were entered into prior
to the adoption of this policy.
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The following table sets forth certain information with respect
to the beneficial ownership of our common stock at
December 31, 2007, as adjusted to reflect the sale of
common stock offered by us in this offering, for:
| • | each person who we know beneficially owns more than five percent of our common stock; | |
| • | each of our directors; | |
| • | each of our named executive officers; and | |
| • | all of our directors and executive officers as a group. |
We have determined beneficial ownership in accordance with the
rules of the SEC. Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the
persons and entities named in the table below have sole voting
and investment power with respect to all shares of common stock
that they beneficially own, subject to applicable community
property laws.
Applicable percentage ownership is based on
27,975,726 shares of common stock outstanding at
December 31, 2007. For purposes of the table below, we have
assumed
that shares
of common stock will be outstanding upon completion of this
offering. 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, warrants or other convertible
securities held by that person that are currently exercisable or
exercisable within 60 days of December 31, 2007. 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 Omeros
Corporation, 1420 Fifth Avenue, Suite 2600, Seattle,
Washington 98101.
|
Number of |
Percentage of Shares |
|||||||||||
|
Shares |
Beneficially Owned | |||||||||||
|
Beneficially |
Before |
|||||||||||
|
Name of Beneficial Owner
|
Owned | Offering | After Offering | |||||||||
|
5% Shareholders:
|
||||||||||||
|
Entities affiliated with ARCH Venture Partners (1)
|
1,447,067 | 5.2 | % | |||||||||
|
Directors and Executive Officers:
|
||||||||||||
|
Gregory A. Demopulos, M.D. (2)
|
4,394,563 | 14.9 | % | |||||||||
|
Marcia S. Kelbon, Esq. (3)
|
431,666 | 1.5 | % | |||||||||
|
Richard J. Klein (4)
|
275,000 | * | ||||||||||
|
Ray Aspiri (5)
|
317,857 | 1.1 | % | |||||||||
|
Thomas J. Cable (6)
|
194,163 | * | ||||||||||
|
Peter A. Demopulos, M.D., FACC (7)
|
517,045 | 1.8 | % | |||||||||
|
Leroy E. Hood, M.D., Ph.D. (8)
|
106,603 | * | ||||||||||
|
David A. Mann
|
— | — | ||||||||||
|
Jean-Philippe Tripet (9)
|
966,476 | 3.5 | % | |||||||||
|
All executive officers and directors as a group (9 persons)
(10)
|
7,203,373 | 24.0 | % | |||||||||
| * | Less than one percent | |
| (1) | Represents (a) 1,437,461 shares of common stock held by ARCH Venture Fund V, L.P. and (b) 9,606 shares of common stock held by ARCH V Entrepreneurs Fund, L.P. |
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| (2) | Includes 1,503,025 shares of common stock that Dr. Demopulos has the right to acquire from us within 60 days of December 31, 2007 pursuant to the exercise of option awards. | |
| (3) | Includes 221,666 shares of common stock that Ms. Kelbon has the right to acquire from us within 60 days of December 31, 2007 pursuant to the exercise of option awards. | |
| (4) | Represents (a) 150,000 shares of common stock that Mr. Klein acquired from us pursuant to the exercise of an option award and (b) 125,000 shares of common stock that Mr. Klein has the right to acquire from us within 60 days of December 31, 2007 pursuant to the exercise of option awards. Pursuant to the terms of his option awards, Mr. Klein has the right to exercise his option awards for shares that he is not vested in. As of December 31, 2007, Mr. Klein had not vested in any shares of common stock that he purchased by exercising his option award. If Mr. Klein’s employment terminates before he fully vests in the shares that he purchased, we will have the right, but not the obligation, to repurchase the unvested shares at a price of $1.00 per share. See “Management — Executive Compensation — Executive Employment Agreements — Richard J. Klein” for a description of the vesting terms of Mr. Klein’s option awards. | |
| (5) | Represents (a) 30,000 shares of common stock that Mr. Aspiri has the right to acquire from us within 60 days of December 31, 2007 pursuant to the exercise of option awards and (b) 287,857 shares of common stock held by Aspiri Enterprises LLC. Mr. Aspiri is the managing partner and a member of Aspiri Enterprises LLC. | |
| (6) | Includes (a) 65,000 shares of common stock that Mr. Cable has the right to acquire from us within 60 days of December 31, 2007 pursuant to the exercise of option awards and (b) 20,000 shares of common stock held by the Thomas J. Cable Defined Benefit Retirement Plan, of which Mr. Cable is the beneficiary. | |
| (7) | Includes 322,188 shares of common stock held by the Demopulos Family Trust, of which Dr. Peter A. Demopulos is the trustee and a beneficiary along with his mother and sister. Dr. Peter A. Demopulos disclaims beneficial ownership of the shares held by the Demopulos Family Trust except to the extent of his pecuniary interest therein. | |
| (8) | Includes 50,000 shares of common stock that Dr. Hood has the right to acquire from us within 60 days of December 31, 2007 pursuant to the exercise of option awards. | |
| (9) | Represents 966,476 shares of common stock held by Aravis Venture I, L.P. Mr. Tripet holds the title of director of Aravis General Partner Ltd., which serves as general partner of Aravis Venture I, L.P. Mr. Tripet disclaims beneficial ownership of the shares held by Aravis Venture I, L.P., except to the extent of his proportionate pecuniary interest therein. | |
| (10) | Includes 1,994,691 shares of common stock that our executive officers and directors have the right to acquire from us within 60 days of December 31, 2007 pursuant to the exercise of option awards. |
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General
The following is a summary of the rights of our common stock and
preferred stock and related provisions of our articles of
incorporation and bylaws, as they will be in effect upon
completion of this offering. For more detailed information,
please see our articles of incorporation and bylaws, which are
filed as exhibits to the registration statement of which this
prospectus is part.
Immediately following the completion of this offering, our
authorized capital stock will consist
of shares,
each with a par value of $0.01 per share, of which:
| • | shares will be designated as common stock; and | |
| • | shares will be designated as preferred stock. |
As of December 31, 2007, assuming the conversion of all
outstanding shares of our convertible preferred stock into
common stock, we had outstanding 27,975,726 shares of
common stock. All of our outstanding shares of convertible
preferred stock will automatically convert into common stock
upon completion of this offering.
Common
Stock
The holders of our common stock are entitled to one vote per
share on all matters to be voted on by the shareholders. Subject
to preferences that may be applicable to any outstanding shares
of preferred stock, holders of common stock are entitled to
receive ratably such dividends as may be declared by the board
of directors out of funds legally available therefor. In the
event we liquidate, dissolve or wind up, holders of common stock
are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preferences of any
outstanding shares of preferred stock. Holders of common stock
have no preemptive, conversion or subscription rights. There are
no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are, and
all shares of common stock to be outstanding upon completion of
this offering will be, fully paid and nonassessable.
Preferred
Stock
Our board of directors has the authority, without further action
by the shareholders, to issue from time to time the preferred
stock in one or more series, to fix the number of shares of any
such series and the designation thereof and to fix the rights,
preferences, privileges and restrictions granted to or imposed
upon such preferred stock, including dividend rights, dividend
rates, conversion rights, voting rights, rights and terms of
redemption, redemption prices, liquidation preference and
sinking fund terms, any or all of which may be greater than or
senior to the rights of the common stock. The issuance of
preferred stock could adversely affect the voting power of
holders of common stock and reduce the likelihood that such
holders will receive dividend payments and payments upon
liquidation. Such issuance could have the effect of decreasing
the market price of the common stock. The issuance of preferred
stock or even the ability to issue preferred stock could have
the effect of delaying, deterring or preventing a change in
control. We have no present plans to issue any shares of
preferred stock.
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Table of Contents
Warrants
As of December 31, 2007, we had warrants outstanding to
purchase an aggregate of 409,643 shares of our common
stock, assuming the conversion of our convertible preferred
stock into common stock, as follows:
| • | A warrant that we assumed in connection with our acquisition of nura on August 11, 2006 to purchase 22,613 shares of our common stock with an exercise price of $4.66 per share. This warrant will terminate upon the earlier of (a) April 26, 2015 or (b) certain acquisitions of us as described in the warrant. | |
| • | Warrants issued on March 29, 2007 to purchase an aggregate of 387,030 shares of our common stock with an exercise price of $6.25 per share. If not exercised, these warrants will terminate on the earlier of (a) completion of this offering, (b) a change of control as defined in the warrants or (c) March 28, 2012. |
The Stanley
Medical Research Institute
Pursuant to our funding agreement with The Stanley Medical
Research Institute, or SMRI, if we meet milestones set forth in
the funding agreement, we have agreed to meet with SMRI to
discuss whether SMRI will make, and whether we will accept,
further equity investments of up to $1.8 million together
with grant funding of up to $4.6 million from SMRI, as
follows:
| • | if we meet the defined preclinical development milestone set forth in the funding agreement, SMRI may purchase up to $1.2 million of our common stock and provide us linked grant funding of up to $1.9 million, or the First Tranche; and | |
| • | if we meet the defined clinical development milestone set forth in the funding agreement, SMRI may purchase up to an additional $600,000 of our common stock and provide us linked grant funding of up to $2.7 million, or the Second Tranche. |
These additional equity investments and grants are subject to
our negotiation of mutually agreeable terms, including the price
per share of the equity investments, with SMRI.
In addition, within ten days following the filing of the
registration statement to which this prospectus is a part, we
must provide SMRI notice of such filing. Within 30 days of
providing such notice to SMRI, SMRI has the right to provide us
the First Tranche
and/or the
Second Tranche of the equity investments and linked grants as
described above, except that SMRI’s equity investment will
be made through the purchase of shares of our Series E
convertible preferred stock at a price of $5.00 per share.
Registration
Rights
The holders of an aggregate of 26,022,263 shares of our
common stock, or their permitted transferees, are entitled to
rights with respect to the registration of these shares under
the Securities Act. These rights are provided pursuant to the
terms of an amended and restated investors’ rights
agreement between us and the holders of these shares. Holders of
an aggregate of 22,079,911 of these shares, or their permitted
transferees, are entitled to demand registration rights,
short-form registration rights and piggyback registration
rights. Holders of the remaining 3,942,352 shares, or their
permitted transferees, are entitled to only piggyback
registration rights. All fees, costs and expenses of
underwritten registrations will be borne by us and all selling
expenses, including underwriting discounts and selling
commissions, will be borne by the holders of the shares being
registered. The holders of all of these shares are subject to
lock-up
agreements with us and/or the representative of the underwriters
pursuant to which they have agreed not to sell these shares
during the period ending at least 180 days after the date
of this prospectus, see “Shares Eligible for Future
Sale —
Lock-Up
Agreements.”
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Demand
Registration Rights
We will be required, upon the written request of the holders of
at least 30% of our shares of common stock issued upon
conversion of our convertible preferred stock, to use our best
efforts to register all or a portion of these shares for public
resale. The demand registration rights are subject to customary
limitations, and we are required to effect only one demand
registration pursuant to the amended and restated
investors’ rights agreement. We are not required to effect
a demand registration prior to 180 days after the
completion of this offering.
Short-Form Registration
Rights
If we are eligible to file a registration statement on
Form S-3,
we will be required, upon the written request of the holders of
at least 20% of these shares of our common stock, to have such
shares registered by us at our expense provided that such
requested registration has an anticipated aggregate offering
price to the public of at least $2.5 million and we have
not already effected one short-form registration in the
preceding twelve-month period.
Piggyback
Registration Rights
If we register any of our securities either for our own account
or for the account of other security holders, the holders of
these shares are entitled to include their shares in the
registration. Subject to certain exceptions, we and the
underwriters may limit the number of shares included in the
underwritten offering if the underwriters believe that including
these shares would adversely affect the offering.
Anti-Takeover
Effects of Washington Law and our Articles of Incorporation and
Bylaws
Certain provisions of Washington law, our articles of
incorporation and our bylaws contain provisions that may delay,
defer or discourage another party from acquiring control of us.
These provisions, which are summarized below, are expected to
discourage coercive takeover practices and inadequate takeover
bids. These provisions are also designed, in part, to encourage
persons seeking to acquire control of us to first negotiate with
our board of directors. We believe that the benefits of
increased protection of our potential ability to negotiate with
an unfriendly or unsolicited acquiror outweigh the disadvantages
of discouraging a proposal to acquire us because negotiation of
these proposals could result in an improvement of their terms.
Undesignated
Preferred Stock
As discussed above, our board of directors has the ability to
issue preferred stock with voting or other rights or preferences
that could impede the success of any attempt to change control
of us. These and other provisions may have the effect of
deferring hostile takeovers or delaying changes in control or
management.
Limits on Ability
of Shareholders to act by Written Consent or call a Special
Meeting
Washington law limits the ability of shareholders of public
companies from acting by written consent by requiring unanimous
written consent for a shareholder action to be effective. This
limit on the ability of our shareholders to act by less than
unanimous written consent may lengthen the amount of time
required to take shareholder actions. As a result, a holder
controlling a majority of our capital stock who is unable to
obtain unanimous written consent from all of our shareholders
would not be able to amend our bylaws or remove directors
without holding a shareholders meeting.
In addition, our articles of incorporation provide that, unless
otherwise required by law, special meetings of the shareholders
may be called only by the chairman of the board, the
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chief executive officer, the president, or the board of
directors acting pursuant to a resolution adopted by a majority
of the board members. A shareholder may not call a special
meeting, which may delay the ability of our shareholders to
force consideration of a proposal or for holders controlling a
majority of our capital stock to take any action, including the
removal of directors.
Requirements for
Advance Notification of Shareholder Nominations and
Proposals
Our bylaws establish advance notice procedures with respect to
shareholder proposals and the nomination of candidates for
election as directors, other than nominations made by or at the
direction of the board of directors or a committee of the board
of directors. The bylaws do not give the board of directors the
power to approve or disapprove shareholder nominations of
candidates or proposals regarding business to be conducted at a
special or annual meeting of the shareholders. However, our
bylaws may have the effect of precluding the conduct of certain
business at a meeting if the proper procedures are not followed.
These provisions may also discourage or deter a potential
acquiror from conducting a solicitation of proxies to elect the
acquirer’s own slate of directors or otherwise attempting
to obtain control of our company.
Board Vacancies
Filled only by Directors then in Office
Vacancies and newly created seats on our board of directors may
only be filled by our board of directors. Only our board of
directors may determine the number of directors on our board.
The inability of our shareholders to determine the number of
directors or to fill vacancies or newly created seats on our
board of directors makes it more difficult to change the
composition of our board of directors, but these provisions may
promote a continuity of existing management.
Directors may be
Removed only for Cause
Our directors may be removed only for cause by the affirmative
vote of the holders of at least two-thirds of our voting stock.
Board
Classification
Our board of directors is divided into three classes. The
directors in each class will serve for a three-year term, one
class being elected each year by our shareholders. For more
information on our classified board, see
“Management—Board of Directors.” This system of
electing and removing directors may tend to discourage a third
party from making a tender offer or otherwise attempting to
obtain control of us, because it generally makes it more
difficult for shareholders to replace a majority of the
directors.
No Cumulative
Voting
Our articles of incorporation provide that shareholders are not
entitled to cumulate votes in the election of directors.
Amendment of
Bylaws
Our articles of incorporation and bylaws provide that
shareholders can amend our bylaws only upon the affirmative vote
of the holders of at least two-thirds of our voting stock.
Washington
Anti-Takeover Statute
Washington law imposes restrictions on some transactions between
a corporation and significant shareholders. Chapter 23B.19
of the Washington Business Corporation Act generally
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prohibits a target corporation from engaging in specified
“significant business transactions” with an
“acquiring person.” This statute could prohibit or
delay the accomplishment of mergers or other takeover or change
in control attempts with respect to us and, accordingly, may
discourage attempts to acquire us. An acquiring person is
defined as a person or group of persons that beneficially owns
10% or more of the voting securities of the target corporation.
The target corporation may not engage in significant business
transactions for a period of five years after the date of the
transaction in which the person became an acquiring person,
unless the transaction or acquisition of shares is approved by a
majority of the disinterested members of the target
corporation’s board of directors prior to the time of
acquisition. Significant business transactions include, among
other things:
| • | a merger or share exchange with, disposition of assets to, or issuance or redemption of stock to or from, the acquiring person; | |
| • | a termination of five percent or more of the employees of the target corporation as a result of the acquiring person’s acquisition of 10% or more of the shares; or | |
| • | a transaction in which the acquiring person is allowed to receive a disproportionate benefit as a shareholder. |
After the five-year period, a significant business transaction
may occur, as long as it complies with fair price provisions
specified in Chapter 23B.19 or is approved at a meeting of
shareholders by a majority of the votes entitled to be counted
within each voting group entitled to vote separately on the
transaction, not counting the votes of shares as to which the
acquiring person has beneficial ownership or voting control. A
corporation may not “opt out” of this statute.
Listing
We have applied to have our common stock listed on the NASDAQ
Global Market under the symbol “OMER.”
Transfer Agent
and Registrar
The transfer agent and registrar for our common stock
is .
The transfer agent’s address
is ,
and its telephone number
is .
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Before this offering, there has not been a public market for
shares of our common stock. Future sales of substantial amounts
of shares of our common stock, including shares issued upon the
exercise of outstanding option awards, in the public market
after this offering, or the possibility of these sales
occurring, could cause the prevailing market price for our
common stock to fall or impair our ability to raise equity
capital in the future.
Upon the completion of this offering, a total
of shares
of common stock will be outstanding, assuming (a) that
there are no exercises of option awards after December 31,
2007, (b) no exercise of the underwriters’
over-allotment option and (c) the issuance
of shares
of common stock upon the cashless net exercise of warrants that
will automatically terminate upon completion of this offering
based on the assumed initial public offering price of
$ per share (the mid-point of the
range set forth on the cover page of this prospectus). Of these
shares,
all shares
of common stock sold in this offering by us will be freely
tradable in the public market without restriction or further
registration under the Securities Act, unless these shares are
held by “affiliates,” as that term is defined in
Rule 144 under the Securities Act.
The
remaining shares
of common stock will be “restricted securities,” as
that term is defined in Rule 144 under the Securities Act.
These restricted securities are eligible for public sale only if
they are registered under the Securities Act or if they qualify
for an exemption from registration under Rules 144 or 701
under the Securities Act, which are summarized below.
Subject to the
lock-up
agreements described below and the provisions of Rules 144
and 701 under the Securities Act, these restricted securities
will be available for sale in the public market as follows:
|
Date
|
Number of Shares | |||
|
On the date of this prospectus
|
||||
|
Between 90 and 180 days after the date of this prospectus
|
||||
|
At various times beginning more than 180 days after the
date of this prospectus
|
||||
In addition, as of December 31, 2007, a total of
5,908,182 shares of our common stock were subject to
outstanding option awards, of which option awards to
purchase shares
of common stock will be vested and eligible for sale
180 days after the date of this prospectus, and a total of
22,613 shares of our common stock were subject to an
outstanding warrant that will be exercisable and eligible for
sale 180 days after the date of this prospectus.
Rule 144
In general, under Rule 144 as it will become effective on
February 15, 2008, a person deemed to be one of our
affiliates for purposes of the Securities Act and who owns
shares that were acquired from us or an affiliate of us at least
six months prior to the proposed sale is entitled to sell upon
the expiration of the
lock-up
agreements described below, within any three-month period
beginning 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of:
| • | one percent of the number of shares of common stock then outstanding, which will equal approximately shares immediately after the offering; and | |
| • | the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
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These sales are also subject to manner of sale provisions,
notice requirements and the availability of current public
information about us.
Under Rule 144, a person who is not deemed to have been one
of our affiliates for purposes of the Securities Act at any time
during the 90 days 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 such shares
without volume limitations, subject only to the availability of
current public information about us. A non-affiliated person who
has beneficially owned restricted securities within the meaning
of Rule 144 for at least one year is entitled to sell those
shares without regard to the provisions of Rule 144.
Rule 701
In general, under Rule 701 as currently in effect, any of
our employees, consultants or advisors who purchase shares from
us in connection with a compensatory stock or option plan or
other written agreement in a transaction that was completed in
reliance on Rule 701 and complied with the requirements of
Rule 701 will be eligible to resell such shares
90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with certain
restrictions, including the holding period, contained in
Rule 144.
Lock-Up
Agreements
Each of our officers and directors, and certain of our existing
shareholders and holders of options and warrants to purchase
shares of our common stock, representing an aggregate
of % of our shares prior to the
offering, have agreed, subject to certain exceptions, not to
offer, sell, contract to sell or otherwise dispose of, or enter
into any transaction that is designed to, or could reasonably be
expected to, result in the disposition of any shares of our
common stock or other securities convertible into or
exchangeable or exercisable for shares of our common stock or
derivatives of our common stock owned by these persons prior to
this offering or common stock issuable upon exercise of options
or warrants held by these persons for a period of 180 days
after the effective date of the registration statement of which
this prospectus is a part without the prior written consent of
Deutsche Bank Securities Inc. This consent may be given at any
time without public notice. We have entered into a similar
agreement with the representative of the underwriters, see
“Underwriters.” There are no agreements between the
representative and any of our shareholders or affiliates
releasing them from these
lock-up
agreements prior to the expiration of the 180-day period.
The 180-day restricted period described in the preceding
paragraph will be extended if:
| • | during the last 17 days of the 180-day restricted period we issue an earnings release or material news, or a material event relating to us occurs; or | |
| • | prior to the expiration of the 180-day restricted period we announce that we will release earnings results during the 16-day period following the last day of the 180-day period, |
in which case the restrictions described in the preceding
paragraph will continue to apply until the expiration of the
18-day period beginning on the issuance of the earnings release
or the occurrence of the material news or material event.
The lock-up restrictions will not apply to shares of common
stock acquired in open-market transactions after the closing of
the offering. The lock-up restrictions also will not apply to
certain transfers not involving a disposition for value provided
that the transferee agrees to be bound by these lock-up
restrictions and provided no filing by any person under the
Exchange Act is required or will be voluntarily made and no
person will be required by law to make or voluntarily make any
public announcement of the transfer. In addition, our officers,
directors and certain of our existing shareholders that purchase
shares of common stock pursuant to the directed share program
may transfer their directed shares provided no filing by any
person
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under the Exchange Act is required or will be voluntarily made
and no person will be required by law to make or voluntarily
make any public announcement of the transfer.
Registration
Statements
We intend to file a registration statement on
Form S-8
under the Securities Act covering shares of common stock subject
to options outstanding reserved for issuance under our stock
plans. We expect to file this registration statement after this
offering. However, none of the shares registered on
Form S-8
will be eligible for resale until the expiration of the
lock-up
agreements to which they are subject.
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Subject to the terms and conditions of the underwriting
agreement, the underwriters named below, through their
representative Deutsche Bank Securities Inc. have severally
agreed to purchase from us the following respective number of
shares of common stock at a public offering price less the
underwriting discounts and commissions set forth on the cover
page of this prospectus:
|
Underwriter
|
Number of Shares
|
|||
| Deutsche Bank Securities Inc. | ||||
|
Pacific Growth Equities, LLC
|
||||
|
Leerink Swan LLC
|
||||
|
Needham & Company, LLC
|
||||
|
Total
|
||||
The underwriting agreement provides that the obligations of the
several underwriters to purchase the shares of common stock
offered hereby are subject to certain conditions precedent and
that the underwriters will purchase all of the shares of common
stock offered by this prospectus, other than those covered by
the over-allotment option described below, if any of the shares
are purchased.
We have been advised by the representative of the underwriters
that 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 and to dealers at a price that
represents a concession not in excess of
$ per share under the public
offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than
$ per share to other dealers.
After the initial public offering, the representative of the
underwriters may change the offering price and other selling
terms.
We have granted to the underwriters an option, exercisable not
later than 30 days after the date of this prospectus, to
purchase up
to additional
shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover
page of this prospectus. The underwriters may exercise this
option only to cover over-allotments made in connection with the
sale of the common stock offered by this prospectus. To the
extent that the underwriters exercise this option, each of the
underwriters will become obligated, subject to conditions, to
purchase approximately the same percentage of these additional
shares of common stock as the number of shares of common stock
to be purchased by it in the above table bears to the total
number of shares of common stock offered by this prospectus. We
will be obligated, pursuant to the option, to sell these
additional shares of common stock to the underwriters to the
extent the option is exercised. If any additional shares of
common stock are purchased, the underwriters will offer the
additional shares on the same terms as those on which
the shares
are being offered.
The underwriting discounts and commissions per share are equal
to the public offering price per share of common stock less the
amount paid by the underwriters to us per share of common stock.
The underwriting discounts and commissions
are % of the initial public
offering price. We have agreed to pay the underwriters the
following discounts and commissions, assuming either no exercise
or full exercise by the underwriters of the underwriters’
over-allotment option:
| Total Fees | ||||||||||||
|
Without Exercise of |
With Full Exercise |
|||||||||||
|
Fee per |
Over-Allotment |
of Over-Allotment |
||||||||||
| share | Option | Option | ||||||||||
|
Discounts and commissions paid by us
|
$ | $ | $ | |||||||||
In addition, we estimate that our share of the total expenses of
this offering, excluding underwriting discounts and commissions,
will be approximately $ .
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We have agreed to indemnify the underwriters against some
specified types of liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters
may be required to make in respect of any of these liabilities.
Each of our officers and directors, and certain of our existing
shareholders and holders of options and warrants to purchase
shares of our common stock, representing an aggregate
of % of our shares prior to the
offering, have agreed, subject to certain exceptions, not to
offer, sell, contract to sell or otherwise dispose of, or enter
into any transaction that is designed to, or could reasonably be
expected to, result in the disposition of any shares of our
common stock or other securities convertible into or
exchangeable or exercisable for shares of our common stock or
derivatives of our common stock owned by these persons prior to
this offering or common stock issuable upon exercise of options
or warrants held by these persons for a period of 180 days
after the effective date of the registration statement of which
this prospectus is a part without the prior written consent of
Deutsche Bank Securities Inc. This consent may be given at any
time without public notice. We have entered into a similar
agreement with the representative of the underwriters except
that without such consent we may grant options and sell shares
pursuant to our 2008 Equity Incentive Plan, sell shares pursuant
to the exercise of option awards granted pursuant to our other
equity incentive plans, and we may issue a limited amount of
shares of our common stock in connection with an acquisition,
strategic partnership or joint venture or collaboration. There
are no agreements between the representative and any of our
shareholders or affiliates releasing them from these
lock-up
agreements prior to the expiration of the 180-day period.
The 180-day restricted period described in the preceding
paragraph will be extended if:
| • | during the last 17 days of the 180-day restricted period we issue an earnings release or material news, or a material event relating to us occurs; or | |
| • | prior to the expiration of the 180-day restricted period we announce that we will release earnings results during the 16-day period following the last day of the 180-day period, |
in which case the restrictions described in the preceding
paragraph will continue to apply until the expiration of the
18-day period beginning on the issuance of the earnings release
or the occurrence of the material news or material event.
The lock-up restrictions will not apply to shares of common
stock acquired in open-market transactions after the closing of
the offering. The lock-up restrictions also will not apply to
certain transfers not involving a disposition for value provided
that the transferee agrees to be bound by these lock-up
restrictions and provided no filing by any person under the
Exchange Act is required or will be voluntarily made and no
person will be required by law to make or voluntarily make any
public announcement of the transfer. In addition, our officers,
directors and certain of our existing shareholders that purchase
shares of common stock pursuant to the directed share program
may transfer their directed shares provided no filing by any
person under the Exchange Act is required or will be voluntarily
made and no person will be required by law to make or
voluntarily make any public announcement of the transfer.
Listing
We have applied to list our common stock on the NASDAQ Global
Market under the symbol “OMER.”
Stabilization
In connection with this offering, the underwriters may purchase
and sell shares of our common stock in the open market. These
transactions may include short sales, purchases to cover
positions created by short sales and stabilizing transactions.
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Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the
offering. Covered short sales are sales made in an amount not
greater than the underwriters’ option to purchase
additional shares of common stock from us in the offering. The
underwriters may close out any covered short position by either
exercising their option to purchase additional shares or
purchasing shares in the open market. In determining the source
of shares to close out the covered short position, the
underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to
the price at which they may purchase shares through the
over-allotment option.
Naked short sales are any sales in excess of the over-allotment
option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position
is more likely to be created if underwriters are concerned that
there may be downward pressure on the price of the shares in the
open market prior to the completion of the offering.
Stabilizing transactions consist of various bids for or
purchases of our common stock made by the underwriters in the
open market prior to the completion of the offering.
The underwriters may impose a penalty bid. This occurs when a
particular underwriter repays to the other underwriters a
portion of the underwriting discount received by it because the
representative of the underwriters have repurchased shares sold
by or for the account of that underwriter in stabilizing or
short covering transactions.
Purchases to cover a short position and stabilizing transactions
may have the effect of preventing or slowing a decline in the
market price of our common stock. Additionally, these purchases,
along with the imposition of the penalty bid, may stabilize,
maintain or otherwise affect the market price of our common
stock. As a result, the price of our common stock may be higher
than the price that might otherwise exist in the open market.
These transactions may be effected on the NASDAQ Global Market
or otherwise and, if commenced, may be discontinued at any time.
In connection with this offering, some underwriters may also
engage in passive market making transactions in our common stock
on the NASDAQ Global Market. Passive market making consists of
displaying bids on the NASDAQ Global Market limited by the
prices of independent market makers and effecting purchases
limited by those prices in response to order flow. Rule 103
of Regulation M promulgated by the SEC limits the amount of
net purchases that each passive market maker may make and the
displayed size of each bid. Passive market making may stabilize
the market price of our common stock at a level above that which
might otherwise prevail in the open market and, if commenced,
may be discontinued at any time.
The representative of the underwriters has informed us that the
underwriters do not intend to make sales to discretionary
accounts in excess of five percent of the total number of shares
of common stock offered by them.
Directed Share
Program
At our request, the underwriters have reserved for sale at the
initial public offering price up
to shares
of our common stock being sold in this offering for our
directors, employees, family members of directors and employees
and other third parties. The number of shares of our common
stock available for the sale to the general public will be
reduced to the extent these reserved shares are purchased. Any
reserved shares not purchased by these persons will be offered
by the underwriters to the general public on the same basis as
the other shares in this offering.
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Initial Public
Offering Price
Prior to this offering, there has been no public market for our
common stock. Consequently, the initial public offering price of
our common stock will be determined by negotiation among us and
the representative of the underwriters. Among the primary
factors that will be considered in determining the public
offering price are:
| • | prevailing market conditions; | |
| • | our results of operations in recent periods; | |
| • | the present stage of our development; | |
| • | the market capitalizations and stages of development of other companies that we and the representative of the underwriters believe to be comparable to our business; and | |
| • | estimates of our business potential. |
There can be no assurance that the initial public offering price
of our common stock will correspond to the price at which our
common stock will trade in the public market subsequent to this
offering or that an active public market for our common stock
will develop and continue after this offering.
Other
Relationships
From time to time in the ordinary course of their respective
business, certain of the underwriters and their affiliates may
in the future engage in commercial banking or investment banking
transactions with us and our affiliates.
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MATERIAL UNITED
STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS OF COMMON STOCK
FOR NON-UNITED STATES HOLDERS OF COMMON STOCK
This section summarizes certain material U.S. federal income and
estate tax considerations relating to the ownership and
disposition of our common stock. This summary does not provide a
complete analysis of all potential tax considerations. The
information provided below is based on provisions of the Code,
and U.S. Treasury regulations promulgated thereunder,
administrative rulings and judicial decisions currently in
effect. These authorities may change at any time, possibly on a
retroactive basis, or the Internal Revenue Service, or the IRS,
might interpret the existing authorities differently. In either
case, the tax considerations of owning or disposing of our
common stock could differ from those described below. For
purposes of this summary, a
“non-United
States holder” is any holder other than a citizen or
resident of the United States, a corporation organized under the
laws of the United States, or any state or the District of
Columbia, a trust that is (a) subject to the primary
supervision of a U.S. court and the control of one of more U.S.
persons or (b) has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a U.S.
person or an estate whose income is subject to U.S. federal
income tax regardless of source.
If you are an individual, you may, in many cases, be deemed to
be a resident of the United States, 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. For these purposes, 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
subject to U.S. federal income tax as if they were
U.S. citizens. A resident alien is urged to consult his or
her own tax advisor regarding the U.S. federal income tax
consequences of the sale, exchange or other disposition of
common stock. If a partnership or other flow-through entity is a
beneficial owner of common stock, the tax treatment of a partner
in the partnership or an owner of the entity will depend upon
the status of the partner or other owner and the activities of
the partnership or other entity. This summary generally does not
address tax considerations that may be relevant to particular
investors because of their specific circumstances, or because
they are subject to special rules, including if the holder is a
U.S. expatriate, “controlled foreign corporation,”
“passive foreign investment company,” corporation that
accumulates earnings to avoid U.S. federal income tax financial
institution, insurance company, broker, dealer or trader in
securities, commodities or currencies, tax-exempt organization,
tax-qualified retirement plan, person subject to the alternative
minimum tax, or person holding our common stock as part of a
hedging or conversion transaction or straddle, or a constructive
sale, or other risk reduction strategy. Finally, this summary
does not describe the effects of any applicable foreign, state
or local tax laws, or, except to the extent discussed below, the
effects of any applicable gift or estate tax laws.
INVESTORS CONSIDERING THE PURCHASE OF COMMON STOCK SHOULD
CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF U.S.
FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR
SITUATIONS AND THE CONSEQUENCES OF FOREIGN, STATE OR LOCAL LAWS,
AND TAX TREATIES.
Dividends
We have not paid, nor do we expect in the future to pay,
dividends; however, any dividend paid to a
non-United
States holder on our common stock will generally be subject to
U.S. federal withholding tax at a 30% rate. The withholding tax
might not apply, however, or might apply at a reduced rate,
under the terms of an applicable income tax treaty between the
United States and the
non-United
States holder’s country of residence. A
non-United
States holder must certify its entitlement to treaty benefits. A
non-United
States holder can meet this certification requirement by
providing a
Form W-8BEN
or appropriate substitute form to us or
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our paying agent prior to the payment of dividends and must be
updated periodically. If the holder holds the stock through a
financial institution or other agent acting on the holder’s
behalf, the holder will be required to provide appropriate
documentation to the agent. The holder’s agent will then be
required to provide certification to us or our paying agent,
either directly or through other intermediaries. For payments
made to a foreign partnership or other flow-through entity, the
certification requirements generally apply to the partners or
other owners rather than to the partnership or other entity, and
the partnership or other entity must provide the partners’
or other owners’ documentation to us or our paying agent.
Special rules, described below, apply if a dividend is
effectively connected with a U.S. trade or business conducted by
the
non-United
States holder.
Sale of Common
Stock
Non-United
States holders will generally not be subject to U.S. federal
income tax on any gains realized on the sale, exchange or other
disposition of common stock unless:
| • | the gain is effectively connected with the conduct by the non-United States holder of a U.S. trade or business (in which case the special rules described below apply); | |
| • | the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the sale, exchange or other disposition of our common stock, and certain other requirements are met; | |
| • | the non-United States holder was a citizen or resident of the United States and thus is subject to special rules that apply to expatriates; or | |
| • | the rules of the Foreign Investment in Real Property Tax Act, or FIRPTA, treat the gain as effectively connected with a U.S. trade or business. |
The FIRPTA rules may apply to a sale, exchange or other
disposition of common stock if we are, or were within five years
before the transaction, a “U.S. real property holding
corporation,” or USRPHC. In general, we would be a USRPHC
if our U.S. real property interests comprised at least half of
our assets. We do not believe that we are a USRPHC or that we
will become one in the future, although there can be no
assurance that this conclusion is correct or might not change in
the future based on changed circumstances.
Dividends or Gain
Effectively Connected With a U.S. Trade or Business
If any dividend on common stock, or gain from the sale, exchange
or other disposition of common stock, is effectively connected
with a U.S. trade or business conducted by a
non-United
States holder, then the dividend or gain will generally be
subject to U.S. federal income tax at the regular graduated
rates. If the
non-United
States holder is eligible for the benefits of a tax treaty
between the United States and the holder’s country of
residence, any “effectively connected” dividend or
gain would generally be subject to U.S. federal income tax only
if it is also attributable to a permanent establishment or fixed
base maintained by the holder in the United States. Payments of
dividends that are effectively connected with a U.S. trade or
business, and therefore included in the gross income of a
non-United
States holder, will not be subject to the 30% withholding tax.
To claim an exemption from withholding, the holder must certify
its qualification, which can be done by filing a
Form W-8ECI.
If the
non-United
States holder is a corporation, under certain circumstances that
portion of its earnings and profits that is effectively
connected with its U.S. trade or business would generally be
subject to a “branch profits tax.” The branch profits
tax rate is generally 30%, although an applicable income tax
treaty might provide for a lower rate.
121
Table of Contents
U.S. Federal
Estate Tax
The estates of nonresident alien individuals are generally
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. The U.S. federal
estate tax liability of the estate of a nonresident alien may be
affected by a tax treaty between the United States and the
decedent’s country of residence.
Backup
Withholding and Information Reporting
The Code and the U.S. Treasury regulations require those who
make specified payments to report the payments to the IRS. Among
the specified payments are dividends and proceeds paid by
brokers to their customers. The required information returns
enable the IRS to determine whether the recipient properly
included the payments in income. This reporting regime is
reinforced by “backup withholding” rules. These rules
require the payors to withhold tax from payments subject to
information reporting if the recipient fails to cooperate with
the reporting regime by failing to provide his taxpayer
identification number to the payor, furnishing an incorrect
identification number, or repeatedly failing to report interest
or dividends on his returns. The backup withholding tax rate is
currently 28%. The backup withholding rules generally do not
apply to payments to corporations, whether domestic or foreign.
Payments of dividends on common stock to
non-United
States holders will generally not be subject to backup
withholding, and payments of proceeds made to
non-United
States holders by a broker upon a sale of common stock will not
be subject to information reporting or backup withholding, in
each case so long as the
non-United
States holder certifies its nonresident status. The
certification procedures to claim treaty benefits described
under “ — Dividends” will satisfy the
certification requirements necessary to avoid the backup
withholding tax as well. We must report annually to the IRS any
dividends paid to each
non-United
States holder and the tax withheld, if any, with respect to
those dividends. Copies of these reports may be made available
to tax authorities in the country where the
non-United
States holder resides.
Any amounts withheld from a payment to a holder of common stock
under the backup withholding rules can be credited against any
U.S. federal income tax liability of the holder and may entitle
the holder to a refund, provided that the required information
is furnished to the IRS.
THE PRECEDING DISCUSSION OF U.S. FEDERAL TAX CONSIDERATIONS
IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH
PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR
REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR
COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE
IN APPLICABLE LAWS.
122
Table of Contents
The validity of the shares of common stock offered hereby will
be passed upon for us by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Seattle, Washington.
Morrison & Foerster LLP, New York, New York, will act
as counsel to the underwriters. A member of Wilson Sonsini
Goodrich & Rosati beneficially holds an aggregate of
3,071 shares of our common stock, which represents less
than one percent of our outstanding shares of common stock.
The consolidated financial statements of Omeros Corporation (a
development-stage company) at December 31, 2006 and 2005,
and for each of the three years in the period ended
December 31, 2006 and for the period from June 16,
1994 (inception) through December 31, 2006, appearing in
this prospectus and registration statement have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
The financial statements of nura, inc. (a development-stage
company) for the period from January 1, 2006 through
August 11, 2006, the year ended December 31, 2005, and
for the period from August 26, 2003 (inception) to
August 11, 2006, appearing in this prospectus and
registration statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report
thereon (which contains an explanatory paragraph relating to
nura, inc.’s ability to continue as a going concern as
described in Note 1 to the financial statements) appearing
elsewhere herein which, as to the period from August 26,
2003 (inception) through December 31, 2004, are based in
part on the report of PricewaterhouseCoopers LLP, independent
accountants. The financial statements referred to above are
included in reliance upon such reports given on the authority of
such firms as experts in accounting and auditing.
The financial statements of nura, inc. (a development-stage
company) for the year ended December 31, 2004 and for the
period from August 26, 2003 (inception) to
December 31, 2004 included in this prospectus and
registration statement have been so included in reliance on the
report (which contains an explanatory paragraph relating nura,
inc.’s ability to continue as a going concern as described
in Note 1 to the financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
We have filed with the SEC a registration statement on
Form S-1
under the Securities Act with respect to the shares of common
stock offered hereby. This prospectus, which constitutes a part
of the registration statement, does not contain all of the
information set forth in the registration statement or the
exhibits and schedules filed therewith. For further information
about us and the common stock offered hereby, reference is made
to the registration statement and the exhibits and schedules
filed therewith. Statements contained in this prospectus
regarding the contents of any contract or any other document
that is filed as an exhibit to the registration statement are
not necessarily complete, and each such statement is qualified
in all respects by reference to the full text of such contract
or other document filed as an exhibit to the registration
statement. A copy of the registration statement and the exhibits
and schedules filed therewith may be inspected without charge at
the public reference room maintained by the SEC, located at
100 F Street, N.E., Room 1580,
Washington, D.C. 20549, and copies of all or any part of
the registration statement may be obtained from such offices
upon the payment of the fees prescribed by the SEC. Please call
the SEC at
1-800-SEC-0330
for further information about the public reference room. The SEC
also maintains an Internet web site that contains reports, proxy
and information statements and other information regarding
registrants that file electronically with the SEC. The address
of the site is www.sec.gov.
123
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NURA, INC.
|
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F-1
Table of Contents
The Board of Directors and Shareholders
Omeros Corporation
We have audited the accompanying consolidated balance sheets of
Omeros Corporation (a development stage company) as of
December 31, 2006 and 2005, and the related consolidated
statements of operations, convertible preferred stock and
shareholders’ equity (deficit), and cash flows for each of
the three years in the period ended December 31, 2006 and
for the period from June 16, 1994 (inception) through
December 31, 2006. These financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Company’s internal control over financial
reporting. Our audits included consideration of internal control
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Omeros Corporation (a development stage
company) at December 31, 2006 and 2005, and the
consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31,
2006 and for the period from June 16, 1994 (inception)
through December 31, 2006, in conformity with
U.S. generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, on January 1, 2006, the Company changed its
method of accounting for stock-based compensation in accordance
with guidance provided in Statement of Financial Accounting
Standards No. 123 (revised 2004) Share-Based
Payment, and on July 1, 2005, the Company adopted
Financial Accounting Standards Board (FASB) Staff Position
150-5,
Issuer’s Accounting under FASB Statement No. 150
for Freestanding Warrants and Other Similar Instruments on
Shares That are Redeemable.
/s/ Ernst & Young LLP
Seattle, Washington
July 20, 2007
F-2
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
(In thousands, except share and per share data)
|
September 30, |
December 31, | |||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| Assets | (unaudited) | |||||||||||
|
Current assets:
|
||||||||||||
|
Cash and cash equivalents
|
$ | 6,520 | $ | 23,400 | $ 253 | |||||||
|
Short-term investments
|
20,651 | 12,485 | 12,119 | |||||||||
|
Receivable associated with funding agreement
|
— | 1,300 | — | |||||||||
|
Prepaid expenses and other current assets
|
469 | 135 | 264 | |||||||||
|
Total current assets
|
27,640 | 37,320 | 12,636 | |||||||||
|
Property and equipment, net
|
860 | 577 | 418 | |||||||||
|
Intangible assets, net
|
189 | 267 | — | |||||||||
|
Restricted cash
|
207 | 202 | — | |||||||||
|
Other assets
|
63 | 66 | 55 | |||||||||
|
Total assets
|
$ | 28,959 | $ | 38,432 | $13,109 | |||||||
See notes to consolidated financial statements
F-3
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS—(Continued)
(In thousands, except share and per share data)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS—(Continued)
(In thousands, except share and per share data)
|
Pro Forma |
||||||||||||||||
|
Shareholders’ |
||||||||||||||||
|
Equity at |
||||||||||||||||
| September 30, | December 31, |
September 30, |
||||||||||||||
| 2007 | 2006 | 2005 | 2007 | |||||||||||||
| (unaudited) |
(Unaudited) |
|||||||||||||||
| (Note 1) | ||||||||||||||||
|
Liabilities, convertible preferred stock and
shareholders’ equity (deficit)
|
||||||||||||||||
|
Current liabilities:
|
||||||||||||||||
|
Accounts payable
|
$ 914 | $ 1,094 | $ 680 | |||||||||||||
|
Accrued expenses
|
1,529 | 607 | 801 | |||||||||||||
|
Preferred stock warrant liability
|
1,674 | 1,037 | 483 | — | ||||||||||||
|
Deferred revenue
|
650 | 1,300 | — | |||||||||||||
|
Current portion of notes payable
|
1,080 | 1,005 | — | |||||||||||||
|
Total current liabilities
|
5,847 | 5,043 | 1,964 | |||||||||||||
|
Notes payable, net of current portion
|
190 | 1,010 | — | |||||||||||||
|
Total liabilities
|
6,037 | 6,053 | 1,964 | |||||||||||||
|
Commitments and contingencies
|
||||||||||||||||
|
Convertible preferred stock, par value $0.01 per share;
Authorized shares—26,314,511 at September 30, 2007 and
December 31, 2006; 14,773,063 at December 31, 2005;
issued and outstanding shares—22,327,407, 21,637,025 and
12,081,880 at September 30, 2007 and December 31, 2006
and 2005, respectively (none, proforma); (liquidation preference
of $92,079, $88,652 and $40,876 at September 30, 2007 and
December 31, 2006 and 2005, respectively)
|
89,168 | 85,742 | 40,888 | — | ||||||||||||
|
Shareholders’ equity (deficit):
|
||||||||||||||||
|
Common stock, par value $0.01:
|
||||||||||||||||
|
Authorized shares — 40,000,000 at September 30, 2007
and December 31, 2006; and 25,000,000 authorized at
December 31, 2005; issued and outstanding
shares—5,399,890, 4,972,600 and 4,482,638 at
September 30, 2007 and December 31, 2006 and 2005,
respectively, (27,727,297 shares proforma)
|
53 | 50 | 45 | 277 | ||||||||||||
|
Additional paid-in capital
|
2,698 | (2,838 | ) | (1,946 | ) | 93,316 | ||||||||||
|
Accumulated other comprehensive income
|
34 | 26 | 6 | 34 | ||||||||||||
|
Deferred stock-based compensation
|
(16 | ) | (33 | ) | (56 | ) | (16 | ) | ||||||||
|
Notes receivable from related party
|
(239 | ) | (239 | ) | (239 | ) | — | |||||||||
|
Deficit accumulated during the development stage
|
(68,776 | ) | (50,329 | ) | (27,553 | ) | (68,776 | ) | ||||||||
|
Total shareholders’ equity (deficit)
|
(66,246 | ) | (53,363 | ) | (29,743 | ) | $ | 24,835 | ||||||||
|
Total liabilities, convertible preferred stock, and
shareholders’ equity (deficit)
|
$ | 28,959 | $ | 38,432 | $ | 13,109 | ||||||||||
See notes to consolidated financial statements
F-4
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
|
Period from |
||||||||||||||||
|
June 16, |
||||||||||||||||
|
1994 |
||||||||||||||||
|
(Inception) |
||||||||||||||||
|
through |
||||||||||||||||
| Year Ended December 31, |
December 31, |
|||||||||||||||
| 2006 | 2005 | 2004 | 2006 | |||||||||||||
|
Grant revenue
|
$ 200 | $ — | $ — | $ 300 | ||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
9,637 | 5,803 | 2,670 | 28,462 | ||||||||||||
|
Acquired in-process research and development
|
10,891 | — | — | 10,891 | ||||||||||||
|
General and administrative
|
3,625 | 1,904 | 2,079 | 14,240 | ||||||||||||
|
Total operating expenses
|
24,153 | 7,707 | 4,749 | 53,593 | ||||||||||||
|
Loss from operations
|
(23,953 | ) | (7,707 | ) | (4,749 | ) | (53,293 | ) | ||||||||
|
Investment income
|
1,088 | 333 | 171 | 2,920 | ||||||||||||
|
Other income
|
179 | 8 | — | 187 | ||||||||||||
|
Interest expense
|
(91 | ) | — | — | (143 | ) | ||||||||||
|
Net loss
|
$(22,777 | ) | $(7,366 | ) | $(4,578 | ) | $ | (50,329 | ) | |||||||
|
Basic and diluted net loss per common share
|
$ (6.17 | ) | $ (2.12 | ) | $ (1.34 | ) | ||||||||||
|
Denominator for basic and diluted net loss per common share
|
3,694,388 | 3,468,886 | 3,416,197 | |||||||||||||
|
Pro forma basic and diluted net loss per common share (unaudited)
|
$ (1.10 | ) | ||||||||||||||
|
Pro forma shares used to compute pro forma basic and diluted net
loss per share (unaudited)
|
20,843,076 | |||||||||||||||
See notes to consolidated financial statements
F-5
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS—(Continued)
(In thousands, except share and per share data)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS—(Continued)
(In thousands, except share and per share data)
|
Period from |
||||||||||||
|
June 16, |
||||||||||||
|
1994 |
||||||||||||
|
(Inception) |
||||||||||||
|
Nine Months Ended |
through |
|||||||||||
| September 30, |
September 30, |
|||||||||||
| 2007 | 2006 | 2007 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
|
Grant revenue
|
$ 650 | $ 200 | $ 950 | |||||||||
|
Operating expenses:
|
||||||||||||
|
Research and development
|
11,173 | 6,230 | 39,635 | |||||||||
|
Acquired in-process research and development
|
— | 10,891 | 10,891 | |||||||||
|
General and administrative
|
8,619 | 1,893 | 22,859 | |||||||||
|
Total operating expenses
|
19,792 | 19,014 | 73,385 | |||||||||
|
Loss from operations
|
(19,142 | ) | (18,814 | ) | (72,435 | ) | ||||||
|
Investment income
|
1,173 | 722 | 4,093 | |||||||||
|
Other income (expense)
|
(355 | ) | 108 | (168 | ) | |||||||
|
Interest expense
|
(123 | ) | (38 | ) | (266 | ) | ||||||
|
Net loss
|
$(18,447 | ) | $ | (18,022 | ) | $ | (68,776 | ) | ||||
|
Basic and diluted net loss per common share
|
$ (4.41 | ) | $ (4.93 | ) | ||||||||
|
Denominator for basic and diluted loss per common share
|
4,184,919 | 3,653,537 | ||||||||||
|
Pro forma basic and diluted net loss per common share
|
$ (0.66 | ) | ||||||||||
|
Pro forma shares used to compute pro forma basic and diluted net
loss per share
|
27,005,598 | |||||||||||
See notes to consolidated financial statements
F-6
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share and per share data)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share and per share data)
|
Deficit |
|||||||||||||||||||||||||||||||||||||||||
|
Accumulated |
Notes |
Accumulated |
|||||||||||||||||||||||||||||||||||||||
|
Additional |
Other |
Deferred |
Receivable |
During the |
Total |
||||||||||||||||||||||||||||||||||||
| Convertible Preferred Stock | Common Stock |
Paid-in |
Comprehensive |
Stock-Based |
from Related |
Development |
Shareholders’ |
||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Compensation | Party | Stage | Deficit | ||||||||||||||||||||||||||||||||
|
Balance at June 16, 1994
|
— | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||
|
Issuance of common stock to founders for $0.01 per share
|
— | — | 3,500,000 | 35 | — | — | — | — | — | 35 | |||||||||||||||||||||||||||||||
|
Issuance of Series A convertible preferred stock for $1.00
per share and $7 in financing costs
|
875,000 | 875 | — | — | (7 | ) | — | — | — | — | (7 | ) | |||||||||||||||||||||||||||||
|
Net loss from inception to December 31, 1994
|
— | — | — | — | — | — | — | — | (140 | ) | (140 | ) | |||||||||||||||||||||||||||||
|
Balance at December 31, 1994
|
875,000 | 875 | 3,500,000 | 35 | (7 | ) | — | — | — | (140 | ) | (112 | ) | ||||||||||||||||||||||||||||
|
Net loss and comprehensive loss
|
— | — | — | — | — | — | — | — | (327 | ) | (327 | ) | |||||||||||||||||||||||||||||
|
Balance at December 31, 1995
|
875,000 | 875 | 3,500,000 | 35 | (7 | ) | — | — | — | (467 | ) | (439 | ) | ||||||||||||||||||||||||||||
|
Net loss and comprehensive loss
|
— | — | — | — | — | — | — | — | (495 | ) | (495 | ) | |||||||||||||||||||||||||||||
|
Balance at December 31, 1996
|
875,000 | 875 | 3,500,000 | 35 | (7 | ) | — | — | — | (962 | ) | (934 | ) | ||||||||||||||||||||||||||||
|
Net loss and comprehensive loss
|
— | — | — | — | — | — | — | — | (787 | ) | (787 | ) | |||||||||||||||||||||||||||||
|
Balance at December 31, 1997
|
875,000 | 875 | 3,500,000 | 35 | (7 | ) | — | — | — | (1,749 | ) | (1,721 | ) | ||||||||||||||||||||||||||||
|
Issuance of Series B convertible preferred stock for $1.75
per share and $302 in financing costs
|
2,663,244 | 4,661 | — | — | (302 | ) | — | — | — | — | (302 | ) | |||||||||||||||||||||||||||||
|
Stock-based compensation
|
— | — | — | — | 6 | — | — | — | — | 6 | |||||||||||||||||||||||||||||||
|
Unrealized holding loss on available-for-sale securities for the
year ended December 31, 1998
|
— | — | — | — | — | (22 | ) | — | — | — | (22 | ) | |||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | — | — | — | (930 | ) | (930 | ) | |||||||||||||||||||||||||||||
|
Comprehensive loss
|
(952 | ) | |||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 1998
|
3,538,244 | $ | 5,536 | 3,500,000 | $ | 35 | $ | (303 | ) | $ | (22 | ) | $ | — | $ | — | $ | (2,679 | ) | $ | (2,969 | ) | |||||||||||||||||||
|
Repurchase of common stock issued to founders
|
— | — | (371,875 | ) | (4 | ) | (61 | ) | — | — | — | — | (65 | ) | |||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of stock options for cash
at $0.18 per share
|
— | — | 1,200 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
|
Issuance of common stock for services at $0.18 per share
|
— | — | 17,537 | — | 3 | — | — | — | — | 3 | |||||||||||||||||||||||||||||||
|
Stock-based compensation
|
— | — | — | — | 4 | — | — | — | — | 4 | |||||||||||||||||||||||||||||||
|
Unrealized holding gain on available-for-sale securities for the
year ended December 31, 1999
|
— | — | — | — | — | 3 | — | — | — | 3 | |||||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | — | — | — | (1,801 | ) | (1,801 | ) | |||||||||||||||||||||||||||||
|
Comprehensive loss
|
(1,798 | ) | |||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 1999 (carried forward)
|
3,538,244 | 5,536 | 3,146,862 | 31 | (357 | ) | (19 | ) | — | — | (4,480 | ) | (4,825 | ) | |||||||||||||||||||||||||||
See notes to consolidated financial statements
F-7
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS’ EQUITY (DEFICIT)—(Continued)
(In thousands, except share and per share data)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS’ EQUITY (DEFICIT)—(Continued)
(In thousands, except share and per share data)
|
Deficit |
|||||||||||||||||||||||||||||||||||||||||
|
Accumulated |
Notes |
Accumulated |
|||||||||||||||||||||||||||||||||||||||
|
Convertible |
Additional |
Other |
Deferred |
Receivable |
During the |
Total |
|||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock |
Paid-in |
Comprehensive |
Stock-Based |
from Related |
Development |
Shareholders’ |
||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Compensation | Party | Stage | Deficit | ||||||||||||||||||||||||||||||||
|
Balance at December 31, 1999 (brought forward)
|
3,538,244 | 5,536 | 3,146,862 | 31 | (357 | ) | (19 | ) | — | — | (4,480 | ) | (4,825 | ) | |||||||||||||||||||||||||||
|
Issuance of Series C convertible preferred stock for $2.65
per share and $262 in financing costs
|
2,825,291 | 7,487 | — | — | (262 | ) | — | — | — | — | (262 | ) | |||||||||||||||||||||||||||||
|
Issuance of Series C convertible preferred stock warrants
for services
|
— | 12 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
|
Issuance of Series C convertible preferred stock upon
exercise of warrants for $2.65 purchase
|
9,433 | 25 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of stock options for cash
at $0.18 to $0.27 per share
|
— | — | 50,614 | 1 | 9 | — | — | — | — | 10 | |||||||||||||||||||||||||||||||
|
Issuance of common stock for services at $0.18 per share
|
— | — | 9,264 | — | 2 | — | — | — | — | 2 | |||||||||||||||||||||||||||||||
|
Stock-based compensation
|
— | — | — | — | 8 | — | — | — | — | 8 | |||||||||||||||||||||||||||||||
|
Unrealized holding gain on available-for-sale securities for the
year ended December 31, 2000
|
— | — | — | — | — | 18 | — | — | — | 18 | |||||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | — | — | — | (1,363 | ) | (1,363 | ) | |||||||||||||||||||||||||||||
|
Comprehensive loss
|
(1,345 | ) | |||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2000
|
6,372,968 | 13,060 | 3,206,740 | 32 | (600 | ) | (1 | ) | — | — | (5,843 | ) | (6,412 | ) | |||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of stock options for cash
at $0.18 to $0.27 per share
|
— | — | 48,125 | — | 9 | — | — | — | — | 9 | |||||||||||||||||||||||||||||||
|
Issuance of common stock for services at $0.27 per share
|
— | — | 12,268 | — | 3 | — | — | — | — | 3 | |||||||||||||||||||||||||||||||
|
Stock-based compensation
|
— | — | — | — | 20 | — | — | — | — | 20 | |||||||||||||||||||||||||||||||
|
Unrealized holding gain on available-for-sale securities for the
year ended December 31, 2001
|
— | — | — | — | — | 33 | — | — | — | 33 | |||||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | — | — | — | (2,554 | ) | (2,554 | ) | |||||||||||||||||||||||||||||
|
Comprehensive loss
|
(2,521 | ) | |||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2001 (carried forward)
|
6,372,968 | $ | 13,060 | 3,267,133 | $ | 32 | $ | (568 | ) | $ | 32 | $ | — | $ | — | $ | (8,397 | ) | $ | (8,901 | ) | ||||||||||||||||||||
See notes to consolidated financial statements
F-8
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS’ EQUITY (DEFICIT)—(Continued)
(In thousands, except share and per share data)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS’ EQUITY (DEFICIT)—(Continued)
(In thousands, except share and per share data)
|
Deficit |
||||||||||||||||||||||||||||||||||||||||
|
Accumulated |
Notes |
Accumulated |
||||||||||||||||||||||||||||||||||||||
|
Convertible |
Additional |
Other |
Deferred |
Receivable |
During the |
Total |
||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock |
Paid-in |
Comprehensive |
Stock-Based |
from Related |
Development |
Shareholders’ |
|||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Compensation | Party | Stage | Deficit | |||||||||||||||||||||||||||||||
|
Balance at December 31, 2001 (brought forward)
|
6,372,968 | $ | 13,060 | 3,267,133 | $ | 32 | $ | (568 | ) | $ | 32 | $ | — | $ | — | $ | (8,397 | ) | $ | (8,901 | ) | |||||||||||||||||||
|
Issuance of Series D convertible preferred stock for $3.97
per share and $124 in financing costs
|
972,580 | 3,861 | — | — | (124 | ) | — | — | — | — | (124 | ) | ||||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of stock options for cash
at $0.19 to $0.27 per share
|
— | — | 423,660 | 4 | 84 | — | — | — | — | 88 | ||||||||||||||||||||||||||||||
|
Deferred stock-based compensation
|
— | — | — | — | 9 | — | (9 | ) | — | — | — | |||||||||||||||||||||||||||||
|
Amortization of deferred stock-based compensation
|
— | — | — | — | — | — | 2 | — | — | 2 | ||||||||||||||||||||||||||||||
|
Stock-based compensation
|
— | — | — | — | 121 | — | — | (65 | ) | — | 56 | |||||||||||||||||||||||||||||
|
Unrealized holding gain on available-for-sale securities for the
year ended December 31, 2002
|
— | — | — | — | — | 16 | — | — | — | 16 | ||||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | — | — | — | (3,152 | ) | (3,152 | ) | ||||||||||||||||||||||||||||
|
Comprehensive loss
|
(3,136 | ) | ||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2002
|
7,345,548 | 16,921 | 3,690,793 | 36 | (478 | ) | 48 | (7 | ) | (65 | ) | (11,549 | ) | (12,015 | ) | |||||||||||||||||||||||||
|
Issuance of Series B convertible preferred stock upon
exercise of warrants for $1.75 per share
|
11,829 | 21 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Repurchase of Series A convertible preferred stock
|
(100,000 | ) | (100 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of stock options for cash
at $0.18 to $0.40 per share
|
— | — | 349,058 | 4 | 91 | — | — | — | — | 95 | ||||||||||||||||||||||||||||||
|
Amortization of deferred stock-based compensation
|
— | — | — | — | — | — | 4 | — | — | 4 | ||||||||||||||||||||||||||||||
|
Stock-based compensation
|
— | — | — | — | 406 | — | (9 | ) | (86 | ) | — | 311 | ||||||||||||||||||||||||||||
|
Unrealized holding loss on available-for-sale securities for the
year ended December 31, 2003
|
— | — | — | — | — | (37 | ) | — | — | — | (37 | ) | ||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | — | — | — | (4,060 | ) | (4,060 | ) | ||||||||||||||||||||||||||||
|
Comprehensive loss
|
(4,097 | ) | ||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2003
|
7,257,377 | 16,842 | 4,039,851 | 40 | 19 | 11 | (12 | ) | (151 | ) | (15,609 | ) | (15,702 | ) | ||||||||||||||||||||||||||
|
Issuance of Series E convertible preferred stock for $5.00
per share and $1,119 in financing costs
|
3,672,293 | 18,361 | — | — | (1,119 | ) | — | — | — | — | (1,119 | ) | ||||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of stock options for cash
at $0.18 to $0.40 per share
|
— | — | 55,687 | 1 | 10 | — | — | — | — | 11 | ||||||||||||||||||||||||||||||
|
Deferred stock-based compensation
|
— | — | — | — | 77 | — | (77 | ) | — | — | — | |||||||||||||||||||||||||||||
|
Stock-based compensation
|
— | — | — | — | 263 | — | 10 | — | — | 273 | ||||||||||||||||||||||||||||||
|
Unrealized holding gain on available-for-sale securities for the
year ended December 31, 2004
|
— | — | — | — | — | 1 | — | — | — | 1 | ||||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | — | — | — | (4,578 | ) | (4,578 | ) | ||||||||||||||||||||||||||||
|
Comprehensive loss
|
(4,577 | ) | ||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2004 (carried forward)
|
10,929,670 | $ | 35,203 | 4,095,538 | $ | 41 | $ | (750 | ) | $ | 12 | $ | (79 | ) | $ | (151 | ) | $ | (20,187 | ) | $ | (21,114 | ) | |||||||||||||||||
See notes to consolidated financial statements
F-9
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS’ EQUITY (DEFICIT)—(Continued)
(In thousands, except share and per share data)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS’ EQUITY (DEFICIT)—(Continued)
(In thousands, except share and per share data)
|
Deficit |
||||||||||||||||||||||||||||||||||||||||
|
Accumulated |
Notes |
Accumulated |
||||||||||||||||||||||||||||||||||||||
|
Convertible |
Additional |
Other |
Deferred |
Receivable |
During the |
Total |
||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock |
Paid-in |
Comprehensive |
Stock-Based |
from Related |
Development |
Shareholders’ |
|||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Compensation | Party | Stage | Deficit | |||||||||||||||||||||||||||||||
|
Balance at December 31, 2004 (brought forward)
|
10,929,670 | $ | 35,203 | 4,095,538 | $ | 41 | $ | (750 | ) | $ | 12 | $ | (79 | ) | $ | (151 | ) | $ | (20,187 | ) | $ | (21,114 | ) | |||||||||||||||||
|
Issuance of Series E convertible preferred stock for $5 per
share and $278 in financing costs
|
1,120,215 | 5,601 | — | — | (278 | ) | — | — | — | — | (278 | ) | ||||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of stock options for cash
at $0.18 to $0.29 per share
|
— | — | 387,100 | 4 | 102 | — | — | — | — | 106 | ||||||||||||||||||||||||||||||
|
Issuance of Series C convertible preferred stock upon
exercise of warrants for $2.65 per share
|
31,995 | 84 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Amortization of deferred stock-based compensation
|
— | — | — | — | — | — | 23 | — | — | 23 | ||||||||||||||||||||||||||||||
|
Stock-based compensation
|
— | — | — | — | (530 | ) | — | — | (88 | ) | — | (618 | ) | |||||||||||||||||||||||||||
|
Reclassification of preferred stock warrants to liabilities
|
— | — | — | — | (490 | ) | — | — | — | — | (490 | ) | ||||||||||||||||||||||||||||
|
Unrealized holding loss on available-for-sale securities for the
year ended December 31, 2005
|
— | — | — | — | — | (6 | ) | — | — | — | (6 | ) | ||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | — | — | — | (7,366 | ) | (7,366 | ) | ||||||||||||||||||||||||||||
|
Comprehensive loss
|
(7,372 | ) | ||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2005
|
12,081,880 | 40,888 | 4,482,638 | 45 | (1,946 | ) | 6 | (56 | ) | (239 | ) | (27,553 | ) | (29,743 | ) | |||||||||||||||||||||||||
|
Issuance of Series E convertible preferred stock for $5.00
per share and $1,821 in financing costs
|
6,156,700 | 30,784 | — | — | (1,821 | ) | — | — | — | — | (1,821 | ) | ||||||||||||||||||||||||||||
|
Issuance of Series E preferred stock warrants to placement
agents
|
— | — | — | — | (607 | ) | — | — | — | — | (607 | ) | ||||||||||||||||||||||||||||
|
Issuance of Series E convertible preferred stock and common
stock for the acquisition of nura
|
3,398,445 | 14,070 | 36,246 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of stock options for cash
at $0.18 to $5.42 per share
|
— | — | 453,716 | 5 | 121 | — | — | — | — | 126 | ||||||||||||||||||||||||||||||
|
Amortization of deferred stock-based compensation
|
— | — | — | — | — | — | 23 | — | — | 23 | ||||||||||||||||||||||||||||||
|
Stock-based compensation
|
— | — | — | — | 1,416 | — | — | — | — | 1,416 | ||||||||||||||||||||||||||||||
|
Unrealized holding gain on available-for-sale securities for the
year ended December 31, 2006
|
— | — | — | — | — | 20 | — | — | — | 20 | ||||||||||||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | — | — | — | (22,777 | ) | (22,777 | ) | ||||||||||||||||||||||||||||
|
Comprehensive loss
|
(22,757 | ) | ||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2006 (carried forward)
|
21,637,025 | $ | 85,742 | 4,972,600 | $ | 50 | $ | (2,838 | ) | $ | 26 | $ | (33 | ) | $ | (239 | ) | $ | (50,329 | ) | $ | (53,363 | ) | |||||||||||||||||
See notes to consolidated financial statements
F-10
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS’ EQUITY (DEFICIT)—(Continued)
(In thousands, except share and per share data)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS’ EQUITY (DEFICIT)—(Continued)
(In thousands, except share and per share data)
|
Deficit |
||||||||||||||||||||||||||||||||||||||||
|
Accumulated |
Notes |
Accumulated |
||||||||||||||||||||||||||||||||||||||
|
Convertible |
Additional |
Other |
Deferred |
Receivable |
During the |
Total |
||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock |
Paid-in |
Comprehensive |
Stock-Based |
from Related |
Development |
Shareholders’ |
|||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Compensation | Party | Stage | Deficit | |||||||||||||||||||||||||||||||
|
Balance at December 31, 2006 (brought forward)
|
21,637,025 | $ | 85,742 | 4,972,600 | $ | 50 | $ | (2,838 | ) | $ | 26 | $ | (33 | ) | $ | (239 | ) | $ | (50,329 | ) | $ | (53,363 | ) | |||||||||||||||||
|
Issuance of Series D convertible preferred stock upon
exercise of warrants for $3.97 per share (unaudited)
|
24,382 | 96 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Issuance of Series E convertible preferred stock for $5.00
per share and $90 in financing costs (unaudited)
|
666,000 | 3,330 | — | — | (90 | ) | — | — | — | — | (90 | ) | ||||||||||||||||||||||||||||
|
Issuance of Series E Preferred stock Warrants to placement
agents (unaudited)
|
— | — | — | — | (22 | ) | — | — | — | — | (22 | ) | ||||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of stock options for cash
of $0.27 to $1.00 per share (unaudited)
|
— | — | 277,290 | 3 | 120 | — | — | — | — | 123 | ||||||||||||||||||||||||||||||
|
Issuance of common stock in connection with early-exercise of
stock options for cash of $1.00 per share (unaudited)
|
— | — | 150,000 | 2 | 148 | — | — | — | — | 150 | ||||||||||||||||||||||||||||||
|
Early exercise of common stock subject to repurchase (unaudited)
|
— | — | — | (2 | ) | (148 | ) | — | — | — | — | (150 | ) | |||||||||||||||||||||||||||
|
Amortization of deferred stock-based compensation (unaudited)
|
— | — | — | — | — | — | 17 | — | — | 17 | ||||||||||||||||||||||||||||||
|
Stock-based compensation (unaudited)
|
— | — | — | — | 5,528 | — | — | — | — | 5,528 | ||||||||||||||||||||||||||||||
|
Unrealized holding gain on available-for-sale securities for the
nine months ended September 30, 2007 (unaudited)
|
— | — | — | — | — | 8 | — | — | — | 8 | ||||||||||||||||||||||||||||||
|
Net loss for the nine months ended September 30, 2007
(unaudited)
|
— | — | — | — | — | — | — | — | (18,447 | ) | (18,447 | ) | ||||||||||||||||||||||||||||
|
Comprehensive loss(unaudited)
|
(18,439 | ) | ||||||||||||||||||||||||||||||||||||||
|
Balance at September 30, 2007 (unaudited)
|
22,327,407 | $ | 89,168 | 5,399,890 | $ | 53 | $ | 2,698 | $ | 34 | $ | (16 | ) | $ | (239 | ) | $ | (68,776 | ) | $ | (66,246 | ) | ||||||||||||||||||
See notes to consolidated financial statements
F-11
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
Period from |
||||||||||||||||
|
June 16, 1994 |
||||||||||||||||
|
(Inception) |
||||||||||||||||
|
Year Ended |
through |
|||||||||||||||
| December 31, |
December 31, |
|||||||||||||||
| 2006 | 2005 | 2004 | 2006 | |||||||||||||
|
Operating activities
|
||||||||||||||||
|
Net loss
|
$ | (22,777 | ) | $ | (7,366 | ) | $ | (4,578 | ) | $ | (50,329 | ) | ||||
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
||||||||||||||||
|
Depreciation and amortization
|
232 | 156 | 115 | 742 | ||||||||||||
|
Stock-based compensation expense (credit)
|
1,439 | (507 | ) | 273 | 1,787 | |||||||||||
|
Acquired in-process research and development
|
10,891 | — | — | 10,891 | ||||||||||||
|
Remeasurement of preferred stock warrant values
|
(117 | ) | (9 | ) | — | (126 | ) | |||||||||
|
(Gain) loss on sale of investment securities
|
(145 | ) | 76 | 89 | 114 | |||||||||||
|
Impairment loss on investments
|
— | 76 | 87 | 163 | ||||||||||||
|
Changes in operating assets and liabilities, net of effect from
nura acquisition in 2006:
|
||||||||||||||||
|
Prepaid expenses and other current and noncurrent assets
|
150 | (22 | ) | 5 | (169 | ) | ||||||||||
|
Accounts payable and accrued expenses
|
155 | 971 | (172 | ) | 1,636 | |||||||||||
|
Net cash used in operating activities
|
(10,172 | ) | (6,625 | ) | (4,181 | ) | (35,291 | ) | ||||||||
|
Investing activities
|
||||||||||||||||
|
Purchases of property and equipment
|
(166 | ) | (278 | ) | (124 | ) | (1,094 | ) | ||||||||
|
Purchases of investments
|
(220,914 | ) | (20,589 | ) | (45,863 | ) | (337,448 | ) | ||||||||
|
Proceeds from sale and maturities of investments
|
220,713 | 22,026 | 32,979 | 324,712 | ||||||||||||
|
Cash paid for acquisition of nura, net of cash acquired of $87
|
(212 | ) | — | — | (212 | ) | ||||||||||
|
Net cash (used in) provided by investing activities
|
(579 | ) | 1,159 | (13,008 | ) | (14,042 | ) | |||||||||
|
Financing activities
|
||||||||||||||||
|
Proceeds from borrowings under note payable
|
— | — | — | 50 | ||||||||||||
|
Payments on notes payable
|
(391 | ) | — | (3 | ) | (441 | ) | |||||||||
|
Proceeds from issuance of convertible preferred stock, net of
issuance costs
|
28,963 | 5,407 | 17,242 | 67,847 | ||||||||||||
|
Issuance of Series E convertible preferred stock for $5.00
per share concurrent with acquisition of nura
|
5,200 | — | — | 5,200 | ||||||||||||
|
Proceeds from issuance of common stock and exercise of stock
options
|
126 | 18 | 11 | 242 | ||||||||||||
|
Repurchase of Series A convertible preferred stock and
common stock
|
— | — | — | (165 | ) | |||||||||||
|
Net cash provided by financing activities
|
33,898 | 5,425 | 17,250 | 72,733 | ||||||||||||
|
Net increase (decrease) in cash and cash equivalents
|
23,147 | (41 | ) | 61 | 23,400 | |||||||||||
|
Cash and cash equivalents at beginning of period
|
253 | 294 | 233 | — | ||||||||||||
|
Cash and cash equivalents at end of period
|
$ | 23,400 | $ | 253 | $ | 294 | $ | 23,400 | ||||||||
|
Supplemental cash flow information
|
||||||||||||||||
|
Cash paid for interest
|
$ 91 | $ — | $ — | $ 143 | ||||||||||||
|
Issuance of common stock in exchange for note receivable from
related party
|
$ — | $ 88 | $ — | $ 239 | ||||||||||||
|
Preferred stock and common stock issued in connection with nura
acquisition
|
$ | 14,070 | $ — | $ — | $ | 14,070 | ||||||||||
See notes to consolidated financial statements
F-12
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
(In thousands)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
(In thousands)
|
Period from |
||||||||||||
|
June 16, 1994 |
||||||||||||
|
(Inception) |
||||||||||||
|
Nine Months Ended |
through |
|||||||||||
| September 30, |
September 30, |
|||||||||||
| 2007 | 2006 | 2007 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
|
Operating activities
|
||||||||||||
|
Net loss
|
$ | (18,447 | ) | $ | (18,022 | ) | $ | (68,776 | ) | |||
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Depreciation and amortization
|
272 | 155 | 1,014 | |||||||||
|
Stock-based compensation expense
|
5,545 | 286 | 7,332 | |||||||||
|
Acquired in-process research and development
|
— | 10,891 | 10,891 | |||||||||
|
Remeasurement of preferred stock warrant values
|
615 | (108 | ) | 489 | ||||||||
|
(Gain) on sale of investment securities
|
(124 | ) | (33 | ) | (10 | ) | ||||||
|
Impairment loss on investments
|
— | — | 163 | |||||||||
|
Changes in operating assets and liabilities, net of effect from
nura acquisition in 2006:
|
||||||||||||
|
Prepaid expenses and other current and noncurrent assets
|
964 | (159 | ) | 795 | ||||||||
|
Accounts payable and accrued expenses
|
742 | 160 | 2,378 | |||||||||
|
Deferred revenue
|
(650 | ) | — | (650 | ) | |||||||
|
Net cash used in operating activities
|
(11,083 | ) | (6,830 | ) | (46,374 | ) | ||||||
|
Investing activities
|
||||||||||||
|
Purchases of property and equipment
|
(477 | ) | (108 | ) | (1,571 | ) | ||||||
|
Purchases of investments
|
(280,478 | ) | (90,072 | ) | (617,926 | ) | ||||||
|
Proceeds from sale and maturities of investments
|
272,444 | 87,297 | 597,156 | |||||||||
|
Cash paid for acquisition of nura, including cash transaction
costs of $299 and cash acquired of $87
|
— | (212 | ) | (212 | ) | |||||||
|
Net cash used in investing activities
|
(8,511 | ) | (3,095 | ) | (22,553 | ) | ||||||
|
Financing activities
|
||||||||||||
|
Proceeds from borrowings under note payable
|
— | — | 50 | |||||||||
|
Payments on notes payable
|
(745 | ) | (154 | ) | (1,186 | ) | ||||||
|
Proceeds from issuance of convertible preferred stock, net of
issuance costs
|
3,336 | 21,799 | 71,183 | |||||||||
|
Issuance of Series E convertible preferred stock for $5.00
per share concurrent with acquisition of nura
|
— | 5,200 | 5,200 | |||||||||
|
Proceeds from issuance of common stock and exercise of stock
options
|
123 | 37 | 365 | |||||||||
|
Repurchase of Series A convertible preferred stock and
common stock
|
— | — | (165 | ) | ||||||||
|
Net cash provided by financing activities
|
2,714 | 26,882 | 75,447 | |||||||||
|
Net (decrease) increase in cash and cash equivalents
|
(16,880 | ) | 16,957 | 6,520 | ||||||||
|
Cash and cash equivalents at beginning of period
|
23,400 | 253 | — | |||||||||
|
Cash and cash equivalents at end of period
|
$ 6,520 | $ | 17,210 | $ 6,520 | ||||||||
|
Supplemental cash flow information
|
||||||||||||
|
Cash paid for interest
|
$ 123 | $ 38 | $ 266 | |||||||||
|
Issuance of common stock in exchange for note receivable from
related party
|
$ — | $ — | $ 239 | |||||||||
|
Preferred stock and common stock issued in connection with nura
acquisition
|
$ — | $ | 14,070 | $14,070 | ||||||||
See notes to consolidated financial statements
F-13
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies |
Organization
Omeros Corporation (Omeros or the Company) is a
biopharmaceutical company committed to discovering, developing
and commercializing products focused on inflammation and
disorders of the central nervous system. The Company’s most
clinically advanced product candidates are derived from its
proprietary
PharmacoSurgerytm
platform designed to improve clinical outcomes of patients
undergoing arthroscopic, ophthalmological, urological and other
surgical and medical procedures. As substantially all efforts of
the Company have been devoted to conducting research and
development of its products, developing the Company’s
patent portfolio, and raising equity capital, the Company is
considered to be in the development stage.
Basis of
Presentation
The consolidated financial statements include the financial
position and results of operations of Omeros and nura, inc.
(nura), its wholly-owned subsidiary. See Note 5 related to
the acquisition of nura.
The acquisition of nura was accounted for as an asset purchase,
and the results of nura have been included in the results of the
Company since August 11, 2006. The inclusion of nura for a
portion of 2006 impacted the comparability of the Company’s
2006 financial information with the financial information for
2005 and 2004. While all of the Company’s financial
statements are labeled as consolidated, the financial statements
for any period prior to August 11, 2006 do not include nura.
Financial
Instruments and Concentration of Credit Risk
The fair values of cash, cash equivalents, receivable associated
with funding agreement, and accounts payable and notes payable,
which are recorded at cost, approximate fair value based on the
short-term nature of these financial instruments. The fair value
of short-term investments is based on quoted market prices. The
carrying value of notes receivable from a related party was
$239,000 at September 30, 2007 and December 31,
2006 and 2005. Due to the related-party nature of these loans,
and their indefinite terms, the Company does not believe that it
is practical to estimate their fair value.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents, and short-term investments. Cash and cash
equivalents are held by financial institutions and are federally
insured up to certain limits. At times, the Company’s cash
and cash equivalents balance exceeds the federally insured
limits. To limit the credit risk, the Company invests its excess
cash primarily in high quality securities such as money market
funds, certificates of deposit, commercial paper and
mortgage-backed securities issued by, or fully collateralized
by, the U.S. government or federal agencies.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
F-14
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
Unaudited Interim
Financial Information
The financial statements as of September 30, 2007, for the
nine month periods ended September 30, 2007 and the
nine months ended September 30, 2006, and for the
period from June 16, 1994 (inception) through
September 30, 2007 are unaudited. The unaudited financial
statements have been prepared on the same basis as the audited
financial statements and, in the opinion of management, include
all adjustments, consisting only of normal recurring
adjustments, necessary to state fairly the financial information
therein. The results of operations for the nine months ended
September 30, 2007 are not necessarily indicative of the
results that may be reported for the year ending
December 31, 2007.
Unaudited Pro
Forma Shareholders’ Equity
In December 2007, the Company’s Board of Directors
authorized the filing of a registration statement with the
Securities and Exchange Commission to sell shares of its common
stock to the public in an initial public offering (the IPO). All
of the Company’s convertible preferred stock outstanding at
September 30, 2007 will convert into 22,327,407 shares
of common stock upon completion of the IPO, assuming a
conversion ratio of one share of common stock for every one
share of convertible preferred stock. Unaudited pro forma
shareholders’ equity assumes the conversion of all
preferred stock into 22,327,407 shares of common stock and
the conversion of all preferred stock warrants to common stock
warrants resulting in the preferred stock warrant liability
being reclassified to additional paid-in capital. Certain of
these warrants totaling 512,029 shares, must be exercised
prior to the IPO, or they will expire. An additional 22,613
warrants will survive the IPO.
Cash and Cash
Equivalents, Short-Term Investments, and Restricted
Cash
Cash and cash equivalents include highly liquid investments with
a maturity of three months or less on the date of purchase.
Short-term investment securities are classified as
available-for-sale and are carried at fair value. Unrealized
gains and losses are reported as a separate component of
shareholders’ deficit. Amortization, accretion, interest
and dividends, realized gains and losses, and declines in value
judged to be other-than-temporary are included in investment
income. The cost of securities sold is based on the
specific-identification method. Investments in securities with
maturities of less than one year, or those for which management
intends to use the investments to fund current operations, are
included in current assets.
The Company evaluates whether an investment is
other-than-temporarily impaired. This evaluation is dependent on
the specific facts and circumstances. Factors that are
considered in determining whether an other-than-temporary
decline in value has occurred include: the market value of the
security in relation to its cost basis; the financial condition
of the investee; and the intent and ability to retain the
investment for a sufficient period of time to allow for recovery
in the market value of the investment.
Restricted cash consists of cash equivalents, the use of which
is restricted by either contract or agreement. At
September 30, 2007 and December 31, 2006, the Company
held a
F-15
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
money market account in the amount of $207,000 and $202,000,
respectively, as collateral securing a letter of credit under
the facility operating lease.
Notes Receivable
from Related Party
The Company received notes, which were determined to be
non-recourse for accounting purposes, from the president, chief
executive officer, chief medical officer and chairman of the
board directors of the Company in conjunction with the exercise
of certain stock options. At September 30, 2007 and
December 31, 2006 and 2005, the Company has not recorded
any allowance for doubtful accounts based on its assessment of
the collectibility of the notes receivable at those dates. Notes
receivable are stated at the principal amount. As the notes
receivable are related to the purchase of the Company’s
common stock, the Company records the notes as a deduction from
shareholders’ deficit.
Property and
Equipment
Property and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated
useful life of the assets, which is generally three to five
years. Leasehold improvements are stated at cost and amortized
using the straight-line method over the term of the lease or
five years, whichever is shorter.
Intangible
Assets
In August 2006, the Company acquired certain intangible assets
related to the acquisition of nura (see Note 5). The
Company assigned a value of $310,000 to assembled and trained
workforce with an amortizable life of three years. The
accumulated amortization of the assembled workforce was $121,000
at September 30, 2007 and $43,000 at December 31,
2006. The Company expects to record amortization of the
assembled workforce of $103,000, $103,000 and $61,000 in 2007,
2008, and 2009, respectively.
Impairment of
Long-Lived Assets
The carrying amount of long-lived assets, including property and
equipment and intangible assets, that are not considered to have
an indefinite useful life are reviewed whenever events or
changes in circumstances indicate that the carrying value of an
asset many not be recoverable. Recoverability of these assets is
measured by comparing the carrying value to future undiscounted
cash flows that the asset is expected to generate. If the asset
is considered to be impaired, the amount of any impairment will
be reflected in the results of operations in the period of
impairment. No impairment existed as of September 30, 2007
and December 31, 2006.
F-16
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
Accrued
Expenses
Accrued expenses consist of the following:
|
September 30, |
December 31, | |||||||||||
|
2007
|
2006 | 2005 | ||||||||||
| (in thousands) | ||||||||||||
|
Employee compensation
|
$293 | $ | 263 | $ | 151 | |||||||
|
Clinical trials
|
619 | 215 | 271 | |||||||||
|
Other accruals
|
617 | 129 | 379 | |||||||||
|
Accrued expenses
|
$ | 1,529 | $ | 607 | $ | 801 | ||||||
Deferred
Rent
The Company recognizes rent expense on a straight-line basis
over the noncancelable term of its operating lease and,
accordingly, records the difference between cash rent payments
and the recognition of rent expense as a deferred rent
liability. The Company also records landlord-funded lease
incentives, such as reimbursable leasehold improvements, as a
deferred rent liability which is amortized as a reduction of
rent expense over the noncancelable terms of its operating lease.
Preferred Stock
Warrant Liability
Effective July 1, 2005, the Company adopted the provisions
of Financial Accounting Standards board (FASB) Staff Position
No. 150-5,
“Issuer’s Accounting under Statement No. 150 for
Freestanding Warrants and Other Similar Instruments on Shares
that are Redeemable,”
(FSP 150-5)
an interpretation of SFAS No. 150, “Accounting
for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity” (SFAS 150). Pursuant to
FSP 150-5
and SFAS 150, the freestanding warrants to purchase the
Company’s convertible preferred stock are classified as
liabilities and are recorded at fair value. Upon adoption of
FSP 150-5,
the Company reclassified the estimated fair value of its
freestanding warrants from equity to a liability. The difference
in fair value of the warrants from the date of grant through the
date of adoption, was immaterial. At each subsequent reporting
period, any change in fair value of the freestanding warrants is
recorded as other expense or income.
For the nine months ended September 30, 2007 and the nine
months ended September 30, 2006 the Company recorded
expense (income) of $615,000 and $(108,000), respectively, and
for the years ended December 31, 2006 and 2005, the Company
recorded income of $117,000 and $9,000, respectively, to reflect
the change in estimated fair value of the freestanding warrants.
The cumulative effect upon adoption of
FSP 150-5
as of July 1, 2005 was not material.
Revenue
Revenue arrangements are accounted for in accordance with the
provisions of Securities and Exchange Commission (SEC) Staff
Accounting Bulletin (SAB) No. 104, “Revenue
Recognition,” and Emerging Issues Task Force (EITF)
No. 00-21,
“Revenue Arrangements with Multiple Deliverables.” A
variety of factors are considered in determining the appropriate
method of revenue recognition under these arrangements, such as
whether the various
F-17
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
elements can be considered separate units of accounting, whether
there is objective and reliable evidence of fair value for these
elements and whether there is a separate earnings process
associated with a particular element of an agreement.
The Company’s revenue since inception relates to grant
funding from third parties. The Company recognizes such funds as
revenue when the related qualified research and development
expenses are incurred up to the limit of the approved funding
amounts.
In December 2006, the Company entered into a funding agreement
with The Stanley Medical Research Institute (SMRI) to develop a
proprietary product candidate for the treatment of
schizophrenia. The funding is expected to advance the
Company’s schizophrenia program though the completion of
Phase 1 clinical trials. Under the agreement, the Company may
receive grant and equity funding up to $9.0 million upon
achievement of research milestones. The Company holds the
exclusive rights to the technology. In consideration for
SMRI’s grant funding, the Company may become obligated to
pay SMRI royalties based on net income, as defined, from
commercial sales of the schizophrenia product, not to exceed a
set multiple of total grant funding received. If the product
does not reach commercialization, the Company is not required to
repay the grant funds. Upon execution of the agreement in
December 2006, the Company recorded $1.3 million as
deferred revenue for the amount due from SMRI as the initial
funding payment. As of December 31, 2006, SMRI was
obligated to pay, and in January 2007 Omeros received, the
$1.3 million. The grant revenue is recognized as research
is performed.
Research and
Development
Research and development costs are comprised primarily of costs
for personnel, including salaries and benefits; occupancy;
clinical studies performed by third parties; materials and
supplies to support the Company’s clinical programs;
contracted research; manufacturing; related consulting
arrangements; and other expenses incurred to sustain the
Company’s overall research and development programs.
Internal research and development costs are expensed as
incurred. Third-party research and development costs are
expensed at the earlier of when the contracted work has been
performed or as upfront and milestone payments are made.
Clinical trial expenses require certain estimates. The Company
estimates these costs based upon a cost per patient that varies
depending on the site of the clinical trial.
In-Process
Research and Development
In connection with the acquisition of nura in August 2006, the
Company recorded an expense of $10.9 million for acquired
in-process research and development. This amount represented the
estimated fair value related to incomplete product candidate
development projects for which, at the time of the acquisition,
technological feasibility had not been established and there was
no alternative future use.
Patents
The Company generally applies for patent protection on processes
and products. Patent application costs are expensed as incurred
as a component of general and administrative expense, as
recoverability of such expenditures is uncertain.
F-18
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
Income
Taxes
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates applied to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. A valuation allowance
is established when necessary to reduce deferred tax assets to
the amount expected to be realized.
Other
Comprehensive Loss
Other comprehensive loss includes certain changes in equity that
are excluded from net loss. The Company’s only component of
other comprehensive loss is unrealized gains (losses) on
available-for-sale securities.
Net Loss Per
Common Share
Basic net loss per common share is calculated by dividing the
net loss by the weighted-average number of common shares
outstanding for the period, less weighted-average unvested
common shares subject to repurchase and common shares subject to
the shareholder note receivable. Diluted net loss per common
share is computed by dividing the net loss applicable to common
shareholders by the weighted-average number of unrestricted
common shares and dilutive common share equivalents outstanding
for the period, determined using the treasury-stock method and
the as if converted method.
EITF No. 03-6 requires net loss attributable to common
shareholders for each period to be allocated to common stock and
participating securities to the extent that the securities are
required to share in the losses. The Company’s
Series A through E convertible preferred stock do not have
a contractual obligation to share in losses of the Company. As a
result, basic net loss per common share is calculated by
dividing net loss by the weighted-average shares of common stock
outstanding during the period.
F-19
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
The following table presents the computation of basic and
diluted net loss per common share (in thousands, except share
and per share data):
|
Nine Months Ended |
||||||||||||||||||||
| September 30, | Year Ended December 31, | |||||||||||||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | ||||||||||||||||
|
Historical
Numerator: |
||||||||||||||||||||
|
Net Loss
|
$ (18,447 | ) | $ (18,022 | ) | $ (22,777 | ) | $ (7,366 | ) | $ (4,578 | ) | ||||||||||
|
Denominator:
|
||||||||||||||||||||
|
Weighted-average common shares outstanding
|
5,172,736 | 4,581,464 | 4,622,315 | 4,096,813 | 4,044,124 | |||||||||||||||
|
Less: Weighted-average unvested common shares subject to
repurchase
|
(59,890 | ) | — | — | — | — | ||||||||||||||
|
Less: Common shares subject to shareholder note receivable
|
(927,927 | ) | (927,927 | ) | (927,927 | ) | (627,927 | ) | (627,927 | ) | ||||||||||
|
Denominator for basic and diluted net loss per common share
|
4,184,919 | 3,653,537 | 3,694,388 | 3,468,886 | 3,416,197 | |||||||||||||||
|
Basic and diluted net loss per common share
|
$ (4.41 | ) | $ (4.93 | ) | $ (6.17 | ) | $ (2.12 | ) | $ (1.34 | ) | ||||||||||
Historical outstanding dilutive securities not included in
diluted loss per common share calculation:
| September 30, | December 31, | |||||||||||||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | ||||||||||||||||
|
Convertible preferred stock
|
22,327,407 | 20,147,025 | 21,637,025 | 12,081,880 | 10,929,670 | |||||||||||||||
|
Options to purchase common stock
|
5,257,413 | 1,113,987 | 5,073,594 | 1,246,095 | 1,463,512 | |||||||||||||||
|
Common stock subject to shareholder note receivable
|
927,927 | 927,927 | 927,927 | 629,927 | 629,927 | |||||||||||||||
|
Warrants to purchase common stock and convertible preferred stock
|
534,642 | 498,821 | 550,981 | 287,288 | 313,515 | |||||||||||||||
|
Common stock subject to repurchase
|
150,000 | — | — | — | — | |||||||||||||||
|
Total
|
29,197,389 | 22,687,760 | 28,189,527 | 14,245,190 | 13,334,624 | |||||||||||||||
F-20
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
|
Nine Months |
||||||||
|
Ended |
Year Ended |
|||||||
|
September 30, |
December 31, |
|||||||
| 2007 | 2006 | |||||||
|
Pro Forma (unaudited)
|
||||||||
|
Numerator:
|
||||||||
|
Net Loss
|
$ (18,447 | ) | $ (22,777 | ) | ||||
|
Plus: other expense (income) attributable to the convertible
preferred stock warrants assumed to have been converted to
common stock warrants
|
615 | (117 | ) | |||||
|
Pro forma net loss
|
$ (17,832 | ) | $ (22,894 | ) | ||||
|
Denominator:
|
||||||||
|
Denominator for basic and diluted net loss per common share
|
4,184,919 | 3,694,388 | ||||||
|
Plus: pro forma adjustments to reflect assumed
weighted-average effect of conversion of convertible preferred
stock
|
21,892,752 | 16,220,761 | ||||||
|
Plus: common shares subject to shareholder note receivable
assumed to be issued upon note repayment
|
927,927 | 927,927 | ||||||
|
Denominator for pro forma basic and diluted net loss per common
share
|
27,005,598 | 20,843,076 | ||||||
|
Pro forma basic and diluted net loss per common share
|
$ (0.66 | ) | $ (1.10 | ) | ||||
Unaudited pro forma basic and diluted net loss per common share
and shares used in computations of pro forma basic and diluted
net loss per common share assume conversion of all shares of
convertible preferred stock into common stock, conversion of all
convertible preferred stock warrants into common stock warrants,
as well as the repayment of the shareholder note receivable as
of January 1, 2006 or the date of issuance, if later.
Stock-Based
Compensation
Prior to January 1, 2006, the Company had adopted the
disclosure-only provisions of SFAS No. 123, Accounting
for Stock-Based Compensation (SFAS 123), as amended by
SFAS No. 148, Accounting for Stock-Based
Compensation—Transition and Disclosure (SFAS 148), and
applied Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), and related
interpretations in accounting for stock options issued prior to
December 31, 2005. Accordingly, through December 31,
2005, employee stock-based compensation expense was recognized
based on the intrinsic value of the option at the date of grant.
Effective January 1, 2006, the Company adopted the fair
value recognition provisions of Statement of Financial
Accounting Standards (SFAS) No. 123R, “Share-Based
Payment” (SFAS 123R) under the prospective method
which requires the measurement and recognition of compensation
expenses for all future share-based payments made to employees
and
F-21
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
directors be based on estimated fair values. The Company is
using the straight-line method to allocate compensation cost to
reporting periods over the optionees’ requisite service
period.
As of September 30, 2007 and December 31, 2006, the
expected future amortization expense for deferred share-based
compensation is as follows:
|
September 30, |
December 31, |
|||||||
|
Years Ending December 31,
|
2007 | 2006 | ||||||
| (in thousands) | ||||||||
|
2007
|
$ | 4 | $ | 21 | ||||
|
2008
|
12 | 12 | ||||||
|
Total
|
$ | 16 | $ | 33 | ||||
Stock options granted to non-employees prior to
December 31, 2005 continue to be accounted for using the
fair value approach in accordance with SFAS 123 and
Emerging Issues Task Force Consensus (EITF) Issue
No. 96-18,
“Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services”
(EITF 96-18).
The options to non-employees are subject to periodic
reevaluation over their vesting terms.
For purposes of estimating the fair value of its common stock
for stock option grants under SFAS 123R, the Company
reassessed the estimated fair value of its common stock as of
December 31, 2005 and 2006 and for the quarterly periods
ended March 31, 2007, June 30, 2007, and
September 30, 2007 by performing valuation analyses as of
the above dates. As a result, the stock options granted in 2006
and 2007 had an exercise price less than the estimated fair
value of the common stock at the date of grant. The Company used
these fair value estimates derived from the valuations to
determine the SFAS 123R stock compensation expense which is
recorded in its financial statements. The valuations were
prepared using a methodology that first estimated the fair value
of the company as a whole, and then allocated a portion of the
enterprise value to common stock. This approach is consistent
with the methods outlined in the AICPA Practice Aid Valuation of
Privately-Held-Company Equity Securities Issued as Compensation.
Significant Risks
and Uncertainties
The Company has incurred significant losses from operations
since its inception and expects losses to continue for the
foreseeable future. The Company’s success depends primarily
on the development and regulatory approval of its product
candidates. From June 16, 1994 (inception) through
September 30, 2007, the Company has incurred cumulative net
losses of $68.8 million. To achieve profitable operations,
the Company must successfully identify, develop and
commercialize its products. Products developed by the Company
will require approval of the Food and Drug Administration (FDA)
or a foreign regulatory authority prior to commercial sales. The
regulatory approval process is expensive, time consuming and
uncertain, and any denial or delay of approval could have a
material adverse effect on the Company. Even if approved, the
Company’s products may not achieve market acceptance and
certain of our products could face competition. The Company will
need to raise additional funds to support its operations, and
such funding may not be available to it on acceptable
F-22
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
terms, if at all. The Company’s board of directors has
approved the filing of a registration statement on
Form S-1
with respect to a proposed initial public offering of its common
stock. The Company may seek additional sources of financing
through collaborations with third parties, or public or private
debt or equity financings and may also reduce expenses related
to its operations if such funding is unavailable.
Segments
The Company operates in only one segment. Management uses cash
flow as the primary measure to manage its business and does not
segment its business for internal reporting or decision-making.
Reclassifications
Realized loss on sale of investments in 2005 and 2004 on the
statements of cash flows was previously reported as a component
of proceeds from sale and maturities of available-for-sale
securities. The Company reclassified the investment gains
realized to (gain) loss on sale of investment securities for the
years 2005 and 2004 to match current presentation. These
reclassifications did not materially affect the balance sheets,
statements of operations or statements of cash flows, as
previously presented.
Recent Accounting
Pronouncements
The Company adopted Financial Accounting Standards Board
Interpretation No. 48 “Accounting for Uncertainties in
Income Taxes—an interpretation of FASB Statement
No. 109” (FIN 48) effective January 1, 2007.
FIN 48 requires that the Company recognize the financial
statement effects of a tax position when it is more likely than
not, based on the technical merits, that the position will be
sustained upon examination. No cumulative adjustment to the
Company’s accumulated deficit was required upon adoption of
FIN 48.
As of January 1, 2007, the Company had no unrecognized tax
benefits, and expected no unrecognized tax benefits in the next
12 months.
The Company files its income tax return in the United States,
which typically provides for a three year statute of limitations
on assessments. However, because of net operating loss
carryforwards, substantially all of the Company’s tax years
remain open to examination by the Internal Revenue Service.
The Company’s policy is to recognize interest and penalties
related to the underpayment of income taxes as a component of
income tax expense. To date, there have been no interest or
penalties charged to the Company in relation to the underpayment
of income taxes.
In September 2006, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 108, “Considering
the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements”
(SAB 108). SAB 108 provides guidance on the
consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a
materiality assessment. SAB 108 establishes an approach
that requires quantification of financial statement errors based
on the effects on each of the Company’s balance sheets and
statement of operations and the related financial statement
F-23
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
disclosures. SAB 108 was adopted by the Company in the
first quarter of 2007. The Company has determined that the
adoption of SAB 108 had no material effect on its results
of operations and financial position.
In September 2006, the FASB issued SFAS No. 157,
“Fair Value Measurements” (SFAS 157).
SFAS 157 provides guidance for using fair value to measure
assets and liabilities. It also responds to investors’
requests for expanded information about the extent to which
companies measure assets and liabilities at fair value, the
information used to measure fair value, and the effect of fair
value measurements on earnings. SFAS 157 applies whenever
other standards require (or permit) assets or liabilities to be
measured at fair value, and does not expand the use of fair
value in any new circumstances. SFAS 157 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007 and is required to be adopted by the
Company effective January 1, 2008. The Company is currently
evaluating the effect, if any, that the adoption of
SFAS 157 will have on its results of operations and
financial position.
In February 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial
Liabilities—Including an amendment of FASB Statement
No. 115” (SFAS 159). SFAS 159 provides
companies with an option to report selected financial assets and
liabilities at fair value. The objective of SFAS 159 is to
reduce both complexity in accounting for financial instruments
and the volatility in earnings caused by measuring related
assets and liabilities differently. Most of the provisions in
SFAS 159 are elective; however, the amendment to FASB
Statement No. 115, “Accounting for Certain Investments
in Debt and Equity Securities,” applies to all entities
with available-for-sale and trading securities. SFAS 159 is
effective as of the beginning of an entity’s first fiscal
year beginning after November 15, 2007. The Company is
currently evaluating the effect, if any, that the adoption of
SFAS 159 will have on its results of operations and
financial position.
In June 2007, the Financial Accounting Standards Board (FASB)
ratified EITF Issue No. 07-3 “Accounting for
Nonrefundable Advance Payments for Goods or Services to Be Used
in Future Research and Development Activities”
(EITF 07-3). The scope of EITF 07-3 is limited to
nonrefundable advance payments for goods and services to be used
or rendered in future research and development activities. This
issue provides that nonrefundable advance payments for goods or
services that will be used or rendered for future research and
development activities should be deferred and capitalized. Such
amounts should be recognized as an expense as the related goods
are delivered or the related services are performed. The Company
intends to adopt EITF 07-3 effective January 1, 2008.
The impact of applying this consensus will depend on the terms
of future research and development contractual arrangements
entered into on or after December 15, 2007.
| Note 2— | Investments |
Cash, cash equivalents, restricted cash and
available-for-sale
securities, all of which are carried at fair value, consisted of
the following as of September 30, 2007, December 31,
2006 and 2005:
F-24
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 2— | Investments—(Continued) |
| September 30, 2007 | ||||||||||||||||
|
Gross |
Gross |
|||||||||||||||
|
Amortized |
Unrealized |
Unrealized |
||||||||||||||
| Cost | Gains | Losses | Fair Value | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Cash
|
$ | 1,737 | $ | — | $ | — | $ | 1,737 | ||||||||
|
Commercial paper
|
4,990 | — | — | 4,990 | ||||||||||||
|
Mortgage-backed securities
|
20,617 | 34 | 20,651 | |||||||||||||
|
Total
|
$ | 27,344 | $ | 34 | $ | — | $ | 27,378 | ||||||||
|
Amounts classified as cash and cash equivalents
|
$ | 6,520 | ||||||||||||||
|
Amounts classified as restricted cash
|
207 | |||||||||||||||
|
Amounts classified as short-term investments
|
20,651 | |||||||||||||||
|
Total
|
$ | 27,378 | ||||||||||||||
| December 31, 2006 | ||||||||||||||||
|
Gross |
Gross |
|||||||||||||||
|
Amortized |
Unrealized |
Unrealized |
||||||||||||||
| Cost | Gains | Losses | Fair Value | |||||||||||||
| (in thousands) | ||||||||||||||||
|
Cash
|
$ | 8,617 | $ | — | $ | — | $ | 8,617 | ||||||||
|
Commercial paper
|
14,985 | — | — | 14,985 | ||||||||||||
|
Mortgage-backed securities
|
12,459 | 26 | — | 12,485 | ||||||||||||
|
Total
|
$ | 36,061 | $ | 26 | $ | — | $ | 36,087 | ||||||||
|
Amounts classified as cash and cash equivalents
|
$ | 23,400 | ||||||||||||||
|
Amounts classified as restricted cash
|
202 | |||||||||||||||
|
Amounts classified as short-term investments
|
12,485 | |||||||||||||||
|
Total
|
$ | 36,087 | ||||||||||||||
F-25
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 2— | Investments—(Continued) |
| December 31, 2005 | ||||||||||||||||
|
Gross |
Gross |
|||||||||||||||
|
Amortized |
Unrealized |
Unrealized |
||||||||||||||
| Cost | Gains | Losses | Fair Value | |||||||||||||
|
Cash
|
$ | 253 | $ | — | $ | — | $ | 253 | ||||||||
|
Mortgage-backed Securities
|
12,113 | 6 | — | 12,119 | ||||||||||||
|
Total
|
$ | 12,366 | $ | 6 | $ | — | $ | 12,372 | ||||||||
|
Amounts classified as cash and cash equivalents
|
$ | 253 | ||||||||||||||
|
Amounts classified as short-term investments
|
12,119 | |||||||||||||||
|
Total
|
$ | 12,372 | ||||||||||||||
The Company’s investment portfolio is made up of cash,
commercial paper and mortgage-backed, adjustable-rate securities
issued by, or fully collateralized by, the U.S. government or
federal agencies. The mortgage-based securities have contractual
maturities ranging from nine to 31 years at
September 30, 2007 and December 31, 2006. Due to
normal annual prepayments of 20% to 25%, the average life of the
portfolio is four to five years. The adjustable rate feature
further shortens the maturity and interest risk of the
portfolio, making it similar to a one-year government agency
security. All investments are classified as short-term on the
accompanying balance sheet.
The composition of the Company’s investment income is as
follows:
|
Nine Months Ended |
||||||||||||||||||||
| September 30, | Year Ended December 31, | |||||||||||||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
|
Gross interest income
|
$ | 1,049 | $ | 689 | $ | 943 | $ | 485 | $ | 339 | ||||||||||
|
Impairment loss on investments
|
— | — | — | (76 | ) | (87 | ) | |||||||||||||
|
Gross realized gains on sales of investments
|
254 | 129 | 270 | 6 | 8 | |||||||||||||||
|
Gross realized losses on sales of investments
|
(130 | ) | (96 | ) | (125 | ) | (82 | ) | (89 | ) | ||||||||||
|
Total investment income
|
$ | 1,173 | $ | 722 | $ | 1,088 | $ | 333 | $ | 171 | ||||||||||
F-26
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 3— | Property and Equipment |
Property and equipment consists of the following:
|
September 30, |
December 31, | |||||||||||
|
2007
|
2006 | 2005 | ||||||||||
| (in thousands) | ||||||||||||
|
Computer equipment
|
$ | 261 | $ | 229 | $ | 197 | ||||||
|
Purchased software
|
19 | 16 | — | |||||||||
|
Office equipment and furniture
|
266 | 236 | 221 | |||||||||
|
Leasehold improvements
|
266 | 261 | 255 | |||||||||
|
Laboratory equipment
|
940 | 534 | 255 | |||||||||
|
Total
|
1,752 | 1,276 | 928 | |||||||||
|
Less accumulated depreciation and amortization
|
(892 | ) | (699 | ) | (510 | ) | ||||||
|
Property and equipment, net
|
$ | 860 | $ | 577 | $ | 418 | ||||||
The Company’s property and equipment have lives that range
from three to five years with the exception of the leasehold
improvements that are limited to the lesser of the term of the
lease or five years. Depreciation expense for the nine months
ended September 30, 2007 and for the years ended
December 31, 2006 and 2005 was $193,000, $189,000 and
$156,000, respectively.
| Note 4— | Notes Payable |
In April 2005, nura entered into a financing agreement under
which nura borrowed $3.0 million. Borrowings under the loan
bear interest at the holder’s prime rate. The Company
assumed this note upon its acquisition of nura in August 2006.
The Company is not subject to financial and operating convents
under the terms of the credit agreement. The lender has security
interest in all of nura’s assets including the intellectual
property. As of December 31, 2006, $2.0 million was
outstanding under the promissory note with interest accruing at
a rate of 9.69% per year.
Future principal payments related to the promissory note at
December 31, 2006 are as follows (in thousands):
|
Year Ending December 31,
|
||||
|
2007
|
$ | 1,005 | ||
|
2008
|
1,010 | |||
|
Total future principal payments
|
$ | 2,015 | ||
| Note 5— | Acquisition of nura |
Effective August 11, 2006, the Company acquired nura, inc.
(nura), a private biotechnology company which expanded and
diversified the Company’s potential product pipeline and
strengthened its discovery capabilities. The Company completed
the acquisition of nura through the issuance of
3,398,445 shares of Omeros Series E convertible
preferred stock and 36,246 shares of common stock, and the
assumption of a $2.4 million promissory note. The
F-27
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 5— | Acquisition of nura—(Continued) |
convertible preferred stock issued in conjunction with the
acquisition included shares issued to certain nura shareholders
in exchange for their $5.2 million investment in Omeros
concurrent with the acquisition. nura’s primary assets
included its research and development team and a proprietary
drug discovery platform. The Company assigned a value of
$14.1 million to the convertible preferred shares issued to
the nura stockholders. This value was based upon the implied
value of the Company’s preferred shares considering the
enterprise value of the Company at the date of the transaction.
The acquisition of nura, a development stage drug discovery
company, was accounted for as an acquisition of assets rather
than as a business combination in accordance with the criteria
outlined in
EITF 98-3
“Determining Whether a Nonmonetary Transaction Involves
Receipt of Productive Assets or of a Business.” The results
of operations of nura since August 11, 2006 have been
included in the Company’s financial statements and consist
primarily of research and development expenses.
The aggregate purchase price of nura was $14.4 million,
consisting of the issuance of 3,398,445 shares of Omeros
convertible preferred stock, 36,246 shares of Omeros common
stock and $299,000 in direct transaction costs. The purchase
price was allocated as follows (in thousands):
|
Cash
|
$ 87 | |||
|
Prepaid assets and other current assets
|
233 | |||
|
Cash investment from existing nura institutional investors
|
5,200 | |||
|
Equipment
|
182 | |||
|
Assumed liabilities
|
(2,535 | ) | ||
|
Net tangible assets
|
3,167 | |||
|
Assembled workforce
|
310 | |||
|
Acquired in-process research and development
|
10,891 | |||
|
Total fair value of assets acquired, net of liabilities assumed
|
$ | 14,368 | ||
Assumed liabilities include notes payable of $2.4 million,
accounts payable and accrued expenses of $65,000, and preferred
stock warrant liability of $64,000.
The value assigned to assembled workforce is being amortized
over three years. The value assigned to acquired in-process
research and development represented the fair value of
nura’s incomplete research and development programs that
had not yet reached technological feasibility and had no
alternative future use as of the acquisition date.
The value of the acquired in-process research and development
was determined by estimating the future net cash flows of
development programs using a present value risk adjusted
discount rate of 40%. The projected cash flows from the acquired
project were based on estimates considering the stage of
development, the time and resources needed to complete product
development, and associated risks including the inherent
difficulties and uncertainties in developing a drug compound,
including obtaining FDA and other regulatory
F-28
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 5— | Acquisition of nura—(Continued) |
approvals. The value of acquired in-process research and
development of $10.9 million was recorded as an operating
expense in 2006.
The following unaudited pro forma financial information has been
prepared in accordance with Article 11 of
Regulation S-X
and presents the statement of operations for the year ended
December 31, 2006 as if the acquisition of nura had been
consummated as of January 1, 2006. The unaudited pro forma
financial statements combine the results of operations of Omeros
for the year ended December 31, 2006 with the results of
operations of nura for the period from January 1, 2006 to
August 11, 2006, and reflect pro forma adjustments that are
directly attributable to the acquisition, factually supportable
and have a continuing impact. The unaudited pro forma statements
of operations do not reflect any incremental direct costs or any
potential cost savings that may result from the consolidation of
the operations of Omeros and nura. Accordingly, the unaudited
pro forma financial information is presented for illustrative
purposes and is not necessarily indicative of the results of
operations of the combined company that would have occurred had
the acquisition occurred at the beginning of the period
presented, nor is it necessarily indicative of future operating
results. The unaudited pro forma information is as follows:
|
Pro Forma |
Pro Forma |
|||||||||||||||
| Omeros | Nura | Adjustments | Combined | |||||||||||||
| (In thousands, except share and per share data) | ||||||||||||||||
|
Grant revenue
|
$ | 200 | $ | 200 | $ | — | $ | 400 | ||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
9,637 | 2,394 | — | 12,031 | ||||||||||||
|
Acquired in-process research and development
|
10,891 | — | (10,891 | ) (1) | — | |||||||||||
|
General and administrative
|
3,625 | 957 | 63 | (2) | 4,645 | |||||||||||
|
Total operating expenses
|
24,153 | 3,351 | (10,828 | ) | 16,676 | |||||||||||
|
Loss from operations
|
(23,953 | ) | (3,151 | ) | 10,828 | (16,276 | ) | |||||||||
|
Investment income
|
1,088 | 8 | — | 1,096 | ||||||||||||
|
Other income
|
179 | 219 | — | 398 | ||||||||||||
|
Interest expense
|
(91 | ) | (295 | ) | — | (386 | ) | |||||||||
|
Net loss
|
$ | (22,777 | ) | $ | (3,219 | ) | $ | 10,828 | $ | (15,168 | ) | |||||
|
Weighted-average common shares outstanding
|
3,694,388 | — | 22,106 | (3) | 3,716,494 | |||||||||||
|
Pro forma basic and diluted net loss per common share
|
$ | (4.08 | ) | |||||||||||||
| (1) | Represents an adjustment to reverse the $10.9 million non-recurring charge for purchased in-process research and development recorded in the historical financial statements of Omeros that resulted directly from the August 11, 2006 acquisition of nura. |
F-29
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 5— | Acquisition of nura—(Continued) |
| (2) | Represents amortization of assembled workforce acquired in the acquisition for the period of $63,000. | |
| (3) | Represents weighed average number of shares issued in connection with the acquisition. |
| Note 6— | Commitments and Contingencies |
The Company leases laboratory and corporate office space, and
rents equipment under operating lease agreements which include
certain rent escalation terms. The Company subleases a portion
of its leased properties. Future minimum payments related to the
leases, which exclude common area maintenance and related
operating expenses, at December 31, 2006 are as follows:
|
Lease |
Sublease |
Net Lease |
||||||||||
|
Year Ending December 31,
|
Payments | Income | Payments | |||||||||
| (in thousands) | ||||||||||||
|
2007
|
$ | 1,333 | $ | 252 | $ | 1,081 | ||||||
|
2008
|
1,117 | 69 | 1,048 | |||||||||
|
2009
|
438 | — | 438 | |||||||||
|
2010
|
427 | — | 427 | |||||||||
|
2011
|
279 | — | 279 | |||||||||
|
Total
|
$ | 3,594 | $ | 321 | $ | 3,273 | ||||||
Rent expense totaled $1.4 million and $650,000 for the nine
months ended September 30, 2007 and the nine months
ended September 30, 2006, respectively, and
$1.1 million, $607,000 and $540,000 for the years ended
December 31, 2006, 2005 and 2004, respectively. Rental
income received under noncancelable subleases was $261,000 and
$61,000 for the nine months ended September 30, 2007 and
the year ended December 31, 2006, respectively. There was
no rental income received under noncancelable subleases for the
nine months ended September 30, 2006 and the years ended
December 31, 2005 and 2004.
The original term for the Company’s laboratory space is
through September 30, 2008. On September 30, 2007, the
Company exercised its option to extend its leases for this
laboratory space. The leases were extended through
September 30, 2011. Lease rates have not yet been set and
will be determined in 2008 based on market rates.
In connection with the funding agreement with SMRI, beginning
the first calendar year after commercial sales of a
schizophrenia product if and when a product is commercialized,
the Company may become obligated to pay royalties based on net
income, as defined, not to exceed a set multiple of total grant
funding received. The Company has not paid any such royalties
through September 30, 2007.
| Note 7— | Warrants |
In 1998, the Company issued a warrant to purchase
11,829 shares of Series B convertible preferred stock
at $1.75 per share, which was fully exercised in 2003. The
warrant value was determined to be immaterial using the
Black-Scholes option-pricing model. In addition, in exchange for
securing a loan for operations, the Company issued warrants to
directors to acquire 124,999 shares of common stock at an
exercise price equal to the Series B convertible
F-30
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 7— | Warrants—(Continued) |
preferred stock exercise price of $1.75 per share. The warrants
expire in December 2007 and all such warrants are outstanding at
December 31, 2006.
In 2000, the Company issued warrants to purchase
49,980 shares of Series C convertible preferred stock
at $2.65 per share. The fair value of the warrants to purchase
40,547 shares of Series C convertible preferred stock,
$72,000, was determined using the Black-Scholes option-pricing
model and was accounted for as a cost of the offering. In
September 2005, these warrants were exercised for 31,995 shares
and the remaining warrants for 8,552 shares expired. The Company
also issued a warrant to purchase 9,433 shares of
Series C convertible preferred stock to a consultant. The
fair value of this warrant, $12,000, was determined using the
Black-Scholes option-pricing model and was expensed in 2000.
This warrant was exercised prior to January 1, 2005.
In 2002, the Company issued a warrant to purchase
25,139 shares of Series D convertible preferred stock
at $3.97 per share. The fair value of the warrant to purchase
the Series D convertible preferred stock is $64,000,
determined using the Black-Scholes option-pricing model. The
warrant was included as a cost of the offering and would have
expired in January 2007. The warrant remained outstanding at
December 31, 2006 but was exercised in January 2007.
During 2006 and 2005, in connection with the sale of
Series E convertible preferred stock, the Company committed
to issue warrants to purchase 241,080 and 14,320 shares,
respectively, of Series E convertible preferred stock at
$6.25 per share upon the final close of the Series E
financing. The value of the 2006 and 2005 warrants to purchase
the Series E convertible preferred stock is $606,000 and
$45,000, respectively, determined using the Black-Scholes
option-pricing model. The warrants are included as a cost of the
Series E convertible preferred stock offering and expire in
2012. All of the Series E related warrants are outstanding at
December 31, 2006.
In connection with the acquisition of nura, the Company issued
warrants to acquire 65 shares of common stock and
22,548 shares of Series E convertible preferred stock
warrants with an exercise price of $4.66 per share, for a
fair value of $64,000 and expiring in 2015.
The following is a table summarizing our warrants outstanding as
of:
| September 30, 2007 | December 31, 2006 | |||||||||||||||||||||||
|
Weighted- |
Weighted- |
|||||||||||||||||||||||
|
Warrants |
Fair |
Average |
Warrants |
Fair |
Average |
|||||||||||||||||||
| Outstanding | Value | Exercise Price | Outstanding | Value | Exercise Price | |||||||||||||||||||
|
Common stock
|
125,064 | $ | — | $ | 1.75 | 125,064 | $ | — | $ | 1.75 | ||||||||||||||
|
Series D
|
— | — | — | 25,139 | 27 | 3.97 | ||||||||||||||||||
|
Series E
|
409,578 | 1,674 | 6.16 | 400,778 | 1,010 | 6.16 | ||||||||||||||||||
|
Total
|
534,642 | $ | 1,674 | $ | 5.13 | 550,981 | $ | 1,037 | $ | 5.06 | ||||||||||||||
The Company adopted the provisions of FASB Staff Position
150-5
“Issuer’s Accounting under FASB Statement No. 150
for Freestanding Warrants and Other Similar Instruments on
Shares That Are Redeemable”
(FSP 150-5)
on July 1, 2005. The difference in fair value of the
warrants from the date of grant through the date of adoption was
immaterial. In accordance
F-31
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 7— | Warrants—(Continued) |
with this guidance, the Company estimated the fair value of all
outstanding convertible preferred stock warrants at July 1,
2005 and reclassified this amount from equity to a liability.
The warrant obligation is adjusted to fair value at the end of
each reporting period. Such fair values were estimated using the
Black-Scholes option pricing model, based on the following
assumptions:
|
July 1, |
||||||||
|
2005 |
||||||||
| September 30, | December 31, |
(Date of |
||||||
| 2007 | 2006 | 2005 | Adoption) | |||||
|
Risk-free interest rate
|
4.36% | 4.57% | 4.38% | 4.58% | ||||
|
Weighted-average expected life (in years)
|
4.5-5.00 | 5.00-6.08 | 1.00-5.00 | 1.5 -5.00 | ||||
|
Expected dividend yield
|
— | — | — | — | ||||
|
Expected volatility rate
|
60% | 60% | 80% | 80% | ||||
The change in value of the fair value of the warrants totaled
$615,000 during the nine months ended September 30, 2007,
($117,000) during the year ended December 31, 2006, and
($9,000) during the year ended December 31, 2005. These
changes in the preferred stock warrant liability are included in
other income (expense) in the consolidated statement of
operations.
| Note 8— | Convertible Preferred Stock |
The Company’s Second Amended and Restated Articles of
Incorporation authorize the Company to issue shares of
Series A through Series E stock, which hereafter are
collectively referred to as convertible preferred stock.
A summary of convertible preferred stock follows (amounts in
thousands, except share and per share data):
| September 30, 2007 | ||||||||||||||||||||
|
Shares |
||||||||||||||||||||
|
Issued |
Authorized |
Issued and |
Aggregate |
|||||||||||||||||
|
Price per |
and |
Outstanding |
Liquidation |
Carrying |
||||||||||||||||
| Share | Designated | Shares | Preference | Value | ||||||||||||||||
|
Series A
|
$ | 1.00 | 775,000 | 775,000 | $ 775 | $ 775 | ||||||||||||||
|
Series B
|
$ | 1.75 | 2,675,073 | 2,675,073 | 4,681 | 4,682 | ||||||||||||||
|
Series C
|
$ | 2.65 | 2,866,719 | 2,866,719 | 7,597 | 7,608 | ||||||||||||||
|
Series D
|
$ | 3.97 | 997,719 | 996,962 | 3,958 | 3,957 | ||||||||||||||
|
Series E
|
$ | 5.00 | 19,000,000 | 15,013,653 | 75,068 | 72,146 | ||||||||||||||
|
Total
|
26,314,511 | 22,327,407 | $ | 92,079 | $ | 89,168 | ||||||||||||||
F-32
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 8— | Convertible Preferred Stock—(Continued) |
| December 31, 2006 | ||||||||||||||||||||
|
Shares |
||||||||||||||||||||
|
Issued |
Authorized |
Issued and |
Aggregate |
|||||||||||||||||
|
Price per |
and |
Outstanding |
Liquidation |
Carrying |
||||||||||||||||
| Share | Designated | Shares | Preference | Value | ||||||||||||||||
|
Series A
|
$ | 1.00 | 775,000 | 775,000 | $ 775 | $ 775 | ||||||||||||||
|
Series B
|
$ | 1.75 | 2,675,073 | 2,675,073 | 4,681 | 4,682 | ||||||||||||||
|
Series C
|
$ | 2.65 | 2,866,719 | 2,866,719 | 7,597 | 7,608 | ||||||||||||||
|
Series D
|
$ | 3.97 | 997,719 | 972,580 | 3,861 | 3,861 | ||||||||||||||
|
Series E *
|
$ | 5.00 | 19,000,000 | 14,347,653 | 71,738 | 68,816 | ||||||||||||||
|
Total
|
26,314,511 | 21,637,025 | $ | 88,652 | $ | 85,742 | ||||||||||||||
| December 31, 2005 | ||||||||||||||||||||
|
Shares |
||||||||||||||||||||
|
Issued |
Authorized |
Issued and |
Aggregate |
|||||||||||||||||
|
Price per |
and |
Outstanding |
Liquidation |
Carrying |
||||||||||||||||
| Share | Designated | Shares | Preference | Value | ||||||||||||||||
|
Series A
|
$ | 1.00 | 875,000 | 775,000 | $ 775 | $ 775 | ||||||||||||||
|
Series B
|
$ | 1.75 | 2,675,073 | 2,675,073 | 4,681 | 4,682 | ||||||||||||||
|
Series C
|
$ | 2.65 | 2,875,271 | 2,866,719 | 7,597 | 7,608 | ||||||||||||||
|
Series D
|
$ | 3.97 | 997,719 | 972,580 | 3,861 | 3,861 | ||||||||||||||
|
Series E
|
$ | 5.00 | 7,350,000 | 4,792,508 | 23,962 | 23,962 | ||||||||||||||
|
Total
|
14,773,063 | 12,081,880 | $ | 40,876 | $ | 40,888 | ||||||||||||||
| (*) | Shares issued in conjunction with the nura acquisition totaled 3,398,445 at a price of $4.14 per share. |
Prior to January 1, 2005, the Company issued
875,000 shares of Series A convertible preferred stock
at $1.00 per share for net proceeds of $868,000;
2,663,244 shares of Series B convertible preferred
stock at $1.75 per share for net proceeds of $4.4 million;
2,825,291 shares of Series C convertible preferred
stock at $2.65 per share for net proceeds of $7.2 million;
and 972,580 shares of Series D convertible preferred
stock at $3.97 per share for net proceeds of $3.7 million.
During 2006 and 2005, the Company issued 7,196,700 and
1,120,215 shares, respectively, of Series E
convertible preferred stock for net proceeds of
$34.2 million and $5.3 million, respectively. The
cumulative cash issuance costs associated with the private
placements of convertible preferred stock were approximately
$4.0 million.
On February 27, 2007, the Company issued
666,000 shares of Series E convertible preferred stock
at $5.00 per share, raising net proceeds of $3.2 million.
The Company also committed to issue warrants to purchase
8,800 shares of Series E convertible preferred stock
at $6.25 per share upon the final close of the Series E
financing.
As discussed in Note 5, effective August 11, 2006, the
Company acquired nura and issued 2,358,445 shares of
Series E convertible preferred stock and 36,246 shares
of common stock. Concurrently, nura stockholders purchased
1,040,000 shares of Series E convertible preferred
stock for $5.2 million.
F-33
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 8— | Convertible Preferred Stock—(Continued) |
Holders of convertible preferred stock have preferential rights
to noncumulative dividends, when and if declared by the Board of
Directors, and are entitled to the number of votes equal to the
number of shares of common stock into which the convertible
preferred stock could be converted. No dividends have been
declared or paid as of September 30, 2007.
In the event of liquidation, Series A, B, C, D, and E
convertible preferred shareholders have preferential rights to
liquidation payments of $1.00, $1.75, $2.65, $3.97, and $5.00
per share, respectively, plus any declared but unpaid dividends.
Each share of Series A, B, C, D, and E convertible
preferred stock is convertible, at the option of the holder,
into one share of common stock, subject to certain adjustments.
Conversion is automatic upon the vote or written consent of the
holders of 50% of the convertible preferred shares, or upon the
closing of an initial public offering of the Company’s
common stock from which the aggregate proceeds are not less than
$10.0 million.
In addition, the Company has granted registration rights and
rights of first offer to the convertible preferred shareholders,
and is precluded from carrying out certain actions without the
approval of the majority of the convertible preferred
shareholders voting as a group.
In the event of a change in control whereby the Company:
(a) is involved in any liquidation or winding up of the
Company, whether voluntary or not, (b) sells or disposes of
all or substantially all of the assets of the Company, or
(c) effects any other transaction or series of related
transactions in which more than 50% of the voting power of the
Company is disposed of, then a “deemed liquidation”
event occurs whereby the convertible preferred shareholders are
entitled to receive their liquidation preferences described
above. This change in control provision and the stock conversion
provision described above require the Company to classify the
convertible preferred stock outside of shareholders’ equity
because under those circumstances, the redemption of the
convertible preferred stock is outside the control of the
Company.
Company Stock
Repurchases
Prior to 2004, the Company repurchased 371,875 shares of
common stock for $65,000. Upon purchase, these shares were
canceled. Shares were repurchased in an amount equal to the
exercise price of the shares. During 2004, the Company
repurchased 100,000 shares of convertible preferred stock
upon resolution of a legal matter that existed prior to 2004.
The Company recorded the repurchased shares as a deduction of
$100,000 from convertible preferred stock at December 31,
2003, which was equal to the original purchase price of the
shares.
| Note 9— | Common Stock |
At September 30, 2007 and December 31, 2006 the
Company was authorized to issue 40,000,000 shares of common
stock. At September 30, 2007 and December 31, 2006,
the Company had 5,399,890 and 4,972,600 shares of common
stock outstanding, respectively.
F-34
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 9— | Common Stock—(Continued) |
The Company has reserved shares of common stock for the
following purposes as of:
|
September 30, |
December 31, |
|||||||
| 2007 | 2006 | |||||||
|
Options granted and outstanding under the 1998 stock option plan
|
5,192,537 | 5,008,079 | ||||||
|
Options available for future grant under the 1998 stock option
plan
|
1,012,928 | 1,624,676 | ||||||
|
Options granted and outstanding outside of the 1998 stock option
plan
|
58,806 | 58,806 | ||||||
|
Options granted and outstanding under the nura 2003 stock option
plan
|
6,070 | 6,709 | ||||||
|
Conversion of convertible preferred stock
|
22,327,407 | 21,637,025 | ||||||
|
Convertible preferred stock warrants
|
409,578 | 425,917 | ||||||
|
Common stock warrants
|
125,064 | 125,064 | ||||||
|
Total shares reserved
|
29,132,390 | 28,886,276 | ||||||
| Note 10— | Stock-Based Compensation |
Stock
Options
Under the Company’s Amended and Restated 1998 Stock Option
Plan (the Plan), 8,311,516 shares of common stock were
reserved for the issuance of incentive and nonqualified stock
options to any former, current, or future employees, officers,
directors, agents, or consultants, including members of
technical advisory boards and any independent contractors of the
Company. Options are granted with exercise prices equal to the
fair market value of the common stock on the date of the grant,
as determined by the Company’s Board of Directors. The
terms of options may not exceed ten years. Generally, options
vest over a four-year period.
Prior to 2005, the Board of Directors approved the grant of
148,906 stock options outside the Plan. These options were
granted with exercise prices equal to the fair market value of
the common stock on the date of grant, as determined by the
Board of Directors.
In connection with the Company’s acquisition of nura on
August 11, 2006, the Company assumed all of the outstanding
options issued under nura’s 2003 Stock Plan (the nura
Plan). As of December 31, 2006, options to purchase
6,817 shares of the Company’s common stock were
outstanding under the nura Plan and no shares remained available
for future issuance pursuant to the nura Plan. These options
were granted with exercise prices equal to the fair market value
of nura’s common stock on the date of grant, as determined
by nura’s board of directors. The Company does not intend
to issue any additional stock options pursuant to the nura Plan.
The Company accounts for cash received in consideration for the
purchase of unvested shares of common stock or the
early-exercise of unvested stock options as a current liability,
included as a component of accrued liabilities in the
Company’s balance sheets. As of
F-35
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 10— | Stock-Based Compensation—(Continued) |
September 30, 2007, there were 150,000 unvested shares of
the Company’s common stock outstanding and $150,000, of
related recorded liability, which is included in accrued
liabilities. As of December 31, 2006 and 2005, there were
no unvested shares of the Company’s common stock
outstanding.
A summary of stock option activity and related information
follows:
|
Weighted- |
||||||||||||
|
Average |
||||||||||||
|
Shares |
Exercise |
|||||||||||
|
Available for |
Options |
Price per |
||||||||||
| Grant | Outstanding | Share | ||||||||||
|
Balance at January 1, 2004
|
439,253 | 1,448,512 | $ | 0.30 | ||||||||
|
Granted
|
(81,000 | ) | 81,000 | 0.50 | ||||||||
|
Exercised
|
— | (55,687 | ) | 0.19 | ||||||||
|
Cancelled
|
10,313 | (10,313 | ) | 0.40 | ||||||||
|
Balance at December 31, 2004
|
368,566 | 1,463,512 | 0.31 | |||||||||
|
Granted
|
(169,683 | ) | 169,683 | 0.50 | ||||||||
|
Exercised
|
— | (387,100 | ) | 0.27 | ||||||||
|
Balance at December 31, 2005
|
198,883 | 1,246,095 | 0.35 | |||||||||
|
Authorized increase in Plan shares
|
5,700,000 | — | — | |||||||||
|
Assumption of outstanding nura stock options
|
— | 15,192 | 5.42 | |||||||||
|
Granted
|
(4,325,853 | ) | 4,325,853 | 0.50 | ||||||||
|
Exercised
|
— | (453,716 | ) | 0.28 | ||||||||
|
Cancelled nura stock options
|
— | (8,184 | ) | 5.42 | ||||||||
|
Cancelled
|
51,646 | (51,646 | ) | 0.37 | ||||||||
|
Balance at December 31, 2006
|
1,624,676 | 5,073,594 | 0.49 | |||||||||
|
Granted
|
(658,500 | ) | 658,500 | 1.15 | ||||||||
|
Exercised
|
— | (427,290 | ) | 0.64 | ||||||||
|
Cancelled nura stock options
|
— | (639 | ) | 5.42 | ||||||||
|
Cancelled
|
46,752 | (46,752 | ) | 0.53 | ||||||||
|
Balance at September 30, 2007
|
1,012,928 | 5,257,413 | $ | 0.56 | ||||||||
The aggregate intrinsic value of options outstanding as of
September 30, 2007 and December 31, 2006 was
$29.8 million and $2.0 million, respectively. The
aggregate intrinsic value of options exercisable as of
September 30, 2007 and December 31, 2006 was
$18.0 million and $935,000, respectively.
F-36
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 10— | Stock-Based Compensation—(Continued) |
The following table summarizes information about stock options
outstanding and exercisable at December 31, 2006:
| Options Outstanding | Options Exercisable | |||||||||||||||||||
|
Weighted- |
||||||||||||||||||||
|
Average |
||||||||||||||||||||
|
Remaining |
Weighted- |
Weighted- |
||||||||||||||||||
|
Range of Exercise |
Number of |
Contractual |
Average |
Number of |
Average |
|||||||||||||||
|
Price
|
Options | Life (Years) | Exercise Price | Options | Exercise Price | |||||||||||||||
|
$0.18-0.40
|
449,933 | 3.56 | $ | 0.24 | 448,140 | $ | 0.24 | |||||||||||||
|
$0.50
|
4,540,390 | 9.86 | $ | 0.50 | 1,808,944 | $ | 0.50 | |||||||||||||
|
$1.00
|
76,562 | 1.71 | $ | 1.00 | 76,562 | $ | 1.00 | |||||||||||||
|
$5.42
|
6,709 | 6.79 | $ | 5.42 | 4,862 | $ | 5.42 | |||||||||||||
|
$0.18-5.42
|
5,073,594 | 9.17 | $ | 0.49 | 2,338,508 | $ | 0.48 | |||||||||||||
A total of up to $1.3 million will be recognized as
compensation expense for the unvested 2,735,086 options
outstanding as of December 31, 2006. This expense will be
recognized over a weighted-average period of 2.7 years.
This excludes non-employee options and variable awards.
Prior to January 1, 2006, compensation cost for stock
options granted to employees was recognized based on the
difference, if any, between the intrinsic market price of common
stock on the date of grant and the exercise price. The value of
any such options was recorded as a component of
shareholders’ deficit and is amortized to expense over the
vesting period of the applicable option.
Compensation cost for stock options granted to employees and
awards modified on or subsequent to January 1, 2006 is
based on the grant-date fair value estimated in accordance with
SFAS 123R and is recognized over the vesting period of the
applicable option on a straight-line basis. The estimated per
share weighted-average fair value of stock options granted to
employees during 2006 was $0.64.
As stock-based compensation expense recognized under
SFAS 123R is based on options ultimately expected to vest,
the expense has been reduced for estimated forfeitures. The fair
value of each employee option grant during 2006 was estimated on
the date of grant using the Black-Scholes option pricing model
with the following assumptions:
|
Nine Months Ended |
||||||||||
| September 30, | Years Ended December 31, | |||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | ||||||
|
Expected volatility
|
60% | 60% | 60% | 0% | 0% | |||||
|
Expected term (in years)
|
6.08 | 5.00-6.08 | 5.00-6.08 | 5.00 | 5.00 | |||||
|
Risk-free interest rate
|
4.42% - 4.78% | 4.63% - 5.04% | 4.57% - 5.04% | 4.58% | 4.00% | |||||
|
Expected dividend yield
|
0% | 0% | 0% | 0% | 0% | |||||
Expected Volatility. The expected volatility
rate used to value stock option grants is based on volatilities
of a peer group of similar companies, considering industry and
stage of life cycle, whose share prices are publicly available.
The peer group was developed based on
F-37
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 10— | Stock-Based Compensation—(Continued) |
companies in the pharmaceutical and biotechnology industry in a
similar stage of development.
Expected Term. The Company elected to utilize
the “simplified” method for “plain vanilla”
options as provided for in the Securities and Exchange
Commission’s Staff Accounting Bulletin No. 107 to
value stock option grants. Under this approach, the
weighted-average expected life is presumed to be the average of
the vesting term and the contractual term of the option.
Risk-free Interest Rate. The risk-free
interest rate assumption was based on zero coupon
U.S. Treasury instruments whose term was consistent with
the expected term of our stock option grants.
Expected Dividend Yield. The Company has never
declared or paid any cash dividends and does not presently plan
to pay cash dividends in the foreseeable future.
The following table summarizes recent stock option grant
activity:
|
Estimated |
||||||||||||||||
|
Number of |
Fair Value of |
|||||||||||||||
|
Shares |
Common |
|||||||||||||||
|
Subject to |
Exercise |
Stock per |
Intrinsic |
|||||||||||||
|
Options |
Price per |
Share at |
Value per Share |
|||||||||||||
|
Grant Date
|
Granted | Share | Date of Grant | at Date of Grant | ||||||||||||
|
July 2006
|
23,000 | $ | 0.50 | $ | 0.89 | $ | 0.39 | |||||||||
|
September 2006
|
28,000 | 0.50 | 0.89 | 0.39 | ||||||||||||
|
December 2006
|
4,274,853 | 0.50 | 0.89 | 0.39 | ||||||||||||
|
March 2007
|
308,500 | 1.00 | 1.05 | 0.05 | ||||||||||||
|
May 2007
|
350,000 | 1.00 | 3.63 | 2.63 | ||||||||||||
|
October 2007 (unaudited)
|
275,733 | 1.25 | 6.23 | 4.98 | ||||||||||||
Stock options granted to non-employees are accounted for using
the fair value approach in accordance with SFAS 123 and
EITF Issue
No. 96-18,
“Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services”
(EITF 96-18).
The fair value of non-employee option grants are estimated using
the Black-Scholes
option-pricing
model and are re-measured over the vesting term as earned. The
estimated fair value is charged to expense over the applicable
service period. During 2006 and 2004 there were no options
granted to non-employees. During 2005, the Company granted
12,183 options to non-employees to purchase shares of common
stock.
In conjunction with the exercise of certain stock options, the
Company received non-recourse promissory notes from its
president, chief executive officer, chief medical officer and
chairman of the board of directors totaling $239,000. The
promissory notes accrue interest at rates ranging from 3% to
6.25% and are secured by pledges of the underlying common stock.
Since the notes are non-recourse, they are treated as stock
options subject to variable accounting whereby changes in the
estimated fair value of the underlying deemed option are
reported as an increase or decrease, as applicable, in
stock-based compensation expense until such time that the notes
are repaid. Stock-based compensation expense (credit) relating
to variable accounting for these notes was $5.0 million for
the nine months ended September 30,
F-38
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 10— | Stock-Based Compensation—(Continued) |
2007, and $361,000, $(534,000), and $264,000 for the years ended
December 31, 2006, 2005 and 2004, respectively.
Stock-Based Compensation Summary. Stock-based
compensation expense includes variable awards, amortization of
deferred stock compensation, and awards accounted for under
SFAS 123R and have been reported in the Company’s
consolidated statements of operations as follows:
|
Nine Months Ended |
||||||||||||||||||||
| September 30, | Years Ended December 31, | |||||||||||||||||||
| 2007 | 2006 | 2006 | 2005 | 2004 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
|
Research and development
|
$ | 245 | $ | 3 | $ | 309 | $ | — | $ | — | ||||||||||
|
General and administrative
|
5,300 | 283 | 1,130 | (507 | ) | 273 | ||||||||||||||
|
Total
|
$ | 5,545 | $ | 286 | $ | 1,439 | $ | (507 | ) | $ | 273 | |||||||||
| Note 11— | Income Taxes |
The Company has a history of losses and therefore has made no
provision for income taxes. Deferred income taxes reflect the
tax effect of net operating loss and tax credit carryforwards
and the net temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
Significant components of deferred tax assets are as follows:
| December 31, | ||||||||
| 2006 | 2005 | |||||||
| (in thousands) | ||||||||
|
Deferred tax assets:
|
||||||||
|
Net operating loss carryforwards
|
$ | 12,131 | $ | 9,331 | ||||
|
Deferred revenue
|
442 | — | ||||||
|
Research and development tax credits
|
1,194 | 816 | ||||||
|
Other
|
94 | 95 | ||||||
| 13,861 | 10,242 | |||||||
|
Less valuation allowance
|
(13,861 | ) | (10,242 | ) | ||||
|
Net deferred tax assets
|
$ | — | $ | — | ||||
As of December 31, 2006 and 2005, the Company had net
operating loss carryforwards and research and development tax
credit carryforwards of approximately $35.7 million and
$1.2 million, respectively. Unless previously utilized, our
net operating loss and research and development tax credit
carryforwards will expire between 2009 and 2025. The difference
between the net operating loss carryforwards and the net loss
for financial reporting purposes relates primarily to in-process
research and development, accrued vacation, depreciation and
stock-based compensation. In certain circumstances, due to
ownership changes, the net operating loss and tax credit
carryforwards may be subject to limitations under the Internal
Revenue Code of 1986, as amended (the Code). The Company’s
ability to utilize its net
F-39
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 11— | Income Taxes—(Continued) |
operating loss and tax credit carryforwards may be limited in
the event that a change in ownership, as defined in
Section 382 of the Code has occurred or may occur in the
future.
A reconciliation of the Federal statutory tax rate of 34% to the
Company’s effective income tax rate follows:
| December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
| (in thousands) | ||||||||||||
|
Statutory tax rate
|
(34 | )% | (34 | )% | (34 | )% | ||||||
|
Permanent difference
|
19 | 1 | 2 | |||||||||
|
Change in valuation allowance
|
14 | 36 | 32 | |||||||||
|
Other
|
1 | (3 | ) | — | ||||||||
|
Effective tax rate
|
— | — | — | |||||||||
As of January 1, 2007, the Company had no unrecognized tax
benefits, and expected no unrecognized tax benefits in the next
12 months. Because of net operating loss carryforwards,
substantially all of the Company’s tax years remain open to
federal tax examination. The Company files income tax returns in
the United States, which typically provides for a three year
statute of limitations on assessments.
The Company’s policy is to recognize interest and penalties
related to the underpayment of income taxes as a component of
income tax expense. To date, there have been no interest or
penalties charged to the Company in relation to the underpayment
of income taxes.
The Company has established a 100% valuation allowance due to
the uncertainty of the Company’s ability to generate
sufficient taxable income to realize the deferred tax assets.
The Company’s valuation allowance increased
$3.7 million, $3.1 million and $1.6 million in
2006, 2005, and 2004, respectively, primarily due to net
operating losses incurred during these periods.
| Note 12— | Related-Party Transactions |
The Company conducts research using the services of one of its
founders. Costs associated with this research totaled $0,
$41,000, $41,000, and $41,000 for the nine months ended
September 30, 2007 and the years ended December 31, 2006, 2005,
and 2004, respectively, and $435,000 for the period of inception
(June 16, 1994) through December 31, 2006.
In conjunction with the exercise of certain stock options by the
president, chief executive officer, chief medical officer and
chairman of the board of directors of the Company, the Company
received recourse notes that were deemed to be
non-recourse
for accounting purposes, in the amount of $88,000 in 2005 and
$151,000 prior to 2003 for a total of $239,000. Through
December 31, 2006, no amounts had been repaid under the
promissory notes. The loans are secured by pledges of common
stock of the Company. The loans bear interest ranging from 3% to
6.25%. Interest income on the loans totaled $9,000 for the nine
months ended September 30, 2007 and, $12,000 and $6,000 for
the years ended December 31, 2006 and 2005, respectively.
Interest receivable of $36,000 at September 30, 2007 and
$28,000 and
F-40
Table of Contents
OMEROS
CORPORATION
(A Development Stage Company)
(A Development Stage Company)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Information as of
September 30, 2007,
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
for the nine months ended September 30, 2007 and for
the nine months ended September 30, 2006 is unaudited)
| Note 12— | Related-Party Transactions—(Continued) |
$16,000 at December 31, 2006 and 2005, respectively, is
included in other current assets in the accompanying balance
sheets. These notes have been determined to be a variable stock
compensation arrangement and the difference between the original
exercise price of the related stock options and the fair value
of the underlying common stock is recorded as stock compensation
expense. For the nine months ended September 30, 2007 and
the nine months ended September 30, 2006, $5.0 million
and $271,00, respectively, for the years ending
December 31, 2006, 2005 and 2004, $362,000, $(534,000) and
$263,000, respectively, and $5.4 million for the period of
inception (June 16, 1994) through September 30,
2007, has been recognized as stock compensation expense
(credit). The shares underlying the loans are not considered
outstanding for the computation of basic and diluted net loss
per common share.
| Note 13— | 401(k) Retirement Plan |
The Company has adopted a 401(k) plan. To date, the Company has
not matched employee contributions to the plan. All employees
are eligible to participate, provided they meet the requirements
of the plan.
| Note 14— | Subsequent Events (unaudited) |
In October 2007, the Company received cash totaling $980,000
from Small Business Innovation Research grants awarded by the
National Institute of Health.
In December 2007, the Company received full payment related to
the notes receivable totaling $239,000 owed by the president,
chief executive officer, chief medical officer and chairman of
the board of directors of the Company.
F-41
Table of Contents
The Board of Directors and Shareholders
Omeros Corporation
We have audited the accompanying statements of operations and
cash flows of nura, inc. (a development stage company) for the
period from January 1, 2006 through August 11, 2006,
the year ended December 31, 2005, and for the period from
August 26, 2003 (inception) through August 11, 2006.
These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits. The
statements of operations and cash flows for the period from
August 26, 2003 (inception) through December 31, 2004,
were audited by other auditors whose report dated
December 2, 2005 expressed an unqualified opinion on those
statements. The financial statements for the period
August 26, 2003 (inception) through December 31, 2004
include total revenues and net loss of $164,000 and $4,486,000
respectively. Our opinion on the statements of operations and
cash flows for the period August 26, 2003 (inception)
through August 11, 2006, insofar as it relates to amounts
for prior periods through December 31, 2004, is based
solely on the report of other auditors.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. We were not engaged to perform an audit
of the Company’s internal control over financial reporting.
Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other
auditors, the financial statements referred to above present
fairly, in all material respects, the results of operations and
cash flows of nura, inc., for the period from January 1,
2006 through August 11, 2006, the year ended
December 31, 2005, and for the period from August 26,
2003 (inception) through August 11, 2006, in conformity
with U.S. generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the
Company’s recurring losses from operations and net capital
deficiency raise substantial doubt about its ability to continue
as a going concern. The 2006 financial statements do not include
any adjustments that resulted from the purchase of the Company
by Omeros Corporation on August 11, 2006.
As discussed in Note 1 to the financial statements, on
January 1, 2006, the Company changed its method of
accounting for stock-based compensation in accordance with
guidance provided in Statement of Financial Accounting Standards
No. 123 (revised 2004) Share-Based Payment, and
on January 1, 2006, the Company adopted Financial
Accounting Standards Board (FASB) Staff Position
150-5,
Issuer’s Accounting under FASB Statement No. 150
for Freestanding Warrants and Other Similar Instruments on
Shares That Are Redeemable.
/s/ Ernst & Young LLP
Seattle, Washington
July 20, 2007
F-42
Table of Contents
To the Board of Directors and
Stockholders of nura, inc.
Stockholders of nura, inc.
In our opinion, the accompanying statements of operations and of
cash flows present fairly, in all material respects, the results
of operations and cash flows of nura, inc. (a development
stage enterprise) for the year ended December 31, 2004 and,
cumulatively, for the period from August 26, 2003 (date of
inception) to December 31, 2004, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Company’s management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the
Company has suffered recurring losses and negative cash flows
from operations since inception and has a net capital deficiency
that raise substantial doubt about the Company’s ability to
continue as a going concern. Management’s plans in regard
to these matters are also described in Note 1. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ PricewaterhouseCoopers
LLP
Seattle, Washington
December 2, 2005
F-43
Table of Contents
NURA, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
|
Period from |
Period from |
|||||||||||||||
|
January 1, |
August 26, |
|||||||||||||||
|
2006 |
2003 |
|||||||||||||||
|
through |
Year Ended |
(Inception) through |
||||||||||||||
|
August 11, |
December 31, |
August 11, |
||||||||||||||
| 2006 | 2005 | 2004 | 2006 | |||||||||||||
|
Revenue
|
$ 200 | $ — | $ 164 | $ 364 | ||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
2,394 | 4,612 | 3,040 | 10,693 | ||||||||||||
|
General and administrative
|
957 | 1,517 | 1,178 | 3,858 | ||||||||||||
|
Total operating expenses
|
3,351 | 6,129 | 4,218 | 14,551 | ||||||||||||
|
Loss from operations
|
(3,151 | ) | (6,129 | ) | (4,054 | ) | (14,187 | ) | ||||||||
|
Sublease and other income
|
219 | 434 | 335 | 1,013 | ||||||||||||
|
Investment income
|
8 | 98 | 57 | 168 | ||||||||||||
|
Interest expense
|
(295 | ) | (190 | ) | — | (486 | ) | |||||||||
|
Net loss
|
$ | (3,219 | ) | $ | (5,787 | ) | $ | (3,662 | ) | $ | (13,492 | ) | ||||
See accompanying notes
F-44
Table of Contents
NURA, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
|
Period from |
||||||||||||||||
|
Period from |
August 26, |
|||||||||||||||
|
January 1, |
2003 |
|||||||||||||||
|
2006 |
(Inception) |
|||||||||||||||
|
through |
Year Ended |
through |
||||||||||||||
|
August 11, |
December 31, |
August 11, |
||||||||||||||
| 2006 | 2005 | 2004 | 2006 | |||||||||||||
|
Operating activities
|
||||||||||||||||
|
Net loss
|
$ | (3,219 | ) | $ | (5,787 | ) | $ | (3,662 | ) | $ | (13,492 | ) | ||||
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
||||||||||||||||
|
Depreciation and amortization
|
77 | 115 | 46 | 243 | ||||||||||||
|
Issuance of non-voting common stock in connection with
modification of office lease agreement
|
— | — | — | 4 | ||||||||||||
|
Non-cash interest
|
92 | 21 | — | 113 | ||||||||||||
|
Change in value of preferred stock warrant liability
|
(8 | ) | — | — | (8 | ) | ||||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||||||
|
Prepaid expenses and other current and noncurrent assets
|
(38 | ) | (11 | ) | 83 | (62 | ) | |||||||||
|
Accounts payable, accrued expenses and deferred rent
|
(283 | ) | 276 | 160 | 294 | |||||||||||
|
Net cash used in operating activities
|
(3,379 | ) | (5,386 | ) | (3,373 | ) | (12,908 | ) | ||||||||
|
Investing activities
|
||||||||||||||||
|
Purchases of equipment
|
— | (166 | ) | (385 | ) | (551 | ) | |||||||||
|
Net cash used in investing activities
|
— | (166 | ) | (385 | ) | (551 | ) | |||||||||
|
Financing activities
|
||||||||||||||||
|
Proceeds from borrowings from notes
|
2,000 | 3,000 | — | 5,100 | ||||||||||||
|
Payments on note payable to bank
|
(522 | ) | (72 | ) | — | (594 | ) | |||||||||
|
Restricted cash related to building
|
(2 | ) | (3 | ) | — | (198 | ) | |||||||||
|
Proceeds from issuance of Series A convertible preferred
stock, net of issuance costs
|
— | — | 5,472 | 9,234 | ||||||||||||
|
Proceeds from issuance of common stock and exercise of stock
options
|
3 | 1 | — | 4 | ||||||||||||
|
Net cash provided by financing activities
|
1,479 | 2,926 | 5,472 | 13,546 | ||||||||||||
|
Net (decrease) increase in cash and cash equivalents
|
(1,900 | ) | (2,626 | ) | 1,714 | 87 | ||||||||||
|
Cash and cash equivalents at beginning of period
|
1,987 | 4,613 | 2,899 | — | ||||||||||||
|
Cash and cash equivalents at end of period
|
$ 87 | $ | 1,987 | $ | 4,613 | $ | 87 | |||||||||
|
Supplemental operating cash flow information
|
||||||||||||||||
|
Cash paid for interest
|
$ 153 | $ 171 | $ — | $ 325 | ||||||||||||
|
Supplemental disclosure of non-cash investing and financing
activity
|
||||||||||||||||
|
Issuance of warrants in connection with debt financing
|
$ 71 | $ 73 | $ — | $ 144 | ||||||||||||
|
Conversion of notes payable into Series A convertible
preferred stock
|
$ — | $ — | $ — | $ 100 | ||||||||||||
|
Issuance of non-voting common stock in connection with
acquisition of assets
|
$ — | $ — | $ — | $ 45 | ||||||||||||
See accompanying notes
F-45
Table of Contents
NURA, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
| Note 1— | Organization and Significant Accounting Policies |
Organization
nura, inc. (the “Company”) is a development-stage drug
discovery company. The Company was incorporated in the state of
Delaware on August 26, 2003 for the purpose of discovering
new therapeutics for central nervous system diseases.
Basis of
Presentation
The statements of operations and of cash flows have been
prepared in accordance with accounting principles generally
accepted in the United States. These statements were prepared
for the purpose of complying with
Regulation S-X,
Rule 3.05 of the Securities and Exchange Commission and are
being included in the
Form S-1
Registration Statement of Omeros Corporation.
Going
Concern
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern, which
contemplates realization of assets and satisfaction of
liabilities in the normal course of business. The Company has
incurred losses and negative cash flows since inception and has
an accumulated deficit of $13.5 million at August 11,
2006. Management’s plan include seeking additional capital
or sale of the Company. Effective August 11, 2006, the
Company was acquired by Omeros Corporation, a biopharmaceutical
company.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Cash and Cash
Equivalents
All highly liquid investments with a purchased maturity of three
months or less are considered to be cash equivalents. Cash and
cash equivalents consist of amounts held in money market funds
and bank accounts with a commercial bank.
Revenue
To date, the Company has generated no revenues from sales of
products. Reported revenues relate to the Small Business
Innovation Research (SBIR) grants awarded to the Company by the
National Institute of Health. Revenue related to grant
agreements is recognized as related research and development
expenses are incurred. In addition, the Company recognized
revenue of $0.2 million in 2006 related to a technology
transfer. The payment was recognized upon receipt of cash and
the transfer of intellectual property, data, and other rights
licensed as there are no continuing obligations.
Research and
Development
Research and development costs are comprised primarily of costs
for personnel, including salaries and benefits; occupancy;
clinical studies performed by third parties; materials and
supplies to support the Company’s clinical programs;
contracted research; manufacturing; consulting arrangements; and
other expenses incurred to sustain the Company’s overall
research and development programs. Internal research and
development costs are expensed
F-46
Table of Contents
NURA, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS—(Continued)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
as incurred. Third-party research and development costs are
expensed at the earlier of when the contracted work has been
performed or as upfront and milestone payments are made.
Impairment of
Long-Lived Assets
The Company assesses the impairment of long-lived assets
whenever events or changes in circumstances indicate that the
carrying amount of an asset might not be recoverable. When such
an event occurs, management determines whether there has been an
impairment by comparing the anticipated undiscounted future net
cash flows of the asset to its carrying value. The impairment
charge, if any, is determined based on the excess of an
asset’s carrying value over its fair value. The Company has
not recognized any impairment losses since inception.
Patents
The Company generally applies for patent protection on processes
and products. Patent application costs are expensed as incurred,
as recoverability of such expenditures is uncertain.
Income
Taxes
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates applied to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. A valuation allowance
is established when necessary to reduce deferred tax assets to
the amount expected to be realized. The Company has a history of
losses and therefore has made no provision for income taxes.
The Company has gross deferred tax assets totaling
$4.5 million and $3.4 million at August 11, 2006
and December 31, 2005, respectively, primarily related to
net operating loss carryforwards. The Company has a full
valuation allowance related to deferred tax assets. The change
in valuation allowance was $1.1 million, $1.9 million,
and $861,000 for the period from January 1, 2006 to
August 11, 2006 and for the years ended December 31,
2005 and 2004, respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform to
the current year presentation. The reclassification increased
2004 research and development expenses by $45,000 and reduced
general and administrative expenses by the same amount. The
reclassifications did not materially impact the statements of
operations or cash flows.
Stock-Based
Compensation
On January 1, 2006, the Company adopted the fair value
recognition provisions of Statement of Financial Accounting
Standards (SFAS) No. 123R, Share-Based Payment
(“SFAS 123R”), under the prospective method which
requires the measurement and recognition of compensation
expenses for all future share-based payments made to employees
and directors be based on estimated fair values. The Company had
no stock option grants during 2006 and accordingly, no stock
compensation expense was recorded during 2006 under the
provisions of SFAS 123R.
Through December 31, 2005, the Company had adopted the
disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS 123),
as amended by SFAS No. 148, Accounting for
Stock-Based Compensation—Transition and Disclosure
F-47
Table of Contents
NURA, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS—(Continued)
| Note 1— | Organization and Significant Accounting Policies—(Continued) |
(SFAS 148), and applied Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25), and related interpretations in accounting for
stock options issued prior to December 31, 2005.
Accordingly, through December 31, 2005, employee
stock-based
compensation expense was recognized based on the intrinsic value
of the option at the date of grant.
Stock options granted to non-employees are accounted using the
fair value approach in accordance with SFAS 123 and
Emerging Issues Task Force Consensus (EITF) Issue
No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods
or Services
(EITF 96-18).
The options to non-employees are subject to periodic
reevaluation over their vesting terms.
Free Standing
Warrants that are Redeemable
On June 29, 2005, the Financial Accounting Standards Board
(FASB) issued Staff Position
150-5,
Issuer’s Accounting under FASB Statement No. 150
for Freestanding Warrants and Other Similar Instruments on
Shares That Are Redeemable
(FSP 150-5).
This Staff Position affirms that freestanding warrants are
subject to the requirements in Statement 150, regardless of the
timing of the redemption feature or the redemption price and
will require the Company to classify the warrants on preferred
stock as liabilities and adjust the warrant instruments to fair
value at each reporting period. The Company adopted
FSP 150-5
on January 1, 2006. Upon adoption of
FSP 150-5,
the Company reclassified the estimated fair value of its
freestanding warrants related to the bank debt (see
Note 3) at the time of issuance from equity to a
liability. There was no cumulative impact of this change in
accounting principle upon adoption as the fair values at the
grant date and adoption date were equal and totaled
approximately $73,000. At each subsequent reporting period, any
change in fair value of the freestanding warrants is recorded as
other expense or other income.
During 2006, the Company had outstanding warrants related to the
bank debt and debt from the Company’s investors (see
Note 3). The change in fair value for these warrants
totaled $8,000 and is included as other income in the Statement
of Operations.
| Note 2— | Commitments and Contingencies |
The Company leases laboratory and corporate office space under
operating lease agreements. These lease agreements include
renewal and escalation clauses that enable the leases to extend
their maturity date as far out as 2013. Future minimum payments
related to the leases at August 11, 2006 are as follows:
|
Year Ending December 31,
|
Operating Lease | Sublease Income | Net Operating Lease | |||||||||
| (in thousands) | ||||||||||||
|
2006 (for the period from August 11, 2006 until
December 31, 2006)
|
$354 | $ | 185 | $169 | ||||||||
|
2007
|
915 | 181 | 734 | |||||||||
|
2008
|
698 | 91 | 607 | |||||||||
|
2009
|
20 | — | 20 | |||||||||
|
2010
|
8 | — | 8 | |||||||||
|
Total
|
$ | 1,995 | $ | 457 | $ | 1,538 | ||||||
F-48
Table of Contents
NURA, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS—(Continued)
| Note 2— | Commitments and Contingencies—(Continued) |
Rent expense totaled $755,000, $1,208,000, $1,169,000, and
$3,449,000 in the period from January 1, 2006 through
August 11, 2006, the years end December 31, 2005 and
2004, and for the period from August 23, 2003 (inception)
through August 11, 2006, respectively.
Rental income received under noncancelable subleases was
$211,000, $419,000, $334,000 and $989,000 in the period from
January 1, 2006 through August 11, 2006, the years
ended December 31, 2005 and 2004, and for the period from
August 23, 2003 (inception) through August 11, 2006,
respectively. A portion of the rental income was received from a
sublease with Omeros Corporation, the company that acquired nura
on August 11, 2006 (see Note 6). Rental income
received from Omeros was $170,000, $279,000, $213,000 and
$662,000 in the period from January 1, 2006 through
August 11, 2006, the years ended December 31, 2005 and
2004, and for the period from August 23, 2003 (inception)
through August 11, 2006, respectively.
| Note 3— | Long-Term Debt |
In April 2005, the Company entered into a financing agreement
(“bank debt”) under which the Company borrowed
$3.0 million. Borrowings under the loan bear interest at
the holder’s prime rate (9.69% during 2005 and 2006). The
lender has security interest in all of the Company’s assets
including intellectual property. As of December 31, 2005
and August 11, 2006, $3.0 million and
$2.4 million was outstanding under the promissory note,
respectively. The Company will repay $0.4 million from
August 12, 2006 through December 31, 2006,
$1 million in 2007 and $1 million in 2008. As
consideration for the loan, the Company issued warrants to
purchase 175,000 shares of preferred stock of the Company
at $0.60 per share. At the date of issuance, the warrants were
valued at $73,000 using the Black-Scholes option pricing model.
The value of the warrants was recorded as a discount to the
loan. On January 1, 2006 the $73,000 originally recorded as
equity was reclassified to a liability in conjunction with
adoption of
FSP 150-5.
Accretion of the discount will be recorded as interest expense
over the life of the loan. These warrants will expire in 2015.
In March 2006, the Company entered into a note and warrant
purchase agreement with several of its existing investors. As
part of the agreement, the Company received a loan of
$2.0 million which has an interest rate of 8% and is due on
the one year anniversary of the initial closing. As
consideration for the loan, the Company issued warrants to
purchase 666,000 shares of preferred stock of the Company
at $0.60 per share. At the date of issuance, the warrants were
valued at $71,000 using the Black-Scholes option-pricing model.
The value of the warrants was recorded as a liability and as a
discount to the loan. Accretion of the discount will be recorded
as interest expense over the life of the loan under the
effective interest rate method. These warrants will become
exercisable with the Company’s next equity financing
arrangement.
F-49
Table of Contents
NURA, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS—(Continued)
| Note 4 | —Stockholders’ Deficit and Stock Options |
Changes in
Stockholders’ Deficit
The following table summarizes the changes in stockholders’
deficit for the period from August 23, 2003 (inception)
through December 31, 2004 (in thousands, except share data).
|
Deficit |
||||||||||||||||||||
|
Accumulated |
||||||||||||||||||||
| Common Stock |
Additional |
During the |
Total |
|||||||||||||||||
|
Number of |
Paid-In |
Development |
Stockholders’ |
|||||||||||||||||
| Shares | Amount | Capital | Stage | Deficit | ||||||||||||||||
|
Issuance of voting common stock for cash at $0.0001 per share
|
3,114,753 | $ | — | $ | — | $ | — | $ | — | |||||||||||
|
Issuance of non-voting common stock at $0.05 per share in
connection with the acquisition of assets and modification of an
office lease agreement
|
980,000 | — | 49 | — | 49 | |||||||||||||||
|
Net loss
|
— | — | — | (824 | ) | (824 | ) | |||||||||||||
|
Balances at December 31, 2003
|
4,094,753 | — | 49 | (824 | ) | (775 | ) | |||||||||||||
|
Net loss
|
— | — | — | (3,662 | ) | (3,662 | ) | |||||||||||||
|
Balances at December 31, 2004
|
4,094,753 | $ | — | $ | 49 | $ | (4,486 | ) | $ | (4,437 | ) | |||||||||
Stock
Options
Under the Company’s 2003 Stock Option Plan (the Plan),
2,298,688 shares of common stock were reserved for issuance
to employees, directors, and consultants. Options granted under
the Plan may be incentive stock options or nonqualified stock
options. Stock purchase rights may also be granted under the
Plan. Incentive stock options may only be granted to employees.
Options are granted with exercise prices equal to the fair
market value of the common stock on the date of the grant, as
determined by the Company’s Board of Directors, unless the
recipient owns stock representing more than 10% of the
outstanding shares, in which case the price of each share shall
be at least 110% of fair market value. The terms of options may
not exceed ten years, excepting recipients with a greater than
10% ownership of outstanding shares, in which case the terms
shall be five years or less. Generally, options vest 25% per
year over a four-year period.
F-50
Table of Contents
NURA, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS—(Continued)
| Note 4 | —Stockholders’ Deficit and Stock Options—(Continued) |
A summary of stock option activity and related information
follows:
|
Weighted-Average |
||||||||||||
|
Shares Available |
Exercise Price per |
|||||||||||
| for Grant | Options Outstanding | Share | ||||||||||
|
Balance at January 1, 2004
|
1,244,211 | 1,054,477 | $ | 0.05 | ||||||||
|
Granted
|
(601,803 | ) | 601,803 | 0.05 | ||||||||
|
Cancelled
|
81,967 | (81,967 | ) | 0.05 | ||||||||
|
Balance at December 31, 2004
|
724,375 | 1,574,313 | 0.05 | |||||||||
|
Granted
|
(219,500 | ) | 219,500 | 0.05 | ||||||||
|
Exercised
|
— | (10,000 | ) | 0.05 | ||||||||
|
Balance at December 31, 2005
|
504,875 | 1,783,813 | $ | 0.05 | ||||||||
|
Exercised
|
— | (58,825 | ) | 0.05 | ||||||||
|
Balance at August 11, 2006
|
504,875 | 1,724,988 | $ | 0.05 | ||||||||
The following table summarizes information about stock options
outstanding and exercisable at August 11, 2006:
| Options Outstanding | Options Exercisable | |||||||||||||||||||
|
Weighted- |
||||||||||||||||||||
|
Average |
||||||||||||||||||||
|
Remaining |
Weighted- |
Weighted- |
||||||||||||||||||
|
Exercise |
Number of |
Contractual Life |
Average |
Number of |
Average |
|||||||||||||||
|
Price
|
Options | (Years) | Exercise Price | Options | Exercise Price | |||||||||||||||
|
$0.05
|
1,724,988 | 7.63 | $ | 0.05 | 1,066,181 | $ | 0.05 | |||||||||||||
The weighted-average grant date fair value of options granted
for the year ended December 31, 2005 and 2004 was $0.01 and
$0.02, respectively. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes minimum
value
option-pricing
model with the following assumptions:
| Years Ended December 31, | ||||
| 2005 | 2004 | |||
|
Volatility
|
— | — | ||
|
Risk-free interest rate
|
4.58% | 3.90%-4.76% | ||
|
Weighted-average
expected life (in years)
|
5 | 4 | ||
|
Dividend yield
|
— | — | ||
The Company had no stock option grants during 2006 and
accordingly no stock compensation expense was recognized under
the provisions of SFAS 123R.
| Note 5— | 401(k) Retirement Plan |
The Company has established a defined contribution savings plan
under Section 401(k) of the Code. This plan covers
substantially all employees who meet minimum age requirement and
allows participants to defer a portion of their annual
compensation on a pre-tax basis. To date, the Company has not
matched employee contributions to the plan.
F-51
Table of Contents
NURA, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS—(Continued)
| Note 6— | Subsequent Events |
Effective August 11, 2006, the Company was acquired by
Omeros Corporation, a Seattle-based biopharmaceutical company.
The nura stockholders received 3.4 million shares of Omeros
Series E convertible preferred stock and 36,000 shares
of common stock, and Omeros assumed the $2.4 million bank
debt (Refer to Note 3).
The acquisition will be accounted for as a purchase by Omeros,
and the results of nura will be included in the consolidated
results of Omeros beginning August 11, 2006.
F-52
Table of Contents
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. We
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where offers and sales are
permitted. The information in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of
delivery of this prospectus or any sale of shares of our common
stock.
TABLE OF
CONTENTS
| Page | ||||
|
Prospectus Summary
|
1 | |||
|
Risk Factors
|
9 | |||
|
Special Note Regarding Forward-Looking Statements
|
29 | |||
|
Use of Proceeds
|
31 | |||
|
Dividend Policy
|
31 | |||
|
Capitalization
|
32 | |||
|
Dilution
|
34 | |||
|
Selected Consolidated Financial Data
|
36 | |||
|
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
38 | |||
|
Business
|
54 | |||
|
Management
|
81 | |||
|
Executive Compensation
|
86 | |||
|
Certain Relationships and Related-Party Transactions
|
103 | |||
|
Principal Shareholders
|
106 | |||
|
Description of Capital Stock
|
108 | |||
|
Shares Eligible For Future Sale
|
113 | |||
|
Underwriters
|
116 | |||
|
Legal Matters
|
123 | |||
|
Experts
|
123 | |||
|
Where You Can Find Additional Information
|
123 | |||
|
Index To Financial Statements
|
F-1 | |||
Until ,
2008 (25 days after the date of this prospectus), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer’s obligation
to deliver a prospectus when acting as underwriter and with
respect to unsold allotments or subscriptions.
Omeros Corporation
Shares
Common Stock
Deutsche Bank
Securities
Pacific Growth Equities,
LLC
Leerink Swann
Needham & Company,
LLC
Prospectus
,
2008
Table of Contents
PART II
INFORMATION NOT
REQUIRED IN PROSPECTUS
| ITEM 13. | OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. |
The following table sets forth all expenses to be paid by the
registrant, other than estimated underwriting discounts and
commissions, in connection with this offering. All amounts shown
are estimates except for the SEC registration fee, the NASDAQ
Global Market listing fee and the FINRA filing fee.
|
SEC registration fee
|
$ | 4,520 | ||
|
NASDAQ Global Market listing fee
|
125,000 | |||
|
FINRA filing fee
|
12,000 | |||
|
Printing and engraving
|
* | |||
|
Legal fees and expenses
|
* | |||
|
Accounting fees and expenses
|
* | |||
|
Transfer agent and registrar fees
|
* | |||
|
Director and officer insurance
|
* | |||
|
Miscellaneous
|
* | |||
|
Total
|
* |
| * | To be completed by amendment. |
| ITEM 14. | INDEMNIFICATION OF DIRECTORS AND OFFICERS. |
Sections 23B.08.500 through 23B.08.600 of the Washington
Business Corporation Act authorize a court to award, or a
corporation’s board of directors to grant, indemnification
to directors and officers on terms sufficiently broad to permit
indemnification under various circumstances for liabilities
arising under the Securities Act.
As permitted by the Washington Business Corporation Act, the
registrant’s articles of incorporation and bylaws that will
be effective following the offering together provide that the
registrant will indemnify any individual made a party to a
proceeding because that individual is or was one of the
registrant’s directors, officers or certain other employees
or agents, and will advance or reimburse the reasonable expenses
incurred by that individual with respect to such proceeding,
without regard to the limitations of Sections 23B.08.510
through 23B.08.550 and 23B.08.560(2) of the Washington Business
Corporation Act, or any other limitation that may be enacted in
the future to the extent the limitation may be disregarded if
authorized by the registrant’s articles of incorporation,
to the fullest extent and under all circumstances permitted by
applicable law. The indemnification rights conferred in the
registrant’s articles of incorporation and bylaws are not
exclusive.
The registrant’s policy is to enter into separate
indemnification agreements with each of its directors and
officers that provide the maximum indemnity allowed to directors
and executive officers by the Washington Business Corporation
Act and also provides for certain additional procedural
protections. The registrant also maintains directors and
officers insurance to insure such persons against certain
liabilities.
These indemnification provisions and the indemnification
agreements entered into between the registrant and its officers
and directors may be sufficiently broad to permit
indemnification of the registrant’s officers and directors
for liabilities (including reimbursement of expenses incurred)
arising under the Securities Act.
II-1
Table of Contents
The underwriting agreement filed as Exhibit 1.1 to this
registration statement provides for indemnification by the
underwriters of the registrant and its officers and directors
for certain liabilities arising under the Securities Act and
otherwise.
| ITEM 15. | RECENT SALES OF UNREGISTERED SECURITIES. |
Since January 1, 2005, the registrant has issued the
following unregistered securities:
1. Since January 1, 2005, the registrant has granted
to directors, officers, employees and consultants option awards
to purchase 5,997,269 shares of common stock with per share
exercise prices ranging from $0.50 to $5.00, and has issued
1,408,437 shares of common stock upon exercise of such
option awards for an aggregate purchase price of $560,310.
2. On August 11, 2006, the registrant assumed option
awards held by directors, officers, employees and consultants of
nura, inc. that after such assumption represented the right to
purchase 15,192 shares of the registrant’s common
stock at an exercise price of $5.42 per share, and since
August 11, 2006 the registrant has issued 299 shares
of common stock upon exercise of such option awards for an
aggregate purchase price of $1,621.
3. Since January 1, 2005, the registrant has sold and
issued to accredited investors 8,982,915 shares of
Series E preferred stock for an aggregate purchase price of
$44,914,575.
4. During September 2005, the registrant sold and issued to
accredited investors 41,428 shares of Series C
preferred stock pursuant to the exercise of warrants for an
aggregate purchase price of $109,784.
5. On August 11, 2006, the registrant issued to
accredited investors 36,246 shares of common stock and
2,358,445 shares of Series E preferred stock in
exchange for all of the capital stock in nura, inc.
6. On August 11, 2006, the registrant assumed a
warrant held by an accredited investor to purchase capital stock
of nura, inc. that after such assumption represented the right
to purchase 65 and 22,548 shares of the registrant’s
common stock and Series E preferred stock, respectively, at
an exercise price of $4.66 per share.
7. During January 2007, the registrant sold and issued to
accredited investors 24,382 shares of Series D
preferred stock pursuant to the exercise of warrants for an
aggregate purchase price of $96,797.
8. On March 29, 2007, the registrant sold and issued
to accredited investors warrants to purchase an aggregate of
387,030 shares of Series E preferred stock at an
exercise price of $6.25 per share as consideration for providing
the registrant broker services in connection with the
registrant’s Series E preferred stock financing. Each
of these brokers is a registered broker-dealer under the
Securities Exchange Act.
9. On October 26, 2007, the registrant issued and sold
to accredited investors 657 shares of its common stock for
an aggregate purchase price of $3,561.
10. During December 2007, the registrant issued and sold to
accredited investors 107,142 shares of common stock
pursuant to the exercise of warrants for an aggregate purchase
price of $187,499.
None of the foregoing transactions involved any underwriters,
underwriting discounts or commissions, or any public offering,
and the registrant believes that each transaction was exempt
from the registration requirements of the Securities Act, with
respect to items (1) and (2) above, in reliance on
Rule 701 thereunder as transactions by an issuer pursuant
to
II-2
Table of Contents
compensatory benefit plans and contracts relating to
compensation and, with respect to items (3)
through (10) above, in reliance on Section 4(2)
thereof as transactions not involving a public offering. The
recipients of securities in such transactions represented their
intention 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 affixed to the share
certificates and instruments issued in such transactions.
Recipients of securities in the transactions described in
(3) through (10) above represented their status as
accredited investors pursuant to Rule 501 of the Securities
Act, and all recipients either received adequate information
about the registrant or had access, through their relationships
with the registrant, to such information.
| ITEM 16. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
(a) Exhibits. The following exhibits are included herein or
incorporated herein by reference:
|
Exhibit |
||
|
Number
|
Description
|
|
|
1.1
|
Form of Underwriting Agreement. | |
|
2.1
|
Agreement and Plan of Reorganization among the registrant, Epsilon Acquisition Corporation, nura, inc. and ARCH Venture Corporation dated August 4, 2006 | |
|
3.1*
|
Form of Amended and Restated Articles of Incorporation of the registrant, to be in effect upon the completion of this offering. | |
|
3.2*
|
Form of Amended and Restated Bylaws of the registrant, to be in effect upon the completion of this offering. | |
|
4.1*
|
Form of registrant’s common stock certificate. | |
|
4.2
|
Stock Purchase Warrant issued by nura, inc. to Oxford Finance Corporation dated April 26, 2005 (assumed by the registrant on August 11, 2006). | |
|
4.3
|
Amended and Restated Investors’ Rights Agreement among the registrant and holders of capital stock dated October 15, 2004. | |
|
5.1*
|
Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. | |
|
10.1
|
Form of Indemnification Agreement to be entered into between the registrant and its directors and officers. | |
|
10.2
|
Second Amended and Restated 1998 Stock Option Plan. | |
|
10.3
|
Form of Stock Option Agreement under the Second Amended and Restated 1998 Stock Option Plan (that does not permit early exercise). | |
|
10.4
|
Form of Amendment to Stock Option Agreement under the Second Amended and Restated 1998 Stock Option Plan (to permit early exercise). | |
|
10.5
|
Form of Stock Option Agreement under the Second Amended and Restated 1998 Stock Option Plan (that permits early exercise). | |
|
10.6
|
nura, inc. 2003 Stock Plan. | |
|
10.7
|
Form of Stock Option Agreement under the nura, inc. 2003 Stock Plan. | |
|
10.8*
|
2008 Equity Incentive Plan. | |
|
10.9*
|
Form of Stock Option Award Agreement under the 2008 Equity Incentive Plan. | |
|
10.10
|
Second Amended and Restated Employment Agreement between the registrant and Gregory A. Demopulos, M.D. dated December 30, 2007. | |
|
10.11
|
Non-Plan Stock Option Agreement between the registrant and Gregory A. Demopulos, M.D. dated December 11, 2001. | |
|
10.12
|
Offer Letter between the registrant and Marcia S. Kelbon, Esq. dated August 16, 2001. | |
|
10.13
|
Offer Letter between the registrant and Richard J. Klein dated May 11, 2007. | |
|
10.14
|
Technology Transfer Agreement between the registrant and Gregory A. Demopulos, M.D. dated June 16, 1994. |
II-3
Table of Contents
|
Exhibit |
||
|
Number
|
Description
|
|
|
10.15
|
Technology Transfer Agreement between the registrant and Pamela A. Pierce, M.D., Ph.D. dated June 16, 1994. | |
|
10.16
|
Second Technology Transfer Agreement between the registrant and Gregory A. Demopulos, M.D. dated December 11, 2001. | |
|
10.17
|
Second Technology Transfer Agreement between the registrant and Pamela Pierce, M.D., Ph.D. dated March 22, 2002. | |
|
10.18
|
Technology Transfer Agreement between the registrant and Gregory A. Demopulos, M.D. dated June 16, 1994 (related to tendon splice technology). | |
|
10.19
|
Master Security Agreement between the nura, inc. and Oxford Finance Corporation dated April 26, 2005. | |
|
10.20
|
Guaranty from the registrant to Oxford Finance Corporation dated August 11, 2006. | |
|
10.21
|
U.S. Bank Centre Office Lease Agreement between Bentall City Centre LLC and Scope International, Inc. dated September 28, 1998. | |
|
10.22
|
Assignment and Amendment of Lease among the registrant, City Centre Associates and Navigant Consulting, Inc. dated August 1, 2002. | |
|
10.23
|
Second Amendment to Office Lease Agreement between the registrant and City Centre Associates dated January 4, 2006. | |
|
10.24
|
Lease Agreement between Alexandria Real Estate Equities, Inc. and Primal, Inc. dated April 6, 2000. | |
|
10.25
|
Lease Agreement between Alexandria Real Estate Equities, Inc. and Primal, Inc. dated September 28, 2001. | |
|
10.26
|
Assignment and Assumption and Modification of Lease Documents among Alexandria Real Estate Equities, Inc., Primal, Inc., and nura, inc. dated October 23, 2003. | |
|
10.27
|
Assignment and Assumption and Modification of Lease Documents among Alexandria Real Estate Equities, Inc., nura, inc., and the registrant dated September 26, 2007. | |
|
10.28†
|
Commercial Supply Agreement between the registrant and Hospira Worldwide, Inc. dated October 9, 2007. | |
|
10.29†
|
Exclusive License and Sponsored Research Agreement between the registrant and the University of Leicester dated June 10, 2004. | |
|
10.30†
|
Research and Development Agreement First Amendment between the registrant and the University of Leicester dated October 1, 2005. | |
|
10.31†
|
Exclusive License and Sponsored Research Agreement between the registrant and the Medical Research Council dated October 31, 2005. | |
|
10.32†
|
Amendment dated May 8, 2007 to Exclusive License and Sponsored Research Agreement between the registrant and the Medical Research Council dated October 31, 2005. | |
|
10.33†
|
Funding Agreement between the registrant and The Stanley Medical Research Institute dated December 18, 2006. | |
|
10.34†
|
Services and Materials Agreement between the registrant and Scottish Biomedical Limited dated April 20, 2007. | |
|
10.35†
|
Amendment dated April 30, 2007 of the Services and Materials Agreement between the registrant and Scottish Biomedical Limited dated April 20, 2007. | |
|
10.36†
|
Drug Product Development and Clinical Supply Agreement between the registrant and Althea Technologies, Inc. dated January 20, 2006. | |
|
10.37†
|
Project Plan for Non-GMP and cGPM Fill and Finish of OMS302 between the registrant and Althea Technologies, Inc. dated May 31, 2007. |
II-4
Table of Contents
|
Exhibit |
||
|
Number
|
Description
|
|
|
10.38†
|
Master Services Agreement between nura, inc. and ComGenex, Inc. dated January 27, 2005. | |
|
21.1
|
List of significant subsidiaries of the registrant. | |
|
23.1
|
Consent of Ernst & Young LLP, independent registered public accounting firm. | |
|
23.2
|
Consent of Ernst & Young LLP, independent auditors. | |
|
23.3
|
Consent of PricewaterhouseCoopers LLP, independent accountants. | |
|
23.4*
|
Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1). | |
|
24.1
|
Power of Attorney (see page II-6 to this Form S-1). |
| * | To be filed by amendment. | |
| † | Confidential treatment will be requested for portions of this exhibit. These portions will be omitted from this Registration Statement and will be filed separately with the Securities and Exchange Commission. |
(b) Financial Statement Schedules
Financial statement schedules have been omitted because they are
inapplicable or not required or because the information is
included elsewhere in the registrant’s consolidated
financial statements and the related 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 by the registrant for liabilities
arising under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
II-5
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Seattle, State of Washington, on this
9th day
of January 2008.
OMEROS CORPORATION
| By: |
/s/ Gregory
A. Demopulos, M.D.
|
Gregory A. Demopulos, M.D.
President, Chief Executive Officer,
Chief Medical Officer and
Chairman of the Board of Directors
POWER OF
ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints Gregory
A. Demopulos, M.D., and Richard J. Klein and each of them,
as his or her true and lawful attorney-in-fact and agent with
full power of substitution, for him or her in any and all
capacities, to sign any and all amendments to this registration
statement (including post-effective amendments or any
abbreviated registration statement and any amendments thereto
filed pursuant to Rule 462(b) increasing the number of
securities for which registration is sought), and to file the
same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection
therewith, as fully for all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated:
|
Signature
|
Title
|
Date
|
||||
|
/s/ Gregory
A. Demopulos, M.D. Gregory A. Demopulos, M.D. |
President, Chief Executive Officer, Chief Medical Officer and Chairman of the Board of Directors (Principal Executive Officer) |
January 9, 2008 | ||||
|
/s/ Richard
J. Klein Richard J. Klein |
Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | January 9, 2008 | ||||
|
/s/ Ray
Aspiri Ray Aspiri |
Director | January 9, 2008 | ||||
|
/s/ Thomas
J. Cable Thomas J. Cable |
Director | January 9, 2008 | ||||
II-6
Table of Contents
|
Signature
|
Title
|
Date
|
||||
|
/s/ Peter
A. Demopulos, M.D. Peter A. Demopulos, M.D. |
Director | January 9, 2008 | ||||
|
/s/ Leroy
E. Hood, M.D., Ph.D. Leroy E. Hood, M.D., Ph.D. |
Director | January 9, 2008 | ||||
|
/s/ David
A. Mann David A. Mann |
Director | January 9, 2008 | ||||
|
/s/ Jean-Philippe
Tripet Jean-Philippe Tripet |
Director | January 9, 2008 | ||||
II-7
Table of Contents
EXHIBIT INDEX
|
Exhibit |
||||
|
Number
|
Description
|
|||
| 1 | .1 | Form of Underwriting Agreement. | ||
| 2 | .1 | Agreement and Plan of Reorganization among the registrant, Epsilon Acquisition Corporation, nura, inc. and ARCH Venture Corporation dated August 4, 2006 | ||
| 3 | .1* | Form of Amended and Restated Articles of Incorporation of the registrant, to be in effect upon the completion of this offering. | ||
| 3 | .2* | Form of Amended and Restated Bylaws of the registrant, to be in effect upon the completion of this offering. | ||
| 4 | .1* | Form of registrant’s common stock certificate. | ||
| 4 | .2 | Stock Purchase Warrant issued by nura, inc. to Oxford Finance Corporation dated April 26, 2005 (assumed by the registrant on August 11, 2006). | ||
| 4 | .3 | Amended and Restated Investors’ Rights Agreement among the registrant and holders of capital stock dated October 15, 2004. | ||
| 5 | .1* | Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. | ||
| 10 | .1 | Form of Indemnification Agreement to be entered into between the registrant and its directors and officers. | ||
| 10 | .2 | Second Amended and Restated 1998 Stock Option Plan. | ||
| 10 | .3 | Form of Stock Option Agreement under the Second Amended and Restated 1998 Stock Option Plan (that does not permit early exercise). | ||
| 10 | .4 | Form of Amendment to Stock Option Agreement under the Second Amended and Restated 1998 Stock Option Plan (to permit early exercise). | ||
| 10 | .5 | Form of Stock Option Agreement under the Second Amended and Restated 1998 Stock Option Plan (that permits early exercise). | ||
| 10 | .6 | nura, inc. 2003 Stock Plan. | ||
| 10 | .7 | Form of Stock Option Agreement under the nura, inc. 2003 Stock Plan. | ||
| 10 | .8* | 2008 Equity Incentive Plan. | ||
| 10 | .9* | Form of Stock Option Award Agreement under the 2008 Equity Incentive Plan. | ||
| 10 | .10 | Second Amended and Restated Employment Agreement between the registrant and Gregory A. Demopulos, M.D. dated December 30, 2007. | ||
| 10 | .11 | Non-Plan Stock Option Agreement between the registrant and Gregory A. Demopulos, M.D. dated December 11, 2001. | ||
| 10 | .12 | Offer Letter between the registrant and Marcia S. Kelbon, Esq. dated August 16, 2001. | ||
| 10 | .13 | Offer Letter between the registrant and Richard J. Klein dated May 11, 2007. | ||
| 10 | .14 | Technology Transfer Agreement between the registrant and Gregory A. Demopulos, M.D. dated June 16, 1994. | ||
| 10 | .15 | Technology Transfer Agreement between the registrant and Pamela Pierce, M.D., Ph.D. dated June 16, 1994. | ||
| 10 | .16 | Second Technology Transfer Agreement between the registrant and Gregory A. Demopulos, M.D. dated December 11, 2001. | ||
| 10 | .17 | Second Technology Transfer Agreement between the registrant and Pamela Pierce, M.D., Ph.D. dated March 22, 2002. | ||
| 10 | .18 | Technology Transfer Agreement between the registrant and Gregory A. Demopulos, M.D. dated June 16, 1994 (related to tendon splice technology). | ||
| 10 | .19 | Master Security Agreement between the nura, inc. and Oxford Finance Corporation dated April 26, 2005. | ||
| 10 | .20 | Guaranty from the registrant to Oxford Finance Corporation dated August 11, 2006. | ||
| 10 | .21 | U.S. Bank Centre Office Lease Agreement between Bentall City Centre LLC and Scope International, Inc. dated September 28, 1998. | ||
| 10 | .22 | Assignment and Amendment of Lease among the registrant, City Centre Associates and Navigant Consulting, Inc. dated August 1, 2002. | ||
Table of Contents
|
Exhibit |
||||
|
Number
|
Description
|
|||
| 10 | .23 | Second Amendment to Office Lease Agreement between the registrant and City Centre Associates dated January 4, 2006. | ||
| 10 | .24 | Lease Agreement between Alexandria Real Estate Equities, Inc. and Primal, Inc. dated April 6, 2000. | ||
| 10 | .25 | Lease Agreement between Alexandria Real Estate Equities, Inc. and Primal, Inc. dated September 28, 2001. | ||
| 10 | .26 | Assignment and Assumption and Modification of Lease Documents among Alexandria Real Estate Equities, Inc., Primal, Inc., and nura, inc. dated October 23, 2003. | ||
| 10 | .27 | Assignment and Assumption and Modification of Lease Documents among Alexandria Real Estate Equities, Inc., nura, inc., and the registrant dated September 26, 2007. | ||
| 10 | .28† | Commercial Supply Agreement between the registrant and Hospira Worldwide, Inc. dated October 9, 2007. | ||
| 10 | .29† | Exclusive License and Sponsored Research Agreement between the registrant and the University of Leicester dated June 10, 2004. | ||
| 10 | .30† | Research and Development Agreement First Amendment between the registrant and the University of Leicester dated October 1, 2005. | ||
| 10 | .31† | Exclusive License and Sponsored Research Agreement between the registrant and the Medical Research Council dated October 31, 2005. | ||
| 10 | .32† | Amendment dated May 8, 2007 to Exclusive License and Sponsored Research Agreement between the registrant and the Medical Research Council dated October 31, 2005. | ||
| 10 | .33† | Funding Agreement between the registrant and The Stanley Medical Research Institute dated December 18, 2006. | ||
| 10 | .34† | Services and Materials Agreement between the registrant and Scottish Biomedical Limited dated April 20, 2007. | ||
| 10 | .35† | Amendment dated April 30, 2007 of the Services and Materials Agreement between the registrant and Scottish Biomedical Limited dated April 20, 2007. | ||
| 10 | .36† | Drug Product Development and Clinical Supply Agreement between the registrant and Althea Technologies, Inc. dated January 20, 2006. | ||
| 10 | .37† | Project Plan for Non-GMP and cGMP Fill and Finish of OMS302 between the registrant and Althea Technologies, Inc. dated May 31, 2007. | ||
| 10 | .38† | Master Services Agreement between nura, inc. and ComGenex, Inc. dated January 27, 2005 | ||
| 21 | .1 | List of significant subsidiaries of the registrant. | ||
| 23 | .1 | Consent of Ernst & Young LLP, independent registered public accounting firm. | ||
| 23 | .2 | Consent of Ernst & Young LLP, independent auditors. | ||
| 23 | .3 | Consent of PricewaterhouseCoopers LLP, independent accountants. | ||
| 23 | .4* | Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1). | ||
| 24 | .1 | Power of Attorney (see page II-6 to this Form S-1). | ||
| * | To be filed by amendment. | |
| † | Confidential treatment will be requested for portions of this exhibit. These portions will be omitted from this Registration Statement and will be filed separately with the Securities and Exchange Commission. |
Exhibit 1.1
_______________ Shares
OMEROS CORPORATION
Common Stock
($0.01 Par Value)
EQUITY UNDERWRITING AGREEMENT
[ ], 2008
Deutsche Bank Securities Inc.
As Representative of the Several Underwriters
As Representative of the Several Underwriters
c/o Deutsche Bank Securities Inc.
60 Wall Street, 4th Floor
New York, New York 10005
60 Wall Street, 4th Floor
New York, New York 10005
Ladies and Gentlemen:
Omeros Corporation, a Washington corporation (the “Company”), proposes to sell to the several
underwriters (the “Underwriters”) named in Schedule I hereto for whom you are acting as
Representative (the “Representative”) an aggregate of ___shares (the “Firm Shares”) of the
Company’s common stock, $0.01 par value (the “Common Stock”). The respective amounts of the Firm
Shares to be so purchased by the several Underwriters are set forth opposite their names in
Schedule I hereto. The Company also proposes to sell at the Underwriters’ option an aggregate of
up to ___additional shares of the Company’s Common Stock (the “Option Shares”) as set forth
below.
As the Representative, you have advised the Company (a) that you are authorized to enter into
this Agreement on behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm Shares set forth
opposite their respective names in Schedule I, plus their pro rata portion of the Option Shares if
you elect to exercise the over-allotment option in whole or in part for the accounts of the several
Underwriters. The Firm Shares and the Option Shares (to the extent the aforementioned option is
exercised) are herein collectively called the “Shares.”
Deutsche Bank Securities Inc. (“DBSI”) has agreed to reserve up to ___of the Shares
to be purchased by it under this Agreement for sale to the Company’s directors, officers, employees
and business associates and other parties related to the Company (collectively, “Participants”), as
set forth in the Prospectus (as defined below) under the heading “Underwriting” (the “Directed
Share Program”). The Shares to be sold by DBSI and its affiliates pursuant to the Directed Share
Program are referred to hereinafter as the “Directed Shares.” Any Directed Shares not orally confirmed for purchase by any Participants by the end of the
business day on which this Agreement is executed will be offered to the public by the Underwriters
as set forth in the Prospectus.
1
In consideration of the mutual agreements contained herein and of the interests of the parties
in the transactions contemplated hereby, the parties hereto agree as follows:
| 1. | Representations and Warranties of the Company. | ||
| The Company represents and warrants to each of the Underwriters as follows: |
(a) A registration statement on Form S-1 (File No. 333-___) with respect to the Shares has
been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as
amended (the “Act”), and the rules and regulations (the “Rules and Regulations”) of the Securities
and Exchange Commission (the “Commission”) thereunder and has been filed with the Commission.
Copies of such registration statement, including any amendments thereto, the preliminary
prospectuses (meeting the requirements of the Rules and Regulations) contained therein and the
exhibits and financial statements, as finally amended and revised, have heretofore been delivered
by the Company to you. Such registration statement, together with any registration statement filed
by the Company pursuant to Rule 462(b) under the Act, is herein referred to as the “Registration
Statement,” which shall be deemed to include all information omitted therefrom in reliance upon
Rules 430A, 430B or 430C under the Act and contained in the Prospectus referred to below, has
become effective under the Act and no post-effective amendment to the Registration Statement has
been filed as of the date of this Agreement. “Prospectus” means the form of prospectus first filed
with the Commission pursuant to and within the time limits described in Rule 424(b) under the Act.
Each preliminary prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a “Preliminary Prospectus.”
(b) As of the Applicable Time (as defined below) and as of the Closing Date or the Option
Closing Date, as the case may be, neither (i) the General Use Free Writing Prospectus(es) (as
defined below) issued at or prior to the Applicable Time, the Statutory Prospectus (as defined
below) and the information included on Schedule II hereto, all considered together (collectively,
the “General Disclosure Package”), nor (ii) any individual Limited Use Free Writing Prospectus (as
defined below), when considered together with the General Disclosure Package, included or will
include any untrue statement of a material fact or omitted or will 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 information contained in or omitted from any Issuer Free Writing Prospectus, in
reliance upon, and in conformity with, written information furnished to the Company by or on behalf
of any Underwriter through the Representative, specifically for use therein, it being understood
and agreed that the only such information is that described in Section 13 herein. As used in this
subsection and elsewhere in this Agreement:
“Applicable Time” means ___[a/p]m (New York time) on the date of this Agreement or such
other time as agreed to by the Company and the Representative.
2
“Statutory Prospectus” as of any time means the Preliminary Prospectus relating to the Shares
that is included in the Registration Statement immediately prior to that time.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in
Rule 433 under the Act, relating to the Shares in the form filed or required to be filed with the
Commission or, if not required to be filed, in the form retained in the Company’s records pursuant
to Rule 433(g) under the Act.
“General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is
identified on Schedule III to this Agreement.
“Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not a
General Use Free Writing Prospectus.
(c) The Company has been duly organized and is validly existing as a corporation in good
standing under the laws of the State of Washington, with corporate power and authority to own or
lease its properties and conduct its business as described in the Registration Statement, the
General Disclosure Package and the Prospectus. The subsidiary of the Company listed in Exhibit A
hereto (the “Subsidiary”) has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with corporate power and
authority to own or lease its properties and conduct its business as described in the Registration
Statement, the General Disclosure Package and the Prospectus. The Subsidiary is the only
subsidiary, direct or indirect, of the Company. The Company and the Subsidiary are duly qualified
to transact business in all jurisdictions in which the conduct of their business requires such
qualification except where the failure to qualify would not either (i) have, individually or in the
aggregate, a material adverse effect on the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the Company and of the
Subsidiary taken as a whole or (ii) prevent the consummation of the transactions contemplated
hereby (the occurrence of any such effect or any such prevention described in the foregoing clauses
(i) and (ii) being referred to as a “Material Adverse Effect”). The outstanding shares of capital
stock of the Subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company free and clear of all liens, encumbrances and equities
and claims; and no options, warrants or other rights to purchase, agreements or other obligations
to issue or other rights to convert any obligations into shares of capital stock or ownership
interests in the Subsidiary are outstanding.
(d) The outstanding shares of Common Stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; the Shares to be issued and sold by the
Company have been duly authorized and when issued and paid for as contemplated herein will be
validly issued, fully paid and non-assessable; and except as waived or terminated in writing before
the date hereof, there are no preemptive rights of shareholders with respect to any of the Shares
or the issue and sale thereof. Neither the filing of the Registration Statement nor the offering
or sale of the Shares as contemplated by this Agreement gives rise to any rights, other than those
which have been waived or satisfied, for or relating to the registration of any shares of Common
Stock.
3
(e) The information set forth under the caption “Capitalization” in the Registration Statement
and the Prospectus (and any similar section or information contained in the General Disclosure
Package) is true and correct. All of the Shares conform to the description thereof contained in
the Registration Statement, the General Disclosure Package and the Prospectus. The form of
certificates for the Shares conforms to the corporate law of the jurisdiction of the Company’s
incorporation and to any requirements of the Company’s organizational documents. Subsequent to the
respective dates as of which information is given in the Registration Statement, the General
Disclosure Package and the Prospectus, except as otherwise specifically stated therein or in this
Agreement, the Company has not: (i) issued any securities (other than securities issued in
connection with the conversion of the outstanding convertible preferred stock, a stock split, or
the grant or exercise of outstanding stock options as set forth in the Registration Statement, the
General Disclosure Package and the Prospectus) or incurred any liability or obligation, direct or
contingent, for borrowed money; or (ii) declared or paid any dividend or made any other
distribution on or in respect to its capital stock. Prior to the time of purchase of the Shares as
described herein, all outstanding shares of Series A convertible preferred stock, par value $0.01
per share, Series B convertible preferred stock, par value $0.01 per share, Series C convertible
preferred stock, par value $0.01 per share, Series D convertible preferred stock, par value $0.01
per share and Series E convertible preferred stock, par value $0.01 per share, of the Company shall
convert into the number of shares of Common Stock, and shall convert in the manner, set forth in
the Registration Statement and the Prospectus; [prior to the date hereof the Company has duly
effected and completed a [ ]-for-[ ] stock split of the Common Stock [and Preferred Stock] in
the manner set forth in the Registration Statement and the Prospectus;] and the Amended and
Restated Articles of Incorporation of the Company and the Amended and Restated By-Laws of the
Company, each in the form filed as an exhibit to the Registration Statement, have been heretofore
duly authorized and approved in accordance with the Washington Business Corporation Act and shall
become effective and in full force and effect on or before the time of such purchase.
(f) The Commission has not issued an order preventing or suspending the use of any Preliminary
Prospectus, any Issuer Free Writing Prospectus or the Prospectus relating to the proposed offering
of the Shares, and no proceeding for that purpose or pursuant to Section 8A of the Act has been
instituted or, to the Company’s knowledge, threatened by the Commission. The Registration
Statement contains, and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform to, the requirements of the
Act and the Rules and Regulations. The Registration Statement and any amendment thereto do not
contain, and will not contain, any untrue statement of a material fact and do not omit, and will
not omit, to state a material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and supplements thereto do
not contain, and will not contain, any untrue statement of a material fact and do not omit, and
will not 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 information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement, in reliance upon,
and in conformity with, written information furnished to the Company by or on behalf of any
Underwriter through the Representative, specifically for use therein, it being understood and
agreed that the only such information is that described in Section 13 herein.
4
(g) Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times
through the completion of the public offer and sale of the Shares, did not, does not and will not
include any information that conflicted, conflicts or will conflict with the information contained
in the Registration Statement or the Prospectus.
(h) The Company has not, directly or indirectly, distributed and will not distribute any
offering material in connection with the offering and sale of the Shares other than any Preliminary
Prospectus, the Prospectus and other materials, if any, permitted under the Act and consistent with
Section 4(b) below. The Company will file with the Commission all Issuer Free Writing Prospectuses
in the time required under Rule 433(d) under the Act. The Company has satisfied or will satisfy
the conditions in Rule 433 under the Act to avoid a requirement to file with the Commission any
electronic road show.
(i) (i) At the time of the initial filing of the Registration Statement and (ii) as of the
date hereof (with such date being used as the determination date for purposes of this subclause
(ii)), the Company was not and is not an “ineligible issuer” (as defined in Rule 405 under the Act,
without taking into account any determination by the Commission pursuant to Rule 405 under the Act
that it is not necessary that the Company be considered an ineligible issuer), including, without
limitation, for purposes of Rules 164 and 433 under the Act with respect to the offering of the
Shares as contemplated by the Registration Statement.
(j) The consolidated financial statements of the Company and the Subsidiary, together with
related notes and schedules as set forth in the Registration Statement, the General Disclosure
Package and the Prospectus, present fairly the financial position and the results of operations and
cash flows of the Company and the consolidated Subsidiary, at the indicated dates and for the
indicated periods. Such financial statements and related schedules have been prepared in
accordance with generally accepted principles of accounting (“GAAP”), consistently applied
throughout the periods involved, except as disclosed therein, and all adjustments necessary for a
fair presentation of results for such periods have been made. The summary and selected
consolidated financial data included in the Registration Statement, the General Disclosure Package
and the Prospectus present fairly the information shown therein and such data has been compiled on
a basis consistent with the financial statements presented therein and the books and records of the
Company. The pro forma financial statements and other pro forma financial information included in
the Registration Statement, the General Disclosure Package and the Prospectus present fairly the
information shown therein, have been prepared in accordance with the Commission’s rules and
guidelines with respect to pro forma financial statements, have been properly compiled on the pro
forma bases described therein, and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein. The Company and the Subsidiary do not
have any material liabilities or obligations, direct or contingent (including any off-balance sheet
obligations or any “variable interest entities” within the meaning of Financial Accounting
Standards Board Interpretation No. 46), not disclosed in the Registration Statement, the General
Disclosure Package and the Prospectus. There are no financial statements (historical or pro forma)
that are required to be included in the Registration Statement, the General Disclosure Package or
the Prospectus that are not included as required.
5
(k) Each of Ernst & Young and PricewaterhouseCoopers LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration Statement, the General
Disclosure Package and the Prospectus, is an independent registered public accounting firm with
respect to the Company and the Subsidiary within the meaning of the Act and the applicable Rules
and Regulations and the Public Company Accounting Oversight Board (United States) (the “PCAOB”).
(l) Except as disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus, neither the Company nor the Subsidiary is aware of (i) any material weakness in its
internal control over financial reporting or (ii) change in internal control over financial
reporting that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
(m) Solely to the extent that the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations promulgated by the Commission and The Nasdaq Stock Market, Inc. (“NASDAQ”) thereunder
(the “Sarbanes-Oxley Act”) has been applicable to the Company, there is and has been no failure on
the part of the Company to comply in all material respects with any provision of the Sarbanes-Oxley
Act. The Company has taken all necessary actions to ensure that it is in compliance with all
provisions of the Sarbanes-Oxley Act that are in effect and with which the Company is required to
comply.
(n) There is no action, suit, claim or proceeding pending or, to the knowledge of the Company,
threatened against the Company or the Subsidiary before any court or administrative agency or
otherwise which if determined adversely to the Company or the Subsidiary would have, individually
or in the aggregate, a Material Adverse Effect, except as set forth in the Registration Statement,
the General Disclosure Package and the Prospectus.
(o) The Company and the Subsidiary have good and marketable title to all of the properties and
assets reflected in the consolidated financial statements hereinabove described or described in the
Registration Statement, the General Disclosure Package and the Prospectus, subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except those reflected in such financial
statements or described in the Registration Statement, the General Disclosure Package and the
Prospectus and except as would not, individually or in the aggregate, have a Material Adverse
Effect. The Company and the Subsidiary occupy their leased properties under valid and binding
leases conforming in all material respects to the description thereof set forth in the Registration
Statement, the General Disclosure Package and the Prospectus with such exceptions as are not
material and do not interfere with the use of such property.
(p) The Company and the Subsidiary have filed all Federal, State, local and foreign tax
returns which have been required to be filed and have paid all taxes indicated by such returns and
all assessments received by them or any of them to the extent that such taxes have become due and
are not being contested in good faith and for which an adequate reserve for accrual has been
established in accordance with GAAP. All tax liabilities have been adequately provided for in the
financial statements of the Company, and the Company does not know of any actual or proposed
additional material tax assessments.
6
(q) Since the respective dates as of which information is given in the Registration Statement,
the General Disclosure Package and the Prospectus, as each may be amended or supplemented, there
has not been any material adverse change or any development involving a prospective material
adverse change in or affecting the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise), or prospects of the Company and the Subsidiary
taken as a whole, whether or not occurring in the ordinary course of business, and there has not
been any material transaction entered into or any material transaction that is probable of being
entered into by the Company or the Subsidiary, other than transactions in the ordinary course of
business and changes and transactions described in the Registration Statement, the General
Disclosure Package and the Prospectus, as each may be amended or supplemented. The Company and the
Subsidiary have no material contingent obligations which are not disclosed in the Company’s
financial statements which are included in the Registration Statement, the General Disclosure
Package and the Prospectus.
(r) Neither the Company nor the Subsidiary is or with the giving of notice or lapse of time or
both, will be, (i) in violation of its articles of incorporation, by-laws, certificate of
formation, limited liability agreement, or other organizational documents or (ii) in violation of
or in default under any agreement, lease, contract, indenture or other instrument or obligation to
which it is a party or by which it, or any of its properties, is bound and, solely with respect to
this clause (ii), which violation or default would have a Material Adverse Effect. The execution
and delivery of this Agreement and the consummation of the transactions herein contemplated and the
fulfillment of the terms hereof will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, (x) any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or the Subsidiary is a party or by which the Company
or the Subsidiary or any of their respective properties is bound, which violation or default would
not, individually or in the aggregate, have a Material Adverse Effect or (y) the articles of
incorporation or by-laws of the Company or (z) any law, order, rule or regulation judgment, order,
writ or decree applicable to the Company or the Subsidiary of any court or of any government,
regulatory body or administrative agency or other governmental body having jurisdiction.
(s) The execution and delivery of, and the performance by the Company of its obligations
under, this Agreement has been duly and validly authorized by all necessary corporate action on the
part of the Company, and this Agreement has been duly executed and delivered by the Company.
(t) Each approval, consent, order, authorization, designation, declaration or filing by or
with any regulatory, administrative or other governmental body necessary in connection with the
execution and delivery by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by the Commission, the
Financial Industry Regulatory Authority (the “FINRA”) or such additional steps as may be necessary
to qualify the Shares for public offering by the Underwriters under State securities or Blue Sky
laws or Canadian provincial securities laws or other non-U.S. laws of those jurisdictions
designated by the Representative) has been obtained or made and is in full force and effect.
7
(u) The Company and the Subsidiary hold all material licenses, certificates and permits from
governmental authorities which are necessary to the conduct of their businesses. Except as
described in the Registration Statement, the General Disclosure Package and the Prospectus, the
Company and the Subsidiary own, have obtained or can acquire on reasonable terms, valid and
enforceable licenses for, or other legal rights to use, the inventions, patent applications,
patents, patent rights, trademarks (both registered and unregistered), trade names, service marks
(both registered and unregistered), service names, copyrights, trade secrets, customer lists,
designs, know-how (including trade secrets and other unpatented and unpatentable proprietary or
confidential information, systems or procedures) or other intellectual property rights or
proprietary rights and information described in the Registration Statement, the General Disclosure
Package and the Prospectus as being owned or licensed by the Company, or used in or necessary to
carry on their business as presently conducted or specifically proposed to be conducted
(collectively, the “Products”), each as described in the Registration Statement, the General
Disclosure Package and the Prospectus (collectively, “Intellectual Property”). To the Company’s
knowledge, all of such patents, registered trademarks, registered copyrights or applications
therefor, owned or licensed by the Company have been duly registered in, filed in or issued by the
United States Patent and Trademark Office, the United States Copyright Office or the corresponding
offices of other jurisdictions and have been maintained and renewed in accordance with all
applicable provisions of law and administrative regulations in the United States and all such other
jurisdictions, except where the failure to do so, individually or in the aggregate, would not have
a Material Adverse Effect. The Company has taken all commercially reasonable steps to establish
and preserve its ownership of or rights to all material Intellectual Property. To the Company’s
knowledge, there are no third parties who have or will be able to assert rights nor have any third
parties provided written notice to the Company alleging that such third party may establish rights,
to any Intellectual Property related to the Products, except as disclosed in the Registration
Statement, the General Disclosure Package or Prospectus. To the Company’s knowledge, there is no
infringement by third parties of any Intellectual Property that would, individually or in the
aggregate, have a Material Adverse Effect (other than with respect to trademarks that would not,
individually or in the aggregate, have a Material Adverse Effect). To the Company’s knowledge,
there is no pending or threatened action, suit or proceeding or written claim by others challenging
the Company’s rights in or to any Intellectual Property that would, individually or in the
aggregate, have a Material Adverse Effect (other than with respect to trademarks that would not,
individually or in the aggregate, have a Material Adverse Effect). There is no pending, or to the
Company’s knowledge, threatened action, suit or proceeding or written claim by others challenging
the validity or enforceability of any Intellectual Property except as described in the Registration
Statement, the General Disclosure Package and the Prospectus. To the Company’s knowledge, the
Company has not formerly and presently is not infringing or violating the valid and enforceable
Intellectual Property of any other person that would, individually or in the aggregate, have a
Material Adverse Effect. There is no pending, or to the Company’s knowledge, threatened action,
suit or proceeding or written claim by another that the Company infringes or otherwise violates the
Intellectual Property of a third party that would, individually or in the aggregate, have a
Material Adverse Effect, and the Company is unaware of any facts that could form a reasonable basis
for any such action, suit, proceeding or claim that would, individually or in the aggregate, have a
Material Adverse Effect. To the Company’s knowledge, the manufacture, use, sale, offer for sale or
import of any Product described in the Registration Statement or Prospectus by the Company would
not infringe any
8
valid and enforceable claim of any patent of another, except that of a licensor who has
granted the Company a license under any such patent. The Company is in compliance with the
material terms of all agreements pursuant to which Intellectual Property has been licensed to the
Company as such are described in the Registration Statement, the General Disclosure Package or the
Prospectus. All such agreements are in full force and effect and there is no notice of default by
the Company thereto, and to the Company’s knowledge, no notice of default thereunder has been
threatened against the Company. To the Company’s knowledge, sublicenses granted to others are now
in compliance with the material terms of all agreements pursuant to which Intellectual Property
has been sublicensed by the Company. To the Company’s knowledge, all such agreements are in full
force and effect and there is no default by any sublicensee thereto. To the Company’s knowledge,
there is no patent or patent application containing claims that interfere with the issued or
pending claims of any patent owned by or licensed to the Company that relate to its product
candidates described in the Registration Statement, the General Disclosure Package and the
Prospectus. The Products described in the Registration Statement, the General Disclosure Package
or the Prospectus, if any, as developed or under development by the Company, fall within the scope
of one or more claims of one or more patents or patent applications owned by or licensed to the
Company. Upon the making, selling, offering for sale or importing into the United States of any
product covered by one or more claims of a United States patent owned or licensed by the Company,
the Company will comply with the marking and notice requirements of 35 U.S.C. § 287(a).
(v) The Company has duly and properly filed or caused to be filed with the U.S. Patent and
Trademark Office (the “PTO”) and applicable foreign and international patent authorities all patent
applications owned by the Company (the “Company Patent Applications”). To the knowledge of the
Company, the Company has complied with the PTO’s duty of candor, good faith and disclosure for the
Company Patent Applications and has made no material misrepresentation in the Company Patent
Applications. To the Company’s knowledge, except as disclosed in the Registration Statement, the
General Disclosure Package and the Prospectus, the Company Patent Applications disclose patentable
subject matters, and the Company has not been notified of any inventorship challenges nor has any
interference been declared or provoked nor is any material fact known by the Company that would
preclude the issuance of patents with respect to the Company Patent Applications or would render
such patents invalid or unenforceable, except as would not individually or in the aggregate have a
Material Adverse Effect. To the Company’s knowledge, except as disclosed in the Registration
Statement, the General Disclosure Package and the Prospectus, no third party possesses rights to
the Company’s Intellectual Property that, if exercised, could enable such party to develop products
competitive to those the Company intends to develop as described in each of the Registration
Statement, the General Disclosure Package and the Prospectus. To the Company’s knowledge, the
Company does not lack nor will it be unable to obtain any rights or licenses to use patents that
are, or would be, necessary to conduct the business now conducted or that is proposed to be
conducted by the Company as described in the Registration Statement, the General Disclosure Package
and the Prospectus.
(w) The Company takes security measures adequate to assert trade secret protection in its
non-patented trade secret technology.
9
(x) Neither the Company, nor to the Company’s knowledge, any of its affiliates, has taken or
may take, directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the stabilization or manipulation
of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. The
Company acknowledges that the Underwriters may engage in passive market making transactions in the
Shares on the Nasdaq Global Market in accordance with Regulation M under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).
(y) Neither the Company nor the Subsidiary is or, after giving effect to the offering and sale
of the Shares contemplated hereunder and the application of the net proceeds from such sale as
described in the Registration Statement, General Disclosure Package and the Prospectus, will be an
“investment company” within the meaning of such term under the Investment Company Act of 1940 as
amended (the “1940 Act”), and the rules and regulations of the Commission thereunder.
(z) Each of the Company and the Subsidiary maintains for it, and if applicable, for the
Subsidiary, a system of internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management’s general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(aa) The Company has established and maintains “disclosure controls and procedures” (as
defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act); the Company’s “disclosure
controls and procedures” are reasonably designed to ensure that all information (both financial and
non-financial) required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the rules and regulations of the Exchange Act, and that all such information is
accumulated and communicated to the Company’s management as appropriate to allow timely decisions
regarding required disclosure and to make the certifications of the Chief Executive Officer and
Chief Financial Officer of the Company required under the Exchange Act with respect to such
reports.
(bb) The statistical, industry-related and market-related data included in the Registration
Statement, the General Disclosure Package and the Prospectus are based on or derived from sources
which the Company reasonably and in good faith believes are reliable and accurate, and the Company
has obtained the written consent to the use of such data from such sources to the extent required.
(cc) The operations of the Company and the Subsidiary are and have been conducted at all times
in compliance with applicable financial record-keeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes
and applicable rules and regulations thereunder (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 the Subsidiary with respect to the Money Laundering Laws is pending or, to the Company’s
knowledge, threatened.
10
(dd) Neither the Company nor, to the Company’s knowledge, any director, officer, agent,
employee or affiliate of the Company is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not
directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make
available such proceeds to the Subsidiary, joint venture partner or other person or entity, for the
purpose of financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.
(ee) The Company and the Subsidiary carry, or are covered by, insurance in such amounts and
covering such risks as is adequate for the conduct of their respective businesses and the value of
their respective properties and as is customary for companies engaged in similar businesses. All
policies of insurance and fidelity or surety bonds insuring the Company or the Subsidiary or their
respective businesses, assets, employees, officers and directors are in full force and effect; the
Company and the Subsidiary are in compliance with the terms of such policies and instruments in all
material respects; and there are no claims by the Company or the Subsidiary under any such policy
or instrument as to which any insurance company is denying liability or defending under a
reservation of rights clause; and neither the Company nor the Subsidiary has been refused any
insurance coverage sought or applied for.
(ff) The Company and the Subsidiary is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder (“ERISA”); no “reportable event”
(as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for
which the Company and the Subsidiary would have any liability; the Company and the Subsidiary has
not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published interpretations
thereunder (the “Code”); and each “pension plan” for which the Company or the Subsidiary would have
any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in
all material respects and nothing has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
(gg) To the Company’s knowledge, there are no affiliations or associations between (i) any
member of the FINRA and (ii) any of the Company’s officers, directors or 5% or greater
securityholders, except as set forth in the Registration Statement.
(hh) Neither the Company nor the Subsidiary is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic or foreign, relating to
the use, disposal or release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic substances (collectively,
“environmental laws”), owns or operates any real property contaminated with any substance that is
subject to environmental laws, is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any environmental laws, which violation,
contamination, liability or claim would, individually or in the aggregate, have a Material Adverse Effect; and the Company is not aware of any pending
investigation which might lead to such a claim.
11
(ii) The Shares have been approved for listing subject to notice of issuance on the Nasdaq
Global Market.
(jj) There are no relationships or related-party transactions involving the Company or the
Subsidiary or any other person required to be described in the Prospectus which have not been
described as required.
(kk) Neither the Company nor the Subsidiary has made any contribution or other payment to any
official of, or candidate for, any federal, state or foreign office in violation of any law which
violation is required to be disclosed in the Prospectus.
(ll) The Company has not failed to file with the applicable regulatory authorities (including,
without limitation, the United States Food and Drug Administration (the “FDA”)) or any foreign,
federal, state or local governmental or regulatory authority performing functions similar to those
performed by the FDA) any required filing, declaration, listing, registration, report or
submission; all such filings, declarations, listings, registrations, reports or submissions were in
material compliance with applicable laws when filed and, except as referred to or described in the
Registration Statement, the General Disclosure Package or the Prospectus or which would not have,
individually or in the aggregate, a Material Adverse Effect, no deficiencies have been asserted by
any applicable regulatory authority (including, without limitation, the FDA or any foreign,
federal, state or local governmental or regulatory authority performing functions similar to those
performed by the FDA) with respect to any such filings, declarations, listings, registrations,
reports or submissions that remain unresolved. Except as would not, individually or in the
aggregate, have a Material Adverse Effect, the Company is in compliance in all material respects
with all applicable rules and regulations of the FDA, and all applicable U.S. and foreign laws,
statutes, ordinances, rules or regulations.
(mm) To the best of the Company’s knowledge, there are no rulemaking or similar proceedings
before the FDA which affect or involve the Company or any of the processes or drug candidates that
the Company has developed, is developing or proposes to develop or uses or proposes to use which,
if the subject of an action unfavorable to the Company, would have a Material Adverse Effect; to
the Company’s knowledge, all of the manufacturing facilities and operations of the Company and its
United States and foreign contract manufacturers are in compliance in all material respects with
applicable FDA and comparable regulations, including current Good Manufacturing Practices, with
respect to the manufacture of the Company’s product candidates.
(nn) The preclinical tests and clinical trials that are described in, or the results of which
are referred to in, the Registration Statement, the General Disclosure Package or the Prospectus,
and, to the Company’s knowledge, such studies and tests conducted by or that the Company intends to
rely on in support of regulatory approval by the FDA or foreign regulatory agencies, were and, if
still pending, are being conducted in all material respects in accordance with protocols filed with
the appropriate regulatory authorities for each such test or trial and in accordance with all
applicable statutes, laws, rules and regulations, as the case may be, and with
12
standard medical and scientific research procedures and all applicable rules, regulations and
policies of the FDA, including, to the extent required by applicable law or regulation, the FDA’s
regulations related to Good Clinical Practices and Good Laboratory Practices, and all applicable
foreign regulatory requirements and standards except where such failure to comply would not have a
Material Adverse Effect; the description of the results of such tests and trials contained in the
Registration Statement, the General Disclosure Package or the Prospectus accurately present
summaries in all material respects of the data derived from such tests and trials, and the Company
has no knowledge of any other tests or trials the results of which discredit or call into question
the preclinical tests or clinical results described or referred to in the Registration Statement,
the General Disclosure Package or the Prospectus such that such test or trial would result in a
Material Adverse Effect; except as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus, the Company has not received any notices or other correspondence from
the FDA or any committee thereof or from any other U.S. or foreign government or drug regulatory
agency requiring the termination, suspension or modification of any preclinical tests or clinical
trials conducted by, or on behalf of, the Company or in which the Company has participated that are
described or referred to in the Registration Statement, the General Disclosure Package or the
Prospectus; and the Company has operated and currently is in compliance in all material respects
with all applicable rules and regulations of the FDA and comparable foreign drug or medical
regulatory agencies outside of the United States except where such failure to comply would not
result in a Material Adverse Effect.
(oo) As of the date of the initial filing of the Registration Statement referred to in Section
1(a), there were no outstanding personal loans made, directly or indirectly, by the Company to any
director or executive officer of the Company.
(pp) None of the information on (or hyperlinked from) the Company’s website at
http://www.omeros.com includes or constitutes a “free writing prospectus” as defined in Rule 405
under the Act and the Company does not maintain or support any website other than
http://www.omeros.com.
(qq) The Subsidiary is not currently prohibited, directly or indirectly, from paying any
dividends to the Company, from making any other distribution on the Subsidiary’s capital stock,
from repaying to the Company any loans or advances to the Subsidiary from the Company or from
transferring any of the Subsidiary’s property or assets to the Company.
(rr) Neither the Company nor the Subsidiary nor any director, officer, agent, employee or
affiliate of the Company or the Subsidiary is aware of or has taken any action, directly or
indirectly, that would result in a violation by such Persons of the Foreign Corrupt Practices Act
of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without
limitation, making use of the mails or any means or instrumentality of interstate commerce
corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of
any money, or other property, gift, promise to give, or authorization of the giving of anything of
value to any “foreign official” (as such term is defined in the FCPA) or any foreign political
party or official thereof or any candidate for foreign political office, in contravention of the
FCPA and the Company, the Subsidiary and its affiliates have conducted their businesses in
compliance with the FCPA and have instituted and maintain
policies and procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith.
13
(ss) Immediately after the issuance and sale of the Shares as contemplated hereby, no shares
of preferred stock of the Company shall be issued or outstanding; and the issuance and sale of the
Shares as contemplated hereby will not cause any holder of any shares of capital stock, securities
convertible into or exchangeable or exercisable for capital stock or options, warrants or other
rights to purchase capital stock or any other securities of the Company to have any right to
acquire any shares of preferred stock of the Company.
(tt) Except pursuant to this Agreement, the Company has not incurred any liability for any
finder’s or broker’s fee or agent’s commission in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby or by the Prospectus.
(uu) No material labor problem or dispute with the employees of the Company or the Subsidiary
exist or, to the Company’s knowledge, is threatened or imminent, and the Company is not aware of
any existing or imminent labor disturbance by the employees of any of its or the Subsidiary’s
principal suppliers, contractors or customers, that could have a Material Adverse Effect.
(vv) No consent, approval, authorization or order of, or qualification with, any governmental
body or agency, other than those obtained, is required in connection with the offering of the
Directed Shares in any jurisdiction where the Directed Shares are being offered.
(ww) The Company has not offered, or caused DBSI or its affiliates to offer, Shares to any
person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i)
a customer or supplier of the Company to alter the customer’s or supplier’s level or type of
business with the Company, or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.
| 2. | Purchase, Sale and Delivery of the Firm Shares. |
(a) On the basis of the representations, warranties and covenants herein contained, and
subject to the conditions herein set forth, the Company agrees to sell to the Underwriters and each
Underwriter agrees, severally and not jointly, to purchase, at a
price of
$ per share, the
number of Firm Shares set forth opposite the name of each Underwriter in Schedule I hereof, subject
to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made in Federal (same day) funds
against delivery of certificates therefor to the Representative for the several accounts of the
Underwriters. Such payment and delivery are to be made through the facilities of The Depository
Trust Company, New York, New York at 10:00 a.m., New York time, on the third business day after the
date of this Agreement or at such other time and date not later than five business days thereafter
as you and the Company shall agree upon, such time and date being herein referred to as the
“Closing Date.” (As used herein, “business day” means a day on which the New York Stock Exchange
is open for trading and on which banks in New York are open for business and are not permitted by
law or executive order to be closed.)
14
(c) In addition, on the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, the Company hereby grants an option to the
several Underwriters to purchase the Option Shares at the price per share as set forth in the first
paragraph of this Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once thereafter within
30 days after the date of this Agreement, by you, as Representative of the several Underwriters, to
the Company setting forth the number of Option Shares as to which the several Underwriters are
exercising the option and the time and date at which such certificates are to be delivered. The
time and date at which certificates for Option Shares are to be delivered shall be determined by
the Representative but shall not be earlier than three nor later than 10 full business days after
the exercise of such option, nor in any event prior to the Closing Date (such time and date being
herein referred to as the “Option Closing Date”). If the date of exercise of the option is three
or more days before the Closing Date, the notice of exercise shall set the Closing Date as the
Option Closing Date. The number of Option Shares to be purchased by each Underwriter shall be in
the same proportion to the total number of Option Shares being purchased as the number of Firm
Shares being purchased by such Underwriter bears to the total number of Firm Shares, adjusted by
you in such manner as to avoid fractional shares. The option with respect to the Option Shares
granted hereunder may be exercised only to cover over-allotments in the sale of the Firm Shares by
the Underwriters. You, as Representative of the several Underwriters, may cancel such option at
any time prior to its expiration by giving written notice of such cancellation to the Company. To
the extent, if any, that the option is exercised, payment for the Option Shares shall be made on
the Option Closing Date in Federal (same day funds) through the facilities of The Depository Trust
Company in New York, New York drawn to the order of the Company.
| 3. | Offering by the Underwriters. |
It is understood that the several Underwriters are to make a public offering of the Firm
Shares as soon as the Representative deems it advisable to do so. The Firm Shares are to be
initially offered to the public at the initial public offering price set forth in the Prospectus.
The Representative may from time to time thereafter change the public offering price and other
selling terms.
It is further understood that you will act as the Representative for the Underwriters in the
offering and sale of the Shares in accordance with a Master Agreement Among Underwriters entered
into by you and the several other Underwriters.
| 4. | Covenants of the Company. | ||
| The Company covenants and agrees with the several Underwriters that: |
(a) The Company will (A) prepare and timely file with the Commission under Rule 424(b) under
the Act a Prospectus in a form approved by the Representative containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance on Rules 430A, 430B
or 430C under the Act, (B) not file any amendment to the Registration Statement or distribute an
amendment or supplement to the General Disclosure Package or the Prospectus of which the
Representative shall not previously have been advised
15
and furnished with a copy or to which the Representative shall have reasonably objected in
writing or which is not in compliance with the Rules and Regulations and (C) file on a timely basis
all reports and any definitive proxy or information statements required to be filed by the Company
with the Commission subsequent to the date of the Prospectus and prior to the termination of the
offering of the Shares by the Underwriters.
(b) The Company will (A) not make any offer relating to the Shares that would constitute an
Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus” (as
defined in Rule 405 under the Act) required to be filed by the Company with the Commission under
Rule 433 under the Act unless the Representative approves its use in writing prior to first use
(each, a “Permitted Free Writing Prospectus”); provided that the prior written consent of the
Representative hereto shall be deemed to have been given in respect of the Issuer Free Writing
Prospectus(es) included in Schedule III hereto, (B) treat each Permitted Free Writing Prospectus as
an Issuer Free Writing Prospectus, (C) comply with the requirements of Rules 164 and 433 under the
Act applicable to any Issuer Free Writing Prospectus, including the requirements relating to timely
filing with the Commission, legending and record keeping and (D) not take any action that would
result in an Underwriter or the Company being required to file with the Commission pursuant to Rule
433(d) under the Act a free writing prospectus prepared by or on behalf of such Underwriter that
such Underwriter otherwise would not have been required to file thereunder. The Company will
satisfy the conditions in Rule 433 under the Act to avoid a requirement to file with the Commission
any electronic road show.
(c) The Company will advise the Representative promptly (A) when the Registration Statement or
any post-effective amendment thereto shall have become effective, (B) of receipt of any comments
from the Commission, (C) of any request of the Commission for amendment of the Registration
Statement or for supplement to the General Disclosure Package or the Prospectus or for any
additional information, and (D) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any order preventing or suspending the use of any
Preliminary Prospectus, any Issuer Free Writing Prospectus or the Prospectus, or of the institution
of any proceedings for that purpose or pursuant to Section 8A of the Act. The Company will use its
best efforts to prevent the issuance of any such order and to obtain as soon as possible the
lifting thereof, if issued.
(d) The Company will cooperate with the Representative in endeavoring to qualify the Shares
for sale under the securities laws of such jurisdictions as the Representative may reasonably have
designated in writing and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company shall not be
required to qualify as a foreign corporation or to file a general consent to service of process in
any jurisdiction where it is not now so qualified or required to file such a consent. The Company
will, from time to time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period as the
Representative may reasonably request for distribution of the Shares.
(e) The Company will deliver to, or upon the order of, the Representative, from time to time,
as many copies of any Preliminary Prospectus as the Representative may reasonably request. The
Company will deliver to, or upon the order of, the Representative, from time to time, as many
copies of any Issuer Free Writing Prospectus as the Representative may
16
reasonably request. The Company will deliver to, or upon the order of, the Representative
during the period when delivery of a Prospectus (or, in lieu thereof, the notice referred to under
Rule 173(a) under the Act) is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representative may reasonably request. The
Company will deliver to the Representative at or before the Closing Date, five signed copies of the
Registration Statement and all amendments thereto including all exhibits filed therewith, and will
deliver to the Representative such number of copies of the Registration Statement (including such
number of copies of the exhibits filed therewith that may reasonably be requested), and of all
amendments thereto, as the Representative may reasonably request.
(f) The Company will comply with the Act and the Rules and Regulations, and the Exchange Act,
and the rules and regulations of the Commission thereunder, so as to permit the completion of the
distribution of the Shares as contemplated in this Agreement and the Prospectus. If during the
period in which a prospectus (or, in lieu thereof, the notice referred to under Rule 173(a) under
the Act) is required by law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of the Underwriters,
it becomes necessary to amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the Prospectus to comply
with any law, the Company promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with the law.
(g) If the General Disclosure Package is being used to solicit offers to buy the Shares at a
time when the Prospectus is not yet available to prospective purchasers and any event shall occur
as a result of which, in the judgment of the Company or in the reasonable opinion of the
Underwriters, it becomes necessary to amend or supplement the General Disclosure Package in order
to make the statements therein, in the light of the circumstances, not misleading, or to make the
statements therein not conflict with the information contained in the Registration Statement then
on file, or if it is necessary at any time to amend or supplement the General Disclosure Package to
comply with any law, the Company promptly will prepare, file with the Commission (if required) and
furnish to the Underwriters and any dealers an appropriate amendment or supplement to the General
Disclosure Package.
(h) The Company will make generally available to its security holders, as soon as it is
practicable to do so, but in any event not later than 15 months after the effective date of the
Registration Statement, an earnings statement (which need not be audited) in reasonable detail,
covering a period of at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the requirements of Section 11(a) of
the Act and Rule 158 under the Act and will advise you in writing when such statement has been so
made available.
(i) Prior to the Closing Date, the Company will furnish to the Underwriters, as soon as they
have been prepared by or are available to the Company, a copy of any unaudited interim financial
statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Registration Statement, the General
Disclosure Package and the Prospectus.
17
(j) No offering, sale, short sale or other disposition of any shares of Common Stock of the
Company or other securities convertible into or exchangeable or exercisable for shares of Common
Stock or derivative of Common Stock (or agreement for such) will be made for a period of 180 days
after the date of the Prospectus, directly or indirectly, by the Company otherwise than hereunder
or with the prior written consent of the Representative, in each case, except for (A) the
registration of the Shares and the sales to the Underwriters pursuant to this Agreement, (B)
issuances of Common Stock upon the exercise of options or warrants or conversion of preferred stock
disclosed as outstanding in the Registration Statement and the Prospectus, (C) the issuance of
employee stock options not exercisable during the Lock-Up Period pursuant to stock option plans
described in the Registration Statement and the Prospectus, and (D) the issuance of shares of
Common Stock or securities convertible into or exchangeable or exercisable for Common Stock or
warrants or other rights to purchase Common Stock or any other securities of the Company in
connection with any acquisition, strategic partnership, joint venture or collaboration to which the
Company is a party, or the acquisition or license of any products or technology by the Company;
provided that the number of shares of Common Stock issued or underlying securities convertible,
exchangeable or exercisable (including pursuant to warrants or other rights) for Common Stock
issued in any case pursuant to clause (D) shall not exceed 500,000 shares and provided further
that, prior to the issuance of any such securities pursuant to clause (D), the Company shall cause
the recipients of such securities to execute and deliver to you Lock-Up Agreements (as defined
below), each substantially in the form of Exhibit A hereto. Notwithstanding the foregoing, if (1)
during the last 17 days of the 180-day restricted period, the Company issues an earnings release or
material news or a material event relating to the Company occurs; or (2) prior to the expiration of
the 180-day restricted period, the Company announces that it will release earnings results during
the 16-day period following the last day of the 180-day restricted period, then in each case the
restrictions imposed by this Agreement shall continue to apply until the expiration of the 18-day
period beginning on the date of the release of the earnings results or the occurrence of material
news or a material event relating to the Company, as the case may be, unless the Representative
waives, in writing, such extension.
(k) The Company will use its best efforts to list the Shares for quotation on the Nasdaq
Global Market and maintain the listing of the Shares on the Nasdaq Global Market.
(l) The Company has caused each officer and director and specific shareholders of the Company
to furnish to you, on or prior to the date of this agreement, a letter or letters, substantially in
the form attached hereto as Exhibit A (the “Lockup Agreement”).
(m) The Company shall apply the net proceeds of its sale of the Shares as set forth in the
Registration Statement, General Disclosure Package and the Prospectus and shall file such reports
with the Commission with respect to the sale of the Shares and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.
(n) The Company shall not invest, or otherwise use the proceeds received by the Company from
its sale of the Shares in such a manner as would require the Company or the Subsidiary to register
as an investment company under the 1940 Act.
(o) The Company will maintain a transfer agent and, if necessary under the jurisdiction of
incorporation of the Company, a registrar for the Common Stock.
(p) The Company will not take, directly or indirectly, any action designed to cause or result
in, or that has constituted or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company.
18
(q) The Company will not, during the Lock-Up Period (as defined in the Lockup Agreement),
waive, amend or modify any lockup agreement or similar provision in any existing agreement it
currently has with any shareholder without the prior written consent of the Representative.
(r) The Company will comply with all applicable securities and other applicable laws, rules
and regulations in each jurisdiction in which the Directed Shares are offered in connection with
the Directed Share Program.
| 5. | Costs and Expenses. |
The Company will pay all costs, expenses and fees (except as otherwise set forth in this
Agreement) incident to the performance of the obligations of the Company under this Agreement,
including, without limiting the generality of the foregoing, the following: accounting fees of the
Company; the fees and disbursements of counsel for the Company; any road show expenses of the
Company (it being understood and agreed that the Company shall be responsible for one-half of the
charter fees and expenses of any private aircraft hired in connection with the road show); the cost
of preparing, printing, filing and delivering to, or as requested by, the Underwriters copies of
the Registration Statement, Preliminary Prospectuses, the Issuer Free Writing Prospectuses, the
Prospectus, this Agreement, the Listing Application, a Blue Sky survey and any supplements or
amendments thereto (including the preparation and printing of the Canadian wrapper, financial
statements, exhibits, schedules, consents and certificates of experts); the filing fees of the
Commission; the filing fees and expenses (including reasonable legal fees and disbursements)
incident to securing any required review by the FINRA of the terms of the sale of the Shares; the
listing fee of the NASDAQ; the costs and expenses (including without limitation any damages or
other amounts payable in connection with legal or contractual liability) associated with the
reforming of any contracts for sale of the Shares made by the Underwriters caused by a breach of
the representation in Section 1(b); and the expenses, including the reasonable fees and
disbursements of counsel for the Underwriters up to an aggregate of $[ ], incurred in
connection with the qualification of the Shares under State securities or Blue Sky laws or the
provincial securities laws of Canada. The Company agrees to pay all costs and expenses of the
Underwriters, including the fees and disbursements of counsel for the Underwriters, incident to the
offer and sale of Directed Shares by the Underwriters to employees and persons having business
relationships with the Company and the Subsidiary. The Company shall not, however, be required to
pay for any of the Underwriters’ expenses (other than those related to qualification under FINRA
regulation and State securities or Blue Sky laws or the provincial securities laws of Canada)
except that, if this Agreement shall not be consummated because the conditions in Section 6 hereof
are not satisfied, or because this Agreement is terminated by the Representative pursuant to
Section 11 hereof, or by reason of any failure, refusal or inability on the part of the Company to
perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on its part to be
performed, unless such failure, refusal or inability is due primarily to the default or omission of
any Underwriter, the Company shall reimburse the several Underwriters for reasonable and documented
out-of-pocket expenses, including reasonable fees and disbursements of counsel, reasonably incurred
in connection with investigating, marketing and proposing to market the Shares or in contemplation
of performing their obligations hereunder; but the Company shall not in any event be liable to any
of the several Underwriters for damages on account of loss of anticipated profits from the sale by
them of the Shares.
19
| 6. | Conditions of Obligations of the Underwriters. |
The several obligations of the Underwriters to purchase the Firm Shares on the Closing Date
and the Option Shares, if any, on the Option Closing Date are subject to the accuracy, as of the
Applicable Time, the Closing Date or the Option Closing Date, as the case may be, of the
representations and warranties of the Company contained herein, and to the performance by the
Company of its covenants and obligations hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments thereto shall have become
effective and the Prospectus and each Issuer Free Writing Prospectus shall have been filed as
required by Rules 424, 430A, 430B, 430C or 433 under the Act, as applicable, within the time period
prescribed by, and in compliance with, the Rules and Regulations, and any request of the Commission
for additional information (to be included in the Registration Statement or otherwise) shall have
been disclosed to the Representative and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended from time to time,
shall have been issued and no proceedings for that purpose or pursuant to Section 8A under the Act
shall have been taken or, to the knowledge of the Company, shall be contemplated or threatened by
the Commission and no injunction, restraining order or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date which would prevent
the issuance of the Shares.
(b) The Representative shall have received on the Closing Date or the Option Closing Date, as
the case may be, the opinion of Wilson Sonsini Goodrich & Rosati, counsel for the Company, dated
the Closing Date or the Option Closing Date, as the case may be, addressed to the Underwriters, and
in form and substance satisfactory to Morrison & Foerster LLP, counsel for the Underwriters,
substantially in the form set forth on Exhibit B hereto.
(c) The Representative shall have received on the Closing Date or the Option Closing Date, as
the case may be, the opinions of (i) Seed IP, special counsel to the Company with respect to
patents and proprietary rights and (ii) Christensen O’Connor Johnson Kindness PLLC, special counsel
to the Company with respect to patents and proprietary rights, each dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters, and in form and substance
satisfactory to Morrison & Foerster LLP, counsel for the Underwriters, substantially in the form
set forth on Exhibit C hereto.
(d) The Representative shall have received on the Closing Date or the Option Closing Date, as
the case may be, the opinion of the General Counsel to the Company with respect to patents and proprietary rights, dated the Closing Date or the Option Closing Date,
as the case may be, addressed to the Underwriters, and in form and substance satisfactory to
Morrison & Foerster LLP, counsel for the Underwriters, substantially in the form set forth on
Exhibit D hereto.
20
(e) The Representative shall have received on the Closing Date or the Option Closing Date, as
the case may be, the opinion of Buc & Beardsley, special counsel to the Company with respect to
regulatory matters, dated as of the Closing Date or the Option Closing Date, as the case may be,
addressed to the Underwriters (and stating that it may be relied upon by counsel to the
Underwriters), and in form and substance satisfactory to Morrison & Foerster LLP, counsel for the
Underwriters, substantially in the form set forth on Exhibit E hereto.
(f) The Representative shall have received from Morrison & Foerster LLP, counsel for the
Underwriters, an opinion dated the Closing Date or the Option Closing Date, as the case may be, in
form and substance reasonably satisfactory to the Representative.
(g) You shall have received, on each of the date hereof, the Closing Date and, if applicable,
the Option Closing Date, letters dated the date hereof, the Closing Date or the Option Closing
Date, as the case may be, each in form and substance satisfactory to you, of Ernst & Young and
PricewaterhouseCoopers LLP in form and substance satisfactory to the Representative; and containing
such other statements and information as is ordinarily included in accountants’ “comfort letters”
to Underwriters with respect to the financial statements and certain financial and statistical
information contained in the Registration Statement, the General Disclosure Package and the
Prospectus.
(h) The Representative shall have received on the Closing Date and, if applicable, the Option
Closing Date, as the case may be, a certificate or certificates of the Chief Executive Officer and
the Chief Financial Officer of the Company to the effect that, as of the Closing Date or the Option
Closing Date, as the case may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the Act and no stop order suspending
the effectiveness of the Registration Statement or no order preventing or suspending the use of any
Preliminary Prospectus, any Issuer Free Writing Prospectus or the Prospectus has been issued, and
no proceedings for such purpose or pursuant to Section 8A of the Act have been taken or are, to his
or her knowledge, contemplated or threatened by the Commission;
(ii) The representations and warranties of the Company contained in Section 1 hereof are true
and correct as of the Closing Date or the Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules 424, 430A, 430B or 430C under
the Act have been made as and when required by such rules;
(iv) He or she has carefully examined the General Disclosure Package and any individual
Limited Use Free Writing Prospectus and, in his or her opinion, as of the Applicable Time, the
statements contained in the General Disclosure Package and any individual Limited Use Free Writing Prospectus did not contain any untrue statement of a material fact,
and such General Disclosure Package and any individual Limited Use Free Writing Prospectus, when
considered together with the General Disclosure Package, did not 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;
21
(v) He or she has carefully examined the Registration Statement and, in his or her opinion, as
of the effective date of the Registration Statement, the Registration Statement and any amendments
thereto did not contain any untrue statement of a material fact and did not omit to state a
material fact necessary in order to make the statements therein not misleading, and since the
effective date of the Registration Statement, no event has occurred which should have been set
forth in a supplement to or an amendment of the Prospectus which has not been so set forth in such
supplement or amendment;
(vi) He or she has carefully examined the Prospectus and, in his or her opinion, as of its
date and the Closing Date or the Option Closing Date, as the case may be, the Prospectus and any
amendments and supplements thereto did not contain any untrue statement of a material fact and did
not 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; and
(vii) Since the respective dates as of which information is given in the Registration
Statement, the General Disclosure Package and Prospectus, there has not been any material adverse
change or any development involving a prospective material adverse change in or affecting the
business, management, properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and the Subsidiary taken as a whole, whether or not arising in the
ordinary course of business.
(i) The Company shall have furnished to the Representative such further certificates and
documents confirming the representations and warranties, covenants and conditions contained herein
and related matters as the Representative may reasonably have requested.
(j) The Firm Shares and Option Shares, if any, have been approved for quotation upon notice of
issuance on the Nasdaq Global Market.
(k) The Lockup Agreements described in Section 4(l) are in full force and effect.
The opinions and certificates mentioned in this Agreement shall be deemed to be in compliance
with the provisions hereof only if they are in all material respects satisfactory to the
Representative and to Morrison & Foerster LLP, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, the obligations of the
Underwriters hereunder may be terminated by the Representative by notifying the Company of such
termination in writing or by telegram at or prior to the Closing Date or the Option Closing Date,
as the case may be.
In such event, the Company and the Underwriters shall not be under any obligation to each
other (except to the extent provided in Sections 5 and 8 hereof).
22
| 7. | Conditions of the Obligations of the Company. |
The obligations of the Company to sell and deliver the portion of the Shares required to be
delivered as and when specified in this Agreement are subject to the conditions that at the Closing
Date or the Option Closing Date, as the case may be, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and in effect or proceedings therefor initiated
or threatened.
| 8. | Indemnification. |
(a) The Company agrees:
(1) to indemnify and hold harmless each Underwriter, the directors and officers of each
Underwriter and each person, if any, who controls any Underwriter within the meaning of
either Section 15 of the Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which such Underwriter or any such controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus, the
Prospectus or any amendment or supplement thereto, (ii) with respect to the Registration
Statement or any amendment or supplement thereto, the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements
therein not misleading or (iii) with respect to any Preliminary Prospectus, any Issuer Free
Writing Prospectus, the Prospectus or any amendment or supplement thereto, 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 in the light of the circumstances under which
they were made; 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 an
untrue statement or alleged untrue statement, or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative specifically for use
therein, it being understood and agreed that the only such information furnished by any
Underwriter consists of the information described as such in Section 13 herein ; and
(2) to reimburse each Underwriter, each Underwriters’ directors and officers, and each
such controlling person upon demand for any legal or other out-of-pocket expenses reasonably
incurred by such Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage or liability, action or proceeding or in responding
to a subpoena or governmental inquiry related to the offering of the Shares, whether or not
such Underwriter or controlling person is a party to any action or proceeding. In the event that it is finally judicially
determined that the Underwriters were not entitled to receive payments for legal and other
expenses pursuant to this subparagraph, the Underwriters will promptly return all sums that
had been advanced pursuant hereto.
(b) Each Underwriter severally and not jointly will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of the Act, against any losses, claims,
damages or liabilities to which the Company or any such director, officer, or controlling person
may become subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus, the Prospectus or any
amendment or supplement thereto, (ii) with respect to the Registration Statement or any amendment
or supplement thereto, the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading or (iii) with
respect to any Preliminary Prospectus, any Issuer Free Writing Prospectus, the Prospectus or any
amendment or supplement thereto, 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 in the
light of the circumstances under which they were made ; and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer, or controlling person in
connection with investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or omission or alleged
omission has been made in the Registration Statement, any Preliminary Prospectus, any Issuer Free
Writing Prospectus, the Prospectus or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through the Representative
specifically for use therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such in Section 13 herein.
This indemnity agreement will be in addition to any liability which such Underwriter may otherwise
have.
(c) In case any proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to this Section 8, such
person (the “indemnified party”) shall promptly notify the person against whom such indemnity may
be sought (the “indemnifying party”) in writing. No indemnification provided for in Section 8(a),
(b) or (d) shall be available to any party who shall fail to give notice as provided in this
Section 8(c) if the party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give such notice, but the
failure to give such notice shall not relieve the indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or otherwise than on account of
the provisions of Section 8(a), (b) or (d). In case any such proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the fees and disbursements
of such counsel related to such proceeding. In
23
any such proceeding, any indemnified party shall have the right to retain its own counsel at
its own expense. Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or
within 30 days of presentation) the fees and expenses of the counsel retained by the indemnified
party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or potential differing
interests between them or (iii) the indemnifying party shall have failed to assume the defense and
employ counsel acceptable to the indemnified party within a reasonable period of time after notice
of commencement of the action. It is understood and agreed that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same jurisdiction be liable for the
reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified pursuant to Section
8(a), (b) or (d) and by the Company in the case of parties indemnified pursuant to Section 8(b).
The indemnifying party shall not be liable for any settlement of any proceeding effected without
its written consent but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any
loss or liability by reason of such settlement or judgment. In addition, the indemnifying party
will not, without the prior written consent of the indemnified party, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action or proceeding of
which indemnification may be sought hereunder (whether or not any indemnified party is an actual or
potential party to such claim, action or proceeding) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability arising out of such
claim, action or proceeding.
(d) The Company and each subsidiary of the Company, whether direct or indirect, jointly and
severally, agree to indemnify and hold harmless DBSI, it directors, officers, affiliates and each
person, if any, who controls DBSI or its affiliates within the meaning of either Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) (i) caused by any untrue
statement or alleged untrue statement of a material fact contained in any material prepared by or
with the consent of the Company for distribution to Participants in connection with the Directed
Share Program, or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading; (ii)
caused by the failure of any Participant to pay for and accept delivery of Directed Shares that the
Participant has agreed to purchase; or (iii) related to, arising out of, or in connection with the
Directed Share Program other than losses, claims, damages or liabilities (or expenses relating
thereto) that are finally judicially determined to have resulted from the bad faith or gross
negligence of DBSI.
(e) To the extent the indemnification provided for in this Section 8 is unavailable to or
insufficient to hold harmless an indemnified party under Section 8(a), (b) or (d) above in respect
of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect the
24
relative benefits received by the Company on the one hand and the Underwriters on the other
from the offering of the Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party 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 the
Underwriters on the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as
any other relevant equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this Section 8(e) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in this Section 8(e).
The amount paid or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in this Section 8(e)
shall be deemed to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares purchased by such
Underwriter, and (ii) no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters’ obligations in this Section 8(e) to
contribute are several in proportion to their respective underwriting obligations and not joint.
(f) In any proceeding relating to the Registration Statement, any Preliminary Prospectus, any
Issuer Free Writing Prospectus, the Prospectus or any supplement or amendment thereto, each party
against whom contribution may be sought under this Section 8 hereby consents to the jurisdiction of
any court having jurisdiction over any other contributing party, agrees that process issuing from
such court may be served upon it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join it as an additional defendant in
any such proceeding in which such other contributing party is a party.
(g) Any losses, claims, damages, liabilities or expenses for which an indemnified party is
entitled to indemnification or contribution under this Section 8 shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages, liabilities or expenses are
incurred. The indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall remain
25
operative and in full force and effect, regardless of (i) any investigation made by or on
behalf of any Underwriter, its directors or officers or any person controlling any Underwriter, the
Company, its directors or officers or any persons controlling the Company, (ii) acceptance of any
Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter, its directors or officers or any person controlling any Underwriter, or to the
Company, its directors or officers, or any person controlling the Company, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained in this Section 8.
| 9. | Default by Underwriters. |
If on the Closing Date or the Option Closing Date, as the case may be, any Underwriter shall
fail to purchase and pay for the portion of the Shares which such Underwriter has agreed to
purchase and pay for on such date (otherwise than by reason of any default on the part of the
Company), you, as Representative of the Underwriters, shall use your reasonable efforts to procure
within 36 hours thereafter one or more of the other Underwriters, or any others, to purchase from
the Company such amounts as may be agreed upon and upon the terms set forth herein, the Shares
which the defaulting Underwriter or Underwriters failed to purchase. If during such 36 hours you,
as such Representative, shall not have procured such other Underwriters, or any others, to purchase
the Shares agreed to be purchased by the defaulting Underwriter or Underwriters, then (a) if the
aggregate number of shares with respect to which such default shall occur does not exceed 10% of
the Shares to be purchased on the Closing Date or the Option Closing date, as the case may be, the
other Underwriters shall be obligated, severally, in proportion to the respective numbers of Shares
which they are obligated to purchase hereunder, to purchase the Shares which such defaulting
Underwriter or Underwriters failed to purchase, or (b) if the aggregate number of shares of Shares
with respect to which such default shall occur exceeds 10% of the Shares to be purchased on the
Closing Date or the Option Closing Date, as the case may be, the Company or you as the
Representative of the Underwriters will have the right, by written notice given within the next
36-hour period to the parties to this Agreement, to terminate this Agreement without liability on
the part of the non-defaulting Underwriters or of the Company except to the extent provided in
Sections 5 and 8 hereof. In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 9, the Closing Date or Option Closing Date, as the case may be, may be
postponed for such period, not exceeding seven days, as you, as Representative, may determine in
order that the required changes in the Registration Statement, the General Disclosure Package or in
the Prospectus or in any other documents or arrangements may be effected. The term “Underwriter”
includes any person substituted for a defaulting Underwriter. Any action taken under this Section
9 shall not relieve any defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
| 10. | Notices. |
All communications hereunder shall be in writing and, except as otherwise provided herein,
will be mailed, delivered, telecopied or telegraphed and confirmed as follows: if to the
Underwriters, to Deutsche Bank Securities Inc., 60 Wall Street, 4th Floor, New York, New
York 10005; Attention: Syndicate Manager, with a copy to Deutsche Bank Securities Inc., 60 Wall
Street, New York, New York 10005, Attention: General Counsel; if to the Company, to Omeros
Corporation, 1420 Fifth Avenue, Suite 2600, Seattle, Washington 98101; Attention: General Counsel, with a copy to Wilson Sonsini Goodrich & Rosati, 701 Fifth Avenue, Suite
5100, Seattle, Washington 98104-7036; Attention: Craig Sherman.
26
| 11. | Termination. |
This Agreement may be terminated by you by notice to the Company (a) at any time prior to the
Closing Date or any Option Closing Date (if different from the Closing Date and then only as to
Option Shares) if any of the following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement, the General Disclosure Package and the
Prospectus, any material adverse change or any development involving a prospective material adverse
change in or affecting the earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and the Subsidiary taken as a whole,
whether or not arising in the ordinary course of business, (ii) any outbreak or escalation of
hostilities or declaration of war or national emergency or other national or international calamity
or crisis (including, without limitation, an act of terrorism) or change in economic or political
conditions if the effect of such outbreak, escalation, declaration, emergency, calamity, crisis or
change on the financial markets of the United States would, in your judgment, materially impair the
investment quality of the Shares, (iii) suspension of trading in securities generally on the New
York Stock Exchange, the American Stock Exchange, the NASDAQ, the Nasdaq Global Market or
limitation on prices (other than limitations on hours or numbers of days of trading) for securities
on either such Exchange, (iv) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court or other governmental authority which in your
opinion materially and adversely affects or may materially and adversely affect the business or
operations of the Company, (v) the declaration of a banking moratorium by United States or New York
State authorities, (vi) any downgrading, or placement on any watch list for possible downgrading,
in the rating of any of the Company’s debt securities by any “nationally recognized statistical
rating organization” (as defined for purposes of Rule 436(g) under the Exchange Act), or (vii) the
suspension of trading of the Company’s common stock by the NASDAQ, the Nasdaq Global Market, the
Commission, or any other governmental authority or, (viii) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which in your opinion has
a material adverse effect on the securities markets in the United States; or
(b) as provided in Sections 6 and 9 of this Agreement.
| 12. | Successors. |
This Agreement has been and is made solely for the benefit of the Underwriters and the Company
and their respective successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter shall be deemed a
successor or assign merely because of such purchase.
| 13. | Information Provided by Underwriters. |
The Company and the Underwriters acknowledge and agree that the only information furnished or
to be furnished by any Underwriter to the Company for inclusion in the Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus or the
Prospectus consists of [the information set forth in the [third, ninth, and tenth through
fifteenth] paragraphs under the caption “Underwriting” in the Prospectus [and] [include any
information furnished by the Underwriters for inclusion in any Issuer Free Writing Prospectus]].
27
| 14. | Miscellaneous. |
The reimbursement, indemnification and contribution agreements contained in this Agreement and
the representations, warranties and covenants in this Agreement shall remain in full force and
effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of the Company or its
directors or officers, and (c) delivery of and payment for the Shares under this Agreement.
The Company acknowledges and agrees that each Underwriter in providing investment banking
services to the Company in connection with the offering, including in acting pursuant to the terms
of this Agreement, has acted and is acting as an independent contractor and not as a fiduciary and
the Company does not intend such Underwriter to act in any capacity other than as an independent
contractor, including as a fiduciary or in any other position of higher trust.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument.
This Agreement shall be governed by, and construed in accordance with, the law of the State of
New York, including, without limitation, Section 5-1401 of the New York General Obligations Law.
The Underwriters, on the one hand, and the Company (on its own behalf and, to the extent
permitted by law, on behalf of its stockholders), on the other hand, waive any right to trial by
jury in any action, claim, suit or proceeding with respect to the your engagement as underwriter or
your role in connection herewith.
If the foregoing letter is in accordance with your understanding of our agreement, please sign
and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among
the Company and the several Underwriters in accordance with its terms.
28
| Very truly yours, OMEROS CORPORATION |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. DEUTSCHE BANK SECURITIES INC. As Representative of the several Underwriters listed on Schedule I |
||||
| By: | Deutsche Bank Securities Inc. | |||
| By: | ||||
| Authorized Officer | ||||
| By: | ||||
| Authorized Officer | ||||
29
SCHEDULE I
Schedule of Underwriters
| Number of Firm Shares | ||
| Underwriter | to be Purchased | |
Deutsche Bank Securities Inc. |
||
Pacific Growth Equities, LLC |
||
Leerink
Swann LLC |
||
Needham & Company, LLC |
||
Total |
30
SCHEDULE II
Price per share (before deduction of underwriting discounts): $[ ]
Number of Shares (including over-allotment): [ ]
Approximate net proceeds to the Company (not including over-allotment): $[ ]
31
SCHEDULE III
32
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
, 2007
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, Washington 98101
1420 Fifth Avenue, Suite 2600
Seattle, Washington 98101
Deutsche Bank Securities Inc.
As Representative of the
Several Underwriters
Several Underwriters
c/o Deutsche Bank Securities Inc.
60 Wall Street, 4th Floor
New York, New York 10005
60 Wall Street, 4th Floor
New York, New York 10005
Ladies and Gentlemen:
The undersigned understands that Deutsche Bank Securities Inc., as representative (the
“Representative”) of the several underwriters (the “Underwriters”), proposes to enter into an
Underwriting Agreement (the “Underwriting Agreement”) with Omeros Corporation, a Washington
corporation (the “Company”), providing for the public offering by the Underwriters, including the
Representative, of common stock, par value $0.01 (the “Common Stock”), of the Company (the “Public
Offering”).
To induce the Underwriters that may participate in the Public Offering to continue their
efforts in connection with the Public Offering, the undersigned agrees that, without the prior
written consent of the Representative, the undersigned will not, directly or indirectly, offer,
sell, pledge, contract to sell (including any short sale), grant any option to purchase or
otherwise dispose of any shares of Common Stock (including, without limitation, shares of Common
Stock of the Company which may be deemed to be beneficially owned by the undersigned on the date
hereof in accordance with the rules and regulations of the Securities and Exchange Commission,
shares of Common Stock which may be issued upon exercise of a stock option or warrant and any other
security convertible into or exchangeable for Common Stock) or enter into any Hedging Transaction
(as defined below) relating to the Common Stock (each of the foregoing referred to as a
“Disposition”) during the period specified in the following paragraph (the “Lock-Up Period”). The
foregoing restriction is expressly intended to preclude the undersigned from engaging in any
Hedging Transaction or other transaction which is designed to or reasonably expected to lead to or
result in a Disposition during the Lock-Up Period even if the securities would be disposed of by
someone other than the undersigned. “Hedging Transaction” means
any short sale (whether or not against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any significant part of
its value from the Common Stock.
33
The initial Lock-Up Period will commence on the date hereof and continue until, and include,
the date that is 180 days after the date of the final prospectus (the “Prospectus”) relating to the
Public Offering (the “Initial Lock-Up Period”); provided, however, that if (1)
during the last 17 days of the Initial Lock-Up Period, (A) the Company releases earnings results or
(B) material news or a material event relating to the Company occurs, or (2) prior to the
expiration of the Initial Lock-Up Period, the Company announces that it will release earnings
results during the 16-day period following the last day of the Initial Lock-Up Period, then in each
case the Lock-Up Period will be extended until the expiration of the 18-day period beginning on the
date of the release of the earnings results or the occurrence of material news or a material event
relating to the Company, as the case may be, unless the Representative waives, in writing, such
extension.
Notwithstanding the foregoing, the undersigned may transfer (a) shares of Common Stock
acquired (i) from the Underwriters pursuant to the directed share program described in the
Prospectus, subject to the terms of such program or (ii) in open market transactions by the
undersigned after the completion of the Public Offering and (b) any or all of the shares of Common
Stock or other Company securities if the transfer is (i) to an immediate family member or a trust
formed for the benefit of an immediate family member, (ii) by gift, will or intestacy, (iii) if the
undersigned is a corporation, partnership or other business entity (A) to another corporation,
partnership or other business entity that is a direct or indirect affiliate of the undersigned or
(B) as part of a private distribution without consideration by the undersigned to its equity
holders on a pro rata basis, (iv) if the undersigned is a trust, to a trustor or beneficiary of the
trust, provided, that in the case of a transfer pursuant to clause (a)(i) or clause (b) (x)
no filing by any person (donor, donee, transferor or transferee) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), shall be required or shall be voluntarily made in
connection with such transfer or distribution (other than a filing on a Form 5, Schedule 13D or
Schedule 13G (or 13D-A or 13G-A) made after the expiration of the Lock-Up Period) and (y) each
person (donor, donee, transferor or transferee) shall not be required by law (including, without
limitation, the disclosure requirements of the Securities Act of 1933, as amended, and the Exchange
Act) to make, and shall agree to not voluntarily make, any public announcement of the transfer or
disposition; provided, further, that in the case of a transfer pursuant to clause
(b), it shall be a condition to the transfer that the transferee execute an agreement stating that
the transferee is receiving and holding the securities subject to the provisions of this Lock-Up
Agreement. In the case of any transfer or disposition in accordance with this paragraph, the
undersigned shall notify Deutsche Bank Securities Inc. at least two business days prior to the
proposed transfer or disposition. For purposes of this paragraph, “immediate family” means the
spouse, domestic partner, lineal descendants, father, mother, brother or sister of the transferor.
34
The undersigned agrees and consents to the entry of stop transfer instructions with the
Company’s transfer agent and registrar against the transfer of shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock held by the undersigned except in
compliance with the foregoing restrictions.
The undersigned hereby waives any and all notice requirements and rights with respect to
registration of securities pursuant to any agreement, understanding or otherwise setting forth the
terms of any security of the Company held by the undersigned, including, without limitation, the
Amended and Restated Investors’ Rights Agreement dated October 15, 2004 among the Company, the
undersigned and other holders of the Company’s securities, as such may be amended from time to
time, and any other registration rights agreement to which the undersigned and the Company may be
party; provided that such waiver shall apply only to the proposed Public Offering, and any
other action taken by the Company in connection with the proposed Public Offering. The undersigned
further agrees that, for the Lock-Up Period, the undersigned will not, without the prior written
consent of the Representative, make any demand for, or exercise any right with respect to, the
registration of Common Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or warrants or other rights to purchase Common Stock or any such securities.
In addition, the undersigned hereby waives any and all preemptive rights, participation
rights, resale rights, rights of first refusal and similar rights that the undersigned may have in
connection with the Public Offering or with any issuance or sale by the Company of any equity or
other securities before the Public Offering, except for any such rights as have been heretofore
duly exercised.
The undersigned hereby agrees that, to the extent that the terms of this Lock-Up Agreement
conflict with or are in any way inconsistent with any registration rights agreement or other
transfer restrictions to which the undersigned and the Company may be a party, this Lock-Up
Agreement supersedes such registration rights agreement or other transfer restrictions.
The undersigned hereby represents and warrants that the undersigned has full power and
authority to enter into this Lock-Up Agreement. All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned and any obligations of the
undersigned shall be binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
Notwithstanding anything herein to the contrary, if (a) the closing of the Public Offering has
not occurred prior to June 30, 2008, (b) the Company withdraws the registration statement related
to the Public Offering or (c) the Underwriting Agreement is executed but is terminated prior to
payment for and delivery of any shares of Common Stock, this Lock-Up Agreement shall be of no
further force or effect.
| Signature: | ||||
| Print Name: | ||||
35
EXHIBIT B
FORM OF OPINION OF WILSON SONSINI GOODRICH & ROSATI
EXHIBIT C
FORM OF OPINIONS OF SEED IP AND CHRISTENSEN O’CONNER JOHNSON
KINDNESS PLLC
KINDNESS PLLC
1
EXHIBIT D
FORM OF OPINION OF GENERAL COUNSEL TO THE COMPANY
EXHIBIT E
FORM OF OPINION OF BUC & BEARDSLEY
Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN OF REORGANIZATION
among
OMEROS CORPORATION,
EPSILON ACQUISITION CORPORATION,
NURA, INC.,
and
ARCH VENTURE CORPORATION,
as Stockholders’ Agent
dated as of
August 4, 2006
TABLE OF CONTENTS
| Page | ||||||||
| ARTICLE 1 THE MERGER | 2 | |||||||
| 1.1 | The Merger | 2 | ||||||
| 1.2 | Closing; Effective Time | 2 | ||||||
| 1.3 | Effect of the Merger | 2 | ||||||
| 1.4 | Certificate of Incorporation; Bylaws | 2 | ||||||
| ARTICLE 2 MERGER CONSIDERATION; EFFECT OF MERGER ON COMPANY CAPITAL STOCK | 3 | |||||||
| 2.1 | Merger Consideration; Exchange of Capital Stock | 3 | ||||||
| 2.2 | Assumption of Stock Options; Other Equity Interest; Oxford Indebtedness | 3 | ||||||
| 2.3 | Merger Sub | 4 | ||||||
| 2.4 | Appraisal Rights | 5 | ||||||
| 2.5 | Mechanics of Exchange | 5 | ||||||
| 2.6 | No Further Rights in Shares | 6 | ||||||
| 2.7 | No Fractional Shares | 7 | ||||||
| 2.8 | Taking of Necessary Action; Further Action | 7 | ||||||
| 2.9 | Post-Closing Adjustment | 7 | ||||||
| 2.10 | Withholding Rights | 9 | ||||||
| ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMPANY | 9 | |||||||
| 3.1 | Organization, Good Standing, Qualification | 10 | ||||||
| 3.2 | Capitalization | 10 | ||||||
| 3.3 | Subsidiaries | 11 | ||||||
| 3.4 | Authorization | 11 | ||||||
| 3.5 | Governmental Consents | 12 | ||||||
| 3.6 | Litigation | 12 | ||||||
| 3.7 | Intellectual Property | 12 | ||||||
| 3.8 | Compliance with Other Instruments | 16 | ||||||
| 3.9 | Agreements; Actions | 16 | ||||||
| 3.10 | Disclosure | 18 | ||||||
| 3.11 | No Conflict of Interest | 18 | ||||||
| 3.12 | Title to Property and Assets | 18 | ||||||
| 3.13 | Financial Statements | 18 | ||||||
| 3.14 | Changes | 19 | ||||||
| 3.15 | Company Employee Matters and Benefit Plans | 20 | ||||||
| 3.16 | Tax Returns, Payments and Elections | 22 | ||||||
| 3.17 | Insurance | 23 | ||||||
| 3.18 | Labor Agreements and Actions | 23 | ||||||
| 3.19 | Permits | 23 | ||||||
| 3.20 | Corporate Documents | 23 | ||||||
-i-
TABLE OF CONTENTS
(Continued)
(Continued)
| Page | ||||||||
| 3.21 | Real Property Holding Company | 24 | ||||||
| 3.22 | Brokers | 24 | ||||||
| 3.23 | Proprietary Information and Inventions Assignment Agreement | 24 | ||||||
| 3.24 | Predecessor Corporations | 24 | ||||||
| 3.25 | Restrictions on Business Activities | 24 | ||||||
| 3.26 | Environmental Matters | 24 | ||||||
| 3.27 | Restricted Securities | 25 | ||||||
| ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB | 25 | |||||||
| 4.1 | Organization, Good Standing, Qualification | 25 | ||||||
| 4.2 | Authorized Capital of Parent | 26 | ||||||
| 4.3 | Subsidiaries | 26 | ||||||
| 4.4 | Authorization | 27 | ||||||
| 4.5 | Valid Issuance of Securities | 27 | ||||||
| 4.6 | Governmental Consents | 27 | ||||||
| 4.7 | Litigation | 27 | ||||||
| 4.8 | Intellectual Property | 28 | ||||||
| 4.9 | Compliance with Other Instruments | 28 | ||||||
| 4.10 | Agreements; Actions | 29 | ||||||
| 4.11 | Disclosure | 30 | ||||||
| 4.12 | No Conflict of Interest | 30 | ||||||
| 4.13 | Rights of Registration and Voting Rights | 31 | ||||||
| 4.14 | Title to Property and Assets | 31 | ||||||
| 4.15 | Financial Statements | 31 | ||||||
| 4.16 | Changes | 31 | ||||||
| 4.17 | Parent Employee Matters and Benefit Plans | 33 | ||||||
| 4.18 | Tax Returns, Payments and Elections | 34 | ||||||
| 4.19 | Insurance | 34 | ||||||
| 4.20 | Labor Agreements and Actions | 35 | ||||||
| 4.21 | Permits | 35 | ||||||
| 4.22 | Corporate Documents | 35 | ||||||
| 4.23 | Brokers | 35 | ||||||
| 4.24 | Proprietary Information and Inventions Assignment Agreement | 35 | ||||||
| 4.25 | Restrictions on Business Activities | 36 | ||||||
| 4.26 | Environmental Matters | 36 | ||||||
| ARTICLE 5 ADDITIONAL AGREEMENTS | 36 | |||||||
| 5.1 | Company’s Conduct of the Business Prior to Closing | 36 | ||||||
| 5.2 | Interim Operations | 37 | ||||||
| 5.3 | Acquisition Proposals | 39 | ||||||
-ii-
TABLE OF CONTENTS
(Continued)
(Continued)
| Page | ||||||||
| 5.4 | Certain Notifications | 40 | ||||||
| 5.5 | Access to Information | 40 | ||||||
| 5.6 | All Commercially Reasonable Efforts | 40 | ||||||
| 5.7 | Consents | 41 | ||||||
| 5.8 | Further Assurances | 41 | ||||||
| 5.9 | Confidentiality | 41 | ||||||
| 5.10 | Public Announcements | 42 | ||||||
| 5.11 | Company Employees | 43 | ||||||
| 5.12 | Stockholder Approval of Merger and Charter Amendment; Redemption | 43 | ||||||
| 5.13 | Director and Officer Indemnification | 44 | ||||||
| 5.14 | Right of Existing Investors to Designate for Election One Member of Parent’s Board of Directors | 44 | ||||||
| 5.15 | Section 280G | 44 | ||||||
| 5.16 | Termination of Plans | 45 | ||||||
| 5.17 | Tax Treatment | 45 | ||||||
| 5.18 | Information Statement | 45 | ||||||
| ARTICLE 6 CONDITIONS TO THE MERGER | 45 | |||||||
| 6.1 | Conditions to Parent’s and Merger Sub’s Obligations to Close | 45 | ||||||
| 6.2 | Conditions to Company’s Obligation to Close | 49 | ||||||
| ARTICLE 7 TERMINATION | 50 | |||||||
| 7.1 | Termination | 50 | ||||||
| 7.2 | Effect of Termination | 51 | ||||||
| ARTICLE 8 INDEMNIFICATION | 51 | |||||||
| 8.1 | Survival of Representations, Warranties and Covenants | 51 | ||||||
| 8.2 | Exclusive Remedy; Limitation on Remedy | 54 | ||||||
| 8.3 | Distributions from Escrow Fund | 55 | ||||||
| 8.4 | Stockholders’ Agent | 56 | ||||||
| 8.5 | Resolution of Conflicts | 57 | ||||||
| 8.6 | Third Party Claims | 58 | ||||||
| 8.7 | Adjustments to Purchase Price | 59 | ||||||
| ARTICLE 9 GENERAL PROVISIONS | 59 | |||||||
| 9.1 | Notices | 59 | ||||||
| 9.2 | Interpretation and Construction of Transaction Agreements | 60 | ||||||
| 9.3 | Specific Performance | 61 | ||||||
| 9.4 | Counterparts; Facsimile Delivery | 61 | ||||||
| 9.5 | Entire Agreement | 61 | ||||||
| 9.6 | Amendment; Waiver; Requirement of Writing | 61 | ||||||
| 9.7 | Expenses | 61 | ||||||
-iii-
TABLE OF CONTENTS
(Continued)
(Continued)
| Page | ||||||||
| 9.8 | No Third-Party Beneficiaries | 62 | ||||||
| 9.9 | Disclaimer of Agency | 62 | ||||||
| 9.10 | Relationship of the Parties | 62 | ||||||
| 9.11 | Assignment | 62 | ||||||
| 9.12 | Severability | 62 | ||||||
| 9.13 | Remedies Cumulative | 62 | ||||||
| 9.14 | Governing Law | 63 | ||||||
-iv-
INDEX OF EXHIBITS AND SCHEDULES
| Exhibits | ||
Exhibit A
|
Defined Terms | |
Exhibit B
|
Voting Agreement | |
Exhibit C
|
Form of Certificate of Merger | |
Exhibit D
|
Benjamin Contract Amendment | |
Exhibit E
|
Series E Stock Purchase Agreement and addendums thereto | |
Exhibit F
|
Series E Investors’ Rights Agreement | |
Exhibit G
|
Charter Amendment |
| Schedules | ||
Schedule 2.1
|
Allocation of Merger Consideration | |
Schedule 2.5(b)
|
Certified Stockholder List | |
Schedule 2.9
|
Estimated Liability Adjustment | |
Schedule 3
|
Company Disclosure Schedule | |
Schedule 4
|
Parent Disclosure Schedule | |
Schedule 5.2
|
Interim Operations | |
Schedule 5.11
|
Retained Company Employees | |
Schedule 6.1(g)
|
Consents/Notices and Related Matters | |
Schedule 6.1(k)
|
Lien Releases |
-v-
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this “Agreement”) is made as of August 4, 2006 (the
“Execution Date”) by and among OMEROS CORPORATION, a corporation organized under the laws of the
State of Washington (“Parent”), EPSILON ACQUISITION CORPORATION, a corporation organized under the
laws of the State of Delaware (“Merger Sub”), NURA, INC., a corporation organized under the laws of
the State of Delaware (“Company”), and Arch Venture Corporation, as stockholders’ agent
(“Stockholders’ Agent”). As used in this Agreement, certain initial capitalized terms shall have
the meanings set forth in Exhibit A.
RECITALS
WHEREAS, the boards of directors of Parent, Merger Sub and Company each have determined that
the acquisition of Company by Parent through the merger of Merger Sub with and into Company
pursuant to the terms and subject to the conditions set forth herein (the “Merger”) is in the best
interests of their respective companies and shareholders and have approved the Merger and the
related transactions set forth herein;
WHEREAS, Merger Sub is a wholly owned subsidiary of Parent;
WHEREAS, pursuant to the Merger, each outstanding share of capital stock of Company shall be
cancelled;
WHEREAS, the parties hereto intend that the Merger shall qualify as a “reorganization” within
the meaning of Section 368(a) of the Code, and that this Agreement shall be, and hereby is, adopted
as a “plan of reorganization” for purposes of Section 368(a) of the Code;
WHEREAS, in order to induce Company to enter into this Agreement certain holders of Company’s
capital stock representing in the aggregate in excess of 50% of the issued and outstanding shares
of Company Voting Common Stock and in excess of 50% of the issued and outstanding shares of Company
Preferred Stock, simultaneously with the execution of this Agreement, have entered into a voting
agreement, substantially in the form of Exhibit B attached hereto (the “Voting Agreement”); and
NOW, THEREFORE, in consideration of the covenants and representations set forth herein, and
for other good and valuable consideration, the adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms and conditions set forth
in this Agreement, at the Effective Time, Merger Sub shall be merged with and into Company, which
shall be the surviving corporation (the “Surviving Corporation”) in the Merger, and the separate
existence of Merger Sub shall thereupon cease. The name of the Surviving Corporation shall remain
“Nura, Inc.” The Merger shall have the effects set forth in the Delaware General Corporation Law
(“Delaware Corporate Law”) as further described in Section 1.3.
1.2 Closing; Effective Time. The closing of the transactions contemplated hereby (the
“Closing”) shall take place as soon as practicable, but not later than August 8, 2006; provided,
that the Closing shall not occur prior to the satisfaction or waiver of each of the conditions set
forth in Article 6 hereof or at such other time as the parties hereto agree in writing (the date
upon which the Closing occurs, the “Closing Date”). The Closing shall take place at the offices of
Wilson Sonsini Goodrich & Rosati, P.C., 701 Fifth Avenue, Suite 5100, Seattle, Washington, or at
such other location as the parties hereto agree. In connection with the Closing, the parties
hereto shall cause the Merger to be consummated by filing at the Closing a certificate of merger,
substantially in the form to be attached hereto as Exhibit C and as acceptable for filing (the
“Certificate of Merger”), together with any required certificates or other documents, with the
Secretary of State of the State of Delaware in accordance with the relevant provisions of Delaware
Corporate Law (the time of such filing with the Secretary of State of the State of Delaware is the
“Effective Time”).
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as
provided in this Agreement, the Certificate of Merger and the applicable provisions of Delaware
Corporate Law; provided that in the event of any conflict between this Agreement or the Certificate
of Merger and Delaware Corporate Law, Delaware Corporate Law shall prevail. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At and from the Effective Time, the certificate of incorporation of the Surviving
Corporation shall be amended and restated to be identical to the certificate of incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, except that the name of the
Surviving Corporation shall be identical to the name of Company in effect immediately prior to the
Effective Time, until such certificate of incorporation is thereafter amended as provided by
Delaware Corporate Law and such certificate of incorporation.
(b) At and from the Effective Time, the bylaws of the Surviving Corporation shall be amended
and restated to be identical to the bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, except that the name of the Surviving Corporation as set forth therein shall be
identical to the name of Company in effect immediately prior to the Effective Time, until such
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bylaws are amended as provided therein, by Delaware Corporate Law and as may be provided in the
Surviving Corporation’s certificate of incorporation.
(c) At and from the Effective Time, the directors of Merger Sub, as in office immediately
prior to the Effective Time, shall be the directors of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified. At and from the Effective Time, the officers of Merger Sub, as in office immediately prior to the Effective Time, shall
be the officers of the Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
(d) Qualification as a Reorganization. The Parties intend that the Merger qualify as
a “reorganization” within the meaning of Section 368(a) of the Code, and that this Agreement shall
be, and is hereby, adopted as a “plan of reorganization” for purposes of Section 368(a) of the
Code.
ARTICLE 2
MERGER CONSIDERATION; EFFECT OF MERGER ON COMPANY CAPITAL STOCK
MERGER CONSIDERATION; EFFECT OF MERGER ON COMPANY CAPITAL STOCK
2.1 Merger Consideration; Exchange of Capital Stock.
(a) By virtue of the Merger and without any action on the part of Parent, Company, Merger Sub
or the holders of any of Company’s securities, at the Effective Time, and notwithstanding any
provision of Company’s certificate of incorporation, each and every share of capital stock of
Company issued and outstanding immediately prior to the Effective Time (the “Company Stock”) shall
be cancelled and extinguished and automatically converted into the right to receive, subject to the
terms and conditions hereof, the merger consideration set forth herein.
(b) The merger consideration shall consist of (i) subject to the escrow holdback provisions
set forth in Section 8.1(g), 0.12885103 shares of Parent’s Series E Preferred Stock (“Parent
Preferred Stock”) issued to each holder of one share of Company’s Series A Preferred Stock
(“Company Preferred Stock”); (ii) 0.00037569 shares of Parent’s Common Stock (“Parent Common
Stock,” together with Parent Preferred Stock, the “Parent Stock”) issued to each holder of one
share of Company Preferred Stock, and (iii) 0.00922672 shares of Parent Common Stock issued to each
holder of one share of Company’s voting Common Stock (“Company Voting Common Stock”)(collectively,
the “Merger Consideration”). The Merger Consideration shall be allocated as set forth in Schedule
2.1.
2.2 Assumption of Stock Options; Other Equity Interest; Oxford Indebtedness.
(a) At the Effective Time, by virtue of the Merger and without any action on the part of any
holder of options and other awards then outstanding under Company’s 2003 Stock Plan (the “Company
Stock Awards”), each Company Stock Award outstanding immediately prior to the Effective Time shall
be assumed by Parent and each Company Stock Award shall become an option to acquire shares of
Parent Common Stock, on the same terms and conditions as were applicable under the Company Stock
Award immediately prior to the Effective Time, except (i) that such assumed Company Stock Award
shall be exercisable for that number of whole shares of Parent
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Common Stock equal to the product
(rounded down to the nearest whole number of shares of Parent Common Stock) obtained by multiplying
the number of shares of Company Voting Common Stock issuable upon the exercise of such Company
Stock Award immediately prior to the Effective Time by 0.00922672, and (ii) that the per share
exercise price for the shares of Parent Common Stock issuable upon exercise of such Company Stock
Awards shall be equal to the quotient (rounded up to the nearest whole cent) obtained by dividing
the exercise price per share of the Company Voting Common Stock for which the Company Stock Award
was exercisable immediately prior to the
Effective Time by 0.00922672. The form and substance of any communications to holders of
Common Stock Awards from the Company shall be subject to advance review and approval of Parent,
which approval will not be unreasonably withheld.
(b) In furtherance of the foregoing, the Company shall have taken such actions prior to or as
of the Effective Time as are reasonable and appropriate to effect the provisions of this Section
2.2, including, without limitation, (1) taking such actions as may be required to confirm that
Parent’s Board of Directors shall, effective as of the Effective Time, become the administrator of
the Plan with respect to the assumed Company Stock Awards, and (2) furnishing to holders of Company
Stock Awards a description of the treatment of such options in connection with the Merger.
(c) At or prior to Closing, Company shall cause all Equity Interests (other than the Company
Stock Awards and the warrant to purchase 175,000 shares of Series A Preferred Stock of the Company
issued to Oxford Financing Corporation in connection with the Oxford Loan (the “Oxford Warrant”))
in or related to Company, including the outstanding Convertible Promissory Notes (defined below)
and outstanding Series A Warrants and other rights, if any, exercisable for Company Preferred Stock
or Company Common Stock (collectively, “Other Equity Interests”), to be exercised or converted, as
applicable and in accordance with the terms and conditions on which such Other Equity Interests
have been granted by Company (as amended), or if not so exercised or converted, to be terminated
and extinguished prior to or upon Closing without Liability or obligation on the part of Surviving
Corporation. In furtherance of the foregoing, to the extent applicable, the Company shall use best
efforts to cause the outstanding Other Equity Interests (including the Convertible Promissory Notes
and/or Series A Warrants) to be amended in a manner reasonably acceptable to Parent to provide that
they will automatically convert into equity of Company at or prior to the Merger. Company shall
use its best efforts to obtain and deliver to Parent prior to Closing duly executed termination and
release agreements or similar written agreements, contingent upon Closing as applicable, with
respect to all Other Equity Interests that do not automatically exercise, convert or otherwise
terminate upon the Merger by their express terms.
(d) The outstanding indebtedness of Company to Oxford Finance Corporation under the Master
Security Agreement dated as of April 26, 2005 shall continue to be an obligation of the Surviving
Corporation (the “Oxford Loan”).
2.3 Merger Sub. At the Effective Time, by virtue of the Merger and without any action
on the part of Parent as the holder thereof, each share of the common stock, no par value per
share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into
one share of the common stock of the Surviving Corporation. This common stock shall be the only
outstanding
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capital stock of the Surviving Corporation immediately following the Effective Time,
and shall be solely owned by Parent.
2.4 Appraisal Rights. Any shares held by stockholders who elect to demand the
appraisal of such stockholders’ shares in Company (the “Dissenting Shares”) shall not be converted
into the right to receive Merger Consideration as set forth in Section 2.1 but shall instead be
converted into the right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to Delaware Corporate Law. Company shall give Parent (a) prompt
notice of any written demand for appraisal received by Company pursuant to Delaware Corporate Law, (b) the opportunity to control all negotiations and proceedings with respect to such
demands and (c) the opportunity to review and comment on all appraisal rights notices and other
communications to the stockholders of Company with respect to appraisal rights. Company agrees
that, except with the prior written consent of Parent, or as required under Delaware Corporate Law,
it will not voluntarily make any payment with respect to, or settle or offer to settle, any such
demand. Each holder of Dissenting Shares (each a “Dissenting Stockholder”) who, pursuant to the
provisions of Delaware Corporate Law, becomes entitled to payment of the fair value of such shares
of Company’s capital stock shall receive payment therefor (but only after the value thereof shall
have been agreed upon or finally determined pursuant to the provisions of Delaware Corporate Law),
with interest paid thereon only to the extent required by Delaware Corporate Law. If, after the
Effective Time, any Dissenting Shares shall lose their status as Dissenting Shares, Parent shall
issue and deliver, upon surrender by the holder of the certificate or certificates representing
such shares of Company capital stock as set forth in Section 2.5, the consideration, if any, to
which such shareholder would otherwise be entitled pursuant to Section 2.1 with respect to such
shares.
2.5 Mechanics of Exchange.
(a) Prior to Closing, Company and Parent shall cause to be mailed to each holder of record (as
of the Effective Time) of a certificate or certificates, which immediately prior to the Effective
Time shall have represented the outstanding shares of Company Preferred Stock or Company Common
Stock (the “Company Stock Certificates”), (i) a letter of transmittal in a form to be mutually
agreed upon by Parent and Company promptly following the date of this Agreement (the “Letter of
Transmittal”) and (ii) instructions for use in effecting the surrender of the Company Stock
Certificates in exchange for the portion of the Merger Consideration payable upon surrender of said
Company Stock Certificates. Following the Effective Time, and upon surrender of Company Stock
Certificates for cancellation to Parent, together with such Letter of Transmittal, duly completed
and validly executed in accordance with the instructions thereto, each holder of Company Stock
Certificates shall be entitled to surrender its Company Stock Certificates to Parent for
cancellation in exchange for such holder’s right to receive, subject to the terms and conditions
hereof, the Merger Consideration pursuant to Section 2.1. It shall be a condition of any holder’s
receipt of any Merger Consideration that Company Stock Certificates representing such holder’s
capital stock be surrendered to Parent, properly endorsed or otherwise in proper form for transfer,
or that such holder comply with Section 2.5(d).
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(b) Attached hereto as Schedule 2.5(b) is a list, addressed to Parent and certified by the
Company as true and correct, of the holders of capital stock of the Company (the “Certified
Stockholder List”). At the Closing, Company shall deliver an update to the Certified Stockholder
List, addressed to Parent and certified by the Company as true and correct, reflecting the holders
of capital stock of the Company at the time of the Closing (the “Final Certified Stockholder
List”). After the date hereof, Company shall consult with Parent prior to transferring shares of
Company Stock Certificates on the records of Company. Parent shall be entitled to rely upon the
Final Certified Stockholder List to establish the identity of those persons entitled to receive
Merger Consideration specified in this Agreement, which Final Certified Stockholder List shall be
conclusive with respect thereto. In the event of a dispute with respect to ownership of stock
represented by any Company Stock Certificates, Parent shall be entitled to deposit any Merger
Consideration in respect thereof in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
(c) Following the Effective Time and upon receipt of any Company Stock Certificate(s) pursuant
to this Section 2.5, Parent shall deliver or cause to be delivered to such holder presenting such
Company Stock Certificate(s) the Merger Consideration as calculated pursuant to Section 2.1 and
Schedule 2.1.
(d) In the event that any Company Stock Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the holder claiming such Company Stock Certificate
to be lost, stolen or destroyed, Parent will deliver or cause to be delivered, in accordance with
and subject to this Section 2.5 and the other terms and conditions hereof, in exchange for such
lost, stolen or destroyed Company Stock Certificate, the applicable portion of such holder’s Merger
Consideration for which the capital stock represented by such certificate has been cancelled and
exchanged pursuant to Section 2.1. When authorizing such payment in exchange therefor, Parent may
in its discretion require the owner of such lost, stolen or destroyed Company Stock Certificate to
give Parent a bond in such sum as it may reasonably direct as indemnity, or such other form of
indemnity, as Parent shall reasonably direct, against any claim that may be made against Parent
with respect to Company Stock Certificate alleged to have been lost, stolen or destroyed.
(e) Parent may, at its option, meet its obligations under this Section 2.5 through a bank,
trust company or other third party reasonably selected by Parent to act as exchange agent in
connection with the Merger.
(f) Notwithstanding anything in this Agreement to the contrary, neither Parent nor any other
party hereto shall be liable to a holder of Company capital stock for any portion of the Merger
Consideration delivered to a public official pursuant to applicable escheat laws following the
passage of time specified therein.
2.6 No Further Rights in Shares. After the Effective Time, holders of Company Stock
Certificates shall cease to have rights with respect to Company capital stock previously
represented by such certificates, and their sole rights (other than such rights as they may have as
Dissenting Stockholders under the applicable provisions of Delaware Corporate Law) shall be to
exchange such certificates for the Merger Consideration, as set forth in Section 2.1.
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2.7 No Fractional Shares. Notwithstanding any other provision of this Agreement,
neither certificates nor scrip for fractional shares of Parent Stock shall be issued in the Merger.
In lieu of any fractional shares to which the holder would otherwise be entitled, Parent shall pay
cash equal to the fraction of a share that such holder would otherwise be entitled to receive in
the Merger multiplied by the fair market value of a share of Parent Common Stock at the time of
Closing as determined by Parent’s Board of Directors.
2.8 Taking of Necessary Action; Further Action. If, at any time after the Effective
Time, any further action is necessary or reasonably desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right to, title to and possession of all
assets, property, rights, privileges, powers and franchises of Company, the officers and directors
of the Surviving Corporation are fully authorized in the name and on the behalf of Company or the Surviving
Corporation or otherwise to take, and shall take, all such lawful and necessary action, so long as
such action is not inconsistent with this Agreement.
2.9 Post-Closing Adjustment.
(a) Attached as Schedule 2.9 is a certificate signed by the Chief Executive Officer of Company
attaching a statement setting forth Company’s reasonable, good faith estimate of (i) the amount of
all current liabilities (calculated in accordance with GAAP) of Company (excluding (i) the current
portion of the outstanding principal of and interest on Company’s indebtedness under the Oxford
Loan, (ii) the lease payments related to the Company’s facility at 1124 Columbia Street, Seattle,
Washington that accrue after the Closing (but not including any amount arising from rental periods
prior to Closing), (iii) the Company Expenses (defined below) and (iv) the Employee Payments
(defined below)) outstanding at the Closing (collectively, the “Current Liabilities”), (ii) the
amount of all Company Expenses and (iii) the amount of any bonuses, severance or back pay paid
within six (6) months prior to the Closing and any bonuses, severance or back pay owing or accrued
as of the Closing to employees of or consultants to Company, all amounts payable pursuant to the
agreements set forth on Section 3.9(a) of the Company Disclosure Schedule and all amounts
set forth on Section 3.14(f) of the Company Disclosure Schedule (it being understood that
amounts set forth on Section 3.14(f) of the Company Disclosure Schedule that are payable to
Mark Benjamin shall be included unless both (a) Mr. Benjamin has entered into the amendment of his
employment agreement in the form attached hereto as Exhibit D and (b) Mr. Benjamin is hired as an
employee of Parent or its subsidiaries within thirty (30) days of the Closing of this Agreement)
(collectively, “Employee Payments”).
(b) As soon as reasonably practicable following the Closing Date, and in any event within
ninety calendar days thereafter, Parent shall cause to be prepared and delivered to the
Stockholders’ Agent a statement (the “Adjustment Statement”) setting forth the actual (i) Current
Liabilities, (ii) Company Expenses, (iii) Employee Payments and (iv) the Adjustment Amount (defined
below).
(c) The “Adjustment Amount” means the sum of the following amounts (provided, if the sum of
such amounts is a negative number, the Adjustment Amount shall equal zero):
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(i) the amount by which the actual Current Liabilities as of the Closing exceed the greater of
(x) $300,000 and (y) the estimated Current Liabilities shown on Schedule 2.9, if any;
(ii) minus, if both the estimated Current Liabilities shown on Schedule 2.9 and the
actual Current Liabilities exceeded $300,000, the amount by which the estimated Current Liabilities
shown on Schedule 2.9 exceed the actual Current Liabilities, if any;
(iii) plus, the amount by which the actual Company Expenses exceed the greater of (x)
$50,000 and (y) the estimated Company Expenses shown on Schedule 2.9, if any;
(iv) minus, if both the estimated Company Expenses shown on Schedule 2.9 and the
actual Company Expenses exceeded $50,000, the amount by which the estimated Company Expenses shown
on Schedule 2.9 exceed the actual Company Expenses, if any; and
(v) plus, any Employee Payments that were not shown on Schedule 2.9.
(d) Following the delivery of the Adjustment Statement to the Stockholders’ Agent, Parent
shall provide the Stockholders’ Agent with access to the records of the Surviving Corporation, as
the Stockholders’ Agent may reasonably request in a manner not unreasonably disruptive to the
Surviving Corporation’s business, during normal business hours and solely for the purpose of
reviewing the Adjustment Statement and determining the Adjustment Amount in accordance with this
Agreement.
(e) If Stockholders’ Agent disagrees with the Adjustment Amount, then within 45 calendar days
after its receipt of the Adjustment Statement, it shall notify Parent of such disagreement in
writing (the “Notice of Disagreement”), setting forth in reasonable detail the particulars of such
disagreement. To be effective, any such Notice of Disagreement shall include a copy of the
Adjustment Statement setting forth Parent’s determination of the Adjustment Amount marked to
indicate those specific line items that are in dispute (the “Disputed Line Items”) and shall be
accompanied by the Stockholders’ Agent’s calculation of each of the Disputed Line Items and the
Stockholders’ Agent’s revised Adjustment Statement setting forth its determination of the
Adjustment Amount. To the extent the Stockholders’ Agent provides a Notice of Disagreement within
such 45 calendar day period, all items that are not Disputed Line Items shall be final, binding and
conclusive for all purposes hereunder. If the Stockholders’ Agent does not provide a Notice of
Disagreement within such forty five calendar day period, the Stockholders’ Agent shall be deemed to
have accepted in full the Adjustment Amount as determined by Parent, which shall be final, binding
and conclusive for all purposes hereunder. If any Notice of Disagreement is timely provided and
contains the proper information as aforesaid, Parent and the Stockholders’ Agent shall use
commercially reasonable efforts for a period of 45 calendar days (or such longer period as they may
mutually agree) to resolve any Disputed Line Items. During such 45 calendar day period, Parent and
the Stockholders’ Agent shall have access to the working papers, schedules and calculations of the
other used in the preparation of the Adjustment Statement and the Notice of Disagreement and the
determination of the Adjustment Amount and Disputed Line Items. If, at the end of such period,
they are unable to resolve such Disputed Line Items, an independent accounting firm of
recognized
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national standing as may be mutually selected by Parent and the Stockholders’ Agent (the
“Auditor”), shall resolve any remaining Disputed Line Items. Within 15 days of the end of such 45
day period set forth above, Parent and the Stockholders’ Agent will enter into such reasonable and
customary arrangements for the services to be rendered by the Auditor under this Section 2.9 which
the Auditor may reasonably request. The Auditor shall determine as promptly as practicable (and in
any event within 30 calendar days from the date that the dispute is submitted to it), whether the
Adjustment Statement and the Adjustment Amount were prepared or determined, as applicable, in
accordance with the standards set forth in Section 2.9(a), (b) and (c) and whether and to what
extent (if any) the Adjustment Amount requires adjustment, limiting its review, however, only to
the Disputed Line Items so submitted. If the Auditor’s resolution of the Disputed Line Items
directly impacts other line items which are not Disputed Line Items, such line items shall be
appropriately adjusted to reflect the resolution of the Disputed Line Items by the Auditor pursuant
to this Section 2.9(e). The Surviving Corporation and the Stockholders’ Agent shall each furnish to the
Auditor such workpapers and other documents and information relating to the disputed issues as the
Auditor may request. The determination of the Auditor shall be final, conclusive and binding on
the parties. The date on which the Adjustment Amount is finally determined in accordance with this
Section 2.9(e) is hereinafter referred as to the “Determination Date.” The fees and expenses of
the Auditor shall be allocated between Parent and Stockholders’ Agent in the same proportion that
the total dollar amount of the Disputed Line Items submitted to the Auditor that is unsuccessfully
disputed by each such party (as finally determined by the Auditor) bears to the total dollar amount
of the Disputed Line Items so submitted by each such party.
(f) If the Adjustment Amount is a positive number, then within two Business Days following the
Determination Date, the number of shares of Parent Preferred Stock having a value equal to the
Adjustment Amount (valuing the Parent Preferred Stock at $5.00 per share) shall be released to
Parent from the Escrow Fund (as defined in Section 8.1(g) below).
2.10 Withholding Rights. Parent, Company or Merger Sub shall be entitled to deduct
and withhold from any amounts otherwise payable pursuant to this Agreement such amounts as are
required to be deducted and withheld with respect to the making of such payments under the
provisions of any applicable Tax laws. Any such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the Person in respect of which such deduction and
withholding was made.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants, as of the date hereof and the Closing, to and for the benefit
of Parent (except, with respect to any particular section or subsection of this Article 3, to the
extent specifically described in the corresponding section or subsection of Schedule 3 (the
“Company Disclosure Schedule”), it being understood and agreed that Company will use good faith
efforts to provide conspicuous cross-references for each description of an exception that may
relate to more than one representation or warranty but that any disclosure set forth in any section
of the Company Disclosure Schedule shall constitute disclosure for any other section of the Company
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Disclosure Schedule to the extent the relevance of such disclosure to such other section is
reasonably apparent from the facts specified in such disclosure):
3.1 Organization, Good Standing, Qualification. Company is a corporation duly
organized, validly existing and in good standing under Delaware Corporate Law and has all requisite
corporate power and authority to carry on its business. Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to qualify would have
a Company Material Adverse Effect.
3.2 Capitalization. The authorized capital of Company as of the date of this
Agreement (or such later date indicated below) consists of:
(a) 40,000,000 shares of Preferred Stock, comprised of 20,000,000 shares of Series A Preferred
Stock, 15,833,332 of which are issued and outstanding and 18,303,703 of which will be
issued and outstanding at the time of the Closing and 20,000,000 shares of Series A-1
Preferred Stock, none of which are issued and outstanding. The rights, privileges and preferences
of the Preferred Stock are as stated in Company’s Amended and Restated Certificate of
Incorporation. All of the outstanding shares of Preferred Stock have been duly authorized, fully
paid and are nonassessable and have been issued in compliance with all applicable federal and state
securities laws.
(b) 29,000,000 shares of voting Common Stock, 3,183,578 shares of which are issued and
outstanding as of the date hereof and 3,183,578 shares of which will be issued and outstanding at
the time of the Closing (except for such additional shares as may be issued upon the exercise of
Company Stock Awards that are outstanding on the date hereof and reflected in Section 3.2(d)). All
of the outstanding shares of voting Common Stock have been duly authorized, fully paid and are
nonassessable and have been issued in compliance with all applicable federal and state securities
laws.
(c) 1,000,000 shares of Company’s non-voting Common Stock (“Company Non-Voting Common Stock”),
980,000 shares of which are issued and outstanding and none of which will be issued and outstanding
on the date of Closing. All of the outstanding shares of Non-Voting Common Stock have been duly
authorized, fully paid and are nonassessable and have been issued in compliance with all applicable
federal and state securities laws.
(d) Company has reserved 2,229,863 shares of Common Stock for issuance to officers, directors,
employees and consultants of Company pursuant to the Company Stock Plan which has been duly adopted
by the Board of Directors and approved by Company’s stockholders. Of such reserved shares of
Common Stock, no shares have been issued pursuant to restricted stock purchase agreements, options
to purchase 1,714,988 shares have been granted and are currently outstanding, and 514,875 shares of
Common Stock remain available for issuance to officers, directors, employees and consultants
pursuant to the Company Stock Plan. Section 3.2(d) of the Company Disclosure Schedule sets forth a
list of all Company Stock Awards outstanding on the date hereof, the number of shares of Company
Stock issuable upon exercise thereof and the exercise price
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thereof (which in each case is $0.05 per share), the vesting schedule with respect thereto, the name of the holder thereof, the date of
grant and the expiration date thereof.
(e) Except (i) as set forth in subsections 3.2(a) through (d), (ii) for warrants to purchase
Series A Preferred Stock set forth on Section 3.2(e) of the Company Disclosure Schedule (the
“Series A Warrants”) and (iii) for the Convertible Promissory Notes set forth on Section 3.2(e) of
the Company Disclosure Schedule (the “Convertible Promissory Notes”), there are no authorized,
issued or outstanding Equity Interests in Company or any authorized, issued or outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first refusal or similar
rights) or agreements, orally or in writing, for the purchase or acquisition from Company of any
shares of its capital stock. Except (i) as set forth in subsections 3.2(a) through (d), at the
time of the Closing, there will be no authorized, issued or outstanding Equity Interests (other
than the Oxford Warrant) in Company or any authorized, issued or outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal or similar rights) or
agreements, orally or in writing, for the purchase or acquisition from Company of any shares of its
capital stock. Company is not a party or subject to any agreement or understanding, and, to the
best of Company’s knowledge, except for the Voting Agreement, there is no agreement or
understanding between any persons and/or entities, which affects or relates to the voting or giving
of written consents with respect to any security of the Company or by a director of Company. The
Required Company Vote is the only stockholder approval necessary under Applicable Law for the
approval of this Agreement and the Merger. The Required Redemption Vote is the only stockholder
approval necessary under Applicable Law for the due authorization and approval of the Charter
Amendment (defined below) and to effectuate the Non-Voting Common Stock Redemption. The Company
has never adjusted or amended the exercise price of any stock options previously awarded, whether
through amendment, cancellation, replacement grant, repricing, or any other means. As a result of
the Merger, Parent will be the sole record and beneficial holder of all of the Equity Interests of
Company. Prior to the Closing, the Company shall have obtained the Required Redemption Vote and
the Required Company Vote.
(f) The Certified Stockholder List reflects all of the outstanding Equity Interests of Company
and the name and address of each holder thereof, in each case, as of the date hereof. The Final
Certified Stockholder List will reflect all of the outstanding Equity Interests of Company and the
name and address of each holder thereof, in each case, as of the Closing.
3.3 Subsidiaries. Company does not currently own or control, directly or indirectly,
any interest in any other corporation, association, or other business entity. Company is not a
participant in any joint venture, partnership or similar agreement.
3.4 Authorization. All corporate action on the part of Company, its officers,
directors and stockholders necessary for the authorization, execution and delivery of the
Transaction Agreements to which any of them are contemplated to be a party, and the performance of
all obligations of Company hereunder and thereunder, have been taken or will be taken prior to the
Closing, and the Transaction Agreements, when executed and delivered by Company and its
stockholders, shall constitute valid and legally binding obligations of Company and its
stockholders, enforceable against
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Company and its stockholders in accordance with their terms
except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
3.5 Governmental Consents. No consent, waiver, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any court, administrative
agency, commission or federal, state, county or local governmental authority, instrumentality or
agency (each, a “Governmental Authority”) on the part of Company is required in connection with the
execution or delivery of this Agreement or the consummation of the transactions contemplated by the
Transaction Agreements except for the filing of the Charter Amendment and the Certificate of Merger
with the Secretary of State of the State of Delaware.
3.6 Litigation. Except as provided in Section 3.6 of the Company Disclosure
Schedule, there is no prior or pending action, suit, proceeding or investigation or, to Company’s
knowledge, currently threatened against Company, that questions the validity of the Transaction
Agreements or the right of Company to enter into them, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in the aggregate, in
any Company Material Adverse Effect, financially or otherwise, or any change in the current equity ownership of
Company, nor is Company aware that there is any basis for the foregoing. The foregoing includes,
without limitation, actions, suits, proceedings or investigations initiated at any time from three
(3) years prior to the date of the Transaction Agreements to present, or, to the knowledge of
Company, threatened, involving the prior employment of any of Company’s employees, their use in
connection with Company’s business of any information or techniques allegedly proprietary to any of
their former employers, or their obligations under any agreements with prior employers. Company is
not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit, proceeding or
investigation by Company currently pending or which Company intends to initiate.
3.7 Intellectual Property.
(a) Company Business Intellectual Property.
(i) Company Products. Section 3.7(a)(i) of the Company Disclosure Schedule
contains a complete and accurate list of all Company Products.
(ii) Registered Intellectual Property. Section 3.7(a)(ii) of the Company
Disclosure Schedule contains a complete and accurate list of all Company Registered Intellectual
Property, any proceedings or actions before any court, tribunal (including the United States Patent
and Trademark Office or equivalent authority anywhere in the world) related to the Company
Registered Intellectual Property, and any actions that must be taken within 150 days after the
Effective Time for the purposes of obtaining, maintaining, perfecting or preserving or renewing any
Company Registered Intellectual Property, including the payment of any registration, maintenance or
renewal fees or the filing of any responses to office actions, documents, applications or
certificates.
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(iii) Intellectual Property Contracts. Section 3.7(a)(iii) of the Company
Disclosure Schedule contains a complete and accurate list of all Contracts to which Company is a
party (1) with respect to Company-Owned Intellectual Property licensed to any third party, or (2)
pursuant to which a third party has licensed any Intellectual Property to Company (“Intellectual
Property Contracts”).
(iv) Intellectual Property Indemnities. Section 3.7(a)(iv) of the Company
Disclosure Schedule contains a complete and accurate list of all Contracts whereby Company has
agreed to, or assumed, any obligation or duty to indemnify, reimburse, hold harmless, defend or
otherwise assume or incur any obligation or liability with respect to the infringement or
misappropriation of any rights in Intellectual Property.
(b) Validity. To the Company’s actual knowledge (including the knowledge of its
patent and legal counsel), each item of Company Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees currently due in connection
with such Company Registered Intellectual Property have been made and, to the Company’s actual
knowledge (including the knowledge of its patent and legal counsel), all necessary documents,
recordations and certificates in connection with such Company Registered Intellectual Property have
been filed with the relevant patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of prosecuting, perfecting
and maintaining such Company Registered Intellectual Property. The Company has not claimed any
status in the application for or registration of any rights in Company Registered Intellectual
Property, including “small business status,” that, to the Company’s actual knowledge (including the
knowledge of its patent and legal counsel), would not be applicable to Parent. The Company has no
knowledge of any information, materials, facts, or circumstances, including any information or fact
that would constitute prior art, that would render any of the Company Registered Intellectual
Property invalid or unenforceable, or would materially affect any pending application for any
Company Registered Intellectual Property and Company has not knowingly misrepresented, or knowingly
failed to disclose, any facts or circumstances in any application for any Company Registered
Intellectual Property that would constitute fraud or a misrepresentation with respect to such
application or that would otherwise affect the validity or enforceability of any Company Registered
Intellectual Property. The Company has completed due search and inquiry for the identification of
material prior art and information relevant to the patentability of its pending Patent applications
and to the validity of its issued Patents included in the Company Registered Intellectual Property,
and has cited such prior art and information to each national patent office to the extent required
and in conformity with the laws, regulations and requirements of such patent offices.
(c) Ownership.
(i) No Company Business Intellectual Property or Company Product is subject to any proceeding
or outstanding decree, order, judgment, or stipulation or Contract restricting in any material
manner, the use, transfer, or licensing thereof by Company, or which may materially affect the
validity, use or enforceability of such Company Business Intellectual Property or Company Product,
and Company is aware of no threatened or impending action or asserted or
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unasserted claim that
could give rise to any legal action that may materially affect the validity, use or enforceability
of such Company Business Intellectual Property or Company Product.
(ii) All Company-Owned Intellectual Property will be fully transferable, alienable or
licensable by Surviving Corporation and/or Parent without restriction and without payment of any
kind to any person.
(iii) The Company owns, and has good and exclusive title to, each item of Company-Owned
Intellectual Property free and clear of any lien or encumbrance (other than the licenses described
in Section 3.7(c)(iii) of the Company Disclosure Schedule. Without limiting the foregoing: (i)
Company is the exclusive owner of all Trademarks that are used to designate the source or origin of
the Company Products; (ii) Company owns exclusively, and has good title to, all copyrighted works
that are embodied in any Company Product; and (iii) Company is, to the Company’s actual knowledge
(including the knowledge of its patent and legal counsel), the exclusive owner of, or has secured
appropriate rights from the owner through license or other agreement to, all Patents that are
included in the Company Owned Intellectual Property.
(iv) No person other than Company has ownership rights or license rights granted by Company to
improvements made by or for Company in any Company Business Intellectual Property.
(v) Within the past year, Company has not (i) transferred ownership of, or granted any
exclusive license of or exclusive right to use, or authorized the retention of any exclusive rights
to use or joint ownership of, Company Business Intellectual Property, to any other person, or (ii)
permitted Company’s rights in any Company-Owned Intellectual Property to lapse or enter the public
domain, except to the extent such failure would not result in a Company Material Adverse Effect.
(d) Non-Infringement.
(i) To the Company’s actual knowledge (including the knowledge of its patent and legal
counsel), the operation of the business of Company as such business currently is conducted or is
currently contemplated to be conducted, including, without limitation, the design, development,
manufacture, use, import, sale licensing or other exploitation of Company Products, does not, and
will not, infringe or misappropriate any Intellectual Property of any third party or constitute
unfair competition or trade practices under the laws of any jurisdiction. The Company has not
received notice from any third party alleging any such infringement, misappropriation, unfair
competition or trade practices.
(ii) All Intellectual Property incorporated into or embodied in any Company Product was
developed solely by either (1) employees of Company acting within the scope of their employment or
(2) by third parties who have exclusively licensed to Company or validly and irrevocably assigned
all of their rights, including all Intellectual Property rights therein, to Company. To the extent
any such Intellectual Property relates to Company Registered Intellectual Property, to
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the maximum
extent provided for by, and in accordance with, applicable laws and regulations, Company has
recorded each such assignment with the relevant Governmental Authority.
(e) Intellectual Property Contracts.
(i) All Intellectual Property Contracts are in full force and effect.
(ii) The Company is not in material breach of any of the Intellectual Property Contracts, and,
to Company’s knowledge, no other party to any Intellectual Property Contract has materially failed
to perform thereunder.
(iii) The consummation of the transactions contemplated by this Agreement will neither violate
nor result in the breach, modification, cancellation, termination or suspension of any Intellectual
Property Contract. Following the Effective Time, Parent will be permitted to exercise all of
Company’s rights under all Intellectual Property Contracts, to the same extent Company would have
been able to had the transactions contemplated by this Agreement not occurred and without being
required to pay any additional amounts or consideration other than fees, royalties or payments
which Company would otherwise be required to pay had such transactions contemplated hereby not
occurred.
(iv) Neither this Agreement nor the transactions contemplated by this Agreement, including the
assignment to Parent, by operation of law or otherwise, of any contracts or agreements to which
Company is a party, will result in (i) any third party being granted rights or
access to, or the placement in or release from escrow, of any software source code or other
technology, (ii) Parent granting to any third party any right in any Intellectual Property, (iii)
Parent being bound by, or subject to, any non-compete or other restriction on the operation or
scope of their respective businesses, or (iv) Parent being obligated to pay any royalties or other
amounts to any third party in excess of those payable by Company prior to the Closing.
(f) Sufficiency of Intellectual Property Rights. The Company-Owned Intellectual
Property, along with the Intellectual Property rights of Company under the Intellectual Property
Contracts, constitute all the Company Business Intellectual Property.
(g) Government Rights. No government funding, facilities of a university, college,
other educational institution or research center or funding from third parties was used in the
development of any Company Business Intellectual Property. To the knowledge of Company, no current
or former employee, consultant or independent contractor of Company, who was involved in, or who
contributed to, the creation or development of any Company-Owned Intellectual Property, has
performed services for the government, university, college, or other educational institution or
research center during a period of time during which such employee, consultant or independent
contractor was also performing services for Company. The U.S. Food and Drug Administration (the
“FDA”) has not indicated, whether written or oral, nor is Company aware that the FDA intends to
suspend, hold or delay Company’s clinical trials or approval of its products.
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(h) Third-Party Infringement. To the knowledge of Company, no person has infringed or
misappropriated, or is infringing or misappropriating, any Company-Owned Intellectual Property, and
no person has infringed or misappropriated, or is infringing or misappropriating, any Company
Business Intellectual Property in a manner that would result in a Company Material Adverse Effect.
(i) Trade Secret Protection. The Company has taken reasonable steps to protect the
rights of Company in Company’s confidential information and trade secrets, and any trade secrets or
confidential information of third parties provided to Company under an obligation of
confidentiality, and, without limiting the foregoing, Company has required each employee and
contractor to execute a proprietary information/confidentiality agreement in the form provided to
Parent, and all current and former employees and contractors of Company has executed such an
agreement, except where the failure to do so would not reasonably be expected have Company Material
Adverse Effect.
3.8 Compliance with Other Instruments. Company is not in violation or default (a) of
any provisions of its Amended and Restated Certificate of Incorporation or Bylaws, (b) of any
instrument, judgment, order, writ or decree to which it is a party or by which it is bound or (c)
to its knowledge, of any provision of federal or state statute, rule or regulation applicable to
Company. The execution, delivery and performance by Company of this Agreement and any Transaction
Agreement to which Company is a party, and the consummation of the transactions contemplated hereby
and thereby, will not contravene, conflict with or result in any violation of or default under
(with or without notice or lapse of time, or both) or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any benefit, result in the
creation or imposition of any lien, pledge, charge, claim, mortgage, liability, security interest,
right of first refusal, title retention agreement, third party right or other encumbrance of any
sort (each, a “Lien”) under or materially impair Company’s rights or alter the rights or obligations of a third
party under (any such event, a “Conflict”) (i) any provision of Company’s Amended and Restated
Certificate of Incorporation or Bylaws, (ii) Contract, or (iii) any judgment, injunction, order,
decree, statute, law, ordinance, rule or regulation applicable to Company or any of the properties
(whether tangible or intangible) or assets of Company. Section 3.8 of the Company
Disclosure Schedule sets forth all necessary consents, waivers and approvals of parties to any
Contracts as are required thereunder in connection with the Merger, or for any such Contract to
remain in full force and effect without limitation, modification or alteration after the Effective
Time so as to preserve all rights of, and benefits to, Company under such Contracts from and after
the Effective Time. Company has obtained, or will obtain prior to the Closing Date, all necessary
consents, waivers and approvals of parties to any Contract as are required thereunder in connection
with the Merger or for such Contracts to remain in effect without modification, limitation or
alteration after the Closing Date. Following the Closing Date, Company will be permitted to
exercise all of its rights under the Contracts without the payment of any additional amounts or
consideration other than amounts or consideration which Company would otherwise be required to pay
had the transactions contemplated by this Agreement not occurred.
3.9 Agreements; Actions.
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(a) There are no agreements, understandings or proposed transactions between Company and any
of its officers, directors, affiliates, or any affiliate thereof.
(b) Except for agreements explicitly contemplated by the Transaction Agreements, there are no
agreements, understandings, instruments, contracts, leases, licenses or proposed transactions to
which Company is a party or by which it is bound that involve (i) obligations (contingent or
otherwise) of, or payments to, Company in excess of, $10,000, (ii) the license of any Patent,
copyright, trade secret or other proprietary right to or from Company, or (iii) the grant of rights
to manufacture, produce, assemble, license, market, or sell any Company Products to any other
person or affect Company’s exclusive right to develop, manufacture, assemble, distribute, market or
sell any Company Products.
(c) Company has not (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness
for money borrowed or incurred any other liabilities individually in excess of $10,000 or in excess
of $50,000 in the aggregate, other than $2,406,299 in outstanding principal and $291,936 in
outstanding interest under the Oxford Loan, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of
its assets or rights, other than the sale of its inventory in the Ordinary Course of Business.
(d) For the purposes of subsections (b) and (c) above, all Indebtedness, Liabilities,
instruments, Contracts and proposed transactions involving the same person or entity (including
persons or entities Company has reason to believe are affiliated with that person or entity) shall
be aggregated for the purposes of meeting the individual minimum dollar amounts of each such
subsection.
(e) Company is in material compliance with and has not materially breached, violated or
defaulted under, or received notice that it has materially breached, violated or defaulted under,
any of the terms or conditions of any Contract, nor is Company aware of any event that would
constitute such a material breach, violation or default with or without the lapse of time, giving
of notice or any combination thereof. Each Contract is in full force and effect and is not subject
to any material default thereunder, nor is any party obligated to Company pursuant thereto subject
to any default thereunder.
(f) Except in connection with the Merger or as set forth in Section 3.9(f) of the Company
Disclosure Schedule, Company has not engaged in the past three (3) months in any discussion (i)
with any representative of any corporation or corporations regarding the merger of Company with or
into any such corporation or corporations, (ii) with any representative of any corporation,
partnership, association or other business entity or any individual regarding the sale, conveyance
or disposition of all or substantially all of the assets of Company or a transaction or series of
related transactions in which more than fifty percent (50%) of the voting power of Company would be
disposed of, or (iii) regarding any other form of liquidation, dissolution or winding up of
Company.
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3.10 Disclosure. Company has fully provided Parent with all the information that
Parent has requested for deciding whether to enter into this Agreement and consummate the Merger.
To Company’s knowledge, no representation or warranty of Company contained in this Agreement and
the exhibits attached hereto or in any certificate furnished or to be furnished to Parent at the
Closing contains any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not misleading in light of
the circumstances under which they were made.
3.11 No Conflict of Interest. Company is not indebted, directly or indirectly, to any
of its officers or directors or to their respective spouses or children, in any amount whatsoever
other than in connection with expenses or advances of expenses incurred in the Ordinary Course of
Business or relocation expenses of employees. To Company’s knowledge, none of Company’s officers
or directors, or any members of their immediate families, are, directly or indirectly, indebted to
Company (other than in connection with purchases of Company’s stock) or have any direct or indirect
ownership interest in any firm or corporation with which Company is affiliated or with which
Company has a business relationship, or any firm or corporation which competes with Company except
that officers, directors and/or stockholders of Company may own stock in (but not exceeding two
percent of the outstanding capital stock of) any publicly traded companies that may compete with
Company. To Company’s knowledge, none of Company’s officers or directors or any members of their
immediate families are, directly or indirectly, interested in any material contract with Company.
Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.12 Title to Property and Assets. Company owns its property and assets free and
clear of all mortgages, liens, loans and encumbrances, except such encumbrances and liens which
arise in the Ordinary Course of Business and do not materially impair Company’s ownership or use of
such property or assets. With respect to the property and assets it leases, Company is in
compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims
or encumbrances.
3.13 Financial Statements. Company has delivered to Parent its unaudited financial
statements (including balance sheet, income statement and statement of cash flows) as of and for
the six-month and twelve-month periods ended June 30, 2006 and December 31, 2005, respectively, and
its audited financial statements (including balance sheet, income statement and statement of cash
flows) as of and for the fiscal year ended December 31, 2004 (collectively, the “Company Financial
Statements”). The Company Financial Statements have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods indicated, except that the unaudited Company Financial
Statements do not contain any footnotes including those that are required by GAAP and except for
normal year-end adjustments which are consistent in nature with adjustments made in prior years.
The Company Financial Statements fairly present the financial condition and operating results of
Company as of the dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments. Except as set forth in the Company Financial Statements, Company has no material
liabilities, contingent or otherwise, other than (i) liabilities incurred in the Ordinary Course of
Business subsequent to June 30, 2006 and (ii) obligations under contracts and
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commitments incurred in the Ordinary Course of Business and not required under GAAP to be reflected in the Company
Financial Statements, which, in both cases, individually or in the aggregate are not material to
the financial condition or operating results of Company. Company is not a guarantor of any
indebtedness of any other person, firm or corporation. Company maintains and will continue to
maintain a standard system of accounting established and administered in accordance with GAAP.
3.14 Changes. Since June 30, 2006 there has not been:
(a) any change in the assets, liabilities, financial condition or operating results of Company
from that reflected in the Company Financial Statements, except changes in the Ordinary Course of
Business that have not had a Company Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by insurance, that has had a
Company Material Adverse Effect;
(c) any waiver or compromise by Company of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by Company, except in the Ordinary Course of Business and that has not had a Company
Material Adverse Effect;
(e) any execution, termination, material change to a material contract, lease, license or
agreement by which Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement with any employee,
officer, director or shareholder;
(g) any sale, assignment or transfer of any material assets or properties, Patents,
Trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any officer or key employee of Company or,
to Company’s knowledge, of any impending resignation or termination of employment of any such
officer or key employee;
(i) receipt of notice that there has been a loss of, or material order cancellation by, any
major customer of Company;
(j) any mortgage, pledge, transfer of a security interest in, or lien, created by Company,
with respect to any of its material properties or assets, except liens for Taxes not yet due or
payable;
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(k) any loans or guarantees made by Company to or for the benefit of its employees, officers
or directors, or any members of their immediate families, other than travel advances and other
advances made in the Ordinary Course of Business;
(l) any declaration, setting aside or payment or other distribution in respect to any of
Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of
any of such stock by Company;
(m) to Company’s knowledge, any other event or condition of any character that might result in
a Company Material Adverse Effect; or
(n) any arrangement or commitment by Company to do any of the things described in this Section
3.14.
3.15 Company Employee Matters and Benefit Plans.
(a) Definitions. For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(i) “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
and as codified in Section 4980B of the Code and Section 601 et. seq. of ERISA;
(ii) “Code” shall mean the Internal Revenue Code of 1986, as amended;
(iii) “Company Employee” shall mean any current or former or retired employee, consultant or
director of the Company or any Company ERISA Affiliate;
(iv) “Company Employee Agreement” shall mean each management, employment, severance,
consulting, relocation, repatriation, expatriation, visa, work permit or other agreement, contract
or understanding between the Company or any Company ERISA Affiliate and any Employee;
(v) “Company Employee Plan” shall mean any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise, funded or
unfunded, including without limitation, each “employee benefit plan,” within the meaning of Section
3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by
the Company or any Company ERISA Affiliate for the benefit of any Employee, or with respect to
which the Company or any Company ERISA Affiliate has or may have any liability or obligation;
(vi) “Company ERISA Affiliate” shall mean each Subsidiary of the Company and any other person
or entity under common control with the Company or any of its
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Subsidiaries within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder;
(vii) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended;
(viii) “IRS” shall mean the Internal Revenue Service;
(ix) “Multiemployer Plan” shall mean any “Pension Plan” which is a “multiemployer plan,” as
defined in Section 3(37) of ERISA; and
(x) “Pension Plan” shall mean each Company Employee Plan which is an “employee pension benefit
plan,” within the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 3.15(b) contains an accurate and complete list of each Company
Employee Plan and each Company Employee Agreement (other than the Company Stock Plan). Neither the
Company nor any ERISA Affiliate has any plan or commitment to establish any new Company Employee
Plan or Company Employee Agreement, to modify any Company Employee Plan or Company Employee
Agreement (except to the extent required by law or to conform any such Company Employee Plan or
Company Employee Agreement to the requirements of any applicable law, in each case as previously
disclosed to Parent in writing, or as required by this Agreement), or to adopt or enter into any
Company Employee Plan or Company Employee Agreement.
(c) Documents. The Company has provided to Parent correct and complete copies of: (i)
all documents embodying each Company Employee Plan and each Company Employee Agreement including
(without limitation) all amendments thereto and all related trust documents; (ii) the most recent
summary plan description together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Company Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company Employee Plan; (iv) all IRS
determination, opinion, notification and advisory letters; and (v) the three (3) most recent plan
years discrimination tests for each Company Employee Plan.
(d) Employee Plan Compliance. The Company and its Company ERISA Affiliates have
performed in all material respects all obligations required to be performed by them under, are not
in default or violation of, and have no knowledge of any default or violation by any other party to
each Company Employee Plan, and each Company Employee Plan has been established and maintained in
all material respects in accordance with its terms and in compliance with all applicable laws,
statutes, orders, rules and regulations, including but not limited to ERISA or the Code. No
“prohibited transaction,” within the meaning of Section 4975 of the Code or Sections 406 and 407 of
ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Company Employee Plan. No Company Employee Plan is being audited or investigated by any government
agency or is subject to any pending or, to the knowledge of the Company, threatened claim or suit.
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(e) No Pension or Welfare Plans. Neither the Company nor any Company ERISA Affiliate
has ever maintained, established, sponsored, participated in, or contributed to, any (i) Pension
Plan which is subject to Title IV of ERISA or Section 412 of the Code, (ii) Multiemployer Plan,
(iii) “multiple employer plan” as defined in ERISA or the Code, or (iv) a “funded welfare plan”
within the meaning of Section 419 of the Code. No Company Employee Plan provides health benefits
that are not fully insured through an insurance contract.
(f) No Post-Employment Obligations. No Company Employee Plan provides, or reflects or
represents any liability to provide post-termination or retiree welfare benefits to any person for
any reason, except as may be required by COBRA or other applicable statute, and neither the Company
nor any Company ERISA Affiliate has ever represented, promised or contracted (whether in oral or
written form) to any Company Employee (either individually or to Company Employees as a group) or
any other person that such Company Employee(s) or other person would be provided with
post-termination or retiree welfare benefits, except to the extent required by statute.
(g) Effect of Transaction.
(i) The execution of this Agreement and the consummation of the transactions contemplated
hereby will not (either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Company Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Company Employee.
(ii) No payment or benefit which will or may be made by the Company or its Company ERISA
Affiliates with respect to any Company Employee or any other “disqualified individual” (as defined
in Code Section 280G and the regulations thereunder) will be characterized as a “parachute
payment,” within the meaning of Section 280G(b)(2) of the Code. There is no contract, agreement,
plan or arrangement to which the Company or any Company ERISA Affiliates is a party or by which it
is bound to compensate any Company Employee for excise taxes paid pursuant to Section 4999 of the
Code.
(h) Section 409A. Schedule 3.15(h) lists each “nonqualified deferred compensation
plan” (as such term is defined in Section 409A(d)(1) of the Code) sponsored or maintained by the
Company and each Company ERISA Affiliate. Each such nonqualified deferred compensation plan
has been operated since January 1, 2005 in good faith compliance with Section 409A of the Code and
any IRS guidance issued with respect thereto. No such nonqualified deferred compensation plan has
been “materially modified” (within the meaning of IRS Notice 2005-1) at any time after October 3,
2004.
3.16 Tax Returns, Payments and Elections. Company has timely filed all Tax Returns as
required by law. These Tax Returns are true and correct in all material respects. Company has
paid all Taxes and other assessments due. The provision for Taxes of Company as shown in the
Company Financial Statements is adequate for Taxes due or accrued as of the date thereof. Company
has not made any elections pursuant to the Code (other than elections that relate solely to
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methods
of accounting, depreciation or amortization) that would have a material effect on Company, its
financial condition, its business as presently conducted or proposed to be conducted or any of its
properties or material assets. Company has never had any material Tax deficiency proposed or
assessed against it and has not executed any waiver of any statute of limitations on the assessment
or collection of any tax or governmental charge. None of Company’s Tax Returns has ever been
audited by governmental authorities. Since June 30, 2006, Company has not incurred any Taxes other
than in the Ordinary Course of Business and Company has made adequate provisions on its books of
account for all Taxes for such period. Company has paid or withheld from each payment made to each
of its employees, consultants or third parties, the amount of all Taxes (including, but not limited
to, federal income Taxes, Federal Insurance Contribution Act Taxes and Federal Unemployment Tax Act
Taxes) required to be paid or withheld therefrom, and has paid the same to the proper Tax receiving
officers or authorized depositories. Company has not engaged in a “reportable transaction,” as set
forth in Treas. Reg. § 1.6011-4(b), or any transaction that is the same as or substantially similar
to one of the types of transactions that the Internal Revenue Service has determined to be a tax
avoidance transaction and identified by notice, regulation, or other form of published guidance as
a “listed transaction,” as set forth in Treas. Reg. § 1.6011-4(b)(2).
3.17 Insurance. Company has in full force and effect fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable deductibles) to allow
it to replace any of its properties that might be damaged or destroyed.
3.18 Labor Agreements and Actions. Company is not bound by or subject to (and none of
its assets or properties is bound by or subject to) any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union has requested or, to
the knowledge of Company, has sought to represent any of the employees, representatives or agents
of Company. There is no strike or other labor dispute involving Company pending, or to the
knowledge of Company threatened, which could have a Company Material Adverse Effect, nor is Company
aware of any labor organization activity involving its employees. Company is not aware that any
officer or key employee, or that any group of key employees, intends to terminate their employment
with Company, nor does Company have a present intention to terminate the employment of any of the
foregoing. The employment of each officer and employee of Company is terminable at the will of
Company. To its knowledge, Company has complied in all material respects with all applicable state
and federal equal employment opportunity laws and with other laws related to employment.
3.19 Permits. Company has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business, the lack of which could have a Company Material Adverse
Effect. Company is not in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
3.20 Corporate Documents. The Amended and Restated Certificate of Incorporation and
Bylaws of Company are in the form provided to Parent. The copy of the minute books of Company
provided to Parent contains minutes of all meetings of directors and stockholders and all actions
by written consent without a meeting by the directors and stockholders since the date of
incorporation
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and reflects all actions by the directors (and any committee of directors) and
stockholders with respect to all transactions referred to in such minutes accurately in all
material respects.
3.21 Real Property Holding Company. Company is not currently, and has not been during
the prior five years, a United States real property holding corporation within the meaning of
Section 897 of the Code and Company has filed with the Internal Revenue Service all statements, if
any, with its United States income tax returns which are required under Section 1.897-2(h) of the
Treasury Regulations.
3.22 Brokers. Company has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this Agreement.
3.23 Proprietary Information and Inventions Assignment Agreement. Company, its
officers, consultants and each of its employees with access to Company’s confidential information
have entered into Company’s standard form of Confidentiality Agreement, Consulting Agreement (with
incorporated confidentiality clause), and/or Proprietary Information and Inventions Assignment
Agreement, in substantially the form made available to Parent.
3.24 Predecessor Corporations. There are no prior, pending or, to the Company’s
knowledge, threatened claims asserted against Company or, to the Company’s knowledge, Company’s
officers, directors or stockholders (solely in their capacity as stockholders) that have not been
waived, released or otherwise extinguished, from or in connection with (a) any Entity which was a
predecessor-in-interest to Company, or (b) the stockholders, employees, consultants, contractors or
business relationships of any such Entity.
3.25 Restrictions on Business Activities. There is no agreement (noncompete or
otherwise), commitment, judgment, injunction, order or decree to which Company is a party or
otherwise binding upon Company, which has or may reasonably be expected to have the effect of
materially prohibiting or impairing any business practice of Company, any acquisition of property
(tangible or intangible) by Company, the conduct of business by Company or otherwise limiting the
freedom of Company or its affiliates to engage in any line of business or to compete with any
Person. Without limiting the generality of the foregoing, Company has not entered into any
agreement under which Company is restricted from selling, licensing or otherwise distributing any
of its technology or products to, or providing services to, customers or potential customers or any
class of customers, in any geographic area, during any period of time or in any segment of the
market.
3.26 Environmental Matters.
(a) No notice, notification, demand, request for information, citation, summons or order has
been received, no complaint has been filed, no penalty has been assessed, and no investigation,
action, claim, suit, proceeding or review (or any basis therefor) is pending or, to the knowledge
of Company, is threatened by any Governmental Authority or other Person relating to Company and
relating to or arising out of any Environmental Law.
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(b) Company is and has been in material compliance with all Environmental Laws and all
Environmental Permits.
(c) There are no material liabilities or obligations of Company of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise arising under or
relating to any Environmental Law or any Hazardous Substance and there is no condition, situation
or set of circumstances that could reasonably be expected to result in or be the basis for any such
liability or obligation.
3.27 Restricted Securities. Company understands that the shares of Parent capital
stock to be issued in the Merger have not been, and will not be, registered under the Securities
Act of 1933, as amended (the “Securities Act”), by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other things, the bona fide
nature of the investment intent of Company’s stockholders. Company understands that the shares of
Parent capital stock are “restricted securities” under applicable U.S. federal and state securities
laws and that, pursuant to these laws, Company’s stockholders must hold the shares of Parent
capital stock indefinitely unless they are registered with the Securities and Exchange Commission
and qualified by state authorities, or an exemption from such registration and qualification
requirements is available. Company acknowledges that Parent has no obligation to register or
qualify the shares of Parent capital stock for resale except for those individuals party to, and to
the extent provided in, Parent’s Investors’ Rights Agreement. Company further acknowledges that if
an exemption from registration or qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale, the holding period for the
shares of Parent capital stock, and on requirements relating to Company which are outside of
Company’s control, and which Company is under no obligation and may not be able to satisfy.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to Company as follows, as of
the date hereof and the Closing, (except, with respect to any particular section or subsection of
this Article 4, to the extent specifically described in the corresponding section or subsection of
Schedule 4 (the “Parent Disclosure Schedule”), it being understood and agreed that Parent will use
good faith efforts to provide conspicuous cross-references for each description of an exception
that may relate to more than one representation or warranty but that any disclosure set forth in
any section of the Parent Disclosure Schedule shall constitute disclosure for any other section of
the Parent Disclosure Schedule to the extent the relevance of such disclosure to such other section
is reasonably apparent from the facts specified in such disclosure):
4.1 Organization, Good Standing, Qualification.
Parent is a corporation duly organized and validly existing under the corporate law of the
State of Washington and has all requisite corporate power and authority to carry on its business.
Merger Sub is a corporation duly organized, validly existing and in good standing under Delaware
Corporate Law and has all requisite corporate power and authority to carry on its business. Parent
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and Merger Sub are duly qualified to transact business and is in good standing in each jurisdiction
in which the failure so to qualify would have a Parent Material Adverse Effect.
4.2 Authorized Capital of Parent. The authorized capital of Parent consists as of the
date of the Agreement of:
(a) 26,314,511 shares of Preferred Stock, (i) 775,000 shares of Series A Preferred Stock, all
of which are issued and outstanding, (ii) 2,675,073 shares of Series B Preferred Stock, all of
which are issued and outstanding, (iii) 2,866,719 shares of Series C Preferred Stock, all of which
are issued and outstanding, (iv) 997,719 shares of Series D Preferred Stock, 972,580 of which are
issued and outstanding, and (v) 19,000,000 shares of Series E Preferred Stock, 9,347,208 of which
are issued and outstanding. The rights, privileges and preferences of the Parent’s Preferred Stock
are as stated in Parent’s Amended and Restated Articles of Incorporation. All of the outstanding
shares of Parent’s Preferred Stock have been duly authorized, fully paid and are nonassessable and
have been issued in compliance with all applicable federal and state securities laws.
(b) 40,000,000 shares of Common Stock, 4,636,138 shares of which are issued and outstanding.
All of the outstanding shares of Common Stock have been duly authorized, fully paid and are
nonassessable and have been issued in compliance with all applicable federal and state securities
laws.
(c) Parent has reserved 8,311,516 shares of Common Stock for issuance to officers, directors,
employees and consultants of Company pursuant to the Parent Stock Option Plan which has been duly
adopted by the Board of Directors and approved by Parent’s shareholders. Of such reserved shares
of Common Stock, 1,376,344 shares have been issued pursuant to restricted stock purchase
agreements, options to purchase 6,932,672 shares have been granted and are currently outstanding,
and 1,378,844 shares of Parent Common Stock remain available for issuance to officers, directors,
employees and consultants pursuant to the Parent Stock Option Plan.
(d) Except for outstanding options issued pursuant to the Parent Stock Option Plan, options to
purchase 148,906 shares of Common Stock issued pursuant to Parent Stock Option Agreements outside
the Parent Stock Option Plan, warrants to purchase 25,139 shares of Series D Preferred Stock and a
warrant to purchase 124,999 shares of Common Stock, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal or similar rights) or
agreements, orally or in writing, for the purchase or acquisition from Parent of any shares of its
capital stock. Parent is not a party or subject to any agreement or understanding, and, to the
best of Parent’s knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents with respect to any
security or by a director of Parent.
4.3 Subsidiaries.
(a) Other than Merger Sub, Parent does not currently own or control, directly or indirectly,
any interest in any other corporation, association or other business entity. The Merger Sub does
not currently own or control, directly or indirectly, any interest in any other corporation,
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association, or other business entity. Neither Parent nor Merger Sub is a participant in any joint
venture, partnership or similar agreement.
(b) The authorized capital of Merger Sub consists as of the date of this Agreement of 1,000
shares of Common Stock, all of which are issued and outstanding. All of the outstanding shares of
Common Stock have been duly authorized, fully paid and are nonassessable and have been issued in
compliance with all applicable federal and state securities laws.
4.4 Authorization. All corporate action on the part of each of Parent and Merger Sub,
its officers, directors and shareholders necessary for the authorization, execution and delivery of
the Transaction Agreements to which Parent and Merger Sub are contemplated to be a party, and the
performance of all obligations of Parent and Merger Sub hereunder and thereunder have been taken or
will be taken prior to the Closing, and the Transaction Agreements, when executed and delivered by
Parent and Merger Sub, shall constitute valid and legally binding obligations of each of Parent and
Merger Sub, enforceable against Parent and Merger Sub in accordance with their terms except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
and other laws of general application affecting enforcement of creditors’ rights generally, and as
limited by laws relating to the availability of specific performance, injunctive relief, or other
equitable remedies.
4.5 Valid Issuance of Securities. Parent Stock that is being issued in accordance
with the terms hereof for the consideration set forth herein will be duly and validly issued, fully
paid and nonassessable and free of restrictions on transfer other than restrictions on transfer
under the Transaction Agreements and applicable state and federal securities laws and, assuming
that each stockholder of the Company that is receiving shares of Parent Stock in the Merger is an
“accredited investor” within the meaning of Regulation D, Rule 501(a), promulgated by the
Securities and Exchange Commission under the Securities Act, shall have been issued in compliance
with all applicable federal and state securities laws.
4.6 Governmental Consents. No consent, waiver, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental Authority on the part of Parent or Merger
Sub is required in connection with the execution or delivery of this Agreement or the consummation
of the transactions contemplated by the Transaction Agreements except for the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware.
4.7 Litigation. Except as provided in Section 4.7 of the Parent Disclosure
Schedule, there is no prior or pending action, suit, proceeding or investigation or, to Parent or
Merger Sub’s knowledge, currently threatened against Parent, Merger Sub or any of its subsidiaries
that questions the validity of the Transaction Agreements or the right of Parent or Merger Sub to
enter into them, or to consummate the transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any Parent Material Adverse Effect, financially or otherwise,
or any change in the current equity ownership of Parent or Merger Sub, nor is Parent or Merger Sub
aware that there is any basis for the foregoing. The foregoing includes, without limitation,
actions, suits, proceedings or investigations initiated at any time from three (3) years prior to
the date of the Transaction Agreements to present or, to the knowledge of Parent or Merger Sub,
threatened,
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involving the prior employment of any of Parent or Merger Sub’s employees, their use in
connection with Parent or Merger Sub’s business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any agreements with prior
employers. Neither Parent, Merger Sub, nor any of its subsidiaries is a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by Parent, Merger Sub, or
any of its subsidiaries currently pending or which Parent, Merger Sub or any of its subsidiaries
intends to initiate.
4.8 Intellectual Property. Section 4.8 of Parent Disclosure Schedule lists
all material intellectual property Parent owns or has an interest in, specifying in each case
whether such intellectual property is owned or controlled by or for, licensed to, or otherwise held
by or for the benefit of Parent, filed in the name of or applied for by Parent and used in
connection with Parent’s business. To the best of Parent’s knowledge, after due search and
inquiry, Parent owns or possesses sufficient title and ownership to all Patents, Trademarks,
service marks, tradenames, copyrights, trade secrets, licenses, information and proprietary rights
and processes necessary for its business as now conducted. To the best of Parent’s knowledge,
Parent’s business as now conducted does not conflict with, or infringe, the rights of others and
Parent is not aware of any third-party rights that might reasonably be expected to lead such
third-party to assert a claim against Parent. There are no outstanding options, licenses, or
agreements of any kind relating to the foregoing, nor is Parent bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. Parent has not received any communications alleging (whether expressly or
implied) that Parent has violated or, by conducting its business, would violate any of the patents,
trademarks, service marks, tradenames, copyrights, trade secrets or other proprietary rights or
processes of any other person or entity. Parent is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee’s best efforts to promote the interest of Parent or
that would conflict with Parent’s business. Neither the execution or delivery of the Transaction
Agreements, nor the carrying on of Parent’s business by the employees of Parent, nor the conduct of
Parent’s business as proposed, will, to Parent’s knowledge, conflict with or result in a breach of
the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated. Parent does not believe it is or will
be necessary to use any inventions of any of its employees (or persons it currently intends to
hire) made prior to their employment by Parent. The FDA has not indicated, whether written or
oral, nor is Parent aware that the FDA intends to suspend, hold or delay Parent’s clinical trials
or approval of its products. To the knowledge of Parent, there is no person or entity violating,
infringing or misappropriating any intellectual property right of Parent.
4.9 Compliance with Other Instruments. Neither Parent nor Merger Sub is in violation
or default (a) of any provisions of the Amended and Restated Articles of Incorporation or Bylaws of
Parent or any provisions of the Articles of Incorporation or Bylaws of Merger Sub, (b) of any
instrument, judgment, order, writ or decree to which it is a party or by which it is bound, or (c)
to its knowledge, of any provision of federal or state statute, rule or regulation applicable to
Parent or
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Merger Sub. The execution, delivery and performance by Parent and Merger Sub of this
Agreement and any of the Transaction Agreements to which Parent or Merger Sub is a party, and the
consummation of the transactions contemplated hereby or thereby, will not contravene, conflict with
or result in any such violation of or default under (with or without notice or lapse of time, or
both) or give rise to a right of termination, cancellation, modification or acceleration of any
obligation or loss of any benefit, result in the creation or imposition of any Lien under or
materially impair Parent’s or Merger Sub’s rights or alter the rights or obligations of a third
party under (i) any provision of Parent’s Amended and Restated Articles of Incorporation, Merger
Sub’s Certificate of Incorporation or either Parent’s or Merger Sub’s Bylaws, (ii) any Contract, or
(iii) any judgment, injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Merger Sub or any of the properties (whether tangible or intangible) or
assets of Parent or Merger Sub. Section 4.9 of the Parent Disclosure Schedule sets forth
all necessary consents, waivers and approvals of parties to any Contracts as are required
thereunder in connection with the Merger, or for any such Contract to remain in full force and
effect without limitation, modification or alteration after the Effective Time so as to preserve
all rights of, and benefits to, Parent and Merger Sub under such Contracts from and after the
Effective Time. Parent and Merger Sub have obtained, or will obtain prior to the Closing Date, all
necessary consents, waivers and approvals of parties to any Contract as are required thereunder in
connection with the Merger or for such Contracts to remain in effect without modification,
limitation or alteration after the Closing Date. Following the Closing Date, Parent and Merger Sub
will be permitted to exercise all of its rights under the Contracts without the payment of any
additional amounts or consideration other than amounts or consideration which Parent and Merger Sub
would otherwise be required to pay had the transactions contemplated by this Agreement not
occurred.
4.10
Agreements; Actions.
(a) There are no agreements, understandings or proposed transactions between Parent or Merger
Sub and any of their respective officers, directors, affiliates, or any affiliate thereof.
(b) Except for agreements explicitly contemplated by the Transaction Agreements, there are no
agreements, understandings, instruments, contracts, leases, licenses or proposed transactions to
which Parent or Merger Sub is a party or by which it is bound that involve (i) obligations
(contingent or otherwise) of, or payments to, Parent or Merger Sub in excess of, $50,000, (ii) the
license of any Patent, copyright, trade secret or other proprietary right to or from Parent or
Merger Sub, or (iii) the grant of rights to manufacture, produce, assemble, license, market, or
sell its products to any other person or affect Parent or Merger Sub’s exclusive right to develop,
manufacture, assemble, distribute, market or sell its products.
(c) Neither Parent nor Merger Sub has (i) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of its capital stock, (ii)
incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess
of $50,000 or in excess of $200,000 in the aggregate, (iii) made any loans or advances
to any person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or
otherwise
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disposed of any of its assets or rights, other than the sale of its inventory in the
Ordinary Course of Business.
(d) For the purposes of subsections (b) and (c) above, all Indebtedness, Liabilities,
instruments, Contracts and proposed transactions involving the same person or entity (including
persons or entities Parent and Merger Sub have reason to believe are affiliated with that person or
entity) shall be aggregated for the purposes of meeting the individual minimum dollar amounts of
each such subsection.
(e) Parent and Merger Sub are in material compliance with and have not materially breached,
violated or defaulted under, or received notice that it has materially breached, violated or
defaulted under, any of the terms or conditions of any Contract, nor are Parent or Merger Sub aware
of any event that would constitute such a material breach, violation or default with or without the
lapse of time, giving of notice or any combination thereof. Each Contract is in full force and
effect and is not subject to any material default thereunder, nor is any party obligated to Parent
or Merger Sub pursuant thereto subject to any default thereunder.
(f) Except in connection with the Merger, neither Parent nor Merger Sub has engaged in the
past three (3) months in any discussion (i) with any representative of any corporation or
corporations regarding the merger of Parent or Merger Sub with or into any such corporation or
corporations, (ii) with any representative of any corporation, partnership, association or other
business entity or any individual regarding the sale, conveyance or disposition of all or
substantially all of the assets of Parent or Merger Sub or a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of Parent or Merger Sub,
respectively, would be disposed of, or (iii) regarding any other form of liquidation, dissolution
or winding up of Parent or Merger Sub.
4.11 Disclosure. Parent and Merger Sub have fully provided Company with all the
information that Company has requested for deciding whether to enter into this Agreement and
consummate the Merger. To Parent’s and Merger Sub’s knowledge, no representation or warranty of
Parent or Merger Sub contained in this Agreement and the exhibits attached hereto or in any
certificate furnished or to be furnished to Company at the Closing contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under which they were
made.
4.12 No Conflict of Interest. Neither Parent nor Merger Sub is indebted, directly or
indirectly, to any of its respective officers or directors or to their respective spouses or
children, in any amount whatsoever other than in connection with expenses or advances of expenses
incurred in the Ordinary Course of Business or relocation expenses of employees. To Parent and
Merger Sub’s knowledge, none of Parent or Merger Sub’s officers or directors, or any members of
their immediate families, are, directly or indirectly, indebted to Parent or Merger Sub (other than
in connection with purchases of Parent or Merger Sub’s stock) or have any direct or indirect
ownership interest in any firm or corporation with which Parent or Merger Sub is affiliated or with
which Parent or Merger Sub has a business relationship, or any firm or corporation which competes
with Parent or Merger Sub except that officers, directors and/or shareholders of Parent or Merger Sub may own stock
in
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(but not exceeding two percent of the outstanding capital stock of) any publicly traded
companies that may compete with Parent or Merger Sub. To Parent and Merger Sub’s knowledge, none
of Parent or Merger Sub’s officers or directors or any members of their immediate families are,
directly or indirectly, interested in any material contract with Parent or Merger Sub. Parent or
Merger Sub is not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
4.13 Rights of Registration and Voting Rights. Except as contemplated in the
Investors’ Rights Agreement, Parent has not granted or agreed to grant any registration rights,
including piggyback rights, to any person or entity. To Parent’s knowledge, no shareholder of
Parent has entered into any agreements with respect to the voting of capital shares of Parent.
4.14 Title to Property and Assets. Parent owns its property and assets free and clear
of all mortgages, liens, loans and encumbrances, except such encumbrances and liens which arise in
the Ordinary Course of Business and do not materially impair Parent’s ownership or use of such
property or assets. With respect to the property and assets it leases, Parent is in compliance
with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims
or encumbrances.
4.15 Financial Statements. Parent has delivered to Company its unaudited financial
statements (including a balance sheet and an income statement ) as of and for the six-month and
twelve-month periods ended June 30, 2006 and December 31, 2005, respectively, and its audited
financial statements (including a balance sheet and an income statement) as of and for the fiscal
year ended December 31, 2004 (collectively, the “Parent Financial Statements”). The Parent
Financial Statements have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated, except that the unaudited Parent Financial Statements may not
contain any footnotes required by GAAP and except for normal year-end adjustments which are
consistent in nature with adjustments made in prior years. Parent Financial Statements fairly
present the financial condition and operating results of Parent or Merger Sub as of the dates, and
for the periods, indicated therein, subject to normal year-end audit adjustments. Except as set
forth in Parent Financial Statements, Parent or Merger Sub has no material liabilities, contingent
or otherwise, other than (i) liabilities incurred in the Ordinary Course of Business subsequent to
June 30, 2006 and (ii) obligations under contracts and commitments incurred in the Ordinary Course
of Business and not required under GAAP to be reflected in Parent Financial Statements, which, in
both cases, individually or in the aggregate are not material to the financial condition or
operating results of Parent. Parent is not a guarantor of any indebtedness of any other person,
firm or corporation. Parent maintains and will continue to maintain a standard system of
accounting established and administered in accordance with GAAP.
4.16 Changes. Since June 30, 2006, there has not been:
(a) any change in the assets, liabilities, financial condition or operating results of Parent
or Merger Sub, from that reflected in the Parent Financial Statements, except changes in the
Ordinary Course of Business that have not had a Parent Material Adverse Effect;
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(b) any damage, destruction or loss, whether or not covered by insurance that has had a Parent
Material Adverse Effect;
(c) any waiver or compromise by Parent or Merger Sub of a valuable right or of a material debt
owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance or payment of any
obligation by Company, except in the Ordinary Course of Business and that has not had a Parent
Material Adverse Effect;
(e) any execution, termination, material change to a material contract, lease, license or
agreement by which Parent or Merger Sub or any of their assets is bound or subject;
(f) any material change in any compensation arrangement or agreement with any employee,
officer, director or shareholder;
(g) any sale, assignment or transfer of any material assets or properties, Patents,
Trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any officer or key employee of Parent or
Merger Sub or, to Parent’s knowledge, of any impending resignation or termination of employment of
any such officer or key employee;
(i) receipt of notice that there has been a loss of, or material order cancellation by, any
major customer of Company;
(j) any mortgage, pledge, transfer of a security interest in, or lien, created by Parent or
Merger Sub, with respect to any of its material properties or assets, except liens for Taxes not
yet due or payable;
(k) any loans or guarantees made by Parent or Merger Sub to or for the benefit of its
employees, officers or directors, or any members of their immediate families, other than travel
advances and other advances made in the Ordinary Course of Business;
(l) any declaration, setting aside or payment or other distribution in respect to any of
Parent’s or Merger Sub’s capital stock, or any direct or indirect redemption, purchase, or other
acquisition of any of such stock by Parent or Merger Sub;
(m) to Parent’s or Merger Sub’s knowledge, any other event or condition of any character that
might result in a Parent Material Adverse Effect; or
(n) any arrangement or commitment by Parent or Merger Sub to do any of the things described in
this Section 4.16.
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4.17
Parent Employee Matters and Benefit Plans.
(a) Definitions. For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(i) “Multiemployer Plan” shall mean any “Pension Plan” which is a “multiemployer
plan,” as defined in Section 3(37) of ERISA; and
(ii) “Parent Employee” shall mean any current or former or retired employee,
consultant or director of Parent or any Parent ERISA Affiliate;
(iii) “Parent Employee Agreement” shall mean each management, employment, severance,
consulting, relocation, repatriation, expatriation, visa, work permit or other agreement, contract
or understanding between Parent or any Parent ERISA Affiliate and any Parent Employee;
(iv) “Parent Employee Plan” shall mean any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise, funded or
unfunded, including without limitation, each “employee benefit plan,” within the meaning of Section
3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by
the Parent or any Parent ERISA Affiliate for the benefit of any Parent Employee, or with respect to
which Parent or any Parent ERISA Affiliate has or may have any liability or obligation;
(v) “Parent ERISA Affiliate” shall mean each subsidiary of Parent and any other person
or entity under common control with Parent or any of its Subsidiaries within the meaning of Section
414(b), (c), (m) or (o) of the Code and the regulations issued thereunder;
(vi) “Pension Plan” shall mean each Parent Employee Plan which is an “employee pension
benefit plan,” within the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 4.17(b) contains an accurate and complete list of each Parent
Employee Plan and each Parent Employee Agreement.
(c) Employee Plan Compliance. Parent and its Parent ERISA Affiliates have performed
in all material respects all obligations required to be performed by them under, are not in default
or violation of, and have no knowledge of any default or violation by any other party to each
Parent Employee Plan, and each Parent Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all applicable laws,
statutes, orders, rules and regulations, including but not limited to ERISA or the Code. No
“prohibited transaction,” within the meaning of Section 4975 of the Code or Sections 406 and 407 of
ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Parent
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Employee Plan. No Parent Employee Plan is being audited or investigated by any government agency
or is subject to any pending or, to the knowledge of Parent, threatened claim or suit.
(d) No Pension or Welfare Plans. Neither Parent nor any Parent ERISA Affiliate has
ever maintained, established, sponsored, participated in, or contributed to, any (i) Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code, (ii) Multiemployer Plan, (iii)
“multiple employer plan” as defined in ERISA or the Code, or (iv) a “funded welfare plan” within
the meaning of Section 419 of the Code. No Parent Employee Plan provides health benefits that are
not fully insured through an insurance contract.
(e) No Post-Employment Obligations. No Parent Employee Plan provides, or reflects or
represents any liability to provide post-termination or retiree welfare benefits to any person for
any reason, except as may be required by COBRA or other applicable statute, and neither Parent nor
any Parent ERISA Affiliate has ever represented, promised or contracted (whether in oral or written
form) to any Parent Employee (either individually or to Parent Employees as a group) or any other
person that such Parent Employee(s) or other person would be provided with post-termination or
retiree welfare benefits, except to the extent required by statute.
4.18 Tax Returns, Payments and Elections. Each of Parent and Merger Sub has timely
filed all Tax Returns as required by law. These Tax Returns are true and correct in all material
respects. Each of Parent and Merger Sub has paid all Taxes and other assessments due. The
provision for Taxes of Parent as shown in the Parent Financial Statements is adequate for Taxes due
or accrued as of the date thereof. Parent has not made any elections pursuant to the Code (other
than elections that relate solely to methods of accounting, depreciation or amortization) that
would have a material effect on Parent, its financial condition, its business as presently
conducted or proposed to be conducted or any of its properties or material assets. Parent has
never had any material Tax deficiency proposed or assessed against it and has not executed any
waiver of any statute of limitations on the assessment or collection of any tax or governmental
charge. None of Parent’s Tax Returns has ever been audited by governmental authorities. Since
June 30, 2006, Parent has not incurred any Taxes other than in the Ordinary Course of Business and
Parent has made adequate provisions on its books of account for all Taxes for such period. Parent
has paid or withheld from each payment made to each of its employees, consultants or third parties,
the amount of all Taxes (including, but not limited to, federal income Taxes, Federal Insurance
Contribution Act Taxes and Federal Unemployment Tax Act Taxes) required to be paid or withheld
therefrom, and has paid the same to the proper Tax receiving officers or authorized depositories.
Parent has not engaged in a “reportable transaction,” as set forth in Treas. Reg. § 1.6011-4(b), or
any transaction that is the same as or substantially similar to one of the types of transactions
that the Internal Revenue Service has determined to be a tax avoidance transaction and identified
by notice, regulation, or other form of published guidance as a “listed transaction,” as set forth
in Treas. Reg. § 1.6011-4(b)(2).
4.19 Insurance. Parent has in full force and effect fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable deductibles) to allow
it to replace any of its properties that might be damaged or destroyed. Parent has in full force
and effect term life insurance, payable to Parent, on the life of Gregory A. Demopulos, M.D., in
the amount of
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$4,900,000. Parent has in full force and effect product liability insurance in the
amount of $5,000,000.
4.20 Labor Agreements and Actions. Neither Parent nor Merger Sub is bound by or
subject to (and none of its assets or properties is bound by or subject to) any written or oral,
express or implied, contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the knowledge of Parent nor Merger Sub, has sought to represent any of the
employees, representatives or agents of Parent or Merger Sub. There is no strike or other labor
dispute involving Parent or Merger Sub pending, or to the knowledge of Parent or Merger Sub
threatened, which could have a Parent Material Adverse Effect, nor is Parent or Merger Sub aware of
any labor organization activity involving its employees. Neither Parent nor Merger Sub is aware
that any officer or key employee, or that any group of key employees, intends to terminate their
employment with Parent or Merger Sub, nor do Parent or Merger Sub have a present intention to
terminate the employment of any of the foregoing. The employment of each officer and employee of
Parent or Merger Sub is terminable at the will of each of Parent or Merger Sub, respectively. To
its knowledge, each of Parent and Merger Sub has complied in all material respects with all
applicable state and federal equal employment opportunity laws and with other laws related to
employment.
4.21 Permits. Parent, Merger Sub and each of its subsidiaries has all franchises,
permits, licenses and any similar authority necessary for the conduct of its business, the lack of
which could have a Parent Material Adverse Effect. Neither Parent nor Merger Sub is in default in
any material respect under any of such franchises, permits, licenses or other similar authority.
4.22 Corporate Documents. The Amended and Restated Articles of Incorporation and
Bylaws of Parent, and the Certificate of Incorporation and Bylaws of Merger Sub, are in the form
made available to Company. The copy of the minute books of Parent and Merger Sub made available to
Company contains minutes of all meetings of directors and shareholders and all actions by written
consent without a meeting by the directors and shareholders since the date of incorporation and
reflects all actions by the directors (and any committee of directors) and shareholders with
respect to all transactions referred to in such minutes accurately in all material respects.
4.23 Brokers. Neither Parent nor Merger Sub has a contract, arrangement or
understanding with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
4.24 Proprietary Information and Inventions Assignment Agreement. Parent, Merger Sub,
and its respective officers, consultants and each of its employees with access to Parent and Merger
Sub’s confidential information have entered into Parent and Merger Sub’s standard form of
Confidentiality Agreement, Consulting Agreement (with incorporated confidentiality clause), and/or
Proprietary Information and Inventions Assignment Agreement, in substantially the form made
available to Company.
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4.25 Restrictions on Business Activities. There is no agreement (noncompete or otherwise), commitment, judgment, injunction, order or
decree to which Parent is a party or otherwise binding upon Parent, which has or may reasonably be
expected to have the effect of materially prohibiting or impairing any business practice of Parent,
any acquisition of property (tangible or intangible) by Parent, the conduct of business by Parent
or otherwise limiting the freedom of Parent or its affiliates to engage in any line
of business or to compete with any Person. Without limiting the generality of the foregoing,
Parent has not entered into any agreement under which Parent is restricted from selling, licensing
or otherwise distributing any of its technology or products to, or providing services to, customers
or potential customers or any class of customers, in any geographic area, during any period of time
or in any segment of the market.
4.26
Environmental Matters.
(a) No notice, notification, demand, request for information, citation, summons or order has
been received, no complaint has been filed, no penalty has been assessed, and no investigation,
action, claim, suit, proceeding or review (or any basis therefor) is pending or, to the knowledge
of Parent, is threatened by any Governmental Authority or other Person relating to Parent and
relating to or arising out of any Environmental Law.
(b) Parent is and has been in material compliance with all Environmental Laws and all
Environmental Permits.
(c) There are no material liabilities or obligations of Parent of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to
any Environmental Law or any Hazardous Substance and there is no condition, situation or set of
circumstances that could reasonably be expected to result in or be the basis for any such liability
or obligation.
ARTICLE 5
ADDITIONAL AGREEMENTS
ADDITIONAL AGREEMENTS
5.1
Company’s Conduct of the Business Prior to Closing.
From the Execution Date until the earlier of the Effective Time or the termination of this
Agreement pursuant to Article 7, except as set forth on the Company Disclosure Schedule, Company
shall:
(i) Except as necessary to comply with its covenants and obligations hereunder or as Parent
shall otherwise agree in writing, conduct its business in the Ordinary Course of Business,
including but not limited to maintaining all contracts, Patents, Patent applications and permits in
full force and effect;
(ii) Use commercially reasonable efforts to collect all of its Accounts Receivable in the
Ordinary Course of Business;
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(iii) Maintain insurance coverage consistent with past practice;
(iv) Use all commercially reasonable efforts to (i) preserve intact its assets, associated
interests, and business and employees and (ii) otherwise maintain good relationships with
employees, sales representatives, licensors, licensees, suppliers, contractors (other than members
of Company’s scientific advisory board and similar consultants except for Linda Buck),
distributors, customers, and others having relations with Company, in each case substantially in the manner
as it has prior to the Execution Date; and
(v) Notify Parent of all employee resignations, terminations, threatened resignations or
impending resignations or terminations.
5.2 Interim Operations. From the Execution Date until the earlier of Effective Time
or the termination of this Agreement pursuant to Article 7, except as set forth in Schedule 5.2 or
as otherwise required herein, Company shall not, and shall cause its officers, directors,
employees, consultants and advisors to not (in each case without the written consent of Parent):
(a) Take any action that would constitute a breach of its representations and warranties;
(b) Take any action that would prevent it from performing or cause it not to perform its
covenants or closing conditions hereunder;
(c) Enter into, become bound by, or permit any of the assets owned or used by it to become
bound by, any material Contract, or amend, modify or terminate, or waive or exercise any material
right or remedy or grant, transfer, license or assign any material right or material claims under,
any material Contract (including any Intellectual Property Contract);
(d) Acquire, lease or license any right or other asset from any other Person or sell encumber,
convey, assign, or otherwise dispose, encumber, pledge, grant or transfer, or lease or license or
sublicense to any Person, or amend or modify, any material right or asset of Company or interest
therein (including with respect to Intellectual Property) or waive or relinquish any material right
or enter into any action that could materially change the value of Company without the prior
consent of Parent;
(e) Declare, accrue, set aside or pay any dividend or make any other distribution in respect
of any shares of capital stock, or repurchase, redeem or otherwise reacquire any shares of capital
stock or other securities or distribute cash outside of the Ordinary Course of Business;
(f) Use the proceeds of any bridge loans from its stockholders for any purpose other than for
working capital for routine operating purposes (which may include Employee Payments included in the
Adjustment Statement);
(g) Sell, issue, grant or authorize the sale, issuance or grant of: (A) any capital stock or
other security; (B) any option, call, warrant or right to acquire any capital stock or other
security;
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(C) any instrument convertible into or exchangeable for any capital stock or other
security; or (D) reserve for issuance any additional grants, and or shares under any stock option
or equity plan;
(h) Amend or permit the adoption of any amendment to its Certificate of Incorporation or
Bylaws or effect or become a party to any merger, consolidation, share exchange, business
combination, amalgamation, recapitalization, reclassification of shares, stock split, reverse stock
split, division or subdivision of shares, consolidation of shares or similar transaction or
otherwise acquire or agree to acquire any assets other than non-material assets or enter into
any material partnership arrangements, joint development agreements or strategic alliances;
(i) Lend money to any Person, or incur or guarantee any indebtedness or issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt securities of Company;
(j) Hire, fire or terminate any employee or consultant or promote the employment status or
title changes of senior employees;
(k) Except with respect to Employee Payments included in the Adjustment Statement, grant any
severance or termination pay (cash, equity or otherwise) to any officer or employee, except
pursuant to written agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing to Parent, or adopt any new severance plan, or amend or modify or
alter in any respect any severance plan, agreement or arrangement existing on the date hereof;
(l) Except with respect to Employee Payments included in the Adjustment Statement, adopt or
amend any employee benefit plan, policy or arrangement, or employee stock purchase or stock option
plan, or enter into any employment contract or collective bargaining agreement (other than offer
letters and letter agreements entered into, in the ordinary course of business and consistent with
past practice, with newly hired employees who are terminable “at will” and who are not officers of
the Company), pay any special bonus or special remuneration (cash, equity or otherwise) to any
director or employee, or increase the salaries or wage rates or fringe benefits (cash, equity or
otherwise) (including rights to severance or indemnification) of its directors, officers, employees
or consultants, except pursuant to agreements outstanding on the date hereof that have been
previously been disclosed in writing to Parent;
(m) Waive any stock repurchase rights, accelerate, amend or change the period of
exercisability of options or restricted stock, or reprice options granted under any employee,
consultant, director or other stock plans or authorize cash payments in exchange for any options
granted under any of such plans;
(n) Make any Tax election or adopt or change any accounting methods, principles or practices;
(o) Commence or settle any litigation; or
(p) Agree or commit to take any of the actions described in this Section 5.2.
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For the avoidance of doubt, Parent’s consent to any of the foregoing shall not be deemed to
affect Company’s representations and warranties, covenants, or Parent’s closing conditions
hereunder or whether a Company Material Adverse Effect has occurred.
5.3 Acquisition Proposals. From the Execution Date until the earlier of the Effective
Time or the termination of this Agreement pursuant to Article 7, Company agrees that neither it nor
any of its officers and directors shall, and that it shall direct and cause its employees, agents
and representatives (including any investment banker, attorney or accountant retained by it) to
not, directly or indirectly, initiate or solicit or take any action designed to encourage or
facilitate (including by way of furnishing information) any inquiries or the making of any proposal
or offer with respect to (a) a sale of, or issuance of stock of Company (except for the conversion
or exercise of previously issued Equity Interests set forth on Company Disclosure Schedule), (b) a
merger, reorganization, share exchange, consolidation, business combination, recapitalization,
liquidation, dissolution, or similar transaction involving Company, or (c) any purchase or sale (or
exclusive license, or non-exclusive license outside the Ordinary Course of Business) of all or any
significant portion of Company’s business or assets (any such proposal or offer being hereinafter
referred to as an “Acquisition Proposal”). Company further agrees that neither it nor any of its
officers and directors shall, and that it shall direct and cause its employees, agents and
representatives (including any investment banker, attorney or accountant retained by it) to not,
directly or indirectly, have any discussion with or provide any Confidential Information or data to
any Person (other than Parent and its Affiliates) relating to an Acquisition Proposal (other than
to respond to any inquiry proposal or offer by indicating that Company is not interested in an
Acquisition Proposal and without providing further information), or engage in any negotiations
concerning an Acquisition Proposal. Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any party (other than Parent
and its Affiliates) conducted heretofore with respect to any Acquisition Proposal and will not
waive any rights under any confidentiality agreements entered into with any such party. If Company
receives any written proposal from a third party concerning an Acquisition Proposal, Company shall
promptly (in any event within two (2) business days of receiving such proposal) provide such
proposal to Parent and inform Parent in writing and in reasonable detail regarding any related
matters pertaining to such Acquisition Proposal, including any subsequent oral or written
communications and the identity of such third party. If Company receives any proposal not in
writing from a third party concerning an Acquisition Proposal, Company shall promptly (in any event
within two (2) business days of receiving such proposal) provide a reasonably detailed written
summary of such proposal including all of its terms and conditions to Parent and inform Parent in
writing and in reasonable detail regarding any related matters pertaining to such Acquisition
Proposal, including any subsequent oral or written communications and the identity of such third
party. Company agrees that it will take the necessary steps to promptly inform the Persons
referred to in the first sentence of this Section 5.3 of their obligations under this Section 5.3.
Subject to applicable law, or as necessary to consummate the Merger and the transactions
contemplated hereby, Company shall not disclose to any Person the fact that it has entered into
this Agreement.
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5.4 Certain Notifications. From the Execution Date until the earlier of the Effective
Time or the termination of this Agreement pursuant to Article 7, Company shall promptly notify
Parent in writing regarding any:
(a) action taken by Company with respect to its business not in the Ordinary Course of
Business;
(b) any action taken by Company or circumstance or event that could reasonably be expected to
have a Company Material Adverse Effect;
(c) fact, circumstance or event, or action by Company (i) which, if known on the date of this
Agreement, would have been required to be disclosed in or pursuant to this Agreement or (ii) the existence, occurrence, or taking of which would result in any of the representations and
warranties of Company contained in this Agreement not being true and correct in all material
respects when made or at Closing;
(d) material breach of any covenant or obligation of Company hereunder; or
(e) circumstance or event that results in, or could reasonably be expected to result in, the
failure of Company to timely satisfy any of the closing conditions in Article 6 of this Agreement,
to the extent Company has knowledge of any of the foregoing.
Any disclosure provided pursuant to this Section 5.4 will not serve to amend information provided
in Company Disclosure Schedule to include such events.
5.5 Access to Information. From the Execution Date until the earlier of the Effective
Time and the termination of this Agreement pursuant to Article 7, Company shall (a) provide Parent
and its representatives with prompt and reasonable access during regular business hours upon
reasonable advance notice, and in a manner so as not to interfere with the normal business
operations of Company, to all premises, properties, key personnel, Persons having business
relationships with Company (including suppliers, licensors, licensees, customers and distributors,
to the extent permitted by such third parties), books and records (including Tax records); (b)
furnish Parent with any regularly prepared financial, operating and other data and information
related to Company’s business (including copies thereof), as Parent may reasonably request; and (c)
otherwise cooperate and assist, to the extent reasonably requested by Parent, with Parent’s
investigation of Company and its business. No information or knowledge obtained in any
investigation pursuant to this Section 5.5 or otherwise shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger in Article 6.
5.6 All Commercially Reasonable Efforts. From the Execution Date until the earlier of
the Effective Time or termination of this Agreement pursuant to Article 7, each of Company, on the
one hand, and Parent and Merger Sub, on the other, shall use all commercially reasonable efforts to
cause to be fulfilled and satisfied all of the other party’s conditions to Closing set forth in
Article 6.
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5.7 Consents. From the Execution Date until the earlier of the Effective Time or the
termination of this Agreement pursuant to Article 7, Company shall use all commercially reasonable
efforts to obtain all Consents necessary to consummate the Merger on the terms and conditions
hereof with respect to Company and Company’s business (including any Consents pertaining to
Contracts of Company or Governmental Approvals held by or required to be obtained by Company), and
Parent shall use all commercially reasonable efforts to obtain any Consents and make and deliver
all filings and notices to consummate the transaction on the terms and conditions hereof that apply
to Parent. Parent shall not be required to, as a condition to Company’s obtaining any Consent (a)
agree to any material changes in, or the imposition of any material condition to the transfer in
connection with the Merger of, any Contract, Governmental Approval or other asset or liability of
Company, (b) dispose of or make any changes to its business or (c) expend any funds or incur any
Liability. Prior to seeking any consent, waiver or approval with respect to any Contract, Company
will consult with Parent to determine whether such consent, waiver or approval should be obtained
and, if Parent determines that it does not want Company seeking any consent, waiver or approval,
and Parent waives Company’s non-compliance with this Section 5.7 with respect to the failure to
obtain such consent, waiver or approval, Company shall not seek to obtain such consent, waiver or
approval.
5.8 Further Assurances. From the Execution Date until the earlier of the Effective Time
or the termination of this Agreement pursuant to Article 7, the parties hereto shall execute such
documents and other papers and take such further actions as may be reasonably requested by Company,
on the one hand, and Parent, on the other hand, to facilitate the Closing as set forth herein.
5.9 Confidentiality.
(a) The provisions of this Section 5.9 shall be effective from the Execution Date until the
earlier of (x) the Effective Time or (y) in the event of termination of this Agreement pursuant to
Article 7, five years from the Execution Date. Without the prior written consent of Company, in
the case of Parent and Merger Sub, and Parent, in the case of Company, (1) Company shall not
disclose or use any Confidential Information of Parent or Merger Sub (including the Term Sheet,
dated July 3, 2006, between Parent and Company and all discussions relating thereto, as well as
this Agreement and all discussions relating thereto), and (2) Parent and Merger Sub shall not
disclose or use the Confidential Information of Company (including the Term Sheet, dated July 3,
2006, between Parent and Company and all discussions relating thereto, as well as this Agreement
and all discussions relating thereto), in each case except as reasonably required in connection
with this Agreement and the Merger. Each of Company, on the one hand, and Parent, on the other
hand, shall use no less than reasonable care in protecting any such Confidential Information
received. Information shall not be deemed Confidential Information under this Section 5.9(a) if
it: (i) is or becomes publicly known through no wrongful act or omission of the receiving party;
(ii) was rightfully known by the receiving party before receipt from the disclosing party; (iii) becomes rightfully known to
the receiving party without confidential or proprietary restriction from a source other than the
disclosing party that does not owe a duty of confidentiality (directly or indirectly) to the
disclosing party with respect to such Confidential Information; or (iv) that is established by the
receiving party using contemporaneous written documentation to have been independently
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developed by
the receiving party without the use of or reference to the Confidential Information of the
disclosing party.
(b) Notwithstanding subsection (a) above, in the event a party believes in good faith that it
is required to disclose the Confidential Information of another party (in such event, such party is
a “Nondisclosing Party,” and the party required to disclose is the “Disclosing Party”) pursuant to
Applicable Law or an Order, and otherwise would be prohibited from doing so under this Section 5.9,
the Disclosing Party shall: (i) promptly notify the Nondisclosing Party of the existence, terms and
circumstances surrounding such requirement; (ii) consult with the Nondisclosing Party on the
advisability of taking legally available steps to resist or narrow such request; and (iii) if
disclosure of such Confidential Information is required, furnish only that portion of the
Confidential Information which the Disclosing Party is legally compelled to disclose and advise the
Nondisclosing Party reasonably in advance of such disclosure (to the extent permitted by applicable
law) so that the Nondisclosing Party may seek an appropriate protective order or other reliable
assurance that confidential treatment will be accorded such Confidential Information. The
Disclosing Party shall not oppose actions by the Nondisclosing Party to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be accorded such
Confidential Information.
(c) Notwithstanding anything to the contrary herein, Parent, Merger Sub and Company shall be
entitled to seek equitable relief to protect their interest in any of their Confidential
Information, including injunctive relief.
(d) In the event of termination of this Agreement pursuant to Article 7, upon written request
therefor by a party hereto which has provided Confidential Information to the party receiving such
Confidential Information, the nondisclosing party shall return to the disclosing party within ten
(10) days of such request by commercially reasonable, secure delivery means reasonably requested by
the disclosing party all Confidential Information of the Disclosing Party, without retaining any
copies thereof (except that a copy of all Confidential Information may be retained (i) by counsel
for the nondisclosing party, and (ii) by the nondisclosing party as deemed reasonably necessary by
the nondisclosing party in connection with any dispute hereto, in which case, any such retained
information shall remain subject to this Section 5.9 and shall be used or disclosed only as
reasonable necessary in connection with such dispute).
5.10 Public Announcements. From the Execution Date until the Closing, Company and Parent
shall cooperate in good faith to jointly prepare all press releases and public announcements
pertaining to this Agreement or the Merger (including any initial respective press releases of
Company and Parent), and neither Company nor its Affiliates, nor Parent nor its Affiliates, shall
issue or otherwise make any public announcement or communication pertaining to this Agreement or
the Merger without the prior consent of Parent (in the case of Company and its Affiliates) or
Company (in the case of Parent and its Affiliates), except as required by Legal Requirements.
Neither party shall unreasonably withhold
approval from the other with respect to any such press release or public announcement. If
prior to the Effective Time any party determines, with the advice of counsel, that it is required
by any Legal Requirement to make this Agreement, the other
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Transaction Agreements or any terms
hereof or thereof public or otherwise issue a press release or make a similar public disclosure
with respect thereto, it shall, at a reasonable time before making any public disclosure, consult
with the other party regarding such disclosure, seek such confidential treatment for such terms or
portions of this Agreement or the other Transaction Agreements as may be reasonably requested by
the other party and disclose only such information as is legally compelled to be disclosed. For
the avoidance of doubt, the restrictions set forth in this section shall not apply to
communications by any party to customers, potential customers or other third parties of Company’s
business in connection with performance of this Agreement and the Transaction Agreements and which
are not generally made to the public.
5.11 Company Employees. At or prior to Closing, Company shall (i) terminate all employment
contracts between Company and its officers and employees, (ii) terminate the employment of all
Company employees, consultants and scientific advisory board members other than the individuals set
forth on Schedule 5.11, (iii) shall enter into severance agreements (in a form reasonably
acceptable to Parent) with any terminated employee who receives any severance, bonus, payment of
insurance or other benefits, including as provided in Sections 3.9(a) and 3.14(f) of the Company
Disclosure Schedule or as otherwise set forth on Schedule 2.9 (without duplication) and (iv) with
respect to all other terminated employees of the Company, shall use commercially reasonable efforts
to enter into severance agreements with such terminated employees in a form reasonably acceptable
to Parent. The Surviving Corporation, at its sole discretion, may extend employment offers to
Company officers or employees. Prior to Closing, Company shall use all commercially reasonable
efforts to cooperate with Parent’s reasonable requests for information and cooperation pertaining
to employee, employee benefit matters and the employment by the Surviving Corporation of Company
employees.
5.12 Stockholder Approval of Merger and Charter Amendment; Redemption.
(a) Promptly after the date hereof, Company will take all action necessary in accordance with
Delaware Corporate Law and its Amended and Restated Certificate of Incorporation and Bylaws to
solicit the written consent of the holders of the capital stock of Company for the purpose of
obtaining the Required Redemption Vote for the approval and adoption of the Charter Amendment. The
board of directors of Company shall recommend that the holders of capital stock of Company approve
and adopt the Charter Amendment. Following the due authorization and approval of the Charter
Amendment and prior to the Closing, Company shall file the Charter Amendment with the Secretary of
State for the State of Delaware and consummate the Non-Voting Common Stock Redemption.
(b) Promptly after the date hereof, Company will (i) take all action necessary in accordance
with Delaware Corporate Law and its Amended and Restated Certificate of Incorporation and Bylaws to
solicit the written consent of the holders of the capital stock of
Company for the purpose of obtaining the Required Company Vote for the approval and adoption
of this Agreement and the Merger, and (ii) otherwise use its best efforts to secure at least the
Required Company Vote or in excess thereof. The board of directors of Company shall recommend that
the holders of capital stock of Company approve and adopt this Agreement and approve and adopt the
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Merger. Company shall in no way challenge the validity or enforceability of any provisions of the
Voting Agreement.
(c) Company shall prior to Closing provide appraisal rights notices in connection with the
Merger in accordance with Delaware Corporate Law, and shall otherwise comply with Section 2.4, the
Amended and Restated Certificate of Incorporation and bylaws of Company and Delaware Corporate Law
with respect to appraisal rights. Company shall promptly inform Parent of any claims for appraisal
rights or similar communications received by Company prior to Closing.
5.13 Director and Officer Indemnification. If the Surviving Corporation amends its
Certificate of Incorporation or Bylaws following Closing in a manner that materially adversely
affects any rights to indemnification provided to Company’s prior officers and directors
thereunder, the Surviving Corporation shall indemnify such prior officers and directors to the same
extent as would have been required pursuant to Company’s Certificate of Incorporation, Bylaws and
any director and officer indemnification agreements (to the extent copies of which have been
delivered to Parent) as in effect immediately prior to Closing without giving effect to any such
amendment; provided that this sentence shall apply only with respect to acts or omissions occurring
prior to Closing. Any indemnification of officers and directors following Closing with respect to
acts or omissions occurring after Closing shall be governed by the Certificate of Incorporation and
Bylaws of the Surviving Corporation as then in effect. The parties acknowledge and agree that
neither this Section 5.13 nor any other provision hereof shall be deemed to impose any
indemnification or similar obligation on Parent or to require Parent to contribute any funds to
Company or to otherwise fund the indemnification obligations of Company. Immediate prior to the
Closing, Company may obtain (and Parent shall pay for) directors’ and officers’ runoff program
liability insurance coverage for a period of three years following the Closing for the benefit of
the prior officers and directors of Company with respect to their acts and omissions as directors
and officers of Company occurring prior to the Closing; provided, however, that the cost of such
liability insurance shall not exceed $36,000.
5.14 Right of Existing Investors to Designate for Election One Member of Parent’s Board of
Directors. Immediately following the Investment, the Existing Investors by majority vote,
shall have the right to designate for election one member to the board of directors of Parent, to
be drawn from the Existing Investors’ employees or as may otherwise be agreed with the other
members of the board of directors of Parent, which initial designee shall be Jean-Philippe Tripet;
provided, that such right shall terminate upon the first to occur of (i) such time as the Existing
Investors no longer hold at least fifty percent (50%) of the capital stock issued to them in
connection with the Merger and the Investment, (ii) the Company’s initial public offering or (iii)
a change of control of Parent.
5.15 Section 280G. Company shall promptly, submit to the stockholders of Company for approval (in a manner
satisfactory to Parent), by such number of stockholders of Company as is required by the terms of
Section 280G(b)(5)(B) of the Code, any payments and/or benefits that may separately or in the
aggregate, constitute “parachute payments” pursuant to Section 280G of the Code (“Section 280G
Payments”) (which determination shall be made by Company and shall be subject to review and
approval by Parent), such that such payments and benefits shall not be deemed
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to be Section 280G
Payments, and prior to the Effective Time Company shall deliver to Parent evidence satisfactory to
Parent that (A) a vote of the stockholders of Company was solicited in conformance with Section
280G and the regulations promulgated thereunder and the requisite stockholder approval was obtained
with respect to any payments and/or benefits that were subject to the stockholder vote (the “280G
Stockholder Approval”), or (B) that the 280G Stockholder Approval was not obtained and as a
consequence, that such payments and/or benefits shall not be made or provided to the extent they
would cause any amounts to constitute Section 280G Payments, pursuant to the waivers of those
payments and/or benefits, which were executed by the affected individuals prior to the stockholder
vote.
5.16 Termination of Plans. Effective as of the day immediately preceding the Closing
Date, Company and its Company ERISA Affiliates, as applicable, shall each terminate any and all
group severance, separation or salary continuation plans, programs or arrangements and any and all
plans intended to include a Code Section 401(k) arrangement (unless Parent provides written notice
to Company that such 401(k) plans shall not be terminated) (collectively, the “Terminating Company
Employee Plans”). Unless Parent provides such written notice to Company, no later than five
business days prior to the Closing Date, Company shall provide Parent with evidence that such
Terminating Company Employee Plan(s) have been terminated (effective as of the day immediately
preceding the Closing Date) pursuant to resolutions of Company’s Board of Directors. The form and
substance of such resolutions shall be subject to review and approval of Parent. Company also
shall take such other actions in furtherance of terminating such Company Employee Plan(s) as Parent
may reasonably require.
5.17 Tax Treatment. None of the Parties shall take any position on any federal, state
or local income or franchise tax return, or take any other tax reporting position, that is
inconsistent with the treatment of the Merger as a “reorganization” within the meaning of Section
368(a) of the Code.
5.18 Information Statement. Promptly following the execution of this Agreement the
parties shall jointly prepare (in a form to be mutually agreed upon by Parent and Company promptly
following the date of this Agreement) and cause to be delivered to the stockholders of the Company
an information statement soliciting stockholder approval of the Redemption, the Merger Agreement
and the Merger (the “Information Statement”). Each of the parties shall use commercially
reasonable efforts to ensure that the Information Statement 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.
ARTICLE 6
CONDITIONS TO THE MERGER
CONDITIONS TO THE MERGER
6.1 Conditions to Parent’s and Merger Sub’s Obligations to Close. The obligations of Parent and Merger Sub to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of each of the following conditions,
any of which may be waived (in whole or in part), in writing, by Parent and Merger Sub:
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(a) Accuracy of Representations and Warranties. The representations and warranties of
Company set forth in this Agreement and qualified as to materiality shall be true and accurate, and
those not so qualified shall be true and accurate in all material respects, at and as of the
Closing with the same force and effect as if made at Closing (other than such representations and
warranties as are made as of another date, which, if qualified as to materiality, shall be true and
accurate as of such date, and, if not so qualified, shall be true and accurate in all material
respects as of such date).
(b) Performance of Covenants. Each and all of the covenants and agreements of Company
to be performed or complied with prior to or on the Closing Date shall have been performed or
complied with in all material respects by Company.
(c) No Company Material Adverse Effect. From the date of this Agreement to Closing,
there shall not have been any Company Material Adverse Effect, and Company shall have no knowledge
of any such change which is threatened. For avoidance of doubt, a Company Material Adverse Effect
shall be deemed to have occurred if there is a lack of sufficient personnel, as determined by
Parent, remaining upon the Closing, that are employed by Company and/or Parent, to permit the
continued advancement of Company’s technologies without delay; provided, however,
that nothing in this Section 6.1(c) shall require Company to have any level of cash resources at
the time of Closing.
(d) Company Certificate. Company shall have delivered to Parent a certificate
executed on behalf of Company by its chief executive officer (i) certifying the matters set forth
in Sections 6.1(a)-(c), (ii) certifying that the board of directors and stockholders of Company
have approved this Agreement, the Merger and the other Transaction Agreements and that such
approvals have not been superseded and (iii) certifying that the attached (A) copy of the duly
executed written consent of the board of directors or the minutes of a meeting of the board of
directors with respect to such board approval is true and correct and that such approval has not
been superseded and (B) copy of duly executed written consent of the stockholders or the minutes of
the meeting of the shareholders with respect to the Required Company Vote and the Required
Redemption Vote is true and correct and that such approval has not been superseded.
(e) Cash Equity Investment. As a condition to, and simultaneous with Closing, the
Existing Investors and/or new investors acceptable to Parent that are interested in participating
shall have invested at least $5,000,000 but no more than $6,000,000 (the “Investment”) in the
aggregate in Parent’s Series E Preferred Stock. The Existing Investors and/or new investors
participating in the Investment shall have become parties to and agreed to be bound by the terms of
the each of the (i) Parent’s Series E Preferred Stock Purchase Agreement and addendums thereto,
attached as Exhibit E, and (ii) Parent’s Series E Investors’ Rights Agreement, attached as Exhibit
F (the “Investors’ Rights Agreement”).
(f) No Pending Litigation; Laws. There shall not be pending or threatened any Order
or Proceeding against Company and there shall not be pending any Order or Proceeding against any
party hereto brought by any Governmental Authority which seeks to materially restrain,
materially modify or invalidate the transactions contemplated by this Agreement. No Governmental
Authority shall have issued, promulgated, enforced or enacted any Legal Requirement or Order that
is then in
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effect or pending and has, or would have, the effect of making the Merger or other
material transactions contemplated by this Agreement illegal or otherwise prohibiting consummation
of the Merger or such other material transactions, or would materially modify or restrain the
Merger or such material transactions, or would otherwise materially adversely affect the right or
ability of the Surviving Corporation to operate Company’s business, or for Parent to own or control
the Surviving Corporation.
(g) Consents/Notices and Related Matters. Company shall have received copies of the
executed third party Consents and such other items, and taken such other actions, that are listed
on Schedule 6.1(g) to this Agreement and such consents (and other items and actions, as applicable)
shall be reasonably acceptable to Parent in form and substance.
(h) Section 280G Payments. With respect to any payments or benefits that Parent
determines may constitute a Section 280G Payment, the shareholders of the Company shall have
approved, pursuant to the method provided for in the regulations promulgated under Section 280G of
the Code, any such Section 280G Payments or shall have disapproved such payments and/or benefits,
and, as a consequence, no Section 280G Payments shall be paid or provided for in any manner and
Parent and its subsidiaries shall not have any liabilities with respect to any Section 280G
Payments.
(i) Termination of Terminating Company Employee Plans. The Company shall have
provided Parent with evidence, reasonably satisfactory to Parent, as to the termination of the
Company Employee Plans referred to in Section 5.16.
(j) Required Company Vote; Required Redemption Vote; Other Corporate Approvals.
Company shall have obtained the Required Company Vote and the approval of the board of directors of
Company for the approval of this Agreement and the Merger, and such approvals shall not have been
superseded and shall be fully effective at Closing. Company shall have obtained the Required
Redemption Vote and the approval of the board of directors of Company for the approval of the
Charter Amendment, and such approvals shall not have been superseded and shall be fully effective
at Closing.
(k) Dissenting Stockholders. After notice duly given in accordance with the Delaware
Corporate Law and Company’s Amended and Restated Certificate of Incorporation and bylaws, holders
of no more than 5% of Company’s capital stock (on an as-converted basis) shall have exercised or
given notice of their intent to exercise appraisal rights under Delaware Corporate Law with respect
to approval of this Agreement.
(l) Lien Releases. There shall be no liens on any of the assets of Company except for
Permitted Encumbrances and as set forth on Schedule 6.1(k), and Company shall have provided to
Parent for filing terminations on Form UCC-3 for the liens set forth on those items of such
schedule in form and substance reasonably acceptable to Parent. Company shall have terminated the
liens described in any other items listed on Schedule 6.1(k) prior to Closing and shall have
provided evidence of such termination to Parent in form and substance reasonably acceptable to
Parent.
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(m) Governmental Consents. There shall have been obtained at or prior to the Closing
Date such permits or authorizations, and there shall have been taken all such other actions by any
Governmental Authority or other regulatory authority having jurisdiction over the parties and the
actions herein proposed to be taken, as may be legally required to consummate the Merger.
(n) Investors’ Rights Agreement. Each Person entitled to receive Parent Stock
pursuant to Section 2.1 shall have executed and delivered to Parent the Investors’ Rights
Agreement, substantially in the form attached hereto as Exhibit F.
(o) Employment. George A. Gaitanaris, M.D., Ph.D. shall have accepted employment with
the Parent.
(p) Indemnification Agreements. At Closing, each officer and director of Company who
is a party to an indemnification agreement with Company will amend such indemnification agreement
to (i) provide for terms substantially similar to those contained in the indemnification agreements
entered into between Parent and its officers and directors and (ii) provide that such agreement
will not release any stockholder (or any Affiliate thereof) from its indemnity obligations under
this Agreement or the Transaction Agreements or provide any right of contribution or advancement of
expenses from Parent with respect to any loss claimed by Parent against such stockholder (or any
affiliate thereof) pursuant to this Agreement or the Transaction Agreements.
(q) Due Diligence. Parent shall have completed the financial, business, technical and
legal due diligence of Company to the satisfaction of Parent, including, without limitation, (i)
review of all intellectual property legal opinions provided to Company by counsel (to be provided
to Parent upon the Execution Date for review prior to the Closing), and (ii) discussions between
Parent and the Stanley Medical Research Institute concerning the Stanley Medical Research
Institute’s award of grant funding to and/or equity investment in Parent after the Closing.
(r) Company Deliverables at Closing. Prior to or at Closing, Company shall deliver to
Parent, in form and substance reasonably acceptable to Parent, the following items:
(i) A duly executed opinion of Summit Law Group, in a form to be mutually agreed upon by
Parent and Company promptly following the date of this Agreement, which shall contain customary
opinions given by the target’s counsel in acquisitions of this type;
(ii) To the extent requested by Parent in advance, the signed written resignations of the
officers and directors of Company in office immediately prior to the Effective Time, effective
contingent upon the consummation of the Merger;
(iii) A certificate from the Secretary of State of the State of Delaware as to Company’s good
standing, dated at a date which is as close as reasonably practicable in advance of the Closing
Date, but in no event more than five (5) days prior to the Closing Date;
(iv) The Certificate of Merger duly executed by Company, including the duly executed related
officers certificate;
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(v) Signature cards for the bank accounts of Company that Parent may use to transfer authority
of those accounts to designees of Parent’s choosing;
(vi) A properly executed notice in a form reasonably acceptable to Parent for purposes of
satisfying Parent’s obligations under Section 897 and 1445 of the Code, together with written
authorization for Parent to deliver such notice to the Internal Revenue Service on behalf of
Company after the Closing; and
(vii) Such other items as may be specifically provided for herein.
(s) Parent shall have received a written resignation from each of the officers and directors
of Company, effective as of the Effective Time.
(t) Charter Amendment and Non-Voting Common Stock Redemption. The amendment to
Company’s Amended and Restated Certificate of Incorporation, substantially in the form attached
hereto as Exhibit G (the “Charter Amendment”) shall have been approved and filed with the Secretary
of State of the State of Delaware and the Company shall have consummated the Non-Voting Common
Stock Redemption.
6.2 Conditions to Company’s Obligation to Close. The obligations of Company to consummate
and effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived (in whole or in part), in writing, by
Company:
(a) Accuracy of Representations and Warranties. The representations and warranties of
Parent and Merger Sub set forth in this Agreement and qualified as to materiality shall be true and
accurate, and those not so qualified shall be true and accurate in all material respects, at and as
of the Closing, with the same force and effect as if made at Closing (other than such
representations and warranties as are made as of another date, which, if qualified as to
materiality, shall be true and accurate as of such date, and, if not so qualified, shall be true
and accurate in all material respects as of such date).
(b) Performance of Covenants. Each and all of the covenants and agreements of Parent
and Merger Sub herein to be performed or complied with prior to or on the Closing Date shall have
been performed or complied with in all material respects by Parent and Merger Sub, respectively.
(c) Parent Certificate. Parent shall have delivered to Company a certificate executed
on behalf of Parent by an officer of Parent (i) certifying the matters set forth in Section
6.2(a)-(b), (ii) certifying that the board of directors and shareholders of Merger Sub have
approved this Agreement and the other Transaction Agreements and that such approvals have not been
superseded, (iii) certifying that the attached (A) copy of the duly executed written consent of the
board of directors or the minutes of a meeting of the board of directors of Merger Sub with respect
to such board approval is true and correct and has not been superseded and (B) copy of duly executed
written consent of the stockholders of Merger Sub with respect to such shareholder approval is true
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and correct and has not been superseded, and (iv) certifying that the board of directors of Parent
has approved this Agreement and the other Transaction Agreements, and that the attached copy of the
duly executed written consent of the board of directors of Parent or the minutes of a meeting of
the board of directors of Parent with respect to such board approval is true and correct and has
not been superseded.
(d) No Pending Litigation; Laws. There shall not be pending or threatened any Order
or Proceeding against any party hereto brought by any Governmental Authority which seeks to
materially restrain, materially modify or invalidate the transactions contemplated by this
Agreement. No Governmental Authority shall have issued, promulgated, enforced or enacted any Legal
Requirement or Order that is then in effect or pending and has, or would have, the effect of making
the Merger or other material transactions contemplated by this Agreement illegal or otherwise
prohibiting consummation of the Merger or such other material transactions, would materially modify
or restrain the Merger or such material transactions, or otherwise materially adversely affects the
right or ability of the Surviving Corporation to operate Company’s business, or for Parent to own
or control the Surviving Corporation.
(e) Parent Deliverables at Closing. Prior to or at Closing, Parent shall deliver to
Company, in form and substance reasonably acceptable to Company, the following items:
(i) A duly executed opinion of Wilson Sonsini Goodrich & Rosati, PC, in a form to be mutually
agreed upon by Parent and Company promptly following the date of this Agreement, which shall
contain customary opinions given by the acquiror’s counsel in acquisitions of this type; and
(ii) Such other items as may be specifically provided for herein.
(f) Governmental Consents. There shall have been obtained at or prior to the Closing
Date such material permits or authorizations, and there shall have been taken all such other
material actions by any Governmental Authority or other regulatory authority having jurisdiction
over the parties and the actions herein proposed to be taken, as may be legally required to
consummate the Merger.
ARTICLE 7
TERMINATION
TERMINATION
7.1 Termination. This Agreement may be terminated prior to Closing as follows:
(a) Agreement. By mutual written agreement of Company and Parent;
(b) Parent’s Breach. At the election of Company, by giving written notice to Parent
if Parent or Merger Sub has (i) breached any representation or warranty herein qualified as to
materiality, (ii) breached any representation or warranty herein not qualified as to materiality in
any material respect, or (iii) breached any covenant or agreement contained in this Agreement in
any material respect; provided, however, Company shall have no termination right hereunder unless the
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breach of such representation, warranty, covenant or agreement shall not have been cured by
Parent or Merger Sub (unless such breach is incapable of cure) within fifteen (15) days after
Parent and Merger Sub shall have received notice from Company that Company intends to exercise its
right to terminate under this Section 7.1(b);
(c) Company’s Breach. At the election of Parent, by giving written notice to Company,
if Company has (i) breached any representation or warranty herein qualified as to materiality, (ii)
breached any representation or warranty herein not qualified as to materiality in any material
respect, or (iii) breached any covenant or agreement contained in this Agreement in any material
respect; provided, however, Parent shall have no termination right hereunder unless the breach of
such representation, warranty, covenant or agreement shall not have been cured by Company (unless
such breach is incapable of cure) within fifteen (15) days after Company shall have received notice
from Parent that Parent intends to exercise its right to terminate under this Section 7.1(c);
(d) Orders. At the election of Company or Parent, upon written notice to the other
party, if any court of competent jurisdiction or other Governmental Authority shall have issued an
Order enjoining or otherwise prohibiting the transactions contemplated under this Agreement and
such Order shall have become final and nonappealable;
(e) Deadline. At the election of either Company or Parent, upon written notice to the
other party, if the Closing has not occurred on or before August 8, 2006, provided that the party
seeking to terminate pursuant to this section has performed all of its obligations hereunder in all
material respects and diligently cooperated as required to fulfill all applicable conditions to
Closing;
(f) Breaching Party. The right to terminate this Agreement under this Section 7.1
shall not be available to any party whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the transactions contemplated herein to occur
or of the transactions being delayed; and
(g) Required Company Vote. By Parent, if the Required Company Vote or the Required
Redemption Vote shall not have been obtained by reason of the failure to obtain the required
consents or votes upon a vote taken by written consent or at a meeting of stockholders, duly
convened therefor or at any adjournment thereof.
7.2 Effect of Termination. In the event of termination of this Agreement in accordance
with Section 7.1 hereof, this Agreement shall thereafter become void and have no effect, and except
that nothing herein will relieve any party of Liability for any willful breach of this Agreement or
for any Liability related to fraud or intentional misrepresentation.
ARTICLE 8
INDEMNIFICATION
INDEMNIFICATION
8.1 Survival of Representations, Warranties and Covenants.
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(a) All representations and warranties of Company in this Agreement or any other Transaction
Agreement (i) shall survive the Closing, any investigation at any time made and the consummation of
the Merger and (ii) shall terminate and expire at the end of eighteen (18) months following Closing
(the period between Closing and the end of such eighteen (18) months following the Closing, the
"Survival Period”) provided that the representations and warranties set forth in Section 3.2 and
any claims resulting from fraud or intentional misrepresentation shall survive for the applicable
statute of limitations. Any claims as to which written notice identifying such claim and the basis
thereof with reasonable specificity shall have been delivered pursuant to the applicable provisions
of this Agreement on or prior to such date shall survive until such claims are resolved. All
representations and warranties of Parent and Merger Sub in this Agreement or any other Transaction
Agreement (i) shall survive the Closing, any investigation at any time made and the consummation of
the Merger and (ii) shall terminate and expire at the end of eighteen (18) months following
Closing; provided that any claims resulting from fraud or intentional misrepresentation shall
survive for the applicable statute of limitations.
(b) If and to the extent Parent has, as a result of its own investigation, actual and specific
knowledge as of the Closing of the breach or failure to be true of any representation or warranty
of Company set forth in Article III of this Agreement (a “Known Company Breach”) and as a direct
result of such Known Company Breach Parent could terminate this Agreement pursuant to subclauses
(i) or (ii) of Section 7.1(c), then following the Closing none of Parent, Surviving Corporation or
any of their affiliates shall be entitled to indemnification pursuant to Section 8 in respect of
Losses that were foreseeable by Parent at the time of Closing to the extent such Losses arose
directly out of such Known Company Breach; provided, however, that this sentence
will not apply to the extent the Company also has, as of the Closing, actual and specific knowledge
of such breach or failure to be true of such representation and warranty. The Indemnifying Parties
shall bear the burden of proving such actual and specific knowledge on the part of Parent and
whether Losses were foreseeable by Parent. If and to the extent Company has, as a result of its
own investigation, actual and specific knowledge as of the Closing of the breach or failure to be
true of any representation or warranty of Parent or Merger Sub set forth in Article IV of this
Agreement (a “Known Parent Breach”) and as a direct result of such Known Parent Breach Company
could terminate this Agreement pursuant to subclauses (i) or (ii) of Section 7.1(b), then following
the Closing none of the Company, the Stockholders Agent (whether on behalf of itself or any other
Person) or any of their Affiliates will be entitled to bring a claim, action, suit, proceeding or
investigation in connection with this Agreement in respect of Losses that were foreseeable by
Company at the time of Closing to the extent such Losses arose directly out of such Known Parent
Breach; provided, however, that this sentence will not apply to the extent Parent
also has, as of the Closing, actual and specific knowledge of such breach or failure to be true of
such representation and warranty. Parent shall bear the burden of proving such actual and
specific knowledge on the part of Company and whether Losses were foreseeable by Company. Except
as provided in this Section 8.1(b), the representations and warranties contained in this Agreement
(and any right to indemnification for breach thereof or other right to indemnification hereunder)
shall not be affected by any investigation, verification or examination by any party hereto or by
any representative or employee of any such party or by any such party’s knowledge or the knowledge of any such
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representative or employee of any facts with respect to the accuracy or inaccuracy of any such
representation or warranty.
(c) Covenants. The covenants and agreements of the parties shall survive the Closing
and any investigation at any time made and the consummation of the Merger until fully performed,
unless limited by their terms or purposes.
(d) Effect of Expiration. On expiration or termination of the representations,
warranties and covenants described in subsection (a) and (c) above shall be of no further force or
effect, and no claims for indemnification may be brought, except with respect to any claim for
indemnification hereunder as to which written notice identifying such claim and the basis thereof
with reasonable specificity shall have been delivered pursuant to the applicable provisions of this
Agreement on or prior to such expiration or termination.
(e) Indemnity. The holders of Company Preferred Stock as of immediately prior to the
Merger ( the “Indemnifying Parties”) shall severally (on a pro rata basis) indemnify and hold
harmless Parent, the Surviving Corporation and their Affiliates, shareholders, partners, members,
officers, directors, employees, agents, representatives, successors and permitted assigns
(collectively, the “Indemnified Parties”) against any and all Losses, whether or not arising out of
third party claims, if such aggregate Losses exceed $50,000, that any such Indemnified Party may
suffer, sustain or become subject to, as a result of, in connection with, or by virtue of:
(i) any breach of, or failure to be true of, any representation or warranty of Company under
this Agreement, or in the certificate furnished by Company pursuant to this Agreement;
(ii) any nonfulfillment or breach of any covenant or agreement by Company under this
Agreement, which nonfulfillment or breach occurred at or prior to the Closing (regardless of when
discovered by Parent);
(iii) any Losses in respect of appraisal rights exercised by Company’s stockholders net of any
amounts of the Merger Consideration which would have been paid to such stockholders if they had not
exercised their appraisal rights; and
(iv) any payment or consideration arising under any consents, waivers or approvals of any
party under any agreement as are reasonably required in connection with and to the extent directly
due under this Agreement or for any such agreement to remain in full force and effect following the
Closing (subsections (i) through (iv) shall be collectively referred to herein as the
“Indemnification Obligations”).
(f) The liability of the Indemnifying Parties for the Indemnification Obligations, shall,
except in the case of fraud or willful misrepresentation or willful breach of a covenant, be
limited to the Escrow Fund (as defined in Section 8.1(g) below). The liability of the Indemnifying
Parties for the Indemnification Obligations arising out of a breach or failure to be true of the
representations or warranties set forth in Sections 3.1, 3.3, 3.5, 3.7, 3.9, 3.10, 3.11, 3.12,
3.13, 3.14,
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3.15, 3.16, 3.17, 3.18, 3.19, 3.21, 3.22, 3.23, 3.25, 3.26 and 3.27, shall be limited (except
in the case of fraud or willful misrepresentation or willful breach of a covenant) to the portion
of the Escrow Fund equal to ten percent (10%) of the shares of Parent Preferred Stock that were
otherwise issuable to the Indemnifying Parties under this Agreement but that were placed into the
Escrow Fund. With respect to any claim made against the Escrow Fund, each Indemnifying Parties’
liability shall be joint and several (it being understood that Parent may seek indemnification from
the Escrow Fund for Losses arising out of claims of fraud, willful misrepresentation or willful
breach of a covenant against the Company or its Affiliates). With respect to any claim made for
fraud or willful misrepresentation or willful breach of a covenant that is not made against the
Escrow Fund, the liability of each Indemnifying Party shall be several and not joint. In the case
of Indemnification Obligations attributable to (i) breach of the representations and warranties set
forth in Section 3.2 or (ii) fraud or willful misrepresentation or willful breach of a covenant,
the maximum liability of each Indemnifying Party shall be limited to the shares of Parent
Preferred Stock issued to each such stockholder as consideration under this Agreement.
(g) At the Closing, fifteen percent (15%) of the shares of Parent Preferred Stock otherwise
issuable to the Indemnifying Parties under this Agreement (the “Escrow Fund”) shall be placed in
escrow by Parent during the Survival Period as security for the Indemnification Obligations of the
Indemnifying Parties. On the date that the last remaining shares of Parent Preferred Stock held in
the Escrow Fund are distributed from the Escrow Fund (such date, the “Final Distribution Date”),
Parent shall distribute the Additional Escrow Amount (defined below) to the Indemnifying Parties
based on their pro rata ownership. For purposes of this Agreement, “Additional Escrow Amount”
shall mean the net amount of cash that Parent receives from the cash exercise of the Company Option
Awards assumed by Parent pursuant to Section 2(a) during the period following the Closing until the
Final Distribution Date.
(h) The right to indemnification under this Article 8 or any other remedy based upon the
representations, warranties, covenants and obligations hereunder shall not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable of being acquired)
at any time, whether before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with any such representation,
warranty, covenant or obligation.
8.2 Exclusive Remedy; Limitation on Remedy.
(a) Except for (i) any action based upon allegations of fraud or willful misrepresentation in
connection with this Agreement or any certificate delivered hereunder or willful breach or breach
of the representations and warranties set forth in Section 3.2 and (ii) any equitable relief
expressly provided for in this Agreement, from and after the Closing the sole remedy of any Person
against the Company and its Affiliates with respect to any and all claims arising under this
Agreement or in connection with the transactions contemplated hereby shall be pursuant to this
Article 8. Parent and Merger Sub hereby waive, from and after the Closing, to the fullest extent
permitted by law, any and all other rights, claims and causes of action they may have against
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Company and its Affiliates under this Agreement and in connection with the transactions
contemplated hereby.
(b) Except (i) for any action based upon allegations of fraud or willful misrepresentation in
connection with this Agreement, (ii) for any equitable relief expressly provided for in this
Agreement, or (iii) as may arise out of the breach or failure to be true of any representation or
warranty of Parent or Merger Sub (to the extent resulting in Losses in excess of $50,000) under
this Agreement or any nonfulfillment or breach of any covenant or agreement by Parent or Merger Sub
under this Agreement (to the extent resulting in Losses in excess of $50,000), no Person will be
permitted to seek any remedy against Parent with respect to any claims arising under this Agreement
or in connection with the transactions contemplated hereby and, to the fullest extent permitted by
law, any and all other rights, claims and causes of action that any Person may have against Parent
and Merger Sub and their Affiliates under this Agreement and in connection with the transactions
contemplated hereby are hereby waived. Except in the case of fraud or willful misrepresentation or
willful breach of a covenant, in no event will Parent’s or Merger Sub’s liability under this
Agreement to any Person arising out of the breach or failure to be true of any representation or
warranty of Parent or Merger Sub under this Agreement or any nonfulfillment or breach of any
covenant or agreement by Parent or Merger Sub under this Agreement exceed (individually or in the
aggregate) the value, determined on the date of the Closing, of ten percent (10%) of the shares of
Parent Preferred Stock issuable under this Agreement. No Person will be permitted (or have the
right) to raise or bring any claim, action, suit, proceeding or investigation under the Transaction
Agreements against Parent or Merger Sub other than the Stockholders’ Agent. In the case of
liabilities attributable to fraud or willful misrepresentation or willful breach of a covenant, the
maximum liability of Parent shall be limited to the value, determined on the date of the Closing,
of the shares of Parent Preferred Stock issuable by Parent at Closing pursuant to this Agreement.
8.3 Distributions from Escrow Fund.
(a) The Escrow Fund shall be held until the date that is eighteen (18) months following the
Closing Date (the “Escrow Period”), other than any amounts with respect to which Parent or the
Surviving Corporation has delivered to the Stockholders’ Agent a notice of Losses under this
Article 8 (a “Claim Notice”) and for amounts returned to Parent for the Adjustment Amount pursuant
to Article 2, in either case, prior to the expiration of the applicable Survival Period.
(b) If the Stockholders’ Agent consents to or does not object to a Claim Notice within 30 days
of delivery thereof, Parent may withdraw from the Escrow Fund and cancel shares of Parent Preferred
Stock having a value (based on a value of the Parent Preferred Stock of $5.00 per share) equal to
the aggregate amount of Losses set forth in the Claim Notice. If the Stockholders’ Agent objects
to the Claim Notice, the parties shall resolve the dispute as set forth in Section 8.5.
(c) Promptly following the expiration of the Escrow Period, all shares remaining in the Escrow
Fund shall be distributed to the Indemnifying Parties based on their pro rata ownership;
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provided,
that if prior to the expiration of the Escrow Period, the Stockholders’ Agent has received one or
more Claim Notices not yet resolved, then an amount up to the aggregate amount of the
aggregate Losses claimed in all such outstanding Claim Notices shall continue to be held in
the Escrow Fund to cover Indemnification Obligations until final resolution of all claims set forth
in any such Claim Notices.
8.4 Stockholders’ Agent.
(a) By voting to approve the Merger or accepting any Merger Consideration, the holders of
Company Stock appoint the Stockholders’ Agent who shall initially be Arch Venture Corporation as an
agent for and on behalf of such Stockholder to give and receive notices and communications, to
agree to, negotiate, enter into settlements and compromises of, and demand arbitration and comply
with orders of courts and awards of arbitrators with respect to, such claims, and to take all
actions necessary or appropriate in the judgment of the Stockholders’ Agent for the accomplishment
of the foregoing or otherwise in connection with this Agreement. The identity of the agent may be
changed by the holders of a majority in interest of the Company Stock as of the Closing Date upon
not less than ten (10) days’ prior written notice to Parent and the Stockholders’ Agent. No bond
shall be required of the Stockholders’ Agent, and the Stockholders’ Agent shall receive no
compensation for his services. Notices or communications to or from the Stockholders’ Agent shall
constitute notice to or from each of the holders of Company Stock.
(b) The Stockholders’ Agent shall not be liable for any act done or omitted hereunder as
Stockholders’ Agent while acting in good faith, and any act done or omitted pursuant to the advice
of counsel shall be conclusive evidence of such good faith. The stockholders of Company entitled
to receive Merger Consideration pursuant to Section 2.1 shall jointly and severally indemnify the
Stockholders’ Agent and hold the Stockholders’ Agent harmless from any loss, Liability or expense
incurred without gross negligence or bad faith on the part of the Stockholders’ Agent and arising
out of or in connection with the acceptance or administration of his duties hereunder.
(c) The Stockholders’ Agent shall have reasonable access to information about Company, and the
Surviving Corporation and Parent and the reasonable assistance of Company’s, the Surviving
Corporation’s and Parent’s respective officers for purposes of performing his duties and exercising
his rights hereunder. The Stockholders’ Agent shall treat confidentially and not disclose any
nonpublic information from or about Company, the Surviving Corporation or Parent.
(d) A decision, act, consent, waiver or instruction of the Stockholders’ Agent shall
constitute a decision of Company stockholders, including the Indemnifying Parties shall be final,
binding and conclusive upon each Company stockholder, including the Indemnifying Party and Parent
may rely upon any decision, act, consent or instruction of the Stockholders’ Agent as being the
decision, act, consent or instruction of each and every such Company Indemnifying Party. Parent,
Company and the Surviving Corporation are hereby relieved of any Liability to any person for any
acts done by them in accordance with such decision, act, consent, waiver or instruction of the
Stockholders’ Agent.
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(e) Arch Venture Corporation hereby agrees to act as Stockholders’ Agent pursuant to the terms
hereof.
8.5 Resolution of Conflicts.
(a) The Stockholders’ Agent may object to any claims made in any Claim Notice by delivering to
Parent a written notice of such objection setting forth in reasonable detail the basis for such
objection (an “Objection Notice”), within 30 days of delivery to the Stockholders’ Agent of the
Claim Notice containing the claim(s) to which the objection relates. The parties shall attempt in
good faith to agree upon the rights of the respective parties with respect to any claims that are
the subject of an Objection Notice. If the parties should so agree, a memorandum setting forth
such agreement shall be prepared and signed by the Stockholders’ Agent and Parent (a “Settlement
Memorandum”). A Settlement Memorandum shall conclusively resolve any dispute regarding a claim to
which it relates. Parent shall be entitled to rely on any such memorandum and deduct shares of
Parent Preferred Stock from the Escrow Fund in accordance with the terms thereof. If an Objection
Notice relating to a Claim Notice is not timely delivered to Parent, then the contents of such
Claim Notice shall be conclusively established.
(b) If no such agreement can be reached after good faith negotiation and prior to thirty days
after delivery of an Objection Notice, either party may demand arbitration of the matter unless the
amount of the Loss that is at issue is the subject of a pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is ascertained or both parties
agree to arbitration, and in either such event the matter shall be settled by arbitration conducted
by one arbitrator mutually agreeable to the parties. If, within thirty days after submission of
any dispute to arbitration, the parties cannot mutually agree on one arbitrator, then, within
fifteen days after the end of such thirty day period, the parties shall each select one arbitrator.
The two arbitrators so selected shall select a third arbitrator. If either party fails to select
an arbitrator during this fifteen day period, then the parties agree that the arbitration will be
conducted by one arbitrator selected by the party which has selected an arbitrator.
(c) Any such arbitration shall be held in King County, Washington under the rules then in
effect of the American Arbitration Association. The arbitrator(s) shall determine how all expenses
relating to the arbitration shall be paid, including the respective expenses of each party, the
fees of each arbitrator and the administrative fee of the American Arbitration Association. The
arbitrator or arbitrators, as the case may be, shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator or majority of the three arbitrators,
as the case may be, to discover relevant information from the opposing parties about the subject
matter of the dispute. The arbitrator, or a majority of the three arbitrators, as the case may be,
shall rule upon motions to compel or limit discovery and shall have the authority to impose
sanctions, including attorneys’ fees and costs, to the same extent as a competent court of law or
equity, should the arbitrators or a majority of the three arbitrators, as the case may be,
determine that discovery was sought without substantial justification or that discovery was refused
or objected to without substantial justification. The decision of the arbitrator or a majority of
the three arbitrators, as the
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case may be, as to the validity and amount of any claim in such Claim Notice shall be final,
binding, and conclusive upon the parties to this Agreement and the holders of Company’s capital
stock and any Indemnifying Party. Such decision shall be written and shall be supported by written
findings of fact and conclusions which shall set forth the award, judgment, decree or order awarded
by the arbitrator(s), and Parent shall be entitled to rely on, and make deductions from the Escrow
Fund in accordance with, the terms of such award, judgment, decree or order, as applicable. Within
thirty days of a decision of the arbitrator(s) requiring payment by one party to another, such
party shall make the payment to such other party, including any distributions out of the Escrow
Fund, as applicable.
(d) Judgment upon any award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. The foregoing arbitration provision shall apply to any dispute among the parties
under this Article 8, whether relating to claims on the Escrow Fund or to the other indemnification
obligations set forth in this Agreement.
8.6 Third Party Claims. Any Indemnified Party making a claim for indemnification under
this Article 8 shall notify the Stockholders’ Agent of the claim in writing promptly after
receiving written notice of any Proceeding against it by a third party, describing the claim, the
amount thereof (if known and quantifiable) and the basis thereof; provided, that the
failure to notify the Stockholders’ Agent shall not relieve the Indemnifying Parties of their
obligations hereunder unless and to the extent the Indemnifying Parties shall be actually and
materially prejudiced by such failure to so notify. The Stockholders’ Agent shall be entitled to
assume the defense of such Proceeding giving rise to an Indemnified Party’s claim by appointing a
counsel of its own choosing reasonably acceptable to the Indemnified Party to be the lead counsel
in connection with such defense; provided, that the Indemnified Party shall be entitled to
participate, at its own expense, in the defense of such claim and to employ counsel of its choice
for such purpose;
(a) the Indemnified Party shall cooperate in good faith with the Stockholder Agent and its
counsel in the defense or compromise of any claims;
(b) the Indemnified Party (and not the Stockholder Agent) shall be entitled to assume control
of such defense and the Indemnified Party shall be able to deduct its fees and expenses of counsel
retained by it from the Escrow Fund if (i) the claim for indemnification relates to or arises in
connection with any criminal proceeding, action, indictment, allegation or investigation; (ii) the
claim seeks an injunction or equitable relief against the Indemnified Party; (iii) a conflict of
interest exists between the positions of Stockholders’ Agent and/or the Indemnifying Parties on the
one hand and the Indemnified Party on the other hand in conducting the defense of such claim; (iv)
an adverse outcome of the claim could reasonably be expected to have a material adverse affect on
the Indemnified Party or its business; or (v) the Stockholder Agent failed or is failing to
vigorously prosecute or defend such claim; and
(c) if the Stockholder Agent shall control the defense of any such claim, the Stockholder
Agent shall obtain the prior written consent of the Indemnified Party before entering into any
settlement of a Proceeding if, (i) pursuant to or as a result of such settlement, injunctive or
other equitable relief will be imposed against the Indemnified Party or its Affiliates, (ii)
such
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settlement provides any relief other than monetary damages that are paid in full by the
Indemnifying Parties or (iii) the settlement does not involve full and unconditional release of
Indemnified Parties from liability for such claim.
8.7 Adjustments to Purchase Price. All indemnification payments under this Article 8 and
shall be deemed adjustments to the Merger Consideration.
ARTICLE 9
GENERAL PROVISIONS
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in writing and shall
be deemed given if delivered personally or by commercial delivery service, or mailed by registered
or certified mail (return receipt requested; provided that in the case of delivery by registered or
certified mail, such notices shall be deemed given three (3) days after they are so mailed) or sent
via facsimile (with confirmation of receipt) to the parties at the following address (or at such
other address for a party as shall be specified by like notice) (notice to the Stockholders’ Agent
shall be deemed to be notice to all Company stockholders, including the Indemnifying Parties for
all purposes):
(a) if to Parent, Merger Sub or, following Closing, the Surviving Corporation, to:
Omeros Corporation
1420 Fifth Avenue
Suite 2600
Seattle, WA 98101
Phone: (206) 676-5000
Fax: (206) 264-7856
Attention: Chief Executive Officer, with a copy to General Counsel
1420 Fifth Avenue
Suite 2600
Seattle, WA 98101
Phone: (206) 676-5000
Fax: (206) 264-7856
Attention: Chief Executive Officer, with a copy to General Counsel
with an additional copy to:
Wilson Sonsini Goodrich & Rosati P.C.
701 Fifth Avenue, Suite 5100
Seattle, WA 98104
Attention: Craig Sherman
Facsimile No.: (206) 883-2699
Telephone No.: (206) 883-2500
701 Fifth Avenue, Suite 5100
Seattle, WA 98104
Attention: Craig Sherman
Facsimile No.: (206) 883-2699
Telephone No.: (206) 883-2500
(b) if, prior to the Closing, to Company, to:
nura, Inc.
1124 Columbia Street
Seattle, WA 98104
Attn: Chief Executive Officer
Facsimile No.: (206) 344-2101
Telephone No.: (206) 344-2100
1124 Columbia Street
Seattle, WA 98104
Attn: Chief Executive Officer
Facsimile No.: (206) 344-2101
Telephone No.: (206) 344-2100
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with a copy to:
Summit Law Group, PLLC
315 Fifth Avenue S., Suite 1000
Seattle, WA 98104
Attention: Mark F. Worthington
Facsimile No.: (206) 676-7001
Telephone No.: (206) 676-7000
315 Fifth Avenue S., Suite 1000
Seattle, WA 98104
Attention: Mark F. Worthington
Facsimile No.: (206) 676-7001
Telephone No.: (206) 676-7000
(c) if to Stockholders’ Agent, to:
Arch Venture Corporation
8725 West Higgins Road
Suite 290
Chicago IL, 60631
Attention: Mark McDonnell
8725 West Higgins Road
Suite 290
Chicago IL, 60631
Attention: Mark McDonnell
9.2 Interpretation and Construction of Transaction Agreements.
(a) Unless the context shall otherwise require, any pronoun herein or in another Transaction
Agreement shall include the corresponding masculine, feminine, and neuter forms, and words using
the singular or plural number also shall include the plural or singular number, respectively. The
words “include,” “includes” and “including” herein or in another Transaction Agreement shall be
deemed to be followed by the phrase “without limitation” and the word “or” shall include the
meaning “either or both.” All references herein or in another Transaction Agreement to sections,
exhibits, and schedules shall be deemed to be references to sections of, and exhibits and schedules
to, the agreement in which such references are made unless the context shall otherwise require.
The table of contents and the headings of the sections herein and in the other Transaction
Agreements are inserted for convenience of reference only and are not intended to be a part of or
to affect the meaning or interpretation of this Agreement or such other Transaction Agreement, as
the case may be. Unless the context shall otherwise require, any reference herein or in another
Transaction Agreement to any agreement or other instrument or statute or regulation is to such
agreement, instrument, statute or regulation as amended and supplemented from time to time (and, in
the case of a statute or regulation, to any successor provision). The words “hereof,” “herein,”
“hereto” and “hereunder” and words of similar import, when used in this Agreement, shall refer to
this Agreement as a whole and not to any particular provision of this Agreement.
(b) The parties acknowledge that each party has participated in the drafting of this Agreement
and the other Transaction Agreements, and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied in the
construction or interpretation of this Agreement or any of the other Transaction Agreements.
(c) Any reference in a Transaction Agreement to a “day” or a number of “days” (without the
explicit qualification of “business”) shall be interpreted as a reference to a calendar day or
number of calendar days. If any action or notice is to be taken or given on or by a particular
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calendar day, and such calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
(d) The phrases “the date of this Agreement”, “the date hereof”, and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to the Execution Date.
9.3 Specific Performance. Each party agrees that irreparable harm, for which there may be
no adequate remedy at law and for which the ascertainment of Damages would be difficult, would
occur in the event any of the provisions of this Agreement were not performed in accordance with
its specific terms or were otherwise breached. Each party accordingly agrees that the other
parties shall be entitled to specifically enforce this Agreement and to obtain an injunction or
injunctions to prevent breaches of the provisions of this Agreement or any other Transaction
Agreement and to enforce specifically the terms and provisions hereof or thereof, in each instance
without being required to post bond or other security and in addition to, and without having to
prove the adequacy of, other remedies at law.
9.4 Counterparts; Facsimile Delivery. This Agreement may be executed in one or more
counterparts and delivered by facsimile, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all parties need not sign the
same counterpart.
9.5 Entire Agreement. This Agreement, the other Transaction Agreements, and the documents
and instruments and other agreements specifically referred to herein or delivered pursuant hereto,
including the exhibits and the schedules hereto and thereto, (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and (b) supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the subject matter
hereof, including the Term Sheet, dated July 3, 2006 between Parent and Company.
9.6 Amendment; Waiver; Requirement of Writing. This Agreement and each of the other
Transaction Agreements cannot be amended or changed nor any performance, term, or condition waived
in whole or in part except by a writing signed by the party against whom enforcement of the
amendment, change or waiver is sought. Any term or condition of this Agreement and each of the
other Transaction Agreements may be waived at any time by the party hereto entitled to the benefit
thereof, and any such term or condition may be modified at any time by an agreement in writing
executed by each of the parties hereto entitled to the
benefit thereof. No delay or failure on the part of any party in exercising any rights
hereunder, and no partial or single exercise thereof, will constitute a waiver of such rights or of
any other rights hereunder.
9.7 Expenses. Each of the parties hereto shall pay, without right of reimbursement from
the other party, all the costs incurred by it incident to the preparation, execution, and delivery
of this Agreement or the performance of its obligations hereunder, whether or not the transactions
contemplated by this Agreement shall be consummated.
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9.8 No Third-Party Beneficiaries. Except with respect to the right to receive the
consideration to be provided at the time of Closing pursuant to Section 2.1(b), and with respect to
director and officer indemnification pursuant to Section 5.13 nothing in this Agreement or the
other Transaction Agreements will be construed as giving any person, other than the parties and
their successors and permitted assigns, any right, remedy, or claim under or in respect of this
Agreement or the other Transaction Agreements or any provision hereof or thereof. Each of the
Existing Investors that participate in the Investment will have the right to rely upon the
representations and warranties made by Parent and Merger Sub in Article IV of this Agreement in
connection with their purchase of Series E Preferred Stock of Omeros pursuant to the Investment.
9.9 Disclaimer of Agency. Except for any provisions herein or in the Transaction
Agreements expressly authorizing one party to act for another, neither this Agreement nor any
Transaction Agreement shall constitute any party as a legal representative or agent of the other
party, nor shall a party have the right or authority to assume, create, or incur any Liability of
any kind, expressed or implied, against or in the name or on behalf of the other party or any of
its Affiliates.
9.10 Relationship of the Parties. Nothing contained in this Agreement or the Transaction
Agreements is intended to, or shall be deemed to, create a partnership or joint venture
relationship among the parties hereto or thereto or any of their Affiliates for any purpose,
including tax purposes.
9.11 Assignment. This Agreement and the other Transaction Agreements and the rights and
obligations of each party hereunder or thereunder shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and permitted assigns; provided that no
party hereto shall assign this Agreement or another Transaction Agreement (except that Parent and
Merger Sub may assign this Agreement and the other Transaction Agreements without the consent of
Company to Affiliates of Parent; provided that Parent and Merger Sub shall not be so released from
their obligations hereunder without the consent of Company).
9.12 Severability. In the event that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force and effect, and the
application of such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of such void or
unenforceable provision.
9.13 Remedies Cumulative. Except as otherwise provided herein (including pursuant to
Section 8.2), any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity, upon
such party, and the exercise by a party of any one remedy will not preclude the exercise of any
other remedy.
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9.14 Governing Law. This Agreement and the other Transaction Agreements (other than the
Voting Agreement) will be construed and interpreted in accordance with and governed by the law of
the State of Washington without regard to the choice- of-law provisions thereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf
by it or by an officer or representative thereunto duly authorized, all as of the date first
written above.
| PARENT OMEROS CORPORATION |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| EPSILON ACQUISITION CORPORATION |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| COMPANY NURA, INC. |
||||
| By: | ||||
| Name: | Patrick Gray | |||
| Title: | Chief Executive Officer | |||
| STOCKHOLDERS’ AGENT |
||||
| Arch Venture Corporation | ||||
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EXHIBIT A
DEFINED TERMS
DEFINED TERMS
“280G Stockholder Approval” shall have the meaning set forth in Section 5.15.
“Accounts Receivable” shall mean all accounts receivable, notes receivable and other
receivables of Company.
“Acquisition Proposal” shall have the meaning set forth in Section 5.3(c).
“Adjustment Amount” shall have the meaning set forth in Section 2.9(c).
“Adjustment Statement” shall have the meaning set forth in Section 2.9(b).
“Auditor” shall have the meaning set forth in Section 2.9(e).
“Affiliate” shall mean, with respect to a Person, (i) any member of the immediate family
(including spouse, brother, sister, descendant, ancestor or in-law) of such Person, (ii) any
officer, director or stockholder of such Person, (iii) any corporation, partnership, trust or other
Entity in which any such Person or any such family member of such Person has a five percent (5%) or
greater interest or is a director, officer, partner or trustee or (iv) any Person that controls, or
is controlled by, or is under common control with, such Person.
“Agreement” shall have the meaning set forth in the preamble hereto.
“Applicable Law” means, with respect to any Person, any federal, state, local or foreign law
(statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule,
regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted,
adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to
such Person, as amended unless expressly specified otherwise.
“Business Day” shall mean any day other than (i) a Saturday or a Sunday or (ii) a day on which
banking and savings and loan institutions are authorized or required by law to be closed in the
United States.
“Certificate of Merger” shall have the meaning set forth in Section 1.2.
“Certified Stockholder List” shall have the meaning set forth in Section 2.5(b).
“Claim Notice” shall have the meaning set forth in Section 8.3(a).
“Closing” shall have the meaning set forth in Section 1.2.
“Closing Date” shall have the meaning set forth in Section 1.2.
A-1
“Charter Amendment” shall have the meaning set forth in Section 6.1(t).
“Code” shall have the meaning set forth in Section 3.15(a)(ii).
“Company” shall have the meaning set forth in the preamble hereto.
“Company Business Intellectual Property” means any and all Intellectual Property used in or
necessary to conduct the business of Company, in the manner currently conducted and as it is
currently contemplated to be conducted, including, without limitation, the design, development,
manufacture, use, import, sale licensing or other exploitation of Company Products.
“Company Disclosure Schedule” shall have the meaning set forth in the introductory paragraph
to Article 3.
“Company Expenses” means the amount of fees and expenses which are payable, directly or
indirectly, by the Company as of the date of Closing that have been or are expected to be incurred
on or prior to the date of Closing (a) on behalf of Company or (b) by Company on behalf of the
holders of Equity Interests in Company, in each case, in connection with the preparation,
negotiation and execution of this Agreement and the consummation of the transactions contemplated
hereby, including the Merger including (i) the fees and disbursements of special outside counsel to
Company, any Company stockholders and/or Stockholders’ Agent (in any such case, to the extent
incurred by Company on their behalf), (ii) the fees and expenses of any accountants or other
agents, advisors, consultants and experts employed by Company, any Company stockholders and/or
Stockholders’ Agent (in any such case, to the extent incurred by Company on their behalf),
including all legal, financial advisory, consulting or other similar fees and expenses, and (iii)
all other out-of-pocket expenses of Company, any Company stockholder and/or Stockholders’ Agent (in
any such case, to the extent incurred by Company on their behalf).
“Company Financial Statements” shall have the meaning set forth in Section 3.13.
“Company Material Adverse Effect” shall mean an event, circumstance, fact or condition which
has had or which could reasonably be expected to have a material adverse effect on (i) Company’s
business, condition, assets, Liabilities, operations, financial performance, or prospects for
continuing the operation of its business as historically conducted, as conducted at Closing and as
proposed to be conducted, (ii) the ability of Company to enter into this Agreement or the other
Transaction Agreements to which it is a party, to consummate the Merger, or to perform its
obligations hereunder or under such other Transaction Agreements or (iii) the ability of the
Surviving Corporation to conduct business following the Merger in substantially the same manner as
conducted by Company prior to the Merger.
“Company Non-Voting Common Stock” shall have the meaning set forth in Section 3.2(c).
“Company-Owned Intellectual Property” means any Intellectual Property that is owned by, or
exclusively licensed to, Company.
A-2
“Company Preferred Stock” shall have the meaning set forth in Section 2.1(b).
“Company Products” means all products or service offerings of Company that have been marketed,
sold, or distributed, or that Company intends to market, sell, or distribute after further research
and/or development of such products and receipt of any necessary regulatory approvals, including
any products or service offerings under development, and including any such products or services
that form the basis, in whole or in part, of any revenue or business projection publicly disclosed
by Company, or provided by Company in connection with the negotiation of this Agreement.
“Company Registered Intellectual Property” means all of the Registered Intellectual Property
owned by, or filed in the name of, Company.
“Company Stock” shall have the meaning set forth in Section 2.1(a).
“Company Stock Awards” shall have the meaning set forth in Section 2.2(a).
“Company Stock Certificates” shall have the meaning set forth in Section 2.5(a).
“Company Stock Plan” shall mean the Nura, Inc. 2003 Stock Option Plan.
“Company Voting Common Stock” shall have the meaning set forth in Section 2.1(b).
“Confidential Information” shall mean all trade secrets and other confidential or proprietary
information of a Person that such Person desires remain secret or confidential, including
information derived from reports, investigations, research, work in progress, codes, marketing and
sales programs, financial projections, cost summaries, pricing formulas, contract analyses,
financial information, projections, confidential filings with any state or federal agency, and all
other confidential concepts, methods of doing business, ideas, materials or information prepared or
performed for, by or on behalf of such Person by its employees, officers, directors, agents,
representatives, or consultants.
“Conflict” shall have the meaning set forth in Section 3.8.
“Consent” shall mean any (i) approval, authorization, certificate, concession, consent,
declaration, grant, exemption, license, permit, variance, vote or waiver, (ii) registration or
filing or (iii) report or notice, including all renewals, amendments and extensions of any of the
foregoing and any similar matters.
“Contract” shall mean any binding mortgage, indenture, lease, contract, covenant, promise,
understanding, arrangement, instrument, commitment, permit, concession, franchise or license to or
undertaking of any nature or other agreement (whether written or oral and whether express or
implied), that is currently in effect, and including any binding amendment, modification, side
letter, supplement or other agreement or change with respect to the foregoing that is currently in
effect, whether written or oral.
A-3
“Convertible Promissory Notes” shall have the meaning set forth in Section 3.2(e).
“Current Liabilities” shall have the meaning set forth in Section 2.9(a).
“day” shall have the meaning set forth in Section 9.2(c).
“Delaware Corporate Law” shall have the meaning set forth in Section 1.1.
“Determination Date” shall have the meaning set forth in Section 2.9(e).
“Disclosing Party” shall have the meaning set forth in Section 5.9(b).
“Disputed Line Items” shall have the meaning set forth in Section 2.9(e).
“Dissenting Shares” shall have the meaning set forth in Section 2.4.
“Dissenting Stockholder” shall have the meaning set forth in Section 2.4.
“Domain Names” shall have the meaning set forth in the “Intellectual Property” definition in
this Exhibit A.
“Effective Time” shall have the meaning set forth in Section 1.2.
“Employee Payments” shall have the meaning set forth in Section 2.9(a).
“Entity” shall mean any corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture, estate, trust
company (including any limited liability company or joint stock company) or other legal entity.
“Environmental Laws” means any Applicable Laws or any agreement with any Governmental
Authority or other third party, relating to (i) pollution, contamination, noise, odor, wetlands,
waste or restoration or protection of the environment or natural resources or the effect of the
environment on employee health and safety or (ii) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance.
“Environmental Permits” means all permits, licenses, franchises, certificates, approvals and
other similar authorizations of Governmental Authority relating to or required by Environmental
Laws and affecting, or relating to, the business of Company as currently conducted.
“Equity Interest” means (i) the capital stock of or other equity or ownership interest in an
Entity (including partnership interests and limited liability company membership interests and
similar interests and any similar or equivalent rights) and any document evidencing any of the
foregoing, (ii) any securities, shares or rights convertible into or exercisable for, and any
preemptive, subscription, acquisition or other outstanding right, option, warrant, conversion
right, exercise right, stock appreciation right, redemption right, repurchase right, phantom
security, or
A-4
Contract of any nature related to the capital stock or other interest described in clause (i)
above and (iii) any beneficial interest related to the capital stock or other interest described in
clause (i) above.
“Escrow Fund” shall have the meaning set forth in Section 8.1(g).
“Escrow Period” shall have the meaning set forth in Section 8.3(a).
“Execution Date” shall have the meaning set forth in the preamble hereto.
“Existing Investors” shall mean Aravis Venture I L.P., ARCH Venture Fund V, L.P. and Novartis
Forschungsstiftung, and their respective affiliates.
“FDA” shall have the meaning set forth in Section 3.7(g).
“Final Certified Stockholder List” shall have the meaning set forth in Section 2.5(b).
“GAAP” shall mean U.S. generally accepted accounting principles in effect on the date on which
they are to be applied pursuant to this Agreement, applied consistently throughout the relevant
periods.
“Governmental Approval” shall mean any: (i) permit, license, certificate, concession,
approval, consent, ratification, permission, clearance, confirmation, exemption, waiver, franchise,
certification, designation, rating, registration, variance, qualification, accreditation or
authorization issued, granted, give, required by or otherwise made available by or under the
authority of any Governmental Authority pursuant to any Legal Requirement; or (ii) pending
application or request for any of the foregoing in (i) above.
“Governmental Authority” shall have the meaning set forth in Section 3.5.
“Hazardous Substance” means any substance listed, defined, designated or classified as
hazardous, toxic or radioactive under any applicable Environmental Law, including petroleum and any
derivative or by-products thereof.
“Indebtedness” means, with respect to any Person, at a particular time, without duplication,
(i) any obligations of such Person under any indebtedness for borrowed money, (ii) any indebtedness
of such Person evidenced by any note, bond, debenture or other debt security, (iii) any written
commitment by which such Person assures a creditor against loss (including contingent reimbursement
obligations with respect to letters of credit), (iv) any indebtedness of such Person pursuant to a
guarantee to a creditor of another Person, (v) any borrowing of money secured by a Lien on such
Person’s assets, (vi) any current obligation for interest, premiums, penalties, fees, make-whole
payments, expenses, indemnities, breakage costs and bank overdrafts with respect to items described
in clauses (i) through (v) above, including any prepayment penalties or fees payable in connection
with the repayment of the outstanding indebtedness Oxford Finance Corporation and (viii) all
obligations of such Person for the deferred and unpaid purchase price of property or
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services (other than trade payables and accrued expenses incurred in the Ordinary Course of
Business).
“Indemnification Obligations” shall have the meaning set forth in Section 8.1(e)(iv).
“Indemnified Parties” shall have the meaning set forth in Section 8.1(e).
“Indemnifying Parties” shall have the meaning set forth in Section 8.1(e).
“Intellectual Property” means any or all of the following and all worldwide common law and
statutory rights in, arising out of, or associated therewith: (i) United States and foreign patents
and utility models and applications therefor and all reissues, divisions, re-examinations,
renewals, extensions, provisionals, continuations and continuations-in-part thereof (“Patents”);
(ii) inventions (whether patentable or not), improvements, trade secrets, proprietary information,
know how, and any rights in technology, invention disclosures, technical data and customer lists,
and all documentation relating to any of the foregoing; (iii) copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout the world; (iv)
domain names, uniform resource locators (“URLs”), other names and locators associated with the
Internet, and applications or registrations therefor (“Domain Names”); (v) industrial designs and
any registrations and applications therefor; (vi) trade names, logos, common law trademarks and
service marks, trademark and service mark registrations, related goodwill and applications therefor
throughout the world (“Trademarks”); (vii) all rights in databases and data collections; (viii) all
moral and economic rights of authors and inventors, however denominated; and (ix) any similar or
equivalent rights to any of the foregoing (as applicable).
“Intellectual Property Contracts” shall have the meaning set forth in Section 3.7(a)(iii).
“Investment” shall have the meaning set forth in Section 6.1(e).
“Investors’ Rights Agreement” shall have the meaning set forth in Section 6.1(e).
“Legal Requirement” shall mean any federal, state, local, municipal, foreign or other law,
statute, legislation, constitution, ordinance, code, Order, edict, decree, proclamation, treaty,
convention, rule, regulation, permit, ruling, directive, requirement (licensing or otherwise),
specification, determination, decision, opinion or interpretation that is or has been issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by
or under the authority of any governmental authority.
“Liability” shall mean any debt, obligation, duty or liability of any nature (including any
unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied,
vicarious, derivative, joint, several or secondary liability, debt, obligation, or duty),
regardless of whether such debt, obligation, duty, or liability would be required to be disclosed
on a balance sheet prepared in accordance with GAAP and regardless of whether such debt,
obligation, duty or liability is immediately due and payable.
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“Lien” shall have the meaning set forth in Section 3.8.
“Loss” or “Losses” shall mean and include any loss, Liability, damage, injury, decline in
value, claim, action, causes of action, demand, settlement, judgment, award, fine, penalty, Tax,
fee (including any legal fee, accounting fee, expert fee or advisory fee), charge, cost (including
any cost of investigation, interest, penalties, reasonable attorney’s fees, consultant and experts
fees) or expense of any nature and any amounts paid in settlement or deferral of any of the
foregoing.
“Merger” shall have the meaning set forth in the recitals hereto.
“Merger Consideration” shall have the meaning set forth in Section 2.1(b).
“Merger Sub” shall have the meaning set forth in the preamble hereto.
“Nondisclosing Party” shall have the meaning set forth in Section 5.9(b).
“Non-Voting Common Stock Redemption” shall have the meaning set forth in the Charter
Amendment.
“Notice of Disagreement” shall have the meaning set forth in Section 2.9(e).
“Objection Notice” shall have the meaning set forth in Section 8.5(a).
“Order” shall mean any temporary, preliminary or permanent order, judgment, injunction, edict,
decree, ruling, pronouncement, determination, decision, opinion, verdict, sentence, stipulation,
subpoena, writ, award or similar action that is or has been issued, made, entered, rendered or
otherwise put into effect by or under the authority of any court, administrative agency or other
Governmental Authority or any arbitrator or arbitration panel.
“Ordinary Course of Business” shall describe any action taken by a party if (i) such action is
consistent with such party’s past practices and is taken in the ordinary course of such party’s
normal day-to-day operations and (ii) such action is not required to be authorized by such party’s
stockholders, board of directors or any committee thereof and does not require any other separate
or special authorization of any nature.
“Other Equity Interests” shall have the meaning set forth in Section 2.2(c).
“Oxford Loan” shall have the meaning set forth in Section 2.2(d).
“Parent” shall have the meaning set forth in the preamble hereto.
“Parent Common Stock” shall have the meaning set forth in Section 2.1(b).
“Parent Disclosure Schedule” shall have the meaning set forth in the introductory paragraph to
Article 4.
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“Parent Financial Statements” shall have the meaning set forth in Section 4.15.
“Parent Material Adverse Effect” shall mean an event, circumstance, fact or condition which
has had or which could reasonably be expected to have a material adverse effect on (i) Parent’s
business, condition, assets, Liabilities, operations, financial performance, or prospects for
continuing the operation of its business as historically conducted, as conducted at Closing and as
proposed to be conducted, (ii) the ability of Parent to enter into this Agreement or the other
Transaction Agreements to which it is a party, to consummate the Merger, or to perform its
obligations hereunder or under such other Transaction Agreements.
“Parent Preferred Stock” shall have the meaning set forth in Section 2.1(b).
“Parent Stock” shall have the meaning set forth in Section 2.1(b).
“Parent Stock Option Agreement” shall mean the agreements pursuant to Parent Stock Option
Plan.
“Parent Stock Option Plan” shall mean the Omeros Corporation 1998 Stock Option Plan.
“Patents” shall have the meaning set forth in the “Intellectual Property” definition in this
Exhibit A.
“Permitted Encumbrances” shall mean (a) encumbrances for taxes, assessments and other
governmental charges not yet due and payable, (b) encumbrances for taxes, assessments and other
governmental charges that are being contested in good faith by appropriate Proceedings promptly
instituted and diligently conducted and for which reasonable reserves have been established, (c)
statutory, mechanics’, laborers’ and material men’s liens arising in the Ordinary Course of
Business for sums not yet due.
“Person” shall mean any individual, Entity or Government Authority.
“Proceeding” shall mean any action, suit, litigation, arbitration, proceeding (including any
civil, criminal, administrative, investigative or appellate proceeding), prosecution, contest,
hearing, inquiry, inquest, audit, examination or investigation that is, has been or may in the
future be commenced, brought, conducted or heard at law or in equity or before any Governmental
Authority.
“Registered Intellectual Property” means all United States, international and foreign: (i)
Patents, including applications therefor; (ii) registered Trademarks, applications to register
Trademarks, including intent-to-use applications, or other registrations or applications related to
Trademarks; (iii) copyrights registrations and applications to register copyrights; (iv) domain
name negotiations; and (v) any other Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued by, filed with, or recorded by, any
private, state, government or other public or quasi-public legal authority at any time.
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“Required Company Vote” shall mean the affirmative vote of the holders of (i) not less than a
majority of the outstanding shares of Company Non-Voting Common Stock, (ii) not less than a
majority of the outstanding shares of Company Non-Voting Common Stock held by the disinterested
holders of the Company Non-Voting Common Stock, (iii) not less than ninety-five percent (95%) of
the outstanding shares of Company Voting Common Stock and (iv) not less than ninety-five percent
(95%) of the outstanding shares of Company Preferred Stock.
“Required Redemption Vote” shall mean the affirmative vote of the holders of (i) not less than
a majority of the outstanding shares of Company Non-Voting Common Stock, (ii) not less than a
majority of the outstanding shares of Company Non-Voting Common Stock held by the disinterested
holders of the Company Non-Voting Common Stock, (iii) not less than a majority of the outstanding
shares of Company Voting Common Stock and (iv) not less than a majority of the outstanding shares
of Company Preferred Stock.
“Section 280G Payments” shall have the meaning set forth in Section 5.15.
“Securities Act” shall have the meaning set forth in Section 3.27.
“Series A Warrants” shall have the meaning set forth in Section 3.2(e).
“Settlement Memorandum” shall have the meaning set forth in Section 8.5(a).
“Stockholders’ Agent” shall have the meaning set forth in the preamble hereto.
“Survival Period” shall have the meaning set forth in Section 8.1(a).
“Surviving Corporation” shall have the meaning set forth in Section 1.1.
“Tax” (and, with correlative meaning, “Taxes” and “Taxable”) shall mean (i) any and all U.S.
federal, state, local and non-U.S. taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all interest, penalties
and additions imposed with respect to such amounts, (ii) any liability for the payment of any
amounts of the type described in clause (i) of this definition as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period, and (iii) any liability for the
payment of any amounts of the type described in clauses (i) or (ii) of this definition as a result
of any express or implied obligation to indemnify any other person or as a result of any
obligations under any agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor or transferor entity.
“Tax Return” shall mean any required federal, state, local and foreign return, estimate,
information statement or report relating to any and all Taxes.
“Terminating Company Employee Plans” shall have the meaning set forth in Section 5.16.
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“Trademarks” shall have the meaning set forth in the “Intellectual Property” definition in
this Exhibit A.
“Transaction Agreements” shall mean this Agreement, the Certificate of Merger, Charter
Amendment and the Voting Agreement.
“URLs” shall have the meaning set forth in the “Intellectual Property” definition in this
Exhibit A.
“Voting Agreement” shall have the meaning set forth in the recitals hereto.
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Schedule 2.1
Allocation of Merger Consideration
Schedule 2.5(b)
Certified Stockholder List
Schedule 2.9(a)
Estimated Liability Adjustment
Schedule 3
Company Disclosure Schedule
Schedule 4
Parent Disclosure Schedule
Schedule 5.2
Interim Operations
Schedule 5.11
Retained Company Employees
Schedule 6.1(g)
Consents/Notices and Related Matters
Schedule 6.1(k)
Lien Releases
Exhibit 4.2
PREFERRED STOCK WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION
WARRANT TO PURCHASE 175,000 SHARES OF SERIES A PREFERRED STOCK
Dated: April 26, 2005
THIS CERTIFIES THAT, for value received, Oxford Finance Corporation, (“Holder”) is entitled to
subscribe for and purchase One Hundred Seventy-Five Thousand (175,000) shares of the fully paid and
nonassessable Series A Preferred Stock (the “Shares” or the “Preferred Stock”) of Nura, Inc., a
Delaware corporation (the “Company”), at the Warrant Price (as hereinafter defined), subject to the
provisions and upon the terms and conditions hereinafter set forth. As used herein, the term
“Series A Preferred Stock” shall mean the Company’s presently authorized Series A Preferred Stock,
and any stock into which such Series A Preferred Stock may hereafter be exchanged.
1. Warrant Price. The Warrant Price shall initially be 60/100 dollars ($.60) per
share, subject to adjustment as provided in Section 7 below.
2. Conditions to Exercise. The purchase right represented by this Warrant may be
exercised at any time, or from time to time, in whole or in part during the term commencing on the
date hereof and ending on:
(a) the later of (i) 5.00 P.M. Eastern Standard Time on the tenth annual anniversary of this
Warrant Agreement or (ii) three (3) years after the closing of the Company’s initial public
offering of its Common Stock (“IPO”) effected pursuant to a Registration Statement on Form S-1 (or
its successor) filed under the Securities Act of 1933, as amended (the “Act”); or
(b) the earlier termination of this Warrant pursuant to Section 3(e).
In the event that, although the Company shall have given notice of a transaction pursuant to
subparagraph (b) hereof, the transaction does not close within 60 days of the day specified by the
Company, unless otherwise elected by the Holder any exercise of the Warrant subsequent to the
giving of such notice shall be rescinded and the Warrant shall again be exercisable until
terminated in accordance with this Paragraph 2.
3. Method of Exercise; Payment; Issuance of Shares; Issuance of New Warrant.
(a) Cash Exercise. Subject to Section 2 hereof, the purchase right represented by
this Warrant may be exercised by the Holder hereof, in whole or in part, by the surrender of this
Warrant (with a duly executed Notice of Exercise in the form attached hereto) at the principal
office of the Company (as set forth in Section 18 below) and by payment to the Company, by check,
of an amount equal to the then applicable Warrant Price per share multiplied by the number of
shares then being purchased. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be in the name of, and delivered
to, the Holder hereof, or as such Holder may direct (subject to the terms of transfer contained
herein and upon payment by such Holder hereof of any applicable transfer taxes). Such delivery
shall be made within 10 days after exercise of the Warrant and at the Company’s expense and, unless
this Warrant has been fully exercised or expired, a new Warrant having terms and conditions
substantially identical to this Warrant and representing the portion of the Shares, if any, with
respect to which this Warrant shall not have been exercised, shall also be issued to the Holder
hereof within 10 days after exercise of the Warrant.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant to Section 3(a),
Holder may elect to receive shares equal to the value of this Warrant (or of any portion thereof
remaining unexercised) by surrender of this Warrant at the principal office of the Company together
with notice of such election, in which event the Company shall issue to Holder the number of shares
of the Company’s Series A Preferred Stock computed using the following formula:
X = Y (A-B)
A
Where X = the number of shares of Series A Preferred Stock to be issued to Holder.
Y = the number of shares of Series A Preferred Stock purchasable under this Warrant (at the
date of such calculation).
A = the Fair Market Value of one share of the Company’s Series A Preferred Stock (at the date
of such calculation).
B = Warrant Exercise Price (as adjusted to the date of such calculation).
(c) Fair-Market Value. For purposes of this Section 3, Fair Market Value of one share of the
Company’s Series A Preferred Stock shall mean:
(i) If the Common Stock is traded on Nasdaq or Over-The-Counter or on an exchange, the per
share Fair Market Value for the Series A Preferred Stock will be the average of the closing bid and
asked prices of the Common Stock quoted in the Over-The-Counter Market Summary or the closing price
quoted on any exchange on which the Common Stock is listed, whichever is applicable, as published
in the Western Edition of The Wall Street Journal for the ten (10) trading days prior to the date
of determination of Fair Market Value multiplied by the number of shares of Common Stock into which
each share of Series A Preferred Stock is then convertible; or
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(ii) In the event of an exercise in connection with a merger, acquisition or other
consolidation in which the Company is not the surviving entity, the per share Fair Market Value for
the Series A Preferred Stock shall be the value to be received per share of Series Preferred Stock
by all Holders of the Series A Preferred Stock in such transaction as determined by the Board of
Directors; or
(iii) In any other instance, the per share Fair Market Value for the Series A Preferred Stock
shall be as determined in good faith by the Company’s Board of Directors unless Holder elects to
have such fair market value determined by an independent appraiser experienced in performing
valuations of similar securities for drug discovery companies similarly situated as Company, which
election must be made by Holder within ten (10) business days of the date the Company notifies
Holder of the fair market value as determined by its Board of Directors. In the event of such an
appraisal, the cost thereof shall be borne by the Holder unless such appraisal results in a fair
market value in excess of 115% of that determined by the Company’s Board of Directors, in which
event the Company shall bear the cost of such appraisal.
In the event of 3(c)(ii) or 3(c)(iii), above, the Company’s Board of Directors shall prepare a
certificate, to be signed by an authorized Officer of the Company, setting forth in reasonable
detail the basis for and method of determination of the per share Fair Market Value of the Series
Preferred Stock. The Board will also certify to the Holder that this per share Fair Market Value
will be applicable to all holders of the Company’s Series A Preferred Stock on the Effective Date
(as defined below). Such certification must be made to Holder at least thirty (30) business days
prior to the proposed effective date of the merger, consolidation, sale, or other triggering event
as defined in 3(c)(ii) and 3(c)(iii), the “Effective Date.”
(d) Automatic Exercise. To the extent this Warrant is not previously exercised, it
shall be automatically exercised in accordance with Sections 3(b) and 3(c) hereof (even if not
surrendered) immediately before its expiration.
(e) Treatment of Warrant Upon Acquisition of Company.
(i) Upon the written request of the Company, Holder agrees that, in the event of an
Acquisition (as defined below) in which the sole consideration is cash, either (a) Holder shall
exercise its conversion or purchase right under this Warrant and such exercise will be deemed
effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to
exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition. The
Company shall provide the Holder with written notice of its request relating to the foregoing
(together with such reasonable information as the Holder may request in connection with such
contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less
than ten (10) days prior to the closing of the proposed Acquisition.
(ii) Upon written request of the Company, Holder agrees that, in the event of a stock for
stock Acquisition of the Company by a publicly traded acquirer if, on the record date for the
Acquisition, the fair market value of the Shares (or other securities issuable upon exercise of
this Warrant) is equal to or greater than two (2x) times the Warrant Price, Company may require the
Warrant to be deemed automatically exercised and the Holder shall participate in the Acquisition as
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a holder of the Shares (or other securities issuable upon exercise of the Warrant) on the same
terms as other holders of the same class of securities of the Company.
(iii) Upon the closing of any Acquisition other than those particularly described in
subsections (i) or (ii) above, the successor entity shall assume the obligations of the Warrant,
and the Warrant shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such
Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant
Price and/or number of Shares shall be adjusted accordingly.
(iv) For the purpose of this Warrant, “Acquisition” means any sale, license, or other
disposition of all or substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company’s securities before the
transaction beneficially own less than 50% of the outstanding voting securities of the surviving
entity after the transaction, other than in connection with an initial public offering.
4. Representations and Warranties of Holder and Restrictions on Transfer Imposed by the
Securities Act of 1933.
(a) Representations and Warranties by Holder. The Holder represents and warrants to
the Company with respect to this purchase as follows:
(i) The Holder has substantial experience in evaluating and investing in private placement
transactions of securities of companies similar to the Company so that the Holder is capable of
evaluating the merits and risks of its investment in the Company and has the capacity to protect
its interests.
(ii) The Holder is acquiring the Warrant and the Shares of Series A Preferred Stock issuable
upon exercise of the Warrant (collectively the “Securities”) for investment for its own account and
not with a view to, or for resale in connection with, any distribution thereof. The Holder
understands that the Securities have not been registered under the Securities Act of 1933, as
amended (the “Act”) by reason of a specific exemption from the registration provisions of the Act,
which depends upon, among other things, the bona fide nature of the investment intent as expressed
herein. In this connection, the Holder understands that, in the view of the Securities and
Exchange Commission (the “SEC”), the statutory basis for such exemption may be unavailable if this
representation was predicated solely upon a present intention to hold the Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities or for a period of one year or any other
fixed period in the future.
(iii) The Holder acknowledges that the Securities must be held indefinitely unless
subsequently registered under the Act or an exemption from such registration is available. The
Holder is aware of the provisions of Rule 144 promulgated under the Act (“Rule 144”) which permits
limited resale of securities purchased in a private placement subject to the satisfaction of
certain conditions, including, in case the securities have been held for more than one but less
than two years, the existence of a public market for the shares, the availability of certain public
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information about the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being through a “broker’s transaction” or
in a transaction directly with a “market maker” (as provided by Rule 144(f)) and the number of
shares or other securities being sold during any three-month period not exceeding specified
limitations.
(iv) The Holder further understands that at the time the Holder wishes to sell the Securities
there may be no public market upon which such a sale may be effected, and that even if such a
public market exists, the Company may not be satisfying the current public information requirements
of Rule 144, and that in such event, the Holder may be precluded from selling the Securities under
Rule 144 unless a) a one-year minimum holding period has been satisfied and b) the Holder was not
at the time of the sale nor at any time during the three-month period prior to such sale an
affiliate of the Company.
(v) The Holder has had an opportunity to discuss the Company’s business, management and
financial affairs with its management and an opportunity to review the Company’s facilities. The
Holder understands that such discussions, as well as the written information issued by the Company,
were intended to describe the aspects of the Company’s business and prospects which it believes to
be material but were not necessarily a thorough or exhaustive description.
(b) Legends. Each certificate representing the Securities shall be endorsed with the
following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A “NO ACTION”
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER
MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR (IF REASONABLY
REQUIRED BY THE COMPANY) AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
The Company need not enter into its stock register a transfer of Securities unless the
conditions specified in the foregoing legend are satisfied. The Company may also instruct its
transfer agent not to register the transfer of any of the Shares unless the conditions specified in
the foregoing legend are satisfied.
(c) Removal of Legend and Transfer Restrictions. The legend relating to the Act
endorsed on a certificate pursuant to paragraph 4(b) of this Warrant and the stop transfer
instructions with respect to the Securities represented by such certificate shall be removed and
the Company shall issue a certificate without such legend to the Holder of the Securities if (i)
the Securities are registered under the Act and a prospectus meeting the requirements of Section 10
of the Act is available or (ii) the Holder provides to the Company an opinion of counsel for the
Holder reasonably satisfactory to the Company, or a no-action letter or interpretive opinion of the
staff of the SEC reasonably satisfactory to the Company, to the effect that public sale, transfer
or assignment of the Securities may be made without registration and without compliance with any
restriction such as Rule 144.
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5. Condition of Transfer or Exercise of Warrant. It shall be a condition to any
transfer or exercise of this Warrant that at the time of such transfer or exercise, the Holder
shall provide the Company with a representation in writing that the Holder or transferee is
acquiring this Warrant and the shares of Series A Preferred Stock to be issued upon exercise, for
investment purposes only and not with a view to any sale or distribution, or will provide the
Company with a statement of pertinent facts covering any proposed distribution. As a further
condition to any transfer of this Warrant or any or all of the shares of Series A Preferred Stock
issuable upon exercise of this Warrant, other than a transfer registered under the Act, the Company
must have received a legal opinion, in form and substance satisfactory to the Company and its
counsel, reciting the pertinent circumstances surrounding the proposed transfer and stating that
such transfer is exempt from the registration and prospectus delivery requirements of the Act.
Each certificate evidencing the shares issued upon exercise of the Warrant or upon any transfer of
the shares (other than a transfer registered under the Act or any subsequent transfer of shares so
registered) shall, at the Company’s option, contain a legend in form and substance satisfactory to
the Company and its counsel, restricting the transfer of the shares to sales or other dispositions
exempt from the requirements of the Act.
As further condition to each transfer, the Holder shall surrender this Warrant to the Company
and the transferee shall receive and accept a Warrant, of like tenor and date, executed by the
Company.
6. Stock Fully Paid; Reservation of Shares. All Shares which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be fully paid and
nonassessable, and free from all taxes, liens, and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be exercised, the Company
will at all times have authorized, and reserved for issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series A Preferred Stock to provide
for the exercise of the rights represented by this Warrant.
7. (a) Adjustment for Certain Events. In the event of changes in the outstanding
Series A Preferred Stock by reason of stock dividends, split-ups, recapitalizations,
reclassifications, mergers, consolidations, combinations or exchanges of shares, separations,
reorganizations, liquidations, or the like, the number and class of shares available under the
Warrant in the aggregate and the Warrant Price shall be correspondingly adjusted, as appropriate,
by the Board of Directors of the Company. The adjustment shall be such as will give the Holder of
this Warrant upon exercise for the same aggregate Warrant Price the total number, class and kind of
shares as it would have owned had the Warrant been exercised prior to the event and had it
continued to hold such shares until after the event requiring adjustment.
(b) Other Antidilution Protections. Additional antidilution rights applicable to the
Series A Preferred Stock purchasable hereunder are as set forth in the Certificate of
Incorporation. Such antidilution rights shall not be restated, amended, modified or waived in any
manner that is adverse to the Holder hereof and different from other holders of Series A Preferred
Stock without the Holder’s written consent. The Company shall promptly provide the Holder with any
restatement, amendment, modification or waiver of the Certification of Incorporation.
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8. Notice of Adjustments. Whenever any Warrant Price shall be adjusted pursuant to
Section 7 hereof, the Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Warrant Price and number of
shares issuable upon exercise of the Warrant after giving effect to such adjustment, and shall
cause copies of such certificate to be mailed (by certified or registered mail, return receipt
required, postage prepaid) within thirty (30) days of such adjustment to the Holder of this Warrant
as set forth in Section 19 hereof.
9. “Market Stand-Off” Agreement. Holder hereby agrees that for a period of up to 180
days following the effective date of the first registration statement of the Company covering
common stock (or other securities) to be sold on its behalf of the Company in an underwritten
public offering, it will not, to the extent requested by the Company and any underwriter, sell or
otherwise transfer or dispose of (other than to designees or transferees who agree to be similarly
bound) any of the Shares or any other securities of the Company at any time during such period
except common stock included in such registration; provided, however, that all officers and
directors of the Company who hold securities of the Company or options to acquire securities of the
Company and all other persons with registration rights enter into similar agreements.
10. Transferability of Warrant. This Warrant is transferable on the books of the
Company at its principal office by the registered Holder hereof upon surrender of this Warrant
properly endorsed, subject to compliance with Section 5 and applicable federal and state securities
laws. The Company shall issue and deliver to the transferee a new Warrant representing the Warrant
so transferred. Upon any partial transfer, the Company will issue and deliver to Holder a new
Warrant with respect to the Warrant not so transferred. Holder shall not have any right to
transfer any portion of this Warrant to any direct competitor of the Company.
11. Registration Rights. The Company shall use reasonable best efforts to add Holder
as a party to that certain Investors’ Rights Agreement dated as of October 21, 2003.
12. No Fractional Shares. No fractional share of Series A Preferred Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional share the Company
shall make a cash payment therefor upon the basis of the Warrant Price then in effect.
13. Charges, Taxes and Expenses. Issuance of certificates for shares of Series A
Preferred Stock upon the exercise of this Warrant shall be made without charge to the Holder for
any United States or state of the United States documentary stamp tax or other incidental expense
with respect to the issuance of such certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the Holder.
14. No Shareholder Rights Until Exercise. This Warrant does not entitle the Holder
hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise
hereof.
15. Registry of Warrant. The Company shall maintain a registry showing the name and
address of the registered Holder of this Warrant. This Warrant may be surrendered for exchange or
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exercise, in accordance with its terms, at such office or agency of the Company, and the
Company and Holder shall be entitled to rely in all respects, prior to written notice to the
contrary, upon such registry.
16. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to
it, and, if mutilated, upon surrender and cancellation of this Warrant, the Company will execute
and deliver a new Warrant, having terms and conditions substantially identical to this Warrant, in
lieu hereof.
17. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be construed and shall be given
effect in all respect as if it had been issued and delivered by the Company on the date hereof.
(b) Successors. This Warrant shall be binding upon any successors or assigns of the
Company.
(c) Governing Law. This Warrant shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia.
(d) Headings. The headings used in this Warrant are used for convenience only and are
not to be considered in construing or interpreting this Warrant.
(e) Saturdays, Sundays, Holidays. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or
shall be a legal holiday in the Commonwealth of Virginia, then such action may be taken or such
right may be exercised on the next succeeding day not a legal holiday.
18. No Impairment. The Company shall not by any action including, without limitation,
amending its Sections or certificate of incorporation or by-laws, any reorganization, transfer of
assets, consolidation, merger, share exchange dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the
Warrants or impair the ability of the Holder(s) to realize upon the intended economic value hereof,
but will at all times in good faith assist in the carrying out of all such terms and in the taking
of all such action as may be necessary or appropriate to protect the rights of the Holder(s) hereof
against impairment. Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock issuable upon the exercise of the Warrants
above the amount payable therefor upon such exercise, (b) take all such action as may be necessary
or appropriate in order that the Company may validly issue fully paid and nonassessable shares of
Common Stock upon the exercise of the Warrants, (c) obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under the Warrants and (d) not issue any capital stock of
any class which is preferred over the Common Stock as to dividends or as to the distribution of
assets upon the voluntary or involuntary dissolution, liquidation or winding up of the Company, (e)
not
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reclassify or convert common stock and (f) not take or permit to be taken any action which
would have the effect of shortening the period provided herein for exercise of the Warrants.
19. Addresses. Any notice required or permitted hereunder shall be in writing and
shall be mailed by overnight courier, registered or certified mail, return receipt required, and
postage pre-paid, or otherwise delivered by hand or by messenger, addressed as set forth below, or
at such other address as the Company or the Holder hereof shall have furnished to the other party.
| If to the Company: | Nura, Inc. | |||
| 1124 Columbia Street, Suite 650 | ||||
| Seattle, WA 98104 | ||||
| Attn: Chief Financial Officer | ||||
| If to the Holder. | Oxford Finance Corporation | |||
| 133 N. Fairfax Street | ||||
| Alexandria, VA 22314 | ||||
| Attn: Chief Financial Officer |
SIGNATURES APPEAR ON NEXT PAGE
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IN WITNESS WHEREOF, Nura, Inc., has caused this Warrant to be executed by its officers
thereunto duly authorized.
Dated as of April 26, 2005.
| NURA, INC. |
||||
| By: | /s/ Jim D. Johnston | |||
| Name: | Jim D. Johnston | |||
| Title: | CFO | |||
NOTICE OF EXERCISE
TO: |
||||
1. The undersigned Warrantholder (“Holder”) elects to acquire shares of the Series A Preferred
Stock (the “Preferred Stock”) of Nura, Inc., (the “Company”), pursuant to the terms of the Stock
Purchase Warrant dated April 26, 2005, (the “Warrant”).
2. The Holder exercises its rights under the Warrant as set forth below:
( )
The Holder elects to purchase _______ shares of Series A Preferred Stock as provided
in Section 3(a), (c) and tenders herewith a check in the amount of $_______ as payment of the
purchase price.
( )
The Holder elects to convert the purchase rights into shares of Series A Preferred Stock
as provided in Section 3(b), (c) of the Warrant.
3. The Holder surrenders the Warrant with this Notice of Exercise.
4. The Holder represents that it is acquiring the aforesaid shares of Series A Preferred Stock
for investment and not with a view to, or for resale in connection with, distribution and that the
Holder has no present intention of distributing or reselling the shares.
5. Please issue a certificate representing the shares of the Series A Preferred Stock in the
name of the Holder or in such other name as is specified below:
| Name: | |||||||||||
| Address: | |||||||||||
| Taxpayer I.D.: | |||||||||||
| Oxford Finance Corporation |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Date: | ||||
Exhibit 4.3
OMEROS CORPORATION
AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT
INVESTORS’ RIGHTS AGREEMENT
October 15, 2004
TABLE OF CONTENTS
| Page | ||||||||
1. |
Registration Rights | 2 | ||||||
| 1.1 | Definitions | 2 | ||||||
| 1.2 | Request for Registration | 3 | ||||||
| 1.3 | Company Registration | 4 | ||||||
| 1.4 | Form S-3 Registration | 4 | ||||||
| 1.5 | Obligations of the Company | 5 | ||||||
| 1.6 | Furnish Information | 7 | ||||||
| 1.7 | Expenses of Registration | 7 | ||||||
| 1.8 | Underwriting Requirements | 8 | ||||||
| 1.9 | Delay of Registration | 9 | ||||||
| 1.10 | Indemnification | 9 | ||||||
| 1.11 | Reports Under Securities Exchange Act of 1934 | 11 | ||||||
| 1.12 | Assignment of Registration Rights | 11 | ||||||
| 1.13 | Limitations on Subsequent Registration Rights | 12 | ||||||
| 1.14 | Market Stand-Off Agreement | 12 | ||||||
| 1.15 | Termination of Registration Rights | 13 | ||||||
2. |
Covenants of the Company | 13 | ||||||
| 2.1 | Delivery of Financial Statements | 13 | ||||||
| 2.2 | Inspection | 13 | ||||||
| 2.3 | Right of First Offer | 14 | ||||||
| 2.4 | Termination of Covenants | 15 | ||||||
3. |
Restrictions on Transfer | 16 | ||||||
| 3.1 | Notice of Sales; Right of First Refusal | 16 | ||||||
| 3.2 | Failure to Exercise | 17 | ||||||
| 3.3 | No Transfers without Board Approval | 17 | ||||||
| 3.4 | Permitted Transactions | 17 | ||||||
| 3.5 | Prohibited Transfers | 18 | ||||||
| 3.6 | Legended Certificates | 18 | ||||||
| 3.7 | Termination | 18 | ||||||
4. |
Miscellaneous | 19 | ||||||
| 4.1 | Successors and Assigns | 19 | ||||||
| 4.2 | Amendments and Waivers | 19 | ||||||
| 4.3 | Notices | 19 | ||||||
| 4.4 | Severability | 19 | ||||||
| 4.5 | Governing Law | 20 | ||||||
| 4.6 | Counterparts | 20 | ||||||
| 4.7 | Titles and Subtitles | 20 | ||||||
| 4.8 | Aggregation of Stock | 20 | ||||||
| 4.9 | Entire Agreement | 20 | ||||||
| 4.10 | Telecopy Execution and Delivery | 20 | ||||||
| 4.11 | Arbitration | 20 | ||||||
| 4.12 | Termination and Supersession | 21 | ||||||
-i-
OMEROS CORPORATION
AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT
INVESTORS’ RIGHTS AGREEMENT
This Amended and Restated Investors’ Rights Agreement (this “Agreement”) is made as of
the 15th day of October, 2004 by and among Omeros Corporation, a Washington corporation
(the “Company”), the investors listed on Exhibit A hereto (the “Series E
Investors”), H. Raymond Cairncross, Gregory A. Demopulos, M.D., George Kargianis, and Pamela
Pierce Palmer, M.D., Ph.D., each of whom is herein referred to as a “Founder,” the holders
of Series A Preferred Stock of the Company (the “Series A Preferred Stock”) listed on
Exhibit B hereto (the “Series A Investors”), the holders of Series B Preferred
Stock of the Company (the “Series B Preferred Stock”) listed on Exhibit C hereto
(the “Series B Investors”), the holders of Series C Preferred Stock of the Company (the
“Series C Preferred Stock”) listed on Exhibit D hereto (the “Series C
Investors”), the holders of the Series D Preferred Stock of the Company (the “Series D
Preferred Stock”) listed on Exhibit E hereto (the “Series D Investors,” and
together with the Series A Investors, the Series B Investors, the Series C Investors and the Series
E Investors, the “Investors”), and the holders of Common Stock of the Company (the
“Common Stock”) listed on Exhibit F hereto (the “Common Shareholders”).
RECITALS
The Company, the Founders, the Common Shareholders and the Investors are parties to the
Amended and Restated Investors’ Rights Agreement dated as of March 16, 2004, as amended on March
19, 2004 (the “Prior Agreement”). The Company issued and sold to the Series E Investors
shares of its Series E Preferred Stock pursuant to the Series E Preferred Stock Purchase Agreement
(the “Purchase Agreement”) dated March 16, 2004 and Addendum Agreements thereto. A
condition to the Series E Investors’ obligations under the Purchase Agreement and the Addendum
Agreements thereto was that the Company, the Founders, the Common Shareholders and the Investors
enter into the Prior Agreement in order to provide the Investors with (i) certain rights to
register shares of Common Stock issuable upon conversion of the Preferred Stock held by the
Investors, (ii) certain rights to receive or inspect information pertaining to the Company, (iii) a
right of first offer with respect to certain issuances by the Company of its securities and (iv) a
right of first refusal upon proposed sales of the Company’s securities held by the Investors and
the Common Shareholders. The Company, the Investors, the Founders and the Common Shareholders each
desire to amend and restate the Prior Agreement in its entirety as set forth herein in order to,
among other things, provide certain of such rights to additional Investors.
AGREEMENT
The parties hereby agree as follows:
1. Registration Rights. The Company and the Investors covenant and agree as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The terms “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act of 1933, as amended (the “Securities Act”), and the
declaration or ordering of effectiveness of such registration statement or document;
(b) The term “Registrable Securities” means (i) the shares of Common Stock issuable or
issued upon conversion of the Series A, Series B, Series C, Series D and Series E Preferred Stock,
(ii) the shares of Common Stock issued to the Founders (the “Founders’ Stock”),
provided, however, that for the purposes of Section 1.2, 1.4 and 1.13 the Founders’
Stock shall not be deemed Registrable Securities and the Founders shall not be deemed Holders, and
(iii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the shares listed in (i) and
(ii); provided, however, that the foregoing definition shall exclude in all cases
any Registrable Securities sold by a person in a transaction in which his or her rights under this
Agreement are not assigned. Notwithstanding the foregoing, Common Stock or other securities shall
only be treated as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions,
and restrictive legends with respect thereto, if any, are removed upon the consummation of such
sale;
(c) The number of shares of “Registrable Securities then outstanding” shall be
determined by the number of shares of Common Stock outstanding which are, and the number of shares
of Common Stock issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities;
(d) The term “Holder” means any person owning or having the right to acquire
Registrable Securities or any assignee thereof in accordance with Section 1.12 of this Agreement;
(e) The term “Form S-3” means such form under the Securities Act as in effect on the
date hereof or any successor form under the Securities Act;
(f) The term “SEC” means the Securities and Exchange Commission; and
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(g) The term “Qualified IPO” means a firm commitment underwritten public offering by
the Company of shares of its Common Stock pursuant to a registration statement under the Securities
Act, which results in aggregate gross proceeds to the Company of at least $10,000,000.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the earlier of (i) three (3) years after
the Closing (as defined in the Purchase Agreement) or (ii) six (6) months after the effective date
of the first registration statement for a public offering of securities of the Company (other than
a registration statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction), a
written request from the Holders of at least thirty percent (30%) of the Registrable Securities
then outstanding that the Company file a registration statement under the Securities Act covering
the registration of Registrable Securities with an anticipated aggregate gross offering price in
excess of $10,000,000, then the Company shall, within ten (10) days of the receipt thereof, give
written notice of such request to all Holders and shall, subject to the limitations of subsection
1.2(b), use its best efforts to effect as soon as practicable, and in any event within 60 days of
the receipt of such request, the registration under the Securities Act of all Registrable
Securities which the Holders request to be registered within twenty (20) days of the mailing of
such notice by the Company in accordance with Section 4.3.
(b) If the Holders initiating the registration request hereunder (“Initiating
Holders”) intend to distribute the Registrable Securities covered by their request by means of
an underwriting, they shall so advise the Company as a part of their request made pursuant to this
Section 1.2 and the Company shall include such information in the written notice referred to in
subsection 1.2(a). The underwriter will be selected by a majority in interest of the Initiating
Holders and shall be reasonably acceptable to the Company. In such event, the right of any Holder
to include his Registrable Securities in such registration shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company as provided in subsection
1.5(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors require a limitation
of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of
shares of Registrable Securities that may be included in the underwriting shall be allocated among
all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to
the amount of Registrable Securities of the Company owned by each Holder; provided,
however, that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely excluded from the
underwriting.
-3-
(c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 1.2 a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the Company, it would
be seriously detrimental to the Company and its shareholders for such registration statement to be
filed and it is therefore essential to defer the filing of such registration statement, the Company
shall have the right to defer such filing for a period of not more than 120 days after receipt of
the request of the Initiating Holders; provided, however, that the Company may not
utilize this right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect, or to take any action to
effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected one (1) registration pursuant to this Section 1.2 and such
registration has been declared or ordered effective;
(ii) During the period starting with the date sixty (60) days prior to the Company’s good
faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after
the effective date of, a registration subject to Section 1.3 hereof; provided that the
Company is actively employing in good faith all reasonable efforts to cause such registration
statement to become effective; or
(iii) If the Initiating Holders propose to dispose of shares of Registrable Securities that
may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.4 below.
1.3 Company Registration. If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock under the Securities Act in connection with
the public offering of such securities solely for cash (other than a registration relating solely
to the sale of securities to participants in a Company stock plan or a transaction covered by Rule
145 under the Securities Act, a registration in which the only stock being registered is Common
Stock issuable upon conversion of debt securities which are also being registered, or any
registration on any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20) days after mailing
of such notice by the Company in accordance with Section 4.3, the Company shall, subject to the
provisions of Section 1.8, cause to be registered under the Securities Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 Form S-3 Registration. In case the Company shall receive from any Holder or
Holders of not less than twenty percent (20%) of the Registrable Securities then outstanding a
written request or requests that the Company effect a registration on Form S-3 and
any related qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
-4-
(a) promptly give written notice of the proposed registration, and any related qualification
or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale and distribution of
all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given within 15 days after
receipt of such written notice from the Company; provided, however, that the
Company shall not be obligated to effect any such registration, qualification or compliance,
pursuant to this Section 1.4: (i) if Form S-3 is not available for such offering by the Holders;
(ii) if the Holders, together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public (net of any underwriters’ discounts or commissions) of
less than $2,500,000; (iii) if the Company shall furnish to the Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have the right to defer
the filing of the Form S-3 registration statement for a period of not more than 120 days after
receipt of the request of the Holder or Holders under this Section 1.4; provided,
however, that the Company shall not utilize this right more than once in any twelve month
period; (iv) if the Company has, within the twelve (12) month period preceding the date of such
request, already effected one (1) registration on Form S-3 for the Holders pursuant to this Section
1.4; (v) in any particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such registration,
qualification or compliance; or (vi) during the period ending one hundred eighty (180) days after
the effective date of a registration statement subject to Section 1.3.
(c) Subject to the foregoing, the Company shall file a registration statement covering the
Registrable Securities and other securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Holders. Registrations effected pursuant to this
Section 1.4 shall not be counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
1.5 Obligations of the Company. Whenever required under this Section 1 to effect the
registration of any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to become effective, and,
upon the request of the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to one hundred twenty (120) days. The Company shall not be required to file, cause to become effective or maintain
the effectiveness of any registration statement that contemplates a distribution of securities on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act.
-5-
(b) Prepare and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement for up to one hundred twenty (120) days.
(c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such other documents as
they may reasonably request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best efforts to register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances, such obligation to continue for so long as the Company is obligated
to maintain the effectiveness of such registration statement.
(g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each
securities exchange on which similar securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant
hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the
effective date of such registration.
(i) Use its best efforts to furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration
pursuant to this Section 1, if such securities are being sold through underwriters, or, if
such securities are not being sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (i) an opinion, dated such date, of
the counsel representing the Company for the purposes of such registration, in form and substance
as is customarily given to underwriters in an underwritten public offering, addressed to the
-6-
underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii)
a letter dated such date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
1.6 Furnish Information. It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of
any selling Holder that such Holder shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder’s Registrable Securities. The Company
shall have no obligation with respect to any registration requested pursuant to Section 1.2 or
Section 1.4 of this Agreement if, as a result of the application of the preceding sentence, the
number of shares or the anticipated aggregate offering price of the Registrable Securities to be
included in the registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company’s obligation to initiate such
registration as specified in subsection 1.2(a) or subsection 1.4(b)(ii), whichever is applicable.
1.7 Expenses of Registration.
(a) Demand Registration. All expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or qualifications pursuant to
Section 1.2, including (without limitation) all registration, filing and qualification fees,
printers’ and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders selected by them with the
approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the
Company; provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request
is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities
to be registered (in which case all participating Holders shall bear such expenses), unless the
Holders of a majority of the Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.2; provided, however, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the condition, business,
or prospects of the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the Company of such
material adverse change, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to Section 1.2.
(b) Company Registration. All expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or qualifications of Registrable
Securities pursuant to Section 1.3 for each Holder (which right may be assigned as provided in
Section 1.12), including (without limitation) all registration, filing, and qualification fees,
printers’ and accounting fees, fees and disbursements of counsel for the Company and the reasonable
fees and disbursements of one counsel for the selling Holder or Holders selected by
-7-
them with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the
Company.
(c) Registration on Form S-3. All expenses incurred in connection with a registration
requested pursuant to Section 1.4, including (without limitation) all registration, filing,
qualification, printers’ and accounting fees and the reasonable fees and disbursements of one
counsel for the selling Holder or Holders selected by them with the approval of the Company, which
approval shall not be unreasonably withheld, and counsel for the Company, but not including any
underwriters’ discounts or commissions associated with Registrable Securities, shall be borne by
the Company.
1.8 Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company’s capital stock, the Company shall not be required under
Section 1.3 to include any of the Holders’ securities in such underwriting unless they accept the
terms of the underwriting as agreed upon between the Company and the underwriters selected by it
(or by other persons entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success of the offering by
the Company. If the total amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is compatible with the success
of the offering, then the Company shall be required to include in the offering only that number of
such securities, including Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such other proportions as
shall mutually be agreed to by such selling shareholders), but in no event shall (i) any shares
being sold by a shareholder exercising a demand registration right similar to that granted in
Section 1.2 be excluded from such offering, (ii) the amount of securities of the selling Holders of
Preferred Stock included in the offering be reduced below thirty percent (30%) of the total amount
of securities included in such offering, unless such offering is the initial public offering of the
Company’s securities, in which case (except as provided in (i) above) the selling shareholders may
be excluded entirely if the underwriters make the determination described above and no other
shareholder’s securities are included or (iii) any securities held by a Founder be included if any
securities held by any selling Holder are excluded. For purposes of the preceding parenthetical
concerning apportionment, for any selling shareholder which is a holder of Registrable Securities
and which is a partnership or corporation, the partners, retired partners and shareholders of such
holder, or the estates and family members of any such partners and retired partners and any trusts
for the benefit of any of the foregoing persons shall be deemed to be a single “selling
shareholder,” and any pro-rata reduction with respect to such “selling shareholder” shall be based upon the aggregate amount of shares carrying registration rights
owned by all entities and individuals included in such “selling shareholder,” as defined in this
sentence.
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1.9 Delay of Registration. No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result of any controversy
that might arise with respect to the interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are included in a
registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder,
the partners, officers, directors and shareholders of each Holder, any underwriter (as defined in
the Securities Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements, omissions or
violations (collectively a “Violation”): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities
law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred,
any legal or other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable to any Holder, underwriter, controlling person or other aforementioned person
for any such loss, claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any such Holder, underwriter,
controlling person or other aforementioned person.
(b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the Securities Act, any
underwriter, any other Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished by such Holder expressly for
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use in connection with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified pursuant to this
subsection 1.10(b), in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained in
this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; provided, that in no event shall any indemnity
under this subsection 1.10(b) exceed the net proceeds from the offering received by such Holder,
except in the case of willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the
commencement of any action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable
fees and expenses to be paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party represented by such counsel
in such proceeding. The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise than under this
Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim,
damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage or expense as well as any other relevant equitable considerations;
provided that in no event shall any contribution by a Holder under this subsection 1.10(d)
exceed the net proceeds from the offering received by such Holder, except in the case of willful
fraud by such Holder. The relative fault of the indemnifying party and of the indemnified party
shall be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and the parties’
relative intent, knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
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(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders under this Section 1.10 shall survive the
completion of any offering of Registrable Securities in a registration statement under this Section
1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the
public without registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are understood and defined in
SEC Rule 144, at all times after ninety (90) days after the effective date of the first
registration statement filed by the Company for the offering of its securities to the general
public so long as the Company remains subject to the periodic reporting requirements under Sections
13 or 15(d) of the Exchange Act;
(b) take such action, including the voluntary registration of its Common Stock under Section
12 of the Exchange Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of
their Registrable Securities, such action to be taken as soon as practicable after the end of the
fiscal year in which the first registration statement filed by the Company for the offering of its
securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) a written statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the
first registration statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies),
(ii) a copy of the most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be reasonably requested
in availing any Holder of any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
1.12 Assignment of Registration Rights. The rights to cause the Company to register
Registrable Securities pursuant to this Section 1 may be assigned (but only with all related
obligations) by a Holder to a transferee or assignee of such securities that (i) is a subsidiary,
parent, partner, limited partner, retired partner or shareholder of a Holder; (ii) is a
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Holder’s family member or trust for the benefit of an individual Holder; or (iii) after such assignment or
transfer, holds at least 200,000 shares of such securities, provided the Company is, within
a reasonable time after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such registration rights are
being assigned; and provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such securities by the transferee
or assignee is restricted under the Securities Act. For the purposes of determining the number of
shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and
assignees of a partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire
Registrable Securities by gift, will or intestate succession) shall be aggregated together and with
the partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single attorney-in-fact for the
purpose of exercising any rights, receiving notices or taking any action under Section 1.
1.13 Limitations on Subsequent Registration Rights. From and after the date of this
Agreement, the Company shall not, without the prior written consent of the Holders of a majority of
the outstanding Registrable Securities (except as otherwise provided in Section 4.2 hereof), enter
into any agreement with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder (a) to include such securities in any registration
filed under Section 1.2 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders
which is included or (b) to make a demand for registration of such securities.
1.14 “Market Stand-Off” Agreement. Each Holder, Founder, Investor and Common
Shareholder (collectively, the “Shareholders”) hereby agrees that, during the period of
duration (up to, but not exceeding, 180 days) specified by the Company and an underwriter of Common
Stock or other securities of the Company, following the effective date of a registration statement
of the Company filed under the Securities Act, it shall not, to the extent requested by the Company
and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except Common Stock included in such registration; provided,
however, that:
(a) such agreement shall be applicable only to the first such registration statement of the
Company which covers Common Stock (or other securities) to be sold on its behalf to the public in
an underwritten offering; and
(b) all officers and directors of the Company, all one-percent or greater securityholders, and
all other persons with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.
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In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions
with respect to the Registrable Securities of each Shareholder (and the shares or securities of
every other person subject to the foregoing restriction) until the end of such period, and each
Shareholder agrees that, if so requested, such Shareholder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent with the provisions
of this Section 1.14.
Notwithstanding the foregoing, the obligations described in this Section 1.14 shall not apply
to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely to an SEC Rule 145
transaction on Form S-4 or similar forms which may be promulgated in the future.
1.15 Termination of Registration Rights. No Holder shall be entitled to exercise any
right provided for in this Section 1 after the earlier of (i) five (5) years following the
consummation of a Qualified IPO, or (ii) such time as Rule 144 or another similar exemption under
the Securities Act is available for the sale of all of such Holder’s shares during a consecutive
three (3)-month period without registration.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall deliver to each Holder of at
least 200,000 shares of Registrable Securities (other than a Holder reasonably deemed by the
Company to be a competitor of the Company):
(a) as soon as practicable, but in any event within ninety (90) days after the end of each
fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the
Company and statement of shareholder’s equity as of the end of such year, and a statement of cash
flows for such year, such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles (“GAAP”), and audited and
certified by an independent public accounting firm of nationally recognized standing selected by
the Company;
(b) as soon as practicable, but in any event within forty-five (45) days after the end of each
of the first three (3) quarters of each fiscal year of the Company, an unaudited profit or loss
statement, a statement of cash flows for such fiscal quarter and an unaudited balance sheet as of
the end of such fiscal quarter; and
(d) as soon as practicable, but in any event thirty (30) days prior to the end of each fiscal
year, a budget and business plan for the next fiscal year, prepared on a quarterly basis, and, as soon as prepared, any other budgets or revised budgets prepared by
the Company.
2.2 Inspection. The Company shall permit each Holder of at least 200,000 shares of
Registrable Securities (except for a Holder reasonably deemed by the Company to be a
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competitor of the Company), at such Holder’s expense, to visit and inspect the Company’s properties, to examine
its books of account and records and to discuss the Company’s affairs, finances and accounts with
its officers, all at such reasonable times as may be requested by the Investor; provided,
however, that the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information which it reasonably considers to be a trade secret or similar
confidential information.
2.3 Right of First Offer. Subject to the terms and conditions specified in this
Section 2.3, the Company hereby grants to each Major Investor (as hereinafter defined) a right of
first offer with respect to future sales by the Company of its Shares (as hereinafter defined).
For purposes of this Section 2.3, a “Major Investor” shall mean any person who holds at
least 200,000 shares of Series B, Series C, Series D and/or Series E Preferred Stock (or Common
Stock issued upon conversion of such shares of Series B, Series C, Series D and/or Series E
Preferred Stock), as adjusted for stock dividends, stock splits, reclassifications and the like.
For purposes of this Section 2.3, Major Investor includes any general partners and affiliates of a
Major Investor. A Major Investor that chooses to exercise the right of first offer may designate
as purchasers under such right itself or its partners or affiliates in such proportions as it deems
appropriate.
Each time the Company proposes to offer any shares of, or securities convertible into or
exercisable for any shares of, any class of its capital stock (for purposes of this Section 2.3,
the “Shares”), the Company shall first make an offering of such Shares to each Major
Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail (“Notice”) to the Major
Investors stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares
to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such Shares.
(b) Within 15 calendar days after delivery of the Notice, the Major Investor may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to that portion of
such Shares which equals the proportion that the number of shares of Common Stock issued and held,
or issuable upon conversion and exercise of all convertible or exercisable securities then held, by
such Major Investor bears to the total number of shares of Common Stock then outstanding (assuming
full conversion and exercise of all convertible securities, warrants or options). The Company
shall promptly, in writing, inform each Major Investor that purchases all the shares available to
it (each, a “Fully-Exercising Investor”) of any other Major Investor’s failure to do
likewise. During the ten (10)-day period commencing after receipt of such information, each Fully-Exercising Investor shall be entitled to obtain that portion of
the Shares for which Major Investors were entitled to subscribe but which were not subscribed for
by the Major Investors that is equal to the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Fully-Exercising Investor bears to the total number of shares of
Common Stock then outstanding (assuming full conversion and exercise of all convertible or
exercisable securities, warrants or options).
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(c) The Company may, during the 45-day period following the expiration of the period provided
in subsection 2.3(b) hereof, offer the remaining unsubscribed portion of the Shares to any person
or persons at a price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the sale of the
Shares within such period, or if such agreement is not consummated within 60 days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be
offered unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.3 shall not be applicable (i) to the issuance
or sale of shares of Common Stock (or options therefor) to employees, officers, consultants and
directors, vendors or others with whom the Company conducts business pursuant to a stock option
plan or restricted stock plan approved by the Board of Directors for the primary purpose of
soliciting or retaining their services, (ii) to or after consummation of a Qualified IPO, (iii) to
the issuance of securities pursuant to the conversion or exercise of convertible or exercisable
securities, (iv) to the issuance of securities in connection with a bona fide business acquisition
of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock
or otherwise, or similar transaction, the terms of which are approved by the Board of Directors of
the Company, (v) to the issuance of securities to financial institutions or lessors in connection
with commercial credit arrangements, equipment financings, or similar transactions, or that are for
other than primarily equity financing purposes, (vi) to the issuance or sale of the Series E
Preferred Stock or warrants to purchase the Series E Preferred Stock, (vii) to the issuance of
securities that, with unanimous approval of the Board of Directors of the Company, are not offered
to any existing shareholder of the Company, or (viii) to the issuance of securities in connection
with a transaction approved by the Board of Directors of the Company to an entity as a component of
a business relationship with such entity also involving material manufacturing, marketing,
distribution, product development and/or technology licensing arrangements. In addition to the
foregoing, the right of first offer in this paragraph 2.3 shall not be applicable with respect to
any Investor and any subsequent securities issuance, if (i) at the time of such subsequent
securities issuance, the Investor is not an “accredited investor,” as that term is then defined in
Rule 501(a) under the Securities Act, and (ii) such subsequent securities issuance is otherwise
being offered only to accredited investors.
2.4 Termination of Covenants.
(a) The covenants set forth in Sections 2.1 through Section 2.3 shall terminate as to each
Holder and be of no further force or effect (i) immediately prior to the
closing of a Qualified IPO, or (ii) when the Company shall sell, convey, or otherwise dispose
of or encumber all or substantially all of its property or business or merge into or consolidate
with any other corporation (other than a wholly-owned subsidiary corporation) or effect any other
transaction or series of related transactions in which more than fifty percent (50%) of the voting
power of the Company is disposed of, provided that this subsection (ii) shall not apply to
a merger effected exclusively for the purpose of changing the domicile of the Corporation.
(b) The covenants set forth in Sections 2.1 and 2.2 shall terminate as to each Holder and be
of no further force or effect when the Company first becomes subject to
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the periodic reporting requirements of Sections 13 or 15(d) of the Exchange Act, if this occurs earlier than the events
described in Section 2.4(a).
3. Restrictions on Transfer.
3.1 Notice of Sales; Right of First Refusal.
(a) Should any Shareholder propose to accept one or more bona fide offers (collectively, a
“Purchase Offer”) from any person(s) or entity(ies) to purchase any shares of the Company’s
capital stock or portions thereof held by such Shareholder (for purposes of this Section 3, the
“Shares”) (other than as set forth in Section 3.4 hereof), such Shareholder shall promptly
deliver a notice (the “Notice”) to the Company stating the terms and conditions of such
Purchase Offer including, without limitation, the number of shares of the Company’s capital stock
to be sold or transferred, the nature of such sale or transfer, the consideration to be paid, and
the name and address of each prospective purchaser or transferee. The Company shall then have the
right, exercisable by notice to the selling Shareholder within thirty (30) days after receipt of
the Notice (the “Initial Company Refusal Period”), to exercise a first right to purchase
all or a portion of such Shares (the “Initial Company Right of First Refusal”) on the same
terms and conditions as described in the Notice.
(b) If the Company does not exercise the Initial Company Right of First Refusal in full and
the sale of the Shares by such Shareholder has been approved by a two-thirds majority of the Board
of Directors of the Company pursuant to Section 3.3 hereof, then promptly after the expiration of
the Initial Company Refusal Period, the Company shall send a written notice, which notice shall
include the Notice from the selling Shareholder (together the “Second Notice”), to each
Investor stating that the Company has chosen not to exercise, in full or in part, the Initial
Company Right of First Refusal. The Company shall then have the right, exercisable by notice to
the selling Shareholder within thirty (30) days after the date of the Second Notice (the
“Subsequent Company Refusal Period”), to exercise a first right to purchase all or a
portion of such Shares (the “Subsequent Company Right of First Refusal”) on the same terms
and conditions as described in the Notice. Each Investor shall have the secondary right, subject
to the Subsequent Company Right of First Refusal, exercisable by notice to the selling Shareholder
and to the Company within twenty (20) days after the Second Notice (the “Refusal Period”),
to exercise a right to purchase such Shares not purchased by the Company (the “Right of First
Refusal”) on the same terms and conditions as described in the Notice and on a pro rata basis,
based upon the number of shares of Common Stock issued and held, or issuable upon
conversion and exercise of all convertible or exercisable securities then held, by such
Investor relative to the aggregate number of shares of Common Stock issued and held, or issuable
upon conversion and exercise of all convertible or exercisable securities then held, by all
Investors; provided that if fewer than all Investors elect to participate, the Shares that
would otherwise be allocated to non-participating Investors shall be allocated to each
participating Investor in a manner such that each participating Investor is entitled to purchase at
least such Investor’s pro rata portion of such unallocated or such different number of Shares as
the participating Investors shall mutually agree. Upon expiration of the Subsequent Company
Refusal Period, the Company will provide notice to all Investors as to whether or not the
Subsequent Company Right of First
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Refusal has been exercised by the Company, and to the extent that it has not, as to whether or not the Right of First Refusal has been exercised by one or more of
the Investors.
3.2 Failure to Exercise. The failure by the Company or an Investor to exercise the
rights under Section 3.1 or Section 3.3 to purchase any portion of Shares in a sale of Shares made
by a Shareholder shall not affect the Company’s or such Investor’s rights to purchase any portion
of Shares in subsequent sales of Shares by any Shareholder.
3.3 No Transfers without Board Approval. Except for transfers to the Company pursuant
to Section 3.1 and except as permitted pursuant to Section 3.4, no Shareholder may transfer any
shares of capital stock of the Company (including without limitation to Investors pursuant to
Section 3.1(b)) without first obtaining the written consent to such transfer from a two-thirds
majority of the Company’s Board of Directors, such two-thirds majority in its good faith judgment,
having determined that such transfer would not be detrimental to the interests of the Company and
its shareholders. In addition, as a condition precedent to any such transfer, the transferee must
agree in writing to be bound by the terms of this Section 3.3 as if such transferee were a
Shareholder under this Section 3.3, and to be bound by all other provisions of this Agreement
applicable to the transferor.
3.4 Permitted Transactions. The provisions of Section 3.1 and Section 3.3 of this
Agreement shall not pertain or apply to:
(a) any pledge of the Company’s capital stock made by a Shareholder pursuant to a bona fide
loan transaction which creates a mere security interest;
(b) any bona fide gift;
(c) any transfer to a Shareholder’s ancestors, descendants or spouse or to a trust for their
benefit;
(d) any sale or transfer of shares of Common Stock among the Shareholders;
(e) any sale or transfer by a Shareholder of up to 5% of the total number of shares of Common
Stock held by such Shareholder on the date of this Agreement in
any twelve-month period; provided that the pledgee, transferee or donee (collectively,
the “Permitted Transferees”) shall furnish the other Shareholders with a written agreement
to be bound by and comply with all provisions of this Agreement applicable to the Shareholders; or
(f) any transfer by a Shareholder that is a partnership to a partner of such partnership or a
retired partner of such partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession of any partner to
his or her spouse or to the siblings, lineal descendants or ancestors of such partner or his or her
spouse.
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3.5 Prohibited Transfers. Any attempt by a Shareholder to transfer shares of the
Company in violation of Section 3 hereof shall be void, and the Company agrees it will not effect
such a transfer nor will it treat any alleged transferee as the holder of such shares without the
written consent of the holders of a two-thirds majority of the Shareholders, voting as a single
class on a fully diluted, as-converted basis, and the written consent of a two-thirds majority of
the Board of Directors of the Company.
3.6 Legended Certificates. Each certificate representing shares of the Series A,
Series B, Series C, Series D and Series E Preferred Stock and Common Stock now owned by the
Shareholders or issued to any Permitted Transferee pursuant to Section 3.4 shall bear the following
legend:
“THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN RESTRICTIONS
AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF
COMMON AND PREFERRED STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.”
The foregoing legend shall be removed upon termination of this Agreement in accordance with
the provisions of Section 3.7.
3.7 Termination. The obligations and restrictions contained in this Section 3 shall
terminate upon the earliest to occur of any one of the following events (and shall not apply to any
transfer by a Shareholder in connection with any such event):
(a) the liquidation, dissolution or indefinite cessation of the business operations of the
Company;
(b) the execution by the Company of a general assignment for the benefit of creditors or the
appointment of a receiver or trustee to take possession of the property and assets of the Company;
(c) the consummation of a Qualified IPO; or
(d) the sale, conveyance, disposal, or encumbrance of all or substantially all of the
Company’s property or business or the Company’s merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary corporation) or if the Company effects any other
transaction or series of related transactions in which more than fifty percent (50%) of the voting
power of the Company is disposed of; provided that this Section 3.7(d) shall not apply to a
merger effected exclusively for the purpose of changing the domicile of the Company.
-18-
4. Miscellaneous.
4.1 Successors and Assigns. Except as otherwise provided in this Agreement, the terms
and conditions of this Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties (including transferees of any of the Preferred
Stock or any Common Stock issued upon conversion thereof). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
4.2 Amendments and Waivers. Any term of this Agreement may be amended or waived only
with the written consent of the Company and the holders of a majority of the Registrable Securities
then outstanding, not including the Founders’ Stock; provided that if such amendment has
the effect of affecting the Founders’ Stock (i) in a manner different than securities issued to the
Investors and (ii) in a manner adverse to the interests of the holders of the Founders’ Stock, then
such amendment shall require the consent of the holder or holders of a majority of the Founders’
Stock. Notwithstanding the foregoing, subsequent Purchasers (as defined under the Purchase
Agreement) of the Company’s Series E Preferred Stock under the Purchase Agreement or any Addendum
Agreement thereto will be added as a party to this Agreement as an Investor without having to
obtain the consents set forth above and shall be bound by and entitled to the terms, benefits and
conditions herein by the execution and delivery of a signature page to this Agreement. Any
amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of
any Registrable Securities then outstanding, each future holder of all such Registrable Securities,
and the Company.
4.3 Notices. Unless otherwise provided, any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax with electronic confirmation
received, or forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified at such party’s
address or fax number as set forth on the signature page or Exhibits hereto or as subsequently
modified by written notice.
4.4 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 shall be excluded from this Agreement, (b) the balance of
this Agreement shall be interpreted as if such provision were so excluded and (c) the balance of
this Agreement shall be enforceable in accordance with its terms.
-19-
4.5 Governing Law. This Agreement and all acts and transactions pursuant hereto shall
be governed, construed and interpreted in accordance with the laws of the State of Washington,
without giving effect to principles of conflicts of laws.
4.6 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
4.7 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.
4.8 Aggregation of Stock. All shares of the Preferred Stock held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
4.9 Entire Agreement. This Agreement (including the Exhibits hereto, if any)
constitutes the entire understanding among the parties with regard to the subjects hereof and
thereof.
4.10 Telecopy Execution and Delivery. A facsimile, telecopy or other reproduction of
this Agreement may be executed by one or more parties hereto, and an executed copy of this
Agreement may be delivered by one or more parties hereto by facsimile or similar electronic
transmission device pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties hereto agree to execute an original of this Agreement
as well as any facsimile, telecopy or other reproduction hereof.
4.11 Arbitration. The parties agree to attempt in good faith to negotiate a
settlement of any and all controversies, claims, or disputes arising out of, relating to, or
resulting from this Agreement. If, after such good faith negotiation, the parties are not able to
reach a settlement, any and all of such controversies, claims, or disputes arising out of, relating
to, or resulting from this Agreement shall be subject to binding arbitration. Such arbitration
shall take place in Seattle, Washington and will be administered by the American Arbitration Association
(“AAA”) in accordance with its Rules for the Resolution of Commercial Disputes. The
parties agree that the arbitrator shall have the power to decide any motions brought by any party
to the arbitration, including motions for summary judgment and/or adjudication and motions to
dismiss and demurrers, prior to any arbitration hearing. The parties also agree that the
arbitrator shall have the power to award any remedies, including attorneys’ fees and costs,
available under applicable law, provided that the prevailing party in any arbitration shall be
entitled to its reasonable attorneys fees and costs. The decision of the arbitrator shall be in
writing.
-20-
Arbitration shall be the sole, exclusive and final remedy for any dispute under this
Agreement and the decision of the arbitrator may be entered by a party in any court or forum, state
or federal, being of competent jurisdiction. Accordingly, no party will be permitted to pursue
court action regarding this Agreement except as expressly permitted in the preceding sentence.
Notwithstanding the foregoing, each party retains the right to seek injunctive relief to prevent a
breach, threatened breach or continuing breach of this Agreement that would cause irreparable
injury to such party.
4.12 Termination and Supersession. This Agreement replaces and supersedes the Prior
Agreement, and the Prior Agreement is hereby terminated.
[Signature Page Follows]
-21-
The parties have executed this Amended and Restated Investors’ Rights Agreement as of the date
first above written.
| COMPANY: OMEROS CORPORATION |
||||
| By: | /s/ Gregory A. Demopulos | |||
| Gregory A. Demopulos, M.D. | ||||
| Chairman of the Board, President and Chief Executive Officer Address: 1420 Fifth Ave., Suite 2600 Seattle, WA 98101 Fax: (206) 264-7856 |
||||
SIGNATURE PAGE TO OMEROS CORPORATION’S
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
| SERIES E INVESTOR: |
||||
| (Investor) | ||||
| By: | ||||
| Name: | ||||
| (print) | ||||
| Title: | ||||
| (if applicable) | ||||
| Address: | ||||
| Fax: | ||||
SIGNATURE PAGE TO OMEROS CORPORATION’S
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
| FOUNDERS: |
||||
| H. Raymond Cairncross | ||||
| Address: Fax: |
||||
| /s/ Gregory A. Demopulos | ||||
| Gregory A. Demopulos, M.D. | ||||
| Address: Fax: |
||||
| George Kargianis | ||||
| Address: Fax: |
||||
| Pamela Pierce Palmer, M.D., Ph.D. | ||||
| Address: Fax: |
||||
SIGNATURE PAGE TO OMEROS CORPORATION’S
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
| SERIES A INVESTOR: |
||||
| (Investor) | ||||
| By: | ||||
| Name: | ||||
| (print) | ||||
| Title: | ||||
| Address: | ||||
| Fax: | ||||
SIGNATURE PAGE TO OMEROS CORPORATION’S
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
| SERIES B INVESTOR: |
||||
| (Investor) | ||||
| By: | ||||
| Name: | ||||
| (print) | ||||
| Title: | ||||
| Address: | ||||
| Fax: | ||||
SIGNATURE PAGE TO OMEROS CORPORATION’S
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
| SERIES C INVESTOR: |
||||
| (Investor) | ||||
| By: | ||||
| Name: | ||||
| (print) | ||||
| Title: | ||||
| Address: | ||||
| Fax: | ||||
SIGNATURE PAGE TO OMEROS CORPORATION’S
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
| SERIES D INVESTOR: |
||||
| (Investor) | ||||
| By: | ||||
| Name: | ||||
| (print) | ||||
| Title: | ||||
| Address: | ||||
| Fax: | ||||
SIGNATURE PAGE TO OMEROS CORPORATION’S
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
| COMMON SHAREHOLDER: |
||||
| /s/ Gregory A. Demopulos | ||||
| (Common Shareholder) | ||||
| By: | ||||
| Name: | ||||
| (print) | ||||
| Title: | ||||
| Address: | ||||
| Fax: | ||||
SIGNATURE PAGE TO OMEROS CORPORATION’S
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
Exhibit A
SERIES E INVESTORS
Marie Stanislaw and Steve Abel
Charles L. Anderson
Dean E. and Lynda M. Anderson JTWROS
Richard W. Anderson
Charles C. Andonian
Andonian Family GST Trust
Martin Andrews
Robert M. Arnold
William and Sylvia Bailey
David H. and Jean Barber
Larry L. Barokas
Alan Bartelheimer
Robert and Alice Bender
Thad Berger
William Blum
Stephen K. Boone
BPEF 2 Omeros Partners, LP
Harold D. Brown
Frederick S. & Jane H. Buckner
Christine Buecker IRA Charles Schwab & Co., Inc. Cust.
John Burgess
Mark Callaghan
Cheve Famille LLC
Chicago Private Investments, Inc.
Ching Defined Benefit Pension Plan
Ching Revocable Trust
Jeff & Janee Christianson
Delores Christianson
Ivan Christianson
CIBC Trust Company (Bahamas) Limited as Trustee of T-2100
Alan and Margaret Cornell
Dale E. Cowles
Bennett and Shirley LaFollette Cozadd
R. Michael Creighton
Critchfield Investment Partners, L.P.
Brian Crynes
Robert Curley
Jann Curley
Michael and Martha Davidson
Harold L. and Pride E. Davies
Patrick Day
M.R. de Carvalho
Delaware Charter Guarantee & Trust Co., Trustee FBO, Jeff Esfeld/Roth IRA
Dennis Shay Co. Profit Sharing Trust
Moss Adams LLP DEF BEN PEN PL #95 U/A DTD 1/31/89, Edward C. Drosdick, TTEE
Richard R. and Marilyn B. Dunn
Richard M. Elkus
Steven and Pauline Elliott
Kevin Elliott
Ruth and John Fay
Robert Feldman
First Washington PSP, DTD 7/1/84 FBO Philip F. Frank Jr., Philip F. Frank Jr. Trustee
Drew & Kristin Fletcher
Barbara R. and Robert M. Frayn, Jr.
Frederick Goldberg Family, LLC
Stuart Fuchs IRA
Gary and Della Furukawa
Michael Gano
Eduardo Garcia & Jane Hoerig
Gretchen Garth
Bill and Lindy Gaylord
Gregory and Susan George
Jonathan R. Goldner
Dian Goldberg
Frederick Goldberg
Stanley and Carolyn Graves
Grosvenor Special Ventures IV, LP
Frank B. & Joan Hall
Scott & Kerry Hall
Bradley Harris
Tom and Jo Ann R. Hornsten
Arthur and Janet Stanton Hurd
Peter Indelicato
Walter R. Ingram
Sam and Naomi Israel
Donald M. Jasper
Donald and Beverly Jefferson
Scott and Susan Jennings
JLB Investment Company
Kanter Family Foundation (IL Corp.)
Gloria Katz Revocable Trust
Bruce Keithly IRA Charles Schwab & Co., Inc. Cust.
David Kenyon
Edward B. Kibble
Donald E. Kline
Robert Kollack
Koppes Family Revocable Trust, Alan W. Koppes Trustee
Dennis J. Kvidera
Kvidera Living Trust
Henry Liebman
Rex Lund
Louis Lundquist
Kathy Lusher
Chai Mann
Pamela B McCabe
Patrick and Michele McCarthy
Karen McDonald
Susan Melodia
Lawrence Meurk
Joanne K. Meyers
Randee Sue Meyers
Michael C. Mossman
MST Partners
Douglas Norberg
Novel BioVentures LLC
Richard J. and Vonda M. Olson
B. Delores O’Neil
Thomas Orvald
James Osgood
Donald F. Padelford
Christohper G Pallis
Chris N Pallis
Christopher G. Pallis IRA
Vasillios N. Pallis
Patricia L. Pedegana
Donald & Laura Peterson Petersen, JTWROS
Donald E. Petersen
Brent P. Pistorese and Linda D. Pistorese Revocable Living Trust
Hasso Plattner
Kathleen Popham
Prentice Family Partnership
Prime Time Partners, L.P.
Prime Time Partners
Herbert Pruzan
Harry Pryde
Paul A. Raidna
Peter and Debra Rettman
George Reynolds
Bradley G. Rich
Ring Revocable Trust, Lawrence W. Ring, Trustee
R.E. Rohde
Dan Rome
John C. Rosling
Donn Rowe
John and Linda Schukar
George E.S. Seligman
Steven L. Sherman
Sherwood Associates, LLC
Lorraine Smith
Linda Barker Spear
John M. Spicer
Robert H and Rita A. Splan
Greg and Vicky Stamolis
Chris W. Strand IRA Rollover UTA Charles Schwab & Co. Inc.
Joseph P. & D. Dyann Strecker
Stuart Sulman
Scott Sulman
Summit Capital Partners, L.P.
Michael J Swindling
Janet Taggares
Tenwall Investment Co.
Brad Thompson
Richard Toll
Wells Fargo Bank IRA C/F Richard W. Tschetter
Gregory P. Vernon
Trevor Vernon
Jerome K. Walsh
Stephen J. Warner
Washington Research Foundation
Gary Waterman
Bruce E. Watterson
Michael Weaver
Jon D. Wheeler
Brad Williamson
Charlotte Witter
Malcolm G. Witter IRA/Bear Stearns Custodian
Olivia Witter
Exhibit B
SERIES A INVESTORS
Gary R. and Mitzi M. Aspiri
Aspiri Enterprises LLC
Jon A. and Julie P. Barwick
Thomas W. and Ann M. Barwick
David and Virginia Broudy
Thomas J. Cable Defined Benefit Retirement Plan
Larry W. and Mary K. Crocker, JTWROS
Peter A. Demopulos, M.D.
Milton and Nancy English
Barbara R. and Robert M. Frayn, Jr.
Steven and Anne Gillis, JTWROS
E. Cary Halpin D.D.S., P.S.
Profit Sharing Plan
Profit Sharing Plan
Chauncey F. Lufkin
Chauncey F. Lufkin, as trustee for
Wende Lufkin
Wende Lufkin
Chauncey F. Lufkin, as trustee for
Lisa L. Collins
Lisa L. Collins
Chauncey F. Lufkin, as trustee for
Chauncey F. Lufkin, Jr.
Chauncey F. Lufkin, Jr.
Chauncey F. Lufkin, as trustee for
Andrew Lufkin
Andrew Lufkin
Chris G. and Vasiliki L. Pallis
Harry Pryde
Wayne E. Quinton
William J. Rex
T2G Limited Partnership
Exhibit C
SERIES B INVESTORS
Charles L. Anderson
Travis S. Ashby
Aspiri Enterprises LLC
Milton A. Barrett, Jr. and Jane S. Barrett
Andrew J. Berndt
Bost & Co. FBO Leonard A. Yerkes
John M. Brenneman
Susan E. Brock-Utne
Thomas F. and Joyce S. Broderick
Thomas J. Cable
City National Bank
TTEE FBO DWT/James
TTEE FBO DWT/James
City National Bank Bank Trustee
DWT FBO Bruce Lamka
DWT FBO Bruce Lamka
Dale E. Cowles
Critchfield Investment Partners, L.P.
Thomas E. Doelger
George T. Drugas, M.D. & Heidi J. Drugas
Peter W. Eising
Ruth G. Fleischmann
Francis D. Galey
Gretchen Garth
William H. Gates, Jr.
Jerry L. and Mary E. Gatewood
Jonathan R. Goldner
Joshua Starbuck Goldner
Marcia M. Goldner
Steven Goldner
As custodian for Julia Starbuck Goldner
As custodian for Julia Starbuck Goldner
Steven Craig Goldner
Dan M. and Wendy Ershig Guy III
Frank B. and Joan B. Hall
Scott and Kerry Hall
Patrick M. and Melinda G. Hannigan
Tom and JoAnn Hornsten
Donn and Abigail Hutchins
Barbara Olivia Jackson
Blayne Johnson
David Kenyon
Edward R. Kibble
Scott Land
Captain Thomas Latsoudis
Chauncey F. Lufkin
Rex Lund
Pamela B. McCabe
Craig McCallum
Daniel J. McHugh
Patricia A. Milbank
Patrick R. Milbank
MST Partners — Leonard H. Shapiro
Dallas L. Otter
Carol F. Padelford
Chris G. and Vasiliki L. Pallis
Panos Brothers Capital, LLC
Patricia L. Pedegana
Piper Jaffray, Inc. as custodian for the benefit of (FBO)
John Hopkins
John Hopkins
Arlen I. Prentice
David Prentice
Quarry Capital Corporation
Paul A. Raidna
Robert J. and Terri L. Rusch, Jr.
John B. Scates
Craig E. Sherman
A.G. Edwards & Sons, Inc. Custodian for Daniel A. Sherman, M.D.,
FBO Daniel A. Sherman M.D. Profit Sharing Plan
FBO Daniel A. Sherman M.D. Profit Sharing Plan
Vicki L. Sheron
Christopher F. Smith
Gary B. and Marilyn R. Smith
Beth Starbuck
Craig W. and Valerie A. Stewart
STF III, L.P.
Joseph P. Strecker and D. Dyann Strecker
Paul and Mary Elizabeth Stritmatter
A.L. and Lucy J. Sytman
T2G Limited Partnership
David R. Toll
Trans Cosmos USA, Inc.
TTEE Robert W. Bethke Living Trust U/A DTD August 22, 1986
VLG Investments 1998
Wayne C. Wager
Christian Wedell
Malcolm G. Witter
Robert L. and Valerie R. Yurina
Exhibit D
SERIES C INVESTORS
Douglas D. Adkins
Alchemy Partners, LLC
Charles L. Anderson
Richard W. Anderson
Travis Ashby
Aspiri Enterprises LLC
Milton A. Barrett, Jr. and Jane S. Barrett
Roger C. Berger, Marital Trust
Andrew J. Berndt
John Brenneman
Deborah Brunton
Frederick S. and Jane H. Buckner
Thomas J. Cable
Ivan and Delores Christianson
Jeff and Janee Christianson
CIBC World Markets as custodian for
Dr. Lynn Staheli IRA
Dr. Lynn Staheli IRA
Reed Corry
Dale L. Cowles
Critchfield Investment Partners, L.P.
CSK-4 Investment Fund
Dean Witter Reynolds custodian for
Marianne LoGerfo IRA Standard
Marianne LoGerfo IRA Standard
Delphic Navigation Company Limited
Thomas E. Doelger
Chris T. Economou
Ershig Family Ltd. Partnership
Ruth G. Fleischmann
Drew and Kristin Fletcher
Edward D. Fugo, Jr.
John Gerondis
James Giammatteo
Gary Glant
Jonathan Goldner
Marcia Goldner
Steven Goldner as custodian for
Joshua Goldner
Joshua Goldner
Steven Goldner as custodian for
Julia Goldner
Julia Goldner
Thomas Green
Dan M. and Wendy Ershig Guy III
H&L Investment Company
Frank B. and Joan B. Hall
Scott and Kerry Hall
Charles K. Hanson
Leroy E. Hood, M.D., Ph.D.
Tom and JoAnn Hornsten
Grady Hughes
Donn and Abigail Hutchins
Bost & Co. FBO
Leonard A. Yerkes III
Leonard A. Yerkes III
Itochu Finance Corporation
Barbara Olivia Jackson
Jerome M. Johnson
Makoto Kaneshiro
William T. Karr
John Keister
David Kenyon
Sanjeev Khanna
Edward B. Kibble
Pamela L. Kirkpatrick
Donald E. Kline
Larry Kopp
Bruce Lamka and Susan Duffy
The Lawrence Trust as dated Aug. 3, 1989,
as amended June 6, 1997 and Sept. 16, 1998
as amended June 6, 1997 and Sept. 16, 1998
Michael Ludwig
Luna Capital LLC I
Pamela and Robert McCabe
Daniel J. McHugh
Marion Colby McNamara
Joanne K. Meyers
Mission Management and Trust FBO
Lawrence Ring IRA Account 7467
Lawrence Ring IRA Account 7467
Robert H. Monroe
MST Partners — Leonard H. Shapiro
Richard J. and Vonda Olson
Gary Oppenheim
PAC Partnership
Carol F. Padelford
Donald F. Padelford
Chris Pallis
Patricia L. Pedegana
Donald E. Petersen and Laura J. Peterson, JTWROS
David Pienkowski
Brent and Linda Pistorese
Prentice Family Partnership
George A. and Sara A. Reynolds
John B. Scates
Scott E. Scribner
Martin Selig
Steven L. and Judith F. Sherman
Vicki L. Sheron
Geoffrey B. Shilling
John M. Spicer
Robert H. Splan
Survivors Trust Dated 7/31/93
Survivors Trust Dated 7/31/93
Craig W. Stewart
Craig W. and Valerie A. Stewart
Harry G. Stewart
STF III, L.P.
Joseph P. Strecker IRA 8566-1600
Joseph P. and D. Dyann Strecker
D. Dyann Strecker IRA 8566-1258
Steve and Lori Sweningson
Michael Swindling
Tranceka, LLC
Trans Cosmos USA, Inc.
Geoffrey P. and Judith K. Vernon
Joseph R. Vitulli
Bruce E. Watterson
Malcolm G. Witter
Exhibit E
SERIES D INVESTORS
Douglas D. Adkins
Richard W. Anderson
Aspiri Enterprises LLC
Thomas W. Barwick
Catherine K. Boshaw
Frederick S. and Jane H. Buckner
Richard and Sallie Burhans
Mark Callaghan
Nicole Chitnis
Jeff and Janee Christianson
Ivan and Delores Christianson
Reed Corry
Mary E. Drobka
Georgette Essad
Gretchen Fava
Drew and Kristin Fletcher
Robert M. Frayne, Jr. and Barbara R. Frayne
Francis D. Galey
Gary Glant
Eunice Kensinger Goldner
Eunice Kensinger Goldner as custodian for
Julia Starbuck Goldner under the UGMA
Julia Starbuck Goldner under the UGMA
Marcia M. Goldner
Jonathan R. Goldner
Richard D. Goldner
Steven C. Goldner
Eunice Kensinger Goldner as custodian for
Joshua Starbuck Goldner under the UGMA
Joshua Starbuck Goldner under the UGMA
Dan M. and Wendy Ershig Guy, III
H&L Investment Company
David E. Hartman
John M. Hopkins
Tom R. Hornsten
Grady M. Hughes
Barbara Olivia Jackson
City National Bank Trustee FBO DWT/Thomas James
Donald M. Jasper
Donald S. and Beverly J. Jefferson JTWROS
Jerome M. Johnson
John Keister
Russell C. Keithly
Edward B. Kibble
Larry S. Kopp
Duane and Suzanne Koxlien
Bruce Lamka and Susan Duffy
Joanne K. Meyers
Michele K. McCarthy Revocable Trust
Michele McCarthy Trustee
Michele McCarthy Trustee
Karen McDonald
Michael C. Mossman
MST Partners
Richard J. and Vonda M. Olson
Donald F. Padelford
Chris Pallis
Donald E. Petersen and Laura J. Peterson, JTWROS
David Pienkowski
Brent P. Piesterese and Linda D. Piesterese Revocable Living Trust
Arthur C. III and Kathleen Popham
Prentice Family Partnership
Paul A. Raidna
George A. and Sara A. Reynolds
Bradley G. Rich
John C. Rosling
George E.S. Seligman
Robert H. Splan Survivors Trust
Steven L. Sherman
Staheli, Inc., Profit Sharing Trustees: Lynn and Lana Staheli
Beth Starbuck
Joseph P. and D. Dyann Strecker
Summit Capital Partners, L.P.
Michael J. Swindling
Janet Taggares
Tranceka, LLC
J. Joseph Veranth Rollover IRA
Gregory P. Vernon
Trevor Vernon
Joseph R. Vitulli
Malcolm G. Witter
Robert L. and Valerie R. Yurina
Exhibit F
COMMON SHAREHOLDERS
Aspiri Enterprises LLC
Scott T. Bell*
John Brenneman
Thomas F. Broderick
H. Raymond Cairncross
H. Raymond Cairncross as Custodian for Caitlin D. Cairncross*
H. Raymond Cairncross as Custodian for Christian H. Cairncross*
Terrence I. Danysh
Gregory A. Demopulos, M.D.
William W. Ericson*
Demopulos Family Trust
Janet Garrow*
Joshua Gebhardt*
Gail E. Gillenwater*
John W. Hempelmann*
Jeffrey Herz*
George Kargianis*
Marcia S. Kelbon*
Craig T. Kobayashi*
Donald E. Marcy
James W. McGinity*
Allison and Todd McIntyre*
John McKay*
Mark Mooney*
Eoin O’Leary*
George Pallis*
Themio Pallis*
Pamela A. Pierce-Palmer, M.D., Ph.D.
J. Thomas Richardson*
Dawson Taylor*
David R. Toll
Tranceka, LLC
Daniel C. Vaughn*
Rachel A. Weiss*
| * | Shall not be deemed a Common Shareholder pursuant to this Agreement until such time as such person or entity shall have executed a counterpart signature page to this Agreement. |
Exhibit 10.1
INDEMNIFICATION AGREEMENT
This
Indemnification Agreement (this “Agreement”) is made as of _________, ___
by
and between Omeros Corporation, a Washington corporation (the “Company”), and
_________
(“Indemnitee”), for good and valuable consideration as set forth below.
RECITALS
A. Indemnitee is an officer or director of the Company and in such capacity is performing
valuable services for the Company.
B. The Company recognizes the importance, and increasing difficulty, of obtaining adequate
liability insurance coverage for its directors, officers, employees, agents and fiduciaries.
C. The Company further recognizes that, at the same time as the availability and coverage of
such insurance has become more limited, litigation against corporate directors, officers,
employees, agents and fiduciaries has continued to increase.
D. As of the date hereof, the Company has provisions for indemnification of its directors and
officers in Article 12 of its Articles of Incorporation (the “Articles of Incorporation”)
and Section 10 of its Bylaws (the “Bylaws”), which provide for indemnification of the
Company’s directors and officers to the fullest extent permitted by the Washington Business
Corporation Act (the “Statute”).
E. The Bylaws and the Statute specifically provide that they are not exclusive, and thereby
contemplate that contracts may be entered into between the Company and the members of its Board of
Directors and its officers with respect to indemnification of such directors and officers.
F. The Bylaws provide that the Company may maintain, at its expense, insurance to protect
itself and any of its directors and officers against liability asserted against such persons
incurred in such capacity whether or not the Company has the power to indemnify such persons
against the same liability under Section 23B.08.510 or .520 of the Statute (as defined below) or a
successor statute.
G. In order to induce Indemnitee to continue to serve as an officer and/or director, as the
case may be, of the Company, the Company has agreed to enter into this Agreement with Indemnitee.
AGREEMENT
In consideration of the recitals above, the mutual covenants and agreements herein contained,
and Indemnitee’s continued service as an officer and/or director, as the case may be, of the
Company after the date hereof, the parties to this Agreement agree as follows:
1. Indemnity of Indemnitee
(a) Scope. The Company agrees to hold harmless and indemnify Indemnitee to the full
extent permitted by law, without regard to the limitations in RCW 23B.08.510 through 23B.08.550 and
23B.08.560(2) and notwithstanding that such indemnification is not specifically authorized by this
Agreement, the Company’s Articles of Incorporation, the Bylaws, the Statute or otherwise.
(b) Changes to Indemnification Right. In the event of any change, after the date of
this Agreement, in any applicable law, statute or rule regarding the right of a Washington
corporation to indemnify a member of its board of directors or an officer, such changes, to the
extent that they would expand Indemnitee’s rights hereunder, shall be within the purview of
Indemnitee’s rights and the Company’s obligations hereunder, and, to the extent that they would
narrow Indemnitee’s rights hereunder, shall be excluded from this Agreement; provided, however,
that any change that is required by applicable laws, statutes or rules to be applied to this
Agreement shall be so applied regardless of whether the effect of such change is to narrow
Indemnitee’s rights hereunder.
(c) Nonexclusivity. The indemnification provided by this Agreement shall not be
deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Articles of
Incorporation, the Bylaws, any agreement, any vote of shareholders or disinterested directors, the
Statute, or otherwise, whether as to action in Indemnitee’s official capacity or otherwise.
(d) Additional Indemnity. If Indemnitee was or is made a party, or is threatened to
be made a party, to or is otherwise involved (including, without limitation, as a witness) in any
Proceeding (as defined below), the Company shall hold harmless and indemnify Indemnitee from and
against any and all losses, claims, damages, costs, liabilities, expenses (including attorneys’
fees), judgments, fines, ERISA excise taxes or penalties, amounts paid in settlement (if such
settlement is approved in advance by the Company, which approval shall not be unreasonably
withheld) actually and reasonably incurred by Indemnitee in connection with such Proceeding
(collectively, “Damages”) if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was
unlawful.
(e) Definition of Proceeding. For purposes of this Agreement, “Proceeding”
shall mean any actual, pending or threatened or completed action, suit, claim, investigation,
hearing, proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative or investigative and whether formal or informal, in which Indemnitee is, was or
becomes involved by reason of the fact that Indemnitee is or was a director, officer, employee or
agent of the Company or that, being or having been such a director, officer, employee or agent,
Indemnitee is or was serving at the request of the Company as a director, officer, partner,
employee, trustee or agent of another corporation or of a partnership, joint venture, trust or
other enterprise (collectively a “Related Company”), including service with respect to an
employee benefit plan, whether the basis of such proceeding is alleged action (or inaction) by
Indemnitee in an official capacity as a director, officer, employee, partner, trustee or agent or
in any other capacity while serving as a director, officer,
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employee, partner, trustee or agent; provided, however, that, except with respect to an action
to enforce the provisions of this Agreement, Proceeding shall not include any action, suit, claim
or proceeding instituted by or at the direction of Indemnitee unless such action, suit, claim or
proceeding is or was authorized by the Company’s Board of Directors.
(f) Determination of Entitlement. In the event that a determination of Indemnitee’s
entitlement to indemnification is required pursuant to Section 23B.08.550 of the Statute or any
successor thereto or pursuant to other applicable law, the appropriate decision-maker shall make
such determination; provided, however, that Indemnitee shall initially be presumed in all cases to
be entitled to indemnification, unless the Company shall deliver to Indemnitee written notice of a
determination that Indemnitee is not entitled to indemnification within twenty (20) days of the
Company’s receipt of Indemnitee’s initial written request for indemnification.
(g) Survival. The indemnification provided under this Agreement shall apply to any
and all Proceedings, notwithstanding that Indemnitee has ceased to be a director, officer,
employee, trustee or agent of the Company or a Related Company.
2. Expense Advances
(a) Generally. The right to indemnification of Damages conferred by Section 1 shall
include the right to have the Company pay Indemnitee’s expenses in any Proceeding as such expenses
are incurred and in advance of such Proceeding’s final disposition (such right is referred to
hereinafter as an “Expense Advance”). Any Expense Advance to be made under this Agreement
shall be paid by the Company to Indemnitee within twenty (20) days following delivery of a written
request therefor by Indemnitee to the Company.
(b) Conditions to Expense Advance. The Company’s obligation to provide an Expense
Advance is subject to the following conditions:
(i) Undertaking. If the Proceeding arose in connection with Indemnitee’s service as a
director and/or officer of the Company (and not in any other capacity in which Indemnitee rendered
service, including service to any Related Company), then Indemnitee or his or her representative
shall have executed and delivered to the Company an undertaking, which need not be secured and
shall be accepted without reference to Indemnitee’s financial ability to make repayment, by or on
behalf of Indemnitee to repay all Expense Advances if and to the extent that it shall ultimately be
determined by a final, unappealable decision rendered by a court having jurisdiction over the
parties and the question that Indemnitee is not entitled to be indemnified for such Expense Advance
under this Agreement or otherwise. No interest shall be charged on any obligation to reimburse the
Company for an Expense Advance.
(ii) Cooperation. Indemnitee shall give the Company such information and cooperation
as it may reasonably request and as shall be within Indemnitee’s power.
(iii) Affirmation. Indemnitee shall furnish, upon request by the Company and if
required under applicable law, a written affirmation of Indemnitee’s good faith belief that any
applicable standards of conduct have been met by Indemnitee.
-3-
3. Procedures for Enforcement
(a) Enforcement. In the event that a claim for indemnity, an Expense Advance or
otherwise is made hereunder and is not paid in full within sixty (60) days (twenty (20) days for an
Expense Advance) after written notice of such claim is delivered to the Company, Indemnitee may,
but need not, at any time thereafter bring suit against the Company to recover the unpaid amount of
the claim (an “Enforcement Action”).
(b) Presumptions in Enforcement Action. In any Enforcement Action the following
presumptions (and limitation on presumptions) shall apply:
(i) The Company shall conclusively be presumed to have entered into this Agreement and assumed
the obligations imposed on it hereunder in order to induce Indemnitee to serve or continue to serve
as an officer and/or director of the Company;
(ii) Neither (A) the failure of the Company (including the Company’s Board of Directors,
independent or special legal counsel or the Company’s shareholders) to have made a determination
prior to the commencement of the Enforcement Action that indemnification of Indemnitee is proper in
the circumstances nor (B) an actual determination by the Company, its Board of Directors,
independent or special legal counsel or shareholders that Indemnitee is not entitled to
indemnification shall be a defense to the Enforcement Action or create a presumption that
Indemnitee is not entitled to indemnification hereunder; and
(iii) If Indemnitee is or was serving as a director, officer, employee, trustee or agent of a
corporation of which a majority of the shares entitled to vote in the election of its directors is
held by the Company or in an executive or management capacity in a partnership, joint venture,
trust or other enterprise of which the Company or a wholly owned subsidiary of the Company is a
general partner or has a majority ownership, then such corporation, partnership, joint venture,
trust or enterprise shall conclusively be deemed a Related Company and Indemnitee shall
conclusively be deemed to be serving such Related Company at the request of the Company.
(c) Attorneys’ Fees and Expenses for Enforcement Action. In the event Indemnitee is
required to bring an Enforcement Action, the Company shall indemnify and hold harmless Indemnitee
against all of Indemnitee’s fees and expenses in bringing and pursuing the Enforcement Action
(including attorneys’ fees at any stage, including on appeal); provided, however, that the Company
shall not be required to provide such indemnity for such attorneys’ fees or expenses if a court of
competent jurisdiction determines that each of the material assertions made by Indemnitee in such
Enforcement Action was not made in good faith or was frivolous.
4. Limitations on Indemnity; Mutual Acknowledgment
(a) Limitation on Indemnity. No indemnity pursuant to this Agreement shall be
provided by the Company:
(i) On account of any suit in which a final, unappealable judgment is rendered against
Indemnitee for an accounting of profits made from the purchase or sale by
-4-
Indemnitee of securities of the Company in violation of the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto;
(ii) For Damages that have been paid directly to Indemnitee by an insurance carrier under a
policy of officers’ and directors’ liability insurance maintained by the Company;
(iii) On account of Indemnitee’s conduct which is finally adjudged to have been intentional
misconduct, a knowing violation of law or the RCW 23B.08.310 or any successor provision of the
Statute, or a transaction from which Indemnitee derived benefit in money, property or services to
which Indemnitee is not legally entitled; or
(vi) If a final decision by a court having jurisdiction in the matter shall determine that
such indemnification is not lawful.
(b) Mutual Acknowledgment. The Company and Indemnitee acknowledge that, in certain
instances, federal law or public policy may override applicable state law and prohibit the Company
from indemnifying Indemnitee under this Agreement or otherwise. For example, the Company and
Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken
the position that indemnification is not permissible for liabilities arising under certain federal
securities laws, and federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and acknowledges that the Company has undertaken or may be
required in the future to undertake with the SEC to submit the question of indemnification to a
court in certain circumstances for a determination of the Company’s right under public policy to
indemnify Indemnitee.
5. Notification and Defense of Claim
(a) Notification. Promptly after receipt by Indemnitee of notice of the commencement
(including a threatened assertion or commencement) of any Proceeding, Indemnitee will, if a claim
in respect thereof is to be made against the Company under this Agreement, notify the Company of
the commencement thereof; but the omission so to notify the Company will not relieve the Company
from any liability which it may have to Indemnitee under this Agreement unless and only to the
extent that such omission can be shown to have prejudiced the Company’s ability to defend the
Proceeding.
(b) Defense of Claim. With respect to any such Proceeding as to which Indemnitee
notifies the Company of the commencement thereof:
(i) The Company may participate therein at its own expense;
(ii) The Company, jointly with any other indemnifying party similarly notified, may assume the
defense thereof, with counsel satisfactory to Indemnitee. After notice from the Company to
Indemnitee of its election so to assume the defense thereof, the Company shall not be liable to
Indemnitee under this Agreement for any legal or other expenses (other than reasonable costs of
investigation) subsequently incurred by Indemnitee in connection with the defense thereof unless
(A) the employment of counsel by Indemnitee has been authorized by the Company, (B)
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Indemnitee shall have reasonably concluded that there may be a conflict of interest between
the Company and Indemnitee in the conduct of the defense of such action, or (C) the Company shall
not in fact have employed counsel to assume the defense of such action, in each of which cases the
fees and expenses of counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the
Company or as to which Indemnitee shall have made the conclusion provided for in (B) above;
(iii) The Company shall not be liable to indemnify Indemnitee under this Agreement for any
amounts paid in settlement of any Proceeding effected without its written consent;
(iv) The Company shall not settle any action or claim in any manner which would impose any
penalty or limitation on Indemnitee without Indemnitee’s written consent; and
(v) Neither the Company nor Indemnitee will unreasonably withhold its, his or her consent to
any proposed settlement.
(c) Notice to Insurers. If, at the time of the receipt of a notice of a claim
pursuant to Section 5(a) hereof, the Company has director and officer liability insurance in
effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such
policies.
6. Severability. Nothing in this Agreement is intended to require or shall be
construed as requiring the Company to do or fail to do any act in violation of applicable law. The
Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall
not constitute a breach of this Agreement. The provisions of this Agreement shall be severable, as
provided in this Section 6. If this Agreement or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify
Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not
have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.
7. No Employment Rights. Nothing contained in this Agreement is intended to create in
Indemnitee any right to continued employment.
8. Officer and Director Liability Insurance. The Company shall, from time to time,
make the good faith determination whether or not it is practicable for the Company to obtain and
maintain a policy or policies of insurance with reputable insurance companies providing the
officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the
Company’s performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance coverage against the
protection afforded by such coverage. In all policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights
and benefits as are accorded to the most favorably insured of the Company’s directors, if
Indemnitee
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is a director; or of the Company’s officers, if Indemnitee is not a director of the Company
but is an officer. Notwithstanding the foregoing, the Company shall have no obligation to obtain
or maintain such insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are disproportionate to the amount of
coverage provided, if the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a
parent or subsidiary of the Company.
9. Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines
or penalties actually or reasonably incurred in the investigation, defense, appeal or settlement of
any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof,
the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments,
fines or penalties to which Indemnitee is entitled.
10. Miscellaneous
(a) Governing Law. 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 Washington, without giving effect to principles of
conflict of law.
(b) Entire Agreement, Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing 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.
(c) 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.
(d) Notices. Any notice, demand or request required or permitted to be given under
this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified at such party’s
address as set forth below or as subsequently modified by written notice.
(e) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.
(f) Successors and Assigns. This Agreement shall be binding upon Indemnitee and upon
the Company, its successors and assigns, and shall inure to the benefit of Indemnitee, Indemnitee’s
heirs, personal representatives and assigns and to the benefit of the Company, its
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successors and assigns. The Company shall require any successor to the Company (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of the Company, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to perform if no such
succession had taken place.
(g) Subrogation. 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 to effectively bring suit to enforce such rights.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and
year first above written.
| OMEROS CORPORATION |
||||
| By: | ||||
| [Name] | ||||
| [Title] | ||||
| Address: | ||||
AGREED TO AND ACCEPTED:
[Name]
(Signature)
Address:
Exhibit 10.2
OMEROS MEDICAL SYSTEMS, INC.
SECOND AMENDED AND RESTATED 1998 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Amended and Restated 1998 Stock Option
Plan are to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of the Company and its
Subsidiaries and to promote the success of the Company’s business. Options granted under the Plan
may be incentive stock options (as defined under Section 422 of the Code) or non-statutory stock
options, as determined by the Administrator at the time of grant of an option and subject to the
applicable provisions of Section 422 of the Code, as amended, and the regulations promulgated
thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) “Administrator” means the Board or any of its Committees appointed pursuant to
Section 4 of the Plan.
(b) “Board” means the Board of Directors of the Company.
(c) “Cause” for termination of an Optionee’s Continuous Status will exist if the
Optionee is terminated for any of the following reasons: (i) Optionee’s willful failure
substantially to perform his or her duties and responsibilities to the Company or deliberate
violation of a Company policy; (ii) Optionee’s commission of any act of fraud, embezzlement,
dishonesty or any other willful misconduct that has caused or is reasonably expected to result in
material injury to the Company; (iii) unauthorized use or disclosure by Optionee of any proprietary
information or trade secrets of the Company or any other party to whom the Optionee owes an
obligation of nondisclosure as a result of his or her relationship with the Company; or (iv)
Optionee’s willful breach of any of his or her obligations under any written agreement or covenant
with the Company. The determination as to whether an Optionee is being terminated for Cause shall
be made in good faith by the Company and shall be final and binding on the Optionee. The foregoing
definition does not in any way limit the Company’s ability to terminate an Optionee’s employment or
consulting relationship at any time as provided in Section 5(d) below, and the term “Company” will
be interpreted to include any Subsidiary, Parent, Affiliate or successor thereto, if appropriate.
(d) “Code” means the Internal Revenue Code of 1986, as amended.
(e) “Committee” means the Committee appointed by the Board of Directors in accordance
with Section 4(a) of the Plan.
(f) “Common Stock” means the Common Stock of the Company.
(g) “Company” means Omeros Medical Systems, Inc., a Washington corporation.
(h) “Consultant” means any person, including an advisor, who is engaged by the Company
or any Parent or Subsidiary to render services and is compensated for such services, and any
director of the Company whether compensated for such services or not, provided that if and in the
event the Company registers any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for their services or are
paid only a director’s fee by the Company.
(i) “Constructive Termination” shall be deemed to occur if (A)(1) there is a material
adverse change in Employee’s position causing such position to be of materially reduced stature or
responsibility, (2) a reduction of more than thirty percent (30%) of Employee’s base compensation
unless in connection with similar decreases of other similarly situated employees of the Company or
(3) Employee’s refusal to comply with the Company’s request to relocate to a facility or location
more than fifty (50) miles from the Company’s current location and (B) within the thirty (30) day
period immediately following such material change or reduction Employee elects to terminate his or
her employment voluntarily.
(j) “Continuous Status as an Employee or Consultant” means the absence of any
interruption or termination of service as an Employee or Consultant. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case of: (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Administrator, provided that such
leave is for a period of not more than ninety (90) days, unless re-employment upon the expiration
of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case of transfers between locations of the
Company or between the Company, its Subsidiaries or their respective successors. For purposes of
this Plan, a change in status from an Employee to a Consultant or from a Consultant to an Employee
will not constitute an interruption of Continuous Status as an Employee or Consultant.
(k) “Employee” means any person, including officers and directors, employed by the
Company or any Parent or Subsidiary of the Company, with the status of employment determined based
upon such minimum number of hours or periods worked as shall be determined by the Administrator in
its discretion, subject to any requirements of the Code. The payment of a director’s fee by the
Company to a director shall not be sufficient to constitute “employment” of such director by the
Company.
(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(m) “Fair Market Value” means, as of any date, the fair market value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market
system including without limitation the National Market of the National Association of Securities
Dealers, Inc. Automated Quotation System (“Nasdaq”), its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were reported), as quoted on such
system or exchange, or the exchange with the greatest volume of trading in Common Stock for the last market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the Administrator deems reliable;
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(ii) If the Common Stock is quoted on the Nasdaq (but not on the National Market thereof) or
regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the Common Stock for
the last market trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value
thereof shall be determined in good faith by the Administrator.
(n) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code, as designated in the applicable option
agreement.
(o) “Listed Security” means any security of the Company that is listed or approved for
listing on a national securities exchange or designated or approved for designation as a national
market system security on an interdealer quotation system by the National Association of Securities
Dealers, Inc.
(p) “Named Executive” means any individual who, on the last day of the Company’s
fiscal year, is the chief executive officer of the Company (or is acting in such capacity) or among
the four most highly compensated officers of the Company (other than the chief executive officer).
Such officer status shall be determined pursuant to the executive compensation disclosure rules
under the Exchange Act.
(q) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option, as designated in the applicable option agreement.
(r) “Option” means a stock option granted pursuant to the Plan.
(s) “Optioned Stock” means the Common Stock subject to an Option.
(t) “Optionee” means an Employee or Consultant who receives an Option.
(u) “Parent” means a “parent corporation”, whether now or hereafter existing, as
defined in Section 424(e) of the Code, or any successor provision.
(v) “Plan” means this Amended and Restated 1998 Stock Option Plan .
(w) “Reporting Person” means an officer, director, or greater than ten percent (10%)
shareholder of the Company within the meaning of Rule 16a-2 under the Exchange Act, who is required
to file reports pursuant to Rule 16a-3 under the Exchange Act.
(x) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, as the same may
be amended from time to time, or any successor provision.
(y) “Share” means a share of the Common Stock, as adjusted in accordance with Section
11 of the Plan.
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(z) “Stock Exchange” means any stock exchange or consolidated stock price reporting
system on which prices for the Common Stock are quoted at any given time.
(aa) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing,
as defined in Section 424(f) of the Code, or any successor provision.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of the Plan,
the maximum aggregate number of shares that may be optioned and sold under the Plan is
2,611,516 shares of Common Stock. The shares may be authorized, but unissued, or
reacquired Common Stock. If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares that were subject thereto shall, unless the
Plan shall have been terminated, become available for future grant under the Plan. In addition,
any shares of Common Stock which are retained by the Company upon exercise of an Option in order to
satisfy the exercise price for such Option or any withholding taxes due with respect to such
exercise shall be treated as not issued and shall continue to be available under the Plan.
4. Administration of the Plan
(a) Initial Plan Procedure. Prior to the date, if any, upon which the Company becomes
subject to the Exchange Act, the Plan shall be administered by the Board or a committee appointed
by the Board.
(b) Plan Procedure After the Date, if any, Upon Which the Company Becomes Subject to the
Exchange Act.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3, the Plan may be
administered by different bodies with respect to directors, non-director officers and Employees or
Consultants who are not Reporting Persons.
(ii) Administration With Respect to Reporting Persons. With respect to grants of
Options to Employees who are Reporting Persons, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with Rule 16b-3 with respect to a plan intended to
qualify thereunder as a discretionary plan, or (B) a committee designated by the Board to
administer the Plan, which committee shall be constituted in such a manner as to permit the Plan to
comply with Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such committee shall continue to serve in its designated capacity until
otherwise directed by the Board. From time to time the Board may increase the size of the
committee and appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused, and remove all
members of the committee and thereafter directly administer the Plan, all to the extent permitted
by Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan. No
person serving as a member of an Administrator that has authority with respect to grants to Reporting Persons shall be eligible to receive any grant under the Plan which would cause
such member to cease to be “disinterested” within the meaning of Rule 16b-3.
(iii) Administration With Respect to Consultants and Other Employees. With respect to
grants of Options to Employees or Consultants who are not Reporting Persons,
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the Plan shall be administered by (A) the Board or (B) a committee designated by the Board, which committee shall be
constituted in such a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of state corporate and securities laws, of the Code and of
any applicable Stock Exchange (the “Applicable Laws”). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan and in the
case of a Committee, the specific duties delegated by the Board to such Committee, and subject to
the approval of any relevant authorities, including the approval, if required, of any Stock
Exchange, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(m) of
the Plan;
(ii) to select the Consultants and Employees to whom Options may from time to time be granted
hereunder;
(iii) to determine whether and to what extent Options are granted hereunder;
(iv) to determine the number of shares of Common Stock to be covered by each such option
granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of
any option granted hereunder;
(vii) to determine whether and under what circumstances an Option may be settled in cash under
Section 9(d) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then current Fair Market Value if the
Fair Market Value of the Common Stock covered by such Option shall have declined since the date the
Option was granted;
(ix) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;
(x) to permit the early exercise of any Option in exchange for restricted stock subject to a
Company right of repurchase; and
(xi) in order to fulfill the purposes of the Plan and without amending the Plan, to modify
grants of Options to participants who are foreign nationals or employed
-5-
outside of the United States in order to recognize differences in local law, tax policies or customs.
(c) Effect of Administrator’s Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees.
5. Eligibility
(a) Nonstatutory Stock Options may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has been granted an Option
may, if he or she is otherwise eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement as either an Incentive
Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the
extent that the aggregate Fair Market Value of the Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares subject to an Incentive
Stock Option shall be determined as of the date of the grant of such Option.
(d) The Plan shall not confer upon any Optionee any right with respect to continuation of
employment or consulting relationship with the Company, nor shall it interfere in any way with such
Optionee’s right or the Company’s right to terminate his or her employment or consulting
relationship at any time, with or without Cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the shareholders of the Company as described
in Section 18 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement. However, in the
case of an Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration
(a) The per share exercise price for the Shares to be issued pursuant to exercise of an Option
shall be such price as is determined by the Board, but shall be subject to the following:
-6-
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns
stock representing more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred
ten percent (110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price shall be no less than one hundred
percent (100%) of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be such
price as determined by the Administrator provided that if such eligible person is, at the time of
the grant of such Option, a Named Executive of the Company, the per Share exercise price shall be
no less than 100% of the Fair Market Value on the date of grant if such Option is intended to
qualify as performance-based compensation under Section 162(m) of the Code.
(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price
other than as required above pursuant to a merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon exercise of an Option,
including the method of payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may consist entirely of (i)
cash, (ii) check, (iii) promissory note, (iv) other Shares that (x) in the case of Shares acquired
upon exercise of an Option, have been owned by the Optionee for more than six months on the date of
surrender or such other period as may be required to avoid a charge to the Company’s earnings, and
(y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which such Option shall be exercised, (v) authorization for the Company to retain from
the total number of Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total number of Shares as
to which the Option is exercised, (vi) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if applicable, shall require to
effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price and any applicable income or employment taxes, (vii) delivery of an
irrevocable subscription agreement for the Shares that irrevocably obligates the option holder to
take and pay for the Shares not more than twelve months after the date of delivery of the
subscription agreement, (viii) any combination of the foregoing methods of payment, or (ix) such other consideration and method
of payment for the issuance of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the Company.
-7-
9. Exercise of Option
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder
shall be exercisable at such times and under such conditions as determined by the Administrator,
including performance criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such exercise has been given
to the Company in accordance with the terms of the Option by the person entitled to exercise the
Option and the Company has received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any consideration and method
of payment allowable under Section 8(b) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned Stock, not withstanding
the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of Shares that
thereafter may be available, both for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. Except as otherwise set
forth in this Section 9(b), the Administrator shall establish and set forth in the applicable
Option Agreement the terms and conditions upon which an Option shall remain exercisable, if at all,
following termination of an Optionee’s Continuous Status, which provisions may be waived or
modified by the Administrator at any time in the Administrator’s sole discretion. To the extent
that the Optionee is not entitled to exercise an Option at the date of his or her termination of
Continuous Status, or if the Optionee (or other person entitled to exercise the Option) does not
exercise the Option to the extent so entitled within the time specified in the Option Agreement or
below (as applicable), the Option shall terminate and the Optioned Stock underlying the unexercised
portion of the Option shall revert to the Plan. In no event may any Option be exercised after the
expiration of the Option term as set forth in the Option Agreement (and subject to Section 7).
The following provisions (1) shall apply to the extent an Option Agreement does not specify
the terms and conditions upon which an Option shall terminate upon termination of an Optionee’s Continuous Status, and (2) establish the minimum post-termination exercise
periods that may be set forth in an Option Agreement:
(i) Termination other than Upon Disability or Death or for Cause. In the event of
termination of an Optionee’s Continuous Status, such Optionee may exercise an Option for 30 days
following such termination to the extent the Optionee was entitled to exercise
-8-
it at the date of such termination. No termination shall be deemed to occur and this Section 9(b)(i) shall not apply
if (i) the Optionee is a Consultant who becomes an Employee, or (ii) the Optionee is an Employee
who becomes a Consultant.
(ii) Disability of Optionee. In the event of termination of an Optionee’s Continuous
Status as a result of his or her disability within the meaning of Section 22(e)(3) of the Code,
such Optionee may exercise an Option at any time within twelve months following such termination to
the extent the Optionee was entitled to exercise it at the date of such termination.
(iii) Death of Optionee. In the event of the death of an Optionee during the period
of Continuous Status since the date of grant of the Option, or within thirty days following
termination of Optionee’s Continuous Status, the Option may be exercised by Optionee’s estate or by
a person who acquired the right to exercise the Option by bequest or inheritance at any time within
twelve months following the date of death, but only to the extent of the right to exercise that had
accrued at the date of death or, if earlier, the date the Optionee’s Continuous Status terminated.
(iv) Termination for Cause. In the event of termination of an Optionee’s Continuous
Status for Cause, any Option (including any exercisable portion thereof) held by such Optionee
shall immediately terminate in its entirety upon first notification to the Optionee of termination
of the Optionee’s Continuous Status. If an Optionee’s employment or consulting relationship with
the Company is suspended pending an investigation of whether the Optionee shall be terminated for
Cause, all the Optionee’s rights under any Option likewise shall be suspended during the
investigation period and the Optionee shall have no right to exercise any Option. This Section
9(b)(iv) shall apply with equal effect to vested Shares acquired upon exercise of an Option granted
prior to the date, if any, upon which the Common Stock becomes a Listed Security to a person other
than an officer, Director or Consultant, in that the Company shall have the right to repurchase
such Shares from the Optionee upon the following terms: (A) the repurchase is made within 90 days
of termination of the Optionee’s Continuous Status for Cause at the Fair Market Value of the Shares
as of the date of termination, (B) consideration for the repurchase consists of cash or
cancellation of purchase money indebtedness, and (C) the repurchase right terminates upon the
effective date of the Company’s initial public offering of its Common Stock. With respect to
vested Shares issued upon exercise of an Option granted to any officer, Director or Consultant, the
Company’s right to repurchase such Shares upon termination of the Optionee’s Continuous Status for
Cause shall be made at the Optionee’s original cost for the Shares and shall be effected pursuant
to such terms and conditions, and at such time, as the Administrator shall determine. Nothing in
this Section 9(b)(iv) shall in any way limit the Company’s right to purchase unvested Shares issued
upon exercise of an Option as set forth in the applicable Option Agreement.
(c) Rule 16b-3. Options granted to Reporting Persons shall comply with Rule 16b-3 and
shall contain such additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption for Plan transactions.
(d) Buyout Provisions. The Administrator may at any time offer to buy out for a
payment in cash or Shares, an Option previously granted, based on such terms and
-9-
conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.
10. Stock Withholding to Satisfy Withholding Tax Obligations.
(a) As a condition of the exercise of an Option granted under the Plan, the Optionee (or in
the case of the Optionee’s death, the person exercising the Option) shall make such arrangements as
the Administrator may require for the satisfaction of any applicable federal, state, local or
foreign withholding tax obligations that may arise in connection with the exercise of the Option
and the issuance of Shares. The Company shall not be required to issue any Shares under the Plan
until such obligations are satisfied. If the Administrator allows the withholding or surrender of
Shares to satisfy an Optionee’s tax withholding obligations under this Section 10 (whether pursuant
to Section 10(c), (d) or (e), or otherwise), the Administrator shall not allow Shares to be
withheld in an amount that exceeds the minimum statutory withholding rates for federal and state
tax purposes, including payroll taxes.
(b) In the case of an Employee and in the absence of any other arrangement, the Employee shall
be deemed to have directed the Company to withhold or collect from his or her compensation an
amount sufficient to satisfy such tax obligations from the next payroll payment otherwise payable
after the date of an exercise of the Option.
(c) This Section 10(c) shall apply only after the date, if any, upon which the Common Stock
becomes a Listed Security. In the case of Optionee other than an Employee (or in the case of an
Employee where the next payroll payment is not sufficient to satisfy such tax obligations, with
respect to any remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Optionee shall be deemed to have elected to have
the Company withhold from the Shares to be issued upon exercise of the Option that number of Shares
having a Fair Market Value determined as of the applicable Tax Date (as defined below) equal to the
amount required to be withheld. For purposes of this Section 10, the Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to
be determined under the Applicable Laws (the “Tax Date”).
(d) If permitted by the Administrator, in its discretion, an Optionee may satisfy his or her
tax withholding obligations upon exercise of an Option by surrendering to the Company Shares that
have a Fair Market Value determined as of the applicable Tax Date equal to the amount required to
be withheld. In the case of shares previously acquired from the Company that are surrendered under
this Section 10(d), such Shares must have been owned by the Optionee for more than six (6) months
on the date of surrender (or such other period of time as is required for the Company to avoid
adverse accounting charges).
(e) Any election or deemed election by an Optionee to have Shares withheld to satisfy tax
withholding obligations under Section 10(c) or (d) above shall be irrevocable as to the particular
Shares as to which the election is made and shall be subject to the consent or disapproval of the
Administrator. Any election by an Optionee under Section 11(d) above must be made on or prior to
the applicable Tax Date.
-10-
(f) In the event an election to have Shares withheld is made by an Optionee and the Tax Date
is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the
Code, the Optionee shall receive the full number of Shares with respect to which the Option is
exercised but such Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
11. Adjustments Upon Changes in Capitalization; Corporate Transactions
(a) Changes in Capitalization. Subject to any required action by the shareholders of
the Company, the number of shares of Common Stock covered by each outstanding Option, and the
number of shares of Common Stock that have been authorized for issuance under the Plan but as to
which no Options have yet been granted or that have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend,
combination, recapitalization or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt of consideration
by the Company; provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been “effected without receipt of consideration.” Such adjustment
shall be made by the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Administrator. The Administrator may, in the
exercise of its sole discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Administrator and give each Optionee the right to exercise his or her Option as
to all of the Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable.
(c) Acquisition, Merger or Change in Control
(i) In the event of a proposed sale of all or substantially all of the assets of the Company,
or the merger of the Company with or into another corporation, or other change in control (a
“Change in Control”), the exercisability of each outstanding Option shall automatically be
accelerated completely so that one hundred percent (100%) of the number of shares of Common Stock
covered by such Option shall be fully vested upon the consummation of the Change in Control; provided, however, that each outstanding Option shall automatically be
accelerated by only fifty percent (50%) of the number of shares of Common Stock covered by such
Option that are unvested at the consummation of the Change in Control if and to the extent: (A)
such Option is either to be assumed by the successor corporation at the consummation of the Change
of Control or be replaced with a comparable option to purchase shares of the capital stock of the
successor corporation at the consummation of the Change in
-11-
Control, or (B) such Option is to be replaced by a comparable cash incentive program of the successor corporation based on the value of
the Option at the time of the consummation of the Change in Control, or (C) the acceleration of
such Option is subject to other limitations imposed by the Administrator at the time of grant.
(ii) With respect to executive officers, as designated by the Administrator, the
exercisability of each outstanding Option held by such executive officer shall be accelerated
completely so that one hundred percent (100%) of the number of shares of Common Stock covered by
such Option are fully vested if the termination of such executive officer is without Cause or a
Constructive Termination within twelve (12) months after the consummation of a Change in Control.
(iii) The Administrator shall have the authority, in the Administrator’s sole discretion, to
provide for the automatic acceleration of any outstanding Option upon the occurrence of a Change in
Control.
12. Non-Transferability of Options. Options 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 and may be exercised or purchased during the lifetime of the Optionee, only
by the Optionee.
13. Time of Granting Options. The date of grant of an Option shall, for all purposes,
be the date on which the Administrator makes the determination granting such Option, or such other
date as is determined by the Board. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or
discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made
that would impair the rights of any Optionee under any grant theretofore made, without his or her
consent. In addition, to the extent necessary and desirable to comply with Rule 16b-3 or with
Section 422 of the Code (or any other applicable law or regulation, including the requirements of
any Stock Exchange), the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) Effect of Amendment or Termination. No amendment or termination of the Plan shall
adversely affect Options already granted, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the
Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any Stock Exchange.
-12-
As a condition to the exercise of an Option, the Company may require the person exercising
such Option to represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required by law.
16. Reservation of Shares. The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan. The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite authority shall not
have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such form as the
Administrator shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date the Plan is adopted.
Such shareholder approval shall be obtained in the degree and manner required under applicable
state and federal law and the rules of any Stock Exchange upon which the Common Stock is listed.
All Options issued under the Plan shall become void in the event such approval is not obtained.
19. Information to Optionees. To the extent required by Applicable Laws, the Company
shall provide financial statements at least annually to each Optionee during the period such
Optionee has one or more Options outstanding. The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key employees whose duties in
connection with the Company assure their access to equivalent information.
20. Awards Granted to California Residents. Prior to the date, if any, upon which the
Common Stock becomes a Listed Security, Options granted under the Plan to persons resident in
California shall be subject to the provisions set forth in Attachment A hereto. To the
extent the provisions of the Plan conflict with the provisions set forth on Attachment A,
the provisions in Attachment A shall govern the terms of such Options.
-13-
Attachment A
Provisions Applicable to Option Recipients
Resident in California
Provisions Applicable to Option Recipients
Resident in California
Until such time as any security of the Company becomes a Listed Security and if required by
applicable laws, the following additional terms shall apply to Options, and Shares issued upon
exercise of such Options, granted under the Amended and Restated 1998 Stock Option Plan (the
“Plan”) to persons resident in California as of the grant date of any such Option (each
such person, a “California Recipient”):
1. In the case of an Option, whether an Incentive Stock Option or a Nonqualified Stock Option,
that is granted to a California Recipient who, at the time of the grant of such Option, owns stock
representing more than 10% of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value on the grant date.
2. In the case of a Nonqualified Stock Option that is granted to any other California
Recipient, the per Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the grant date.
3. With respect to an Option issued to any California Recipient who is not an Officer,
Director or Consultant, such Option shall become exercisable, or any repurchase option in favor of
the Company shall lapse, at the rate of at least 20% per year over five years from the grant date.
4. The following rules shall apply to an Option issued to any California Recipient or to stock
issued to a California Recipient upon exercise of an Option, in the event of termination of the
California Recipient’s employment or services with the Company:
(a) If such termination was for reasons other than death or disability, the California
Recipient shall have at least 30 days after the date of such termination (but in no event later
than the expiration of the term of such Option established by the Plan Administrator as of the
grant date) to exercise such Option.
(b) If such termination was on account of the death or disability of the California Recipient,
the holder of the Option may, but only within six months from the date of such termination (but in
no event later than the expiration date of the term of such Option established by the Plan
Administrator as of the grant date), exercise the Option to the extent the California Recipient was
otherwise entitled to exercise it at the date of such termination. To the extent that the
California Recipient was not entitled to exercise the Option at the date of termination, or if the
holder does not exercise such Option to the extent so entitled within six months from the date of
termination, the Option shall terminate and the Common Stock underlying the unexercised portion of
the Option shall revert to the Plan.
(c) Section 9(b)(iv) of the Plan shall apply with equal effect to vested Shares acquired upon
exercise of an Option granted prior to the date, if any, upon which the Common Stock becomes a Listed Security to a person other than an Officer, Director or Consultant, in
that
-14-
the Company shall have the right to repurchase such Shares from the Optionee upon the
following terms: (A) the repurchase is made within 90 days of termination of the Optionee’s
Continuous Status for Cause at the Fair Market Value of the Shares as of the date of termination,
(B) consideration for the repurchase consists of cash or cancellation of purchase money
indebtedness, and (C) the repurchase right terminates upon the effective date of the Company’s
initial public offering of its Common Stock. With respect to vested Shares issued upon exercise of
an Option granted to any Officer, Director or Consultant, the Company’s right to repurchase such
Shares upon termination of the Optionee’s Continuous Status for Cause shall be made at the
Participant’s original cost for the Shares and shall be effected pursuant to such terms and
conditions, and at such time, as the Administrator shall determine. Nothing in this Section
9(b)(iv) shall in any way limit the Company’s right to purchase unvested Shares issued upon
exercise of an Option as set forth in the applicable Option Agreement.
5. The Company shall provide financial statements at least annually to each California
Recipient during the period such person has one or more Options outstanding, and in the case of an
individual who acquired Shares pursuant to the Plan, during the period such individual owns such
Shares. The Company shall not be required to provide such information if the issuance of awards
under the Plan is limited to key employees whose duties in connection with the Company assure their
access to equivalent information.
6. Unless defined below or otherwise in this Attachment, Capitalized terms shall have the
meanings set forth in the Plan. For purposes of this Attachment, “Officer” means a person who is
an officer of the Company within the meaning of Section 16(a) of the Exchange Act and the rules and
regulations promulgated thereunder.
-15-
Exhibit
10.3
OMEROS CORPORATION
SECOND AMENDED AND RESTATED 1998 STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
«Optionee» (“Optionee”)
«OptioneeAddress1»
«OptioneeAddress2»
«OptioneeAddress1»
«OptioneeAddress2»
You have been granted an option to purchase Common Stock of Omeros Corporation (the “Company”)
as follows:
| Date of Grant (Later of Board Approval Date or Commencement of Employment/Consulting): | «GrantDate» | ||
| Vesting Commencement Date: | «VestingCommenceDate» | ||
| Exercise Price per Share: | $«ExercisePrice» | ||
| Total Number of Shares Granted: | «NoOfShares» | ||
| Type of Option: | «Type» | ||
| Term/Expiration Date: | «ExpirDate» | ||
| Vesting Schedule: | This Option may be exercised, in whole or in part, in accordance with the following vesting schedule: «Vesting» |
||
| Termination Period: | Option may be exercised for ninety (90) days after termination of employment or consulting relationship except as set out in Sections 6 and 7 of the Stock Option Agreement (but in no event later than the Expiration Date). |
This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one document.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS
EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT
OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT OR IN THE COMPANY’S STOCK OPTION PLAN SHALL
CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO
TERMINATE OPTIONEE’S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
This option is granted under and governed by the terms and conditions of the Second Amended
and Restated 1998 Stock Option Plan (the “Plan”) and the Stock Option Agreement, both of
which are attached and incorporated in their entireties into this document. By your signature, you
acknowledge receipt of a copy of the Plan and the Stock Option Agreement, and represent that you
are familiar with the terms and provisions thereof, and hereby accept this Option subject to all of
the terms and provisions thereof. You further acknowledge that you have reviewed the Plan, the
Stock Option Agreement and this Option in their entirety, have had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understand all provisions of this
Option. You hereby agree to accept as binding, conclusive and final all decisions or
interpretations of the Administrator (as defined in the Plan) upon any questions arising under the
Plan, the Stock Option Agreement or this Option.
| «Optionee»: | Omeros Corporation | |||||
| By: | ||||||
Signature
|
Gregory A. Demopulos, M.D. | |||||
| Chief Executive Officer | ||||||
-2-
OMEROS CORPORATION
SECOND AMENDED AND RESTATED 1998 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
1. Grant of Option. Omeros Corporation, a Washington corporation (the “Company”),
hereby grants to Optionee, an option (the “Option”) to purchase a total number of shares of Common
Stock (the “Shares”) set forth in the Notice of Stock Option Grant, at the exercise price per share
set forth in the Notice of Stock Option Grant (the “Exercise Price”) subject to the terms,
definitions and provisions of the Omeros Corporation Second Amended and Restated 1998 Stock Option
Plan (the “Plan”) adopted by the Company, which is incorporated herein by reference. Unless
otherwise defined herein, capitalized terms used herein shall have the same meaning as set forth in
the Notice of Stock Option Grant or Plan.
If designated an Incentive Stock Option, this Option is intended to qualify as an Incentive
Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its Term in accordance
with the Vesting Schedule set out in the Notice of Stock Option Grant and with the provisions of
Section 9 of the Plan as follows:
(a) Right to Exercise
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee’s death, disability or other termination of employment, the
exercisability of the Option is governed by Sections 5, 6 and 7 below, subject to the limitation
contained in Section 2(a)(i).
(iii) In no event may this Option be exercised after the date of expiration of the term of
this Option as set forth in the Notice of Stock Option Grant.
(b) Method of Exercise. This Option shall be exercisable by execution and delivery of
the Exercise Notice and Restricted Stock Purchase Agreement attached hereto as Exhibit A
(the “Exercise Agreement”) or of any other form of written notice approved for such purpose by the
Company which shall state the election to exercise the Option, the number of Shares in respect of
which the Option is being exercised, and such other representations and agreements as to the
holder’s investment intent with respect to such shares of Common Stock as may be required by the
Company pursuant to the provisions of the Plan. Such written notice shall be signed by Optionee
and shall be delivered in person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such issuance and such
exercise shall comply with all relevant provisions of applicable law and the requirements of any
stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by any of the following,
or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which (i) in the case of Shares
acquired pursuant to the exercise of a Company option, have been owned by Optionee for more than
six (6) months on the date of surrender, and (ii) have a fair market value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being exercised; or
(d) if there is a public market for the Shares and they are registered under the Securities
Act of 1933, as amended (the “Securities Act”), delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the Company the amount of
sale or loan proceeds required to pay the exercise price.
4. Restrictions on Exercise. This Option may not be exercised until such time as the
Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such shares would constitute a
violation of any applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the Federal
Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to
make any representation and warranty to the Company as may be required by any applicable law or
regulation.
5. Termination of Relationship. In the event of termination of Optionee’s Continuous
Status as an Employee or Consultant, Optionee may, to the extent otherwise so entitled at the date
of such termination (the “Termination Date”), exercise this Option during the Termination Period
set forth in the Notice of Stock Option Grant. To the extent that Optionee was not entitled to
exercise this Option at such Termination Date, or if Optionee does not exercise this Option within
the Termination Period, the Option shall terminate.
6. Disability of Optionee
(a) Notwithstanding the provisions of Section 5 above, in the event of termination of
Optionee’s Continuous Status as an Employee or Consultant as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within
twelve (12) months from the Termination Date (but in no event later than the
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Expiration Date set forth in the Notice of Stock Option Grant and in Section 9 below),
exercise this Option to the extent Optionee was entitled to exercise it as of such Termination
Date. To the extent that Optionee was not entitled to exercise the Option as of the Termination
Date, or if Optionee does not exercise the Option (to the extent so entitled) within the time
specified in this Section 6(a), the Option shall terminate.
(b) Notwithstanding the provisions of Section 5 above, in the event of termination of
Optionee’s Continuous Status as an Employee or Consultant as a result of any disability not
constituting a total and permanent disability (as set forth in Section 22(e)(3) of the Code),
Optionee may, but only within six (6) months from the Termination Date (but in no event later than
the Expiration Date set forth in the Notice of Stock Option Grant and in Section 9 below), exercise
this Option to the extent Optionee was entitled to exercise it as of such Termination Date;
provided, however, that if this is an Incentive Stock Option and Optionee fails to exercise this
Incentive Stock Option within three (3) months from the Termination Date, this Option will cease to
qualify as an Incentive Stock Option (as defined in Section 422 of the Code) and Optionee will be
treated for federal income tax purposes as having received ordinary income at the time of such
exercise in an amount generally measured by the difference between the Exercise Price for the
Shares and the fair market value of the Shares on the date of exercise. To the extent that
Optionee was not entitled to exercise the Option at the Termination Date, or if Optionee does not
exercise the Option to the extent so entitled within the time specified in this Section 6(b), the
Option shall terminate.
7. Death of Optionee. In the event of the death of Optionee (a) during the Term of
this Option and while an Employee or Consultant of the Company and having been in Continuous Status
as an Employee or Consultant since the date of grant of the Option, or (b) within thirty (30) days
after Optionee’s Termination Date, the Option may be exercised at any time within six (6) months
following the date of death (but in no event later than the Expiration Date set forth in the Notice
of Stock Option Grant and in Section 9 below), by Optionee’s estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the Termination Date.
8. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by him or her. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.
9. Term of Option. This Option may be exercised only within the Term set forth in the
Notice of Stock Option Grant, subject to the limitations set forth in Section 7 of the Plan.
10. Tax Consequences. Set forth below is a brief summary as of the date of this
Option of certain of the federal tax consequences of exercise of this Option and disposition of the
Shares under the laws in effect as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
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CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock Option. If this Option qualifies as an Incentive
Stock Option, there will be no regular federal income tax liability upon the exercise of the
Option, although the excess, if any, of the fair market value of the Shares on the date of exercise
over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal
tax purposes and may subject Optionee to the alternative minimum tax in the year of exercise.
(b) Exercise of Nonstatutory Stock Option. If this Option does not qualify as an
Incentive Stock Option, there may be a regular federal income tax liability upon the exercise of
the Option. Optionee will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date
of exercise over the Exercise Price. If Optionee is an employee, the Company will be required to
withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the time of exercise.
(c) Disposition of Shares. In the case of a Nonstatutory Stock Option, if the Shares
are held for at least one (1) year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes. In the case of an Incentive Stock
Option, if Shares transferred pursuant to the Option are held for at least one (1) year after
exercise and are disposed of at least two (2) years after the Date of Grant, any gain realized on
disposition of the Shares will also be treated as long-term capital gain for federal income tax
purposes. If Shares purchased under an Incentive Stock Option are disposed of within such one (1)
year period or within two (2) years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the fair market value of the Shares on
the date of exercise, or (ii) the sale price of the Shares.
(d) Notice of Disqualifying Disposition of Incentive Stock Option Shares. If the
Option granted to Optionee herein is an Incentive Stock Option, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to such Incentive Stock Option on or before the
later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after
the date of exercise, Optionee shall immediately notify the Company in writing of such disposition.
Optionee acknowledges and agrees that he or she may be subject to income tax withholding by the
Company on the compensation income recognized by Optionee from the early disposition by payment in
cash or out of the current earnings paid to Optionee.
11. Withholding Tax Obligations. Optionee understands that, upon exercising a
Nonstatutory Stock Option, he or she will recognize income for tax purposes in an amount equal to
the excess of the then fair market value of the Shares over the Exercise Price. However, the
timing of this income recognition may be deferred for up to six (6) months if Optionee is subject
to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). If Optionee
is an employee, the Company will be required to withhold from Optionee’s
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compensation, or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income. Additionally, Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an Incentive Stock Option.
Optionee shall satisfy his or her tax withholding obligation arising upon the exercise of this Option by one or some combination of the following methods: (a) by cash
payment, (b) out of Optionee’s current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares which (i) in the case of Shares previously
acquired from the Company, have been owned by Optionee for more than six (6) months on the date of
surrender, and (ii) have a fair market value on the date of surrender equal to or greater than
Optionee’s marginal tax rate times the ordinary income recognized, or (d) by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option that number of Shares
having a fair market value equal to the amount required to be withheld. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined (the “Tax Date”).
If Optionee is subject to Section 16 of the Exchange Act (an “Insider”), any surrender of
previously owned Shares to satisfy tax withholding obligations arising upon exercise of this Option
must comply with the applicable provisions of Rule 16b-3 promulgated under the Exchange Act (“Rule
16b-3”).
All elections by Optionee to have Shares withheld to satisfy tax withholding obligations shall
be made in writing in a form acceptable to the Administrator and shall be subject to the following
restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular Shares of the Option as
to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of the Administrator.
12. Market Standoff Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing any underwritten
offering of the Company’s 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 Shares (other than those
included in the registration) 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.
13. Miscellaneous
(a) Governing Law. This Stock Option Agreement, together with the related Notice of
Stock Option Grant (collectively this “Agreement”), and all acts and transactions
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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 Washington, without giving effect to principles of
conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing 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.
(c) 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
the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of
the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement has been reviewed by each of the parties hereto and
is the result of negotiations between 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.
(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party’s address as set forth below or as
subsequently modified by written notice.
(f) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Optionee under this Agreement may only be assigned with the prior written consent of
the Company.
(g) Arbitration. The parties agree to attempt in good faith to negotiate a settlement
of any and all controversies, claims, or disputes arising out of, relating to, or resulting from
this Agreement. If, after such good faith negotiation, the parties are not able to reach a
settlement, any and all of such controversies, claims, or disputes arising out of, relating to, or
resulting from this Agreement shall be subject to binding arbitration. Such arbitration shall take
place in Seattle, Washington and will be administered by the American Arbitration Association
(“AAA”) in accordance with its Rules for the Resolution of Commercial Disputes. The
parties agree that the arbitrator shall have the power to decide any motions brought by any party
to the arbitration, including motions for summary judgment and/or adjudication and motions to
dismiss and demurrers, prior to any arbitration hearing. The parties also agree that the
arbitrator shall have the power to award any remedies, including attorneys’ fees and costs,
available under
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applicable law, provided that the prevailing party in any arbitration shall be
entitled to its reasonable attorneys fees and costs. The decision of the arbitrator shall be in
writing. Arbitration shall be the sole, exclusive and final remedy for any dispute under this
Agreement and the decision of the arbitrator may be entered by a party in any court or forum, state
or federal, being of
competent jurisdiction. Accordingly, no party will be permitted to pursue court action
regarding this Agreement except as expressly permitted in the preceding sentence. Notwithstanding
the foregoing, each party retains the right to seek injunctive relief to prevent a breach,
threatened breach or continuing breach of this Agreement that would cause irreparable injury to
such party.
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Exhibit A
OMEROS
CORPORATION
SECOND
AMENDED AND RESTATED 1998 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement (“Agreement”) is made as of ___, by and between Omeros Corporation,
a Washington corporation (the “Company”), and Optionee (also referred to as “Purchaser”). To the
extent any capitalized terms used in this Agreement are not defined, they shall have the meaning
ascribed to them in the Second Amended and Restated 1998 Stock Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby
elects to exercise his or her option to purchase ___ shares of the Common Stock (the
“Shares”) of the Company under and pursuant to the Company’s Second Amended and Restated 1998 Stock
Option Plan (the “Plan”) and the Stock Option Agreement
dated ___ (the “Option
Agreement”). The purchase price for the Shares shall be
$ per Share for a total purchase
price of $___. The term “Shares” refers to the purchased Shares and all securities
received in replacement of the Shares or as stock dividends or splits, all securities received in
replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and
all new, substituted or additional securities or other properties to which Purchaser is entitled by
reason of Purchaser’s ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under this
Agreement shall occur at the principal office of the Company simultaneously with the execution of
this Agreement in accordance with the provisions of Section 2(b) of the Option Agreement. On such
date, the Purchaser will deliver payment of the purchase price therefor by (a) check made payable
to the Company, (b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the Option Agreement, or
(d) by a combination of the foregoing.
3. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Purchaser shall not assign, encumber or dispose of any interest in
the Shares except in compliance with the provisions below and applicable securities laws.
(a) Right of First Refusal. Before any Shares held by Purchaser or any transferee of
Purchaser (either being sometimes referred to herein as the “Holder”) may be sold or otherwise
transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall
have a right of first refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the “Right of First Refusal”).
(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (A) the Holder’s bona fide
intention to sell or otherwise transfer such Shares; (B) the name of each proposed purchaser
or
other transferee (“Proposed Transferee”); (C) the number of Shares to be transferred to each
Proposed Transferee; and (D) the terms and conditions of each proposed sale or transfer. The
Holder shall offer the Shares at the same price (the “Offered Price”) and upon the same terms (or
terms as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty (30) days after
receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the
Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to
any one or more of the Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased
by the Company or its assignee(s) under this Section 3(a) shall be the Offered Price. If the
Offered Price includes consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of
the Notice or in the manner and at the times set forth in the Notice.
(v) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section 3(a), then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within sixty (60) days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any applicable
securities laws and the Proposed Transferee agrees in writing that the provisions of this Section 3
shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within such period, or if
the Holder proposes to change the price or other terms to make them more favorable to the Proposed
Transferee, a new Notice shall be given to the Company, and the Company and/or its assignees shall
again be offered the Right of First Refusal before any Shares held by the Holder may be sold or
otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section 3(a) notwithstanding, the transfer of any or all of the Shares during Purchaser’s
lifetime or on Purchaser’s death by will or intestacy to Purchaser’s Immediate Family or a trust
for the benefit of the Optionee’s Immediate Family shall be exempt from the provisions of this
Section 3(a). “Immediate Family” as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or other recipient
shall receive and hold the Shares so transferred subject to the provisions of this Section, and
there shall be no further transfer of such Shares except in accordance with the terms of this
Section 3.
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(b) Involuntary Transfer.
(i) Company’s Right to Purchase upon Involuntary Transfer. In the event, at any time
after the date of this Agreement, of any transfer by operation of law or other involuntary transfer
(including death or divorce, but excluding a transfer to Immediate Family as set forth in
Section 3(a)(vi) above) of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of the purchase price
paid by Purchaser pursuant to this Agreement or the fair market value of the Shares on the date of
transfer. Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares shall be provided to
the Company for a period of thirty (30) days following receipt by the Company of written notice by
the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be transferred
pursuant to Section 3(b)(i), the price per Share shall be a price set by the Board of Directors of
the Company that will reflect the current value of the stock in terms of present earnings and
future prospects of the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with the valuation as
determined by the Board of Directors of the Company, the Purchaser shall be entitled to have the
valuation determined by an independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the Purchaser.
(c) Assignment. The right of the Company to purchase any part of the Shares may be
assigned in whole or in part to any shareholder or shareholders of the Company or other persons or
organizations; provided, however, that an assignee, other than a corporation that
is the parent or a one hundred percent (100%) owned subsidiary of the Company, must pay the
Company, upon assignment of such right, cash equal to the difference between the original purchase
price and fair market value, if the original purchase price is less than the fair market value of
the Shares subject to the assignment.
(d) Restrictions Binding on Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interest subject to the provisions of this Agreement.
Any sale or transfer of the Company’s Shares shall be void unless the provisions of this Agreement
are satisfied.
(e) Termination of Rights. The right of first refusal granted the Company by
Section 3(a) above and the option to repurchase the Shares in the event of an involuntary transfer
granted the Company by Section 3(b) above shall terminate upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the Securities Act. Upon termination
of the right of first refusal described in Section 3(a) above, a new certificate or
certificates representing the Shares not repurchased shall be issued, on request, without the
legend referred to in Section 6(a)(ii) herein and delivered to Purchaser.
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4. Investment and Taxation Representations. In connection with the purchase of the
Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Shares. Purchaser is purchasing the Shares for investment for his or her own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser’s investment intent as expressed herein.
(c) Purchaser understands that the Shares are “restricted securities” under applicable U.S.
federal and state securities laws and that, pursuant to these laws, Purchaser must hold the Shares
indefinitely unless they are registered with the Securities and Exchange Commission and qualified
by state authorities, or an exemption from such registration and qualification requirements is
available. Purchaser acknowledges that the Company has no obligation to register or qualify the
Shares for resale. Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may by conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and requirements
relating to the Company which are outside of Purchaser’s control, and which the Company is under no
obligation and may not be able to satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of
Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted any tax consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
5. Restrictive Legends and Stop-Transfer Orders
(a) Legends. The certificate or certificates representing the Shares shall bear the
following legends (as well as any legends required by applicable state and federal corporate and
securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISPOSITION
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
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(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or subsidiary of the Company, to
terminate Purchaser’s employment, for any reason, with or without cause.
7. Market Stand-off Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing any underwritten
offering of the Company’s securities, Purchaser agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) 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.
8. Miscellaneous
(a) Governing Law. 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 Washington, without giving effect to principles of
conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any
waiver of any rights under this Agreement, shall be effective unless in writing 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.
(c) 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.
-5-
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
the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of
the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement has been reviewed by each of the parties hereto and
is the result of negotiations between 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.
(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party’s address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.
-6-
(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Purchaser under this Agreement may only be assigned with the prior written consent
of the Company.
(h) Arbitration. The parties agree to attempt in good faith to negotiate a settlement
of any and all controversies, claims, or disputes arising out of, relating to, or resulting from
this Agreement. If, after such good faith negotiation, the parties are not able to reach a
settlement, any and all of such controversies, claims, or disputes arising out of, relating to, or
resulting from this Agreement shall be subject to binding arbitration. Such arbitration shall take
place in Seattle, Washington and will be administered by the American Arbitration Association
(“AAA”) in accordance with its Rules for the Resolution of Commercial Disputes. The
parties agree that the arbitrator shall have the power to decide any motions brought by any party
to the arbitration, including motions for summary judgment and/or adjudication and motions to
dismiss and demurrers, prior to any arbitration hearing. The parties also agree that the
arbitrator shall have the power to award any remedies, including attorneys’ fees and costs,
available under applicable law, provided that the prevailing party in any arbitration shall be
entitled to its reasonable attorneys fees and costs. The decision of the arbitrator shall be in
writing. Arbitration shall be the sole, exclusive and final remedy for any dispute under this
Agreement and the decision
of the arbitrator may be entered by a party in any court or forum, state or federal, being of
competent jurisdiction. Accordingly, no party will be permitted to pursue court action regarding
this Agreement except as expressly permitted in the preceding sentence. Notwithstanding the
foregoing, each party retains the right to seek injunctive relief to prevent a breach, threatened
breach or continuing breach of this Agreement that would cause irreparable injury to such party.
[Signature Page Follows]
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The parties have executed this Exercise Notice and Restricted Stock Purchase Agreement as of the
date first set forth above.
| COMPANY: | ||||||||
| OMEROS CORPORATION | ||||||||
| By: | ||||||||
| (Signature) |
||||||||
| Name: | ||||||||
| (Print) |
||||||||
| Title: | ||||||||
| Address: | ||||||||
| PURCHASER: | ||||||||
| (Signature) |
||||||||
| (Printed Name) |
||||||||
| Address: | ||||||||
I, , spouse of , have read and hereby approve the foregoing
Agreement. In consideration of the Company’s granting my spouse the right to purchase the Shares
as set forth in the Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or other such interest shall hereby by similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
| Spouse of | |||||||
-8-
RECEIPT
The
undersigned hereby acknowledges receipt of Certificate No. ___ representing ___
shares of Common Stock of Omeros Corporation (the “Company”).
Dated:
|
||||||
| (Signature) | ||||||
| |
RECEIPT
Omeros Corporation (the “Company”) hereby acknowledges receipt of (check as
applicable):
A check in the amount of $
The cancellation of indebtedness in the amount of $
Certificate No. representing shares of the Company’s Common Stock with a
fair market value of
$
$
given by as consideration for Certificate No. representing
shares of Common Stock of the Company.
Dated: |
||||||||
| Omeros Corporation | ||||||||
| By: | ||||||||
| (Signature) | ||||||||
| Name: | ||||||||
| (Printed Name) | ||||||||
| Title: | ||||||||
Exhibit 10.4
OMEROS CORPORATION
AMENDMENT TO STOCK OPTION AGREEMENT
This Amendment (this “Amendment”) is made as of and amends the
Stock Option Agreement with a grant date of <<GRANT DATE>> (the “Agreement”) by
and between <<OPTIONEE>> (the “Optionee”) and Omeros Corporation, a Washington
corporation (the “Company”).
WHEREAS, on <<GRANT DATE>> the Company granted Optionee a stock option (the
“Option”) pursuant to the Company’s Amended and Restated 1998 Stock Option Plan (the
“Plan”);
WHEREAS, the Company and the Optionee desire to amend the Agreement related to the Option to
provide Optionee the right, but not the obligation, to early exercise the Option for unvested
shares;
NOW, THEREFORE, the Optionee and the Company agree that the Agreement shall be amended as
follows:
1. Amendment. The introductory paragraph of Section 2 of the Agreement which before
this Amendment read:
“This Option shall be exercisable during its Term in accordance with the Vesting Schedule
set out in the Notice of Stock Option Grant and with the provisions of Section 9 of the Plan
as follows:”
is amended and restated in its entirety to read as follows:
“This Option shall be exercisable during its Term in accordance with the Vesting Schedule
set out in the Notice of Stock Option Grant and with the provisions of Section 9 of the Plan
or, alternatively, at the election of the Optionee, this Option may be exercised in whole or
in part at any time as to Shares that have not yet vested in accordance with the provisions
of Section 9 of the Plan, each as follows:”
2. Method of Exercise. In addition to the right to exercise the Option by execution
and delivery of the Exercise Notice and Restricted Stock Purchase Agreement attached as Exhibit
A to the Agreement together with the fulfillment of the other requirements described in Section
2(b) of the Agreement, at Optionee’s election, Optionee shall have the right to exercise the Option
by execution and delivery of the Exercise Notice and Restricted Stock Purchase Agreement attached
as Exhibit I to this Amendment together with the fulfillment of the other requirements
described in Section 2(b) of the Agreement.
3. Full Force and Effect. To the extent not expressly amended hereby, the Agreement
remains otherwise unchanged and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been entered into as of the date first set forth above.
| OMEROS CORPORATION | OPTIONEE | |||||||
By: |
||||||||
| Gregory A. Demopulos, M.D. | <<OPTIONEE>> | |||||||
| Chief Executive Officer | ||||||||
-2-
Exhibit I
OMEROS CORPORATION
SECOND AMENDED AND RESTATED 1998 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement (“Agreement”) is made as of , by and between Omeros Corporation,
a Washington corporation (the “Company”), and (“Optionee”) (also referred to as
“Purchaser”). To the extent any capitalized terms used in this Agreement are not defined, they
shall have the meaning ascribed to them in the Second Amended and Restated 1998 Stock Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby
elects to exercise his or her option to purchase shares of the Common Stock (the
“Shares”) of the Company under and pursuant to the Company’s Second Amended and Restated 1998 Stock
Option Plan (the “Plan”) and the Stock Option Agreement dated (the “Option
Agreement”). The purchase price for the Shares shall be $ per Share for a total
purchase price of $ . Of these Shares, Purchaser has elected to purchase
of those Shares which have become vested as of the date hereof under the Vesting
Schedule set forth in the Notice of Stock Option Grant (the “Vested Shares”) and
Shares which have not yet vested under such Vesting Schedule (the “Unvested Shares”). The term
“Shares” refers to the purchased Shares and all securities received in replacement of the Shares or
as stock dividends or splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new, substituted or
additional securities or other properties to which Purchaser is entitled by reason of Purchaser’s
ownership of the Shares.
If Purchaser is purchasing Unvested Shares, Purchaser and not the Company is solely
responsible for filing an 83(b) Election with the Internal Revenue Service (as further described in
Section 8 below), and Purchaser acknowledges and agrees that neither the Company, its employees nor
its agents shall have any liability to Purchaser if Purchaser fails to timely or otherwise properly
file an 83(b) Election with the Internal Revenue Service.
2. Time and Place of Exercise. The purchase and sale of the Shares under this
Agreement shall occur at the principal office of the Company simultaneously with the execution of
this Agreement in accordance with the provisions of Section 2(b) of the Option Agreement. On such
date, the Purchaser will deliver payment of the purchase price therefor by (a) check made payable
to the Company, (b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the Option Agreement, or
(d) by a combination of the foregoing.
3. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Purchaser shall not assign, encumber or dispose of any interest in
the Shares while the Shares are subject to the Company’s Repurchase Option (as defined below),
except as provided below. After any Shares have been released from such Repurchase Option,
Purchaser shall not assign, encumber or dispose of any interest in such Shares except in compliance
with the provisions below and applicable securities laws.
(a) Repurchase Option.
(i) In the event of the voluntary or involuntary termination of Purchaser’s employment or
consulting relationship with the Company for any reason (including death or disability), with or
without cause, the Company shall upon the date of such termination (the “Termination Date”)
have an irrevocable, exclusive option (the “Repurchase Option”) for a period of 90 days
from such date to repurchase all or any portion of the Shares held by Purchaser as of the
Termination Date which have not yet been released from the Company’s Repurchase Option at the
original purchase price per Share specified in Section 1 (adjusted for any stock splits, stock
dividends and the like). The Company has the right, but not the obligation, to exercise the
Repurchase Option.
(ii) Unless the Company notifies Purchaser in writing within 90 days from the date of
termination of Purchaser’s employment or consulting relationship that it does not intend to
exercise its Repurchase Option with respect to some or all of the Shares, the Repurchase Option
shall be deemed automatically exercised by the Company as of the 90th day following such
termination, provided that the Company may notify Purchaser that it is exercising its Repurchase
Option as of a date prior to such 90th day. Unless Purchaser is otherwise notified by the Company
pursuant to the preceding sentence that the Company does not intend to exercise its Repurchase
Option as to some or all of the Shares to which it applies at the time of termination, execution of
this Agreement by Purchaser constitutes written notice to Purchaser of the Company’s intention to
exercise its Repurchase Option with respect to all Shares to which such Repurchase Option applies.
The Company, at its choice, may satisfy its payment obligation to Purchaser with respect to
exercise of the Repurchase Option by either (A) delivering a check to Purchaser in the amount of
the purchase price for the Shares being repurchased, or (B) in the event Purchaser is indebted to
the Company, canceling an amount of such indebtedness equal to the purchase price for the 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 Option pursuant to this Section 3(a)(ii) in which Purchaser is indebted
to the Company, such indebtedness equal to the purchase price of the Shares being repurchased shall
be deemed automatically canceled as of the 90th day following termination of Purchaser’s employment
or consulting relationship unless the Company otherwise satisfies its payment obligations. As a
result of any repurchase of Shares pursuant to this Section 3(a), the Company shall become the
legal and beneficial owner of the 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 Shares being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Unvested Shares shall initially be subject to the
Repurchase Option. The Unvested Shares shall be released from the Repurchase Option in accordance with the Vesting Schedule set forth in the Notice of Stock Option Grant
-2-
until all Shares are released from the Repurchase Option. Fractional shares shall be rounded to
the nearest whole share.
(b) Right of First Refusal. Before any Shares held by Purchaser or any transferee of
Purchaser (either being sometimes referred to herein as the “Holder”) may be sold or otherwise
transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall
have a right of first refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the “Right of First Refusal”).
(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (A) the Holder’s bona fide intention to sell or
otherwise transfer such Shares; (B) the name of each proposed purchaser or other transferee
(“Proposed Transferee”); (C) the number of Shares to be transferred to each Proposed Transferee;
and (D) the terms and conditions of each proposed sale or transfer. The Holder shall offer the
Shares at the same price (the “Offered Price”) and upon the same terms (or terms as similar as
reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty (30) days after
receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the
Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to
any one or more of the Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased
by the Company or its assignee(s) under this Section 3(b) shall be the Offered Price. If the
Offered Price includes consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of
the Notice or in the manner and at the times set forth in the Notice.
(v) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section 3(b), then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within sixty (60) days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any applicable
securities laws and the Proposed Transferee agrees in writing that the provisions of this Section 3
shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within such
period, or if the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the Company, and the Company
-3-
and/or its assignees shall again be offered the Right of First Refusal before any Shares held by
the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section 3(b) notwithstanding, the transfer of any or all of the Shares during Purchaser’s
lifetime or on Purchaser’s death by will or intestacy to Purchaser’s Immediate Family or a trust
for the benefit of the Optionee’s Immediate Family shall be exempt from the provisions of this
Section 3(b). “Immediate Family” as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or other recipient
shall receive and hold the Shares so transferred subject to the provisions of this Section, and
there shall be no further transfer of such Shares except in accordance with the terms of this
Section 3.
(c) Involuntary Transfer.
(i) Company’s Right to Purchase upon Involuntary Transfer. In the event, at any time
after the date of this Agreement, of any transfer by operation of law or other involuntary transfer
(including death or divorce, but excluding a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of the purchase price
paid by Purchaser pursuant to this Agreement or the fair market value of the Shares on the date of
transfer, subject to Section 3(e). Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of thirty (30) days following receipt by the Company
of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be transferred
pursuant to Section 3(c)(i), the price per Share shall be a price set by the Board of Directors of
the Company that will reflect the current value of the stock in terms of present earnings and
future prospects of the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with the valuation as
determined by the Board of Directors of the Company, the Purchaser shall be entitled to have the
valuation determined by an independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the Shares may be
assigned in whole or in part to any shareholder or shareholders of the Company or other persons or
organizations; provided, however, that an assignee, other than a corporation that
is the parent or a one hundred percent (100%) owned subsidiary of the Company, must pay the
Company, upon assignment of such right, cash equal to the difference between the original purchase
price and fair market value, if the original purchase price is less than the fair market value of
the Shares subject to the assignment.
-4-
(e) Restrictions Binding on Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interest subject to the provisions of this Agreement,
including, insofar as applicable, the Repurchase Option. In the event of any purchase by the
Company hereunder where the Shares or interest are held by a transferee, the transferee shall be
obligated, if requested by the Company, to transfer the Shares or interest to the Purchaser for
consideration equal to the amount to be paid by the Company hereunder. In the event the Repurchase
Option is deemed exercised by the Company pursuant to Section 3(a)(ii) hereof, the Company may deem
any transferee to have transferred the Shares or interest to Purchaser prior to their purchase by
the Company, and payment of the purchase price by the Company to such transferee shall be deemed to
satisfy Purchaser’s obligation to pay such transferee for such Shares or interest, and also to
satisfy the Company’s obligation to pay Purchaser for such Shares or interest. Any sale or
transfer of the Company’s Shares shall be void unless the provisions of this Agreement are
satisfied.
(f) Termination of Rights. The right of first refusal granted the Company by
Section 3(b) above and the option to repurchase the Shares in the event of an involuntary transfer
granted the Company by Section 3(c) above shall terminate upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the Securities Act. Upon termination of
the right of first refusal described in Section 3(b) above, a new certificate or certificates
representing the Shares not repurchased shall be issued, on request, without the legend referred to
in Section 6(a)(ii) herein and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the enforcement of the
provisions of Section 3 above, Purchaser agrees, immediately upon receipt of the certificate(s) for
the Shares subject to the Company’s Repurchase Option to deliver such certificate(s), together with
an Assignment Separate from Certificate in the form attached to this Agreement as Attachment A
executed by Purchaser and by Purchaser’s spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary’s designee, to hold such certificate(s) and Assignment
Separate from Certificate in escrow and to take all such actions and to effectuate all such
transfers and/or releases as are in accordance with the terms of this Agreement. Purchaser hereby
acknowledges that the Secretary of the Company, or the Secretary’s designee, is so appointed as the
escrow holder with the foregoing authorities as a material inducement to make this Agreement and
that said appointment is coupled with an interest and is accordingly irrevocable. Purchaser agrees
that said escrow holder shall not be liable to any party hereof (or to any other party). The
escrow holder may rely upon any letter, notice or other document executed by any signature
purported to be genuine and may resign at any time. Purchaser agrees that if the Secretary of the
Company, or the Secretary’s designee, resigns as escrow holder for any or no reason, the Board of
Directors of the Company shall have the power to appoint a successor to serve as escrow holder
pursuant to the terms of this Agreement.
-5-
5. Investment and Taxation Representations. In connection with the purchase of the
Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Shares. Purchaser is purchasing the Shares for investment for his or her own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser’s investment intent as expressed herein.
(c) Purchaser understands that the Shares are “restricted securities” under applicable U.S.
federal and state securities laws and that, pursuant to these laws, Purchaser must hold the Shares
indefinitely unless they are registered with the Securities and Exchange Commission and qualified
by state authorities, or an exemption from such registration and qualification requirements is
available. Purchaser acknowledges that the Company has no obligation to register or qualify the
Shares for resale. Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may by conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and requirements
relating to the Company which are outside of Purchaser’s control, and which the Company is under no
obligation and may not be able to satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of
Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted any tax consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
(e) If Purchaser is purchasing Unvested Shares, Purchaser agrees that Purchaser and not the
Company is solely responsible for filing an 83(b) Election with the Internal Revenue Service (as
further described in Section 8 below), and Purchaser acknowledges and agrees that neither the
Company, its employees nor its agents shall have any liability to Purchaser if Purchaser fails to
timely or otherwise properly file an 83(b) Election with the Internal Revenue Service.
6. Restrictive Legends and Stop-Transfer Orders
(a) Legends. The certificate or certificates representing the Shares shall bear the
following legends (as well as any legends required by applicable state and federal corporate and
securities laws):
-6-
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or subsidiary of the Company, to
terminate Purchaser’s employment, for any reason, with or without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the Internal
Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income for a Nonstatutory Stock
Option and as alternative minimum taxable income for an Incentive Stock Option the difference
between the amount paid for the Shares and the fair market value of the Shares as of the date any
restrictions on the Shares lapse. In this context, “restriction” means the right of the Company to
buy back the Shares pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the Shares are purchased,
rather than when and as the Repurchase Option expires, by filing an election under Section 83(b)
(an “83(b) Election”) of the Code with the Internal Revenue Service within 30 days from the
date of purchase. The IRS makes no exceptions to this filing deadline. Even if the Fair
Market Value of the Shares at the time of the execution of this Agreement equals the amount paid
for the Shares, the election must be made to avoid income and alternative minimum tax treatment
under Section 83(a) in the future. Purchaser understands that failure to file such an election in
a timely manner may result in adverse tax consequences
-7-
for Purchaser. Purchaser further understands that an additional copy of such election form should be filed
with his or her federal income tax return for the calendar year in which the date of this Agreement
falls. Purchaser acknowledges that the foregoing is only a summary of the effect of United States
federal income taxation with respect to purchase of the Shares hereunder, and does not purport to
be complete. Purchaser further acknowledges that the Company has directed Purchaser to seek
independent advice regarding the applicable provisions of the Code, the income tax laws of any
municipality, state or foreign country in which Purchaser may reside, and the tax consequences of
Purchaser’s death.
Purchaser agrees that he or she will execute and deliver to the Company with this executed
Agreement a copy of the Acknowledgment and Statement of Decision Regarding Section 83(b) Election
(the “Acknowledgment”) attached hereto as Attachment B. Purchaser further agrees that he or she
will execute and submit with the Acknowledgment a copy of the 83(b) Election attached hereto as
Attachment C (for tax purposes in connection with the early exercise of an option) if Purchaser has
indicated in the Acknowledgment his or her decision to make such an election.
Purchaser agrees that Purchaser and not the Company is solely responsible for filing an 83(b)
election with the Internal Revenue Service, and Purchaser acknowledges and agrees that neither the
Company, its employees nor its agents shall have any liability to Purchaser if Purchaser fails to
timely or otherwise properly file an 83(b) Election with the Internal Revenue Service.
9. Market Stand-off Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing any underwritten
offering of the Company’s securities, Purchaser agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) 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.
10. Miscellaneous
(a) Governing Law. 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 Washington, without giving effect to principles of
conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in
-8-
writing 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.
(c) 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
the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of
the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement has been reviewed by each of the parties hereto and
is the result of negotiations between 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.
(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party’s address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Purchaser under this Agreement may only be assigned with the prior written consent
of the Company.
(h) Arbitration. The parties agree to attempt in good faith to negotiate a settlement
of any and all controversies, claims, or disputes arising out of, relating to, or resulting from
this Agreement. If, after such good faith negotiation, the parties are not able to reach a
settlement, any and all of such controversies, claims, or disputes arising out of, relating to, or
resulting from this Agreement shall be subject to binding arbitration. Such arbitration shall take
place in Seattle, Washington and will be administered by the American Arbitration Association
(“AAA”) in accordance with its Rules for the Resolution of Commercial Disputes. The
parties agree that the arbitrator shall have the power to decide any motions brought by any party
to the arbitration, including motions for summary judgment and/or adjudication and motions to
dismiss and demurrers, prior to any arbitration hearing. The parties also agree that the
arbitrator shall have the power to award any remedies, including attorneys’ fees and costs,
available under applicable law, provided that the prevailing party in any arbitration shall be
entitled to its reasonable attorneys fees and costs. The decision of the arbitrator shall be in
writing. Arbitration shall be the sole, exclusive and final remedy for any dispute under this
Agreement and the decision of the arbitrator may be entered by a party in any court or forum, state or
-9-
federal, being of competent jurisdiction. Accordingly, no party will be permitted to
pursue court action regarding this Agreement except as expressly permitted in the preceding
sentence. Notwithstanding the foregoing, each party retains the right to seek injunctive relief to
prevent a breach, threatened breach or continuing breach of this Agreement that would cause
irreparable injury to such party.
[Signature Page Follows]
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The parties have executed this Exercise Notice and Restricted Stock Purchase Agreement as of the
date first set forth above.
| COMPANY: | ||||||
| OMEROS CORPORATION | ||||||
| By: | ||||||
| (Signature) | ||||||
| Name: | ||||||
| (Print) | ||||||
| Title: | ||||||
| Address: | ||||||
| PURCHASER: | ||||||
| (Signature) | ||||||
| (Printed Name) | ||||||
| Address: | ||||||
I, , spouse of , have read and hereby approve the foregoing
Agreement. In consideration of the Company’s granting my spouse the right to purchase the Shares
as set forth in the Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or other such interest shall hereby by similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
| Spouse of | ||||||
-11-
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Exercise Notice and Restricted Stock Purchase
Agreement between the undersigned (“Purchaser”) and Omeros Corporation (the
“Company”) dated , (the “Agreement”), Purchaser hereby sells,
assigns and transfers unto the Company ( ) shares of the
Common Stock of the Company, standing in Purchaser’s name on the books of the Company represented
by Certificate No. , and hereby irrevocably appoints to transfer
said stock on the books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS THERETO.
Dated:
|
||||||
| Signature: | ||||||
| Optionee | ||||||
| Spouse of Optionee (if applicable) |
Instruction: Please do not fill in any blanks other than the signature line. The purpose of this
assignment is to enable the Company to exercise its Repurchase Option set forth in the Agreement
without requiring additional signatures on the part of Purchaser.
ATTACHMENT B
ACKNOWLEDGMENT AND STATEMENT OF DECISION
REGARDING SECTION 83(b) ELECTION
REGARDING SECTION 83(b) ELECTION
The undersigned (which term includes the undersigned’s spouse), a purchaser of
shares of Common Stock of Omeros Corporation, a Washington corporation (the “Company”) by
exercise of an option (the “Option”) granted pursuant to the Company’s Second Amended and
Restated 1998 Stock Plan (the “Plan”), hereby states as follows:
1. The undersigned acknowledges receipt of a copy of the Plan relating to the offering of such
shares. The undersigned has carefully reviewed the Plan and the option agreement pursuant to which
the Option was granted.
2. The undersigned either [check and complete as applicable]:
| (a) | has consulted, and has been fully advised by, the undersigned’s own tax advisor, , whose business address is , regarding the federal, state and local tax consequences of purchasing shares under the Plan, and particularly regarding the advisability of making elections pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”) and pursuant to the corresponding provisions, if any, of applicable state law; or | ||
| (b) | has knowingly chosen not to consult such a tax advisor. |
3. The undersigned hereby states that the undersigned has decided [check as applicable]:
| (a) | to make an election pursuant to Section 83(b) of the Code, and is submitting to the Company, together with the undersigned’s executed Exercise Notice and Restricted Stock Purchase Agreement, an executed copy of form entitled “Election Under Section 83(b) of the Internal Revenue Code of 1986”, provided that the undersigned is solely responsible for filing such election with the Internal Revenue Service; or | ||
| (b) | not to make an election pursuant to Section 83(b) of the Code. |
4. Neither the Company nor any subsidiary or representative of the Company has made any
warranty or representation to the undersigned with respect to the tax consequences of the
undersigned’s purchase of shares under the Plan or of the making or failure to make an election
pursuant to Section 83(b) of the Code or the corresponding provisions, if any, of applicable state
law.
Date:
|
||||||||
| «Optionee» | ||||||||
Date: |
||||||||
| Spouse of «Optionee» |
ATTACHMENT C
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue
Code, to include in taxpayer’s gross income or alternative minimum taxable income, as applicable,
for the current taxable year, the amount of any income that may be taxable to taxpayer in
connection with taxpayer’s receipt of the property described below:
| 1. | The name, address, taxpayer identification number and taxable year of the undersigned are as follows: |
| NAME OF TAXPAYER: | ||||||||
| NAME OF SPOUSE: | ||||||||
| ADDRESS: | ||||||||
| IDENTIFICATION NO. OF TAXPAYER: | ||||||||
| IDENTIFICATION NO. OF SPOUSE: | ||||||||
| TAXABLE YEAR: | ||||||||
| 2. | The property with respect to which the election is made is described as follows: |
shares of the Common Stock (the “Shares”), $0.01 par value,
of Omeros Corporation, a Washington corporation (the “Company”).
| 3. | The date on which the property was transferred is: |
| 4. | The property is subject to the following restrictions: |
Repurchase option at cost in favor of the Company upon termination of taxpayer’s
employment or consulting relationship.
| 5. | The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $ |
| 6. | The amount (if any) paid for such property: $ |
The undersigned has submitted a copy of this statement to the person for whom the services were
performed in connection with the undersigned’s receipt of the above-described property. The
transferee of such property is the person performing the services in connection with the transfer
of said property.
The undersigned understands that the foregoing election may not be revoked except with the
consent of the Commissioner.
Dated: |
||||||||
| Signature of Taxpayer | ||||||||
Dated: |
||||||||
| Signature of Spouse |
RECEIPT
The undersigned hereby acknowledges receipt of Certificate No. representing
shares of Common Stock of Omeros Corporation (the “Company”).
Dated:
|
||||||||
| (Signature) | ||||||||
| (Printed Name) |
RECEIPT
Omeros Corporation (the “Company”) hereby acknowledges receipt of (check as
applicable):
A check in the amount of $
The cancellation of indebtedness in the amount of $
Certificate No. representing
shares of the Company’s Common Stock with a
fair market value of $
given by
as consideration for Certificate No.
representing shares of Common Stock of the Company.
Dated:
|
||||||||
| Omeros Corporation | ||||||||
| By: | ||||||||
| (Signature) | ||||||||
| Name: | ||||||||
| (Printed Name) | ||||||||
| Title: | ||||||||
Exhibit 10.5
OMEROS CORPORATION
SECOND AMENDED AND RESTATED 1998 STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
«Optionee» (“Optionee”)
«OptioneeAddress1»
«OptioneeAddress2»
«OptioneeAddress1»
«OptioneeAddress2»
You have been granted an option to purchase Common Stock of Omeros Corporation (the “Company”)
as follows:
Date of Grant (Later of Board Approval Date or Commencement of Employment/Consulting): |
«GrantDate» | ||
Vesting Commencement Date:
|
«VestingCommenceDate» | ||
Exercise Price per Share:
|
$«ExercisePrice» | ||
Total Number of Shares Granted:
|
«NoOfShares» | ||
Type of Option:
|
«Type» | ||
Term/Expiration Date:
|
«ExpirDate» | ||
Vesting Schedule:
|
This Option will vest in accordance with the following vesting schedule: «Vesting» | ||
Exercisability:
|
This Option may be exercised, in whole or in part, at any time prior to its expiration for vested and unvested Shares. The Company has the right, but not the obligation, to repurchase unvested Shares upon termination of employment or consulting relationship. | ||
Termination Period:
|
Option may be exercised for ninety (90) days after termination of employment or consulting relationship except as set out in Sections 6 and 7 of the Stock Option Agreement (but in no event later than the Expiration Date). |
This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one document.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS
EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT
OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT OR IN THE COMPANY’S STOCK OPTION PLAN SHALL
CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO
TERMINATE OPTIONEE’S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
This option is granted under and governed by the terms and conditions of the Second Amended
and Restated 1998 Stock Option Plan (the “Plan”) and the Stock Option Agreement, both of
which are attached and incorporated in their entireties into this document. By your signature, you
acknowledge receipt of a copy of the Plan and the Stock Option Agreement, and represent that you
are familiar with the terms and provisions thereof, and hereby accept this Option subject to all of
the terms and provisions thereof. You further acknowledge that you have reviewed the Plan, the
Stock Option Agreement and this Option in their entirety, have had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understand all provisions of this
Option. You hereby agree to accept as binding, conclusive and final all decisions or
interpretations of the Administrator (as defined in the Plan) upon any questions arising under the
Plan, the Stock Option Agreement or this Option.
| «Optionee»: | Omeros Corporation | |||||
| By: | ||||||
| Chief Executive Officer | ||||||
-2-
OMEROS CORPORATION
SECOND AMENDED AND RESTATED 1998 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
1. Grant of Option. Omeros Corporation, a Washington corporation (the “Company”),
hereby grants to Optionee, an option (the “Option”) to purchase a total number of shares of Common
Stock (the “Shares”) set forth in the Notice of Stock Option Grant, at the exercise price per share
set forth in the Notice of Stock Option Grant (the “Exercise Price”) subject to the terms,
definitions and provisions of the Omeros Corporation Second Amended and Restated 1998 Stock Option
Plan (the “Plan”) adopted by the Company, which is incorporated herein by reference. Unless
otherwise defined herein, capitalized terms used herein shall have the same meaning as set forth in
the Notice of Stock Option Grant or Plan.
If designated an Incentive Stock Option, this Option is intended to qualify as an Incentive
Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice
of Stock Option Grant, and to the extent it is not so designated or to the extent the Option does
not qualify as an Incentive Stock Option, it is intended to be a Nonstatutory Stock Option.
Notwithstanding the above, if designated as an Incentive Stock Option, in the event that the
Shares subject to this Option (and all other Incentive Stock Options granted to Optionee by the
Company or any Parent or Subsidiary, including under other plans of the Company) that first become
exercisable in any calendar year have an aggregate fair market value (determined for each Share as
of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess
of $100,000 shall be treated as subject to a Nonstatutory Stock Option, in accordance with Section
5(b) of the Plan.
2. Exercise of Option. This Option shall be exercisable during its Term in accordance
with the terms set out in the Notice of Stock Option Grant and with the provisions of Section 9 of
the Plan as follows:
(a) Right to Exercise
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee’s death, disability or other termination of employment, the
exercisability of the Option is governed by Sections 5, 6 and 7 below, subject to the limitation
contained in Section 2(a)(i).
(iii) In no event may this Option be exercised after the date of expiration of the term of
this Option as set forth in the Notice of Stock Option Grant.
(b) Method of Exercise. This Option shall be exercisable by execution and delivery of
the Exercise Notice and Restricted Stock Purchase Agreement attached hereto as
Exhibit A (the “Exercise Agreement”) or of any other form of written notice approved
in writing for such purpose by the Company (a “Written Exercise Notice”) which shall state the
election to exercise the Option, the number of Shares in respect of which the Option is being
exercised, and such other representations and agreements as to the holder’s investment intent with
respect to such shares of Common Stock as may be required by the Company pursuant to the provisions
of the Plan. Such Exercise Agreement or Written Exercise Notice shall be signed by Optionee and
shall be delivered in person or by certified mail to the Secretary of the Company. The Exercise
Agreement or Written Exercise Notice shall be accompanied by payment of the Exercise Price. This
Option shall be deemed to be exercised upon receipt by the Company of such Exercise Agreement or
Written Exercise Notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such issuance and such
exercise shall comply with all relevant provisions of applicable law and the requirements of any
stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by any of the following,
or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which (i) in the case of Shares
acquired pursuant to the exercise of a Company option, have been owned by Optionee for more than
six (6) months on the date of surrender, and (ii) have a fair market value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being exercised; or
(d) if there is a public market for the Shares and they are registered under the Securities
Act of 1933, as amended (the “Securities Act”), delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the Company the amount of
sale or loan proceeds required to pay the exercise price.
4. Restrictions on Exercise. This Option may not be exercised until such time as the
Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such shares would constitute a
violation of any applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the Federal
Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to
make any representation and warranty to the Company as may be required by any applicable law or
regulation.
5. Termination of Relationship. In the event of termination of Optionee’s Continuous
Status as an Employee or Consultant, Optionee may, to the extent otherwise so
-2-
entitled at the date of such termination (the “Termination Date”), exercise this Option during
the Termination Period set forth in the Notice of Stock Option Grant (but only to the extent then
vested). To the extent that Optionee was not entitled to exercise this Option at such Termination
Date, or if Optionee does not exercise this Option within the Termination Period, the Option shall
terminate.
6. Disability of Optionee
(a) Notwithstanding the provisions of Section 5 above, in the event of termination of
Optionee’s Continuous Status as an Employee or Consultant as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within
twelve (12) months from the Termination Date (but in no event later than the Expiration Date set
forth in the Notice of Stock Option Grant and in Section 9 below), exercise this Option to the
extent Optionee was entitled to exercise it as of such Termination Date (but only to the extent
then vested). To the extent that Optionee was not entitled to exercise the Option as of the
Termination Date, or if Optionee does not exercise the Option (to the extent so entitled) within
the time specified in this Section 6(a), the Option shall terminate.
(b) Notwithstanding the provisions of Section 5 above, in the event of termination of
Optionee’s Continuous Status as an Employee or Consultant as a result of any disability not
constituting a total and permanent disability (as set forth in Section 22(e)(3) of the Code),
Optionee may, but only within six (6) months from the Termination Date (but in no event later than
the Expiration Date set forth in the Notice of Stock Option Grant and in Section 9 below), exercise
this Option to the extent Optionee was entitled to exercise it as of such Termination Date (but
only to the extent then vested); provided, however, that if this is an Incentive Stock Option and
Optionee fails to exercise this Incentive Stock Option within three (3) months from the Termination
Date, this Option will cease to qualify as an Incentive Stock Option (as defined in Section 422 of
the Code) and Optionee will be treated for federal income tax purposes as having received ordinary
income at the time of such exercise in an amount generally measured by the difference between the
Exercise Price for the Shares and the fair market value of the Shares on the date of exercise. To
the extent that Optionee was not entitled to exercise the Option at the Termination Date, or if
Optionee does not exercise the Option to the extent so entitled within the time specified in this
Section 6(b), the Option shall terminate.
7. Death of Optionee. In the event of the death of Optionee (a) during the Term of
this Option and while an Employee or Consultant of the Company and having been in Continuous Status
as an Employee or Consultant since the date of grant of the Option, or (b) within thirty (30) days
after Optionee’s Termination Date, the Option may be exercised at any time within twelve (12)
months following the date of death (but in no event later than the Expiration Date set forth in the
Notice of Stock Option Grant and in Section 9 below), by Optionee’s estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the Termination Date (and only to the extent then vested).
8. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised
-3-
during the lifetime of Optionee only by him or her. The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns of Optionee.
9. Term of Option. This Option may be exercised only within the Term set forth in the
Notice of Stock Option Grant, subject to the limitations set forth in Section 7 of the Plan.
10. Tax Consequences. Set forth below is a brief summary as of the date of this
Option of certain of the federal tax consequences of exercise of this Option and disposition of the
Shares under the laws in effect as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THIS SUMMARY DOES NOT ADDRESS THE TAX LAWS
AND REGULATIONS APPLICABLE TO EXERCISING AN OPTION BEFORE IT IS VESTED, WHICH ARE SUMMARIZED IN
EXHIBIT A ATTACHED HERETO. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock Option. If this Option qualifies as an Incentive
Stock Option, there will be no regular federal income tax liability upon the exercise of the
Option, although the excess, if any, of the fair market value of the Shares on the date of exercise
over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal
tax purposes and may subject Optionee to the alternative minimum tax in the year of exercise.
(b) Exercise of Nonstatutory Stock Option. If this Option does not qualify as an
Incentive Stock Option, there may be a regular federal income tax liability upon the exercise of
the Option. Optionee will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date
of exercise over the Exercise Price. If Optionee is an employee, the Company will be required to
withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the time of exercise.
(c) Disposition of Shares. In the case of a Nonstatutory Stock Option, if the Shares
are held for at least one (1) year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes. In the case of an Incentive Stock
Option, if Shares transferred pursuant to the Option are held for at least one (1) year after
exercise and are disposed of at least two (2) years after the Date of Grant, any gain realized on
disposition of the Shares will also be treated as long-term capital gain for federal income tax
purposes. If Shares purchased under an Incentive Stock Option are disposed of within such one (1)
year period or within two (2) years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the fair market value of the Shares on
the date of exercise, or (ii) the sale price of the Shares.
(d) Notice of Disqualifying Disposition of Incentive Stock Option Shares. If the
Option granted to Optionee herein is an Incentive Stock Option, and if Optionee sells or
-4-
otherwise disposes of any of the Shares acquired pursuant to such Incentive Stock Option on or
before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1)
year after the date of exercise, Optionee shall immediately notify the Company in writing of such
disposition. Optionee acknowledges and agrees that he or she may be subject to income tax
withholding by the Company on the compensation income recognized by Optionee from the early
disposition by payment in cash or out of the current earnings paid to Optionee.
11. Withholding Tax Obligations. Optionee understands that, upon exercising a
Nonstatutory Stock Option, he or she will recognize income for tax purposes in an amount equal to
the excess of the then fair market value of the Shares over the Exercise Price. However, the
timing of this income recognition may be deferred for up to six (6) months if Optionee is subject
to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). If Optionee
is an employee, the Company will be required to withhold from Optionee’s compensation, or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income. Additionally, Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an Incentive Stock Option.
Optionee shall satisfy his or her tax withholding obligation arising upon the exercise of this
Option by one or some combination of the following methods: (a) by cash payment, (b) out of
Optionee’s current compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares which (i) in the case of Shares previously acquired from the
Company, have been owned by Optionee for more than six (6) months on the date of surrender, and
(ii) have a fair market value on the date of surrender equal to or greater than Optionee’s marginal
tax rate times the ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option that number of Shares having a fair market
value equal to the amount required to be withheld. For this purpose, the fair market value of the
Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to
be determined (the “Tax Date”).
If Optionee is subject to Section 16 of the Exchange Act (an “Insider”), any surrender of
previously owned Shares to satisfy tax withholding obligations arising upon exercise of this Option
must comply with the applicable provisions of Rule 16b-3 promulgated under the Exchange Act (“Rule
16b-3”).
All elections by Optionee to have Shares withheld to satisfy tax withholding obligations shall
be made in writing in a form acceptable to the Administrator and shall be subject to the following
restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular Shares of the Option as
to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of the Administrator.
-5-
12. Market Standoff Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing any underwritten
offering of the Company’s 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 Shares (other than those
included in the registration) 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.
13. Miscellaneous
(a) Governing Law. This Stock Option Agreement, together with the related Notice of
Stock Option Grant (collectively 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 Washington, without giving effect to principles of
conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing 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.
(c) 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
the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of
the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement has been reviewed by each of the parties hereto and
is the result of negotiations between 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.
(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party’s address as set forth below or as
subsequently modified by written notice.
(f) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights
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and obligations of Optionee under this Agreement may only be assigned with the prior written
consent of the Company.
(g) Arbitration. The parties agree to attempt in good faith to negotiate a settlement
of any and all controversies, claims, or disputes arising out of, relating to, or resulting from
this Agreement. If, after such good faith negotiation, the parties are not able to reach a
settlement, any and all of such controversies, claims, or disputes arising out of, relating to, or
resulting from this Agreement shall be subject to binding arbitration. Such arbitration shall take
place in Seattle, Washington and will be administered by the American Arbitration Association
(“AAA”) in accordance with its Rules for the Resolution of Commercial Disputes. The
parties agree that the arbitrator shall have the power to decide any motions brought by any party
to the arbitration, including motions for summary judgment and/or adjudication and motions to
dismiss and demurrers, prior to any arbitration hearing. The parties also agree that the
arbitrator shall have the power to award any remedies, including attorneys’ fees and costs,
available under applicable law, provided that the prevailing party in any arbitration shall be
entitled to its reasonable attorneys fees and costs. The decision of the arbitrator shall be in
writing. Arbitration shall be the sole, exclusive and final remedy for any dispute under this
Agreement and the decision of the arbitrator may be entered by a party in any court or forum, state
or federal, being of competent jurisdiction. Accordingly, no party will be permitted to pursue
court action regarding this Agreement except as expressly permitted in the preceding sentence.
Notwithstanding the foregoing, each party retains the right to seek injunctive relief to prevent a
breach, threatened breach or continuing breach of this Agreement that would cause irreparable
injury to such party.
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Exhibit A
OMEROS CORPORATION
SECOND AMENDED AND RESTATED 1998 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement (“Agreement”) is made as of , by and between Omeros Corporation,
a Washington corporation (the “Company”), and Optionee (also referred to as “Purchaser”). To the
extent any capitalized terms used in this Agreement are not defined, they shall have the meaning
ascribed to them in the Second Amended and Restated 1998 Stock Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby
elects to exercise his or her option to purchase
shares of the Common Stock (the
“Shares”) of the Company under and pursuant to the Company’s Second Amended and Restated 1998 Stock
Option Plan (the “Plan”) and the Stock Option Agreement dated (the “Option
Agreement”). The purchase price for the Shares shall be $ per Share for a total
purchase price of $ . Of these Shares, Purchaser has elected to purchase
of those Shares which have become vested as of the date hereof under the Vesting
Schedule set forth in the Notice of Stock Option Grant (the “Vested Shares”) and Shares which have not yet vested under such Vesting Schedule (the “Unvested Shares”). The term
“Shares” refers to the purchased Shares and all securities received in replacement of the Shares or
as stock dividends or splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new, substituted or
additional securities or other properties to which Purchaser is entitled by reason of Purchaser’s
ownership of the Shares.
If Purchaser is purchasing Unvested Shares, Purchaser and not the Company is solely
responsible for filing an 83(b) Election with the Internal Revenue Service (as further described in
Section 8 below), and Purchaser acknowledges and agrees that neither the Company, its employees nor
its agents shall have any liability to Purchaser if Purchaser fails to timely or otherwise properly
file an 83(b) Election with the Internal Revenue Service.
2. Time and Place of Exercise. The purchase and sale of the Shares under this
Agreement shall occur at the principal office of the Company simultaneously with the execution of
this Agreement in accordance with the provisions of Section 2(b) of the Option Agreement. On such
date, the Purchaser will deliver payment of the purchase price therefor by (a) check made payable
to the Company, (b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the Option Agreement, or
(d) by a combination of the foregoing.
3. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Purchaser shall not assign, encumber or dispose of any interest in
the Shares while the Shares are subject to the Company’s Repurchase Option (as defined below),
except as provided below. After any Shares have been released from such Repurchase Option,
Purchaser shall not assign, encumber or dispose of any interest in such Shares except in compliance
with the provisions below and applicable securities laws.
(a) Repurchase Option.
(i) In the event of the voluntary or involuntary termination of Purchaser’s employment or
consulting relationship with the Company for any reason (including death or disability), with or
without cause, the Company shall upon the date of such termination (the “Termination Date”)
have an irrevocable, exclusive option (the “Repurchase Option”) for a period of 90 days
from such date to repurchase all or any portion of the Shares held by Purchaser as of the
Termination Date which have not yet been released from the Company’s Repurchase Option at the
original purchase price per Share specified in Section 1 (adjusted for any stock splits, stock
dividends and the like). The Company has the right, but not the obligation, to exercise the
Repurchase Option.
(ii) Unless the Company notifies Purchaser in writing within 90 days from the date of
termination of Purchaser’s employment or consulting relationship that it does not intend to
exercise its Repurchase Option with respect to some or all of the Shares, the Repurchase Option
shall be deemed automatically exercised by the Company as of the 90th day following such
termination, provided that the Company may notify Purchaser that it is exercising its Repurchase
Option as of a date prior to such 90th day. Unless Purchaser is otherwise notified by the Company
pursuant to the preceding sentence that the Company does not intend to exercise its Repurchase
Option as to some or all of the Shares to which it applies at the time of termination, execution of
this Agreement by Purchaser constitutes written notice to Purchaser of the Company’s intention to
exercise its Repurchase Option with respect to all Shares to which such Repurchase Option applies.
The Company, at its choice, may satisfy its payment obligation to Purchaser with respect to
exercise of the Repurchase Option by either (A) delivering a check to Purchaser in the amount of
the purchase price for the Shares being repurchased, or (B) in the event Purchaser is indebted to
the Company, canceling an amount of such indebtedness equal to the purchase price for the 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 Option pursuant to this Section 3(a)(ii) in which Purchaser is indebted
to the Company, such indebtedness equal to the purchase price of the Shares being repurchased shall
be deemed automatically canceled as of the 90th day following termination of Purchaser’s employment
or consulting relationship unless the Company otherwise satisfies its payment obligations. As a
result of any repurchase of Shares pursuant to this Section 3(a), the Company shall become the
legal and beneficial owner of the 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 Shares being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Unvested Shares shall initially be subject to the
Repurchase Option. The Unvested Shares shall be released from the Repurchase Option in accordance
with the Vesting Schedule set forth in the Notice of Stock Option Grant
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until all Shares are released from the Repurchase Option. Fractional shares shall be rounded
to the nearest whole share.
(b) Right of First Refusal. Before any Shares held by Purchaser or any transferee of
Purchaser (either being sometimes referred to herein as the “Holder”) may be sold or otherwise
transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall
have a right of first refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the “Right of First Refusal”).
(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (A) the Holder’s bona fide intention to sell or
otherwise transfer such Shares; (B) the name of each proposed purchaser or other transferee
(“Proposed Transferee”); (C) the number of Shares to be transferred to each Proposed Transferee;
and (D) the terms and conditions of each proposed sale or transfer. The Holder shall offer the
Shares at the same price (the “Offered Price”) and upon the same terms (or terms as similar as
reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty (30) days after
receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the
Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to
any one or more of the Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased
by the Company or its assignee(s) under this Section 3(b) shall be the Offered Price. If the
Offered Price includes consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of
the Notice or in the manner and at the times set forth in the Notice.
(v) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section 3(b), then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within sixty (60) days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any applicable
securities laws and the Proposed Transferee agrees in writing that the provisions of this Section 3
shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within such period, or if
the Holder proposes to change the price or other terms to make them more favorable to the Proposed
Transferee, a new Notice shall be given to the Company, and the Company
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and/or its assignees shall again be offered the Right of First Refusal before any Shares held
by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section 3(b) notwithstanding, the transfer of any or all of the Shares during Purchaser’s
lifetime or on Purchaser’s death by will or intestacy to Purchaser’s Immediate Family or a trust
for the benefit of the Optionee’s Immediate Family shall be exempt from the provisions of this
Section 3(b). “Immediate Family” as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or other recipient
shall receive and hold the Shares so transferred subject to the provisions of this Section, and
there shall be no further transfer of such Shares except in accordance with the terms of this
Section 3.
(c) Involuntary Transfer.
(i) Company’s Right to Purchase upon Involuntary Transfer. In the event, at any time
after the date of this Agreement, of any transfer by operation of law or other involuntary transfer
(including death or divorce, but excluding a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of the purchase price
paid by Purchaser pursuant to this Agreement or the fair market value of the Shares on the date of
transfer, subject to Section 3(e). Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of thirty (30) days following receipt by the Company
of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be transferred
pursuant to Section 3(c)(i), the price per Share shall be a price set by the Board of Directors of
the Company that will reflect the current value of the stock in terms of present earnings and
future prospects of the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with the valuation as
determined by the Board of Directors of the Company, the Purchaser shall be entitled to have the
valuation determined by an independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the Shares may be
assigned in whole or in part to any shareholder or shareholders of the Company or other persons or
organizations; provided, however, that an assignee, other than a corporation that
is the parent or a one hundred percent (100%) owned subsidiary of the Company, must pay the
Company, upon assignment of such right, cash equal to the difference between the original purchase
price and fair market value, if the original purchase price is less than the fair market value of
the Shares subject to the assignment.
-4-
(e) Restrictions Binding on Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interest subject to the provisions of this Agreement,
including, insofar as applicable, the Repurchase Option. In the event of any purchase by the
Company hereunder where the Shares or interest are held by a transferee, the transferee shall be
obligated, if requested by the Company, to transfer the Shares or interest to the Purchaser for
consideration equal to the amount to be paid by the Company hereunder. In the event the Repurchase
Option is deemed exercised by the Company pursuant to Section 3(a)(ii) hereof, the Company may deem
any transferee to have transferred the Shares or interest to Purchaser prior to their purchase by
the Company, and payment of the purchase price by the Company to such transferee shall be deemed to
satisfy Purchaser’s obligation to pay such transferee for such Shares or interest, and also to
satisfy the Company’s obligation to pay Purchaser for such Shares or interest. Any sale or
transfer of the Company’s Shares shall be void unless the provisions of this Agreement are
satisfied.
(f) Termination of Rights. The right of first refusal granted the Company by
Section 3(b) above and the option to repurchase the Shares in the event of an involuntary transfer
granted the Company by Section 3(c) above shall terminate upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the Securities Act. Upon termination of
the right of first refusal described in Section 3(b) above, a new certificate or certificates
representing the Shares not repurchased shall be issued, on request, without the legend referred to
in Section 6(a)(ii) herein and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the enforcement of the
provisions of Section 3 above, Purchaser agrees, immediately upon receipt of the certificate(s) for
the Shares subject to the Company’s Repurchase Option to deliver such certificate(s), together with
an Assignment Separate from Certificate in the form attached to this Agreement as Attachment A
executed by Purchaser and by Purchaser’s spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary’s designee, to hold such certificate(s) and Assignment
Separate from Certificate in escrow and to take all such actions and to effectuate all such
transfers and/or releases as are in accordance with the terms of this Agreement. Purchaser hereby
acknowledges that the Secretary of the Company, or the Secretary’s designee, is so appointed as the
escrow holder with the foregoing authorities as a material inducement to make this Agreement and
that said appointment is coupled with an interest and is accordingly irrevocable. Purchaser agrees
that said escrow holder shall not be liable to any party hereof (or to any other party). The
escrow holder may rely upon any letter, notice or other document executed by any signature
purported to be genuine and may resign at any time. Purchaser agrees that if the Secretary of the
Company, or the Secretary’s designee, resigns as escrow holder for any or no reason, the Board of
Directors of the Company shall have the power to appoint a successor to serve as escrow holder
pursuant to the terms of this Agreement.
-5-
5. Investment and Taxation Representations. In connection with the purchase of the
Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Shares. Purchaser is purchasing the Shares for investment for his or her own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser’s investment intent as expressed herein.
(c) Purchaser understands that the Shares are “restricted securities” under applicable U.S.
federal and state securities laws and that, pursuant to these laws, Purchaser must hold the Shares
indefinitely unless they are registered with the Securities and Exchange Commission and qualified
by state authorities, or an exemption from such registration and qualification requirements is
available. Purchaser acknowledges that the Company has no obligation to register or qualify the
Shares for resale. Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may by conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and requirements
relating to the Company which are outside of Purchaser’s control, and which the Company is under no
obligation and may not be able to satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of
Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted any tax consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
(e) If Purchaser is purchasing Unvested Shares, Purchaser agrees that Purchaser and not the
Company is solely responsible for filing an 83(b) Election with the Internal Revenue Service (as
further described in Section 8 below), and Purchaser acknowledges and agrees that neither the
Company, its employees nor its agents shall have any liability to Purchaser if Purchaser fails to
timely or otherwise properly file an 83(b) Election with the Internal Revenue Service.
6. Restrictive Legends and Stop-Transfer Orders
(a) Legends. The certificate or certificates representing the Shares shall bear the
following legends (as well as any legends required by applicable state and federal corporate and
securities laws):
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(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or subsidiary of the Company, to
terminate Purchaser’s employment, for any reason, with or without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the Internal
Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income for a Nonstatutory Stock
Option and as alternative minimum taxable income for an Incentive Stock Option the difference
between the amount paid for the Shares and the fair market value of the Shares as of the date any
restrictions on the Shares lapse. In this context, “restriction” means the right of the Company to
buy back the Shares pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the Shares are purchased,
rather than when and as the Repurchase Option expires, by filing an election under Section 83(b)
(an “83(b) Election”) of the Code with the Internal Revenue Service within 30 days from the
date of purchase. The IRS makes no exceptions to this filing deadline. Even if the Fair
Market Value of the Shares at the time of the execution of this Agreement equals the amount paid
for the Shares, the election must be made to avoid income and alternative minimum tax treatment
under Section 83(a) in the future. Purchaser understands that failure to file such an election in
a timely manner may result in adverse tax consequences
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for Purchaser. Purchaser further understands that an additional copy of such election form
should be filed with his or her federal income tax return for the calendar year in which the date
of this Agreement falls. Purchaser acknowledges that the foregoing is only a summary of the effect
of United States federal income taxation with respect to purchase of the Shares hereunder, and does
not purport to be complete. Purchaser further acknowledges that the Company has directed Purchaser
to seek independent advice regarding the applicable provisions of the Code, the income tax laws of
any municipality, state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser’s death.
Purchaser agrees that he or she will execute and deliver to the Company with this executed
Agreement a copy of the Acknowledgment and Statement of Decision Regarding Section 83(b) Election
(the “Acknowledgment”) attached hereto as Attachment B. Purchaser further agrees that he or she
will execute and submit with the Acknowledgment a copy of the 83(b) Election attached hereto as
Attachment C (for tax purposes in connection with the early exercise of an option) if Purchaser has
indicated in the Acknowledgment his or her decision to make such an election.
Purchaser agrees that Purchaser and not the Company is solely responsible for filing an 83(b)
election with the Internal Revenue Service, and Purchaser acknowledges and agrees that neither the
Company, its employees nor its agents shall have any liability to Purchaser if Purchaser fails to
timely or otherwise properly file an 83(b) Election with the Internal Revenue Service.
9. Market Stand-off Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing any underwritten
offering of the Company’s securities, Purchaser agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) 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.
10. Miscellaneous
(a) Governing Law. 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 Washington, without giving effect to principles of
conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in
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writing 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.
(c) 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
the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of
the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement has been reviewed by each of the parties hereto and
is the result of negotiations between 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.
(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party’s address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Purchaser under this Agreement may only be assigned with the prior written consent
of the Company.
(h) Arbitration. The parties agree to attempt in good faith to negotiate a settlement
of any and all controversies, claims, or disputes arising out of, relating to, or resulting from
this Agreement. If, after such good faith negotiation, the parties are not able to reach a
settlement, any and all of such controversies, claims, or disputes arising out of, relating to, or
resulting from this Agreement shall be subject to binding arbitration. Such arbitration shall take
place in Seattle, Washington and will be administered by the American Arbitration Association
(“AAA”) in accordance with its Rules for the Resolution of Commercial Disputes. The
parties agree that the arbitrator shall have the power to decide any motions brought by any party
to the arbitration, including motions for summary judgment and/or adjudication and motions to
dismiss and demurrers, prior to any arbitration hearing. The parties also agree that the
arbitrator shall have the power to award any remedies, including attorneys’ fees and costs,
available under applicable law, provided that the prevailing party in any arbitration shall be
entitled to its reasonable attorneys fees and costs. The decision of the arbitrator shall be in
writing. Arbitration shall be the sole, exclusive and final remedy for any dispute under this
Agreement and the decision of the arbitrator may be entered by a party in any court or forum, state
or
-9-
federal, being of competent jurisdiction. Accordingly, no party will be permitted to pursue
court action regarding this Agreement except as expressly permitted in the preceding sentence.
Notwithstanding the foregoing, each party retains the right to seek injunctive relief to prevent a
breach, threatened breach or continuing breach of this Agreement that would cause irreparable
injury to such party.
[Signature Page Follows]
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The parties have executed this Exercise Notice and Restricted Stock Purchase Agreement as of the
date first set forth above.
| COMPANY: | ||||||
| OMEROS CORPORATION | ||||||
| By: | ||||||
| (Signature) | ||||||
| Name: | ||||||
| (Print) | ||||||
| Title: | ||||||
| Address: | ||||||
| PURCHASER: | ||||||
| (Signature) | ||||||
| (Printed Name) | ||||||
| Address: | ||||||
I, , spouse of , have read and hereby approve the foregoing
Agreement. In consideration of the Company’s granting my spouse the right to purchase the Shares
as set forth in the Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or other such interest shall hereby by similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
Spouse of
-11-
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Exercise Notice and Restricted Stock Purchase
Agreement between the undersigned (“Purchaser”) and Omeros Corporation (the
“Company”) dated , (the “Agreement”), Purchaser hereby sells,
assigns and transfers unto the Company ( ) shares of the
Common Stock of the Company, standing in Purchaser’s name on the books of the Company represented
by Certificate No. , and hereby irrevocably appoints to transfer
said stock on the books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS THERETO.
Dated: |
||||||
| Signature: | ||||||
| Optionee | ||||||
| Spouse of Optionee (if applicable) |
Instruction: Please do not fill in any blanks other than the signature line. The purpose of this
assignment is to enable the Company to exercise its Repurchase Option set forth in the Agreement
without requiring additional signatures on the part of Purchaser.
ATTACHMENT B
ACKNOWLEDGMENT AND STATEMENT OF DECISION
REGARDING SECTION 83(b) ELECTION
REGARDING SECTION 83(b) ELECTION
The undersigned (which term includes the undersigned’s spouse), a purchaser of
shares of Common Stock of Omeros Corporation, a Washington corporation (the “Company”) by
exercise of an option (the “Option”) granted pursuant to the Company’s Second Amended and
Restated 1998 Stock Plan (the “Plan”), hereby states as follows:
1. The undersigned acknowledges receipt of a copy of the Plan relating to the offering of such
shares. The undersigned has carefully reviewed the Plan and the option agreement pursuant to which
the Option was granted.
2. The undersigned either [check and complete as applicable]:
(a) has consulted, and has been fully advised by, the undersigned’s own tax
advisor, , whose business address is
, regarding the federal, state and local tax consequences
of purchasing shares under the Plan, and particularly regarding the advisability of
making elections pursuant to Section 83(b) of the Internal Revenue Code of 1986, as
amended (the “Code”) and pursuant to the corresponding provisions, if any, of
applicable state law; or
(b) has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check as applicable]:
(a) to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned’s executed Exercise Notice and
Restricted Stock Purchase Agreement, an executed copy of form entitled “Election Under
Section 83(b) of the Internal Revenue Code of 1986”, provided that the undersigned is
solely responsible for filing such election with the Internal Revenue Service; or
(b) not to make an election pursuant to Section 83(b) of the Code.
4. Neither the Company nor any subsidiary or representative of the Company has made any
warranty or representation to the undersigned with respect to the tax consequences of the
undersigned’s purchase of shares under the Plan or of the making or failure to make an election
pursuant to Section 83(b) of the Code or the corresponding provisions, if any, of applicable state
law.
Date:
|
||||||
| «Optionee» | ||||||
Date: |
||||||
| Spouse of «Optionee» |
ATTACHMENT C
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue
Code, to include in taxpayer’s gross income or alternative minimum taxable income, as applicable,
for the current taxable year, the amount of any income that may be taxable to taxpayer in
connection with taxpayer’s receipt of the property described below:
| 1. | The name, address, taxpayer identification number and taxable year of the undersigned are as follows: |
| NAME OF TAXPAYER: | ||
| NAME OF SPOUSE: | ||
| ADDRESS: |
||
| IDENTIFICATION NO. OF TAXPAYER: | ||
| IDENTIFICATION NO. OF SPOUSE: | ||
| TAXABLE YEAR: |
| 2. | The property with respect to which the election is made is described as follows: |
shares of the Common Stock (the “Shares”), $0.01 par value,
of Omeros Corporation, a Washington corporation (the “Company”).
| 3. | The date on which the property was transferred is: | |
| 4. | The property is subject to the following restrictions: |
Repurchase option at cost in favor of the Company upon termination of taxpayer’s
employment or consulting relationship.
| 5. | The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $ | |
| 6. | The amount (if any) paid for such property: $ |
The undersigned has submitted a copy of this statement to the person for whom the services were
performed in connection with the undersigned’s receipt of the above-described property. The
transferee of such property is the person performing the services in connection with the transfer
of said property.
The undersigned understands that the foregoing election may not be revoked except with the
consent of the Commissioner.
Dated:
|
||||||
| Signature of Taxpayer | ||||||
Dated: |
||||||
| Signature of Spouse |
RECEIPT
The undersigned hereby acknowledges receipt of Certificate No. representing
shares of Common Stock of Omeros Corporation (the “Company”).
Dated:
|
||||||
| (Signature) | ||||||
| (Printed Name) |
RECEIPT
Omeros Corporation (the “Company”) hereby acknowledges receipt of (check as
applicable):
A check in the amount of $
The cancellation of indebtedness in the amount of $
Certificate No. representing
shares of the Company’s Common Stock with a
fair market value of $
given by as consideration for Certificate No. representing
shares of Common Stock of the Company.
Dated:
|
||||||||
| Omeros Corporation | ||||||||
| By: | ||||||||
| (Signature) | ||||||||
| Name: | ||||||||
| (Printed Name) | ||||||||
| Title: | ||||||||
Exhibit 10.6
nura, inc.
2003 STOCK PLAN
1. Purposes of the Plan. The purposes of this Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide additional incentive to
Employees, Directors and Consultants and to promote the success of the Company’s business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined
by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the
Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) “Administrator” means the Board or any of its Committees as shall be administering
the Plan in accordance with Section 4 hereof.
(b) “Applicable Laws” means the requirements relating to the administration of stock
option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable
laws of any other country or jurisdiction where Options or Stock Purchase Rights are granted under
the Plan.
(c) “Board” means the Board of Directors of the Company.
(d) “Change in Control” means the occurrence of any of the following events:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company’s then outstanding voting securities; or
(ii) The consummation of the sale or disposition by the Company of all or substantially all of
the Company’s assets; or
(iii) The consummation of a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or consolidation.
(e) “Code” means the Internal Revenue Code of 1986, as amended.
(f) “Committee” means a committee of Directors or of other individuals satisfying
Applicable Laws appointed by the Board in accordance with Section 4 hereof.
(g) “Common Stock” means the Common Stock of the Company.
(h) “Company” means nura, inc., a Delaware corporation.
(i) “Consultant” means any person who is engaged by the Company or any Parent or
Subsidiary to render consulting or advisory services to such entity.
(j) “Director” means a member of the Board.
(k) “Disability” means total and permanent disability as defined in Section 22(e)(3)
of the Code.
(l) “Employee” means any person, including officers and Directors, employed by the
Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a
director’s fee by the Company shall be sufficient to constitute “employment” by the Company.
(m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(n) “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:
(i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or system on the day of
determination, as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked
prices for the Common Stock on the day of determination; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value
thereof shall be determined in good faith by the Administrator.
(o) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.
(p) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.
(q) “Option” means a stock option granted pursuant to the Plan.
-2-
(r) “Option Agreement” means a written or electronic agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant. The Option
Agreement is subject to the terms and conditions of the Plan.
(s) “Optioned Stock” means the Common Stock subject to an Option or a Stock Purchase
Right.
(t) “Optionee” means the holder of an outstanding Option or Stock Purchase Right
granted under the Plan.
(u) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.
(v) “Plan” means this 2003 Stock Plan.
(w) “Restricted Stock” means Shares issued pursuant to a Stock Purchase Right or
Shares of restricted stock issued pursuant to an Option.
(x) “Restricted Stock Purchase Agreement” means a written agreement between the
Company and the Optionee evidencing the terms and restrictions applying to Shares purchased under a
Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and
conditions of the Plan and the notice of grant.
(y) “Service Provider” means an Employee, Director or Consultant.
(z) “Share” means a share of the Common Stock, as adjusted in accordance with
Section 13 below.
(aa) “Stock Purchase Right” means a right to purchase Common Stock pursuant to Section
11 below.
(bb) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing,
as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan,
the maximum aggregate number of Shares that may be subject to option and sold under the Plan is
2,298,688 Shares. The Shares may be authorized but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares that were subject thereto shall become available for
future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have
actually been issued under the Plan, upon exercise of either an Option or Stock Purchase Right,
shall not be returned to the Plan and shall not become available for future distribution under the
Plan, except that if unvested Shares of Restricted Stock are repurchased by the Company at their
original purchase price, such Shares shall become available for future grant under the Plan.
-3-
4. Administration of the Plan.
(a) Administrator. The Plan shall be administered by the Board or a Committee
appointed by the Board, which Committee shall be constituted to comply with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan and, in the
case of a Committee, the specific duties delegated by the Board to such Committee, and subject to
the approval of any relevant authorities, the Administrator shall have the authority in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock Purchase Rights may from time
to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each such award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time
or times when Options or Stock Purchase Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based
in each case on such factors as the Administrator, in its sole discretion, shall determine;
(vi) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules and regulations relating to sub-plans established for the purpose of satisfying applicable
foreign laws;
(vii) to allow Optionees to satisfy withholding tax obligations by electing to have the
Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right
that number of Shares having a Fair Market Value equal to the minimum amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees to have Shares
withheld for this purpose shall be made in such form and under such conditions as the Administrator
may deem necessary or advisable; and
(viii) to construe and interpret the terms of the Plan and Options granted pursuant to the
Plan.
(c) Effect of Administrator’s Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees.
-4-
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be granted
to Service Providers. Incentive Stock Options may be granted only to Employees.
6. Limitations.
(a) Incentive Stock Option Limit. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Incentive Stock Options are exercisable for the first time by the Optionee
during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were
granted. The Fair Market Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(b) At-Will Employment. Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuing the Optionee’s relationship as a
Service Provider with the Company, nor shall it interfere in any way with his or her right or the
Company’s right to terminate such relationship at any time, with or without cause, and with or
without notice.
7. Term of Plan. Subject to stockholder approval in accordance with Section 19, the
Plan shall become effective upon its adoption by the Board. Unless sooner terminated under
Section 15, it shall continue in effect for a term of ten (10) years from the later of (i) the
effective date of the Plan, or (ii) the earlier of the most recent Board or stockholder approval of
an increase in the number of Shares reserved for issuance under the Plan.
8. Term of Option. The term of each Option shall be stated in the Option Agreement;
provided, however, that the term shall be no more than ten (10) years from the date of grant
thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five
(5) years from the date of grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator, but shall be
subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such Option, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
-5-
(B) granted to any other Employee, the per Share exercise price shall be no less than 100% of
the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be
determined by the Administrator.
(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price
other than as required above pursuant to a merger or other corporate transaction.
(b) Forms of Consideration. The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of
grant). Such consideration may consist of, without limitation, (1) cash, (2) check,
(3) promissory note, (4) other Shares, provided Shares acquired directly from the Company (x) have
been owned by the Optionee for more than six months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan, or (6) any combination of
the foregoing methods of payment. In making its determination as to the type of consideration to
accept, the Administrator shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder
shall be exercisable according to the terms hereof at such times and under such conditions as
determined by the Administrator and set forth in the Option Agreement. An Option may not be
exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written or electronic
notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise
the Option, and (ii) full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized by the Administrator
and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall
be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee
and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the Shares are issued, except as provided in
Section 13 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of Shares
thereafter available, both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
-6-
(b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a
Service Provider, such Optionee may exercise his or her Option within such period of time as is
specified in the Option Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option as set forth in
the Option Agreement). In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for three (3) months following the Optionee’s termination. If, on the
date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered
by the unvested portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a
result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period
of time as is specified in the Option Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the
date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered
by the unvested portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may
be exercised within such period of time as is specified in the Option Agreement (but in no event
later than the expiration of the term of such Option as set forth in the Option Agreement), by the
Optionee’s designated beneficiary, provided such beneficiary has been designated prior to
Optionee’s death in a form acceptable to the Administrator. If no such beneficiary has been
designated by the Optionee, then such Option may be exercised by the personal representative of the
Optionee’s estate or by the person(s) to whom the Option is transferred pursuant to the Optionee’s
will or in accordance with the laws of descent and distribution. In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee’s termination. If, at the time of death, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to
the Plan. If the Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Leaves of Absence.
(i) Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be
suspended during any unpaid leave of absence.
(ii) A Service Provider shall not cease to be an Employee in the case of (A) any leave of
absence approved by the Company or (B) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor.
-7-
(iii) For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days,
unless reemployment upon expiration of such leave is guaranteed by statute or contract. If
reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed,
then three (3) months following the 91st day of such leave, any Incentive Stock Option
held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated
for tax purposes as a Nonstatutory Stock Option.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition
to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the
Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan,
it shall advise the offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must accept such offer. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted
Stock Purchase Agreement shall grant the Company a repurchase option exercisable within 90 days of
the voluntary or involuntary termination of the purchaser’s service with the Company for any reason
(including death or disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be
paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option
shall lapse at such rate as the Administrator may determine.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be determined by the
Administrator in its sole discretion.
(d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the
purchaser shall have rights equivalent to those of a stockholder and shall be a stockholder when
his or her purchase is entered upon the records of the duly authorized transfer agent of the
Company. No adjustment shall be made for a dividend or other right for which the record date is
prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the
Plan.
12. Transferability of Options and Stock Purchase Rights. Unless determined otherwise
by the Administrator, Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or the laws of descent
and distribution, and may be exercised during the lifetime of the Optionee, only by the Optionee.
13. Adjustments; Dissolution or Liquidation; Merger or Change in Control.
(a) Adjustments. In the event that any dividend or other distribution (whether in the
form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off, combination,
-8-
repurchase, or exchange of Shares or other securities of the Company, or other change in the
corporate structure of the Company affecting the Shares occurs, the Administrator, in order to
prevent diminution or enlargement of the benefits or potential benefits intended to be made
available under the Plan, may (in its sole discretion) adjust the number and class of Shares that
may be delivered under the Plan and/or the number, class, and price of Shares covered by each
outstanding Option or Stock Purchase Right
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable
prior to the effective date of such proposed transaction. To the extent it has not been previously
exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation
of such proposed action.
(c) Merger or Change in Control. In the event of a merger of the Company with or into
another corporation, or a Change in Control, each outstanding Option and Stock Purchase Right shall
be assumed or an equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor corporation in a merger
or Change in Control refuses to assume or substitute for the Option or Stock Purchase Right, then
the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right
as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or Change in Control, the Administrator shall
notify the Optionee in writing or electronically that this Option or Stock Purchase Right shall be
fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger
or Change in Control, the option or right confers the right to purchase or receive, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or
Change in Control, the consideration (whether stock, cash, or other securities or property)
received in the merger or Change in Control by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares); provided, however,
that if such consideration received in the merger or Change in Control is not solely common stock
of the successor corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the exercise of the Option
or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase
Right, to be solely common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of common stock in the merger or Change in
Control.
14. Time of Granting Options and Stock Purchase Rights. The date of grant of an
Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator
makes the determination granting such Option or Stock Purchase Right, or such later date as is
determined by the Administrator. Notice of the determination shall be given to each Service
Provider to whom an Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
-9-
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or
terminate the Plan.
(b) Stockholder Approval. The Board shall obtain stockholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise
between the Optionee and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability to
exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to
the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply
with Applicable Laws and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Option, the
Administrator may require the person exercising such Option to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan, shall at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
19. Stockholder Approval. The Plan shall be subject to approval by the stockholders
of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder
approval shall be obtained in the degree and manner required under Applicable Laws.
-10-
Exhibit
10.7
nura, inc.
2003 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 2003 Stock Plan shall have the same
defined meanings in this Stock Option Agreement.
| I. | NOTICE OF STOCK OPTION GRANT |
Name:
Address:
The undersigned Optionee has been granted an Option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as follows:
| Date of Grant | ||||||||||
| Vesting Commencement Date | ||||||||||
| Exercise Price per Share | $ | |||||||||
| Total Number of Shares Granted | ||||||||||
| Total Exercise Price | $ | |||||||||
| Type of Option: | Incentive Stock Option | |||||||||
| Nonstatutory Stock Option | ||||||||||
| Term/Expiration Date: | ||||||||||
Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the following vesting
schedule:
25% of the Shares subject to the Option shall vest on the one (1) year anniversary of the
Vesting Commencement Date, and 1/48 of the Option shall vest each month thereafter, subject to
Optionee continuing to be a Service Provider on such dates.
Termination Period:
This Option shall be exercisable for three (3) months after Optionee ceases to be a Service
Provider. Upon Optionee’s death or Disability, this Option may be exercised for one (1) year after
Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the
Term/Expiration Date as provided above.
| II. | AGREEMENT |
1. Grant of Option. The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant (the “Optionee”), an option (the “Option”) to purchase the
number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the
Notice of Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which
is incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code.
Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option
shall be treated as a Nonstatutory Stock Option (“NSO”).
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance
with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the
Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise
notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the
election to exercise the Option, the number of Shares with respect to which the Option is being
exercised, and such other representations and agreements as may be required by the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by the aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such
exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to the Optionee on the date on which the Option is exercised
with respect to such Shares.
3. Optionee’s Representations. In the event the Shares have not been registered under
the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall,
if required by the Company, concurrently with the exercise of all or any portion of this Option,
deliver to the Company his or her Investment Representation Statement in the form attached hereto
as Exhibit B.
-2-
4. Lock-Up Period. Optionee hereby agrees that Optionee shall not offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any Common Stock (or other securities) of the Company or enter into any
swap, hedging or other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of any Common Stock (or other securities) of the Company held by
Optionee (other than those included in the registration) for a period specified by the
representative of the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of any registration statement of
the Company filed under the Securities Act.
Optionee agrees to execute and deliver such other agreements as may be reasonably requested by
the Company or the underwriter which are consistent with the foregoing or which are necessary to
give further effect thereto. In addition, if requested by the Company or the representative of the
underwriters of Common Stock (or other securities) of the Company, Optionee shall provide, within
ten (10) days of such request, such information as may be required by the Company or such
representative in connection with the completion of any public offering of the Company’s securities
pursuant to a registration statement filed under the Securities Act. The obligations described in
this Section shall not apply to a registration relating solely to employee benefit plans on Form
S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating
solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in
the future. The Company may impose stop-transfer instructions with respect to the shares of Common
Stock (or other securities) subject to the foregoing restriction until the end of said one hundred
eighty (180) day period. Optionee agrees that any transferee of the Option or shares acquired
pursuant to the Option shall be bound by this Section.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless exercise program adopted by
the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares acquired from the Company,
either directly or indirectly, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the
aggregate Exercise Price of the Exercised Shares.
6. Restrictions on Exercise. This Option may not be exercised until such time as the
Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such shares would constitute a
violation of any Applicable Law.
7. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
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lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be
binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with the Plan and the
terms of this Option.
9. Tax Obligations.
(a) Withholding Taxes. Optionee agrees to make appropriate arrangements with the
Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all
Federal, state, local and foreign income and employment tax withholding requirements applicable to
the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to
Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of
Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income
tax withholding by the Company on the compensation income recognized by the Optionee.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference.
The Plan and this Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee’s interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not the choice of law
rules of Washington.
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION
OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN
EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
-4-
Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had
an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions arising under the Plan or
this Option. Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
OPTIONEE
|
nura, inc. | |
Signature
|
By | |
Print Name
|
Title | |
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EXHIBIT A
2003 STOCK PLAN
EXERCISE NOTICE
nura, inc.
1124 Columbia Street, Suite 650
Seattle, Washington 98104
Attention: Mr. Patrick Gray
1124 Columbia Street, Suite 650
Seattle, Washington 98104
Attention: Mr. Patrick Gray
1. Exercise of Option. Effective as of today, , , the undersigned
(“Optionee”) hereby elects to exercise Optionee’s option to purchase shares of the Common
Stock (the “Shares”) of nura, inc. (the “Company”) under and pursuant to the 2003 Stock Plan (the
“Plan”) and the Stock Option Agreement dated , (the “Option Agreement”).
2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase
price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in
connection with the exercise of the Option.
3. Representations of Optionee. Optionee acknowledges that Optionee has received,
read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their
terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall
be issued to the Optionee as soon as practicable after the Option is exercised in accordance with
the Option Agreement. No adjustment shall be made for a dividend or other right for which the
record date is prior to the date of issuance except as provided in Section 13 of the Plan.
5. Company’s Right of First Refusal Before any Shares held by Optionee or any
transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise
transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall
have a right of first refusal to purchase the Shares on the terms and conditions set forth in this
Section (the “Right of First Refusal”).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or
otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee
(“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee;
and (iv) the bona fide cash price or other consideration for which the Holder
proposes
to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the
Offered Price to the Company or its
assignee(s).
assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after
receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the
Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to
any one or more of the Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by
the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price
includes consideration other than cash, the cash equivalent value of the non-cash consideration
shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of
the Notice or in the manner and at the times set forth in the Notice.
(e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 120 days after the date of the Notice, that any such sale or other
transfer is effected in accordance with any applicable securities laws and that the Proposed
Transferee agrees in writing that the provisions of this Section shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right of First Refusal
before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section notwithstanding, the transfer of any or all of the Shares during the Optionee’s
lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a
trust for the benefit of the Optionee’s immediate family shall be exempt from the provisions of
this Section. “Immediate Family” as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or other recipient
shall receive and hold the Shares so transferred subject to the provisions of this Section, and
there shall be no further transfer of such Shares except in accordance with the terms of this
Section.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate
as to any Shares upon the earlier of (i) the first sale of Common Stock of the Company to the
general public, or (ii) a Change in Control in which the successor corporation has equity
securities that are publicly traded.
-2-
6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents
that Optionee has consulted with any tax consultants Optionee deems advisable in connection with
the purchase or disposition of the Shares and that Optionee is not relying on the Company for any
tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause the legends
set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s)
evidencing ownership of the Shares together with any other legends that may be required by the
Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS
ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST
REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE
EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES
AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT THE CONSENT
OF THE COMPANY OR THE MANAGING UNDERWRITER.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to
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vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so
transferred.
8. Successors and Assigns. The Company may assign any of its rights under this
Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the
benefit of the successors and assigns of the Company. Subject to the restrictions on transfer
herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs,
executors, administrators, successors and assigns.
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice
shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review
such dispute at its next regular meeting. The resolution of such a dispute by the Administrator
shall be final and binding on all parties.
10. Governing Law; Severability. This Exercise Notice is governed by the internal
substantive laws but not the choice of law rules, of Washington. In the event that any provision
hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Option Agreement will continue in full force and effect.
11. Entire Agreement. The Plan and Option Agreement are incorporated herein by
reference. This Exercise Notice, the Plan, the Option Agreement and the Investment Representation
Statement constitute the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the Company and Optionee
with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s
interest except by means of a writing signed by the Company and Optionee.
Submitted by:
|
Accepted by: | |
OPTIONEE
|
nura, inc. | |
Signature
|
By | |
Print Name
|
Title | |
Address:
|
Address: | |
| Date Received |
-4-
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
|
||||
COMPANY:
|
nura, inc. | |||
SECURITY:
|
COMMON STOCK | |||
AMOUNT: |
||||
DATE: |
In connection with the purchase of the above-listed Securities, the undersigned Optionee
represents to the Company the following:
(a) Optionee is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s
own account only and not with a view to, or for resale in connection with, any “distribution”
thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).
(b) Optionee acknowledges and understands that the Securities constitute “restricted
securities” under the Securities Act and have not been registered under the Securities Act in
reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee
understands that, in the view of the Securities and Exchange Commission, the statutory basis for
such exemption may be unavailable if Optionee’s representation was predicated solely upon a present
intention to hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the market price of the
Securities, or for a period of one year or any other fixed period in the future. Optionee further
understands that the Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register the Securities.
Optionee understands that the certificate evidencing the Securities will be imprinted with any
legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the Securities Act, which, in substance, permit limited public resale of “restricted securities”
acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701
at the time of the grant of the Option to the Optionee, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject to the
reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days
thereafter (or such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited
“broker’s transaction” or in transactions directly with a market maker (as said term is defined
under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability
of certain public information about the Company, (3) the amount of Securities being sold during any
three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the
Option, then the Securities may be resold in certain limited circumstances subject to the
provisions of Rule 144, which requires the resale to occur not less than one year after the later
of the date the Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than
two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the
paragraph immediately above.
(d) Optionee further understands that in the event all of the applicable requirements of Rule
701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A,
or some other registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden
of proof in establishing that an exemption from registration is available for such offers or sales,
and that such persons and their respective brokers who participate in such transactions do so at
their own risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
| Signature of Optionee: | ||||||
| Date: , | ||||||
- 2 -
EXHIBIT 10.10
OMEROS CORPORATION
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended and Restated Employment Agreement (the “Agreement”) is dated as of
December 30, 2007 (the “Effective Date”) by and between Dr. Gregory A. Demopulos
(“Employee”) and Omeros Corporation, a Washington corporation (the “Company”), and
amends and restates in its entirety the Employment Agreement between Employee and the Company dated
as of December 11, 2001, as amended and restated on June 15, 2005, and the Amended and Restated
Employment Agreement between Employee and the Company dated as of December 12, 2006.
1. Term of Agreement.
(a) Subject to the provisions of Section 3, this Agreement shall commence on the date hereof
and shall continue until terminated by either party. The period of the Employee’s employment
hereunder is hereinafter referred to as the “Employment Period.” The Company’s obligations
under Sections 4(c), 5, 10 and 11(i) shall survive the termination of this Agreement, as will the
Employee’s obligations under Section 9.
(b) On or before May 1, 2009, Employee and the Company shall execute a new employment
agreement acceptable to Employee, and on customary market terms consistent with those for chief
executive officers of similarly situated companies, relating to the terms and conditions of
Employee’s future employment by the Company (including, without limitation, severance protection
and the award of stock or stock options).
2. Duties.
(a) Position. Employee shall be employed as President and Chief Executive Officer of
the Company. Employee will report to the Company’s Board of Directors (the “Board”), and
all other employees of the Company will report, directly or indirectly, to Employee.
(b) Obligations to the Company. Employee agrees to the best of his ability and
experience that he will at all times loyally and conscientiously perform all of the duties and
obligations required of him. During the Employment Period, Employee will devote all of his
business time and attention to the business of the Company, will not render commercial or
professional services of any nature to any person or organization, whether or not for compensation,
without the prior written consent of the Board, and will not directly or indirectly engage or
participate in any business that is competitive in any manner with the business of the Company;
provided, that, notwithstanding the foregoing, Employee may:
(i) devote such time to clinical practice and related activities as he reasonably deems
necessary to maintain his status as a board-eligible orthopedic and hand and microvascular surgeon,
and Employee will be entitled to all of the benefits and profits arising therefrom or incident
thereto; and
(ii) serve on the boards or other governing bodies of, or otherwise participate in the
activities of, charitable and other not-for-profit or community organizations, and in connection
therewith accept and retain honoraria, speaking fees and the like; and
(iii) invest (whether or not passively) and otherwise be involved in (through the provision of
services or otherwise) one or more ventures, however organized or owned, that have as a business
objective the development and/or commercial exploitation of an electronic system of reporting
medical test results, so long as such involvement does not require his participation in the daily
operations of such venture or ventures or materially interfere with the performance of his duties
to the Company; and
(iv) with the consent of the Board (which consent shall not be unreasonably withheld), serve
on the boards or other governing bodies of businesses or organizations not described in (ii) or
(iii) above.
The ownership by Employee of not more than 1% of the outstanding equity securities of a corporation
whose stock is listed on a national stock exchange or the Nasdaq National Market shall in no event
be treated as directly or indirectly engaging or participating in a competitive business. (For the
avoidance of doubt, the immediately preceding sentence shall not be construed as limiting in any
way Employee’s investment or involvement as described in clause (iii) above.) To the extent
consistent with the foregoing, Employee will also comply with and be bound by the Company’s
operating policies, procedures and practices from time to time in effect during the Employment
Period.
3. At-Will Employment. The Company and Employee acknowledge that Employee’s
employment is and shall continue to be at-will, as defined under applicable law, and that
Employee’s employment with the Company may be terminated by either party at any time for any or no
reason. If Employee’s employment terminates for any reason, Employee shall not be entitled to any
benefits other than as provided in this Agreement or applicable law.
4. Compensation. For the duties and services to be performed by Employee hereunder,
the Company shall pay Employee, and Employee agrees to accept, the following:
(a) Salary and Bonus.
(i) Base Salary. Effective as of January 1, 2007, Employee shall receive base salary
at an annual rate of $475,000 or such higher annual rate as the Board or its Compensation Committee
may approve (“Base Salary”), payable in accordance with the Company’s payroll practices for
executive employees but not less frequently than semi-monthly. The Compensation Committee shall
review Employee’s Base Salary not less frequently than annually, beginning the earlier of January
1, 2008 or the period for annual reviews for all employees of the Company, and may increase it but,
except for a reduction consistent with an across-the-board reduction in the base compensation
payable to other executive employees, may not decrease it, without the consent of Employee. In
addition, Employee’s total cash compensation from Base Salary and bonuses (disregarding the bonus
described in the first sentence of Section 4(a)(ii) below)
-2-
may never be less, for any fiscal year
of the Company, than the highest total cash compensation from
base salary and bonuses (excluding sales commissions) paid or payable for such year to any
other executive employee of the Company. For purposes of this Agreement, an “executive employee”
is any employee with the title “director” or more senior.
(ii) Bonuses. On or before December 31, 2007, the Company will pay to Employee a
bonus of $167,147.45 (less applicable withholding taxes) as a one-time bonus. In addition, for
each fiscal year of the Company beginning on or after January 1, 2008, Employee shall be entitled
to participate in all bonus and incentive plans or programs, if any, of the Company, in each case
at a level and on terms commensurate with his position, it being understood that a reduction in
base salary may be a prerequisite for Employee to participate in any bonus or incentive plan or
program, so long as other executives of the Company who participate in such bonus or incentive plan
or program are also subject to a proportional or greater reduction in base salary.
(b) Additional Benefits. Employee will be eligible to participate in the Company’s
employee benefit and fringe benefit plans and programs of general application and in any other
employee benefit and fringe benefit plans and programs of the Company that are made available to
other executive employees of the Company, including without limitation those plans covering
medical/dental, disability and life insurance, in accordance with the rules established for
individual participation in any such plan or program and under applicable law and, in each case, on
terms that are not less favorable to Employee than the terms applicable to other executive
employees of the Company. Employee will be eligible for not less than four weeks of vacation per
year and for sick leave in accordance with the Company’s policies in effect during the Employment
Term, and will receive such other benefits as the Company generally provides to its other employees
of comparable position and experience. In addition to and not in lieu of the foregoing, the
Company shall bear the costs incurred by Employee in maintaining his status as a board-eligible
orthopedic and hand and microvascular surgeon, including, without limitation, payment of Employee’s
malpractice insurance and professional fees.
(c) Reimbursement of Expenses; Insurance. Subject to substantiation in accordance
with Company policies, Employee shall be promptly reimbursed by the Company for all reasonable
expenses that he incurs in the course of his employment hereunder. During the Employment Period
and thereafter, Employee shall be indemnified by the Company to the fullest extent permitted by law
against all liability with respect to acts or omissions by Employee during the course of his
employment with the Company (including for this purpose any service on the Board), and the Company
shall maintain in force adequate insurance covering such acts or omissions.
5. Termination of Employment and Severance Benefits.
(a) Termination of Employment. Employee’s employment, and with it the Employment
Period, shall terminate upon the first to occur of the following:
(i) The Company’s termination of Employee’s employment for Cause (as defined in Section 7(a)
below) (“Termination for Cause”);
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(ii) The Company’s termination of Employee’s employment for Disability (as defined in Section
7(d) below) (“Disability Termination”);
(iii) The Company’s termination of Employee’s employment other than a Termination for Cause or
a Disability Termination (“Termination Without Cause”).
(iv) The termination by Employee of his employment for Good Reason (as defined in Section 7(b)
below) or any other termination by Employee that is treated as a Constructive Termination under
Section 7(b) below (“Constructive Termination”).
(v) The termination by Employee of his employment other than for Good Reason (“Voluntary
Termination”).
(vi) Termination of Employee’s employment by reason of death.
The effective date of Employee’s termination (the “Date of Termination”) shall be (A) in
the case of a termination under clause (vi) above, the date of death, and (B) in every other case,
the date on which the Company (in the case of termination described in clauses (i), (ii) or (iii)
above) or Employee (in the case of clauses (iv) and (v) above) gives the other party notice of
termination or, if a later date is specified in such notice, such later date.
(b) Severance Benefits. Employee shall be entitled to receive severance benefits upon
termination of employment only as set forth in this Section 5(b):
(i) Voluntary Termination. If Employee’s employment terminates by Voluntary
Termination, then Employee shall not be entitled to receive payment of any severance benefits.
Employee will be entitled to prompt payment of all Base Salary, bonuses (including, without
limitation, the full amount of any milestone or incentive payments achieved by Employee at or prior
to the Date of Termination) and vacation earned but not yet paid as of the Date of Termination, and
Employee’s benefits will be continued under the Company’s then existing benefit plans and programs
in accordance with such plans and programs in effect on the Date of Termination and in accordance
with applicable law.
(ii) Involuntary Termination. If Employee’s employment is terminated by the Company
in a Termination Without Cause or by Employee in a Constructive Termination, Employee will be
entitled to receive all amounts he would have received in the event of a Voluntary Termination plus
the following severance benefits (“Severance Benefits”):
(x) until the earlier of (I) the last day of the two year period beginning on the Date of
Termination and (II) Employee’s start date with a new employer that pays Employee base salary equal
to or in excess of his Base Salary in effect immediately prior to the Date of Termination (or, in
the event of any purported decrease in Base Salary prior to the Date of Termination, which
purported decrease was a stated cause for Constructive Termination by Employee, base salary equal
to or in excess of his Base Salary in effect immediately prior to such purported decrease) (the
“Severance Period”), salary continuation at an annual rate equal to the sum
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of (a) the rate
of Base Salary in effect immediately prior to the Date of Termination (or, in the event of any
purported decrease in Base Salary prior to the Date of Termination, which purported decrease was a
stated cause for Constructive Termination by Employee, at the rate in effect immediately prior to
such purported decrease), plus (b) the greater of (i) if any portion of Employee’s remuneration
during the two-year period preceding the calendar year in which the Date of Termination falls
was paid or payable as a bonus, the annual average of the aggregate of such bonus amounts, or (ii)
for the calendar year in which the Date of Termination falls, any bonus to which Employee would
have been entitled for such year if his employment had not been terminated, as determined by the
Board in good faith. Such salary continuation payments shall be paid on the same periodic basis as
payments of base salary are paid to executive employees of the Company, but not less frequently
than semi-monthly. The severance payments described in this clause (x) shall not be subject to
offset for other earnings.
(y) during the Severance Period, continued participation by Employee and his eligible
dependents in all medical, dental, optical and mental health benefit plans or programs of the
Company, in each case as in effect immediately prior to the Date of Termination (or, in the event
of any purported decrease in coverage occurring prior to the Date of Termination, as in effect
immediately prior to such purported decrease) and in each case on terms not less favorable to
Employee and his eligible dependents than the terms applicable to active executive employees of the
Company and their eligible dependents, unless comparable coverage is provided by Employee’s new
employer.
(z) full and immediate vesting and accelerated exercisability of all stock options held by
Employee immediately prior to the Date of Termination and full and immediate vesting of all shares
of stock of the Company previously acquired by Employee or purchasable under any such stock option;
provided, that Employee shall have until the maximum term of the option to exercise any stock
option that had not been exercised prior to the Date of Termination.
(iii) Termination for Cause. If Employee’s employment is terminated by the Company in
a Termination for Cause, then Employee shall not be entitled to receive payment of any severance
benefits. Employee will be entitled to prompt payment of all Base Salary, bonuses and vacation
earned but not yet paid as of the Date of Termination, and Employee’s benefits will be continued
under the Company’s then existing benefit plans and programs in accordance with such plans and
programs in effect on the Date of Termination and in accordance with applicable law.
(iv) Termination by Reason of Death or Disability. In the event that Employee’s
employment with the Company terminates as a result of Employee’s death or a Disability Termination,
Employee (or Employee’s estate or personal representative) will be entitled to prompt payment of
all Base Salary, bonuses and vacation earned but not yet paid as of the Date of Termination and any
other benefits payable under the Company’s then existing benefit plans and policies in accordance
with such plans and policies in effect on the date of death or Disability and in accordance with
applicable law.
6. Section 409A.
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(a) Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified
employee” within the meaning of Section 409A of the Code and the final regulations and any other
guidance promulgated thereunder (“Section 409A”) at the time of his termination, and the Deferred
Compensation Separation Benefits will not and could not under any circumstances,
regardless of when such termination occurs, be paid in full by the later of (i) March 15 of
the year following Employee’s termination, or (ii) fifteenth day of the third month of the
Company’s fiscal year following Employee’s termination, then only that portion of the Deferred
Compensation Separation Benefits which do not exceed the Section 409A Limit (as defined below) will
be made within the first six (6) months following Employee’s termination of employment in
accordance with the payment schedule applicable to each such payment or benefit. For these
purposes, each severance payment and benefit is hereby designated as a separate payment and will
not collectively be treated as a single payment. Any portion of the Deferred Compensation
Separation Benefits in excess of the Section 409A Limit shall accrue and, to the extent such
portion of the Deferred Compensation Separation Benefits would otherwise have been payable within
the first six (6) months following Employee’s termination of employment, will become payable on the
first payroll date that occurs on or after the date six (6) months and one (1) day following the
date of Employee’s termination of employment. All subsequent Deferred Compensation Separation
Benefits, if any, will be payable in accordance with the payment schedule applicable to each
payment or benefit.
(b) This provision is intended to comply with the requirements of Section 409A so that none of
the Severance Benefits to be provided hereunder will be subject to the additional tax imposed under
Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and
Employee agree to work together in good faith to consider amendments to this Agreement and to take
such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any
additional tax or income recognition prior to actual payment to Employee under Section 409A.
7. Definition of Terms. The following terms referred to in this Agreement shall have
the following meanings:
(a) Cause. For purposes of this Agreement, “Cause” for Employee’s termination will
exist at any time after the happening of one or more of the following events:
(i) Employee’s willful misconduct or gross negligence in performance of his or her duties
hereunder, including Employee’s refusal to comply in any material respect with the legal directives
of the Board so long as such directives are not inconsistent with Employee’s position and duties,
and such refusal to comply is not remedied within 10 working days after written notice from the
Board, which written notice shall state that failure to remedy such conduct may result in
Termination for Cause;
(ii) Dishonest or fraudulent conduct that materially discredits the Company, a deliberate
attempt to do an injury to the Company, or conduct that materially discredits the Company or is
materially detrimental to the reputation of the Company, including conviction of a felony; or
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(iii) Employee’s material breach, if incurable, of any element of the Company’s Confidential
Information and Invention Assignment Agreement, including without limitation, Employee’s theft or
other misappropriation of the Company’s proprietary information.
(b) Constructive Termination. For purposes of this Agreement, “Constructive
Termination” means Employee’s termination of his employment within 120 days following the
occurrence of Good Reason. For purposes of this Agreement, “Good Reason” means any of the
following: (i) any material diminution in Employee’s authority, duties or responsibilities; (ii)
any material diminution in Base Salary; (iii) any material change in the geographic location at
which Employee must perform services (in other words, the relocation of Employee to a principal
work location that is more than 50 miles from the Company’s location on the Effective Date); and
(iv) any other action or inaction that constitutes a material breach by the Company of this
Agreement.
Provided, however, that before Employee may terminate his employment in a Constructive
Termination, (A) Employee must provide the Company with written notice within 90 days of the event
that Employee believes constitutes “Good Reason” specifically identifying the acts or omissions
constituting the grounds for Good Reason and (B) the Company must have an opportunity within 30
days following delivery of such notice to cure the Good Reason condition.
(c) Deferred Compensation Separation Benefits. For purposes of this Agreement,
“Deferred Compensation Separation Benefits” shall mean the Severance Benefits payable to
Employee, if any, pursuant to this Agreement, together with any other severance payments or
separation benefits which may be considered deferred compensation under Section 409A.
(d) Disability. For purposes of this Agreement, “Disability” shall mean that
Employee has been unable to perform his or her duties hereunder as the result of his or her
incapacity due to physical or mental illness, and such inability, which continues for at least 120
consecutive calendar days or 150 calendar days during any consecutive twelve-month period, if
shorter, after its commencement, is determined to be total and permanent by a physician selected by
the Company and its insurers and acceptable to Employee or to Employee’s legal representative (with
such agreement on acceptability not to be unreasonably withheld).
(e) Section 409A Limit. For purposes of this Agreement, “Section 409A Limit”
shall mean the lesser of two (2) times: (i) Employee’s annualized compensation based upon the
annual rate of pay paid to Employee during the Company’s taxable year preceding the Company’s
taxable year of Employee’s termination of employment as determined under Treasury Regulation
1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or
(ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section
401(a)(17) of the Code for the year in which Employee’s employment is terminated.
8. Confidentiality Agreement. Employee shall sign, or has signed, a Confidential
Information and Invention Assignment Agreement (the “Confidentiality Agreement”)
substantially in the form attached hereto as Exhibit A. Employee hereby represents and
warrants to the Company that he or she has complied with all obligations under the Confidentiality
Agreement and agrees to continue to abide by the terms of the Confidentiality Agreement and further
agrees that the
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provisions of the Confidentiality Agreement shall survive any termination of this
Agreement or of Employee’s employment relationship with the Company.
9. Noncompetition Covenant. Employee hereby agrees that he or she shall not, during
the Employment Period and until the later of (i) the end of the Severance Period, if any, and (ii)
one
year after the Date of Termination, do any of the following without the prior written consent
of the Board:
(a) Compete. Carry on any business or activity (whether directly or indirectly, as a
partner, stockholder, principal, agent, director, affiliate, employee or consultant) which is
directly competitive with the business conducted by the Company (as conducted now or during the
term of Employee’s employment), nor engage in any other activities that conflict with Employee’s
obligations to the Company. The parties acknowledge and agree that Employee shall not be deemed to
have breached his undertakings under this Section 9 by reason of engaging, whether during the
Employment Period or thereafter, in any or any combination of the activities described as permitted
activities under Section 2(b), including, for the avoidance of doubt but without limitation,
Section 2(b)(iii).
(b) Solicit Business. Solicit or influence or attempt to influence any client or
customer, either directly or indirectly, to direct his or its purchase of the Company’s products
and/or services to any person, firm, corporation, institution or other entity in competition with
the business of the Company.
(c) Solicit Personnel. During the term of this Agreement and until the later of (i)
the end of the Severance Period and (ii) one year after the Date of Termination, solicit or
influence or attempt to influence any person employed by the Company to terminate or otherwise
cease his employment with the Company or become an employee of any competitor of the Company. This
Section 9(c) is to be read in conjunction with Section 6 of the Confidential Information and
Invention Assignment Agreement executed by Employee.
10. Successors. This Agreement shall be binding on the Company and its successors and
assigns. Without limiting the foregoing, the Company shall require any successor (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all
or substantially all of the Company’s business and/or assets to assume the Company’s obligations
under this Agreement and to agree expressly to perform the Company’s obligations under this
Agreement in the same manner and to the same extent as the Company would be required to perform
such obligations in the absence of a succession. The terms of this Agreement and all of Employee’s
rights hereunder shall inure to the benefit of, and be enforceable by, Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
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11. Miscellaneous Provisions.
(a) No Duty to Mitigate. Employee shall not be required to mitigate the amount of any
payment contemplated by this Agreement (whether by seeking new employment or in any other manner).
(b) Amendments and Waivers. Any term of this Agreement may be amended or waived only
with the written consent of the parties.
(c) Sole Agreement. This Agreement, including Exhibit A hereto, constitutes the sole
agreement of the parties and supersedes all oral negotiations and prior writings with respect to
the subject matter hereof. In particular, this Agreement shall supersede any terms contained
in stock option agreements provided to Employee or in any exhibits to this Agreement, in each case
that are contrary to the terms hereof; provided, for the avoidance of doubt, that subject to the
last sentence of Section 4(b), nothing in this Agreement shall be construed as adversely affecting
Employee’s rights under any stock option granted to him prior to the Effective Date.
(d) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient upon receipt, when delivered personally or by a
nationally-recognized delivery service (such as Federal Express or UPS), or 48 hours after being
deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is
addressed to the party to be notified at such party’s address as set forth in the signature blocks
below or as subsequently modified by written notice.
(e) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Washington, without giving effect to the
principles of conflict of laws.
(f) 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
the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of
the Agreement shall be enforceable in accordance with its terms.
(g) Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together will constitute one and the same instrument.
(h) Arbitration. Any dispute or claim arising out of or in connection with this
Agreement will be finally settled by binding arbitration in Seattle, Washington in accordance with
the rules of the American Arbitration Association by one arbitrator appointed in accordance with
said rules. The arbitrator shall apply Washington law, without reference to rules of conflicts of
law or rules of statutory arbitration, to the resolution of any dispute. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction thereof.
Notwithstanding the
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foregoing, the parties may apply to any court of competent jurisdiction for
preliminary or interim equitable relief, or to compel arbitration in accordance with this
paragraph, without breach of this arbitration provision. This Section 11(h) shall not apply to the
Confidentiality Agreement.
(i) Legal Fees. The Company shall reimburse Employee for his legal fees incurred in
negotiating this Agreement. In addition, the Company shall pay all legal and other reasonable fees
and expenses that Employee may incur in connection with any action by Employee to obtain any
severance, coverage, reimbursement, remuneration or other payment or benefit asserted by Employee
in good faith to be owing to him under the Agreement, if Employee substantially prevails with
respect to any material claim brought in the arbitration.
(j) Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES THAT, IN EXECUTING
THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL,
AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT
SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
(signature page follows)
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The parties have executed this Agreement the date first written above.
| OMEROS CORPORATION |
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| By: | /s/ Marcia S. Kelbon | |||
| Title: | VP, Patent & General Counsel | |||
| Address: | 1420 Fifth Avenue, Suite 2600 | |||
| Seattle, WA 98101 | ||||
| GREGORY A. DEMOPULOS |
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| Signature: | /s/ Gregory A. Demopulos, M.D. | |||
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
EXHIBIT A
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
INVENTION ASSIGNMENT AGREEMENT
OMEROS MEDICAL SYSTEMS, INC.
EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
In consideration for my becoming employed, or my employment being continued, by Omeros Medical
Systems, Inc. or its subsidiaries, affiliates, or successors (collectively, the “Company”),
and for any cash, equity or other compensation for my services, I hereby agree as follows:
| 1. | Overall Duties. During my term of employment with the Company, I will perform for the Company such duties as may be designated by the Company from time to time. I will devote my best efforts to the interests of the Company and will not engage in other employment or in any activities detrimental to the best interests of the Company without the prior written consent of the Company. | |
| 2. | Company Intellectual Property. | |
| 2.1 | Definitions. As used in this Agreement, the term “Intellectual Property” means discoveries, developments, concepts, designs, ideas, know-how, improvements, inventions, trade secrets and/or original works of authorship, and trademarks, whether or not patentable, copyrightable or otherwise legally protectable. This includes, but is not limited to, any new product, apparatus, article of manufacture, biological material, method, procedure, process, technique, system, compound, formulation, composition of matter, design or configuration of any kind, or any improvement thereon. As used in this Agreement, the term “Company Intellectual Property” means all Intellectual Property that I may solely or jointly create, conceive, develop or reduce to practice during the term of my employment with the Company which (i) pertains to any current or planned line of business activity of the Company, (ii) was aided by the use of time, material or facilities of the Company, whether or not during working hours or (iii) relates to any of my work carried out for the Company, whether or not during normal working hours. Company Intellectual Property shall not be interpreted to include, and any assignment of inventions required by this Agreement does not apply to, any invention or other proprietary right of mine which I have disclosed to the Board of Directors of Omeros and which has been disclaimed thereby as being unrelated to and not in conflict with the present future business or research of Omeros. | |
| 2.2 | Duty to Disclose and Company Ownership. I agree to promptly disclose all Company Intellectual Property to the Company, for no additional compensation. All Company Intellectual Property shall be the sole property of the Company and its assigns to the maximum extent permitted by law (and to the fullest extent permitted by law shall be deemed “works made for hire”), and the Company and its successors and assigns shall be the sole owner of all patents, copyrights, trademarks, trade secrets and other rights in connection therewith. | |
| 2.3 | Assignment. I hereby assign and transfer to the Company, for no additional compensation, any right and title to and interest in Company Intellectual Property that I may have or acquire, including any copyrights and Registrations and renewals therefore, any inventions, any United States, International and foreign patent applications filed on such inventions, the right to apply for all such patent applications in my name or in the name of the Company, such Company Intellectual Property to be held and enjoyed by the Company as entirely as the same would have been held and enjoyed by me had this assignment and transfer not been made. | |
| 2.4 | Assistance. I agree to provide all required or requested assistance to the Company to permit the Company, at its expense but at no additional compensation to me, in obtaining and enforcing the full benefits, enjoyment, rights and title throughout the world in Company Intellectual Property, including but not limited to the review and execution of assignments confirming ownership by the |
| Company, declarations, powers of attorney, and other documents, and assistance or cooperation in legal proceedings. I hereby irrevocably designate the Company and its duly authorized officers and agents as my agent and attorney-in fact, to execute and file on my behalf any such applications and to do all other lawful acts to further the prosecution and issuance of patents, copyright and mask work registrations related to such Inventions. This power of attorney shall not be affected by my subsequent incapacity. | ||
| 2.5 | Notice Required by Revised Code of Washington 49.44.140. Any assignment of inventions required by this Agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the Company was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) directly to the business of the Company or (ii) to the Company’s actual or demonstrably anticipated research or development or (b) the invention results from any work performed by the employee for the Company. | |
| 2.6 | I attach hereto as Exhibit A a complete list of all inventions or other Intellectual Property, if any, made by me prior to my employment with the Company that are relevant to any aspect of the Company’s current and planned business, and I represent and warrant that such list is complete. If no such list is attached to this Agreement, I represent that I have no such inventions or other Intellectual Property at the time of signing this Agreement. If in the course of my employment with the Company, I use or incorporate into a product or process offered or under development by the Company an invention or other Intellectual Property not included in the Company Intellectual Property in which I have an interest, the Company is hereby granted a nonexclusive, fully paid-up, royalty-free, perpetual worldwide license of my interest to use and sublicense such invention or other Intellectual Property without restriction of any kind. | |
| 3. | Confidentiality Obligation. | |
| 3.1 | Definition. As used in this Agreement, the term “Proprietary Information” means information or material not generally known or available outside the Company, or information or material entrusted to the Company by third parties, that I may obtain or create before or during the term of my employment, or obtain through the Company’s resources or personnel after my employment. This includes, but is not limited to, Company Intellectual Property, other inventions, confidential knowledge, copyrights, product ideas, techniques, processes, formulas, object codes, biological materials, mask works and/or any other information of any type relating to documentation, laboratory notebooks, data, schematics, algorithms, flow charts, mechanisms, research, manufacture, improvements, assembly, installation, marketing, forecasts, sales, pricing, customers, customer lists, customer data, investor names and lists, the duties, qualifications, performance levels and compensation of other employees, and/or cost or other financial data concerning any of the foregoing or the Company and its operations. Proprietary Information may be contained in material such as drawings, samples, procedures, specifications, reports, studies, customer or supplier lists, budgets, cost or price lists, compilations or computer programs, or may be in the nature of unwritten knowledge or know-how. | |
| 3.2 | Duty to Protect Proprietary Information. I understand and agree that all Proprietary Information is the sole property of the Company and its assigns. I hereby assign to the Company any rights I may acquire in such Proprietary Information. During and after my employment, I will hold in confidence and not directly or indirectly disclose or use any Proprietary Information, except as authorized by the Company as necessary for carrying out my duties for the Company. I agree not to make copies of such Proprietary Information except as authorized by the Company. Upon termination of my employment, or upon earlier request of the Company, I will return or deliver to |
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| the Company all tangible or electronic forms or copies of such Proprietary Information in my possession or control. These obligations with respect to Proprietary Information shall not apply to information that I can conclusively establish with written documentation: (i) was widely known to the public at the time I obtained the Proprietary Information or later becomes widely known to the public through no direct or indirect action on my part; (ii) was known to me prior to my employment or pre-employment relationship or association with Company; or (iii) that I later receive from a third party having the lawful right to disclose the same. | ||
| 4. | Ownership of Physical Property. All documents, apparatus, equipment and other physical property in any form, whether or not pertaining to Proprietary Information, furnished to me by the Company or produced by me or others in connection with my employment shall be and remain the sole property of the Company, and will be returned to the Company upon request or upon termination of my employment, even if not requested. | |
| 5. | Non-solicitation of Employees, Consultants and Other Parties. During the term of my employment with the Company, and for a period of one (1) year following the termination of my employment with the Company for any reason, I shall not directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees or consultants to terminate their relationship with the Company, or attempt any of the foregoing, either for myself or any other person or entity. For a period of one (1) year following termination of my employment with the Company for any reason, I shall not solicit any licensor, customer, or licensee of the Company, that are known to me, with respect to any business, products or services that are competitive to the products or services offered by the Company or under development as of the date of termination of my relationship with the Company. | |
| 6. | Noncompetition. During the term of my employment with the Company and for one (1) year following the termination of my employment or relationship with the Company for any reason, I will not, without the Company’s prior written consent, directly or indirectly work on any products or services that are competitive with products or services (a) being commercially developed or exploited by the Company during my employment or (b) on which I worked or about which I learned Proprietary Information during my employment with the Company. | |
| 7. | No Conflicts. I represent that my performance of all the terms of this Agreement as an employee of the Company does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me in confidence or in trust prior to my becoming an employee of the Company, and I will not disclose to the Company, or induce the Company to use, any confidential or proprietary information or material belonging to any previous employer or others. I am not a party to and agree not to enter into any written or oral agreement that conflicts or interferes with the provisions of this Agreement. I will not bring to my employment with the Company any materials or documents obtained from or belonging to a former employer except those documents listed in Exhibit A, which I have the unrestricted right to use and disclose without breach of any agreement or other obligation. | |
| 8. | At-Will Relationship. I understand and acknowledge that my employment with the Company is and shall continue to be at-will, as defined under applicable law, meaning that either I or the Company may terminate the relationship at any time for any reason or no reason, without further obligation or liability on the part of the Company. | |
| 9. | Miscellaneous. This Agreement inures to the benefit of successors and assigns of the Company and is binding upon my heirs and legal representatives. My obligations under Sections 2 and 3 of this Agreement shall endure and subsist beyond the term of my employment, and my obligations under |
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| Sections 5 and 6 of this Agreement shall continue beyond the term of this Agreement for the
periods noted in those sections. I acknowledge that violation of this Agreement by me may cause irreparable injury to the Company, and I agree that the Company will be entitled to seek extraordinary relief in court, including, but not limited to, temporary restraining orders, preliminary injunctions and permanent injunctions without the necessity of posting a bond or other security and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement. |
||
| This Agreement supersedes any oral, written or other communications or agreements concerning the subject matter of this Agreement, and may be amended or waived only by a written instrument that I and a duly authorized officer of the Company have signed. This Agreement shall be governed by the laws of the State of Washington applicable to contracts entered into and performed entirely within the State of Washington, without giving effect to principles of conflict of laws. If any provision of this Agreement is held to be unenforceable under applicable law, then such provision shall be excluded from this Agreement only to the extent unenforceable, and the remainder of such provision and of this Agreement shall be enforceable in accordance with its terms. | ||
| 10. | Acknowledgment. I certify and acknowledge that I have carefully read all of the provisions of this Agreement and that I understand and will fully and faithfully comply with such provisions. I acknowledge that the Company’s counsel represents the interest of the Company, and have received a recommendation to obtain independent legal counsel to review this Agreement in advance and counsel me of my rights and obligations thereunder. |
| OMEROS MEDICAL SYSTEMS, INC. | Gregory A. Demopulos, M.D. | |||
By:
|
/s/ Marcia S. Kelbon | /s/ Gregory A. Demopulos, M.D. | ||
Title:
|
VP, Patent & General Counsel | Dated: 12/11/01 | ||
Dated:
|
12/11/01 | |||
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Exhibit A
Omeros Medical Systems, Inc.
| 1. | The following is a complete list of all inventions or other Intellectual Property relevant to the subject matter of my employment by the Company that have been made or conceived or first reduced to practice by me, alone or jointly with others or which were known to me prior to my employment by the Company. I represent that such list is complete. |
Those inventions and intellectual property listed and described in Technology Transfer
Agreements executed by me and effective June 16, 1994 and December 11, 2001.
| 2. | þ I am not bringing any materials and documents of a former employer to the Company. |
o I propose to bring to the Company the following non-proprietary materials or documents of a
former employer. I certify that I have the unrestricted right to use and disclose these without
breach of any confidence, agreement or other obligation.
| By: | /s/ Gregory A. Demopulos, M.D. | |||
| Gregory A. Demopulos, M.D. | ||||
| [Please Print Employee Name] | ||||
Exhibit 10.11
OMEROS MEDICAL SYSTEMS, INC.
NOTICE OF STOCK OPTION GRANT
Gregory Demopulos, M.D.
6530 83rd Place SE
Mercer Island, Washington 98040
6530 83rd Place SE
Mercer Island, Washington 98040
You have been granted an option to purchase Common Stock of Omeros Medical Systems, Inc. (the
“Company”) as follows:
| Board Approval Date: | December 11, 2001 | ||
| Date of Grant (Later of Board | |||
| Approval Date or Commencement | |||
| of Employment/Consulting): | December 11, 2001 | ||
| Exercise Price per Share: | $0.265 | ||
| Total Number of Shares Granted: | 93,125 | ||
| Total Exercise Price: | $24,678.13 | ||
| Type of Option: | Nonstatutory Stock Option | ||
| Expiration Date: | December 10, 2011 | ||
| Vesting Commencement Date: | December 11, 2001 | ||
| Vesting/Exercise Schedule: | This Option may be exercised, in whole or in part, at any time after the Date of Grant. The Shares underlying this Option shall be fully vested on the Vesting Commencement Date. |
| Termination Period: | This Option may be exercised for 90 days after termination of employment | ||
| or consulting relationship except as set out in Section 5 of the Stock Option Agreement | |||
| (but in no event later than the Expiration Date); provided, that if Optionee’s | |||
| employment relationship is terminated by the Company in a “Termination Without Cause” | |||
| or by Optionee in a “Constructive Termination” (as both of such terms are defined in | |||
| the Employment Agreement dated December 11, 2001 between Company and Optionee) this | |||
| Option may be exercised until the Expiration Date. Optionee is responsible for keeping | |||
| track of the Expiration Date. The Company will not provide further notice of such | |||
| period. | |||
| Transferability: | This Option may not be transferred. |
By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the Stock
Option Agreement which is attached and made a part of this document.
All capitalized terms in this Notice shall have the meaning ascribed to them in this Notice
or, if not otherwise defined herein, in the attached Stock Option Agreement.
In addition, you agree and acknowledge that nothing in this Notice or the attached documents
confers upon you any right to continue your employment or consulting relationship with the Company
for any period of time, nor does it interfere in any way with your right or the Company’s right to
terminate that relationship at any time, for any reason, with or without cause.
| OMEROS MEDICAL SYSTEMS, INC. | ||||||
| By: | ||||||
Gregory Demopulos, M.D.
|
Name: | |||||
| Title: | ||||||
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OMEROS MEDICAL SYSTEMS, INC.
STOCK OPTION AGREEMENT
1. Grant of Option. Omeros Medical Systems, Inc., a Washington corporation (the
“Company”), hereby grants to Gregory Demopulos, M.D. (“Optionee”), an option (the
“Option”) to purchase the total number of shares of Common Stock (the “Shares”) set
forth in the Notice of Stock Option Grant (the “Notice”), at the exercise price per Share
set forth in the Notice (the “Exercise Price”) subject to the terms, definitions and
provisions of this Agreement. All capitalized terms in this Agreement shall have the meaning
ascribed to them in the attached Appendix.
2. Designation of Option. This Option is intended to be a Nonstatutory Stock Option.
3. Exercise of Option. This Option shall be exercisable during its term in accordance
with the Vesting/Exercise Schedule set out in the Notice and with the provisions of Section 10 of
this Agreement as follows:
(a) Right to Exercise.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee’s death, disability or other termination of employment, the
exercisability of the Option is governed by Sections 5 and 6 below, subject to the limitations
contained in this Section 3.
(iii) In no event may this Option be exercised after the Expiration Date of the Option as set
forth in the Notice.
(b) Method of Exercise.
(i) This Option shall be exercisable by execution and delivery of the Exercise Notice and
Restricted Stock Purchase Agreement attached hereto as Exhibit A, or any other form of
written notice approved for such purpose by the Company which shall state Optionee’s election to
exercise the Option, the number of Shares in respect of which the Option is being exercised, and
such other representations and agreements as to the holder’s investment intent with respect to such
Shares as may be required by the Company pursuant to the provisions of this Agreement. Such
written notice shall be signed by Optionee and shall be delivered to the Company by such means as
are determined by the Company in its discretion to constitute adequate delivery. The written
notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the Exercise Price.
(ii) As a condition to the exercise of this Option and as further set forth in Section 10 of
this Agreement, Optionee agrees to make adequate provision for federal,
state or
other tax withholding obligations, if any, which arise upon the vesting or exercise of the
Option, or disposition of Shares, whether by withholding, direct payment to the Company, or
otherwise.
(iii) The Company is not obligated, and will have no liability for failure, to issue or
deliver any Shares upon exercise of the Option unless such issuance or delivery would comply with
the Applicable Laws, with such compliance determined by the Company in consultation with its legal
counsel. This Option may not be exercised if the issuance of such Shares upon such exercise or the
method of payment of consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under Part 221 of
Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a
condition to the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by the Applicable Laws. Assuming
such compliance, for income tax purposes the Shares shall be considered transferred to Optionee on
the date on which the Option is exercised with respect to such Shares.
4. Method of Payment. Payment of the Exercise Price shall be by any of the following,
or a combination of the following, at the election of Optionee:
(a) cash, check or promissory note bearing a commercial rate of interest at the date of
exercise (either in the form attached as Exhibit B to this agreement or any other form
approved by the Company);
(b) prior to the date, if any, upon which the Common Stock becomes a Listed Security, by
surrender of other shares of Common Stock of the Company that have an aggregate Fair Market Value
on the date of surrender equal to the Exercise Price of the Shares as to which the Option is being
exercised. In the case of shares acquired directly or indirectly from the Company, such shares
must have been owned by Optionee for more than six (6) months on the date of surrender (or such
other period of time as is necessary to avoid the Company’s incurring adverse accounting charges);
or
(c) following the date, if any, upon which the Common Stock is a Listed Security, delivery of
a properly executed exercise notice together with irrevocable instructions to a broker approved by
the Company to deliver promptly to the Company the amount of sale or loan proceeds required to pay
the exercise price.
5. Termination of Relationship. Following the date of termination of Optionee’s
Continuous Service Status for any reason (the “Termination Date”), Optionee may exercise
the Option only as set forth in the Notice and this Section 5. To the extent that Optionee is not
entitled to exercise this Option as of the Termination Date, or if Optionee does not exercise this
Option within the Termination Period set forth in the Notice or the termination periods set forth
below, the Option shall terminate in its entirety. In no event may any Option be exercised after
the Expiration Date as set forth in the Notice.
(a) Termination. In the event of termination of Optionee’s Continuous Service Status
other than as a result of Optionee’s disability or death, Optionee may, to the
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extent
otherwise so entitled at the date of such termination, exercise this Option during the
Termination Period set forth in the Notice.
(b) Other Terminations. In connection with any termination other than a termination
covered by Section 5(a), Optionee may exercise the Option only as described below:
(i) Termination upon Disability of Optionee. In the event of termination of
Optionee’s Continuous Service Status as a result of Optionee’s disability, Optionee may, but only
within twelve (12) months from the Termination Date, exercise this Option to the extent Optionee
was entitled to exercise it as of such Termination Date.
(ii) Death of Optionee. In the event of the death of Optionee, the Option may be
exercised at any time within six (6) months following the date of death by Optionee’s estate or by
a person who acquired the right to exercise the Option by bequest or inheritance, but only to the
extent Optionee was entitled to exercise the Option as of the Termination Date.
(c) Buyout Provisions. The Company may at any time offer to buy out the Option for a
payment in cash or Shares based on such terms and conditions as the Company shall establish and
communicate to the Optionee at the time that such offer is made.
6. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by him or her. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.
7. Tax Consequences. Below is a brief summary as of the date of this Option of
certain of the federal tax consequences of exercise of this Option and disposition of the Shares
under the laws in effect as of the Date of Grant. THIS SUMMARY IS INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES.
Since this Option does not qualify as an incentive stock option under the Code, there may be a
regular federal (and state) income tax liability upon the exercise of the Option. Optionee will be
treated as having received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise
Price. If Optionee is an Employee, the Company will be required to withhold from Optionee’s
compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal
to a percentage of this compensation income at the time of exercise. If Shares issued upon
exercise of a Nonstatutory Stock Option are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal income tax
purposes.
8. Lock-Up Agreement. In connection with the initial public offering of the Company’s
securities and upon request of the Company or the underwriters managing any
underwritten offering of the Company’s securities, Optionee hereby agrees not to sell, make
any
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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) without the prior written consent of the Company or such underwriters, as the case
may be, for such period of time (not to exceed 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.
9. Effect of Agreement. Optionee represents that he or she is familiar with the terms
and provisions of this Agreement (and has had an opportunity to consult counsel regarding the
Option terms), and hereby accepts this Option and agrees to be bound by its contractual terms as
set forth herein. Optionee hereby agrees to accept as binding, conclusive and final all decisions
and interpretations of the Company regarding any questions relating to the Option.
10. Taxes.
(a) As a condition of the exercise of this Option, the Optionee (or in the case of the
Optionee’s death, the person exercising the Option) shall make such arrangements as the Company may
require for the satisfaction of any applicable federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise of the Option and the issuance of
Shares. The Company shall not be required to issue any Shares under this Agreement until such
obligations are satisfied. If the Company allows the withholding or surrender of Shares to satisfy
an Optionee’s tax withholding obligations under this Section 10 (whether pursuant to Section 10(c),
(d) or (e), or otherwise), the Company shall not allow Shares to be withheld in an amount that
exceeds the minimum statutory withholding rates for federal and state tax purposes, including
payroll taxes.
(b) In the case of an Employee and in the absence of any other arrangement, the Employee shall
be deemed to have directed the Company to withhold or collect from his or her compensation an
amount sufficient to satisfy such tax obligations from the next payroll payment otherwise payable
after the date of an exercise of the Option.
(c) This Section 10(c) shall apply only after the date, if any, upon which the Common Stock
becomes a Listed Security. In the case of an Optionee other than an Employee (or in the case of an
Employee where the next payroll payment is not sufficient to satisfy such tax obligations, with
respect to any remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Optionee shall be deemed to have elected to have
the Company withhold from the Shares to be issued upon exercise of the Option that number of Shares
having a Fair Market Value determined as of the applicable Tax Date (as defined below) equal to the
amount required to be withheld. For purposes of this Section 10, the Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to
be determined under the Applicable Laws (the “Tax Date”).
(d) If permitted in writing by the Company, in its sole discretion, Optionee may satisfy his
or her tax withholding obligations upon exercise of an Option by surrendering to the
Company Shares that have a Fair Market Value determined as of the applicable Tax Date
-4-
equal to
the amount required to be withheld. In the case of shares previously acquired from the Company
that are surrendered under this Section 10(d), such Shares must have been owned by the Optionee for
more than six (6) months on the date of surrender (or such other period of time as is required for
the Company to avoid adverse accounting charges).
(e) Any election or deemed election by an Optionee to have Shares withheld to satisfy tax
withholding obligations under Section 10(c) or (d) above shall be irrevocable as to the particular
Shares as to which the election is made and shall be subject to the consent or disapproval of the
Company. Any election by an Optionee under Section 10(d) above must be made on or prior to the
applicable Tax Date.
(f) In the event an election to have Shares withheld is made by an Optionee and the Tax Date
is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the
Code, the Optionee shall receive the full number of Shares with respect to which the Option is
exercised but such Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
11. Adjustments Upon Changes in Capitalization, Merger or Certain Other Transactions.
(a) Changes in Capitalization. Subject to any required action by the shareholders of
the Company, the number of Shares of Common Stock covered by the Option, as well as the price per
Share of Common Stock covered by the Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination, recapitalization or reclassification of the Common Stock, or
any other increase or decrease in the number of issued Shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been “effected without receipt of
consideration.” Such adjustment shall be made by the Company, and its determination in that
respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such action, unless
otherwise determined by the Company, in it sole discretion.
(c) Corporate Transaction. In the event of a Corporate Transaction, each outstanding
Option shall be assumed or an equivalent option or right shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation (the “Successor
Corporation”), unless the Successor Corporation does not agree to assume the award or to
substitute an equivalent option or right, in which case such Option shall terminate upon the
consummation of the transaction.
-5-
For purposes of this Section 11(c), an Option shall be considered assumed, without limitation,
if, at the time of issuance of the stock or other consideration upon a Corporate Transaction each
holder of an Option would be entitled to receive upon exercise of the award the same number and
kind of shares of stock or the same amount of property, cash or securities as such holder would
have been entitled to receive upon the occurrence of the transaction if the holder had been,
immediately prior to such transaction, the holder of the number of Shares of Common Stock covered
by the award at such time (after giving effect to any adjustments in the number of Shares covered
by the Option as provided for in this Section 11); provided that if such consideration received in
the transaction is not solely common stock of the Successor Corporation, the Company may, with the
consent of the Successor Corporation, provide for the consideration to be received upon exercise of
the award to be solely common stock of the Successor Corporation equal to the Fair Market Value of
the per Share consideration received by holders of Common Stock in the transaction.
(d) Certain Distributions. In the event of any distribution to the Company’s
shareholders of securities of any other entity or other assets (other than dividends payable in
cash or stock of the Company) without receipt of consideration by the Company, the Company may, in
its sole discretion, appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. Amendment of Option. In addition to any changes or adjustments that may be made
pursuant to Section 11 above, the Company’s Board of Directors shall have the authority to make the
following determinations with respect to, and amendments to, the Option without the consent of
Optionee: (a) waiver of any restriction applicable to the Option or the Optioned Stock; (b)
settlement in cash of the Option; (c) reduction in the exercise price of the Option to the Fair
Market Value of the Company’s Common Stock as of the date of such reduction in price; and (d) any
other amendment or adjustment that does not materially and adversely affect Optionee’s rights
hereunder.
13. Miscellaneous.
(a) Governing Law. 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 Washington, without giving effect to principles of
conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing 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.
(c) 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
-6-
the Agreement shall be interpreted as if such provision were so excluded and (iii) the
balance of the Agreement shall be enforceable in accordance with its terms.
(d) 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.
(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party’s address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Optionee under this Agreement may only be assigned with the prior written consent of
the Company.
(h) Accredited Investor. The Optionee is an accredited investor as defined in Rule
501(a) of Regulation D promulgated under the Securities Act of 1933.
[Signature Page Follows]
-7-
This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one document.
| Gregory Demopulos, M.D. | OMEROS MEDICAL SYSTEMS, INC. | |||||||||
| By: | ||||||||||
| Name: | ||||||||||
Dated:
|
Title: | |||||||||
-8-
APPENDIX
(a) “Affiliate” means an entity other than a Subsidiary (as defined below) which,
together with the Company, is under common control of a third person or entity.
(b) “Applicable Laws” means the legal requirements relating to the administration of
stock option and grants under applicable U.S. state corporate laws, U.S. federal and applicable
state securities laws, the Code, any Stock Exchange rules or regulations and the applicable laws of
any other country or jurisdiction where the Option is granted under this Agreement, as such laws,
rules, regulations and requirements shall be in place from time to time.
(c) “Board” means the Board of Directors of the Company.
(d) “Code” means the Internal Revenue Code of 1986, as amended.
(e) “Common Stock” means the Common Stock of the Company.
(f) “Consultant” means any person, including an advisor, who is engaged by the Company
or any Parent, Subsidiary or Affiliate to render services and is compensated for such services, and
any director of the Company whether compensated for such services or not.
(g) “Continuous Service Status” means the absence of any interruption or termination
of service as an Employee or Consultant. Continuous Service Status as an Employee or Consultant
shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Administrator, provided that such leave is for a period of
not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed
by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time
to time; or (iv) in the case of transfers between locations of the Company or between the Company,
its Parents, Subsidiaries, Affiliates or their respective successors. A change in status from an
Employee to a Consultant or from a Consultant to an Employee will not constitute an interruption of
Continuous Service Status.
(h) “Corporate Transaction” means a sale of all or substantially all of the Company’s
assets, or a merger, consolidation or other capital reorganization of the Company with or into
another corporation.
(i) “Director” means a member of the Board.
(j) “Employee” means any person employed by the Company or any Parent, Subsidiary or
Affiliate, with the status of employment determined based upon such factors as are deemed
appropriate by the Administrator in its discretion, subject to any requirements of the Code or the
Applicable Laws. The payment by the Company of a director’s fee to a Director shall not be
sufficient to constitute “employment” of such Director by the Company.
(k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(l) “Fair Market Value” means, as of any date, the fair market value of the Common
Stock, as determined by the Administrator in good faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value shall be based upon the closing price for
the Shares as reported in the Wall Street Journal for the applicable date.
(m) “Listed Security” means any security of the Company that is listed or approved for
listing on a national securities exchange or designated or approved for designation as a national
market system security on an interdealer quotation system by the National Association of Securities
Dealers, Inc.
(n) “Nonstatutory Stock Option” means an Option not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) “Option” means a stock option granted pursuant to this Agreement.
(p) “Optioned Stock” means the Common Stock subject to an Option.
(q) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code, or any successor provision.
(r) “Share” means a share of the Common Stock, as adjusted in accordance with Section
11 of this Agreement.
(s) “Stock Exchange” means any stock exchange or consolidated stock price reporting
system on which prices for the Common Stock are quoted at any given time.
(t) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing,
as defined in Section 424(f) of the Code, or any successor provision.
-2-
EXHIBIT A
OMEROS MEDICAL SYSTEMS, INC.
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement (“Agreement”) is made as of ___, by and between Omeros
Medical Systems, Inc., a Washington corporation (the “Company”), and Gregory Demopulos,
M.D. (“Purchaser”). To the extent any capitalized terms used in this Agreement are not
defined, they shall have the meaning ascribed to them in the Option Agreement (as defined below).
1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby
elects to exercise his or her option to purchase ___ shares of the Common Stock (the
“Shares”) of the Company under and pursuant to the Stock Option Agreement dated December
11, 2001 (the “Option Agreement”). The purchase price for the Shares shall be $0.265 per
Share for a total purchase price of $___. The term “Shares” refers to the purchased
Shares and all securities received in replacement of the Shares or as stock dividends or splits,
all securities received in replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other properties to
which Purchaser is entitled by reason of Purchaser’s ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under this
Agreement shall occur at the principal office of the Company simultaneously with the execution and
delivery of this Agreement in accordance with the provisions of Section 3(b) of the Option
Agreement. On such date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser’s name) against payment of
the exercise price therefor by Purchaser by (a) check made payable to the Company, (b) cancellation
of indebtedness of the Company to Purchaser, (c) delivery of shares of the Common Stock of the
Company in accordance with Section 4(b) of the Option Agreement, or (d) delivery of a promissory
note in the form attached as Exhibit B to the Option Agreement (or in any form acceptable
to the Company), or (e) a combination of the foregoing. If Purchaser delivers a promissory note as
partial or full payment of the purchase price, Purchaser will also deliver a Pledge and Security
Agreement in the form attached as Exhibit C to the Option Agreement (or in any form
acceptable to the Company).
3. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Purchaser shall not assign, encumber or dispose of any interest in
the Shares except in compliance with the provisions below and applicable securities laws.
(a) Right of First Refusal. Before any Shares held by Purchaser or any transferee of
Purchaser (either being sometimes referred to herein as the “Holder”) may be sold or
otherwise transferred (including transfer by gift or operation of law), the Company or its
assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions
set forth in this Section 3(a) (the “Right of First Refusal”).
(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to
sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other
transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each
Proposed Transferee; and (iv) the terms and conditions of each proposed sale or transfer. The
Holder shall offer the Shares at the same price (the “Offered Price”) and upon the same
terms (or terms as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty (30) days after
receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the
Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to
any one or more of the Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price (“Purchase Price”) for the Shares
purchased by the Company or its assignee(s) under this Section 3(a) shall be the Offered Price. If
the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness, or by any combination thereof within 30 days after receipt of the Notice
or in the manner and at the times set forth in the Notice.
(v) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section 3(a), then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within 60 days after the date of the Notice and provided further that
any such sale or other transfer is effected in accordance with any applicable securities laws and
the Proposed Transferee agrees in writing that the provisions of this Section 3 shall continue to
apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, or if the Holder proposes
to change the price or other terms to make them more favorable to the Proposed Transferee, a new
Notice shall be given to the Company, and the Company and/or its assignees shall again be offered
the Right of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section 3(a) notwithstanding, the transfer of any or all of the Shares during Purchaser’s
lifetime or on Purchaser’s death by will or intestacy to Purchaser’s Immediate Family or a trust
for the benefit of Purchaser’s Immediate Family shall be exempt from the provisions of this Section
3(a). “Immediate Family” as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or other recipient
shall receive and hold the Shares so transferred subject to the provisions of this
-2-
Section, and there shall be no further transfer of such Shares except in accordance with the terms of
this Section 3.
(b) Involuntary Transfer.
(i) Company’s Right to Purchase upon Involuntary Transfer. In the event, at any time
after the date of this Agreement, of any transfer by operation of law or other involuntary transfer
(including death or divorce, but excluding a transfer to Immediate Family as set forth in Section
3(a)(vi) above) of all or a portion of the Shares by the record holder thereof, the Company shall
have an option to purchase all of the Shares transferred at the greater of the purchase price paid
by Purchaser pursuant to this Agreement or the fair market value of the Shares on the date of
transfer. Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares shall be provided to
the Company for a period of thirty (30) days following receipt by the Company of written notice by
the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be transferred
pursuant to Section 3(b)(i), the price per Share shall be a price set by the Board of Directors of
the Company that will reflect the current value of the stock in terms of present earnings and
future prospects of the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with the valuation as
determined by the Board of Directors of the Company, the Purchaser shall be entitled to have the
valuation determined by an independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the Purchaser.
(c) Assignment. The right of the Company to purchase any part of the Shares may be
assigned in whole or in part to any shareholder or shareholders of the Company or other persons or
organizations.
(d) Restrictions Binding on Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interest subject to the provisions of this Agreement.
Any sale or transfer of the Company’s Shares shall be void unless the provisions of this Agreement
are satisfied.
(e) Termination of Rights. The right of first refusal granted the Company by
Section 3(a) above and the option to repurchase the Shares in the event of an involuntary transfer
granted the Company by Section 3(b) above shall terminate upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended
(the “Securities Act”). Upon termination of the right of first refusal described in
Section 3(b) above, a new certificate or certificates representing the Shares not repurchased shall
be issued, on written request, without the legend referred to in Section 6(a)(ii) herein and
delivered to Purchaser.
-3-
4. Investment and Taxation Representations. In connection with the purchase of the
Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Shares. Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act or under any applicable provision of state law. Purchaser
does not have any present intention to transfer the Shares to any person or entity.
(b) Purchaser understands that the Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser’s investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the securities must be held
indefinitely unless they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser further acknowledges and understands that the Company is
under no obligation to register the securities. Purchaser understands that the certificate(s)
evidencing the securities will be imprinted with a legend which prohibits the transfer of the
securities unless they are registered or such registration is not required in the opinion of
counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701, each promulgated under the
Securities Act, which, in substance, permit limited public resale of “restricted securities”
acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such
issuer), in a non-public offering subject to the satisfaction of certain conditions. Purchaser
understands that the Company provides no assurances as to whether he or she will be able to resell
any or all of the Shares pursuant to Rule 144 or Rule 701, which rules require, among other things,
that the Company be subject to the reporting requirements of the Securities Exchange Act of 1934,
as amended, that resales of securities take place only after the holder of the Shares has held the
Shares for certain specified time periods, and under certain circumstances, that resales of
securities be limited in volume and take place only pursuant to brokered transactions.
Notwithstanding this paragraph (d), Purchaser acknowledges and agrees to the restrictions set forth
in paragraph (e) below.
(e) Purchaser further understands that in the event all of the applicable requirements of
Rule 144 or 701 are not satisfied, registration under the Securities Act, compliance with
Regulation A, or some other registration exemption will be required; and that, notwithstanding the
fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement securities other than in
a registered offering and otherwise than pursuant to Rule 144 or 701 will have a substantial burden
of proof in establishing that an exemption from registration is available for such offers or sales,
and that such persons and their respective brokers who participate in such transactions do so at
their own risk.
-4-
(f) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of
Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted any tax consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
(g) Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act of 1933.
5. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. The certificate or certificates representing the Shares shall bear the
following legends (as well as any legends required by applicable state and federal corporate and
securities laws):
| (i) | THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933. | ||
| (ii) | THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. |
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or subsidiary of the Company, to
-5-
terminate Purchaser’s employment or consulting relationship, for any reason, with or without cause.
7. Lock-Up Agreement. In connection with the initial public offering of the Company’s
securities and upon request of the Company or the underwriters managing any underwritten offering
of the Company’s securities, Purchaser 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 or
whenever acquired (other than those included in the registration) without the prior written consent
of the Company or such underwriters, as the case may be, for such period of time (not to exceed 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.
8. Miscellaneous.
(a) Governing Law. 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 Washington, without giving effect to principles of
conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing 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.
(c) 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 the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance
of the Agreement shall be enforceable in accordance with its terms.
(d) 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.
(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party’s address as set forth below or as
subsequently modified by written notice.
-6-
(f) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Purchaser under this Agreement may only be assigned with the prior written consent
of the Company.
[Signature Page Follows]
-7-
The parties have executed this Exercise Notice and Restricted Stock Purchase Agreement as of
the date first set forth above.
| COMPANY: | ||||
| OMEROS MEDICAL SYSTEMS, INC. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| PURCHASER: | ||||
| Gregory Demopulos, M.D. | ||||
| (Signature) | ||||
| Address: | ||||
I, ___, spouse of Gregory Demopulos, M.D., have read and hereby approve the
foregoing Agreement. In consideration of the Company’s granting my spouse the right to purchase
the Shares as set forth in the Agreement, I hereby agree to be irrevocably bound by the Agreement
and further agree that any community property or other such interest shall hereby be similarly
bound by the Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any
amendment or exercise of any rights under the Agreement.
| Spouse of Gregory Demopulos, M.D. |
EXHIBIT B
PROMISSORY NOTE
| $___ | Seattle, Washington ___, 2003 |
For value received, the undersigned promises to pay Omeros Medical Systems, Inc., a Washington
corporation (the “Company”), at its principal office the principal sum of $___with
interest from the date hereof at a rate of ___% [rate offered by third party commercial lender]
per annum, compounded semiannually, on the unpaid balance of such principal sum. Such principal
and interest shall be due and payable on the earlier to occur of Termination for Cause, Voluntary
Termination or five years after either Termination Without Cause or Constructive Termination, as
such terms are defined in the Employment Agreement dated December 11, 2001 by and between the
Company and the undersigned.
Principal and interest are payable in lawful money of the United States of America. AMOUNTS
DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum as the Court may
deem reasonable shall be added hereto as attorneys’ fees. The makers and endorsers have severally
waived presentment for payment, protest notice of protest and notice of nonpayment of this Note.
This Note, which shall be a recourse loan with respect to thirty percent (30%) of the
principal amount hereof and with respect to one hundred percent (100%) of the interest thereon, is
secured by a pledge of certain shares of Common Stock of the Company and is subject to the terms of
a Pledge and Security Agreement between the undersigned and the Company of even date herewith.
| Gregory Demopulos, M.D. |
Agreed to and accepted:
| OMEROS MEDICAL SYSTEMS, INC. | ||||
By: |
||||
Its: |
||||
EXHIBIT C
PLEDGE AND SECURITY AGREEMENT
This
Pledge and Security Agreement (the “Agreement”) is entered into this ___ day of
___ 2003 by and between Omeros Medical Systems, Inc., a Washington corporation (the
“Company”), and Gregory A. Demopulos, M.D. (“Purchaser”).
RECITALS
In
connection with Purchaser’s exercise of an option to purchase ___ shares of the
Company’s Common Stock pursuant to a Stock Option Agreement dated December 11, 2001 between
Purchaser and the Company (the “Option Agreement”), Purchaser is delivering a promissory
note of even date herewith (the “Note”) in full or partial payment of the exercise price
for such shares. The Company requires that the Note be secured by a pledge of a number of shares
of Common Stock of the Company equal to the number of shares of Common Stock purchased pursuant to
the exercise of the Option Agreement on the terms set forth below.
AGREEMENT
In consideration of the Company’s acceptance of the Note as full or partial payment of the
exercise price of the shares purchased pursuant to the exercise of the Option Agreement, and for
other good and valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The Note shall become payable as described therein.
2. Purchaser shall deliver to the Secretary of the Company, or his or her designee
(hereinafter referred to as the “Pledge Holder”), stock certificate number ___
representing ___ shares of the Company’s Common Stock (the “Shares”), together with an
Assignment Separate from Certificate in the form attached to this Agreement as Attachment A
executed by Purchaser and by Purchaser’s spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when required pursuant to
this Agreement. In addition, if Purchaser is married, Purchaser’s spouse shall execute the
signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension or modification of the
Note, Purchaser hereby grants to the Company a security interest in and pledges with and delivers
to the Company the Shares (sometimes referred to herein as the “Collateral”).
4. In the event that Purchaser prepays all or a portion of the Note, in accordance with the
provisions thereof, Purchaser intends, unless written notice to the contrary is delivered to the
Pledge Holder, that the Shares represented by the portion of the Note so repaid, including annual
interest thereon, shall continue to be so held by the Pledge Holder, to serve as independent
collateral for the outstanding portion of the Note for the purpose of
commencing the holding period set forth in Rule 144(d) promulgated under the Securities Act of
1933, as amended (the “Securities Act”).
5. In the event of any foreclosure of the security interest created by this Agreement, the
Company may sell the Shares at a private sale or may repurchase the Shares itself. The parties
agree that, prior to the establishment of a public market for the Shares of the Company, the
securities laws affecting sale of the Shares make a public sale of the Shares commercially
unreasonable. The parties further agree that the repurchasing of such Shares by the Company, or by
any person to whom the Company may have assigned its rights under this Agreement, is commercially
reasonable if made at a price determined by the Board of Directors in its discretion, fairly
exercised, representing what would be the fair market value of the Shares reduced by any limitation
on transferability, whether due to the size of the block of shares or the restrictions of
applicable securities laws.
6. In the event of default in payment when due of any indebtedness under the Note, the Company
may elect then, or at any time thereafter, to exercise all rights available to a secured party
under the Washington Commercial Code including the right to sell the Collateral at a private or
public sale or repurchase the Shares as provided above. The proceeds of any sale shall be applied
in the following order:
(a) To the extent necessary, proceeds shall be used to pay all reasonable expenses of the
Company in enforcing this Agreement and the Note, including, without limitation, reasonable
attorney’s fees and legal expenses incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy any remaining indebtedness
under Purchaser’s Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
7. Upon full payment by Purchaser of all amounts due under the Note, Pledge Holder shall
deliver to Purchaser all Shares in Pledge Holder’s possession belonging to Purchaser, and Pledge
Holder shall thereupon be discharged of all further obligations under this Agreement;
provided, however, that Pledge Holder shall nevertheless retain the Shares as
escrow agent if at the time of full payment by Purchaser said Shares are still subject to a
Repurchase Option in favor of the Company.
-2-
The parties have executed this Pledge and Security Agreement as of the date first set forth
above.
| COMPANY: | ||||||
| OMEROS MEDICAL SYSTEMS, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| (print) | ||||||
| Title: | ||||||
| Address: | ||||||
| PURCHASER: | ||||||
| Gregory Demopulos, M.D. | ||||||
| (Signature) | ||||||
| (Print Name) | ||||||
| Address: | ||||||
-3-
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security Agreement between the
undersigned (“Purchaser”) and Omeros Medical Systems, Inc. (the “Company”) dated
___, ___ (the “Agreement”), Purchaser hereby sells, assigns and transfers unto
the Company ___(___) shares of the Common Stock of the Company,
standing in Purchaser’s name on the books of the Company and represented by Certificate No. ___,
and does hereby irrevocably constitute and appoint ____
to transfer said stock on the books of the Company with full power of substitution in the premises.
THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT.
Dated: |
||||||
| Signature: | ||||||
| Gregory Demopulos, M.D. | ||||||
| Spouse of Gregory Demopulos, M.D. (if applicable) |
Instruction: Please do not fill in any blanks other than the signature line. The purpose of this
assignment is to perfect the security interest of the Company pursuant to the Agreement.
Exhibit 10.12
Omeros Medical Systems, Inc.
August 16, 2001
Marcia S. Kelbon
9981 Kingston Farm Road
Kingston, WA 98346
9981 Kingston Farm Road
Kingston, WA 98346
Dear Marcia:
On behalf of Omeros Medical Systems, Inc. (the “Company”), I am pleased to offer you the
position of Vice President, Patent and General Counsel, of the Company. Speaking for myself, as
well as the other members of the Company’s Board of Directors, we are all very impressed with your
credentials and we look forward to your future success in this position.
The terms of your new position with the Company are as set forth below:
1. Position.
a. You will become the Vice President, Patent and General Counsel, working out of the
Company’s headquarters office in Seattle, Washington. As Vice President, Patent and General
Counsel, you will have overall responsibility for the management of the Company’s patent portfolio,
assist the Company in other legal matters and facilitate interactions with legal firms engaged by
the Company. You will report to the Company’s CEO.
b. You agree to the best of your ability and experience that you will at all times loyally and
conscientiously perform all of the duties and obligations required of and from you pursuant to the
express and implicit terms hereof, and to the reasonable satisfaction of the Company. During the
first four (4) months of your employment, if requested by attorneys at Christensen O’Connor Johnson
and Kindness, PLLC (COJK), you may provide consulting services for COJK to assist in the transition
of legal services for your previous clients at COJK. During the term of your employment, you agree
that you will devote all of your business time and attention (except as previously provided in
connection with consulting for COJK) to the business of the Company, the Company will be entitled
to all of the benefits and profits arising from or incident to all such work services, consulting
and advice, you will not render commercial or professional services of any nature to any person or
organization, whether or not for compensation, without the prior written consent of the Company’s
Board of Directors, and you will not directly or indirectly engage or participate in any business
that is competitive in any manner with the business of the Company. Nothing in this letter
agreement will prevent you from accepting speaking or presentation engagements in exchange for
honoraria or from serving on boards of charitable organizations, or from owning no more than two
percent (2%) of the outstanding equity securities of a corporation whose stock is listed on a
national stock exchange.
2. Start Date. Subject to fulfillment of any conditions imposed by this letter
agreement, you will commence this new position with the Company in October 2001, the specific date
to be mutually agreed by you and the Company’s CEO.
3. Proof of Right to Work. For purposes of federal immigration law, you will be
required to provide to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us within three (3)
business days of your date of hire, or our employment relationship with you may be terminated.
4. Compensation. You will be paid a monthly salary of $15,691.67 which is equivalent
to $188,300 on an annualized basis. Your salary will be payable in two equal payments per month
pursuant to the Company’s regular payroll policy.
5. Stock Options. In connection with the commencement of your employment, the Company
has recommended that the Board of Directors grant you an option (the “Option”) to purchase
210,000 shares of the Company’s Common Stock (“Shares”) with an exercise price equal to the
fair market value ($0.265) on the date of the grant. 18.75% of the total number of Shares subject
to the Option shall vest on the date nine (9) months (the “Cliff Period”) from the vesting
commencement date; thereafter, 1/48th of the total number of Shares subject to the Option shall
vest on the monthly anniversary of the vesting commencement date, for so long as the optionee
remains an employee of or consultant to the Company. If the Company terminates your employment for
reasons other than your performance during the Cliff Period, 1/48th of the total number of Shares
subject to the Option shall vest for each month of your employment by the Company. Vesting will,
of course, depend on your continued employment with the Company. The Option will be an incentive
stock option to the maximum extent allowed by the tax code and will be subject to the terms of the
Company’s Amended and Restated 1998 Stock Option Plan (the “Plan”) and the Stock Option
Agreement between you and the Company. In the event of an acquisition of the Company, if your
employment is terminated without cause by the acquiring entity during the term of the Option,
vesting of 100% of the Shares subject to the Option shall automatically be accelerated.
6. Benefits.
a. Insurance Benefits. The Company will provide you with its standard disability
insurance coverage.
b. Paid time off. You will be entitled to three weeks paid time off per year,
increasing to fours weeks paid time off per year after twelve months of employment, and an
additional ten paid holidays per year.
7. Proprietary Information and Inventions Agreement. Your acceptance of this offer
and commencement of employment with the Company is contingent upon the execution, and delivery to
an officer of the Company, of the Company’s Proprietary Information and Inventions Agreement, a
copy of which is enclosed for your review and execution (the “Confidentiality Agreement”),
prior to or on your Start Date.
8. Confidentiality of Terms. You agree to follow the Company’s strict policy that
employees must not disclose, either directly or indirectly, any information, including any of the
terms of this agreement, regarding salary, bonuses, or stock purchase or option allocations to any
person, including other employees of the Company; provided, however, that you may discuss such
-2-
terms with members of your immediate family and any legal, tax or accounting specialists who
provide you with individual legal, tax or accounting advice.
9. At-Will Employment. Notwithstanding the Company’s obligation described in Section
8 above, your employment with the Company will be on an “at will” basis, meaning that either you or
the Company may terminate your employment at any time for any reason or no reason, without further
obligation or liability.
We are all delighted to be able to extend you this offer, Marcia, and look forward to working
with you. To indicate your acceptance of the Company’s offer, please sign and date this letter in
the space provided below and return it to me, along with a signed and dated copy of the
Confidentiality Agreement. This letter, together with the Confidentiality Agreement, set forth the
terms of your employment with the Company and supersede any prior representations or agreements,
whether written or oral. This letter may not be modified or amended except by a written agreement,
signed by the Company and by you.
| Very truly yours, | ||||
| OMEROS MEDICAL SYSTEMS, INC. | ||||
| /s/ Gregory Demopulos | ||||
| Gregory A. Demopulos, M.D. | ||||
| Chairman of the Board and CEO |
ACCEPTED AND AGREED:
|
||
MARCIA S. KELBON |
||
/s/ Marcia Kelbon |
||
Signature |
||
8/17/01 |
||
Date |
| Enclosure: | Proprietary Information and Inventions Agreement |
-3-
Exhibit 10.13
May 11, 2007
Richard J. Klein
530 NE 79th Street
Seattle, WA 98115
530 NE 79th Street
Seattle, WA 98115
Dear Rick:
On behalf of Omeros Corporation (the “Company”), I am pleased to offer you the position of
Chief Financial Officer. Speaking for myself, as well as the other members of the Company’s
management team, we are pleased that you want to join the Company and we all look forward to your
future success with Omeros.
The terms of your new position with the Company are as set forth below:
1. Position.
a. You will become Chief Financial Officer within the Company, working out of the Company’s
headquarters office in Seattle, Washington. As Chief Financial Officer you will have responsibility
for all financial matters. You will be required to exercise considerable independent judgment and
you will report to the Company’s Chief Executive Officer.
b. You agree to the best of your ability and experience that you will at all times loyally
and conscientiously perform all of the duties and obligations required of and from you pursuant to
the express and implicit terms hereof, and to the reasonable satisfaction of the Company. During
the term of your employment, you further agree that you will devote all of your business time and
attention to the business of the Company, the Company will be entitled to all of the benefits and
profits arising from or incident to all such work services and advice, you will not render
commercial or professional services of any nature to any person or organization, whether or not for
compensation, without the prior written consent of the Company’s Board of Directors, and you will
not directly or indirectly engage or participate in any business that is competitive in any manner
with the business of the Company. You will be permitted to serve on the board of at least one
for-profit corporation, subject to the prior and continued approval of the Company’s Board of
Directors including, without limitation, the Board’s determination on an on-going basis that
such
May 11, 2007
Page 2
Page 2
service does not present any business, scientific or legal conflict of interest and does not
unduly limit the time and attention that you provide to the Company’s business. Nothing in this
letter agreement will prevent you from accepting speaking or presentation engagements in exchange
for honoraria or from serving on boards of charitable organizations, or from owning no more than
one percent (1%) of the outstanding equity securities of a corporation whose stock is listed on a
national stock exchange.
2. Start Date. Subject to fulfillment of any conditions imposed by this letter
agreement, you will commence this new position with the Company on May 14, 2007, unless another
date is mutually agreed upon.
3. Proof of Right to Work. For purposes of federal immigration law, you will be
required to provide to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us within three (3)
business days of your date of hire, or our employment relationship with you may be terminated.
4. Compensation.
a. Base Salary. You will be paid a monthly salary of $20,833.33, which is equivalent
to $250,000 on an annualized basis. Your salary will be payable in two equal payments per month
pursuant to the Company’s regular payroll policy.
b. Salary Review. Your base salary will be reviewed periodically as part of the
Company’s normal salary review process.
5. Stock Options.
a. Initial Grant. In connection with the commencement of your employment, the Company
will recommend that the Board of Directors grant you two options to purchase an aggregate of
275,000 shares of the Company’s Common Stock (“Shares”), each with an exercise price equal
to the fair market value on the date of the grant. The first option (the “First Option”) will be to
purchase 250,000 Shares (the “Base Shares”) and the second option (the “Second Option”) will be to
purchase 25,000 Shares (the “Performance Shares”). The Base Shares will begin vesting on your start
date, with 25% of the Base Shares vesting twelve months after your start date and 1/48th
of the Base Shares vesting monthly thereafter. The Performance Shares will not be eligible to
commence vesting unless, within twelve months of your start date, the Company closes a public or
private financing that meets parameters associated with such financing determined by the Board of
Directors on the date of the grant of your options (a “Financing”). Should the Company
close a Financing within the first twelve months of your start date, then the Performance Shares
will vest on the same schedule as the Base Shares (i.e., 25% vesting twelve months after your start
date and 1/48th vesting monthly thereafter). In the absence of a Financing
being closed within the first twelve months of your start date, the Performance Shares will
not be eligible to vest and the Second Option will be automatically cancelled. Vesting of the Base
Shares
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May 11, 2007
Page 3
Page 3
and the Performance Shares will, of course, depend on your continued employment with the
Company.
Unless requested by you, prior to the date of grant of your options, that all or part of your
options be non-qualified stock options, the options will be incentive stock options to the maximum
extent allowed by the tax code and, whether non-qualified and/or incentive stock options, will all
be subject to the terms of the Company’s Amended and Restated 1998 Stock Option Plan (“Option
Plan”) and the Stock Option Agreements between you and the Company. If you do elect to have a
portion of your First Option and/or Second Option treated as a non-qualified stock option, then the
Company may divide such option into two options, with one representing the portion of such option
intended to be treated as an incentive stock option and the other representing the portion of such
option intended to be treated as a non-qualified stock option.
Under the Option Plan, 50% of unvested shares subject to an option automatically vest upon a
change of control. In addition, for executive officers of Omeros, of which you will be one, if
within one year of the change of control the acquirer constructively terminates an executive
officer (e.g., the executive officer terminates his employment following a material adverse change
in his position at the acquirer) or terminates an executive officer without cause, then 100% of the
unvested shares subject to an option shall automatically vest. Also, if, while you are an employee
of the Company, the Company provides the opportunity to any other group of employees to exercise
any part of their option grants prior to vesting of such part of their option grants, then the
Company will provide a similar opportunity to you, provided that the Company would have the right
to repurchase at the original purchase price any unvested portion of your Shares that you exercised
should your employment with the Company be terminated but, under no circumstance, would the Company
have any obligation to repurchase any of your vested or unvested Shares.
b. Subsequent Option Grants. Subject to the discretion of the Company’s Board of
Directors, you may be eligible to receive additional grants of stock options or purchase rights
from time to time in the future, on such terms and subject to such conditions as the Board
of Directors shall determine as of the date of any such grant.
6. Benefits.
a. Insurance Benefits. The Company will provide you with standard insurance benefits
and will defray the costs of covering your dependents under its medical and dental insurance
program.
b. Vacation/Sick Leave. You will be entitled to twenty days paid vacation and ten
days paid sick leave per year, pro-rated for the remainder of this calendar year. Vacation and
Sick Leave accrue ratably over the year from the date of hire.
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May 11, 2007
Page 4
Page 4
c. Transportation. Parking will be provided for you in the building that is equal to
$295 per month.
7. Background Check. You understand that employment will be contingent on completion
of a background verification of previous employment and education.
8. Proprietary Information and Invention Agreement. Your acceptance of this offer and
commencement of employment with the Company is contingent upon the execution, and delivery to an
officer of the Company, of the Company’s Proprietary Information and Inventions Agreement (the
“PIIA”), a copy of which is enclosed for your review and execution prior to your Start
Date.
9. Confidentiality of Terms. You agree to follow the Company’s strict policy that
employees must not disclose, either directly or indirectly, any information, including any of the
terms of this agreement, regarding salary or stock purchase or option allocations to any person,
including other employees of the Company; provided, however, that you may discuss such terms with
members of your immediate family and any legal, tax or accounting specialists who provide you with
individual legal, tax or accounting advice.
10. At-Will Employment. Notwithstanding the Company’s obligation described in
Section 9 above, your employment with the Company will be on an “at will” basis, meaning that
either you or the Company may terminate your employment at any time for any reason or no reason,
without further obligation or liability.
This letter, together with the PIIA, sets forth the terms of your employment with the Company
and supersedes any prior representations or agreements, whether written or oral. This letter may
not be modified or amended except by a written agreement, signed by the Company
and by you.
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May 11, 2007
Page 5
Page 5
We are all delighted to be able to extend you this offer and look forward to working with you.
To indicate your acceptance of the Company’s offer, please sign and date this letter in the space
provided below and return it to me, along with a signed and dated copy of the PIIA.
| Very truly yours, | ||||
| OMEROS CORPORATION | ||||
| /s/ Gregory A. Demopulos | ||||
| Chairman of the Board and CEO |
ACCEPTED AND AGREED:
|
||
RICHARD J. KLEIN |
||
/s/ Richard J. Klein
|
||
5/14/07 |
||
Enclosure: Proprietary Information and Inventions Agreement
-5-
Exhibit 10.14
TECHNOLOGY TRANSFER AGREEMENT
This Technology Transfer Agreement (this “Agreement”) is entered into as of June 16, 1994, by
and between Gregory A. Demopulos, M.D. (“Demopulos”) and Omeros Medical Systems, Inc., a Washington
corporation (“Omeros”).
Demopulos, along with Pamela A. Pierce, M.D., Ph.D. (“Pierce”), is the inventor of certain
technology relating to the irrigation of various body regions (as further described below, the
“Technology”). Demopulos desires to transfer all his right, title and interest in and to the
Technology to Omeros for further research, development and commercialization, and Omeros desires to
obtain ownership of and other rights in the Technology for such purpose.
For good and valuable consideration, the receipt and sufficiency of such consideration being
hereby acknowledged, the parties agree:
1. Definitions. The following definitions apply whenever the specified terms are used
in this Agreement or in any attachments to this Agreement:
a. “Confidential Information” means confidential information relating to the
Technology, now existing or hereafter arising, including without limitation, research,
developments, inventions, technical data, any type of product development, and any and all other
processes, formulae, marketing plans or proposals, customer lists or other customer information,
financial information, or any observations, data, written material, records or documents.
Confidential Information includes any such information whether or not such information was
developed, devised or otherwise created in whole or in part by the efforts of Demopulos or Omeros.
Confidential Information shall not include a matter of public knowledge, unless such matter become
public knowledge as a result of unauthorized disclosure to the general public, or the combination
of such matters would amount to Confidential Information. In any dispute over whether information
is Confidential Information for purposes of enforcement of this Agreement, it shall be the burden
of Demopulos to show that such contested information is neither confidential nor a Trade Secret.
b. “Intellectual Property Rights” mean all intellectual property rights arising under
federal, state or common law and relating to the Technology, including without limitation Patent
Rights and Know-How.
c. “Know-How” means all information, now existing or hereafter acquired, known to
Demopulos and related in any way to the Technology, including without limitation, information
directly or indirectly related to any formula, method, procedure, process, composition of matter,
design, material, or other subject matter that contributes in whole or in part to the present or
future commercial development, exploitation, utilization or understanding of the Technology.
Know-How also includes, without limitation, the following: (a) any Confidential Information; (b)
any information relating in any way to the Technology that may result from further research
sponsored in whole or in part by Omeros; and (c) any information relating to the Technology,
whether or not such information was developed, devised or otherwise created in whole or in part by
the efforts of Demopulos or Omeros and whether or not it is a matter of public knowledge.
d. “New Invention” means any invention, discovery, concept, idea, information or
improvement, whether or not patentable, that is (i) made, developed or conceived in whole or in
part while Demopulos is an employee, agent, officer, director, or shareholder of Omeros, and (ii)
is derived from the Technology.
e. “Patent Rights” mean the rights of Demopulos to any and all matter claimed in or
disclosed by any and all present and future letters patent, pending applications for patents and
other legal rights applied for by or granted to Demopulos, alone or with another or others, as
inventor or co-inventor in any country with respect to or in connection with the Technology, and
any and all divisions, continuations, continuations-in-part, reissues, substitutions,
re-examinations, extensions and renewals arising therefrom or issuing thereon. Without limiting
the generality of the foregoing, Patent Rights include without limitation, any and all foreign
rights related to, derived from, or claiming priority from U.S. Patent Rights.
f. “Technology” means that certain technology developed in whole or in part by
Demopulos and related to the irrigation of any body region (including but not limited to surgical
wounds, burns, any body cavity, the cardiovascular or urinary system or anatomic joint during
arthroscopic surgery) using an irrigation solution providing analgesic and anti-inflammatory
effects. Without limiting the generality of the foregoing, the Technology shall include, without
limitation, all related advances or improvements, whether or not patentable.
g. “Trade Secrets” mean any and all Confidential Information within the definition of
that term as set forth in RCW Chapter 19.108.
2. Transfer of Technology
a. Present Technology. Demopulos hereby irrevocably sells, assigns, conveys and
otherwise transfers to Omeros all right, title and interest in and to the Technology, Know-How,
Patent Rights, and other Intellectual Property Rights, which right, title, and interest he now
possess or may hereafter acquire. Such transfer hereby includes, without limitation, all right,
title and interest of Demopulos in and to the Patent Rights, and any and all existing records that
contain Know-How. Upon execution of this Agreement, Demopulos shall execute an Assignment of
Patent Rights in the form attached hereto as Exhibit A, and shall identify for Omeros any and all
existing records that contain Know-How. Demopulos and Omeros jointly shall determine which of such
records shall be delivered to Omeros as originals or as copies, and such records shall be
identified and categorized in writing no later than thirty (30) days after execution of this
Agreement. Demopulos shall then transfer and deliver to Omeros all such records that contain
Know-How in a form reasonably understandable by any physician or scientist generally knowledgeable
of relevant methods of surgery or other treatment. Upon such transfer and delivery, such records
shall be the property of Omeros and shall be under Omeros’ exclusive control. Thereafter, on a
timely basis, but not less than quarterly, Demopulos shall develop, produce, deliver to Omeros and
maintain permanent records, in writing or otherwise, that set forth Know-How in a form reasonably
understandable by any physician or scientist generally knowledgeable of relevant surgical methods.
b. Future Developments. Demopulos acknowledges that title to any and all New
Inventions shall immediately vest in Omeros. Immediately upon the development of any New
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Invention, Demopulos shall disclose such New Invention to Omeros in writing. From time to
time, Demopulos shall execute such documents as Omeros may reasonably require to evidence
assignment to Omeros of all right, title, and interest in and to such New Inventions.
3. Covenant Not to Disclose. For a period of at least ten (10) years, Demopulos shall
not at any time, without the express prior written consent of Omeros, disclose or otherwise make
known or available to any person, firm, corporation or other entity, or use for their own account,
any Confidential Information. Both Demopulos and Omeros shall utilize reasonable procedures to
safeguard Confidential Information, including releasing Confidential Information to employees of
Omeros only on a “need-to-know” basis.
4. Consideration. The shares of the common stock of Omeros being issued to Demopulos
as of the date of this Agreement shall constitute consideration for the transfer of rights
described in Section 2 above, for Demopulos’ covenant not to disclose Confidential Information, and
for other covenants and promises made by Demopulos hereunder.
5. Specific Performance. Demopulos and Omeros acknowledge that (a) the covenants set
forth in Sections 2 and 3 are essential elements of the transactions contemplated in this
Agreement, that, but for the agreement of the parties to comply with such covenants, neither
Demopulos nor Omeros would have entered into such transactions, and that each party has consulted
with counsel and has been advised in all respects concerning the reasonableness of such covenants
as to scope and limit of time; (b) the nonbreaching party will not have any adequate remedy at law
if the other party violates the terms of Section 2 or 3 or fails to perform any of its other
obligations hereunder; and (c) the nonbreaching party shall have the right, in addition to any
other rights it may have, to obtain in any court of competent jurisdiction temporary, preliminary
and permanent injunctive relief to restrain any breach or threatened breach, or otherwise to
specifically enforce, any of such covenants or any other obligations if the breaching party fails
to perform any of its obligations under this Agreement.
6. Right to Repurchase Technology. In the event that Omeros either (a) files for
liquidation under Chapter 7 of the United States Bankruptcy Act, or (b) undertakes a voluntary
dissolution, liquidation and termination (except in connection with a merger, reorganization,
consolidation or sale of assets), Demopulos shall have the right, along with co-inventor Pierce, to
repurchase the Technology from Omeros for a price equal to the then-current fair market value of
the Technology. If the parties are unable to agree upon the fair market value of the Technology
within thirty (30) days after the filing or undertaking described above, then such value shall be
established by the appraisal of a qualified, mutually acceptable independent appraiser. In the
event the parties are unable to agree upon an appraiser within sixty (60) days after the filing or
undertaking described above, then Demopulos and Omeros each shall select an independent appraiser,
and the two appraisers shall select a third independent appraiser. The three appraisers shall
conduct such appraisal proceeding in accordance with the Commercial Arbitration Rules of the
American Arbitration Association as then in effect, and the decisions of the appraisers shall be
delivered to the parties not later than four months after the commencement of such appraisal
proceeding. All such appraisal proceedings shall take place in Seattle, Washington and all results
of such proceedings shall be binding on Demopulos and Omeros. All appraisal expenses shall be paid
by Demopulos. Demopulos’ rights to repurchase the Technology under this Section 6 are subject to
the similar rights
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of co-inventor Pierce, with whom Omeros executed an agreement substantially similar hereto.
In the event that both Demopulos and Pierce desire to exercise their respective rights to
repurchase the Technology, those parties shall be responsible for negotiating between themselves
their individual rights and obligations with regard to such transfer, and Demopulos and Pierce
shall exercise their rights jointly in any transaction involving Omeros.
7. Severability. The invalidity of all or any part of any section of this Agreement
shall not render invalid the remainder of this Agreement or the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted
to be only so broad as is enforceable. Demopulos and Omeros agree and stipulate that the covenants
set forth in Sections 2, 3 and 6 are fair and reasonably necessary for the protection of their
protectable interests. In the event a court of competent jurisdiction should decline to enforce
any provision of Sections 2, 3 or 6, Sections 2, 3 or 6 shall be deemed to be modified to the
minimum extent which the court shall find enforceable.
8. Miscellaneous.
a. Headings. The headings of the sections and paragraphs of this Agreement are
inserted for convenience only, and shall not control or affect the meaning or construction of any
provisions hereof.
b. Waiver of Breach. Neither the waiver of any breach of any provision of this
Agreement, nor failure to enforce any provision hereof, shall operate or be construed as a waiver
of any subsequent breach by either party.
c. Disputes. In any litigation or dispute arising out of this Agreement, the
substantially prevailing party will be entitled to recover, in addition to other relief granted,
all reasonable costs and attorneys’ fees, including such costs and fees on appeal.
d. Rights Cumulative. The provisions of this Agreement shall not be construed as
limiting any rights or remedies that either party may otherwise have under applicable law.
e. Governing Law. The rights and obligations under this Agreement shall in all
respects be governed by the laws of the State of Washington. This Agreement is intended to
supplement and not to supersede the rights of the parties under the Uniform Trade Secrets Act, as
adopted by the State of Washington.
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f. Integration. This Agreement as herein written constitutes the entire understanding
between the parties pertaining to the subject matter contained in it, and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties. It is expressly
understood and agreed that this Agreement may not be altered, amended, modified or otherwise
changed in any respect whatsoever, except by a writing duly executed by the parties.
DATED as of June 16, 1994.
| /s/ Gregory A. Demopulos | ||||
| Gregory A. Demopulos, M.D. |
||||
| Omeros Medical Systems, Inc. |
||||
| By | /s/ H. Raymond Cairncross | |||
| H. Raymond Cairncross, Its V.P. | ||||
-5-
PATENT RIGHTS ASSIGNMENT
FOR VALUE RECEIVED, I, Gregory A. Demopulos, M.D., hereby sell, assign and transfer unto
Omeros Medical Systems, Inc., a Washington corporation (“Omeros”) as assignee, and its successors,
assigns and legal representatives, the entire right, title and interest, for all countries in and
to certain inventions associated with certain technology related to the irrigation of various body
regions, as more particularly described in that certain Technology Transfer Agreement between
Omeros and me, dated as of June 16, 1994, and all the rights and privileges under any and all
letters patent that may be granted therefor.
I request that any and all patents for said inventions be issued to said assignee, its
successors, assigns and legal representatives, or to such nominees as it may designate.
I agree that, when requested, I will, without charge to said assignee but at its expense, sign
all papers, take all lawful oaths, and do all acts which may be necessary, desirable or reasonably
appropriate for securing and maintaining patents for said inventions in any and all countries and
for vesting title thereto in said assignee, its successors, assigns and legal representatives or
nominees.
I authorize and empower the said assignee, its successors, assigns and legal representatives
or nominees, to invoke and claim for any application for patent or other form of protection for
said inventions filed by it or them, the benefit of the right of priority provided by the
International Convention for the Protection of Industrial Property, as amended, or by any
convention which may henceforth be substituted for it, and to invoke and claim such right of
priority without further written or oral authorization from us.
I hereby consent that a copy of this assignment shall be deemed a full legal and formal
equivalent of any assignment, consent to file or like document which may be required in any country
for any purpose and more particularly in proof of the right of the said assignee or nominee to
claim the aforesaid benefit of the right of priority provided by the International Convention for
the Protection of Industrial Property, as amended, or by any convention which may henceforth be
substituted for it.
I covenant with said assignee, its successors, assigns and legal representatives, that the
rights and property herein conveyed are free and clear of any encumbrance, and that we have full
right to convey the same as herein expressed.
SIGNED AT Seattle, Washington, as of the 16th day of June, 1994.
| /s/ Gregory A. Demopulos | ||||
| Gregory A. Demopulos, M.D. | ||||
Witnessed and Accepted:
Omeros Medical Systems, Inc.
| by | /s/ H. Raymond Cairncross | |||
| H. Raymond Cairncross, its V.P. | ||||
-2-
Exhibit 10.15
TECHNOLOGY TRANSFER AGREEMENT
This Technology Transfer Agreement (this “Agreement”) is entered into as of June 16, 1994, by
and between Pamela A. Pierce, M.D., Ph.D. (“Pierce”) and Omeros Medical Systems, Inc., a Washington
corporation (“Omeros”).
Pierce, along with Gregory A. Demopulos, M.D. (“Demopulos”), is the inventor of certain
technology relating to the irrigation of various body regions (as further described below, the
“Technology”). Pierce desires to transfer all her right, title and interest in and to the
Technology to Omeros for further research, development and commercialization, and Omeros desires to
obtain ownership of and other rights in the Technology for such purpose.
For good and valuable consideration, the receipt and sufficiency of such consideration being
hereby acknowledged, the parties agree:
1. Definitions. The following definitions apply whenever the specified terms are used
in this Agreement or in any attachments to this Agreement:
a. “Confidential Information” means confidential information relating to the
Technology, now existing or hereafter arising, including without limitation, research,
developments, inventions, technical data, any type of product development, and any and all other
processes, formulae, marketing plans or proposals, customer lists or other customer information,
financial information, or any observations, data, written material, records or documents.
Confidential Information includes any such information whether or not such information was
developed, devised or otherwise created in whole or in part by the efforts of Pierce or Omeros.
Confidential Information shall not include a matter of public knowledge, unless such matter become
public knowledge as a result of unauthorized disclosure to the general public, or the combination
of such matters would amount to Confidential Information. In any dispute over whether information
is Confidential Information for purposes of enforcement of this Agreement, it shall be the burden
of Pierce to show that such contested information is neither confidential nor a Trade Secret.
b. “Intellectual Property Rights” mean all intellectual property rights arising under
federal, state or common law and relating to the Technology, including without limitation Patent
Rights and Know-How.
c. “Know-How” means all information, now existing or hereafter acquired, known to
Pierce and related in any way to the Technology, including without limitation, information directly
or indirectly related to any formula, method, procedure, process, composition of matter, design,
material, or other subject matter that contributes in whole or in part to the present or future
commercial development, exploitation, utilization or understanding of the Technology. Know-How
also includes, without limitation, the following: (a) any Confidential Information; (b) any
information relating in any way to the Technology that may result from further research sponsored
in whole or in part by Omeros; and (c) any information relating to the Technology, whether or not
such information was developed, devised or otherwise created in whole or in part by the efforts of
Pierce or Omeros and whether or not it is a matter of public knowledge.
d. “New Invention” means any invention, discovery, concept, idea, information or
improvement, whether or not patentable, that is (i) made, developed or conceived in whole or in
part while Pierce is an employee, agent, officer or shareholder of Omeros, and (ii) is derived from
the Technology.
e. “Patent Rights” mean the rights of Pierce to any and all matter claimed in or
disclosed by any and all present and future letters patent, pending applications for patents and
other legal rights applied for by or granted to Pierce, alone or with another or others, as
inventor or co-inventor in any country with respect to or in connection with the Technology, and
any and all divisions, continuations, continuations-in-part, reissues, substitutions,
re-examinations, extensions and renewals arising therefrom or issuing thereon. Without limiting
the generality of the foregoing, Patent Rights include without limitation, any and all foreign
rights related to, derived from, or claiming priority from U.S. Patent Rights.
f. “Technology” means that certain technology developed in whole or in part by Pierce
and related to the irrigation of any body region (including but not limited to surgical wounds,
burns, any body cavity, the cardiovascular or urinary system or anatomic joint during arthroscopic
surgery) using an irrigation solution providing analgesic and anti-inflammatory effects. Without
limiting the generality of the foregoing, the Technology shall include, without limitation, all
related advances or improvements, whether or not patentable.
g. “Trade Secrets” mean any and all Confidential Information within the definition of
that term as set forth in RCW Chapter 19.108.
2. Transfer of Technology
a. Present Technology. Pierce hereby irrevocably sells, assigns, conveys and
otherwise transfers to Omeros all right, title and interest in and to the Technology, Know-How,
Patent Rights, and other Intellectual Property Rights, which right, title, and interest she now
possess or may hereafter acquire. Such transfer hereby includes, without limitation, all right,
title and interest of Pierce in and to the Patent Rights, and any and all existing records that
contain Know-How. Upon execution of this Agreement, Pierce shall execute an Assignment of Patent
Rights in the form attached hereto as Exhibit A, and shall identify for Omeros any and all existing
records that contain Know-How. Pierce and Omeros jointly shall determine which of such records
shall be delivered to Omeros as originals or as copies, and such records shall be identified and
categorized in writing no later than thirty (30) days after execution of this Agreement. Pierce
shall then transfer and deliver to Omeros all such records that contain Know-How in a form
reasonably understandable by any physician or scientist generally knowledgeable of relevant methods
of surgery or other treatment. Upon such transfer and delivery, such records shall be the property
of Omeros and shall be under Omeros’ exclusive control. Thereafter, on a timely basis, but not
less than quarterly, Pierce shall develop, produce, deliver to Omeros and maintain permanent
records, in writing or otherwise, that set forth Know-How in a form reasonably understandable by
any physician or scientist generally knowledgeable of relevant surgical methods.
b. Future Developments. Pierce acknowledges that title to any and all New Inventions
shall immediately vest in Omeros. Immediately upon the development of any New
-2-
Invention, Pierce shall disclose such New Invention to Omeros in writing. From time to time,
Pierce shall execute such documents as Omeros may reasonably require to evidence assignment to
Omeros of all right, title, and interest in and to such New Inventions.
3. Covenant Not to Disclose. For a period of at least ten (10) years, Pierce shall
not at any time, without the express prior written consent of Omeros, disclose or otherwise make
known or available to any person, firm, corporation or other entity, or use for their own account,
any Confidential Information. Both Pierce and Omeros shall utilize reasonable procedures to
safeguard Confidential Information, including releasing Confidential Information to employees of
Omeros only on a “need-to-know” basis.
4. Consideration. The shares of the common stock of Omeros being issued to Pierce as
of the date of this Agreement shall constitute consideration for the transfer of rights described
in Section 2 above, for Pierce’s covenant not to disclose Confidential Information, and for other
covenants and promises made by Pierce hereunder.
5. Specific Performance. Pierce and Omeros acknowledge that (a) the covenants set
forth in Sections 2 and 3 are essential elements of the transactions contemplated in this
Agreement, that, but for the agreement of the parties to comply with such covenants, neither Pierce
nor Omeros would have entered into such transactions, and that each party has consulted with
counsel and has been advised in all respects concerning the reasonableness of such covenants as to
scope and limit of time; (b) the nonbreaching party will not have any adequate remedy at law if the
other party violates the terms of Section 2 or 3 or fails to perform any of its other obligations
hereunder; and (c) the nonbreaching party shall have the right, in addition to any other rights it
may have, to obtain in any court of competent jurisdiction temporary, preliminary and permanent
injunctive relief to restrain any breach or threatened breach, or otherwise to specifically
enforce, any of such covenants or any other obligations if the breaching party fails to perform any
of its obligations under this Agreement.
6. Right to Repurchase Technology. In the event that Omeros either (a) files for
liquidation under Chapter 7 of the United States Bankruptcy Act, or (b) undertakes a voluntary
dissolution, liquidation and termination (except in connection with a merger, reorganization,
consolidation or sale of assets), Pierce shall have the right, along with co-inventor Demopulos, to
repurchase the Technology from Omeros for a price equal to the then-current fair market value of
the Technology. If the parties are unable to agree upon the fair market value of the Technology
within thirty (30) days after the filing or undertaking described above, then such value shall be
established by the appraisal of a qualified, mutually acceptable independent appraiser. In the
event the parties are unable to agree upon an appraiser within sixty (60) days after the filing or
undertaking described above, then Pierce and Omeros each shall select an independent appraiser, and
the two appraisers shall select a third independent appraiser. The three appraisers shall conduct
such appraisal proceeding in accordance with the Commercial Arbitration Rules of the American
Arbitration Association as then in effect, and the decisions of the appraisers shall be delivered
to the parties not later than four months after the commencement of such appraisal proceeding. All
such appraisal proceedings shall take place in Seattle, Washington and all results of such
proceedings shall be binding on Pierce and Omeros. All appraisal expenses shall be paid by Pierce.
Pierce’s rights to repurchase the Technology under this Section 6 are subject to the similar
rights of co-inventor Demopulos, with whom Omeros executed an agreement substantially similar
hereto. In the event
-3-
that both Pierce and Demopulos desire to exercise their respective rights to repurchase the
Technology, those parties shall be responsible for negotiating between themselves their individual
rights and obligations with regard to such transfer, and Pierce and Demopulos shall exercise their
rights jointly in any transaction involving Omeros.
7. Severability. The invalidity of all or any part of any section of this Agreement
shall not render invalid the remainder of this Agreement or the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted
to be only so broad as is enforceable. Pierce and Omeros agree and stipulate that the covenants
set forth in Sections 2, 3 and 6 are fair and reasonably necessary for the protection of their
protectable interests. In the event a court of competent jurisdiction should decline to enforce
any provision of Sections 2, 3 or 6, Sections 2, 3 or 6 shall be deemed to be modified to the
minimum extent which the court shall find enforceable.
8. Miscellaneous.
a. Headings. The headings of the sections and paragraphs of this Agreement are
inserted for convenience only, and shall not control or affect the meaning or construction of any
provisions hereof.
b. Waiver of Breach. Neither the waiver of any breach of any provision of this
Agreement, nor failure to enforce any provision hereof, shall operate or be construed as a waiver
of any subsequent breach by either party.
c. Disputes. In any litigation or dispute arising out of this Agreement, the
substantially prevailing party will be entitled to recover, in addition to other relief granted,
all reasonable costs and attorneys’ fees, including such costs and fees on appeal.
d. Rights Cumulative. The provisions of this Agreement shall not be construed as
limiting any rights or remedies that either party may otherwise have under applicable law.
e. Governing Law. The rights and obligations under this Agreement shall in all
respects be governed by the laws of the State of Washington. This Agreement is intended to
supplement and not to supersede the rights of the parties under the Uniform Trade Secrets Act, as
adopted by the State of Washington.
-4-
f. Integration. This Agreement as herein written constitutes the entire understanding
between the parties pertaining to the subject matter contained in it, and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties. It is expressly
understood and agreed that this Agreement may not be altered, amended, modified or otherwise
changed in any respect whatsoever, except by a writing duly executed by the parties.
DATED as of June 16, 1994.
| /s/ Pamela A. Pierce | ||||
| Pamela A. Pierce, M.D., Ph.D. | ||||
| Omeros Medical Systems, Inc. |
||||
| By | /s/ H. Raymond Cairncross | |||
| H. Raymond Cairncross, Its V.P. | ||||
-5-
PATENT RIGHTS ASSIGNMENT
FOR VALUE RECEIVED, I, Pamela A. Pierce, M.D., Ph.D., hereby sell, assign and transfer unto
Omeros Medical Systems, Inc., a Washington corporation (“Omeros”) as assignee, and its successors,
assigns and legal representatives, the entire right, title and interest, for all countries in and
to certain inventions associated with certain technology related to the irrigation of various body
regions, as more particularly described in that certain Technology Transfer Agreement between
Omeros and me, dated as of June 16, 1994, and all the rights and privileges under any and all
letters patent that may be granted therefor.
I request that any and all patents for said inventions be issued to said assignee, its
successors, assigns and legal representatives, or to such nominees as it may designate.
I agree that, when requested, I will, without charge to said assignee but at its expense, sign
all papers, take all lawful oaths, and do all acts which may be necessary, desirable or reasonably
appropriate for securing and maintaining patents for said inventions in any and all countries and
for vesting title thereto in said assignee, its successors, assigns and legal representatives or
nominees.
I authorize and empower the said assignee, its successors, assigns and legal representatives
or nominees, to invoke and claim for any application for patent or other form of protection for
said inventions filed by it or them, the benefit of the right of priority provided by the
International Convention for the Protection of Industrial Property, as amended, or by any
convention which may henceforth be substituted for it, and to invoke and claim such right of
priority without further written or oral authorization from us.
I hereby consent that a copy of this assignment shall be deemed a full legal and formal
equivalent of any assignment, consent to file or like document which may be required in any country
for any purpose and more particularly in proof of the right of the said assignee or nominee to
claim the aforesaid benefit of the right of priority provided by the International Convention for
the Protection of Industrial Property, as amended, or by any convention which may henceforth be
substituted for it.
I covenant with said assignee, its successors, assigns and legal representatives, that the
rights and property herein conveyed are free and clear of any encumbrance, and that we have full
right to convey the same as herein expressed.
SIGNED AT San Francisco, California, as of the 16th day of June, 1994.
| /s/ Pamela A. Pierce | ||||
| Pamela A. Pierce, M.D., Ph.D. | ||||
| Witnessed and Accepted: Omeros Medical Systems, Inc. |
||||
| by | /s/ H. Raymond Cairncross | |||
| H. Raymond Cairncross, its V.P. | ||||
-2-
Exhibit 10.16
SECOND TECHNOLOGY TRANSFER AGREEMENT
This Second Technology Transfer Agreement (this “Agreement”) is entered into as of the
December 11, 2001, by and between Gregory A. Demopulos, M.D. (“Demopulos”) and Omeros Medical
Systems, Inc., a Washington corporation (“Omeros”).
Demopulos, along with Pamela A. Pierce, M.D., Ph.D. (“Pierce”), is the inventor of certain
technology relating to methods, compositions and devices for drug delivery, chondroprotection,
inhibition of tumor cell adhesion and invasion, the treatment of urogenital disorders, peripheral
nervous system pain inhibition and rotational analgesia (as further described below, the
“Technology”). Demopulos desires to transfer all his right, title and interest in and to the
Technology to Omeros for further research, development and commercialization, and Omeros desires to
obtain ownership of and other rights in the Technology for such purpose.
For good and valuable consideration, the receipt and sufficiency of such consideration being
hereby acknowledged, the parties agree:
1. Definitions. The following definitions apply whenever the specified terms are used
in this Agreement or in any attachments to this Agreement:
a. “Confidential Information” means confidential information relating to the
Technology, now existing or hereafter arising, including without limitation, research,
developments, inventions, technical data, any type of product development, and any and all other
processes, formulae, marketing plans or proposals, customer lists or other customer information,
financial information, or any observations, data, written material, records or documents.
Confidential Information includes any such information whether or not such information was
developed, devised or otherwise created in whole or in part by the efforts of Demopulos or Omeros.
Confidential Information shall not include a matter of public knowledge, unless such matter become
public knowledge as a result of unauthorized disclosure to the general public, or the combination
of such matters would amount to Confidential Information. In any dispute over whether information
is Confidential Information for purposes of enforcement of this Agreement, it shall be the burden
of Demopulos to show that such contested information is neither confidential nor a Trade Secret.
b. “Intellectual Property Rights” mean all intellectual property rights arising under
federal, state or common law and relating to the Technology, including without limitation Patent
Rights and Know-How.
c. “Know-How” means all information, now existing or hereafter acquired, known to
Demopulos and related in any way to the Technology, including without limitation, information
directly or indirectly related to any formula, method, procedure, process, composition of matter,
design, material, or other subject matter that contributes in whole or in part to the present or
future commercial development, exploitation, utilization or understanding of the Technology.
Know-How also includes, without limitation, the following: (a) any Confidential Information; (b)
any information relating in any way to the Technology that may result from further research
sponsored in whole or in part by Omeros; and (c) any information relating to the Technology,
whether or not such
information was developed, devised or otherwise created in whole or in part by the efforts of
Demopulos or Omeros and whether or not it is a matter of public knowledge.
d. “New Invention” means any invention, discovery, concept, idea, information or
improvement, whether or not patentable, that is (i) made, developed or conceived in whole or in
part while Demopulos is an employee, agent, officer, director, or shareholder of Omeros, and (ii)
is derived from the Technology.
e. “Patent Rights” mean the rights of Demopulos to any and all inventions included
within the Technology and any matter claimed in or disclosed by any and all present and future
letters patent, pending applications for patents and other legal rights applied for in the name of,
by or granted to Demopulos, alone or with another or others, as inventor or co-inventor in any
country with respect to or in connection with the Technology, and any and all divisions,
continuations, continuations-in-part, reissues, substitutions, re-examinations, extensions and
renewals arising therefrom or issuing thereon. Without limiting the generality of the foregoing,
Patent Rights include without limitation, any and all foreign rights related to, derived from, or
claiming priority from U.S. Patent Rights.
f. “Technology” means that certain technology developed in whole or in part by
Demopulos and related to compositions, methods and devices for: (a) the delivery of
pharmaceuticals, including but not limited to drug delivery agents or compositions that enhance the
uptake, retention or effect of anti-inflammatory, analgesic, chondroprotective, anti-spasm,
anti-restenotic and/or other pharmacological agents; (b) the protection of cartilage, including but
not limited to compositions that are injected, irrigated or otherwise applied to anatomic joints to
inhibit cartilage catabolism, promote cartilage anabolism, inhibit inflammation and/or inhibit
pain; (c) the inhibition of tumor cell adhesion and invasion during surgical procedures; (d) the
treatment or prevention of urogenital disorders including but not limited to agents to inhibit
spasm, inflammation, pain and tumor cell adhesion and invasion; (e) rotational analgesia including
but not limited to rotational intrathecal analgesia methods, compositions and administration
devices; or (f) the inhibition or relief of peripheral nervous system pain. Without limiting the
generality of the foregoing, the Technology shall include, without limitation, all related advances
or improvements, whether or not patentable.
The Technology shall not include, and any assignment of inventions required by this Agreement
does not apply to, any invention of Demopulos for which no equipment, supplies, facility or trade
secret information of Omeros was used and which was developed entirely on Demopulos’ own time,
unless (a) the invention relates (i) directly to the business of Omeros or (ii) to Omeros’ actual
or demonstrably anticipated research or development or (b) the invention results from any work
performed by Demopulos for Omeros. The Technology also shall not include, and any assignment of
inventions required by this Agreement does not apply to, any invention of Demopulos which would
otherwise be included in the Technology but which Demopulos has disclosed to the Board of Directors
of Omeros and which has been disclaimed thereby as being unrelated to and not in conflict with the
present or future business or research of Omeros.
g. “Trade Secrets” mean any and all Confidential Information within the definition of
that term as set forth in RCW Chapter 19.108.
-2-
2. Transfer of Technology.
a. Present Technology. Demopulos hereby irrevocably sells, assigns, conveys and
otherwise transfers to Omeros all right, title and interest in and to the Technology, Know-How,
Patent Rights, and other Intellectual Property Rights, which right, title, and interest he now
possess or may hereafter acquire, and hereby confirms all previous assignments granted to Omeros
related to the Technology, Know-How, Patent Rights, and other Intellectual Property Rights. Such
transfer hereby includes, without limitation, all right, title and interest of Demopulos in and to
the Patent Rights, and any and all existing records that contain Know-How. In keeping with these
obligations, Demopulos has executed Assignments of Patent Rights as attached hereto as Exhibits
A-H. To the extent not already provided to Omeros, Demopulos shall identify for Omeros any and all
existing records that contain Know-How. Demopulos and Omeros jointly shall determine which of such
records shall be delivered to Omeros as originals or as copies, and such records shall be
identified and categorized in writing no later than thirty (30) days after execution of this
Agreement. Demopulos shall then transfer and deliver to Omeros all such records that contain
Know-How in a form reasonably understandable by any physician or scientist generally knowledgeable
of relevant methods of surgery or other treatment. Upon such transfer and delivery, such records
shall be the property of Omeros and shall be under Omeros’ exclusive control. Thereafter, on a
timely basis, but not less than quarterly, Demopulos shall develop, produce, deliver to Omeros and
maintain permanent records, in writing or otherwise, that set forth Know-How in a form reasonably
understandable by any physician or scientist generally knowledgeable of relevant surgical methods.
b. Future Developments. Demopulos acknowledges that title to any and all New
Inventions shall immediately vest in Omeros. Immediately upon the development of any New
Invention, Demopulos shall disclose such New Invention to Omeros in writing. From time to time,
Demopulos shall execute such documents as Omeros may reasonably require to evidence assignment to
Omeros of all right, title, and interest in and to such New Inventions.
3. Covenant Not to Disclose. For a period of at least ten (10) years, Demopulos shall
not at any time, without the express prior written consent of Omeros, disclose or otherwise make
known or available to any person, firm, corporation or other entity, or use for their own account,
any Confidential Information. Both Demopulos and Omeros shall utilize reasonable procedures to
safeguard Confidential Information, including releasing Confidential Information to employees of
Omeros only on a “need-to-know” basis.
4. Consideration. The Grant of Options to purchase shares of stock of Omeros issued
to Demopulos on December 11, 2001 shall constitute consideration for the transfer of rights
described in Section 2 above, for Demopulos’s covenant not to disclose Confidential Information,
and for other covenants and promises made by Demopulos hereunder.
5. Specific Performance. Demopulos and Omeros acknowledge that (a) the covenants set
forth in Sections 2 and 3 are essential elements of the transactions contemplated in this
Agreement, that, but for the agreement of the parties to comply with such covenants, neither
Demopulos nor Omeros would have entered into such transactions, and that each party has consulted
with counsel and has been advised in all respects concerning the reasonableness of such covenants
as to scope and limit of time; (b) the nonbreaching party will not have any adequate remedy at law
if the other party
-3-
violates the terms of Section 2 or 3 or fails to perform any of its other obligations
hereunder; and (c) the nonbreaching party shall have the right, in addition to any other rights it
may have, to obtain in any court of competent jurisdiction temporary, preliminary and permanent
injunctive relief to restrain any breach or threatened breach, or otherwise to specifically
enforce, any of such covenants or any other obligations if the breaching party fails to perform any
of its obligations under this Agreement.
6. Right to Repurchase Technology. In the event that Omeros either (a) files for
liquidation under Chapter 7 of the United States Bankruptcy Act, or (b) undertakes a voluntary
dissolution, liquidation and termination (except in connection with a merger, reorganization,
consolidation or sale of assets), Demopulos shall have the right, along with co-inventor Pierce, to
repurchase the Technology from Omeros for a price equal to the then-current fair market value of
the Technology. If the parties are unable to agree upon the fair market value of the Technology
within thirty (30) days after the filing or undertaking described above, then such value shall be
established by the appraisal of a qualified, mutually acceptable independent appraiser. In the
event the parties are unable to agree upon an appraiser within sixty (60) days after the filing or
undertaking described above, then Demopulos and Omeros each shall select an independent appraiser,
and the two appraisers shall select a third independent appraiser. The three appraisers shall
conduct such appraisal proceeding in accordance with the Commercial Arbitration Rules of the
American Arbitration Association as then in effect, and the decisions of the appraisers shall be
delivered to the parties not later than four months after the commencement of such appraisal
proceeding. All such appraisal proceedings shall take place in Seattle, Washington and all results
of such proceedings shall be binding on Demopulos and Omeros. All appraisal expenses shall be paid
by Demopulos. Demopulos’s rights to repurchase the Technology under this Section 6 are subject to
the similar rights of co-inventor Pierce, with whom Omeros executed an agreement substantially
similar hereto. In the event that both Demopulos and Pierce desire to exercise their respective
rights to repurchase the Technology, those parties shall be responsible for negotiating between
themselves their individual rights and obligations with regard to such transfer, and Demopulos and
Pierce shall exercise their rights jointly in any transaction involving Omeros.
7. Severability. The invalidity of all or any part of any section of this Agreement
shall not render invalid the remainder of this Agreement or the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted
to be only so broad as is enforceable. Demopulos and Omeros agree and stipulate that the covenants
set forth in Sections 2, 3 and 6 are fair and reasonably necessary for the protection of their
protectable interests. In the event a court of competent jurisdiction should decline to enforce
any provision of Sections 2, 3 or 6, Sections 2, 3 or 6 shall be deemed to be modified to the
minimum extent which the court shall find enforceable.
8. Miscellaneous.
a. Headings. The headings of the sections and paragraphs of this Agreement are
inserted for convenience only, and shall not control or affect the meaning or construction of any
provisions hereof.
-4-
b. Waiver of Breach. Neither the waiver of any breach of any provision of this
Agreement, nor failure to enforce any provision hereof, shall operate or be construed as a waiver
of any subsequent breach by either party.
c. Disputes. In any litigation or dispute arising out of this Agreement, the
substantially prevailing party will be entitled to recover, in addition to other relief granted,
all reasonable costs and attorneys’ fees, including such costs and fees on appeal.
d. Rights Cumulative. The provisions of this Agreement shall not be construed as
limiting any rights or remedies that either party may otherwise have under applicable law.
e. Governing Law. The rights and obligations under this Agreement shall in all
respects be governed by the laws of the State of Washington. This Agreement is intended to
supplement and not to supersede the rights of the parties under the Uniform Trade Secrets Act, as
adopted by the State of Washington.
f. Integration. This Agreement as herein written constitutes the entire understanding
between the parties pertaining to the subject matter contained in it, and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties. It is expressly
understood and agreed that this Agreement may not be altered, amended, modified or otherwise
changed in any respect whatsoever, except by a writing duly executed by the parties. This
Agreement supplements a previous Technology Transfer Agreement executed by Demopulos and Omeros
dated June 16, 1994, and also supplements any rights Omeros has under the law by virtue of any
invention(s) included within the Patent Rights or New Invention having been made while Demopulos is
an employee and/or officer of Omeros, and nothing in this Agreement shall be interpreted to
contravene such previous Technology Transfer Agreement.
Wherefore each party has executed this Agreement on the date set forth below to signify
acceptance of all of the above terms and provisions.
| OMEROS MEDICAL SYSTEMS, INC. | GREGORY A. DEMOPULOS, M.D. | |||||||||
By:
|
/s/ Marcia S. Kelbon | By: | /s/ Gregory A. Demopulos | |||||||
| Vice President, Patent and General Counsel | ||||||||||
Date:
|
12/11/01 | Date: | 12/11/01 | |||||||
-5-
Exhibit 10.17
SECOND TECHNOLOGY TRANSFER AGREEMENT
This Second Technology Transfer Agreement (this “Agreement”) is entered into as of the date
last executed below, by and between Pamela Pierce Palmer, M.D., Ph.D. (“Palmer”) and Omeros Medical
Systems, Inc., a Washington corporation (“Omeros”).
Palmer, along with Gregory A. Demopulos, M.D. (“Demopulos”), is the inventor of certain
technology relating to methods, compositions and devices for drug delivery, chondroprotection,
inhibition of tumor cell adhesion and invasion, the treatment of urogenital disorders, peripheral
nervous system pain inhibition and rotational analgesia (as further described below, the
“Technology”). Palmer desires to transfer all his right, title and interest in and to the
Technology to Omeros for further research, development and commercialization, and Omeros desires to
obtain ownership of and other rights in the Technology for such purpose.
For good and valuable consideration, the receipt and sufficiency of such consideration being
hereby acknowledged, the parties agree:
1. Definitions. The following definitions apply whenever the specified terms are used
in this Agreement or in any attachments to this Agreement:
a. “Confidential Information” means confidential information relating to the
Technology, now existing or hereafter arising, including without limitation, research,
developments, inventions, technical data, any type of product development, and any and all other
processes, formulae, marketing plans or proposals, customer lists or other customer information,
financial information, or any observations, data, written material, records or documents.
Confidential Information includes any such information whether or not such information was
developed, devised or otherwise created in whole or in part by the efforts of Palmer or Omeros.
Confidential Information shall not include a matter of public knowledge, unless such matter become
public knowledge as a result of unauthorized disclosure to the general public, or the combination
of such matters would amount to Confidential Information. In any dispute over whether information
is Confidential Information for purposes of enforcement of this Agreement, it shall be the burden
of Palmer to show that such contested information is neither confidential nor a Trade Secret.
b. “Intellectual Property Rights” mean all intellectual property rights arising under
federal, state or common law and relating to the Technology, including without limitation Patent
Rights and Know-How.
c. “Know-How” means all information, now existing or hereafter acquired, known to
Palmer and related in any way to the Technology, including without limitation, information directly
or indirectly related to any formula, method, procedure, process, composition of matter, design,
material, or other subject matter that contributes in whole or in part to the present or future
commercial development, exploitation, utilization or understanding of the Technology. Know-How
also includes, without limitation, the following: (a) any Confidential Information; (b) any
information relating in any way to the Technology that may result from further research sponsored
in whole or in part by Omeros; and (c) any information relating to the Technology, whether or not
such
information was developed, devised or otherwise created in whole or in part by the efforts of
Palmer or Omeros and whether or not it is a matter of public knowledge.
d. “New Invention” means any invention, discovery, concept, idea, information or
improvement, whether or not patentable, that is (i) made, developed or conceived in whole or in
part while Palmer is an employee, agent, officer, director, or shareholder of Omeros, and (ii) is
derived from the Technology.
e. “Patent Rights” mean the rights of Palmer to any and all inventions included within
the Technology and any matter claimed in or disclosed by any and all present and future letters
patent, pending applications for patents and other legal rights applied for in the name of, by or
granted to Palmer, alone or with another or others, as inventor or co-inventor in any country with
respect to or in connection with the Technology, and any and all divisions, continuations,
continuations-in-part, reissues, substitutions, re-examinations, extensions and renewals arising
therefrom or issuing thereon. Without limiting the generality of the foregoing, Patent Rights
include without limitation, any and all foreign rights related to, derived from, or claiming
priority from U.S. Patent Rights.
f. “Technology” means that certain technology developed in whole or in part by Palmer
and related to compositions, methods and devices for: (a) the delivery of pharmaceuticals,
including but not limited to drug delivery agents or compositions that enhance the uptake,
retention or effect of anti-inflammatory, analgesic, chondroprotective, anti-spasm, anti-restenotic
and/or other pharmacological agents; (b) the protection of cartilage, including but not limited to
compositions that are injected, irrigated or otherwise applied to anatomic joints to inhibit
cartilage catabolism, promote cartilage anabolism, inhibit inflammation and/or inhibit pain; (c)
the inhibition of tumor cell adhesion and invasion during surgical procedures; (d) the treatment or
prevention of urogenital disorders including but not limited to agents to inhibit spasm,
inflammation, pain and tumor cell adhesion and invasion; (e) rotational analgesia including but not
limited to rotational intrathecal analgesia methods, compositions and administration devices; or
(f) the inhibition or relief of peripheral nervous system pain. Without limiting the generality of
the foregoing, the Technology shall include, without limitation, all related advances or
improvements, whether or not patentable.
g. “Trade Secrets” mean any and all Confidential Information within the definition of
that term as set forth in RCW Chapter 19.108.
2. Transfer of Technology
a. Present Technology. Palmer hereby irrevocably sells, assigns, conveys and
otherwise transfers to Omeros all right, title and interest in and to the Technology, Know-How,
Patent Rights, and other Intellectual Property Rights, which right, title, and interest he now
possess or may hereafter acquire, and hereby confirms all previous assignments granted to Omeros
related to the Technology, Know-How, Patent Rights, and other Intellectual Property Rights. Such
transfer hereby includes, without limitation, all right, title and interest of Palmer in and to the
Patent Rights, and any and all existing records that contain Know-How. In keeping with these
obligations, Palmer has executed Assignments of Patent Rights as attached hereto as Exhibits A-H.
To the extent not already provided to Omeros, Palmer shall identify for Omeros any and all existing
records that
-2-
contain Know-How. Palmer and Omeros jointly shall determine which of such records shall be
delivered to Omeros as originals or as copies, and such records shall be identified and categorized
in writing no later than thirty (30) days after execution of this Agreement. Palmer shall then
transfer and deliver to Omeros all such records that contain Know-How in a form reasonably
understandable by any physician or scientist generally knowledgeable of relevant methods of surgery
or other treatment. Upon such transfer and delivery, such records shall be the property of Omeros
and shall be under Omeros’ exclusive control. Thereafter, on a timely basis, but not less than
quarterly, Palmer shall develop, produce, deliver to Omeros and maintain permanent records, in
writing or otherwise, that set forth Know-How in a form reasonably understandable by any physician
or scientist generally knowledgeable of relevant surgical methods.
b. Future Developments. Palmer acknowledges that title to any and all New Inventions
shall immediately vest in Omeros. Immediately upon the development of any New Invention, Palmer
shall disclose such New Invention to Omeros in writing. From time to time, Palmer shall execute
such documents as Omeros may reasonably require to evidence assignment to Omeros of all right,
title, and interest in and to such New Inventions.
3. Covenant Not to Disclose. For a period of at least ten (10) years, Palmer shall
not at any time, without the express prior written consent of Omeros, disclose or otherwise make
known or available to any person, firm, corporation or other entity, or use for their own account,
any Confidential Information. Both Palmer and Omeros shall utilize reasonable procedures to
safeguard Confidential Information, including releasing Confidential Information to employees of
Omeros only on a “need-to-know” basis.
4. Consideration. The Grant of Options to purchase shares of stock of Omeros issued
to Palmer on December 11, 2001 shall constitute consideration for the transfer of rights described
in Section 2 above, for Palmer’s covenant not to disclose Confidential Information, and for other
covenants and promises made by Palmer hereunder.
5. Specific Performance. Palmer and Omeros acknowledge that (a) the covenants set
forth in Sections 2 and 3 are essential elements of the transactions contemplated in this
Agreement, that, but for the agreement of the parties to comply with such covenants, neither Palmer
nor Omeros would have entered into such transactions, and that each party has consulted with
counsel and has been advised in all respects concerning the reasonableness of such covenants as to
scope and limit of time; (b) the nonbreaching party will not have any adequate remedy at law if the
other party violates the terms of Section 2 or 3 or fails to perform any of its other obligations
hereunder; and (c) the nonbreaching party shall have the right, in addition to any other rights it
may have, to obtain in any court of competent jurisdiction temporary, preliminary and permanent
injunctive relief to restrain any breach or threatened breach, or otherwise to specifically
enforce, any of such covenants or any other obligations if the breaching party fails to perform any
of its obligations under this Agreement.
6. Right to Repurchase Technology. In the event that Omeros either (a) files for
liquidation under Chapter 7 of the United States Bankruptcy Act, or (b) undertakes a voluntary
dissolution, liquidation and termination (except in connection with a merger, reorganization,
consolidation or sale of assets), Palmer shall have the right, along with co-inventor Demopulos, to
repurchase the Technology from Omeros for a price equal to the then-current fair market value of
the Technology.
-3-
If the parties are unable to agree upon the fair market value of the Technology within thirty
(30) days after the filing or undertaking described above, then such value shall be established by
the appraisal of a qualified, mutually acceptable independent appraiser. In the event the parties
are unable to agree upon an appraiser within sixty (60) days after the filing or undertaking
described above, then Demopulos and Omeros each shall select an independent appraiser, and the two
appraisers shall select a third independent appraiser. The three appraisers shall conduct such
appraisal proceeding in accordance with the Commercial Arbitration Rules of the American
Arbitration Association as then in effect, and the decisions of the appraisers shall be delivered
to the parties not later than four months after the commencement of such appraisal proceeding. All
such appraisal proceedings shall take place in Seattle, Washington and all results of such
proceedings shall be binding on Palmer and Omeros. All appraisal expenses shall be paid by Palmer.
Palmer’s rights to repurchase the Technology under this Section 6 are subject to the similar
rights of co-inventor Demopulos, with whom Omeros executed an agreement substantially similar
hereto. In the event that both Palmer and Demopulos desire to exercise their respective rights to
repurchase the Technology, those parties shall be responsible for negotiating between themselves
their individual rights and obligations with regard to such transfer, and Palmer and Demopulos
shall exercise their rights jointly in any transaction involving Omeros.
7. Severability. The invalidity of all or any part of any section of this Agreement
shall not render invalid the remainder of this Agreement or the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted
to be only so broad as is enforceable. Palmer and Omeros agree and stipulate that the covenants
set forth in Sections 2, 3 and 6 are fair and reasonably necessary for the protection of their
protectable interests. In the event a court of competent jurisdiction should decline to enforce
any provision of Sections 2, 3 or 6, Sections 2, 3 or 6 shall be deemed to be modified to the
minimum extent which the court shall find enforceable.
8. Miscellaneous.
a. Headings. The headings of the sections and paragraphs of this Agreement are
inserted for convenience only, and shall not control or affect the meaning or construction of any
provisions hereof.
b. Waiver of Breach. Neither the waiver of any breach of any provision of this
Agreement, nor failure to enforce any provision hereof, shall operate or be construed as a waiver
of any subsequent breach by either party.
c. Disputes. In any litigation or dispute arising out of this Agreement, the
substantially prevailing party will be entitled to recover, in addition to other relief granted,
all reasonable costs and attorneys’ fees, including such costs and fees on appeal.
d. Rights Cumulative. The provisions of this Agreement shall not be construed as
limiting any rights or remedies that either party may otherwise have under applicable law.
e. Governing Law. The rights and obligations under this Agreement shall in all
respects be governed by the laws of the State of Washington. This Agreement is intended to
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supplement and not to supersede the rights of the parties under the Uniform Trade Secrets Act,
as adopted by the State of Washington.
f. Integration. This Agreement as herein written constitutes the entire understanding
between the parties pertaining to the subject matter contained in it, and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties. It is expressly
understood and agreed that this Agreement may not be altered, amended, modified or otherwise
changed in any respect whatsoever, except by a writing duly executed by the parties. This
Agreement supplements a previous Technology Transfer Agreement executed by Palmer and Omeros dated
June 16, 1994, and nothing in this Agreement shall be interpreted to contravene such previous
Technology Transfer Agreement.
Wherefore each party has executed this Agreement on the date set forth below to signify
acceptance of all of the above terms and provisions.
| OMEROS MEDICAL SYSTEMS, INC. | PAMELA PIERCE PALMER, M.D., Ph.D. | |||||||||
By:
|
/s/ Gregory A. Demopulos | By: | /s/ Pamela Pierce Palmer | |||||||
| Chairman and Chief Executive Officer | ||||||||||
Date:
|
3/12/02 | Date: | 3/22/02 | |||||||
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Exhibit 10.18
TECHNOLOGY TRANSFER AGREEMENT
This Technology Transfer Agreement (this “Agreement”) is entered into as of June 16, 1994, by
and between Gregory A. Demopulos, M.D. (“Demopulos”) and Omeros Medical Systems, Inc., a Washington
corporation (“Omeros”).
Demopulos, along with Stephen A. Yencho, Ph.D., P.E. (“Yencho”), is the inventor of certain
technology relating to the surgical repair of lacerated or ruptured anatomic soft tissues (as
further described below, the “Technology”). Demopulos desires to transfer all his right, title and
interest in and to the Technology to Omeros for further research, development and
commercialization, and Omeros desires to obtain ownership of and other rights in the Technology for
such purpose.
For good and valuable consideration, the receipt and sufficiency of such consideration being
hereby acknowledged, the parties agree:
1. Definitions. The following definitions apply whenever the specified terms are used
in this Agreement or in any attachments to this Agreement:
a. “Confidential Information” means confidential information relating to the
Technology, now existing or hereafter arising, including without limitation, research,
developments, inventions, technical data, any type of product development, and any and all other
processes, formulae, marketing plans or proposals, customer lists or other customer information,
financial information, or any observations, data, written material, records or documents.
Confidential Information includes any such information whether or not such information was
developed, devised or otherwise created in whole or in part by the efforts of Demopulos or Omeros.
Confidential Information shall not include a matter of public knowledge, unless such matter become
public knowledge as a result of unauthorized disclosure to the general public, or the combination
of such matters would amount to Confidential Information. In any dispute over whether information
is Confidential Information for purposes of enforcement of this Agreement, it shall be the burden
of Demopulos to show that such contested information is neither confidential nor a Trade Secret.
b. “Intellectual Property Rights” mean all intellectual property rights arising under
federal, state or common law and relating to the Technology, including without limitation Patent
Rights and Know-How.
c. “Know-How” means all information, now existing or hereafter acquired, known to
Demopulos and related in any way to the Technology, including without limitation, information
directly or indirectly related to any formula, method, procedure, process, composition of matter,
design, material, or other subject matter that contributes in whole or in part to the present or
future commercial development, exploitation, utilization or understanding of the Technology.
Know-How also includes, without limitation, the following: (a) any Confidential Information;
(b) any information relating in any way to the Technology that may result from further research
sponsored in whole or in part by Omeros; and (c) any information relating to the Technology,
whether or not such information was developed, devised or otherwise created in whole or in
part by the efforts of Demopulos or Omeros and whether or not it is a matter of public knowledge.
d. “New Invention” means any invention, discovery, concept, idea, information or
improvement, whether or not patentable, that is (i) made, developed or conceived in whole or in
part while Demopulos is an employee, agent, officer, director, or shareholder of Omeros, and
(ii) is derived from the Technology.
e. “Patent Rights” mean the rights of Demopulos to any and all matter claimed in or
disclosed by any and all present and future letters patent, pending applications for patents and
other legal rights applied for by or granted to Demopulos, alone or with another or others, as
inventor or co-inventor in any country with respect to or in connection with the Technology, and
any and all divisions, continuations, continuations-in-part, reissues, substitutions,
re-examinations, extensions and renewals arising therefrom or issuing thereon. Without limiting
the generality of the foregoing, Patent Rights include without limitation, any and all foreign
rights related to, derived from, or claiming priority from U.S. Patent Rights.
f. “Technology” means that certain technology developed in whole or in part by
Demopulos and related to the surgical repair of lacerated or ruptured anatomic soft tissues,
including but not limited to tendons and/or ligaments, which technology currently includes and is
embodied by a surgical device commonly referred to as the “Tendon Splice” along with related
application instruments. Without limiting the generality of the foregoing, the Technology shall
include, without limitation, all related advances or improvements, whether or not patentable.
g. “Trade Secrets” mean any and all Confidential Information within the definition of
that term as set forth in RCW Chapter 19.108.
2. Transfer of Technology.
a. Present Technology. Demopulos hereby irrevocably sells, assigns, conveys and
otherwise transfers to Omeros all right, title and interest in and to the Technology, Know-How,
Patent Rights, and other Intellectual Property Rights, which right, title, and interest he now
possess or may hereafter acquire. Such transfer hereby includes, without limitation, all right,
title and interest of Demopulos in and to the Patent Rights, and any and all existing records that
contain Know-How. Upon execution of this Agreement, Demopulos shall execute an Assignment of
Patent Rights in the form attached hereto as Exhibit A, and shall identify for Omeros any and all
existing records that contain Know-How. Demopulos and Omeros jointly shall determine which of such
records shall be delivered to Omeros as originals or as copies, and such records shall be
identified and categorized in writing no later than thirty (30) days after execution of this
Agreement. Demopulos shall then transfer and deliver to Omeros all such records that contain
Know-How in a form reasonably understandable by any physician or scientist generally knowledgeable
of methods of tendon surgery. Upon such transfer and delivery, such records shall be the property
of Omeros and shall be under Omeros’ exclusive control. Thereafter, on a timely basis, but not
less than quarterly, Demopulos shall develop, produce, deliver to Omeros and maintain permanent
records, in writing or otherwise, that set forth Know-How in a form reasonably understandable by
any physician or scientist generally knowledgeable of relevant surgical methods.
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b. Future Developments. Demopulos acknowledges that title to any and all New
Inventions shall immediately vest in Omeros. Immediately upon the development of any New
Invention, Demopulos shall disclose such New Invention to Omeros in writing. From time to time,
Demopulos shall execute such documents as Omeros may reasonably require to evidence assignment to
Omeros of all right, title, and interest in and to such New Inventions.
c. Other Inventions. Pursuant to RCW 49.44.150, Demopulos shall disclose to Omeros
all inventions being developed by Demopulos for the purpose of determining whether such inventions
are New Inventions or Other Inventions. If Demopulos receives any bona fide offer to transfer all
or any portion of any Other Invention, Demopulos immediately shall disclose to Omeros the nature of
such Other Invention and the terms of such offer. For a period of at least ten (10) years, Omeros
will not at any time, without the express prior written consent of Demopulos, disclose or otherwise
make known or available to any person, firm, corporation or other entity, nor shall Omeros use for
its own account, any such Other Invention so disclosed by Demopulos.
3. Covenant Not to Disclose. For a period of at least ten (10) years, Demopulos shall
not at any time, without the express prior written consent of Omeros, disclose or otherwise make
known or available to any person, firm, corporation or other entity, or use for their own account,
any Confidential Information. Both Demopulos and Omeros shall utilize reasonable procedures to
safeguard Confidential Information, including releasing Confidential Information to employees of
Omeros only on a “need-to-know” basis.
4. Consideration. The shares of the common stock of Omeros being issued to Demopulos
as of the date of this Agreement shall constitute consideration for the transfer of rights
described in Section 2 above, for Demopulos’ covenant not to disclose Confidential Information, and
for other covenants and promises made by Demopulos hereunder.
5. Specific Performance. Demopulos and Omeros acknowledge that (a) the covenants set
forth in Sections 2 and 3 are essential elements of the transactions contemplated in this
Agreement, that, but for the agreement of the parties to comply with such covenants, neither
Demopulos nor Omeros would have entered into such transactions, and that each party has consulted
with counsel and has been advised in all respects concerning the reasonableness of such covenants
as to scope and limit of time; (b) the nonbreaching party will not have any adequate remedy at law
if the other party violates the terms of Section 2 or 3 or fails to perform any of its other
obligations hereunder; and (c) the nonbreaching party shall have the right, in addition to any
other rights it may have, to obtain in any court of competent jurisdiction temporary, preliminary
and permanent injunctive relief to restrain any breach or threatened breach, or otherwise to
specifically enforce, any of such covenants or any other obligations if the breaching party fails
to perform any of its obligations under this Agreement.
6. Right to Repurchase Technology. In the event that Omeros either (a) files for
liquidation under Chapter 7 of the United States Bankruptcy Act, or (b) undertakes a voluntary
dissolution, liquidation and termination (except in connection with a merger, reorganization,
consolidation or sale of assets), Demopulos shall have the right, along with co-inventor Yencho, to
repurchase the Technology from Omeros for a price equal to the then-current fair market value of
the Technology. If the parties are unable to agree upon the fair market value of the Technology
within
-3-
thirty (30) days after the filing or undertaking described above, then such value shall be
established by the appraisal of a qualified, mutually acceptable independent appraiser. In the
event the parties are unable to agree upon an appraiser within sixty (60) days after the filing or
undertaking described above, then Demopulos and Omeros each shall select an independent appraiser,
and the two appraisers shall select a third independent appraiser. The three appraisers shall
conduct such appraisal proceeding in accordance with the Commercial Arbitration Rules of the
American Arbitration Association as then in effect, and the decisions of the appraisers shall be
delivered to the parties not later than four months after the commencement of such appraisal
proceeding. All such appraisal proceedings shall take place in Seattle, Washington and all results
of such proceedings shall be binding on Demopulos and Omeros. All appraisal expenses shall be paid
by Demopulos. Demopulos’ rights to repurchase the Technology under this Section 6 are subject to
the similar rights of co-inventor Yencho, with whom Omeros executed an agreement substantially
similar hereto. In the event that both Demopulos and Yencho desire to exercise their respective
rights to repurchase the Technology, those parties shall be responsible for negotiating between
themselves their individual rights and obligations with regard to such transfer, and Demopulos and
Yencho shall exercise their rights jointly in any transaction involving Omeros.
7. Severability. The invalidity of all or any part of any section of this Agreement
shall not render invalid the remainder of this Agreement or the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted
to be only so broad as is enforceable. Demopulos and Omeros agree and stipulate that the covenants
set forth in Sections 2, 3 and 6 are fair and reasonably necessary for the protection of their
protectable interests. In the event a court of competent jurisdiction should decline to enforce
any provision of Sections 2, 3 or 6, Sections 2, 3 or 6 shall be deemed to be modified to the
minimum extent which the court shall find enforceable.
8. Miscellaneous.
a. Headings. The headings of the sections and paragraphs of this Agreement are
inserted for convenience only, and shall not control or affect the meaning or construction of any
provisions hereof.
b. Waiver of Breach. Neither the waiver of any breach of any provision of this
Agreement, nor failure to enforce any provision hereof, shall operate or be construed as a waiver
of any subsequent breach by either party.
c. Disputes. In any litigation or dispute arising out of this Agreement, the
substantially prevailing party will be entitled to recover, in addition to other relief granted,
all reasonable costs and attorneys’ fees, including such costs and fees on appeal.
d. Rights Cumulative. The provisions of this Agreement shall not be construed as
limiting any rights or remedies that either party may otherwise have under applicable law.
e. Governing Law. The rights and obligations under this Agreement shall in all
respects be governed by the laws of the State of Washington. This Agreement is intended to
-4-
supplement and not to supersede the rights of the parties under the Uniform Trade Secrets Act,
as adopted by the State of Washington.
f. Integration. This Agreement as herein written constitutes the entire understanding
between the parties pertaining to the subject matter contained in it, and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties. It is expressly
understood and agreed that this Agreement may not be altered, amended, modified or otherwise
changed in any respect whatsoever, except by a writing duly executed by the parties.
DATED as of June 16, 1994.
| /s/ Gregory A. Demopulos | ||||
| Gregory A. Demopulos, M.D. | ||||
| Omeros Medical Systems, Inc. | ||||
| By | /s/ H. Raymond Cairncross | |||
| H. Raymond Cairncross, Its V.P. | ||||
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EXHIBIT A
PATENT RIGHTS ASSIGNMENT
FOR VALUE RECEIVED, I, Gregory A. Demopulos, M.D., hereby sell, assign and transfer unto
Omeros Medical Systems, Inc., a Washington corporation (“Omeros”) as assignee, and its successors,
assigns and legal representatives, the entire right, title and interest, for all countries in and
to certain inventions associated with certain technology related to the surgical repair of
lacerated or ruptured anatomic soft tissues, as more particularly described in that certain
Technology Transfer Agreement between Omeros and me, dated as of June 16, 1994, and all the rights
and privileges under any and all letters patent that may be granted therefor.
I request that any and all patents for said inventions be issued to said assignee, its
successors, assigns and legal representatives, or to such nominees as it may designate.
I agree that, when requested, I will, without charge to said assignee but at its expense, sign
all papers, take all lawful oaths, and do all acts which may be necessary, desirable or reasonably
appropriate for securing and maintaining patents for said inventions in any and all countries and
for vesting title thereto in said assignee, its successors, assigns and legal representatives or
nominees.
I authorize and empower the said assignee, its successors, assigns and legal representatives
or nominees, to invoke and claim for any application for patent or other form of protection for
said inventions filed by it or them, the benefit of the right of priority provided by the
International Convention for the Protection of Industrial Property, as amended, or by any
convention which may henceforth be substituted for it, and to invoke and claim such right of
priority without further written or oral authorization from us.
I hereby consent that a copy of this assignment shall be deemed a full legal and formal
equivalent of any assignment, consent to file or like document which may be required in any country
for any purpose and more particularly in proof of the right of the said assignee or nominee to
claim the aforesaid benefit of the right of priority provided by the International Convention for
the Protection of Industrial Property, as amended, or by any convention which may henceforth be
substituted for it.
I covenant with said assignee, its successors, assigns and legal representatives, that the
rights and property herein conveyed are free and clear of any encumbrance, and that we have full
right to convey the same as herein expressed.
SIGNED AT Seattle, Washington, as of the 16th day of June, 1994.
| /s/ Gregory A. Demopulos | ||||
| Gregory A. Demopulos, M.D. | ||||
Witnessed and Accepted:
Omeros Medical Systems, Inc.
By
|
/s/ H. Raymond Cairncross | |||
| H. Raymond Cairncross, Its V.P. |
-2-
Exhibit 10.19
Master Security Agreement
No. 5081087
No. 5081087
MASTER SECURITY AGREEMENT
No. 5081087
Dated as of April 26, 2005 (“Agreement”)
No. 5081087
Dated as of April 26, 2005 (“Agreement”)
THIS AGREEMENT is between Oxford Finance Corporation (together with its successors and
assigns, if any, “Secured Party”) and Nura, Inc. (“Debtor”). Secured Party has an office at 133 N.
Fairfax Street, Alexandria, VA 22314. Debtor is a corporation organized and existing under the
laws of the state of Delaware. Debtor’s mailing address and chief place of business is 1124
Columbia Street, Suite 650, Seattle, Washington, 98104.
1. CREATION OF SECURITY INTEREST.
Debtor grants to Secured Party, its successors and assigns, a security interest in and against
the Collateral (as that term is defined herein). This security interest is given to secure the
payment and performance of all debts, obligations and liabilities of any kind whatsoever of Debtor
to Secured Party, now existing or arising in the future, including but not limited to the payment
and performance of certain Promissory Notes from time to time executed by Debtor (collectively
“Notes” and each a “Note”), and any renewals, extensions and modifications of such debts,
obligations and liabilities (such Notes, debts, obligations and liabilities are called the
“Indebtedness”). Unless otherwise provided by applicable law, notwithstanding anything to the
contrary contained in this Agreement, to the extent that Secured Party asserts a purchase money
security interest in any items of Collateral (the “PMSI Collateral”): (i) the PMSI Collateral shall
secure only that portion of the Indebtedness which has been advanced by Secured Party to enable
Debtor to purchase, or acquire rights in or the use of such PMSI Collateral (the “PMSI
Indebtedness”), and (ii) no other Collateral shall secure the PMSI Indebtedness.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.
Debtor represents, warrants and covenants as of the date of this Agreement and as of the
date of each Note (as appropriate) that:
| (a) | Due Organization. Debtor’s exact legal name is as set forth in the preamble of this Agreement and Debtor is, duly organized, existing and in good standing under the laws of the State set forth in the preamble of this Agreement, has its chief executive offices at the location specified in the preamble, and is, and will remain duly qualified and licensed in every jurisdiction wherever necessary to carry on its business and operations; | ||
| (b) | Power and Capacity to Enter Into and Perform Obligations. Debtor has adequate power and capacity to enter into, and to perform its obligations under this Agreement, each Note and any other documents evidencing, or given in connection with, any of the Indebtedness (all of the foregoing are called the “Debt Documents”); |
Master Security Agreement
No. 5081087
No. 5081087
| (c) | Due Authorization. This Agreement and the other Debt Documents have been duly authorized, executed and delivered by Debtor and constitute legal, valid and binding agreements enforceable in accordance with their terms, except to the extent that the enforcement of remedies may be limited under applicable bankruptcy and insolvency laws; | ||
| (d) | Approvals and Consents. No approval, consent or withholding of objections is required from any governmental authority or instrumentality with respect to the entry into, or performance by Debtor of any of the Debt Documents, except any already obtained; | ||
| (e) | No Violations or Defaults. The entry into, and performance by, Debtor of the Debt Documents will not (i) violate any of the organizational documents of Debtor or any judgment, order, law or regulation applicable to Debtor, or (ii) result in any breach of or constitute a default under any contract to which Debtor is a party, or result in the creation of any lien, claim or encumbrance on any of Debtor’s property (except for liens in favor of Secured Party) pursuant to any indenture, mortgage, deed of trust, bank loan, credit agreement, or other agreement or instrument to which Debtor is a party; | ||
| (f) | Litigation. There are no suits or proceedings pending in court or before any commission, board or other administrative agency against or affecting Debtor which could, in the aggregate, have a material adverse effect on Debtor, its business or operations, or its ability to perform its obligations under the Debt Documents, nor does Debtor have reason to believe that any such suits or proceedings are threatened; | ||
| (g) | Solvency. The fair salable value of Debtor’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; the Debtor is not left with unreasonably small capital after the transactions in this Agreement or any Notes and Debtor is able to pay its debts (including trade debts) as they mature. | ||
| (h) | Financial Statements Prepared In Accordance with GAAP. All financial statements delivered to Secured Party in connection will) the Indebtedness have been prepared in accordance with generally accepted accounting principles, but excluding footnotes and normal year-end adjustments, and since the date of the most recent financial statement, there has been no material adverse change to Debtors financial condition; | ||
| (i) | Use of Collateral. The Collateral is not, and will not be, used by Debtor for personal, family or household purposes; | ||
| (j) | Collateral in Good Condition and Repair. The Collateral is, and will remain, in good condition and repair, subject to normal wear and tear, and Debtor will not be negligent in its care and use; |
Master Security Agreement
No. 5081087
No. 5081087
| (k) | Ownership of Collateral. Debtor is, and will remain, the sole and lawful owner, and in possession of, the Collateral, and has the sole right and lawful authority to grant the security interest described in this Agreement; | ||
| (l) | Encumbrances. The Collateral is, and will remain, free and clear of all liens, claims and encumbrances of any kind whatsoever, except for (i) liens in favor of Secured Party, (ii) liens for taxes not yet due or for taxes being contested in good faith and which do not involve, in the judgment of Secured Party, any risk of the sale, forfeiture or loss of any of the Collateral, and (iii) inchoate material men’s, mechanic’s, repairmen’s and similar liens arising by operation of law in the normal course of business for amounts which are not delinquent (all of such liens are called “Permitted Liens”); | ||
| (m) | Negative Pledge on Intellectual Property. Debtor’s Intellectual Property is, and will remain, free and clear of all liens, claims and encumbrances of any kind whatsoever, except for Permitted Liens. Debtor shall not sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of its Intellectual Property, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Secured Party) with any entity which directly or indirectly prohibits or has the effect of prohibiting Debtor from selling, transferring, assigning, mortgaging, pledging, leasing, granting a security interest in or upon, or encumbering any of Debtor’s Intellectual Property; provided, however, that Debtor may grant non-exclusive licenses with respect to components of Debtor’s Intellectual Property in connection with joint ventures and corporate collaborations in the ordinary course of business. | ||
| (n) | Taxes. All federal, state and local tax returns required to be filed by Debtor have been filed with the appropriate governmental agencies and all taxes due and payable by Debtor have been timely paid. Debtor will pay when due all taxes, assessments and other liabilities except as contested in good faith and by appropriate proceedings and for which adequate reserves have been established; | ||
| (o) | No Defaults. No event or condition exists under any material agreement, instrument or document to which Debtor is a party or may be subject, or by which Debtor or any of its properties are bound, which constitutes a default or an event of default thereunder, or will, with the giving of notice, passage of time, or both, would constitute a default or event of default thereunder; | ||
| (p) | Certification of Financial Information. All reports, certificates, schedules, notices and financial information submitted by Debtor to the Secured Party pursuant to this Agreement shall be certified as true and correct by the president or chief financial officer of Debtor; |
Master Security Agreement
No. 5081087
No. 5081087
| (q) | Notice of Material Adverse Change. Debtor shall give the Secured Party prompt written notice of any event, occurrence or other matter which has resulted or may result in a material adverse change in its financial condition, business operations, prospects, product development, technology, or business or contractual relations with third parties of Debtor which would impair the ability of Debtor to perform its obligations hereunder or under any of the other financing agreements to which it is a party or of Secured Party to enforce the Indebtedness or realize upon the Collateral | ||
| (r) | Notice of Investor Abandonment. Debtor shall give the Secured Party prompt written notice Secured Party if (a) it is the clear intention of Debtor’s investors to not continue to fund the Debtor in the amounts and timeframe necessary to enable Debtor to satisfy the Indebtedness as it becomes due and payable or (b) there is a material impairment in the perfection or priority of the Secured Party’s security interest in the Collateral. | ||
| (s) | Transactions with Affiliates. Debtor shall not, without the prior written consent of Security Party, directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Debtor except for transactions that are in the ordinary course of Debtor’s business, upon fair and reasonable terms that are no less favorable to Debtor than would be obtained in an arm’s length transaction with a nonaffiliated Person. | ||
| (t) | Audits. Debtor shall allow Security Party to audit Debtor’s Collateral at Debtor’s expense. Such audits will be conducted no more often than every six (6) months unless an Event of Default has occurred and is continuing. | ||
| (u) | Primary Account and Wire Transfer Instructions. Debtor maintains its Primary Account (the “Primary Operating Account”) and the Wire Transfer Instructions for the Primary Operating Account are as follows: |
Comerica Bank
10500 NE 8th Street
Suite 1905
Bellevue, WA 98004
Swift: MNBDUS33
ABA No.: 121137522
Account No.: 1891926162
Account Name: Nura, Inc.
10500 NE 8th Street
Suite 1905
Bellevue, WA 98004
Swift: MNBDUS33
ABA No.: 121137522
Account No.: 1891926162
Account Name: Nura, Inc.
Debtor hereby agrees that Loans will be advanced to the account specified above and
regularly scheduled payments will be automatically debited from the same account. In
addition to the Primary Operating Account identified hereinabove, Debtor maintains the
following other deposit and investment accounts:
Master Security Agreement
No. 5081087
No. 5081087
Comerica Bank
10500 NE 8th Street
Suite 1905
Bellevue, WA 98004
Swift: MNBDUS33
Account No.: 1892015684 & 189286334-9
Account Name: Nura, Inc.
10500 NE 8th Street
Suite 1905
Bellevue, WA 98004
Swift: MNBDUS33
Account No.: 1892015684 & 189286334-9
Account Name: Nura, Inc.
| (v) | Right to Invest. Debtor hereby grants to Secured Party a right (but not an obligation) to invest up to $1,000,000 but not more than $3,000,000, in each case subject to the first rights to invest provided to holders of the Company’s preferred stock, in each of the Debtor’s Subsequent Financings on the same terms, conditions and pricing offered to its investors. Debtor shall give Secured Party at least thirty (30) days prior written notice of each Subsequent Financing containing the terms, conditions and pricing of each Subsequent Financing. As used herein, “Subsequent Financing” shall mean the next and any future round of private equity financing in which the Debtor receives, in the aggregate, at least $2,000,000 of net proceeds excluding any bridge debt financing except to the extent actually converted to equity in the Debtor. |
3. COLLATERAL.
The Debtor, covenants and agrees that, so long as any of the Debt Documents shall remain in
effect, or unless the Secured Party shall otherwise consent in writing:
| (a) | Possession of Collateral; Inspection of Collateral. Until the declaration of any default, Debtor shall remain in possession of the Collateral; except that Secured Party shall have the right to possess (i) any chattel paper or instrument that constitutes a part of the Collateral, and (ii) any other Collateral in which Secured Party’s security interest may be perfected only by possession. Secured Party may inspect any of the Collateral during normal business hours after giving Debtor reasonable prior notice. | ||
| (b) | Maintenance of Collateral. Debtor shall (i) use the Collateral only in its trade or business, (ii) maintain all of the Collateral in good operating order and repair, normal wear and tear excepted, (iii) use and maintain the Collateral only in compliance with manufacturers recommendations and all applicable laws, and (iv) keep all of the Collateral free and clear of all liens, claims and encumbrances (except for Permitted Liens). | ||
| (c) | Disposition of Collateral. Secured Party docs not authorize and Debtor agrees it shall not (i) part with possession of any of the Collateral (except to Secured Party or for maintenance and repair), (ii) remove any of the Collateral from the continental United States, or (iii) sell, rent, lease, mortgage, license, grant a security interest in or otherwise transfer or encumber (except for Permitted liens) any of the Collateral. |
Master Security Agreement
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| (d) | Taxes. Debtor shall pay promptly when due all taxes, license fees, assessments and public and private charges levied or assessed on any of the Collateral, on its use, or on this Agreement or any of the other Debt Documents. At its option, Secured Party may discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral and may pay for the maintenance, insurance and preservation of the Collateral and effect compliance with the terms of this Agreement or any of the other Debt Documents. Debtor agrees to reimburse Secured Party, on demand, all costs and expenses incurred by Secured Party in connection with such payment or performance and agrees that such reimbursement obligation shall constitute Indebtedness. | ||
| (e) | Books and Records. Debtor shall, at all times, keep accurate and complete records of the Collateral, and Secured Party shall have the right to inspect and make copies of all of Debtor’s books and records relating to the Collateral during normal business hours, after giving Debtor reasonable prior notice. | ||
| (f) | Third Party Possession of Collateral. Debtor agrees and acknowledges that any third person who may at any time possess all or any portion of the Collateral shall be deemed to hold, and shall hold, the Collateral as the agent of, and as pledge holder for, Secured Party. Secured Party may at any time give notice to any third person described in the preceding sentence that such third person is holding the Collateral as the agent of, and as pledge holder for, the Secured Party. | ||
| (g) | Receivables. As to each and every Receivable, should Debtor have Receivables now or in the future, (a) it is a bona fide existing obligation, valid and enforceable against the Account Debtor for a sum certain for sales of goods shipped or delivered, or goods leased, or services rendered in the ordinary course of business, (b) all supporting documents, instruments, chattel paper and other evidence of indebtedness, if any, delivered to the Secured Party are complete and correct and valid and enforceable in accordance with their terms, and all signatures and endorsements that appear thereon are genuine, and all signatories and endorsers have full capacity to contract, (c) to the best of the Debtor’s knowledge, the Account Debtor is liable for and will make payment of the amount expressed in such Receivable according to its terms; (d) it will be subject to no discount, deduction, setoff, counterclaim, return, allowance or special terms of payment without the prior approval of the Secured Party, (e) it is subject to no dispute, defense or offset, real or claimed, (f) it is not subject to any prohibition or limitation upon assignment, (g) it has not been redated or reissued in satisfaction of prior Receivables, (h) the Debtor has full right and power to grant the Secured Party a security interest therein and the security interest granted in such Receivable to the Secured Party in this Agreement, when perfected, will be a valid first security interest which will inure to the benefit of the Secured Party without |
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| further action. The warranties set out herein shall be deemed to have been made with respect to each and every Receivable now owned or hereafter acquired by the Debtor. | |||
| (h) | Bailees. The Inventory, should Debtor have Inventory now or in the future, is not now and shall not at any time hereafter be stored with a bailee, warehouseman, or similar party without the Secured Party’s prior written consent. If any Inventory is so stored, the Debtor will, concurrent with storing such Inventory, cause any such bailee, warehouseman, or similar party to issue and deliver to the Secured Party, in a form acceptable to the Secured Party, warehouse receipts in the Secured Party’s name evidencing the storage of the Inventory. All such warehouse receipts do and will evidence ownership of the Inventory stored by the issuers thereof, and the holder thereof is and will continue to be the owner of good and marketable title of same, free and clear of any Liens or encumbrances. All such warehouse receipts are and will be genuine, valid and enforceable by the holder thereof in accordance with their terms and all statements thereon are and will be true and accurate in all respects. | ||
| (i) | Change of Address. All of the Collateral is located in and will in the future be in the possession of the Debtor at its address stated above or at such other addresses as may be set forth on the attached Schedule A. The Debtor has not at any time within the past four (4) months either (a) maintained Inventory or Equipment or (b) maintained its chief executive office or its records with respect to the Receivables at any other location and shall not do so hereafter except with the prior written consent of the Secured Party. The Secured Party shall be entitled to rely upon the foregoing unless it receives 14 days’ advance written notice of a change in the address of the Debtor’s executive offices or location of the Collateral. | ||
| (j) | Schedules of Receivables. Upon the written request of Secured Party, deliver to the Secured Party schedules of all outstanding Receivables, should Debtor have Receivables now or in the future,. Such schedules shall be in form satisfactory to the Secured Party and shall show the age of such Receivables in intervals of not more than thirty (30) days, and contain such other information and be accompanied by such supporting documents as the Secured Party may from time to time prescribe. The Debtor shall also deliver to the Secured Party copies of the Debtor’s invoices, sales journals, evidences of shipment or delivery and such other schedules and information as the Secured Party may reasonably request. The items to be provided under this Section are to be prepared and delivered to the Secured Party from time to time solely for its convenience in maintaining records of the Collateral and the Debtor’s failure to give any of such items to the Secured Party shall not affect, terminate, modify or otherwise limit the Secured Party’s security interest granted herein. |
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| (k) | Consignment. If at any time any of the Inventory, should Debtor have Inventory now or in the future, is placed by the Debtor on consignment with any person or entity (“Consignee”), the Debtor shall, prior to the delivery of such consigned Inventory; |
| a. | Provide the Secured Party with all consignment agreements and other instruments and documentation to be used in connection with such consignment, all of which agreements, instruments, and documentation shall be acceptable in form and substance to the Secured Party; | ||
| b. | Prepare and file appropriate financing statements with respect to any consigned Inventory showing the Consignee as debtor, the Debtor as secured party, and the Secured Party as assignee of the Debtor; | ||
| c. | Prepare and file appropriate financing statements with respect to any consigned Inventory showing the Debtor as debtor, and the Secured Party as secured party; | ||
| d. | After all financing statements referred to in the previous two subsections have been filed, conduct a search of all filings made against the Consignee in alt jurisdictions in which the Inventory to be consigned is to be located while on consignment, and deliver to the Secured Party copies of the results of all such searches; and | ||
| e. | Notify, in writing, all creditors of the Consignee that are or may be holders of security interests in the Inventory to be consigned, that the Debtor expects to deliver certain Inventory to the Consignee, all of which Inventory shall be described in such notice by item or type. |
| (l) | Fixtures. Not permit any item of the Equipment to become a fixture to real estate or an accession to other property without the prior written consent of the Secured Party, and the Equipment is now and shall at all times remain personal property except with the Secured Party’s prior written consent. If any of the Collateral is or will be attached to real estate in such a manner as to become a fixture under applicable state law and if such real estate is encumbered, the Debtor will obtain from the holder of each Lien or encumbrance a written consent and subordination to the security interest hereby granted, or a written disclaimer of any interest in the Collateral, in a form acceptable to the Secured Party. | ||
| (m) | Chattel Paper. Promptly, upon request by the Secured Party, deliver, assign, and endorse to the Secured Party all chattel paper and all other documents held by the Debtor in connection therewith. |
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| (n) | Copies of Government Contracts. Make available to the Secured Party, at the request of the Secured Party, a copy of each Government Contract in which the Secured Party has a security interest and a copy of each amendment thereto or modification thereof which changes the price of such contract or the amount funded to pay for such contract, except to the extent that furnishing such copies may be prohibited by government security regulations. Attached hereto as Schedule B is a complete list of all Government Contracts under which Receivables now exist or may hereafter arise, identified by the names of the contracting parties thereto, the date thereof and the number identifying the Government Contract or agreement and providing information in the form specified by the Secured Party from time to time regarding the contracting officer, the identity of any sureties and the disbursing officer, whether progress payments are to be made and the rate thereof, whether the Government Contract or agreement has been fully performed and such other information as the Secured Party may request. A true, complete and correct copy of each such Government Contract (including all modifications thereto and notice of exercise of options thereunder) now existing has been provided to the Secured Party by the Debtor. The Debtor shall as soon as practicable (but in no event later than five days prior to the date of execution thereof) notify the Secured Party of any additional Government Contracts, or any renewals or extensions of any Government Contract or the exercise of any options thereunder or modifications thereof, identified by the names of the contracting parties thereto, the date thereof and the number identifying the Government Contract or agreement and providing information in the form specified by the Secured Party from time to time regarding the contracting officer, the identity of any sureties and the disbursing officer, whether progress payments are to be made and the rate thereof, and such other information as the Secured Party may request, and a true, complete and correct copy of each such Government Contract, amendment or modification or exercise of option shall be provided lo the Secured Party by the Debtor no later than the date of execution thereof. | ||
| (o) | Claims and Disputes. Immediately upon learning thereof, report to the Secured Party any reclamation, return or repossession of goods, any claim or dispute asserted by any Account Debtor or other obligor, and any other matter affecting the value and enforceability or collectability of any of the Collateral. In addition, the Debtor shall, at its sole cost and expense (including attorneys’ fees), settle any and all such claims and disputes and indemnify and protect the Secured Party against any liability, loss or expense arising therefrom or out of any such reclamation, return or repossession of goods, provided, however, that the Secured Party, if it shall so elect, shall have the right at all times to settle, compromise, adjust or litigate all claims or disputes directly with the Account Debtor or other obligor upon such terms and conditions as the Secured Party deems advisable and charge all costs and expenses thereof (including attorneys’ fees) to the Debtor’s account and add them to the principal amount of the Indebtedness. |
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| (p) | Government Contracts Are Binding, Etc Take the necessary or appropriate steps to ensure that all Government Contracts have been, or if arising hereafter will be, legally awarded and binding on the parties thereto; no payment has been or will be made by the Debtor, any affiliate, or any person acting on their behalf, to any person that was, is or will be contingent upon the award of any Government Contract in violation of applicable procurement law or that would otherwise be in violation of applicable procurement law (including, but not limited to, the Federal Acquisition Regulations, the Defense Acquisition Regulations, the Federal Procurement Regulations and the Armed Services Procurement Regulations); there is no claim that has been asserted by any government agency or authority concerning the award or performance of any Government Contract and the Debtor shall immediately notify the Secured Party of the assertion of any such claim or the existence of any basis therefor; neither the Debtor nor any director, employee or Affiliate has been debarred or suspended from participation in the award of contracts with the federal government or any state or local government, or any agency or instrumentality thereof, or is a party to or the subject of any pending or threatened proceeding or investigation relating to debarment or suspension, and the Debtor shall immediately notify the Secured Party of the occurrence of any of the foregoing or the existence of any basis therefor; and neither the Debtor nor any Affiliate, nor any officer, director or employee of any of them, is permanently or temporarily enjoined or barred from engaging in or continuing any conduct or practice relating to the conduct of their business, or enjoining or requiring any of them to take any action of any kind relating thereto, and the Debtor shall immediately notify the Secured Party of the occurrence of any of the foregoing or the existence of any basis therefor. | ||
| (q) | No Provisions Prohibiting Assignment of Government Contracts. Take the necessary or appropriate steps to ensure that each Government Contract (i) doss not and will not contain any provision prohibiting assignment thereof as provided herein, (ii) contains a “no set-off’ clause or does not permit any set-off against or reduction of the obligation to make payments thereunder for liability of the Debtor to the government because of renegotiation, fine, penalty (other than as specifically permitted by the federal Assignment of Claims Act with respect to Government Contracts with the federal government), taxes, social security contributions, or withholding or failing to withhold taxes, social security contributions or similar amounts, whether arising from or independent of the Government Contract. The Debtor shall promptly notify the Secured Party of any claimed set-off or reduction or the disallowance of progress payment requests. | ||
| (r) | Cost Accounting and Procurement Systems. The Debtor’s cost accounting and procurement systems are and at all times have been, and will continue to be, in compliance with all applicable requirements. |
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| (s) | Compliance with Assignment Requirements for Government Contracts. The Debtor is now in compliance and hereby covenants and agrees that the Debtor will in the future comply with any and all of the requirements of Title 3l Section 3727 and Title 31 Section 15 of the United States Code and any similar state or local law and all rules and regulations relating thereto, as amended, where such statutes, rules and regulations are applicable to a particular Receivable, and shall at all times take all such other action as may be necessary to facilitate and/or ensure perfection of the Secured Party’s security interest in and the assignment to the Secured Party of any Government Account and Government Contract. | ||
| (t) | Information Concerning Government Contracts. At the request of the Secured Party, submit to the Secured Party for the Secured Party’s approval each Government Contract which the Debtor desires to be included in determining eligible Government Accounts, and provide such other information concerning such Government Contract as the Secured Party may reasonably request. | ||
| (u) | Domain Name. Take the necessary or appropriate steps to ensure that the identity and location of the servers used in connection with the Debtor’s domain name and the identity of the party having control over the domain name server and of the administrative contact with the registry have been disclosed to the Secured Party. The Debtor shall not change the domain name server without notification to the Secured Party. The Debtor shall maintain the trademark of the domain name by defending against any infringement suits and by policing the trademark. The Debtor shall renew the domain name registration during the loan term. The Debtor shall make all payments to the domain name registrar necessary to maintain the domain name. | ||
| (v) | Account Control Agreements. Debtor shall at all times maintain all Cash Equivalents owned by Debtor on deposit in a Deposit Account or Accounts in Debtor’s name at Comerica Bank or in a Deposit Account or Accounts at another institution (a “Third Party Institution”) covered by an account control agreement in favor of Secured Party (the terms of which shall be substantially identical to the terms of that certain Control Agreement, dated , 200 , between Debtor and Secured Party, or otherwise acceptable to Secured Party). At any time that the Cash Equivalents or any portion thereof are held in an account or accounts in one or more Third Party Institutions, the related account control agreement shall provide that Secured Party is to receive monthly account statements, in form and substance acceptable to Secured Party, evidencing that the Cash Equivalents are maintained in the related account. With respect to each such Deposit Account, Debtor, Secured Party, and each Third Party Institution with which a Deposit Account is maintained, shall enter into a written agreement, granting Secured Party control of the Deposit Account and providing that the Third Party Institution will comply with instructions |
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| originated by the Secured Party directing disposition of the funds in the Deposit Account without further consent by Debtor. Such account control agreement may in accordance with the provisions thereof provide terns under which Debtor may remove funds from the Deposit Account; provided all funds in or transferred into the Deposit Account on or after the effectiveness of this Agreement shall be subject to the security interest granted under this Agreement. |
4. INSURANCE.
| (a) | Risk of Loss. Debtor shall at all times bear the entire risk of any loss, theft, damage to, or destruction of, any of the Collateral from any cause whatsoever. | ||
| (b) | Insurance Requirements. Debtor agrees to maintain general liability insurance and to keep the Collateral insured against loss or damage by fire and extended coverage perils, theft, burglary, risk of loss by collision (for any or all Collateral which are vehicles) and such other risks as Secured Party may reasonably require. The liability insurance coverage shall be in an amount standard for companies similar to Debtor in Debtor’s industry in Debtor’s geographic region. The property insurance coverage shall be in an amount no less than the full replacement value of the Collateral. All insurance policies shall be in a form, with companies and with deductible amounts, acceptable to Secured Party. Debtor shall deliver to Secured Party policies or certificates of insurance evidencing such coverage. Each policy shall name Secured Party as a loss payee and an additional insured, shall provide for coverage to Secured Party regardless of the breach by Debtor of any warranty or representation made therein, shall not be subject to co-insurance, and shall provide that coverage may not be canceled or altered by the insurer except upon thirty (30) days prior written notice to Secured Party. Debtor appoints Secured Party as its attorney-in-fact to make proof of loss, claim for insurance and adjustments with insurers, and to receive payment of and execute or endorse all documents, checks or drafts in connection with insurance payments. Secured Party shall not act as Debtor’s attorney-in fact unless Debtor is in default. Proceeds of insurance shall be applied, at the option of Secured Party, to repair or replace the Collateral or to reduce any of the Indebtedness. |
5. REPORTS.
| (a) | Notice of Events. Debtor shall promptly notify Secured Party of (i) any change in the name of Debtor, (ii) any change in the state of its incorporation or registration, (iii) any relocation of its chief executive offices, (iv) any of the Collateral being lost, stolen, missing, destroyed, materially damaged or worn out, or (v) any lien, claim or encumbrance other than Permitted Liens attaching to or being made against any of the Collateral. |
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| (b) | Financial Statements, Reports and Certificates. Debtor will deliver to Secured Party within one-hundred eighty (180) days of the close of each fiscal year of Debtor, Debtor’s complete financial statements including a balance sheet, income statement, statement of shareholders’ equity and statement of cash flows, each prepared in accordance with generally accepted accounting principles, but excluding footnotes and normal year-end adjustments, consistently applied, certified by a recognized firm of certified public accountants satisfactory to Secured Party. Debtor will deliver to Secured Party copies of Debtor’s quarterly financial statements including a balance sheet, income statement and statement of cash flows, each prepared by Debtor in accordance with generally accepted accounting principles, but excluding footnotes and normal year-end adjustments, consistently applied by Debtor and certified by Debtor’s chief financial officer, within ninety (90) days after the close of each of Debtor’s fiscal quarter. Debtor will deliver to Secured Party copies of all Forms 10-K and 10-Q, if any, within 30 days after the dates on which they are filed with the Securities and Exchange Commission. Debtor will deliver to Secured Party copies of Debtor’s monthly financial statements including a balance sheet and income statement, each prepared by Debtor in accordance with generally accepted accounting principles, , but excluding footnotes and normal year-end adjustments, consistently applied by Debtor and certified by Debtor’s chief financial officer, within forty-five (45) days after the close of each month. Concurrently with delivery of the foregoing information, and from time to time promptly upon request of Secured Party, Debtor will deliver to Secured Party a Compliance Certificate substantially consistent with the form of the document attached hereto as Schedule C. Debtor will deliver to Secured Party promptly upon request of Secured Party, in form satisfactory to Secured Party, such other and additional information as Secured Party may reasonably request from time to time. |
6. FURTHER ASSURANCES.
| (a) | Further Assurances Regarding Security Interests. Debtor shall, upon request of Secured Party, furnish to Secured Party such further information, execute and deliver to Secured Party such documents and instruments (including, without limitation, Uniform Commercial Code financing statements) and shall do such other acts and things as Secured Party may at any time reasonably request relating to the perfection or protection of the security interest created by this Agreement or for the purpose of carrying out the intent of this Agreement. Without limiting the foregoing, Debtor shall cooperate and do all acts deemed necessary or advisable by Secured Party to continue in Secured Party a perfected first security interest in the Collateral, and shall obtain and furnish to Secured Party any subordinations, releases, landlord waivers, lessor waivers, mortgagee waivers, or control agreements, and similar documents as may be from time to time requested by, and in form and substance satisfactory to, Secured Party. |
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| (b) | Authorization To File Financial Statements. Debtor shall perform any and all acts requested by the Secured Party to establish, maintain and continue the Secured Party’s security interest and liens in the Collateral, including but not limited to, executing or authenticating financing statements and such other instruments and documents when and as reasonably requested by the Secured Party. Debtor hereby authorizes Secured Party through any of Secured Party’s employees, agents or attorneys to file any and all financing statements, including, without limitation, any original filings, continuations, transfers or amendments thereof required to perfect Secured Party’s security interest and liens in the Collateral under the UCC without authentication or execution by Debtor. Debtor hereby irrevocably authorizes the Secured Patty at any time and from tune to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statement(s) and amendments thereto that (a) indicate the Collateral (i) as all assets of the Debtor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the State or such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) provide any other information required by part 5 of Article 9 of the Uniform Commercial Code of the State or such other jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether the Debtor is an organization, the type of organization and any organization identification number issued to the Debtor, and (ii) in the case of a financing statement filed as a fixture filing, a sufficient description of real property to which the Collateral relates. The Debtor agrees to furnish any such information to the Secured Party promptly upon the Secured Party’s request. | ||
| (c) | Indemnification. Debtor shall indemnify and defend the Secured Party, its successors and assigns, and their respective directors, officers and employees, from and against all claims, actions and suits (including, without limitation, related attorneys’ fees) of any kind whatsoever arising, directly or indirectly, in connection with any of the Collateral. |
7. DEFAULT AND REMEDIES.
| (a) | Defaults. Debtor shall be in default under this Agreement and each of the other Debt Documents if any one of the following should occur: |
| (i) | Debtor breaches its obligation to pay when due any installment or other amount due or coming due under any of the Debt Documents; | ||
| (ii) | Debtor, without the prior written consent of Secured Party, attempts to or does sell, rent, lease, license, mortgage, grant a security interest in, or otherwise transfer or encumber (except for Permitted Liens) any of the Collateral; |
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| (iii) | Debtor breaches any of its insurance obligations under Section 4: | ||
| (iv) | Debtor breaches any of its other non-payment obligations under any of the Debt Documents and fails to cure that breach within thirty (30) days after written notice from Secured Party; | ||
| (v) | Any warranty, representation or statement made by Debtor in any of the Debt Documents or otherwise in connection with any of the Indebtedness shall be false or misleading in any material respect; | ||
| (vi) | Any of the Collateral is subjected to attachment, execution, levy, seizure or confiscation in any legal proceeding or otherwise, or if any legal or administrative proceeding is commenced against Debtor or any of the Collateral, which in the good faith judgment of Secured Party subjects any of the Collateral to a material risk of attachment, execution, levy, seizure or confiscation and no bond is posted or protective order obtained to negate such risk; | ||
| (vii) | Debtor breaches or is in default under any other agreement between Debtor and Secured Party; | ||
| (viii) | Debtor or any guarantor or other obligor for any of the Indebtedness (collectively “Guarantor”) dissolves, terminates its existence, becomes insolvent or ceases to do business as a going concern; | ||
| (ix) | Debtor or any Guarantor is a natural person, Debtor or any such Guarantor dies or becomes incompetent; | ||
| (x) | A receiver is appointed for all or of any part of the property of Debtor or any Guarantor, or Debtor or any Guarantor makes any assignment for the benefit of creditors; | ||
| (xi) | Debtor or any Guarantor files a petition under any bankruptcy, insolvency or similar law, or any such petition is filed against Debtor or any Guarantor and is not dismissed within forty-five (45) days; | ||
| (xii) | Debtor’s improper filing of an amendment or termination statement relating to a filed financing statement describing the Collateral; | ||
| (xiii) | Debtor shall merge with or consolidate into any other entity or sell all or substantially all of its assets or in any manner terminate its existence; |
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| (xiv) | If Debtor is a privately held corporation, and without the prior written consent of Secured Party, which consent shall not be unreasonably delayed, conditioned or withheld, more than 50% of Debtor’s voting capital stock, or effective control of Debtor’s voting capital stock, issued and outstanding from time to time, is not retained by the holders of such stock on the date the Agreement is executed, other than (a) by the sale or issuance of Debtor’s equity securities in a public offering or to venture capital investors or (b) pursuant to a merger or consolidation in which Debtor is the surviving entity pursuant to the terms of section 7(a)(xiii) above; | ||
| (xv) | If Debtor should become a publicly held corporation, there shall be a change in the ownership of Debtor’s stock such that Debtor is no longer subject to the reporting requirements of the Securities Exchange Act of 1934 or no longer has a class of equity securities registered under Section 12 of the Securities Act of 1933; | ||
| (xvi) | Debtor defaults under any other written financing arrangement between Debtor and a third party, the amount of which is in excess of S75,000; and | ||
| (xvii) | Secured Party shall have determined in its sole and good faith judgment that (a) it is the clear intention of Debtor’s investors to not continue to fund the Debtor in the amounts and timeframe necessary to enable Debtor to satisfy the Indebtedness as it becomes due and payable or (b) there is a material impairment in the perfection or priority of the Secured Party’s security interest in the Collateral; or | ||
| (xviii) | Secured Patty shall have determined in its sole and good faith judgment that there has been a material adverse change in the financial condition, business, operations, prospects, product development, technology, or business or contractual relations with third parties of Debtor from the date hereof, or a change or event shall have occurred which would impair the ability of Debtor to perform its obligations hereunder or under any of the other financing agreements to which it is a party or of Secured Party to enforce the Indebtedness or realize upon the Collateral. |
| (b) | Acceleration. If Debtor is in default, the Secured Party, at its option, may declare any or all of the Indebtedness to be immediately due and payable, without demand or notice to Debtor or any guarantor. The accelerated obligations and liabilities shall bear interest (both before and after any judgment) until paid in full at the lower of eighteen percent (18%) per annum or the maximum rate not prohibited by applicable law. |
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| (c) | Rights and Remedies. Secured Party shall have all of the rights and remedies of a Secured Party under the Uniform Commercial Code, and under any other applicable law. Without limiting the foregoing, Secured Party shall have the right to (i) notify any account debtor of Debtor or any obligor on any instrument which constitutes part of the Collateral to make payment to the Secured Party, (ii) with or without legal process, enter any premises where the Collateral may be and take possession of and remove the Collateral from the premises or store it on the premises, (iii) sell the Collateral at public or private sale, in whole or in part, and have the right to bid and purchase at said sale, (iv) to instruct the bank maintaining any Deposit Account to transfer the funds in the Deposit Account to any account of the Secured Party, or (v) lease or otherwise dispose of all or part of the Collateral, applying proceeds from such disposition to the obligations then in default. If requested by Secured Party, Debtor shall promptly assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party, which is reasonably convenient to both parties. Secured Party may also render any or all of the Collateral unusable at the Debtor’s premises and may dispose of such Collateral on such premises without liability for rent or costs. Any notice that Secured Party is required to give to Debtor under the Uniform Commercial Code of the time and place of any public sale or the time after which any private sate or other intended disposition of the Collateral is to be made shall be deemed to constitute reasonable notice if such notice is given to the last known address of Debtor at least five (5) days prior to such action. Upon the occurrence and during the continuation of an Event of Default, Debtor hereby appoints Secured Party as Debtor’s attorney-in-fact, with full authority in Debtor’s place and stead and in Debtor’s name or otherwise, from time to time in Secured Party’s sole and arbitrary discretion, to take any action and to execute any instrument which Secured Party may deem necessary or advisable to accomplish the purpose of this Agreement. | ||
| (d) | Application of Proceeds. Proceeds from any sale or lease or other disposition shall be applied: first, to all costs of repossession, storage, and disposition including without limitation attorneys’, appraisers’, and auctioneers’ fees; second, to discharge the obligations then in default; third, to discharge any other Indebtedness of Debtor to Secured Party, whether as obligor, endorser, guarantor, surety or indemnitor; fourth, to expenses incurred in paying or settling liens and claims against the Collateral; and lastly, to Debtor, if there exists any surplus. Debtor shall remain fully liable for any deficiency. | ||
| (e) | Fees and Costs. Debtor agrees to pay alt reasonable attorneys’ fees and other costs incurred by Secured Party in connection with the enforcement, assertion, defense or preservation of Secured Patty’s rights and remedies under this Agreement, or if prohibited by law, such lesser sum as may be permitted. Debtor further agrees that such fees and costs shall constitute Indebtedness. |
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| (f) | Remedies Cumulative. Secured Party’s rights and remedies under this Agreement or otherwise arising are cumulative and may be exercised singularly or concurrently. Neither the failure nor any delay on the part of the Secured Party to exercise any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise of that or any other right, power or privilege. SECURED PARTY SHALL NOT BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OTHER AGREEMENT, INSTRUMENT OR PAPER SIGNED BY DEBTOR UNLESS SUCH WAIVER IS EXPRESSED IN WRITING AND SIGNED BY SECURED PARTY. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. | ||
| (g) | WAIVER OF JURY TRIAL. DEBTOR AND SECURED PARTY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. |
8. MISCELLANEOUS.
| (a) | Assignment. This Agreement, any Note and/or any of the other Debt Documents may be assigned, in whole or in part, by Secured Party without notice to Debtor, and Debtor agrees not to assert against any such assignee, or assignee’s assigns, any defense, set-off, recoupment claim or counterclaim which Debtor has or may at any time have against Secured Party for any reason whatsoever. Debtor agrees that if Debtor receives written notice of an assignment from Secured Party, Debtor will pay all amounts payable under any assigned Debt Documents to such assignee or as |
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| instructed by Secured Party. Debtor also agrees to confirm in writing receipt of the notice of assignment as may be reasonably requested by Secured Party or assignee. | |||
| (b) | Notices. All notices to be given in connection with this Agreement shall be in writing, shall be addressed to the parties at their respective addresses set forth in this Agreement (unless and until a different address may be specified in a written notice to the other party), and shall be deemed given (i) on the date of receipt if delivered in hand or by facsimile transmission, (ii) on the next business day after being sent by express mail, and (iii) on the fourth business day after being sent by regular, registered or certified mail. As used herein, the term “business day” shall mean and include any day other than Saturdays, Sundays, or other days on which commercial banks in New York, New York are required or authorized to be closed. | ||
| (c) | Correction of Errors. Secured Party may correct patent errors end fill in all blanks in this Agreement or in any Note consistent with the agreement of the parties. | ||
| (d) | Time is of the Essence. Time is of the essence of this Agreement. This Agreement shall be binding, jointly and severally, upon all parties described as the “Debtor” and their respective heirs, executors, representatives, successors and assigns, and shall inure to the benefit of Secured Party, its successors and assigns. | ||
| (e) | Entire Agreement. This Agreement and its Notes constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior understandings (whether written, verbal or implied) with respect to such subject matter. THIS AGREEMENT AND ITS NOTES SHALL NOT BE CHANGED OR TERMINATED ORALLY OR BY COURSE OF CONDUCT, BUT ONLY BY A WRITING SIGNED BY BOTH PARTIES. Section headings contained in this Agreement have been included for convenience only, and shall not affect the construction or interpretation of this Agreement. | ||
| (f) | Termination of Agreement. This Agreement shall continue in full force and effect until all of the Indebtedness has been indefeasibly paid in full to Secured Party or its assignee. The surrender, upon payment or otherwise, of any Note or any of the other documents evidencing any of the Indebtedness shall not affect the right of Secured Party to retain the Collateral for such other Indebtedness as may then exist or as it may be reasonably contemplated will exist in the future. This Agreement shall automatically be reinstated if Secured Party is ever required to return or restore the payment of all or any portion of the Indebtedness (all as though such payment had never been made). | ||
| (g) | CHOICE OF LAW. DEBTOR AGREES THAT SECURED PARTY AND/OR ITS SUCCESSORS AND ASSIGNS SHALL HAVE THE OPTION BY WHICH STATE LAWS THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED: |
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(A) THE LAWS OF THE COMMONWEALTH OF VIRGINIA; OR (B) IF COLLATERAL HAS BEEN PLEDGED
TO SECURE THE LIABILITIES, THEN BY THE LAWS OF THE STATE OR STATES WHERE THE
COLLATERAL IS LOCATED, AT SECURED PARTY’S OPTION. THIS CHOICE OF STATE LAWS IS
EXCLUSIVE TO THE SECURED PARTY. DEBTOR SHALL NOT HAVE ANY OPTION TO CHOOSE THE LAWS
BY WHICH THIS AGREEMENT SHALL BE GOVERNED. DEBTOR ACKNOWLEDGES THAT THIS AGREEMENT
IS BEING SIGNED BY THE SECURED PARTY IN PARTIAL CONSIDERATION OF SECURED PARTY’S
RIGHT TO ENFORCE IN THE JURISDICTION STATED ABOVE. DEBTOR CONSENTS TO JURISDICTION
IN THE COMMONWEALTH OF VIRGINIA OR THE STATE IN WHICH ANY COLLATERAL IS LOCATED AND
VENUE IN ANY FEDERAL OR STATE COURT IN THE COMMONWEALTH OF VIRGINIA OR THE STATE IN
WHICH COLLATERAL IS LOCATED FOR SUCH PURPOSES AND WAIVES ANY AND ALL RIGHTS TO
CONTEST SAID JURISDICTION AND VENUE AND ANY OBJECTION THAT SAID COUNTY IS NOT
CONVENIENT. DEBTOR WAIVES ANY RIGHTS TO COMMENCE ANY ACTION AGAINST SECURED PARTY IN
ANY JURISDICTION EXCEPT VIRGINIA, OR IF SECURED PARTY CHOOSES TO LITIGATE IN A STATE
WHERE COLLATERAL IS LOCATED THEN IN SUCH COUNTY AND STATE.
| (h) | Limitation of Liability. The Secured Party shall not, under any circumstances, be liable for any error or omission or delay of any kind occurring in the settlement, collection or payment of any Receivables or any instrument received in payment thereof or for any damage resulting therefrom. The Secured Party is authorized to accept the return of the goods represented by any of the Receivables, without notice to or consent by the Debtor, or without discharging or in any manner affecting the Loan. | ||
| (i) | Notification to Account Debtors. The Secured Party shall have the right at any time to notify any Account Debtor of the Secured Party’s security interest in the Receivables and to require payments to be made directly to the Secured Party. To facilitate direct collection, the Debtor hereby appoints the Secured Party and any officer or employee of the Secured Party, as the Secured Party may from time to time designate, as attorney-in-fact for the Debtor to (a) receive, open and dispose of all mail addressed to the Debtor and take therefrom any payments on or proceeds of Receivables; (b) take over the Debtor’s post office boxes or make such other arrangements, in which the Debtor shall cooperate, to receive the Debtor’s mail, including notifying the post office authorities to change the address for delivery of mail addressed to the Debtor to such address as the Secured Party shall designate; (c) endorse the name of the Debtor in favor of the Secured Party upon any and all checks, drafts, money orders, notes, acceptances or other evidences of payment or |
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| Collateral that may come into the Secured Party’s possession; (d) sign and endorse the name of the Debtor on any invoice or bill of lading relating to any of the Receivables, on verifications of Receivables sent to any Account Debtor, to drafts against any Account Debtor, to assignments of Receivables, and to notices to any Account Debtor; and (e) do all acts and things necessary to carry out this Agreement and the transactions contemplated hereby, including signing the name of the Debtor on any instruments required by law in connection with the transactions contemplated hereby and on financing statements as permitted by the Virginia Uniform Commercial Code. The Debtor hereby ratifies and approves all acts of such attorneys-in-fact, and neither the Secured Party nor any other such attorney-in-fact shall be liable for any acts of commission or omission, or for any error of judgment or mistake of fact or law of any such attorney-in-fact. This power, being coupled with an interest, is irrevocable so long as the Loan remains unsatisfied, or any Loan Document remains effective, as solely determined by the Secured Party. | |||
| (j) | Loss; Depreciation or Other Damage. The Secured Party shall not be liable for or prejudiced by any loss, depreciation or other damage to Receivables or other Collateral unless caused by the Secured Party’s willful and malicious act, and the Secured Party shall have no duty to take any action to preserve or collect any Receivable or other Collateral. |
9. DEFINITIONS.
As used herein, the following terms, when initial capital letters are used, shall have the
respective meanings set forth below. In addition, all terms defined in the Virginia Uniform
Commercial Code (including revised Article 9 thereof) shall have the meanings given therein unless
otherwise defined herein.
Defined Terms. As used in this Agreement, the following terms shall have the following meanings,
unless the context otherwise requires:
“Account Debtor” shall mean the account debtor or any customer of the Debtor who is
obligated or indebted to the Debtor with respect to any of the Receivables and/or the
prospective purchaser with respect to any contract right, and/or any party or organization
who enters into or proposes to enter into any contract or other arrangement with the Debtor
pursuant to which the Debtor is to deliver any personal property or perform any service.
“Affiliate” of a Person is a Person that owns or controls directly or indirectly the Person,
any Person that controls or is controlled by or is under common control with the Person, and
each of that Person’s senior executive officers, directors, partners and, for any Person
that is a limited liability company, that Person’s managers and members.
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“Collateral” shall mean all personal property and fixtures of the Debtor, including, but not
limited to all of the Receivables, Payments, accounts, the Deposit Account or Accounts,
contract rights, instruments, documents, chattel paper (including tangible and electronic
chattel paper), payment intangibles, commercial tort claims, health-care-insurance
receivables, instruments, investment property, supporting obligations and general
intangibles now owned or hereafter acquired by the Debtor and all goods, equipment, general
intangibles and property of the Debtor described below which is now owned or hereafter
acquired by the Debtor, wherever located; all deposit accounts (including all signature
cards, account agreements and other documents relating to deposit accounts) and other
obligations or indebtedness owed to the Debtor from whatever source arising; letter of
credit rights; all rights of the Debtor to receive any payment in money or kind; ail
Inventory; all Equipment; all Intellectual Property; all of the Debtor’s rights as an unpaid
seller, including stoppage in transit, detinue and reclamation; alt guarantees, or other
agreements or property securing or relating to any of the items referred to above, or
acquired for the purpose of securing and enforcing any of such items; all books of account
and documents related thereto; all customer lists and other documents containing the names,
addresses and other information regarding
the Debtor’s customers, subscribers or those to whom the Debtor provides any services;
computer tapes, programs, discs and other material, media or documents relating to the
recording, billing or analyzing of any of the above; all computers, word processors,
printers, switches, interfaces, source codes, mask works, software, web servers, website
service contracts, internet connection contract or line lease, website hosting service
contract, website license agreements, back-up copies of website content, contracts with
website advertisers, scripts, codes or Active-X controls, technology escrow agreements,
website content development agreements, all rights, of whatever form, in and to domain
names, instructional material, and connectors and all parts, accessories, additions,
substitutions, or options together with all property or equipment used in connection with
any of the above or which are used to operate or cause to operate any features, special
applications, format controls, options or software of any or all of the above-mentioned
items; whether now owned or existing or hereafter acquired or arising, in and to all
domestic and foreign copyrights, copyright registrations and copyright applications,
patents, license agreements, trademarks, service names, service marks, logos, tradenames,
trade secrets, goodwill, other intellectual property and all income, royalties and other
proceeds therefrom; contractual rights, literary rights, all amounts received as an award in
or settlement of a suit in damages, proceeds of loans, interests in joint ventures or
general or limited partnerships, the sale by the Debtor of any of the foregoing and all
proceeds (cash and non-cash) of the foregoing; proceeds of property received wholly or
partly in trade or exchange for the Collateral and all rents, revenues, issues, profits and
proceeds in any form, including cash, insurance proceeds, distributions on stock, negotiable
instruments and other evidences of indebtedness, chattel paper, security agreements and
other documents arising from the sale, lease, license, encumbrance, collection of, or any
other temporary or permanent disposition of, the Collateral or any interest therein. The
Debtor acknowledges and agrees that, in applying the law of any jurisdiction that at any
time enacts all or substantially all of the uniform
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provisions of Revised Article 9 of the Uniform Commercial Code (1999 Official Text), the
foregoing collateral description covers all assets of the Debtor. The Secured Party may at
any time and from time to time file, pursuant to the provisions of this Agreement, financing
and continuation statements and amendments thereto reflecting the same.
“Cash Equivalents” means the sum outstanding, at any one time, of (i) all cash (in United
States dollars) owned by Debtor at such time plus (ii) the fair market value of all cash
equivalents and short term investments (as those terms are defined by GAAP) owned by Debtor
at such time.
“Deposit Account” means a demand, time, savings, passbook, or similar account maintained
with a bank.
“Equipment” shall mean (a) all goods and equipment of the Debtor of every type and
description, now owned and hereafter acquired and wherever located, including, without
limitation, all imbedded software, machinery, motor vehicles and other rolling stock,
furniture, furnishings, tools, dies, fittings, accessories, all substitutions therefore,
leasehold improvements, fixtures, and materials and supplies relating to any of the
foregoing; (b) all present and future documents of title and trust receipts relating to any
of the foregoing; (c) all present and future rights, claims and causes of action of Debtor
in connection with purchases of (or contracts for the purchase of), or warranties relating
to, or damages to, goods held or to he held by the Debtor as equipment; (d) all present and
future warranties, manuals and other written materials (and packaging thereof or relating
thereto) relating to any of the foregoing; and (e) all present and future general
intangibles of the Debtor in any way relating to any of the foregoing.
“Government Accounts” shall mean all accounts arising out of any Government Contract.
“Government Contract” shall mean any contract between the Debtor and the United States
Government, any state or local government or any agency thereof, and all amendments thereto.
“Intellectual Property” shall mean (a) all of the Debtor’s right, title and interest,
whether now owned or existing or hereafter acquired or arising, in and to all domestic and
foreign copyrights, copyright registrations and copyright applications, whether or not
registered or filed with any governmental authority, together with (i) all renewals thereof,
(ii) all present and future rights of the Debtor under all present and future license
agreements relating thereto, whether the Debtor is licensee or licensor thereunder, (iii)
all income, royalties, damages and payments now or hereafter due and/or payable to the
Debtor thereunder or with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iv) all of the Debtor’s present
and future claims, causes of action and rights to sue for past, present or future
infringements thereof, and (v) all rights corresponding thereto throughout the world
(collectively “Copyright Rights”); (b) all of the
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Debtor’s right, title and interest, whether now owned or existing or hereafter acquired or
arising, in and to all United States and foreign patents, and pending and abandoned United
States and foreign patent applications, including, without limitation, the inventions and
improvements described or claimed therein, together with(i) any reissues, divisions,
continuations, certificates of re-examination, extensions and continuations-in-part thereof,
(ii) all present and future rights of the Debtor under all present and future license
agreements relating thereto, whether the Debtor is licensee or licensor thereunder, (iii)
all income, royalties, damages and payments now or hereafter due and/or payable to the
Debtor thereunder or with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iv) all of the Debtor’s present
and future claims, causes of action and rights to sue for past, present or future
infringements thereof, and (v) all rights corresponding thereto throughout the world
(collectively “Patent Rights”); (c) all of the Debtor’s right, title and interest, whether
now owned or existing or hereafter acquired or arising, in and to all domestic and foreign
trademarks, trademark registrations, trademark applications and trade names, whether or not
registered or filed with any governmental authority, together with (i) all renewals thereof,
(ii) all present and future rights of the Debtor under all present and future license
agreements relating thereto, whether the Debtor is licensee or licensor thereunder, (iii)
all income, royalties, damages and payments now or hereafter due and/or payable to the
Debtor thereunder or with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iv) all of the Debtor’s present
and future claims, causes of action and rights to sue for past, present or future
infringements thereof, and (v) all rights corresponding thereto throughout the world
(collectively “Trademark Rights”); (d) all present and future licenses and license
agreements of the Debtor, and all rights of the Debtor under or in connection therewith,
whether the Debtor is licensee or licensor thereunder, including, without limitation, any
present or future franchise agreements under which the Debtor is franchisee or franchisor,
together with (i) all renewals thereof, (ii) all income, royalties, damages and payments now
or hereafter due and/or payable to the Debtor thereunder or with respect thereto, including,
without limitation, damages and payments for past, present or future infringements thereof,
(iii) all claims, causes of action and rights to sue for past, present or future
infringements thereof, and (iv) all rights corresponding thereto throughout the world
(collectively “License Rights”); (e) all present and future trade secrets of the Debtor; and
(f) all other present and future intellectual property of the Debtor.
“Inventory” shall mean and include (a) all goods now owned or hereafter acquired by the
Debtor, which are held for sale or lease by the Debtor or are furnished or to be furnished
by the Debtor under contracts of service, (b) all raw materials, work in process, finished
goods, packaging materials, and other materials and supplies of every kind used or consumed
in connection with the manufacture, production, packing, shipping, advertising or sale of
such goods, (c) all proceeds and products from the sale or other disposition of such goods,
including all goods returned, repossessed, or acquired by the Debtor by way of substitution
or replacement, and all additions and accessions thereto, and all documents and instruments
(as
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those terms are defined in the Uniform Commercial Code) covering such goods;
(d) all the Debtor’s rights as an unpaid seller, including stoppage in transit,
detinue and reclamation; and (e) all of the above owned by the Debtor or in which the
Debtor now has or in which the Debtor may hereafter acquire an interest, whether in transit
or in the Debtor’s constructive or actual possession or held by the Debtor or others for the
Debtor’s account (including any of the above held on consignment), including, without limitation,
all of the above which may be located on the Debtor’s premises or upon the premises of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents, finishers, converters or other
third parties who may have possession, temporary or otherwise, thereof.
“Lien(s)” shall mean any mortgage, pledge, deed of trust, assignment, security interest,
encumbrance, hypothecation, lien, or charge of any kind (including any conditional sale or
other title retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any jurisdiction).
“Payment” or “Payments” shall mean any check, draft, cash or any other remittance or credit
in payment or on account of any or all of the Receivables and the cash proceeds of any
returned, rejected or repossessed goods, the sale or lease of which gave rise to a
Receivable.
“Person” is any individual, sole proprietorship, partnership, limited liability company,
joint venture, company association, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.
“Receivables” shall mean in addition to the definition of account as contained in the
Uniform Commercial Code (a) all of the Debtor’s present and future accounts, contract
rights, receivables, promissory notes and other Instruments, chattel paper (including
tangible and electronic chattel paper), tax refunds, general intangibles (excluding the
Intellectual Property) and all rights to receive the payment of money or other consideration
under present or future contracts including, without limitation, all of the Debtor’s rights
under each Government Contract and all related Government Accounts now owned or hereafter
acquired by the Debtor; (b) all present and future cash of the Debtor; (c) all present and
future judgments, orders, awards and decrees in favor of the Debtor and causes of action in
favor of the Debtor; (d) all present and future contingent and noncontingent rights of the
Debtor to the payment of money for any reason whatsoever, whether arising in contract, tort
or otherwise including, without limitation, all rights to receive payments under presently
existing or hereafter acquired or created letters of credit; (e) all present and future
claims, rights of indemnification and other rights of the Debtor under or in connection with
any contracts or agreements to which the Debtor is or becomes a party or third party beneficiary; (f) all
goods previously or hereafter returned, repossessed or stopped in transit, the sale, lease
or other disposition of which contributed to the creation of any account, instrument or
chattel paper of
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the Debtor; (g) all present and future rights of the Debtor as an unpaid seller of goods,
including rights of stoppage in transit, detinue and reclamation; (h) all rights which the
Debtor may now or at any time hereafter have, by law or agreement, against any Account
Debtor or other obligor of the Debtor, and all rights, liens and security interests which
the Debtor may now or at any time hereafter have, by law or agreement, against any property
of any Account Debtor or other obligor of the Debtor, (i) all invoices and shipping
documents; and (j) all present and future interests and rights of the Debtor, including
rights to the payment of money, under or in connection with all present and future leases
and subleases of real or personal property to which the Debtor is a party, as lessor,
sublessor, lessee or sublessee.
SIGNATURES APPEAR ON FOLLOWING PAGE
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IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally bound hereby, have duly
executed this Agreement in one or more counterparts, each of which shall tie deemed to be an
original, as of the day and year first aforesaid.
| SECURED PARTY: | DEBTOR: | |||||||||
| Oxford Finance Corporation | Nura, Inc. | |||||||||
By: |
By: | /s/ Jim D. Johnston | ||||||||
Name: |
Name: | Jim D. Johnston | ||||||||
Title: |
Title: | Chief Financial Officer | ||||||||
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SCHEDULE A
(Collateral Locations)
(Collateral Locations)
1124 Columbia Street, Suite 650, Seattle, Washington, 98104
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SCHEDULE B
(Complete List of all Government Contracts)
(Complete List of all Government Contracts)
| Contracting Parties | Contracting Officer | Surety | Disbursing Officer | Contract Status | ||||
No government contracts
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SCHEDULE C
(Compliance Certificate)
(Compliance Certificate)
Form attached
| Master Security Agreement No. 5081087 |
Promissory Note |
PROMISSORY NOTE
To Master Security Agreement No. 5081087
To Master Security Agreement No. 5081087
(Date)
FOR VALUE RECEIVED, Nura, Inc., a Delaware corporation, located at the address stated below
(“Maker”) promises, jointly and severally if more than one, to pay to the order of Oxford Finance
Corporation or any subsequent holder hereof (each, a “Payee”) at its office located at 133 N.
Fairfax Street, Alexandria, VA 22314 or at such other place as Payee or the holder hereof may
designate, the principal sum of Three Million Dollars ($3,000,000.00), with interest on the unpaid
principal balance, from the date hereof through and including the dates of payment, at a fixed
interest rate of nine and eight tenths percent (9.8%) per annum. Maker shall make six (6) payments
of interest only as follows:
| Periodic | ||||
| Installment | Amount | |||
1-6 |
$ | 24,500.00 | ||
Thereafter, commencing on December 1, 2005, maker shall make payments of principal and interest in
thirty-six (36) consecutive monthly installments of principal and interest as follows:
| Periodic | ||||
| Installment | Amount | |||
7-42
|
$ | 96,520.11 | ||
each (a “Periodic Installment”) and a final installment which shall be in the amount of the total
outstanding principal and interest, if any. The first Periodic Installment shall be due and
payable on June 1, 2005, and the following Periodic Installments and the final installment shall be
due and payable on the first day of each succeeding month (each, a “Payment Date”) thereafter.
Such installments have been calculated on the basis of a 360-day year of twelve 30-day months.
Each payment may, at the option of the Payee, be calculated and applied on an assumption that such
payment would be made on its due date.
The acceptance by Payee of any payment which is less than payment in full of all amounts due and
owing at such time shall not constitute a waiver of Payee’s right to receive payment in full at
such time or at any prior or subsequent time.
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
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| The Maker hereby expressly authorizes the Payee to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto. |
| This Note may be secured by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a “Security Agreement” and any Security Agreement, this Note and any other document evidencing or securing this loan is hereinafter called a “Debt Document”). |
| Time is of the essence hereof. If any installment or any other sum due under this Note or any Security Agreement is not received when due, the Maker agrees to pay, in addition to the amount of each such installment or other sum, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due hereunder; or (ii) Maker is in default under, or fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid, together with all accrued interest thereon and any other sum payable under this Note or any Security Agreement, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent (18%) per annum or the highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment). |
| Notwithstanding anything to the contrary contained herein or in the Security Agreement, Maker may not prepay in full or in part any indebtedness hereunder without the express written consent of Payee in its sole discretion. |
| The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an “Obligor”) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of, security or of any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit may be brought and maintained against any one or more of them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting this Note or enforcing any of the security hereof, and agrees to pay (if and to the extent permitted by law) all expenses incurred in collection, including Payee’s actual attorneys’ fees. Maker and each |
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
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Obligor agrees that fees not in excess of twenty percent (20%) of the amount then due shall be
deemed reasonable.
Maker and Payee intend to strictly comply with all applicable federal and Virginia laws, including
applicable usury laws (or the usury laws of any jurisdiction whose usury laws are deemed to apply
to the Note or any other Debt Document despite the intention and desire of the parties to apply the
usury laws of the Commonwealth of Virginia). Accordingly, the provisions of this paragraph shall
govern and control over every other provision of this Note or any other Debt Document which
conflicts or is inconsistent with this Section, even if such provision declares that it controls.
As used in this paragraph, the term “interest” includes the aggregate of all charges, fees,
benefits or other compensation which constitute interest under applicable law, provided
that, to the maximum extent permitted by applicable law, (a) any non-principal payment shall be
characterized as an expense or as compensation for something other than the use, forbearance or
detention of money and not as
interest, and (b) all interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term of the obligations.
In no event shall Maker or any other person be obligated to pay, or Payee have any right or
privilege to reserve, receive or retain, (a) any interest in excess of the maximum amount of
non-usurious interest permitted under the laws of the Commonwealth of Virginia or the applicable
laws (if any) of the United States or of any other state, or (b) total interest in excess of the
amount which Payee could lawfully have contracted for, reserved, received, retained or charged had
the interest been calculated for the full term of the obligations. On each day, if any, that the
interest rate (the “Stated Rate”) called for under this Note or any other Debt Document
exceeds the maximum non-usurious rate, the rate at which interest shall accrue shall automatically
be fixed by operation of this sentence at the maximum non-usurious rate for that day. Thereafter,
interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the maximum
non-usurious rate, in which case, the provisions of the immediately preceding sentence shall again
automatically operate to limit the interest accrual rate to the maximum non-usurious rate. The
daily interest rates to be used in calculating interest at the maximum non-usurious rate shall be
determined by dividing the applicable maximum non-usurious rate by the number of days in the
calendar year for which such calculation is being made. None of the terms and provisions contained
in this Note or in any other Debt Document which directly or indirectly relate to interest shall
ever be construed without reference to this paragraph, or be construed to create a contract to pay
for the use, forbearance or detention of money at an interest rate in excess of the maximum
non-usurious rate. If the term of any obligation is shortened by reason of acceleration of
maturity as a result of any Default or by any other cause, or by reason of any required or
permitted prepayment, and if for that (or any other) reason Payee at any time, including but not
limited to, the stated maturity, is owed or receives (and/or has received) interest in excess of
interest calculated at the maximum non-usurious rate, then and in any such event all of any such
excess interest shall be canceled automatically as of the date of such
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
Master Security Agreement
No. 5081087
No. 5081087
acceleration, prepayment or other event which produces the excess, and, if such excess interest has
been paid to Payee, it shall be credited pro tanto against the then-outstanding principal
balance of Maker’s obligations to Payee, effective as of the date or dates when the event occurs
which causes it to be excess interest, until such excess is exhausted or all of such principal has
been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess
shall be promptly refunded to its payor.
THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY
DEALINGS BETWEEN THE MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY OR
ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND
PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS,
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION.
IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with
respect to the subject matter hereof and supersedes all prior understandings, agreements and
representations, express or implied.
No variation or modification of this Note, or any waiver of any of its provisions or conditions,
shall be valid unless in writing and signed by an authorized representative of Maker and Payee.
Any such waiver, consent, modification or change shall be effective only in the specific instance
and for the specific purpose given.
Any provision in this Note or any Security Agreement which is in conflict with any statute, law or
applicable rule shall be deemed omitted, modified or altered to conform thereto.
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
Master Security Agreement
No. 5081087
No. 5081087
Upon receipt of an affidavit of an officer of Payee as to the loss, theft, destruction or
mutilation of this Note or any Debt Document which is not of public record, and, in the case of any
such loss, theft, destruction or mutilation, upon surrender and cancellation of such Note or other
Debt Document, Maker will issue, in lieu thereof, a replacement Note or other Debt Document in the
same principal amount thereof and otherwise of like tenor.
It is understood and agreed that this Note and all of the Debt Documents were negotiated and have
been or will be delivered to Payee in the Commonwealth of Virginia, which State the parties agree
has a substantial relationship to the parties and to the underlying transactions embodied by this
Note and the Debt Documents. Maker agrees to furnish to Payee at Payee’s office in Alexandria, VA,
all further instruments, certifications and documents to be furnished hereunder. The parties also
agree that if collateral is pledged to secure the debt evidenced by this Note, that the state or
states in which such collateral is located each have a substantial relationship to the parties and
to the underlying transaction embodied by this Note and the Debt Documents.
MAKER AGREES THAT THE PAYEE OF THIS NOTE SHALL HAVE THE OPTION BY WHICH STATE LAWS THIS NOTE SHALL
BE GOVERNED AND CONSTRUED: (A) THE LAWS OF THE COMMONWEALTH OF VIRGINIA; OR (B) IF COLLATERAL HAS
BEEN PLEDGED TO SECURE THE DEBT EVIDENCED BY THIS NOTE, THEN BY THE LAWS OF THE STATE OR STATES
WHERE THE COLLATERAL IS LOCATED, AT PAYEE’S OPTION. THIS CHOICE OF STATE LAWS IS EXCLUSIVE TO THE
PAYEE OF THIS NOTE. MAKER SHALL NOT HAVE ANY OPTION TO CHOOSE THE LAWS BY WHICH THIS NOTE SHALL BE
GOVERNED. MAKER AND GUARANTORS HEREBY CONSENT TO THE EXERCISE OF JURISDICTION OVER IT BY ANY
FEDERAL COURT SITTING IN VIRGINIA OR ANY VIRGINIA COURT SELECTED BY PAYEE, FOR THE PURPOSES OF ANY
AND ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTE, THE LOAN AGREEMENT
AND ALL OTHER DOCUMENTS. MAKER AND GUARANTORS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
PROCEEDING BROUGHT IN ANY SUCH COURT, ANY CLAIM BASED ON THE CONSOLIDATION OF PROCEEDINGS IN SUCH
COURTS IN WHICH PROPER VENUE MAY LIE IN DIVERGENT JURISDICTIONS, AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. MAKER AND
GUARANTORS HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, THE OTHER DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY.
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
Master Security Agreement
No. 5081087
No. 5081087
Confession of Judgment. In the event that this Note or any installment under this Note is
not paid when due, whether by maturity or acceleration, Maker hereby appoints and constitutes Cindi
E. Cohen and Lauri E. Cleary, either of whom may act (a Virginia attorney) Maker’s duly constituted
attorney-in-fact to confess judgment pursuant to the provisions of Section 8.01-431 et seq.
of the Code of Virginia of 1950, as amended, against Maker for all principal and interest due and
payable under this Note, together with attorneys’ fees and collection fees as provided in this Note
(to the extent permitted by law), which judgment shall be confessed in the Clerk’s Office of the
Circuit Court of the City of Alexandria and/or Fairfax and/or Arlington Counties, Virginia. Maker
shall, upon Payee’s request, name such additional or alternative persons designated by Payee as
Maker’s duly constituted attorney-in-fact to confess judgment against Maker pursuant to the above
Section. Upon request of Payee, Maker also shall agree to the designation of any additional
circuit courts in the Commonwealth of Virginia in which judgment may be confessed against Maker.
No single exercise of the power to confess judgment shall be deemed to exhaust the power and no
judgment
against fewer than all the persons constituting Maker shall bar any subsequent action or judgment
against any one or more of such persons against whom judgment has not been obtained on this Note.
| Nuva, Inc. | ||||||||
/s/ Mohammad Mousa
|
By: | /s/ Jim D. Johnston | ||||||
Witness |
||||||||
Mohammad Mousa
|
Name: | Jim D. Johnston | ||||||
(Print name) |
||||||||
1124 Columbia St. #650, Seattle, WA 98104
|
Title: | Chief Financial Officer | ||||||
(Address) |
||||||||
| Federal Tax ID #: 77-0607176 | ||||||||
| Address: 1124 Columbia Street, | ||||||||
| Suite 650 Seattle, WA 98104 | ||||||||
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
Exhibit 10.20
OMEROS CORPORATION GUARANTY TO
OXFORD FINANCE CORPORATION
OXFORD FINANCE CORPORATION
Date: August 11, 2006
Oxford Finance Corporation
133 North Fairfax Street
Alexandria, VA 22314
133 North Fairfax Street
Alexandria, VA 22314
To induce you to consent to the anticipated merger transaction involving Epsilon Acquisition
Corporation, a corporation organized and existing under the laws of the State of Delaware, and
Nura, Inc , a corporation organized and existing under the laws of the State of Delaware
(collectively, the “Customer”), as well as to enter into, purchase or otherwise acquire, now or at
any time hereafter, any promissory notes, security agreements, chattel mortgages, pledge
agreements, conditional sale contracts, lease agreements, and/or any other documents or instruments
evidencing, or relating to, any loan, extension of credit or other financial accommodation (such
merger and loan transaction documents collectively , the “Account Documents” and each an “Account
Document”) to Omeros Corporation, a corporation organized and existing under the laws of the State
of Washington, but without in any way binding you to do so, the undersigned, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby guarantee
to you, your successors and assigns, the due regular and punctual payment of any sum or sums of
money which the Customer may owe to you now or at any time hereafter, whether evidenced by an
Account Document, on open account or otherwise, and whether it represents principal, interest, late
charges, indemnities, an original balance, an accelerated balance, liquidated damages, a balance
reduced by partial payment, a deficiency after sale or other disposition of any leased equipment,
collateral or security, or any other type of sum of any kind whatsoever that the Customer may owe
to you now or at any time hereafter, and does hereby further guarantee to you, your successors and
assigns, the due, regular and punctual performance of any other duty or obligation of any kind or
character whatsoever that the Customer may owe to you now or at any time hereafter (all such
payment and performance obligations being collectively referred to as “Obligations”). Undersigned
does hereby further guarantee to pay upon demand all reasonable attorneys’ fees and other costs
which may be suffered by you by reason of the default of the undersigned under this Guaranty. As
used in this Guaranty, “you” shall mean Oxford Finance Corporation and all its subsidiaries and
affiliates.
This Guaranty is a guaranty of prompt payment and performance (and not merely a guaranty of
collection). Nothing herein shall require you to first seek or exhaust any remedy against the
Customer, its successors and assigns, or any other person obligated with respect to the
Obligations, or to first foreclose, exhaust or otherwise proceed against any leased equipment,
collateral or security which may be given in connection with the Obligations. It is agreed that
you may, upon any breach or default of the Customer, or at any time thereafter, make demand upon
the undersigned and receive payment and performance of the Obligations, with or without notice or
demand for payment or performance by the Customer, its successors or assigns, or any other person.
Suit may be brought and maintained against the undersigned, at your election, without joinder of
the Customer or any other person as parties thereto. The obligations of each signatory to this
Guaranty shall be joint and several.
The undersigned agrees that its obligations under this Guaranty shall be primary, absolute,
continuing and unconditional, irrespective of and unaffected by any of the following actions or
circumstances (regardless of any notice to or consent of the undersigned): (a) the genuineness,
validity, regularity and enforceability of the Account Documents or any other document; (b) any
extension, renewal, amendment, change, waiver or other modification of the Account Documents or any
other document; (c) the absence of, or delay in, any action to enforce the Account Documents, this
Guaranty or any other document; (d) your failure or delay in obtaining any other guaranty of the
Obligations (including, without limitation, your failure to obtain the signature of any other
guarantor hereunder); (e) the release of, extension of time for payment or performance by, or any
other indulgence granted to the Customer or any other person with respect to the Obligations by
operation of law or otherwise, (f) the existence, value, condition, loss, subordination or release
(with or without substitution) of, or failure to have title to or perfect and maintain a security
interest in, or the time, place and manner of any sale or other disposition of any leased
equipment, collateral or security given in connection with the Obligations, or any other impairment
(whether intentional or negligent, by operation of law or otherwise) of the rights of the
undersigned; (g) the Customer’s voluntary or involuntary bankruptcy, assignment for the benefit of
creditors, reorganization, or similar proceedings affecting the Customer or any of its assets; or
(h) any other action or circumstances which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, other than payment in full of the Obligations.
This Guaranty, the Account Documents and the Obligations may be assigned by you, without the
consent of the Undersigned. The Undersigned agrees that if it receives written notice of an
assignment from you, the Undersigned will pay all amounts due hereunder to such assignee or as
instructed by you. The Undersigned also agrees to confirm in writing receipt of the notice of
assignment as may be reasonably requested by assignee. The Undersigned hereby waives and agrees
not to assert against any such assignee any of the defenses set forth in the immediate preceding
paragraph.
This Guaranty may be terminated upon delivery to you (at your address shown above) of a
written termination notice from the undersigned. However, as to all Obligations (whether matured,
unmatured, absolute, contingent or otherwise) incurred by the Customer prior to your receipt of
such written termination notice (and regardless of any subsequent amendment, extension or other
modification which may be made with respect to such Obligations), this Guaranty shall nevertheless
continue and remain undischarged until all such Obligations are indefeasibly paid and performed in
full.
The undersigned agrees that this Guaranty shall remain in full force and effect or be
reinstated (as the case may be) if at any time payment or performance of any of the Obligations (or
any part thereof) is rescinded, reduced or must otherwise be restored or returned by you, all as
though such payment or performance had not been made. If, by reason of any bankruptcy, insolvency
or similar laws effecting the rights of creditors, you shall be prohibited from exercising any of
your rights or remedies against the Customer or any other person or against any property, then, as
between you and the undersigned, such prohibition shall be of no force and effect, and you shall
have the right to make demand upon, and receive payment from, the undersigned of all amounts and
other sums that would be due to you upon a default with respect to the Obligations.
-2-
Notice of acceptance of this Guaranty and of any default by the Customer or any other person
is hereby waived. Presentment, protest, demand, and notice of protest, demand and dishonor of any
of the Obligations, and the exercise of possessory, collection or other remedies for the
Obligations, are hereby waived. The undersigned warrants that it has adequate means to obtain from
the Customer on a continuing basis financial data and other information regarding the Customer and
is not relying upon you to provide any such data or other information. Without limiting the
foregoing, notice of adverse change in the Customer’s financial condition or of any other fact
which might materially increase the risk of the undersigned is also waived. All settlements,
compromises, accounts stated and agreed balances made in good faith between the Customer, its
successors or assigns, and you shall be binding upon and shall not affect the liability of the
undersigned.
Payment of all cash amounts now or hereafter owed to the undersigned by the Customer or any
other obligor for any of the Obligations is hereby subordinated in right of payment to the
indefeasible payment in full to you of all Obligations. Until the Obligations are paid in full,
the undersigned hereby irrevocably and unconditionally waives and relinquishes all statutory,
contractual, common law, equitable and all other claims against the Customer, any other obligor for
any of the Obligations, any collateral therefore, or any other assets of the Customer or any such
other obligor, for subrogation, reimbursement, exoneration, contribution, indemnification, setoff
or other recourse in respect of sums paid or payable to you by the undersigned hereunder, and,
until the Obligations are paid in full, the undersigned hereby further irrevocably and
unconditionally waives and relinquishes any and all other benefits which it might otherwise
directly or indirectly receive or be entitled to receive by reason of any amounts paid by, or
collected or due from, it, the Customer or any other obligor for any of the Obligations, or
realized from any of their respective assets.
THE UNDERSIGNED HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS GUARANTY, THE OBLIGATIONS
GUARANTEED HEREBY, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN US RELATING TO THE SUBJECT
MATTER HEREOF OR THEREOF, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN US. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY, THE OBLIGATIONS GUARANTEED HEREBY, OR ANY RELATED
DOCUMENTS. IN THE EVENT OF LITIGATION, THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
As used in this Guaranty, the word “person” shall include any individual, corporation,
partnership, joint venture, association, joint-stock company, trust, unincorporated organization,
or any government or any political subdivision thereof.
This Guaranty shall be governed by, construed, and interpreted in accordance with the law of
the Commonwealth of Virginia, without regard to the choice of law principles thereof.
-3-
This Guaranty is intended by the parties as a final expression of the guaranty of the
undersigned and is also intended as a complete and exclusive statement of the terms thereof. No
course of dealing, course of performance or trade usage, nor any paid evidence of any kind, shall
be used to supplement or modify any of the terms hereof. Nor are there any conditions to the full
effectiveness of this Guaranty. This Guaranty and each of its provisions may only be waived,
modified, varied, released, terminated or surrendered, in whole or in part, by a duly authorized
written instrument signed by you. No failure by you to exercise your rights hereunder shall give
rise to any estoppel against you, or excuse the undersigned from performing hereunder. Your waiver
of any right to demand performance hereunder shall not be a waiver of any subsequent or other right
to demand performance hereunder.
This Guaranty shall bind the undersigned’s successors and assigns and the benefits thereof
shall extend to and include your successors and assigns. In the event of default hereunder, you
may at any time inspect undersigned’s records as related to the Obligations hereunder during normal
business hours and upon reasonable advance notice, or at your option, undersigned shall furnish you
with the most current independent audit report that has been obtained by the undersigned.
If any provisions of this Guaranty are in conflict with any applicable statute, rule or law,
then such provisions shall be deemed null and void to the extent that they may conflict therewith,
but without invalidating any other provisions hereof.
Each signatory on behalf of a corporate guarantor warrants that he had authority to sign on
behalf of such corporation and by so signing, to bind said guarantor corporation hereunder.
IN WITNESS WHEREOF, this Guaranty is executed the day and year above written.
OMEROS CORPORATION
By:
|
/s/ Gregory Demopulos | |||||
| (Signature) | ||||||
Title:
|
Chairman & CEO | |||||
| (Officer’s Title) | ||||||
ATTEST:
|
/s/ Craig Sherman | |||||
| Secretary/Assistant Secretary |
-4-
Certified Resolution
The undersigned hereby certifies that he/she is Secretary of Omeros Corporation, that the
following resolution was passed at a meeting of the Board of Directors of said corporation held on
July 31, 2006 duly called, a quorum being present, that said resolution has not
since been revoked or amended. and that the form of guaranty referred to therein is the form shown
attached hereto:
“RESOLVED that it is to the benefit of this corporation that it execute a guaranty of the
obligations of Epsilon Acquisition Corporation, a corporation organized and existing under the laws
of the State of Delaware, and Nura, Inc., a corporation organized and existing under the laws of
the State of Delaware (“Customer”) to Oxford Finance Corporation (together with its successors and
assigns, if any, the “Secured Party”) and that the benefit to be received by this corporation from
such guaranty is reasonably worth the obligations thereby guaranteed, and further that such
guaranty shall be substantially in the form annexed to these minutes, and further that any Vice
President and the Chief Executive Officer (Title of Officers) of this corporation are
authorized to execute such guaranty on the behalf of this corporation.”
WITNESS my hand and the seal of this corporation on this 11 day of August,
2006.
| /s/ Craig Sherman | ||||
[Seal] Secretary
Exhibit 10.21
U.S. BANK CENTRE
OFFICE LEASE AGREEMENT
| Landlord: | BENTALL CITY CENTRE L.L.C. |
|||
| Tenant: | SCOPE INTERNATIONAL, INC. |
|||
| Date: | September 28, 1998 |
U.S. BANK CENTRE
OFFICE LEASE AGREEMENT
OFFICE LEASE AGREEMENT
THIS
LEASE is made as of this _____ day of ___________, 1998, by and between BENTALL CITY
CENTRE L.L.C., a Washington limited liability company (hereinafter referred to as “Landlord”), and
SCOPE INTERNATIONAL, INC, a Washington corporation (hereinafter referred to as “Tenant”).
LEASE SUMMARY
| Section 1.1 | The Building | |||||
| (a) | Name: | U.S. Bank Centre | ||||
| (b) | Address: | 1420 Fifth Avenue | ||||
| Seattle, WA 98101 | ||||||
| (c) | Total Rentable Area of Building: | 921,298 sq. ft. | ||||
| (d) | Total Rentable Area of Office Tower: | 842,493 sq. ft. | ||||
| The Premises | ||||||
| (a) | Total Rentable Area: | 3,874 sq. ft. | ||||
| (b) | Floor Location: | 26th Floor | ||||
| (c) | Suite Number: | 2628 | ||||
| Section 2.1 | Use of Premises and Tenant’s Trade Name | |||||
| (a) | Tenant’s Trade Name: | Scope International. | ||||
| (b) | Use of Premises: | Business office use only. | ||||
| Section 3.1 | Lease Term | |||||
| (a) | Sixty and one-half (60 1/2) months, from November 15, 1998, through November 30, 2003. | |||||
| (b) | Lease Commencement Date: November 15, 1998. | |||||
| Section 4.1 | Basic Rent | |||||
| Rent Per Rentable | ||||||||
| Month(s) | Monthly Rent Installment | Sq. Ft. Per Year | ||||||
11/15/98 — 11/30/99 |
$ | 10,898.85 | $ | 33.76 | ||||
12/1/99 — 11/30/01 |
$ | 11,221.69 | $ | 34.76 | ||||
12/1/01 — 11/30/03 |
$ | 11,544.52 | $ | 35.76 | ||||
-i-
| Section 4.2 | Operating Expenses | |||||
| (a) | Tenant’s Proportionate Share: | .4205% of Total Rentable Area of Building | ||||
| .4598% of Total Rentable Area of Office Tower | ||||||
| (b) | Base Year: | 1998. | ||||
| Section 5.1 | Security Deposit | |||||
| (a) | Security Deposit: | $11,544.52 | ||||
| Section 5.2 | Prepaid Rent | |||||
| (a) | Prepaid Rent: | $10,898.85 | ||||
| (b) | Month(s) to which the Prepaid Rent is | |||||
| applied: | December, 1998 (first full calendar month). | |||||
| Section 19.1 | Addresses for Notices | |||||
| (a) | Landlord: | (b) Tenant: | ||||
| Bentall City Centre, L.L.C. | Scope International | |||||
| c/o General Manager | Suite 2628 | |||||
| Suite 1550 | 1420 Fifth Avenue | |||||
| 1420 Fifth Avenue | Seattle, WA 98101 | |||||
| Seattle, WA 98101 | ||||||
| Section 21.13 | Broker’s Commission | |||||
| (a) | Landlord’s Leasing Representative | |||||
| (Broker/Salesperson): | Pat Pendergast | |||||
| (b) | Landlord’s Leasing Representative (Firm): | Washington Partners | ||||
| (c) | Address: | 520 Pike Street, Suite 1450 | ||||
| Seattle, WA 98101 | ||||||
| (d) | Tenant’s Leasing Representative | |||||
| (Broker/Salesperson): | Brian Kelly | |||||
| (e) | Tenant’s Leasing Representative (Firm): | Steven C. Johnson & Associates | ||||
| (f) | Address: | 600 University Street, Suite 3025 | ||||
| Seattle, Washington 98101-3115 | ||||||
-ii-
TABLE OF CONTENTS
| Page | ||||||||
| ARTICLE 1. PREMISES | 1 | |||||||
| Section 1.1 | Premises Defined | 1 | ||||||
| Section 1.2 | Alterations | 1 | ||||||
| Section 1.3 | Condition of Premises | 1 | ||||||
| Section 1.4 | Common Areas | 1 | ||||||
| ARTICLE 2. BUSINESS PURPOSE AND USE | 1 | |||||||
| Section 2.1 | Permitted Uses | 1 | ||||||
| Section 2.2 | Prohibited Uses | 2 | ||||||
| Section 2.3 | Compliance With Laws | 2 | ||||||
| ARTICLE 3. TERM | 2 | |||||||
| Section 3.1 | Term | 2 | ||||||
| Section 3.2 | Lease Year | 2 | ||||||
| Section 3.3 | Possession by Tenant | 2 | ||||||
| ARTICLE 4. RENT | 3 | |||||||
| Section 4.1 | Basic Rent | 3 | ||||||
| Section 4.2 | Operating Expenses | 3 | ||||||
| Section 4.3 | Rent | 7 | ||||||
| Section 4.4 | Place of Payment | 7 | ||||||
| ARTICLE 5. SECURITY DEPOSIT AND PREPAID RENT | 7 | |||||||
| Section 5.1 | Security Deposit | 7 | ||||||
| Section 5.2 | Prepaid Rent | 7 | ||||||
| ARTICLE 6. TAXES | 8 | |||||||
| Section 6.1 | Personal Property Taxes | 8 | ||||||
| Section 6.2 | Business Taxes | 8 | ||||||
| ARTICLE 7. MAINTENANCE, REPAIRS AND ALTERATIONS | 8 | |||||||
| Section 7.1 | Landlord’s and Tenant’s Improvements | 8 | ||||||
| Section 7.2 | Services to Be Furnished by Landlord | 8 | ||||||
| Section 7.3 | Tenant’s Maintenance and Repairs | 9 | ||||||
| Section 7.4 | Tenant’s Alterations | 9 | ||||||
| Section 7.5 | Liens | 10 | ||||||
| ARTICLE 8. INSURANCE | 10 | |||||||
| Section 8.1 | Use; Rate | 10 | ||||||
| Section 8.2 | Liability Insurance | 10 | ||||||
| Section 8.3 | Worker’s Compensation Insurance | 10 | ||||||
| Section 8.4 | Casualty Insurance | 10 | ||||||
| Section 8.5 | Compliance With Regulations | 10 | ||||||
| Section 8.6 | Waiver of Subrogation | 10 | ||||||
-i-
TABLE OF CONTENTS
(Continued)
(Continued)
| Page | ||||||||
| Section 8.7 | General Requirements | 11 | ||||||
| Section 8.8 | Blanket Insurance | 12 | ||||||
| ARTICLE 9. DESTRUCTION AND CONDEMNATION | 12 | |||||||
| Section 9.1 | Total or Partial Destruction | 12 | ||||||
| Section 9.2 | Condemnation | 13 | ||||||
| Section 9.3 | Sale Under Threat of Condemnation | 14 | ||||||
| ARTICLE 10. INDEMNITY AND WAIVER | 14 | |||||||
| Section 10.1 | Indemnity | 14 | ||||||
| Section 10.2 | Waiver | 15 | ||||||
| ARTICLE 11. DELAYS | 15 | |||||||
| Section 11.1 | Delays | 15 | ||||||
| ARTICLE 12. ASSIGNMENT, SUBLEASE AND SUCCESSION | 15 | |||||||
| Section 12.1 | Consent Required | 15 | ||||||
| Section 12.2 | General Conditions | 16 | ||||||
| Section 12.3 | Succession | 16 | ||||||
| ARTICLE 13. SURRENDER OF POSSESSION | 16 | |||||||
| Section 13.1 | Surrender | 16 | ||||||
| Section 13.2 | Condition at Time of Surrender | 16 | ||||||
| ARTICLE 14. HOLDING OVER | 16 | |||||||
| Section 14.1 | Holding Over | 16 | ||||||
| ARTICLE 15. ENTRY BY LANDLORD | 16 | |||||||
| Section 15.1 | Entry by Landlord | 16 | ||||||
| Section 15.2 | Failure to Surrender | 17 | ||||||
| ARTICLE 16. SUBORDINATION | 17 | |||||||
| Section 16.1 | Lease Subordinate To Mortgages | 17 | ||||||
| Section 16.2 | Estoppel Certificates | 17 | ||||||
| ARTICLE 17. DEFAULT AND REMEDY | 18 | |||||||
| Section 17.1 | Events of Tenant’s Default | 18 | ||||||
| Section 17.2 | Remedies | 18 | ||||||
| Section 17.3 | Reletting | 19 | ||||||
| Section 17.4 | Default of Landlord | 19 | ||||||
| Section 17.5 | Non-Waiver | 19 | ||||||
| Section 17.6 | Mortgagee Protection | 19 | ||||||
| ARTICLE 18. LIMITATION OF LIABILITY | 20 | |||||||
| Section 18.1 | Limitation of Landlord’s Liability | 20 | ||||||
| Section 18.2 | Applicability | 20 | ||||||
| ARTICLE 19. NOTICES | 20 | |||||||
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TABLE OF CONTENTS
(Continued)
(Continued)
| Page | ||||||||
| Section 19.1 | Notices | 20 | ||||||
| ARTICLE 20. HAZARDOUS SUBSTANCES | 21 | |||||||
| Section 20.1 | Presence and Use of Hazardous Substances | 21 | ||||||
| Section 20.2 | Cleanup Costs, Default and Indemnification | 21 | ||||||
| ARTICLE 21. MISCELLANEOUS | 21 | |||||||
| Section 21.1 | Headings | 21 | ||||||
| Section 21.2 | Amendments | 21 | ||||||
| Section 21.3 | Time of the Essence | 21 | ||||||
| Section 21.4 | Entire Agreement | 21 | ||||||
| Section 21.5 | Language | 21 | ||||||
| Section 21.6 | Invalidity | 22 | ||||||
| Section 21.7 | Late Charges | 22 | ||||||
| Section 21.8 | [Not Used] | 22 | ||||||
| Section 21.9 | Computation of Time | 22 | ||||||
| Section 21.10 | Applicable Law | 22 | ||||||
| Section 21.11 | Attorneys’ Fees | 22 | ||||||
| Section 21.12 | Termination | 22 | ||||||
| Section 21.13 | Broker’s Commission | 22 | ||||||
| Section 21.14 | Signs or Advertising | 23 | ||||||
| Section 21.15 | Transfer of Landlord’s Interest | 23 | ||||||
| Section 21.16 | Counterparts | 23 | ||||||
| Section 21.17 | Quiet Enjoyment | 23 | ||||||
| Section 21.18 | Authority | 23 | ||||||
| Section 21.19 | Name of Building | 23 | ||||||
| Section 21.20 | Rules and Regulations | 23 | ||||||
| Section 21.21 | Consents | 23 | ||||||
| Section 21.22 | Agency Disclosure | 24 | ||||||
| Section 21.23 | Lease Summary, Addendum and Exhibits | 24 | ||||||
| Section 21.24 | Survival | 24 | ||||||
| Section 21.25 | Parking | 24 | ||||||
Exhibits:
A — Tenant Floor Plan
B — Legal Description
C — Tenant Improvements and Landlord’s and Tenant’s Work
D — Rules and Regulations
E — Intentionally deleted.
F — Estoppel Certificate
G — Subordination
H — Parking Agreement
B — Legal Description
C — Tenant Improvements and Landlord’s and Tenant’s Work
D — Rules and Regulations
E — Intentionally deleted.
F — Estoppel Certificate
G — Subordination
H — Parking Agreement
-iii-
U.S. BANK CENTRE
OFFICE LEASE AGREEMENT
OFFICE LEASE AGREEMENT
ARTICLE 1. PREMISES
Section 1.1
Premises Defined. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon the terms and conditions hereinafter set forth, those certain premises and
improvements consisting of the floor area and the location described in the Lease Summary and
designated on the plans attached hereto as Exhibit A (hereinafter referred to as the
“Premises”). The Premises are located in the building known as the U.S. Bank Centre (the
“Building”) which is situated in the City of Seattle, County of King, State of Washington and
located upon the real property described in Exhibit B (the “Property”).
Section 1.2
Alterations. Tenant acknowledges that Exhibit A sets forth the floor plan
for the floor(s) of the Building on which the Premises is located and the location of the Premises
therein. Landlord may in its sole discretion increase, decrease, or change the number, locations
and dimensions of any hallways, lobby areas and other improvements shown on Exhibit A that
are not within the Premises, provided the same does not unreasonably interfere with Tenant’s use of
the Premises. Upon reasonable advance notice to Tenant, Landlord reserves the right from time to
time (a) to install, use, maintain, repair, relocate and replace pipes, ducts, conduits, wires, and
appurtenant meters and equipment for service to the Premises or to other parts of the Building
which are above the ceiling surfaces, below the floor surfaces, within the walls and in the central
core areas of the Building which are located within the Premises or located elsewhere in the
Building; (b) to alter or expand the Building; and (c) to alter, relocate or substitute any of the
Common Areas, as defined in Section 1.4 below.
Section 1.3 Condition of Premises. The Premises are leased by Landlord and accepted by Tenant in an “as is” condition, subject
to any improvements, alterations or modifications to be made pursuant to Article 7 below,
and the requirement of Landlord to complete the improvements specified therein.
Section 1.4 Common Areas. So long as Tenant occupies the Premises under the terms of this Lease, Tenant, its
licensees, invitees, customers and employees shall have the non-exclusive right to use all
entrances, lobbies, and other public areas of the Building (the “Common Areas”) in common with
Landlord, other Building tenants, and their respective licensees, invitees, customers and
employees. The use of the Common Areas shall be subject to the terms and conditions of this Lease.
ARTICLE 2. BUSINESS PURPOSE AND USE
Section 2.1 Permitted Uses. Tenant shall use the Premises solely for the purposes specified in the Lease Summary, and
for no other business or purpose without the prior written consent of the Landlord. Tenant shall
use
the Premises solely under the trade name specified in the
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Lease Summary, and under no other
name without the prior written consent of the Landlord, which consent shall not be unreasonably
withheld.
Section 2.2 Prohibited Uses. Tenant shall not do or permit anything to be done in or about the Premises, nor bring or
keep anything therein, which will (a) in any way increase the existing rate of or affect any policy
of fire or other insurance upon the Building or any of its contents, or cause a cancellation of any
insurance policy covering any part thereof or any of its contents; (b) obstruct or interfere in any
way with the rights of other tenants or occupants of the Building or injure or unreasonably annoy
any of them; or (c) use or allow the Premises to be used for any improper, unlawful or
objectionable purposes. Tenant shall not cause, maintain or permit any nuisance in, on or about
the Premises, nor shall Tenant commit or suffer to be committed any waste in, on or about the
Premises. Tenant shall not place upon or install in windows or other openings any signs, symbols,
drapes, or other material without written approval of Landlord. Tenant shall not place any object
or barrier within, or otherwise obstruct, any of the Common Areas.
Section 2.3 Compliance With Laws. Tenant shall at all times comply with all laws, ordinances and any regulations promulgated
by any governmental authority having jurisdiction over the Building and/or the Premises. To the
extent Landlord is required by the City of Seattle to maintain carpooling and public transit
programs, Tenant shall cooperate in the implementation and use of these programs by and among
Tenant’s employees.
ARTICLE 3. TERM
Section 3.1 Term. The term of this Lease shall commence on the Lease Commencement Date identified in Section
3.1(b) of the Lease Summary. From the Lease Commencement Date, the term of this Lease shall
continue for the time period specified in the Lease Summary, the expiration of which shall be the
Termination Date of this Lease, unless this Lease is sooner terminated as hereinafter provided.
The period between the Lease Commencement Date and the Termination Date shall be referred to as the
“Lease Term” or “Term”. The Landlord and Tenant acknowledge that certain obligations under the
provisions of this Lease may be binding upon them prior to the Lease Commencement Date, such as,
but not limited to, the provisions of Exhibit C, and Landlord and Tenant shall be bound by
such provisions prior to the Lease Commencement Date.
Section 3.2 Lease Year. “Lease Year” shall mean that period of twelve (12) consecutive months which ends on
December 31 of each year and which falls within the Term of this Lease; provided,
however, the first Lease Year (which may be a partial Lease Year) shall mean that period
from the Lease Commencement Date until the December 31 first occurring after the Lease Commencement
Date and the last Lease Year (which may be a partial Lease Year) shall mean that period from the
January 1st last occurring during the Term of this Lease until the Termination Date.
Section 3.3 Possession by Tenant. Landlord shall deliver to Tenant, and Tenant shall accept from Landlord, possession of the
Premises, upon the date of substantial completion of the standard “Tenant Improvements”, described
as “Landlord’s Work” in Exhibit C. Certification by Landlord’s architect (the “Project
Architect”) as to the substantial completion of the Premises shall be conclusive and binding upon
Landlord and Tenant. If Landlord cannot deliver possession of the
-2-
Premises to Tenant by the Lease
Commencement Date, as specified in the Lease Summary, then this Lease shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom.
ARTICLE 4. RENT
Section 4.1 Basic Rent. Tenant shall pay to Landlord as minimum rental for the use and occupancy of the Premises
the “Basic Rent” as specified in the Lease Summary. Basic Rent shall be payable in Monthly Rent
Installments of the amount specified in the Lease Summary, on or before the first day of each month
of the Lease Term beginning on the Lease Commencement Date. Basic Rent for any partial year shall
be prorated based upon the actual number of months left in such partial year. The Monthly Rent
Installment for any partial month shall be prorated based upon the actual number of days in that
partial month.
Section 4.2 Operating Expenses.
4.2.1 This is a fully serviced, gross Lease. All Operating Expenses shall be included in the
Basic Rent from the Lease Commencement Date through the Base Year (as defined in the Lease
Summary). For each calendar year following the Base Year, Tenant shall pay, in monthly
installments and as “Additional Rent”, an amount equal to the “Tenant’s Proportionate Share” (as
hereinafter defined) of actual “Total Operating Expanses” (as hereinafter defined) minus Tenant’s
Proportionate Share of actual Total Operating Expenses for the Base Year. Notwithstanding anything
herein to the contrary, Tenant shall in no event pay less than the Basic Rent in any calendar year.
4.2.2 “Tenant’s Proportionate Share” shall be computed by dividing the Total Rentable Area of
the Premises by the Total Rentable Area of the Building or Total Rentable Area of the Office Tower,
as applicable with respect to any particular Operating Expense. Tenant’s Proportionate Share upon
the Lease Commencement Date for the entire Premises is as specified in the Lease Summary.
4.2.3 “Rentable Area of the Building,” “Rentable Area of the Office Tower” and “Rentable Area
of the Premises” are defined as those areas obtained by measuring the Building, Office Tower and
Premises using Landlord’s method of measurement, which method is based substantially on the method
of measuring floor area in office buildings specified in the American National Standard Publication
ANSI/BOMA Z65.1-1996 published by the Building Owners and Managers Association International
(otherwise known as “BOMA Standard”). The Total Rentable
Area of the Building, Total Rentable Area of the Office Tower and Total Rentable Area of the
Premises, as of the Lease Commencement Date, are as specified in the Lease Summary. The Total
Rentable Area of the Premises exceeds the usable area of the Premises to include a pro rata share
of hallways, restrooms, and other common elements located on the floor on which the Premises are
located. Tenant’s Proportionate Share shall be calculated based upon the Total Rentable Area of
the Building with respect to Operating Expenses the benefit of which are shared with Building
retail and office tenants and based upon the Total Rentable Area of the Office Tower with respect
to Operating Expenses the benefit of which are shared only with other Office Tower tenants.
-3-
4.2.4 Landlord shall provide Tenant with a written estimate of Total Operating Expenses for
the succeeding year at least thirty (30) days after the start of each Lease Year during the Lease
Term, following the first Lease Year of the Lease Term. Tenant shall then pay to Landlord, monthly
in advance, one-twelfth (1/12) of Tenant’s Proportionate Share of the estimated Total Operating
Expenses for the said Lease Year in excess of the product of the Expense Stop multiplied by the
Rentable Area of the Premises. In the event any item of actual Operating Expenses, including
without limitation those items identified in subparagraph (4.2.6) below, increases five percent
(5%) or more in price or cost over any twelve (12) month period, Landlord shall have the option to
pass through to Tenant’s Proportionate Share of any increase in the actual Operating Expenses upon
thirty (30) days’ written notice from Landlord to Tenant.
4.2.5 Within one hundred twenty (120) days after the end of every Lease Year during the Lease
Term, Landlord shall provide the Tenant with a written statement of the actual Total Operating
Expenses for that Lease Year. If the actual Total Operating Expenses should exceed the estimated
amount with respect to such Lease Year, then Tenant shall pay Landlord the additional amount due to
the Landlord within thirty (30) days and, if actual Total Operating Expenses should be less than
the estimated Total Operating Expenses for that Lease Year, then Landlord shall credit, against
future Additional Rent due under this Article, the amount of any overpayment by Tenant.
4.2.6 “Operating Expenses” as used herein shall mean all costs, expenses and other charges
incurred by Landlord in connection with the ownership, operation, repair and maintenance of the
Property and the Building as a first class mixed use retail/office building complex in the Central
Business District of Seattle, Washington, including but not limited to:
4.2.6.1 Wages, salaries and fringe benefits of all employees and contractors engaged in the
management, operation and maintenance of the Property and/or the Building; employer’s Social
Security taxes, unemployment taxes or insurance, and any other taxes which may be levied against
Landlord on those wages and salaries; and the cost to Landlord of disability and hospitalization
insurance and pension or retirement benefits for these employees;
4.2.6.2 All supplies and materials used in the operation and maintenance of the Property
and/or the Building;
4.2.6.3 Cost of water and power, and cost of heating, lighting, air conditioning and
ventilating the Building, the Common Areas and the Premises, which costs shall be based on either
Tenant’s Proportionate Share or separately allocated to the Premises, at Landlord’s
option, based upon either direct usage, if separately metered, or an appropriate allocation
among all tenants consuming those services as measured from the meter monitoring this usage;
4.2.6.4 The electrical costs incurred in the operation of the “chiller” for the Building,
which shall be allocated pro rata among the Building tenants;
4.2.6.5 Cost of maintenance, depreciation and replacement of machinery, tools and equipment
(if owned by Landlord) and for rental paid for such machinery, tools and equipment (if rented) used
in connection with the operation or maintenance of the Building;
-4-
4.2.6.6 All premiums and deductibles on policies of compensation, public liability, property
damage, automobile, garage keepers, rental loss and any other policies of insurance maintained by
Landlord with respect to the Property, Building or any insurable interest therein. Cost of
casualty and liability insurance applicable to the Property and/or the Building, the improvements
therein, and Landlord’s personal property used in connection therewith;
4.2.6.7 Cost of janitorial services, repairs and general maintenance;
4.2.6.8 Any capital improvements made or installed (a) to be in compliance with any applicable
government statutes, ordinances, regulations or other requirements, and (b) for purposes of saving
labor or otherwise reducing applicable operating costs, amortized over the useful life of such
improvements, as determined by Landlord in accordance with generally accepted accounting principles
and practices in effect at the time of acquisition of the capital item;
4.2.6.9 Costs in connection with maintaining and operating any garage owned by the Landlord
for use by tenants of the Building;
4.2.6.10 All taxes and assessments and governmental charges whether federal, state, county or
municipal and any other taxes and assessments attributable to the Property and/or the Building or
its operation, including without limitation real property taxes and assessments and any tax or
other levy, however denominated, on or measured by the rental collected by the Landlord with
respect to the Building, or on Landlord’s business of leasing the Building, but excluding federal
and state taxes on income;
4.2.6.11 The cost of maintaining any public transit system, vanpool, or other public or
semi-public transportation imposed upon Landlord’s ownership and operation of the Building;
4.2.6.12 Cost of all accounting and other professional fees incurred in connection with the
operation of the Property and/or the Building;
4.2.6.13 A management fee, not to exceed current market rates, which may be payable to the
Landlord;
4.2.6.14 Cost of replacing lamps, bulbs, starters and ballasts used in the Building, other
than those for which the cost is billed directly to a tenant.
Operating Expenses shall not include expenses for which the Landlord is reimbursed or
indemnified (either by an insurer, condemnor, tenant or otherwise); expenses incurred in leasing or
procuring tenants (including, without limitation, lease commissions, legal expenses, and expenses
of renovating space for tenants); legal expenses arising out of disputes with tenants or the
enforcement of the provisions of any lease of space in the Building; interest or amortization
payments on any mortgage or mortgages, and rental under any ground or underlying lease or leases;
costs of any work or service performed for or facilities furnished to a tenant at the tenant’s
cost; the cost of correcting defects (latent or otherwise) in the construction of the Building,
except those conditions (not
-5-
occasioned by construction defects) resulting from wear and tear shall
not be deemed defects; and costs of capital improvements and depreciation and amortization (except
as provided in Section 4.2.6.8 or otherwise above). Landlord and Tenant shall each from
time to time upon request of the other sign a written memorandum confirming the amount of the
Additional Rent as adjusted from time to time hereunder.
4.2.7 Tenant shall have the right, upon fulfillment of the conditions set forth below, to
conduct one (1) audit of the Landlord’s books and records covering the Operating Expenses for a
particular calendar year to verify the accuracy of the Landlord’s determination of the Tenant’s
Proportionate Share of such Operating Expenses. The conditions which must be met before Tenant
shall have the right to audit the books and records of a particular calendar year are as follows:
4.2.7.1 Tenant must provide Landlord not less than thirty (30) days’ prior written notice of
the Tenant’s election to audit (the “Tenant’s Notice of Audit”), together with the information
concerning the auditor as outlined in subsection 4.2.7.4 below, which Tenant’s Notice of Audit and
information must be delivered to Landlord within thirty (30) days after Tenant’s receipt of the
Landlord’s statement of actual Operating Expenses for a particular calendar year.
4.2.7.2 Tenant’s audit must be undertaken and completed by Tenant or its agents at reasonable
times during Landlord’s normal business hours at the place where the Landlord’s records are kept.
Said audit must be completed within ninety (90) days of Tenant’s receipt of the Landlord’s
statement of Operating Expenses for a particular calendar year.
4.2.7.3 Tenant shall not entitled to conduct an audit if Tenant is in default under this Lease
at the time Tenant gives its Tenant’s Notice of Audit or at the time the Tenant or its agent
undertakes the audit.
4.2.7.4 At the time the Tenant delivers its Tenant’s Notice of Audit to Landlord, the Tenant
shall also provide evidence reasonably acceptable to the Landlord that the audit will be a “fair
and true audit.” For the purposes hereof, the term “fair and true audit” shall mean that the
review of the subject books and records shall be undertaken and completed by the Tenant, its
officers or employees, or by an independent accounting firm being paid on an hourly basis and that
in no event will the party auditing the books (or that party’s employer or principal) directly or
indirectly base the compensation or fees for such audit work upon a percentage of the savings found
or the return due the Tenant by reason of that audit.
4.2.7.5 The Tenant’s rights to audit the Landlord’s books and records shall be strictly
limited to the right set forth above and the Tenant shall have no right to audit
any of the Landlord’s books or records for any calendar year before or after the Lease Term or
for any calendar year other than the immediately preceding calendar year as set forth above. All
costs and expenses of the audit shall be borne solely by the Tenant.
4.2.7.6 A true and correct copy of the audit shall be delivered to the Landlord within fifteen
(15) days of the completion of such audit if Tenant requests a credit for overpayment. Any
overpayment shown by such audit shall be subject to the Landlord’s prompt
-6-
verification and, upon
such verification, shall be given to the Tenant as a credit against Operating Expenses next falling
due or, if after the expiration of the Term, shall be paid directly to Tenant.
Section 4.3 Rent. The terms “Rent” and “Rental” as used in this Lease shall mean all amounts to be paid
hereunder by Tenant whether those sums are designated as Basic Rent or Additional Rent and as
adjusted by the terms of this Lease. Failure by Tenant to pay any sum of Rent due under this
Article 4 shall entitle Landlord to pursue any or all remedies specified in this Lease as
well as remedies specified in RCW Chapter 59.12 or otherwise allowed by law.
Section 4.4 Place of Payment. All Rent shall be paid to the Landlord on or before the first day of each calendar month at
the address to which notices to Landlord are to be given. All Rental payments to be made
hereunder, whether Basic Rent, or Additional Rent or otherwise, are to be made without deduction,
setoff, prior notice or demand by Landlord.
ARTICLE 5. SECURITY DEPOSIT AND PREPAID RENT
Section 5.1 Security Deposit. Contemporaneously with Tenant’s execution of this Lease, Tenant shall pay to Landlord the
sum set forth as the Security Deposit in the Lease Summary as security for the full and faithful
performance of every provision of this Lease to be performed by Tenant. If Tenant defaults with
respect to any provision of this Lease, including but not limited to the provisions relating to the
payment of Rent, the repair of damage to the Premises caused by Tenant and/or cleaning the Premises
upon termination of this Lease, Landlord may use, apply or retain all or any part of this Security
Deposit for the payment of any Rent or any other sum in default, the repair of such damage to the
Premises, the cost of cleaning or for the payment of any other amount which Landlord may spend or
become obligated to spend by reason of Tenant’s default or to compensate Landlord for any other
loss or damage which Landlord may suffer by reason of Tenant’s default to the full extent permitted
by law. If any portion of said Security Deposit is so used or applied, Tenant shall, within ten
(10) days after written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount and Tenant’s failure to do so shall be a
material breach of this Lease. Landlord shall not be required to keep Tenant’s Security Deposit
separate from its general funds, and Tenant shall not be entitled to interest on the Security
Deposit. If Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it, the Security Deposit
or any balance thereof shall be returned to Tenant (or, at Landlord’s option, to the last
assignee of Tenant’s interest hereunder) within ten (10) days after the expiration of the Lease
Term.
Section 5.2 Prepaid Rent. Contemporaneously with Tenant’s execution of this Lease, Tenant shall pay to Landlord the
sum set forth as Prepaid Rent in the Lease Summary to be applied to Basic Rent for the month-during
the Term hereof as specified in the Lease Summary. In the event Tenant defaults under the terms of
this Lease prior to the application of the Prepaid Rent, such sums shall be held as a Security
Deposit to be disposed of in accordance with Section 5.1 above.
-7-
ARTICLE 6. TAXES
Section 6.1 Personal Property Taxes. Tenant shall pay before delinquency all license fees, public charges, property taxes and
assessments on the furniture, fixtures, equipment and other property of or being used by Tenant at
any time situated on or installed in the Premises.
Section 6.2 Business Taxes. Tenant shall pay before delinquency all taxes and assessments or license fees levied,
assessed or imposed by law or ordinance, by reason of the use of the Premises for the specific
purposes set forth in this Lease.
ARTICLE 7. MAINTENANCE, REPAIRS AND ALTERATIONS
Section 7.1 Landlord’s and Tenant’s Improvements. Landlord and Tenant shall, each at its own expense, complete and install in a good and
workmanlike manner within the Premises those items specified as the “Landlord’s Work” and “Tenant’s
Work”, respectively, on Exhibit C attached hereto.
Section 7.2 Services to Be Furnished by Landlord. Provided Tenant is not in default under any of the provisions of this Lease, and subject to
reimbursement pursuant to Section 4.2 above, Landlord shall provide the following services
during standard hours of operation of the Building. These standard hours of operation are 8 a.m.
to 6 p.m., Monday through Friday, and 8 a.m. to 1 p.m., on Saturdays.
7.2.1 Public utilities shall be caused to furnish the Premises with electricity and water
utilized in operating any and all facilities serving the Premises;
7.2.2 Hot and cold water at those points of supply provided for general use of other tenants
in the Building, central heat and air conditioning in season, at such times as Landlord normally
furnishes these services to other tenants in the Building and at temperatures and in amounts as are
considered by Landlord to be standard, but this service at times during the
weekdays at other than standard hours of operation for the Project, on Saturday afternoons,
Sundays and holidays shall be furnished only upon request of Tenant, who shall bear the entire
costs thereof;
7.2.3 Routine maintenance, painting and electric lighting service for all Common Areas and
special service areas of the Building in the manner and to the extent deemed by Landlord to be
standard and consistent with the operation and maintenance of the Building as a first-class office
building in the Central Business District (CBD) of Seattle;
7.2.4 Janitorial service, on a five (5) day week basis, excluding Fridays, Saturdays, and
legal holidays;
7.2.5 Electrical facilities to provide sufficient power for typewriters, personal computers
and other small office machines of similar low electrical consumption, but not including
electricity required for electronic data processing equipment, special lighting in excess of
building standard, and any other item of electrical equipment which (itself) consumes more than .5
-8-
kilowatts per hour at rated capacity or requires a voltage other than 120 volts single phase per
square foot. If any electrical equipment installed in the Premises requires air conditioning
capacity above that provided by the building standard system, then the additional air conditioning
installation and corresponding operating costs will be the separate obligation of the Tenant; and
7.2.6 Security for the Building; provided, however, Landlord shall not be
liable to Tenant or any employee, invitee, licensee or sublessee of Tenant for bodily injury,
property damage, or other losses or damages due to theft, burglary, or other criminal activities
occurring in or about the Building.
In the event Tenant desires any of the aforementioned services in amounts in excess of those deemed
by Landlord to be “standard” and in the event Landlord elects to provide these additional services,
Tenant shall pay Landlord as Additional Rent hereunder the cost of providing these additional
services. Failure by Landlord to any extent to furnish any of the above services, or any cessation
thereof, resulting from causes beyond the control of Landlord, shall not render Landlord liable in
any respect for damages to either person or property, nor shall that event be construed as an
eviction of Tenant, nor result in an abatement of Rent, nor relieve Tenant from any of Tenant’s
obligations hereunder (including, but not limited to, the payment of Rent). Should any of the
equipment or machinery utilized in supplying the services listed herein for any cause cease to
function properly, Landlord shall use reasonable diligence to repair that equipment or machinery
promptly, but Tenant shall have no right to terminate this Lease, and shall have no claim for a
reduction, abatement or rebate of Rent or damages on account of any interruption in service
occasioned thereby or resulting therefrom.
Section 7.3 Tenant’s Maintenance and Repairs. Tenant shall be obligated to maintain and to make all repairs, replacements or additions of
any kind whatsoever to all personal property located within the Premises and to all trade fixtures,
furnishings and carpet located within the Premises, Tenant also shall be responsible for
maintaining and replacing all specialty lamps, bulbs, starters and ballasts.
Section 7.4 Tenant’s Alterations. Subject to Landlord’s prior written approval, Tenant may make, at its expense, additional
improvements or alterations to the Premises which it may deem necessary or desirable. Landlord’s
approval to any improvements or alterations may be withheld in Landlord’s sole discretion if such
improvements or alterations require any other alteration, addition, or improvement to be performed
or made to any portion of the Building other than the Premises. Any repairs or new construction by
Tenant shall be done in compliance with all applicable laws, rules, and regulations (including,
without limitation, the Americans with Disabilities Act of 1990 (the “ADA”)) and in conformity with
plans and specifications approved by Landlord and shall be performed by a licensed contractor
approved by Landlord; provided, however, Landlord’s consent to any alterations or improvements, or
Landlord’s approval of plans and specifications for such alterations or improvements shall create
no responsibility or liability on the part of Landlord for their completeness, design sufficiency,
or compliance with all laws, rules, and regulations (including, without limitation, the ADA). If
requested by Landlord, Tenant shall post a bond or other security satisfactory to Landlord to
protect Landlord against liens arising from work performed for Tenant.
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All work performed shall be
done in a workmanlike manner and with materials of the quality and appearance as exist throughout
the Building. Landlord may require Tenant to remove and restore any improvements or alterations on
the termination of this Lease in accordance with Section 13.2 below.
Section 7.5 Liens. Tenant shall keep the Premises and the Building free from any liens arising out of any work
performed, material furnished, or obligations incurred by Tenant. If Tenant disputes the
correctness or validity of any claim of lien, Tenant shall, within ten (10) days after written
request by Landlord, pest or provide security in a form and amount acceptable to Landlord to insure
that title to the Property remains free from the lien claimed.
ARTICLE 8. INSURANCE
Section 8.1 Use; Rate. Tenant shall not do anything in or about the Premises which will in any way tend to
increase insurance rates paid by Landlord on policies of liability or casualty insurance maintained
with respect to the Building and/or Property. In no event shall Tenant carry on any activities
which would invalidate any insurance coverage maintained by Landlord.
Section 8.2 Liability Insurance. Tenant shall during the Lease Term, at its sole expense, maintain in full force a policy or
policies of commercial general liability insurance issued by one or more insurance carriers,
insuring against liability for injury to or death of persons and loss of or damage to property
occurring in or on the Premises and any portion of the Common Area which is subject to Tenant’s
exclusive control. Said liability insurance shall be in an amount not less than Two Million
Dollars ($2,000,000.00) combined single limit for bodily and personal injury and property damage
per occurrence and not less than Three Million Dollars ($3,000,000.00) in the aggregate.
Section 8.3 Worker’s Compensation Insurance. Tenant shall at all times maintain Worker’s Compensation Insurance in compliance with
Washington law.
Section 8.4 Casualty Insurance. Tenant shall pay for and shall maintain in full force and effect during the Term of this
Lease a standard form policy or policies of property and all-risk coverage with an extended
coverage endorsement covering all interior and storefront glass, whether plate or otherwise, stock
in trade, trade fixtures, equipment, and other personal property located in the Premises and used
by Tenant in connection with its business.
Section 8.5 Compliance With Regulations. Tenant shall, at its own expense, comply with all requirements, including installation of
fire extinguishers, or automatic dry chemical extinguishing systems, required by insurance
underwriters or any governmental authority having jurisdiction thereover, necessary for the
maintenance of reasonable fire and extended insurance for the Premises and/or Building.
Section 8.6 Waiver of Subrogation. Any property and all-risk coverage insurance carried by Landlord or Tenant insuring, in
whole or in part, the Building and/or the Premises, including improvements, alterations and changes
in and to the Premises made by either of them, and
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Tenant’s trade fixtures therein shall be written
in such a manner as to permit the waiver of rights of subrogation prior to loss by either party
against the other in connection with loss or damage covered by the policies involved. So long as
the policy or policies can be so written and maintained in effect, neither Landlord nor Tenant
shall be liable to the other for any such loss or damage. Either party shall, upon request by the
other party, furnish such other party evidence of its compliance with this Section 8.6.
Section 8.7 General Requirements.
8.7.1 All policies of insurance required to be carried hereunder by Tenant shall be written by
companies licensed to do business in Washington and which have A.M. Best rating of not less than
A:XIII or better in the “Best’s Key Rating Guide”. Tenant shall, when requested by Landlord,
furnish Landlord with a certificate evidencing insurance required to be maintained by Tenant
pursuant to this Article 8 and shall satisfy Landlord that each such policy is in full
force and effect.
8.7.2 The commercial general liability insurance required to be carried under Section
8.2 above shall be primary and non-contributing with the insurance carried by Landlord.
8.7.3 Each policy required under Sections 8.2 and 8.4 shall expressly include,
severally and not collectively, as named or additionally named insured thereunder, the Landlord,
Landlord’s property manager, and any person or firm designated by the Landlord and having an
insurable interest thereunder, hereinafter called “Additional Insured,” as their respective
interests may appear.
8.7.4 All insurance policies maintained by Tenant shall not be subject to cancellation in
coverage except upon at least thirty (30) days’ prior written notice to Landlord. The policies of
insurance or duly executed Accord Form 27, Evidence of Property Insurance Forms evidencing such
policies, together with satisfactory evidence of the payment of premiums thereon, shall be
deposited with Landlord on the Lease Commencement Date and not less than thirty (30) days prior to
the expiration of the term of such coverage.
8.7.5 If the Tenant fails to procure and maintain insurance as required by this Article
8, the Landlord may obtain such insurance and keep it in effect, and the Tenant shall pay to
Landlord the premium cost thereof, upon demand and as Additional Rent, with interest as provided in
Section 21.7 below from the date of payment by the Landlord to the date of repayment by the
Tenant.
8.7.6 The limits of any insurance maintained by Tenant pursuant to this Article 8
shall in no way limit the liability of Tenant under this Lease.
8.7.7 All policies required in Sections 8.2, 8.3, and 8.4 shall have A.M. Best rating
of not less than A:XIII and written with an insurance company licensed to do business in the State
of Washington.
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Section 8.8 Blanket Insurance. The Tenant may fulfill its insurance obligations hereunder by maintaining a so-called
“blanket” policy or policies of insurance in a form that provides by specific endorsement coverage
not less than that which is required hereunderfor the particular property or interest referred to
herein; provided, however, that the coverage required by this Article 8
will not be reduced or diminished by reason of use of such blanket policy of insurance.
ARTICLE 9. DESTRUCTION AND CONDEMNATION
Section 9.1 Total or Partial Destruction.
9.1.1 In the event the Building and/or the Premises is damaged by fire or other perils covered
by Landlord’s insurance, Landlord shall:
9.1.1.1 In the event of total destruction, at Landlord’s option, as soon as reasonably
possible thereafter, commence repair, reconstruction and restoration of the Building and/or the
Premises and prosecute the same diligently to completion, in which event this Lease shall remain in
full force and effect; or within sixty (60) days after the discovery of such
damage, elect not to so repair, reconstruct or restore the Building and/or the Premises, in
which event this Lease shall terminate. In either event, Landlord shall give Tenant written notice
of its intention within said sixty (60) day period. In the event Landlord elects not to restore
the building, and/or the Premises, this Lease shall be deemed to have terminated as of the date of
the discovery of such total destruction.
9.1.1.2 In the event of partial destruction of the Building and/or the Premises, to an extent
not exceeding twenty-five percent (25%) of the full insurable value thereof, and if the damage
thereto is such that the Building and/or the Premises may be repaired, reconstructed or restored
within a period of ninety (90) days from the date of the discovery of such casualty, and if
Landlord will receive insurance proceeds sufficient to cover the cost of such repairs, then
Landlord shall commence and proceed diligently with the work of repair, reconstruction and
restoration and this Lease shall continue in full force and effect. If such work of repair,
reconstruction and restoration shall require a period longer than ninety (90) days or exceeds
twenty-five percent (25%) of the full insurable value thereof, or if said insurance proceeds will
not be sufficient to cover the cost of such repairs, then Landlord either may elect to so repair,
reconstruct or restore and the Lease shall continue in full force and effect or Landlord may elect
not to repair, reconstruct or restore and the Lease shall then terminate. Under any of the
conditions of this Section 9.1.1.2, Landlord shall give written notice to Tenant of its
intention within sixty (60) days after Landlord’s discovery of such partial destruction. In the
event Landlord elects not to restore the Building and/or the Premises, this Lease shall be deemed
to have terminated as of the date possession of the Premises is surrendered to Landlord.
9.1.2 Upon any termination of this Lease under any of the provisions of this Section
9.1, the parties shall be released without further obligation to the other from the date
possession of the Premises is surrendered to Landlord except for items which have therefore accrued
and are then unpaid.
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9.1.3 In the event of repair, reconstruction and restoration by Landlord as herein provided,
the rental payable under this Lease shall be abated proportionately with the degree to which
Tenant’s use of the Premises is impaired during the period of such repair, reconstruction or
restoration; provided that there shall be no abatement of rent if such damage is the result of
Tenant’s negligence or intentional wrongdoing. Tenant shall not be entitled to any compensation or
damages for loss in the use of the whole or any part of the Premises and/or any inconvenience or
annoyance occasioned by such damage, repair, reconstruction or restoration. Tenant shall not be
released from any of its obligations under this Lease except to the extent and upon the conditions
expressly stated in this Section. 9.1. Notwithstanding anything to the contrary contained
in this Section 9.1, if Landlord is delayed or prevented from repairing or restoring the
damaged Premises within one (1) year after the discovery of such damage or destruction by reason of
acts of God, war, governmental restrictions, inability to procure the necessary labor or materials,
or other cause beyond the control of Landlord, Landlord, at its option, may terminate this Lease,
whereupon Landlord shall be relieved of its obligation to make such repairs or restoration and
Tenant shall be released from its obligations under this Lease as of the end of said one year
period.
9.1.4 If damage is due to any cause other than fire or other peril covered by extended
coverage insurance, Landlord may elect to terminate this Lease.
9.1.5 If Landlord is obligated to or elects to repair or restore as herein provided, Landlord
shall be obligated to make repair or restoration only of those portions of the Building and the
Premises which were originally provided at Landlord’s expense, and the repair and restoration of
items not provided at Landlord’s expense shall be the obligation of Tenant.
9.1.6 Notwithstanding anything to the contrary contained in this Section 9.1.
Landlord shall not have any obligation, whatsoever to repair, reconstruct or restore the Premises
when the damage resulting from any casualty covered under this Section 9.1 is discovered
during the last twelve (12) months of the Term of this Lease or any extension hereof.
9.1.7 Landlord and Tenant hereby waive the provisions of any statutes or court decisions which
relate to the abatement or termination of leases when leased property is damaged or destroyed and
agree that such event shall be exclusively governed by the terms of this Lease.
Section 9.2 Condemnation. If the whole of the Building or the Premises, or such portion thereof as shall be required
for its reasonable use, shall be taken by virtue of any condemnation or eminent domain proceeding,
this Lease shall automatically terminate as of the date of the condemnation, or as of the date
possession is taken by the condemning authority, whichever is later. Current Rent shall be
apportioned as of the date of the termination. In case of a taking of a part of the Premises or a
part of the Building not required for the reasonable use of the Premises, then this Lease shall
continue in full force and effect and the Rental shall be equitably reduced based upon the
proportion by which the Rentable Area of the Premises is reduced. This Rent reduction shall be
effective on the date of the partial taking. No award, settlement in lieu of an award, or any
partial or entire taking shall be apportioned, and Tenant hereby assigns to Landlord any award or
settlement in lieu of an award which may be made in the taking or condemnation proceeding, together
with any
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and all rights of Tenant now or hereafter arising in or to the same or any part thereof;
provided that nothing herein shall prevent Tenant from making a separate claim against the
condemning authority for the taking of Tenant’s personal property and/or moving costs so long as
such claim in no way affects the award to be received by Landlord.
Section 9.3 Sale Under Threat of Condemnation. A sale by Landlord to any authority having the power of eminent domain, either under threat
of condemnation or while condemnation proceedings are pending, shall be deemed to be a taking under
the power of eminent domain for all purposes under this Article 9.
ARTICLE 10. INDEMNITY AND WAIVER
Section 10.1 Indemnity.
10.1.1 Tenant, as a material part of the consideration to be rendered to Landlord, and subject
to subsection 10.1.2 below, hereby agrees to defend, indemnify, and hold
Landlord harmless against any and all claims, costs, and liabilities, including reasonable
attorneys’ fees and costs (including costs and fees associated with any lawsuit or appeal), arising
by reason of any injury or claim of injury to person or property, of any nature and howsoever
caused, arising out of the use, occupation and/or control of the Premises, or from any breach of
the terms of this Lease, or any violation of any governmental or insurance requirements by Tenant,
its sublessees, assignees, invitees, agents, employees, contractors, or licensees, except and to
the extent as may arise out of the willful or negligent acts of Landlord or Landlord’s agents,
employees or contractors. Landlord, subject to subsection 10.1.2 below, hereby agrees to
defend, indemnify, and hold Tenant harmless against any and all claims, costs, and liabilities,
including reasonable attorneys’ fees and costs (including costs and fees associated with any
lawsuit or appeal), arising by reason of any breach of the terms of this Lease by Landlord, or any
violation of any governmental or insurance requirements by Landlord, its employees or contractors,
except and to the extent as may arise out of the willful or negligent acts of Tenant or Tenant’s
agents, employees or contractors.
10.1.2 In the event of concurrent negligence of Tenant, its sublessees assignees, invitees,
agents, employees, contractors, or licensees on the one hand, and that of Landlord, its agents,
employees, or contractors on the other hand, which concurrent negligence results in injury or
damage to persons or property of any nature and howsoever caused, and relates to the construction,
alteration, repair, addition to, subtraction from, improvement to or maintenance of the Premises,
Common Areas, or Building, Tenant’s obligation to indemnify Landlord as set forth in this
Section 10.1 shall be limited to the extent of Tenant’s negligence, and that of Tenant’s
sublessees, assignees, invitees, agents, employees, contractors or licensees, including Tenant’s
proportional share of costs, attorneys’ fees and expenses incurred in connection with any claim,
action or proceeding brought with respect to such injury or damage. Tenant agrees that it will not
assert its industrial insurance immunity if such assertion would be inconsistent with Landlord’s
right to indemnification from Tenant pursuant to this Section 10.1. The parties agree that
this provision was mutually negotiated.
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Section 10.2 Waiver. All property kept, stored or maintained on the Premises shall be so kept, stored or
maintained at the sole risk of Tenant. Except in the case of Landlord’s negligence or willful
misconduct, Landlord shall not be liable, and Tenant waives all claims against Landlord, for
damages to persons or property sustained by Tenant or by any other person or firm resulting from
the Building or by reason of the Premises or any equipment located therein becoming out of repair,
or through the acts or omissions of any persons present in the Building (including the Common
Areas) or renting or occupying any part of the Building (including the Common Areas), or for loss
or damage resulting to Tenant or its property from burst, stopped or leaking sewers, pipes,
conduits, or plumbing fixtures, or for interruption of any utility services, or from any failure of
or defect in any electric line, circuit, or facility, or any other type of improvement or service
on or furnished to the Premises or the Common Areas or resulting from any accident in, on, or about
the Premises or the Common Areas.
ARTICLE 11. DELAYS
Section 11.1 Delays. If either party is delayed in the performance of any covenant of this Lease because of any
of the following causes (referred to elsewhere in this Lease as a “Delaying Cause”) acts of the
other party, action of the elements, war, riot, labor disputes, inability to procure or general
shortage of labor or materials in the normal channels of trade, delay in transportation, delay in
inspections, or any other cause beyond the reasonable control of the parry so obligated, whether
similar or dissimilar to the foregoing, financial inability excepted, then that performance shall
be excused for the period of the delay but shall in no way affect Tenant’s obligation to pay Rent
or the length of the Lease Term.
ARTICLE 12. ASSIGNMENT, SUBLEASE AND SUCCESSION
Section 12.1 Consent Required. Tenant shall neither assign this Lease or any interest herein, nor sublet, license, grant
any concession, or otherwise give permission to anyone other than Tenant to use or occupy all or
any part of the Premises without the prior written consent of Landlord, which shall not be
unreasonably withheld by Landlord following Landlord’s receipt of the items described in the
following sentence. Landlord may condition its consent upon an increase in the Basic Rent payable
hereunder in an amount equal to any subrental or other consideration received by Tenant as a result
of the subletting or assignment which is in excess of the Basic Rent provided for in Section
4.1 above, and the submission of all information requested by Landlord pertaining to the
proposed assignment/sublease, including the business proposed to be conducted by the
assignee/sublessee, the financial condition of the proposed assignee/sublessee, hours of operation
of the proposed assignee/sublessee, and such other documentation and information as may be
requested by Landlord. Landlord shall require a Five Hundred Dollar ($500.00) payment to cover its
handling charges for each assignment or sublease it is requested to approve. The sale, assignment,
transfer, sublease or disposition, whether for value, by operation of law, gift, will, or
intestacy, of (a) fifty percent (50%) or more of the issued and outstanding stock of Tenant if
Tenant is a corporation, or (b) of the interest of any general partner, joint venturers, or
associate of Tenant, if Tenant is a partnership, joint venturer, or association, shall be deemed an
assignment of this Lease under this Section 12.1.
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Section 12.2 General Conditions. In the event of any assignment or sublease, Tenant shall remain primarily liable on its
covenants hereunder unless released in writing by Landlord. In the event of any assignment or
sublease, the assignee or sublessee shall agree in writing to perform and be bound by all of the
covenants of this Lease required to be performed by Tenant. Any one assignment or subletting
approved by Landlord pursuant to Section 12.1, shall not be deemed to allow any further
assignment or subletting without Landlord’s prior written consent.
Section 12.3 Succession. Subject to any limitations on assignment and subletting set forth herein, all the terms and
provisions of this Lease shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
ARTICLE 13. SURRENDER OF POSSESSION
Section 13.1 Surrender. At the expiration of the Lease created hereunder, whether by lapse of time or otherwise,
Tenant shall surrender the Premises to Landlord.
Section 13.2 Condition at Time of Surrender. Furnishings, trade fixtures and equipment including but not limited to voice and data
cabling, telecommunications equipment installed by Tenant shall be the property of Tenant. Upon
termination of this Lease, Tenant shall remove any such property. Tenant shall repair or reimburse
Landlord for the cost of repairing any damage to the Premises and/or Common Areas resulting from
the installation or removal of Tenant’s property, and Tenant shall deliver the Premises to Landlord
in clean and good condition, except for reasonable wear and tear.
ARTICLE 14. HOLDING OVER
Section 14.1 Holding Over. This Lease shall terminate without further notice at the expiration of the Lease Term. Any
holding over by Tenant without the express written consent of Landlord shall not constitute the
renewal or extension of this Lease or give Tenant any rights in or to the Premises. In the event
of such a holding over by Tenant without the express written consent of Landlord, the monthly Rent
payments to be paid by Tenant shall be subject to increase at the sole discretion of Landlord in an
amount equal to one hundred fifty percent (150%) of the then applicable Rental rate;
provided, however, no payment of such increased Rental by Tenant shall be deemed to
extend or renew the Term of this Lease, and such Rental payments shall be fixed by Landlord only to
establish the amount of liability for payment of Rent on the part of Tenant during such period of
holding over. In the event Landlord shall give its express written consent to Tenant to occupy the
Premises beyond the expiration of the Term, that occupancy shall be construed to be a
month-to-month tenancy upon all the same terms and conditions as set forth herein unless modified
by Landlord in such written consent; provided that Rent charged during any period of holding over
shall be as stated above.
ARTICLE 15. ENTRY BY LANDLORD
Section 15.1 Entry by Landlord. Landlord reserves, and shall at any and all times have, the right to enter the
Premises
during business hours to inspect the same, to show the Premises to
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prospective purchasers or
lessees, to post notices of nonresponsibility, to repair the Premises and any portion of the
Building that Landlord may deem necessary or desirable, without abatement of Rent, and may for that
purpose erect scaffolding and other necessary structures where reasonably required by the character
of the work to be performed; provided, that the entrance to the Premises shall not be blocked
unreasonably thereby and, provided, further that the business of the Tenant shall not be interfered
with unreasonably. Tenant hereby waives any claim for damages, injury or inconvenience to or
interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned by Landlord’s exercise of its rights pursuant to this Section
15.1, except and to the extent any such damage, injury or interference results from the
negligence of Landlord. Landlord shall at all times have and retain a key with which to unlock all
of the doors in, upon and about the Premises, excluding Tenant’s vaults, safes and files, and
Landlord shall have the right to use any and all means which Landlord may deem proper to open the
doors to or in the Premises in an emergency, in order to obtain entry to the Premises without
liability to Tenant. Any entry to the Premises obtained by Landlord by any of these means, or
otherwise, shall not under any circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any
portion thereof. Notwithstanding the foregoing, Landlord agrees to use reasonable efforts to
provide reasonable advance notice to Tenant before entering the Premises for any reason other than
routine entries (for example, to replace light bulbs) or emergencies threatening injury to persons
or damage to property.
Section 15.2 Failure to Surrender. If Tenant fails to surrender the Premises upon the expiration or termination of this Lease,
Tenant shall indemnify and hold Landlord harmless from loss and liability resulting from that
failure, including, without limiting the generality of the foregoing, any claims made by any
succeeding tenant.
ARTICLE 16. SUBORDINATION
Section 16.1 Lease Subordinate To Mortgages. This Lease shall automatically be subordinate to any existing mortgages or deeds of trust
which affect the Property, the Building and/or the Premises; to any first mortgages or deeds of
trust hereafter affecting the Property, the Building and/or the Premises, and to all renewals,
modifications, consolidations, replacements or extensions thereof. This provision shall be
self-operative and no further instrument of subordination shall be required by any existing or
first mortgagee or beneficiary of a deed of trust; provided, that Tenant shall have the
continued enjoyment of the Premises free from any disturbance or interruption by any existing or
first mortgagee or beneficiary of a deed of trust, or any purchaser at a foreclosure or private
sale of the Property as a result of Landlord’s default under a mortgage or deed of trust, so long
as Tenant is not then in default under the terms and conditions of this Lease.
Section 16.2 Estoppel Certificates. Tenant shall, within fifteen (15) days of presentation, acknowledge and deliver to Landlord
(a) any subordination or non-disturbance agreement or other instrument that Landlord may require to
carry out the provisions of this Article, and (b) any estoppel certificate requested by Landlord
from time to time in the standard form of any mortgages or beneficiary of and deed of trust
affecting the Building and Premises certifying, if such be true, that Tenant is in occupancy, that
this Lease is unmodified and in full force and effect, or if there have
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been modifications, that
the Lease as modified is in full force and effect, and stating the modifications and the dates to
which the Rent and other charges shall have been paid, and that there are no Rental offsets or
claims. Acceptable forms of estoppel certificate and subordination agreement are attached as
Exhibits F and G.
ARTICLE 17. DEFAULT AND REMEDY
Section 17.1 Events of Tenant’s Default. The occurrence of any one or more of the following events shall constitute a material
default in breach of this Lease by Tenant:
17.1.1 Vacation or abandonment of the Premises;
17.1.2 Failure by Tenant to make any payment required as and when due, where that failure
shall continue for a period of three (3) calendar days;
17.1.3 Failure by Tenant to observe or perform any of the covenants, conditions or provisions
of this Lease, other than making any payment when due, where that failure shall continue for a
period of thirty (30) calendar days after Landlord gives written notice to Tenant of that failure;
and
17.1.4 Making by Tenant of any general assignment or general arrangement for the benefit of
creditors; the filing by or against Tenant of a petition in bankruptcy, including reorganization or
arrangement, unless, in the case of a petition filed against Tenant, the petition is dismissed
within thirty (30) calendar days; or the appointment of a trustee or receiver to take possession of
substantially all of Tenant’s assets located at the Premises, or of Tenant’s interest in this
Lease.
Section 17.2 Remedies. In the event of any breach or default by Tenant under the terms or provisions of this
Lease, Landlord, in addition to any other rights or remedies that it may have, shall have the
immediate right of reentry. Should Landlord elect to reenter or take possession, of the Premises,
it may either terminate this Lease, or from time to time, without terminating this Lease, relet the
Premises or any part thereof for the account and in the name of the Tenant or otherwise, for any
term or terms and conditions as Landlord in its sole discretion may deem advisable, with the right
to complete construction of or make alterations and repairs to the Premises and/or improvements
installed by Tenant. Tenant shall pay to Landlord in the event of reletting, as soon as
ascertained, the costs and expenses incurred by Landlord in the reletting, completion of
construction, or in making any alterations and repairs. Rentals received by Landlord from any
reletting shall be applied: first, to the payment of any indebtedness, other than Rent, due
hereunder from Tenant to Landlord; second, to the payment of Rent due and unpaid hereunder and to
any other payments required to be made by the Tenant hereunder; and the residue, if any, shall be
held by Landlord as payment of future Rent or damages in the event of termination as the same may
become due and payable hereunder; and the balance, if any, at the end of the Term of this Lease
shall be paid to Tenant. Should rental received from time to time from the reletting during any
month be a lesser Rental than herein agreed to by Tenant, the Tenant shall pay the deficiency to
Landlord. The Tenant shall pay the deficiency each month as the amount thereof is ascertained by
the Landlord.
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Notwithstanding the foregoing, Landlord shall also have the right upon Tenant’s
default to terminate this Lease, accelerate all Rental payments due under this Lease for the
remaining Term hereof, or if Tenant has been granted an
option to extend and that option has been exercised, for the remainder of the option term, and
shall be entitled to recover from Tenant the total amount of unpaid Rent together with all past due
Rent and any other payment due hereunder, less the amount which is established to be the reasonable
rental value of the Premises for the remaining Term, after taking into consideration normal
duration of vacancy periods, tenant improvement costs and Landlord’s reasonably anticipated costs
of reletting the Premises.
Section 17.3 Reletting. No reletting of the Premises by Landlord permitted under Section 17.2 shall be
construed as an election on Landlord’s part to terminate this Lease unless a notice of Landlord’s
intention to terminate is given to Tenant, or unless the termination of the Lease is decreed by a
court of competent jurisdiction. In the event of reletting without termination, Landlord may at
any time thereafter elect to terminate this Lease for a previous breach, provided it has not been
cured. Should Landlord at any time terminate this Lease for any breach, in addition to any other
remedy it may have, it may recover from Tenant all damages it may incur by reason of that breach.
Section 17.4 Default of Landlord. Landlord shall not be in default unless Landlord fails to perform its obligations under
this Lease within thirty (30) days after written notice by Tenant, or if such failure is not
reasonably capable of being cured within such thirty (30) day period, Landlord shall not be in
default unless Landlord has failed to commence the cure and diligently pursue the cure to
completion.
Section 17.5 Non-Waiver. Failure by Landlord to take action or declare a default as a result of any breach of any
term, covenant or condition herein contained shall not be deemed to be a waiver of that term,
covenant, or condition, or of any subsequent breach of any term, covenant or condition herein
contained. The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other
than the failure of Tenant to pay the particular Rental so accepted, regardless of Landlord’s
knowledge of that preceding breach at the time of acceptance of the Rent.
Section 17.6 Mortgagee Protection. In the event of any uncured default on the part of Landlord, which default would entitle
Tenant to terminate this Lease, Tenant shall not terminate this Lease unless Tenant has notified
any mortgagee or beneficiary of deed of trust, whose address shall have been furnished to Tenant,
at least sixty (60) days in advance of the proposed effective date of the termination. During the
sixty (60) day period the mortgagee or beneficiary shall be entitled to commence to cure the
default. If the default is not capable of being cured with due diligence within the sixty (60) day
period, the Lease shall not be terminated if the mortgagee or beneficial of a deed of trust shall
have commenced to cure the default within the sixty (60) day period and shall pursue the cure with
due diligence thereafter. If the default is one which is not capable of cure by the mortgagee or
beneficiary of a deed of trust within the sixty (60) day period because the mortgagee or
beneficiary of a deed of trust
is not in possession of the Building or Property, the sixty (60) day period shall be extended
to include the time needed to obtain possession of the Premises by the
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mortgagee or beneficiary of
a deed of trust by power of sale, judicial foreclosure, or other legal action required to recover
possession, provided that these avenues are pursued with due diligence.
ARTICLE 18. LIMITATION OF LIABILITY
Section 18.1 Limitation of Landlord’s Liability. Tenant understands, covenants and agrees the Landlord’s liability under this Lease is
expressly limited to Landlord’s interest in the Property and the Building, and Tenant shall have no
recourse hereunder against any member or manager of Landlord nor any other property of Landlord or
any property of any member or manager of Landlord. In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns hereby further covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord:
18.1.1 The sole and exclusive remedy shall be against Landlord’s interest in the Property and
the Building;
18.1.2 No member or manager of Landlord shall be sued or named as a party in any suit or
action (except as may be necessary to secure jurisdiction over the Landlord);
18.1.3 No service of process shall be made against any member or manager of Landlord (except
as may be necessary to secure jurisdiction over Landlord);
18.1.4 No judgment will be taken against any member or manager of Landlord;
18.1.5 No writ of execution will ever be levied against the assets of any member or manager of
Landlord other than the limited liability company assets of Landlord; and
18.1.6 These covenants and agreements are enforceable both by Landlord and also by any member
or manager of Landlord.
Section 18.2 Applicability. Tenant agrees that each of the covenants and agreements contained in Section 18.1
above shall be applicable to any covenant or agreement either expressly contained in this Lease or
imposed by statute or at common law.
ARTICLE 19. NOTICES
Section 19.1 Notices. Any notice required or desired to be given under this Lease shall be in writing with copies
directed as indicated herein and shall be personally served or given by mail Any notice given by
mail shall be deemed to have been given when seventy-two (72) hours have elapsed from the time
such notice was deposited in the United States mail, certified mail, return receipt requested,
and postage prepaid, addressed to the party to be served at the last address given by that party to
the other party under the provisions of this section. As of the Lease Commencement Date, the
addresses of the Landlord and Tenant are as specified in the Lease Summary.
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ARTICLE 20. HAZARDOUS SUBSTANCES
Section 20.1 Presence and Use of Hazardous Substances. Tenant shall not, without Landlord’s prior written consent, keep on or around the Premises,
Common Areas or Building, for use, disposal, transportation, treatment, generation, storage or
sale, any substances designated as, or containing components designated as, hazardous, dangerous,
toxic or harmful (collectively referred to as “Hazardous Substances”), and/or are subject to
regulation by any federal, state or local law, regulation, statute or ordinance.
Section 20.2 Cleanup Costs, Default and Indemnification. Tenant shall be fully and completely liable to Landlord for any and all cleanup costs and
any and all other charges, fees, penalties (civil and criminal) imposed by any governmental
authority with respect to Tenant’s use, disposal, transportation, treatment, generation, storage
and/or sale of Hazardous Substances, in or about the Premises, Common Areas, or Building, whether
or not consented to by Landlord. Tenant shall indemnify, defend and hold Landlord harmless from
any and all of the costs, fees, penalties, liabilities and charges incurred by, assessed against or
imposed upon Landlord (as well as Landlord’s attorneys’ fees and costs) as a result of Tenant’s
use, disposal, transportation, treatment, generation, storage and/or sale of Hazardous Substances.
ARTICLE 21. MISCELLANEOUS
Section 21.1 Headings. The headings used in this Lease are for convenience only. They shall not be construed to
limit or to extend the meaning of any part of this Lease.
Section 21.2 Amendments. Any amendments or additions to this Lease shall be in writing by the parties hereto, and
neither Tenant nor Landlord shall be bound by any verbal or implied agreements.
Section 21.3 Time of the Essence. Time is expressly declared to be of the essence of this Lease.
Section 21.4 Entire Agreement. This Lease contains the entire agreement of the parties hereto with respect to the matters
covered hereby, and no other agreement, statement or promise made by any party hereto, or to any
employee, officer or agent of any party hereto, which is not contained herein, shall be binding or
valid.
Section 21.5 Language. The words “Landlord” and “Tenant”, when used herein, shall be applicable to one (1) or more
persons, as the case may be, and the singular shall include the plural and the neuter shall include
the masculine and feminine, and if there be more than one (1) the obligations hereof shall be joint
and several. The word “persons” whenever used shall include individuals, firms, associations and
corporations and any other legal entity, as applicable. The language in all parts of this Lease
shall in all cases be construed as a whole and in accordance with its fair meaning, and shall not
be construed strictly for or against Landlord or Tenant.
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Section 21.6 Invalidity. If any provision of this Lease shall be deemed to be invalid, void or illegal it shall in
no way affect, impair or invalidate any other provision hereof.
Section 21.7 Late Charges. Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent or other sums
due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount
of which is difficult to determine, but include, without limitation, processing and accounting
charges, and late charges which may be imposed upon Landlord by the terms of any mortgage or deed
of trust covering the Premises. Therefore, in the event Tenant shall fail to pay any installment
of Rent or other sum due hereunder within three (3) days of the due date, Tenant shall pay to
Landlord as Additional Rent and as a reasonable estimate of the costs to Landlord, a late charge
equal to ten percent (10%) of each installment or the sum of One Hundred Dollars ($100.00) per
month, whichever is greater. A Fifty Dollar ($50.00) charge will be paid by the Tenant to the
Landlord for each returned check. In the event Landlord pays any sum or expense on behalf of
Tenant which Tenant is obligated to pay hereunder, or in the event Landlord expends any other sum
or incurs any expense, or Tenant fails to pay any sum due hereunder, Landlord shall be entitled to
receive interest upon that sum at the rate of eighteen percent (18%) per annum until paid.
Section 21.8 [Not Used].
Section 21.9 Computation of Time. The word “day” means “calendar day” herein, and the computation of time shall include all
Saturdays, Sundays and holidays for purposes of determining time periods specified herein.
Section 21.10 Applicable Law. This Lease shall be interpreted and construed under and pursuant to the laws of the State of Washington.
Section 21.11 Attorneys’ Fees. In the event either party requires the services of an attorney in connection with enforcing
the terms of this Lease or in the event suit is brought for the recovery of any Rent due under this
Lease for the breach of any covenant or condition of this Lease, or for the restitution of the
Premises to Landlord, and/or eviction of Tenant during the Term of this Lease or after the
expiration thereof, the prevailing party will be entitled to a reasonable sum for attorneys’ fees,
witness fees, and other court costs, both at trial and on appeal.
Section 21.12 Termination. Upon the termination of this Lease by expiration of time or otherwise, the rights of Tenant
and all persons claiming under Tenant in and to the Premises shall cease.
Section 21.13 Broker’s Commission. Tenant represents and warrants that it has incurred no liabilities or claims for brokerage
commissions or finder’s fees in connection with the negotiation and/or execution of this Lease and
that it has not dealt with or has any knowledge of any real estate broker/agent or salesperson in
connection with this Lease except for those identified in the Lease Summary. Tenant agrees to
indemnify, defend, and hold Landlord harmless from and against, all of such liabilities and claims (including, without limitation, attorneys’ fees and costs) made by any
other broker/agent or salesperson claiming to represent Tenant in connection with this Lease.
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Section 21.14 Signs or Advertising. The Tenant will not inscribe any inscription or post, place, or in any manner display any
sign, notice, picture or poster or any advertising matter whatsoever, anywhere in or about the
Premises or Building which can be seen from outside the Premises, without first obtaining
Landlord’s written consent thereto. Any consent so obtained from Landlord shall be with the
understanding and agreement that Tenant will remove these items at the termination of the tenancy
herein created and repair any damage or injury to the Premises or the Building caused thereby.
Landlord will install and maintain an Office Tower directory of tenants in the principal lobby
entrances of the Building, and Landlord may, as it may determine from rime to time, publish or
advertise the Office tenancy list of Landlord’s Building. Tenant shall not use photographs,
drawings, of other renderings of the Building, the Building logo or tradename, or any other
proprietary name, mark or symbol of Landlord without first obtaining Landlord’s prior written
consent.
Section 21.15 Transfer of Landlord’s Interest. In the event Landlord transfers its reversionary interest in the Premises or its rights
under this Lease, other than a transfer for security purposes only, Landlord shall be relieved of
all obligations occurring hereunder after the effective date of such transfer.
Section 21.16 Counterparts. This Agreement may be executed by the parries in counterparts, and each counterpart
Agreement shall be deemed to be an original hereof.
Section 21.17 Quiet Enjoyment. Subject to the provisions of this Lease and conditioned upon performance of all of the
provisions to be performed by Tenant hereunder, Landlord shall secure to Tenant during the Lease
Term the quiet and peaceful possession of the Premises and all rights and privileges appertaining
thereto.
Section 21.18 Authority. Each party hereto warrants that it has the authority to enter into this Agreement and that
the signatories hereto have the authority to bind Landlord and Tenant, respectively.
Section 21.19 Name of Building. In the event Landlord chooses to change the name of the Building, Tenant agrees that such
change shall not affect in any way its obligations under this Lease, and that, except for the name
change, all terms and conditions of this Lease shall remain in full force and effect. Tenant
agrees further that such name change shall not require a formal amendment to this Lease, but shall
be effective upon Tenant’s receipt of written notification from Landlord of said change.
Section 21.20 Rules and Regulations. Tenant agrees to abide by and adhere to any rules and regulations for the Building, and all
amendments thereto, which may be promulgated from time to time by Landlord which do not materially
change the provisions of this Lease. The rules and regulations currently in effect upon the date
of execution of this Lease are set forth as Exhibit D attached hereto.
Section 21.21 Consents. Landlord shall act reasonably when determining whether to give any consents or approvals
under the terms of this Lease.
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Section 21.22 Agency Disclosure. At the signing of this Lease, the Leasing Representative(s) identified in the Lease Summary
represented the party noted therein. Each party signing this document confirms that prior oral
and/or written disclosure of agency was provided to him/her in this transaction (as required by WAC
308-124D-040).
Section 21.23 Lease Summary, Addendum and Exhibits. The Lease Summary, set forth in the opening pages of the Lease, as well as any Addenda and
Exhibits to this Lease are hereby incorporated herein by reference.
Section 21.24 Survival. Those provisions of this Lease which, in order to be given full effect, require performance
by either Landlord or Tenant following the termination of this Lease shall survive the Termination
Date.
Section 21.25 Parking. During the term of the Lease, Landlord shall make available to Tenant in the Building
Garage a total of four (4) vehicle parking spaces. The parking spaces shall be available as
unreserved and undesignated spaces. Tenant shall pay Landlord (or the Garage operator if Landlord
so requests) monthly rent for each vehicle parking space provided hereunder at the monthly parking
rate for similar spaces in the Garage established from time to time by Landlord or the Garage
operator. Tenant’s use of parking in the Building Garage shall be subject to the terms and
conditions of the Parking Agreement attached hereto as Exhibit H.
IN WITNESS WHEREOF, this Lease Agreement is executed on the day and year first written above.
| TENANT: | SCOPE INTERNATIONAL, INC., | ||||||
| a Washington corporation | |||||||
| By: | /s/ Terry Mulberg |
||||||
| Its | President
|
||||||
| LANDLORD: | BENTALL CITY CENTRE L.L.C., | ||||||
| a Washington limited liability company | |||||||
| By: | BENTALL U.S. L.L.C., a Washington | ||||||
| limited liability company | |||||||
| Its Sole member | |||||||
| By: | /s/ Gary J. Carpenter
|
||||||
| Chief Operating Officer | |||||||
| By: | /s/ Betsy Sutherland |
||||||
| Vice President and Regional Manager | |||||||
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TENANT ACKNOWLEDGMENT
STATE OF WASHINGTON
|
) | |||||||
| ) | ss. | |||||||
COUNTY OF KING
|
) |
I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgment is the person whose true signature appears on this document.
On this 28th day of September, 1998 before me personally appeared
Terry Mulberg, to me known to be the President of SCOPE INTERNATIONAL, INC., the
corporation that executed the within and foregoing instrument, and acknowledged the said instrument
to be the free and voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument and that the seal
affixed, if any, is the corporate seal of said corporation.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ Elizabeth S. Sutherland
|
||||
| My commission expires: 11-15-98 | ||||
| Elizabeth S. Sutherland | ||||
| [Type or Print Notary Name] |
(Use This Space for Notarial Seal Stamp)
LANDLORD’S ACKNOWLEDGMENT
STATE OF WASHINGTON
|
) | |||||||
| ) | ss. | |||||||
COUNTY OF KING
|
) |
I certify that I know or have satisfactory evidence that the persons appearing before me and
making this acknowledgment are the persons whose true signatures appear on this document.
On this 28th day of September, 1998 before me personally appeared
Gary Carpenter, to me known to be the Chief Operating Officer of Bentall U.S.
L.L.C., the sole member of BENTALL CITY CENTRE L.L.C., the limited liability company that executed
the within and foregoing instrument, and acknowledged the said instrument to be the free and
voluntary act and deed of said company, for the uses and purposes therein mentioned, and on oath
stated that he was authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ Anne M. Douglas
|
||||
| My commission expires: 5-29-01 | ||||
| Anne M. Douglas | ||||
| [Type or Print Notary Name] |
(Use This Space for Notarial Seal Stamp)
STATE OF WASHINGTON
|
) | |||||||
| ) | ss. | |||||||
COUNTY OF KING
|
) |
I certify that I know or have satisfactory evidence that the persons appearing before me and
making this acknowledgment are the persons whose true signatures appear on this document.
On this 28th day of September, 1998 before me personally appeared
Betsy Sutherland, to me known to be the Vice President and Regional Manager of
Bentall U.S. L.L.C., the sole member of BENTALL CITY CENTRE L.L.C., the limited liability company
that executed the within and foregoing instrument, and acknowledged the said instrument to be the
free and voluntary act and deed of said company, for the uses and purposes therein mentioned, and
on oath stated that he was authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ Anne M. Douglas
|
||||
| My commission expires: 5-29-01 | ||||
| Anne M. Douglas | ||||
| [Type or Print Notary Name] |
(Use This Space for Notarial Seal Stamp)
EXHIBIT A
EXHIBIT B
LEGAL DESCRIPTION
PARCEL A:
Apartment Number 2 of Sixth and Union Condominium, a condominium intended for commercial use,
according to the condominium plan and survey map delineating said apartment, recorded in Volume 90
of condominiums, pages 1 through 9, inclusive, under King County Recording Number 8901121121;
TOGETHER WITH an undivided 54.8% interest in the common areas and facilities appertaining to said
apartment, and including therein, limited common areas and facilities so appertaining, according to
the condominium declarations recorded under King County Recording Number 8901121122.
PARCEL B:
The southeasterly half of Lot 6 and all of Lot 7, Block 17, Addition to the Town of Seattle, as
laid out by AA. Denny (commonly known as A.A. Denny’s Third Addition to the City of Seattle),
according to the plat thereof recorded in volume 1 of Plats, page 33, in King County, Washington;
TOGETHER WITH the northeasterly half in width of vacated alley adjoining Lot 7 and the
southeasterly half of Lot 6, all in Block 17; EXCEPT that portion lying within the following
described parcel:
Beginning at the southeast corner of Block 17, Addition to the City of Seattle, as laid out by A.A.
Denny (commonly known as A.A. Denny’s Third Addition to the City of Seattle), according to the plat
thereof recorded in Volume 1 of Plats, page 33, in King County, Washington; thence northerly along
the east line of said Block 17, north 30 37’10” west 5.00 feet to a point 5.00 feet northerly of,
as measured at right angles, the south line of said Block 17 and the TRUE POINT OF BEGINNING;
thence westerly and parallel with the south line, south 59 21’52” west 131.00 feet; thence
northerly and parallel with the east line of said Block 17, north 30 37’10” west 127.50 feet;
thence easterly and parallel with the south line of said Block 17, north 59 21’52” east 131.00 feet
to the east line of said Block 17; thence southerly along said east line, south 30 37’10” east
127.50 feet to the point of beginning.
PARCEL C:
Beginning at the southeast corner of Block 17, Addition to the City of Seattle, as laid out by A.A.
Denny (commonly known as A.A. Denny’s Third Addition to the City of Seattle), according to the plat
thereof recorded in Volume 1 of Plats, page 33, in King County, Washington; thence northerly along
the east line of said Block 17, north 30 37’10” west 5.00 feet to a point 5.00 feet northerly of,
as measured at right angles, the south line of said Block 17; thence westerly and parallel with
said south line, south 59 21’52” west 131.00 feet to the TRUE POINT OF BEGINNING; thence northerly
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and parallel with the east line of said Block 17, north 30 37’10” west 127.50 feet; thence
easterly and parallel with the south line of said Block 17, north 59 21’52” east 131.00 feet to the
east line of said Block 17; thence northerly along said east line, north 30 37’10” west 217.23 feet
to a point 10.00 feet south of, as measured at right angles, the north line of Block 17; thence
westerly and parallel with said north line, south 59 22’24” west 256.07 feet to the west line of
said Block 17; thence southerly along said west line, south 30 38’15” east 229.85 feet to the
northwest corner of Lot 9 of said Block 17; thence easterly along the north line of said Lot 9,
north 59 22’03” east 120.00 feet to the northeast corner of said Lot 9; thence southerly along the
east line of said Lot 9, south 30 37’43” east 114.92 feet to a point 5.00 feet northerly of, as
measured at right angles, the south line of said Block 17; thence easterly and parallel with said
south line, north 59 21’52” east 4.98 feet to the point of beginning; EXCEPT the southeasterly half
of Lot 6 and all of Lot 7, Block 17, Addition to the Town of Seattle, as laid out by A.A. Denny
(commonly known as A.A. Denny’s Third Addition to the City of Seattle), according to the plat
thereof recorded in Volume 1 of Plats, page 33, in King County, Washington; AND EXCEPT the
northeasterly half in width of the vacated alley adjoining said Lot 7 and the southeasterly half of
Lot 6, all in Block 17.
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EXHIBIT C
TO
U.S. BANK CENTRE OFFICE LEASE AGREEMENT
SCOPE INTERNATIONAL, INC.
WORKLETTER
| I. | BASIC BUILDING IMPROVEMENTS PROVIDED BY LANDLORD | |
| Tenant shall accept the Premises on an “AS-IS” basis. Landlord shall have no obligation to alter, remodel or improve the Premises, excluding Landlord’s agreement to construct and install a doorway into the existing inaccessible approximate 500 square foot area, which comprises a portion of the 3,874 rentable area of the premises, which area Landlord shall cause to be clean and clear of existing property of other tenant(s), ready for the installation by Tenant of the Tenant Improvements described in this work letter. | ||
| II. | TENANT IMPROVEMENTS | |
| Subject to Landlord’s prior written approval, which approval will not be unreasonably withheld or delayed or unreasonably conditioned, Tenant shall have the right to have certain tenant improvements installed in the Premises in accordance with the provisions of the Lease and this Work Letter. The tenant improvements approved by Landlord are referred to as the “Tenant Improvements”. Landlord shall pay the cost of such Tenant Improvements up to an amount equal to $13.00 per rentable square foot of the Premises (the “Tenant Improvement Allowance”). The Tenant Improvement Allowance shall be used exclusively for the cost of design and construction of Tenant Improvements which will be permanently affixed to the Premises including, but not be limited to: Landlord’s construction management fee (as described in Section IV below), space planning fees, architectural fees, engineering fees, cabling, partitions, doors, door frames, hardware, paint, wall coverings, bass, floor coverings, thermostats, telephone and electrical outlets, light switches, window coverings, all fire life safety modifications and upgrades, supplemental HVAC, all applicable permit fees, building standard signage and sales tax. The Tenant Improvement Allowance shall not be used for Tenant’s personal property including equipment, furniture, or trade fixtures. The cost of the Tenant Improvements up to the Tenant Improvement Allowance shall be applied by Landlord directly to Landlord’s contractor performing the work. All costs and expenses related to the Tenant Improvements in excess of the Tenant Improvement Allowance shall be paid directly by Tenant to the contractor(s) performing the work when due. |
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| III. | DESIGN OF TENANT IMPROVEMENTS | |
| Tenant shall cause Tenant’s architect to prepare all space plans, work letters and construction drawings for the Tenant Improvements, all of which shall be subject to Landlord’s written approval, which approval shall not be unreasonably withheld or delayed. Tenant shall use one of Landlord’s approved architects for preparation or review of the Final Plans (as defined below). The construction drawings (the “Final Plans”) shall be sufficient to obtain all required building permits. | ||
| IV. | CONSTRUCTION OF TENANT IMPROVEMENTS |
| A. | Construction by Landlord: Landlord’s contractor shall construct the Tenant Improvements in accordance with the approved Final Plans (the “Work”). Tenant may select Tenant’s contractor from a list of three contractors provided by Landlord. Tenant shall be responsible for reviewing all bids for the Tenant Improvements. Tenant, at Tenant’s cost, shall provide Landlord with a copy of final as-built plans following completion of the Tenant Improvements. Tenant shall pay Landlord a construction management fee equal to, four percent (4%) of the actual cost of the Work (excluding design fees), as evidenced by the signed construction contract with Unimark Construction, including, without limitation, permit fees, sales tax, and change orders. Landlord shall use its reasonable best efforts to cause the contractor to complete the Work by the Lease Commencement Date. | ||
| B. | Payments: Payment for the Work shall be made in accordance with Section II above. | ||
| C. | Changes in Final Plans: Any substantive change to the Final Plans must be approved by Landlord in writing and shall be completed at Tenant’s expense. |
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EXHIBIT D
RULES AND REGULATIONS
1. The sidewalks, halls, passages, elevators, stairways, exits and entrances of the Building shall
not be obstructed by Tenant or used by it for any purpose other than for ingress and egress from
the Premises. The halls, passages, exits, entrances, elevators, retail arcade, escalators,
balconies and stairways are not for the use of the general public, and Landlord shall in all cases
retain the right to control and prevent access to those areas by all persons whose presence in the
judgment of Landlord would be prejudicial to the safety, character, reputation and interests of the
Building and its tenants, provided that nothing in this Lease shall be construed to prevent access
to persons with whom Tenant normally deals in the ordinary course of its business, unless those
persons are engaged in illegal activities. Tenant shall not go upon the roof of the Building,
except in areas that Landlord may designate as “Common Areas” from time to time.
2. The Premises shall not be used for lodging or sleeping. Unless ancillary to a restaurant or
other food service use specifically authorized in Tenant’s Lease, no cooking shall be done or
permitted by Tenant on the Premises, except that the preparation of hot beverages and use of
microwave ovens for Tenant and its employees shall be permitted.
3. Landlord shall clean the leased Premises in manner reasonably standard and consistent with the
Building as a first class building in CBD of Seattle, attached hereto, and except with the written
consent of Landlord, no person or persons other than those approved by Landlord will be permitted
to enter the Building for such purpose, but Tenant shall have the right to have an employee on the
Premises for special and/or extraordinary cleaning as desired by Tenant and at Tenant’s expense.
Tenant shall not cause unnecessary labor by reason of Tenant’s carelessness and indifference in the
preservation of good order and cleanliness.
4. Tenant shall not alter any lock or install a new or additional lock or any bolt on any door of
the Premises without furnishing Landlord with a key for any lock and obtaining Landlord’s prior
permission. Tenant, upon the termination of its tenancy, shall deliver to Landlord all keys and/or
security cards to doors in the Building and the Premises that shall have been furnished to Tenant
and in the event of less of any keys and/or security cards so furnished, shall pay Landlord for the
lost keys and/or security cards and changing of locks as a result of such loss.
5. The freight elevator shall be available for use by Tenant, subject to reasonable scheduling as
Landlord shall deem appropriate. The persons employed by Tenant to move equipment or other items
in or out of the Building must be acceptable to Landlord. Landlord shall have the right to
prescribe the weight, size and position of all equipment, materials, supplies, furniture or other
property brought into the Building. No safes or other objects larger or heavier than the freight
elevator of the Building is limited to carry shall be brought into or installed on the Premises
without Landlord’s prior written consent. Heavy objects shall, if considered necessary by
Landlord, stand on wood strips of thickness as is necessary to properly distribute the weight of
those objects. Landlord will not be responsible for loss of or damage to any property from any
cause, and all damage done to
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the Building by moving or maintaining Tenant’s property shall be
repaired at the expense of Tenant.
The moving of heavy objects shall occur only between those hours as may be designated by and only
upon written notice to Landlord and the persons employed to move heavy objects in or out of the
Building must be acceptable to Landlord.
6. Tenant shall not use or keep in the Premises or the Building any kerosene, gasoline or flammable
or combustible fluid or materials or use any method of heating or air conditioning other than that
supplied by Landlord. Tenant shall not sweep or throw or permit to be swept or thrown from the
Premises any debris or other substance into any of the corridors, halls or lobbies or out of the
doors or windows or into the stairways of the Building and Tenant shall not use, keep or permit to
be used or kept any foul or noxious gas or substance in the Premises. Tenant shall not use, keep
or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business in the Building.
7. During non-business hours and on holidays access to the Building, or to the halls, corridors or
stairways in the Building, or to the Premises, may be refused unless the person seeking access is
known to the Building and has a pass or is properly identified. Landlord shall in no case be
liable for damages for the admission to or exclusion from the Building of any person whom Landlord
has the right to exclude under Rule 1 above. In case of invasion, mob, riot, public excitement or
other circumstances rendering that action advisable in Landlord’s opinion, Landlord reserves the
right to prevent access to the Building during the continuance of that activity by taking those
actions that Landlord may deem appropriate, including closing entrances to the Building.
8. Tenant shall see that the doors of the Premises are closed and securely locked when Tenant’s
employees leave the Premises, after hours.
9. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any
purpose other than that for which they were constructed, no foreign substance of any kind
whatsoever shall be deposited in any of them, and any damage resulting to them from Tenant’s misuse
shall be paid for by Tenant.
10. Except with the prior written consent of Landlord, Tenant shall not sell, or permit the sale
from the Premises of newspapers, magazines, periodicals, theater tickets or any other goods,
merchandise or service, nor shall Tenant carry on, or permit or allow any employee or other person
to carry on, business in or from the Premises for the service or accommodation of occupants of any
other portion of the Building, nor shall the Premises be used for manufacturing of any kind, or for
any business or activity other than that specifically provided for in Tenant’s Lease. No Tenant
shall obtain for use upon the Premises ice, towel and other similar services, or accept barbering
or shoe polishing services in the Premises, except from persons authorized by Landlord and at hours
and under regulations fixed by Landlord.
11. Tenant shall not install any radio or television antenna, loudspeaker or other device on the
roof or exterior walls of the Building.
-2-
12. Tenant shall not use in any space, or in the Common Areas of the Building, any handtrucks
except those equipped with rubber tires and side guards or other material handling equipment as
Landlord may approve. No other vehicles of any kind shall be brought by Tenant into the Building
or kept in or about the Premises. All mail carts shall be equipped with rubber guards to protect
elevators, doors and hallways.
13. No sign, advertisement or notice visible from the exterior of the Premises shall be inscribed,
painted or affixed by Tenant on any part of the Building or the Premises without the prior written
consent of Landlord. If Landlord shall have consented at anytime, whether before or after the
execution of this Lease, that consent shall in no way operate as a waiver or release of any of the
provisions of this Rule 13 or of this Lease, and shall be deemed to relate only to the particular
sign, advertisement or notice so consented to by Landlord and shall not be construed as dispensing
with the necessity of obtaining the specific written consent of Landlord with respect to each and
every such sign, advertisement or notice other than the particular sign, advertisement or notice,
as the case may be, so consented to by Landlord.
14. Except as shown in the design plan approved by Landlord, the sashes, sash doors, windows,
glass, relights, and any lights or skylights that reflect or admit light into the halls or other
places of the Building shall nor be covered or obstructed and, there shall be no hanging plants or
other similar objects in the immediate vicinity of the windows or placed upon the window sills or
hung from the window heads.
15. No tenant shall lay linoleum or other similar floor covering so that it is affixed to the floor
of the Premises in any manner except by a paste, or other material which may easily be removed with
water, the use of cement or other similar adhesive materials being expressly prohibited. The
method of affixing any linoleum or other similar floor covering to the floor, as well as the method
of affixing carpets or rugs to the Premises, shall be subject to approval by Landlord. The expense
of repairing any damage resulting from a violation of this Rule 15 shall be borne by the Tenant by
whom, or by whose agents, clerks, employees or visitors, the damage shall have been caused.
16. All loading, unloading, and delivery of merchandise, supplies, materials and furniture to the
Premises shall be made during reasonable hours and in entryways and elevators as Landlord shall
designate. In its use of the building loading dock, Tenant shall not obstruct or permit the
obstruction of loading areas, and at no time shall Tenant park vehicles in the loading areas except
for loading and unloading.
17. Canvassing, soliciting, peddling or distribution of handbills or any other written material in
the Building is prohibited and Tenant shall cooperate to prevent these activities.
18. Tenant shall not permit the use or the operation of any coin operated machines on the Premises,
including, without limitation, vending machines, video games, pinball machines, or pay telephones
without the prior written consent of Landlord.
19. Landlord may direct the use of all pest extermination and scavenger contractors through-out the
Building and/or Premises at intervals as Landlord may require.
-3-
20. If Tenant desires telephone or telegraph connections, Landlord will direct service technicians
as to where and how the wires are to be introduced. No boring or cutting for wires or otherwise
shall be made without directions from Landlord.
21. Tenant shall immediately, upon request from Landlord (which request need not be in writing),
reduce its lighting in the Premises for temporary periods designated by Landlord, when required in
Landlord’s judgment to prevent overloads of mechanical or electrical systems of the Building.
22. Landlord reserves the right to select the name of the Building and to change the name as it may
deem appropriate from time to time, and Tenant shall not refer to the Building by any name other
than: (a) the names as selected by Landlord (as that name may be changed from time to time), or (b)
the postal address, approved by the United States Post Office. Tenant shall not use the name of
the Building in any respect other than as an address of its operation in the Building without the
prior written consent of Landlord.
23. The requirements of Tenant will be attended to only upon application by telephone or in person
at the office of the Building manager. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special instruction from Landlord.
24. Landlord may waive any one or more of the Rules and Regulations for the benefit of any
particular tenant or tenants, but no waiver by Landlord shall be construed as a waiver of the Rules
and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter
enforcing any Rules and Regulations against any or all of the tenants in the Building.
25. Wherever the word “Tenant” occurs in these Rules and Regulations, it is understood and agreed
that it shall mean Tenant’s assigns, subtenants, associates, agents, clerks, employees and
visitors. Wherever the word “Landlord” occurs in these Rules and Regulations, it is understood and
agreed that it shall mean Landlord’s assigns, agents, clerks, employees and visitors.
26. These Rules and Regulations are in addition to, and shall not be construed in any way to
modify, alter or amend, in whole or part, the terms, covenants, agreements and conditions of any
Lease of Premises in the Building.
27. Landlord reserves the right to make additional rules and regulations as in its judgment may
from time to time be needed for the safety, care and cleanliness of the Building, and for the
preservation of good order therein.
-4-
EXHIBIT E
Intentionally deleted.
-1-
EXHIBIT F
ESTOPPEL CERTIFICATE
(FORM)
__________________________
__________________________
__________________________ (the
“Agent”), for itself and as agent
for certain lenders (“Lenders”)
__________________________
__________________________ (the
“Agent”), for itself and as agent
for certain lenders (“Lenders”)
BENTALL CITY CENTRE L.L.C.,
a Washington limited liability company,
(“Landlord”)
a Washington limited liability company,
(“Landlord”)
OFFICE TENANT ESTOPPEL CERTIFICATE
| Re: | Lease Dated: | |||||
| Commencement Date: | ||||||
| Termination Date: | ||||||
| Landlord: | BENTALL CITY CENTRE L.L.C. | |||||
| Tenant: | ||||||
| Premises: | Approximately ______ sq. ft. located at Suite ______, U.S. Bank Centre, 1420 Fifth Avenue, Seattle, Washington (“Premises”) |
Tenant under the above-described lease (the “Lease”) hereby certifies to Agent and to Landlord
as follows:
1. Attached hereto is a true, correct and complete copy of the Lease, the Premises of which are
more particularly described in the Lease. The Lease represents the entire agreement between the
parties as to the Premises and is now in full force and effect. All provisions of the Lease and
the amendments thereto (if any) referred to above are hereby ratified.
2. The
term of the Lease commenced on ____________, 19 ____. Rent commenced to accrue on
____________,19 ____.
3. Tenant
entered into occupancy of the Premises on or about ____________, 19 ____. Tenant
opened for business at the Premises on or about
____________, 19 ____.
-1-
4. The
initial term of the Lease shall expire on ____________, 19 ___, with ______
(___) renewal option(s) of a period of ____________ (______) years each.
5. The Lease has not been amended, modified, supplemented, extended, renewed or assigned, except as
follows: __________________________________________________________________________________________________________
(if none, so state)
6. All conditions of the Lease to be performed by Landlord thereunder and necessary to the
enforceability of the Lease have been satisfied, except as follows: _______________________________________________________________________
(if none, so state)
7. Tenant acknowledges that the Lease has been (or will be) assigned to Agent. Tenant has not
received any notice of any other sale, pledge, transfer or assignment of the Lease or of the
rentals thereunder by Landlord.
8. The amount of fixed monthly rent is currently $ _________.
9. The amount of the security deposit (if any) deposited by Tenant is $ _________. No other
security deposits have been made.
10. Tenant is paying the full rental under the Lease, which rental has been paid in full as of the
date hereof. No rental under the Lease has been paid for more than thirty (30) days in advance of
its due date.
11. There are no defaults on the part of Landlord under the Lease, and there are no events
currently existing (or with the passage of time, giving of notice or both, would exist) which give
Tenant the right to cancel or terminate the Lease.
12. Tenant has no defense as to its obligations under the Lease and claims no setoff or
counterclaim against Landlord.
13. Tenant has no right to any concession (rental or otherwise) or similar compensation in
connection with renting the space it occupies, except as provided in the Lease.
14. There are no actions, whether voluntary or otherwise, pending against the undersigned or any
guarantor of Tenant’s obligations under the Lease pursuant to the bankruptcy or insolvency laws of
the United States or any state thereof.
15. Tenant represents and warrants that it has not used, generated, released, discharged, stored or
disposed of any hazardous waste, hazardous substances, toxic waste, toxic substances or related
materials (collectively, “Hazardous Materials”) on, under, in or about the Premises, or transported
any Hazardous Materials to or from the Premises, other than Hazardous Materials used in the
-2-
ordinary and commercially reasonable course of Tenant’s business in compliance with all applicable
laws.
16. Tenant acknowledges that the present Landlord of the Premises is BENTALL CITY CENTRE L.L.C.,
the owner of the property which includes the Premises.
17. Tenant’s address for notices under the terms of the Lease is: ______________________________________________________________
18. Tenant acknowledges that Landlord is relying on the representations made herein.
19. Tenant acknowledges that Lenders intend to continue to finance the indebtedness of BENTALL CITY
CENTRE L.L.C or its partners, to be secured by the property of which the Premises are a part, that
BENTALL CITY CENTRE L.L.C. intends to collaterally assign the Lease to Agent in connection with
such financing, and that Lenders are relying upon the representations made herein.
20. Tenant confirms that BENTALL CITY CENTRE L.L.C continues to be the Landlord under the Lease.
Tenant will continue to pay all rents and other amounts due thereunder to BENTALL CITY CENTRE
L.L.C. in accordance with notices delivered or to be delivered by BENTALL CITY CENTRE L.L.C.
DATED: ____________, 19 ____
| TENANT: | ||||||||||
| a | ||||||||||
| By. | ||||||||||
| Its | ||||||||||
ACCEPTED AND AGREED THIS
______ day of _________, 19___.
______ day of _________, 19___.
LANDLORD:
BENTALL CITY CENTRE L.L.C, a Washington limited liability company
By BENTALL U.S. L.L.C., a Washington limited liability company
| Its Sole Member | ||||
By |
||||
Chief Operating Officer |
||||
Exhibit A — Lease
-3-
EXHIBIT G
SUBORDINATION AGREEMENT (FORM)
SUBORDINATION, ATTORNMENT,
NOTICE AND NON-DISTURBANCE AGREEMENT
NOTICE AND NON-DISTURBANCE AGREEMENT
THIS AGREEMENT is made as of the ______ day of ____________, 1990, by and between
______________________________ (“Tenant”), and ________________________ (the “Agent”), for itself and as
agent of certain lenders (“Lenders”).
RECITALS:
A. Tenant entered into a certain lease (the “Lease”), dated the ______ day of _________19___, with
BENTALL CITY CENTRE, L.L.C., a Washington limited liability company (“Landlord”), pertaining to
certain improvements (the “Improvements”) constructed on land located in King County, Washington,
described on Exhibit A (the land and the improvements are hereafter called “the Property”).
B. Lenders continue to provide financing (the “Loans”) which is secured by a Deed of Trust,
Security Agreement and Financing Statement from Landlord recorded in the records of King County,
Washington, creating a valid first lien on the Property and a valid Deed of Trust (the Deed of
Trust and all renewals, modifications, substitutions, extensions and replacements thereof,
including increases in the indebtedness secured thereby, are hereafter collectively called the
“Deed of Trust”).
C. Lenders have required that Tenant subordinate its interest in the Lease to the Deed of Trust and
agree to attorn to Lenders as a condition precedent to the making of the Loans.
NOW, THEREFORE, in consideration of the foregoing facts and the mutual covenants set forth
herein, Tenant and Agent hereby agree as follows, notwithstanding anything contained in the Lease
to the contrary;
1. Tenant agrees that the Lease and the rights of Tenant thereunder are and shall remain
subordinate to the Deed of Trust and all renewals, extensions, and modifications thereof.
2. Lenders agree that they will not disturb the possession of Tenant under the Lease upon any
judicial or nonjudicial foreclosure of the Deed of Trust, or upon acquiring title to the Property
by deed in lieu of foreclosure if Tenant is not then in default under the Lease or hereunder, and
agree further that, so long as Tenant is not in default under the Lease or hereunder, Lenders
thereafter will (a) accept the attornment of Tenant, (b) recognize all renewal rights set forth in
the Lease, and (c) undertake and perform all obligations as Landlord under the Lease.
-1-
3. In the event of the foreclosure of the Deed of Trust, judicially or nonjudicially, or if
title to the Property is conveyed by deed in lieu of foreclosure, Tenant agrees to attorn to and
accept the purchaser(s) at the foreclosure sale(s) conducted pursuant to the Deed of Trust or the
grantee(s) in such deed(s) in lieu of foreclosure and his or its (or their) heirs, legal
representatives, successors and assigns as Landlord under the Lease for the balance then remaining
of the term thereof, subject to all terms and conditions of the Lease; provided,
however, that in no event shall any such purchaser (or grantee) of the Property or the
holder of the Deed of Trust be; (i) liable for obligations or acts of Landlord occurring or arising
prior to the date of such foreclosure or deed on lieu of foreclosure, (ii) liable for any rent paid
in advance by Tenant for any period beyond the month in which Lender succeeds to the interest of
Borrower under the Lease, (iii) subject to any offsets or defenses which Tenant may have against
any prior Landlord, except for on-going non-monetary obligations of the Landlord under this Lease,
(iv) bound by any previous amendment or modification of the Lease or any waiver or forbearance by
Landlord unless the same was approved in writing by Lender.
4. Tenant agrees that with respect to any written notice required to be given to Landlord
under the Lease, a copy of such notice shall be delivered to Agent. Tenant also agrees to give
Agent notice of each default of Landlord and any successor landlord under the Lease and thirty (30)
days to cure such default prior to the exercise by Tenant of any right to terminate the Lease;
provided that, if such default is of a nature that it is not capable of being cured within
a 30-day period, Tenant shall not exercise any such right to terminate the Lease if Agent is
diligently pursuing such cure. With respect to a default which is personal to Landlord such as
bankruptcy and thus not capable of being cured by Agent or a default which is not capable of being
cured without possession of the Property, Agent shall be deemed to be curing such default if,
within such 30-day period, Agent commences and thereafter pursues (subject to any judicial stays,
injunctions, or other delays) foreclosure proceedings with respect to the Property.
5. Any notice required of permitted to be delivered hereunder shall be deemed to be delivered,
whether actually received or not, when deposited in the United States Mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties hereto at the
respective addresses set out opposite their names below, or such other addresses as they have
heretofore specified by written notice delivered in accordance herewith:
| Tenant: | ||||||
| Agent: | ||||||
6. Tenant shall not pay rental under the Lease for more than one month in advance.
-2-
7. Tenant acknowledges that as of the date of execution of this Agreement, there is no default
by the Landlord under the terms of the Lease and the Lease is in full force and effect.
8. Nothing in this Agreement shall be construed to require Agent to see to the application of
the proceeds of the Loan, and Tenant’s agreement set forth herein shall not be impaired on account
of any modifications of the documents evidencing and securing the Loans.
9. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto
and to their successors and assigns.
EXECUTED as of the date set cut above and all documents attached hereto will be effective on
the date stared above.
| TENANT: | ||||||||||
| a | ||||||||||
| By: | ||||||||||
| Its: | ||||||||||
| AGENT: | ||||||||||
| By: | ||||||||||
| Its: | ||||||||||
ACCEPTED AND AGREED THIS
______ day of _________, 19___.
______ day of _________, 19___.
LANDLORD:
BENTALL CITY CENTRE L.L.C, a Washington limited liability company
By BENTALL U.S. L.L.C., a Washington limited liability company
| Its Sole Member | ||||
By |
||||
Chief Operating Officer |
||||
Exhibit A — Legal Description
ADD APPROPRIATE ACKNOWLEDGMENT FORMS FOR SIGNATURES
-3-
EXHIBIT H
PARKING AGREEMENT
Unless terminated as set forth herein, so long as the lease to which this Parking Agreement is
attached (hereinafter the “Lease”) remains in effect, and so long as the Rules and Regulations
adopted by Landlord are not violated, Tenant hereby rents from Landlord, and Landlord hereby rents
to Tenant, for use by Tenant or Tenant’s employees who normally occupy the Building, on a
non-exclusive basis, FOUR (4) parking space(s) in the above-referenced parking garage (hereinafter
“Garage”) at the current monthly market rate which shall be established by Landlords’ Parking
Operator (hereinafter “Operator”) and adjusted from time to time and applicable to monthly parking
spaces. Tenant may validate visitor parking by such methods or methods as Operator may approve, at
the validation rate and from time to time generally applicable to visitor parking. Landlord
expressly reserves the right to designate parking areas and to modify the parking structure for
other uses or to any extent. Tenant may terminate Tenant’s rental of one or more of the parking
spaces by giving Landlord fifteen (15) days advance written notice thereof. Unless Tenant
terminates the rental of the parking spaces, Tenant shall be responsible for paying rent on all
parking space for the entire term of the Lease. If Tenant terminates the rental of one or more
parking spaces, Tenant shall not have the right to reinstate the parking spaces terminated unless
Landlord determines, in its sole discretion, that sufficient parking spaces are available.
The following Rules and Regulations, including the sticker, Secard or other identification system
(hereinafter “Parking Identification”) established by operator, are in effect until notice is given
to Tenant of any change. Landlord reserves the right to modify and/or adopt such other reasonable
and non-discriminatory Rules and Regulations for the Garage as it deems necessary for the operation
of the Garage. Landlord may refuse to permit any person who violates the Rules and Regulations to
park in the Garage, and any violation of these Rules and Regulations may result, in the operator’s
full discretion, in the violator’s vehicle being barreled at a charge of $15.00 and/or removed at
the violator’s expense. In either of said events, the Parking Identification supplied by Landlord
may be requested by Landlord and must then be returned to Landlord.
RULES AND REGULATIONS
| 1. | Public Garage hours are posted at the entrance and exits of the Garage. Landlord reserves the right to adjust such hours. |
| 2. | Vehicles must be parked entirely within the stall lines painted on the floor. |
| 3. | Monthly parkers may park in any open space not designated “reserved”, “handicapped” or “no parking”. |
| 4. | All directional signs and arrows must be observed. |
| 5. | The speed limit shall be 5 miles per hour. |
-1-
| 6. | Parking is prohibited: |
| a. | In areas not striped for parking; | ||
| b. | In aisles; | ||
| c. | Where “no parking” signs are posted; | ||
| d. | In cross-hatched areas; | ||
| e. | In such other areas as may be designated by operator; | ||
| f. | In compact stalls by oversized vehicles. |
| 7. | The Parking Identification supplied by Landlord or operator shall remain the property of Landlord. Such Parking Identification must be displayed as requested and may not be mutilated in any manner. The serial number of the Parking Identification may not be obliterated. Parking Identification may be transferable upon prior authorization by Operator, but any Parking Identification in the possession of an unauthorized holder will be void. |
| 8. | The monthly rate for rental of parking spaces is payable in advance and must be paid on or before the first day of each month. Failure to do so will automatically cancel parking privileges and a reinstatement fee may be charged. No deductions or allowances from the monthly rate will be made for days the designated parker does not use the Garage. |
| 9. | Garage managers or attendants are not authorized to make or allow any exceptions to these Rules and Regulations. |
| 10. | Every designated parker is required to park and lock his own vehicle. All responsibility for damage to vehicles or persons while in the Garage is assumed by the designated parker. |
| 11. | Loss or theft of Parking Identification from vehicles must be reported to the Operator immediately. |
| a. | Any Parking Identification reported lost or stolen found on any unauthorized vehicle will be confiscated and the holder will be subject to prosecution. | ||
| b. | Any Parking Identification found by the user must be reported to the Operator immediately to avoid confusion. |
| 12. | Spaces rented to persons are for the express purpose of parking one vehicle per space. Washing, waxing, cleaning or servicing of any vehicle by the designated parker and/or his agents is prohibited. |
| 13. | Parking shall be for motor vehicles only. Trailers, or similar transport vehicles designed to be towed by a motor vehicle, shall be prohibited. |
-2-
| 14. | Operator reserves the right to refuse the sale of monthly stickers or other Parking Identification to any Tenant or person and/or his agents or representatives who willfully refuse to comply with the above Rules and Regulations and all posted city, state or federal ordinances, or laws or agreements. |
| 15. | Tenant shall acquaint all persons to whom Tenant assigns parking spaces of these Rules and Regulations. |
| 16. | Landlord shall not be responsible for any theft and/or vandalism to designated Parker’s vehicle or its contents while in the Garage. |
| 17. | If designated parker forgets Parking Identification and a daily ticket is pulled, that ticket must be presented for validation to the Operator the same day prior to exiting the Garage or otherwise, the posted daily parking rate will apply. |
| 18. | Parking privileges shall be on an unassigned or executive valet basis as designated by Operator. |
Monthly parking is available twenty-four (24) hours, seven (7) days a week. Tenants and their
visitors shall have priority use of all parking areas. Garage monthly parking charges may be
adjusted from time to time by Landlord.
Upon receipt of payment, a fully completed signed parking application, and this Agreement, by
operator, the designated parker will be issued Parking Identification to be used to gain access to
the Garage. Only one Parking Identification will be issued and it is the responsibility of the
designated parker to transfer the Parking Identification if they have more than one vehicle.
Payment of the monthly parking is the responsibility of the Tenant. Parking access may be
restricted depending on the parking area selected. Monthly parkers taking tickets to gain access
to a restricted area will be responsible for payment of the posted parking rate upon exiting.
Monthly parking fees are due and payable in advance on the first day of the month. If the monthly
parking fee is not paid by the fifth working day of the month, Operator will terminate the monthly
parking privileges ( and have the designated Parker’s Parking Identification, if applicable,
deleted from the system, denying access to the parking areas. If the fifth of the month falls on a
weekend or holiday, the next business day will apply.
MONTHLY PARKING IS PAYABLE WITHOUT THE SUBMISSION OF AN INVOICE OR STATEMENT AND A REINSTATEMENT
FEE OF $15.00 WILL BE IMPOSED FOR PAYMENTS RECEIVED AFTER 2:00 P.M. ON THE FIFTH WORKING DAY OF
EACH MONTH.
There are no refunds granted for monthly parking for any reason.
Proration to one-half (1/2) month’s monthly parking fee will be observed only after the 16th day of
each month.
-3-
EXHIBIT “A”
Seattle Leasing Co. Lease No. 2335
| Quantity | Equipment Description | |
Inter-Tel
Axxess Digital Telephone System equipped to accommodate: 24 Digital Stations, 8 Analog Stations, 1 Local T-1 |
||
| 1 | Axxess Main Cabinet, 7 Universal Card Slots, includes Remote
Maintenance Modem |
|
| 1 | Power Supply (9 amp) |
|
| 1 | Axxess CPU 128, includes CPU 128 Software |
|
| 1 | Axxess Database, Programming Software — Provides Windows-Based System
Administration |
|
| 1 | 25-Unit Software Key (PAL) |
|
| 1 | Digital Station Card, 8 Digital Telephones Per Card, Requires Card Slot |
|
| 1 | Digital Station Card, 16 Digital Telephones Per Card, Requires Card Slot |
|
| 1 | T-1 Card, on Board CSU, Requires Card Slot |
|
| 19 | Standard Digital Telephone with Liquid Crystal Display, Features 32
Character LCD, Speakerphone Capability w/Use of Options Card |
|
| 4 | Executive Digital Telephone, Features 6X16 Character Context Sensitive
LCD and Full-Duplex Speakerphone |
|
| 1 | Direct Station Selection (DSS) Console, Features 60 DSS Programmable
Keys, Requires PC Data Port Module |
|
| 1 | Option Card, Supports up to 4 DSP’s, Includes Options Software, One DSP
Included on Card, Requires Card Slot |
|
| 1 | Axxessory Talk Windows NT Platform, 4 Ports, 165 Hours Storage |
|
| 1 | Axxessory Talk Visual Mail, 20 User, Integrates Voice Mail, E-Mail and
Faxes on Computer Desktop, Displays messages within E-Mail sent across
WAV files |
|
| 1 | Ultimate! Call Accounting Software for Windows |
|
| 1 | PC Shelf |
|
| 1 | Analog Station Card (16 Port) |
|
| 1 | Power Supply |
|
| 1 | PC Data Port Module |
This Exhibit “A” is attached to and a part of Seattle Leasing Co. Lease No. 2335 and constitutes a
true and accurate description of the equipment.
| LESSEE: Scope International, Inc. | ||||||
| BY: | /s/ Terry Mulberg | |||||
| TITLE: President | ||||||
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SCHEDULE “A”
EQUIPMENT LIST
EQUIPMENT LIST
Proposed System: Inter-Tel Axxess Digital Telephone System equipped to accommodate:
= 24 Digital Stations
= 8 Analog Stations
= 1 Local T-1
= 8 Analog Stations
= 1 Local T-1
System Capacity: 128 Universal Ports with the Ability to Expand up to 512 Universal Ports
| UNIT | EXTENDED | |||||||||||||||
| QTY | PART # | DESCRIPTION | PRICE | PRICE | ||||||||||||
| SYSTEM COMPONENTS | ||||||||||||||||
| 1 | 550.1300/ | Axxess Main Cabinet
|
$ | 1,021.00 | $ | 1,021.00 | ||||||||||
| 550.3026 | — 7 Universal Card Slots, |
|||||||||||||||
— Includes Remote Maintenance Modem |
||||||||||||||||
| 1 | 550.0110 | Power Supply (9 amp)
|
$ | 737.00 | $ | 737.00 | ||||||||||
| 1 | 550.2010 | Axxess CPU 128
|
$ | 1,580.00 | $ | 1,580.00 | ||||||||||
— Includes CPU 128 Software |
||||||||||||||||
| 1 | 827.8662 | Axxess Database
|
No Charge | No Charge | ||||||||||||
Programming Software |
||||||||||||||||
— Provides Windows-Based System
Administration |
||||||||||||||||
| 1 | 827.8473 | 25-Unit Software Key (PAL)
|
$ | 840.00 | $ | 840.00 | ||||||||||
| Required Feature Units: Optional Feature Units: | ||||||||||||||||
| Automatic Route Selection (3 units) Advanced CO Interface (7 units) | ||||||||||||||||
| Directories (2 units) ACD Hunt Groups (5 units) | ||||||||||||||||
| System forwarding (3 units) Uniform Call Distribution Hunt groups (5 units) | ||||||||||||||||
| Subtotal: 8 units | ||||||||||||||||
| STATION/LINE CARDS | ||||||||||||||||
| 1 | 550.2101 | Analog Station Card
|
$ | 1,160.00 | $ | 1,160.00 | ||||||||||
— 8 Ports Per Card |
||||||||||||||||
— Requires Card Slot |
||||||||||||||||
| 1 | 550.2200 | Digital Station Card
|
$ | 414.00 | $ | 414.00 | ||||||||||
— 8 Digital Telephones Per Card |
||||||||||||||||
— Requires Card Slot |
||||||||||||||||
| 1 | 550.2250 | Digital Station Card
|
$ | 1,034.00 | $ | 1,034.00 | ||||||||||
— 16 Digital Telephones Per Card |
||||||||||||||||
-1-
| UNIT | EXTENDED | |||||||||||||||
| QTY | PART # | DESCRIPTION | PRICE | PRICE | ||||||||||||
— Requires Card Slot |
||||||||||||||||
| 1 | 550.2730 | T-1 Card — On Board CSU
|
$ | 2,530.00 | $ | 2,530.00 | ||||||||||
— Requires Card Slot |
||||||||||||||||
| STATION EQUIPMENT | ||||||||||||||||
| 19 | 550.4400 | Standard Digital Telephone with Liquid Crystal Display |
$ | 307.00 | $ | 5,833.00 | ||||||||||
— Features 32 Character LCD |
||||||||||||||||
— Speakerphone Capability with Use of
Options Card |
||||||||||||||||
| 4 | 550.4500 | Executive Digital Telephone
|
$ | 458.00 | $ | 1,832.00 | ||||||||||
— Features 6 X 16 Character Context
Sensitive LCD and Full-Duplex
Speakerphone |
||||||||||||||||
| 1 | 550.4200 | Direct Station Selection (DSS) Console
- - Features 60 DSS Programmable Keys
- - Requires PC Data Port Module
|
$ | 381.00 | $ | 381.00 | ||||||||||
| FEATURE SUPPORT EQUIPMENT | ||||||||||||||||
| 1 | 550.2600 | Option Card
|
$ | 578.00 | $ | 578.00 | ||||||||||
— Supports up to 4 DSP’s |
||||||||||||||||
— Includes Options Software |
||||||||||||||||
— One DSP Included on Card |
||||||||||||||||
— Requires Card Slot |
||||||||||||||||
| VOICE MAIL | ||||||||||||||||
| 1 | 550.5221/823.1270 | Axxessory Talk Windows NT Platform
|
$ | 8,668.00 | $ | 8,668.00 | ||||||||||
— 4 Ports, 165 Hours Storage |
||||||||||||||||
| 1 | 827.8703 | Axxessory Talk Visual Mail
|
$ | 2,475.00 | $ | 2,475.00 | ||||||||||
— 20 User |
||||||||||||||||
— Integrates Voice Mail, E-Mail and
Faxes on Computer Desktop |
||||||||||||||||
— Displays messages within E-Mail
sent across WAV files |
||||||||||||||||
| 1 | W700326PW | Ultimate! Call Accounting Software
for Windows
|
$ | 1,790.00 | $ | 1,790.00 | ||||||||||
Subtotal
|
$ | 30,873.00 | ||||||||||||||
Less CPU Special
|
$ | 703.00 | ||||||||||||||
Subtotal
|
$ | 30,170.00 | ||||||||||||||
-2-
| UNIT | EXTENDED | |||||||||||||||
| QTY | PART # | DESCRIPTION | PRICE | PRICE | ||||||||||||
Less Discount
|
$ | 3,017.00 | ||||||||||||||
TOTAL INSTALLED PURCHASE PRICE
|
$ | 27,153.00 | ||||||||||||||
| (plus tax) | ||||||||||||||||
Includes: One year WIN/WIN Extended Service Package. Telco coordination, and user training.
Cable not included.
Sales Rep: Phone Number: Date: |
Rosyln Comley 206-812-7036 September 29, 1998 |
| Accepted By: | Date | |||||||||
-3-
Exhibit 10.22
ASSIGNMENT AND AMENDMENT OF LEASE
THIS ASSIGNMENT AND AMENDMENT OF LEASE (this “Agreement”) is dated for reference purposes the
1st day of August, 2002, by and among CITY CENTRE ASSOCIATES, a Delaware general partnership
(“Landlord”), NAVIGANT CONSULTING, INC., a Delaware Corporation (“Tenant”), and OMEROS CORPORATION,
a Washington corporation formerly named Omeros Medical Systems, Inc., (“Omeros”).
RECITALS
A. Landlord’s predecessor in interest, Bentall City Centre L.L.C., and Tenant’s predecessor in
interest, Scope International, Inc., entered into that certain U.S. Bank Centre Office Lease
Agreement dated as of September 28, 1998 (the “Lease”) for the lease of certain premises (the
“Premises”) consisting of 3,874 rentable square feet located in the U.S. Bank Centre, 1420 Fifth
Avenue, Seattle, Washington, and commonly know as Suite 2675. Omeros is currently a subtenant of
Tenant in the Premises under a sublease dated December 22, 2000 (“Sublease”).
B. Contemporaneously with the execution of this Agreement, Omeros is also subleasing space
located adjacent to the Premises from Gores & Blais, P.S. (“Gores & Blais”) consisting of 8,927
rentable square feet (the “Gores & Blais Space”). The lease term of Omeros’ sublease with Gores &
Blais expires on August 30, 2006. However, the lease term of the Lease expires on November 30,
2003 (“Initial Term”). Therefore, subject to the terms and conditions of this Agreement, the
parties hereto have agreed to assign the Lease to Omeros effective on December 1, 2003, and amend
the Lease to, among other things, extend the Lease term through August 30, 2006.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Defined Terms. Unless otherwise defined in this Agreement, capitalized terms used herein
shall have the same meaning as they are given in the Lease.
2. Assignment and Assumption of Lease.
2.1 Assignment; Return of Security Deposit. Effective as of November 30, 2003 (the “Effective
Date”), and subject to the terms and conditions of this Agreement, Tenant hereby assigns,
transfers, sets over, conveys and delivers unto Omeros, its successors and assigns, all of Tenant’s
right, title and interest in and to the Lease, including, without limitation, Tenant’s interest, if
any, in improvements to or in the Premises. Subject to Landlord’s right to retain the Security
Deposit in accordance with the terms of the Lease in the event of a default, Landlord shall return
Tenant’s $11,544.52 Security Deposit to Tenant on October 1, 2002 and Omeros shall not be obligated
to place a new Security Deposit with Landlord. Subject to Tenant’s right to retain the Sublease
security deposit in accordance with the terms of the Sublease in the event of a default, Tenant
shall return Omeros’ $23,089.04 Sublease security deposit to Omeros within thirty (30) days
following the expiration of the Initial Term of the Lease (November 30, 2003).
2.2 Assumption; Acceptance of Premises. Subject to the terms and conditions of this
Agreement. Omeros hereby accepts the assignment of the Lease on the Effective Date and assumes and
agrees to perform all obligations and duties of the Tenant under the Lease to the extent such
obligations and duties accrue on and after the Effective Date. Tenant will deliver the Premises
and Omeros will accept the Premises in its present “‘as is” condition on the Effective Date.
Landlord shall not require Omeros to remove any of the improvements to the premises made by Tenant
or Omeros as of the Effective date.
2.3 Landlord’s Consent; Release of Tenant. Landlord hereby consents to the assignment of the
Lease by Tenant to Omeros. Tenant shall be released from all obligations and duties under the
Lease to the extent they accrue on and after the Effective Date. Landlord hereby waives any claim
it may have to a handling charge for the assignment of the Lease.
2.4 Indemnification. Tenant shall indemnify, defend and hold Omeros harmless from and against
any and all claims or liabilities (including reasonable attorney’s fees) with respect to the Lease
and Tenant’s use and occupancy of the Premises which relate to a time period prior to the Effective
Date, excluding any such claim or liability to the extent such claim or liability arises from the
negligence or willful misconduct of Omeros. Omeros shall indemnify, defend and hold Tenant
harmless from and against any and all claims or liabilities (including reasonable attorney’s fees)
with respect to the Lease and Omeros’ use and occupancy of the Premises which relate to a time
period on or after the Effective Date, excluding any such claim or liability to the extent such
claim or liability arises from the negligence or willful misconduct of Tenant.
3. Lease Amendments. With respect to the time period commencing on the Effective Date and
continuing through the expiration of the Lease term (as extended herein), Landlord and Omeros agree
that the Lease is amended as follows:
3.1 Extension of Term. The Lease term is hereby extended from the Initial Term to continue
for the period of December 1, 2003, through August 30, 2006 (the “Extended Term”). Except as
expressly set forth in this Agreement, all terms and conditions of the Lease shall apply to the
Extended Term.
3.2 Extended Term Basic Rent. The Basic Rent for the Extended Term shall be as follows:
| Months | Monthly Installment | Rent Per Rentable Sq. Ft. | ||||||
12/1/03 — 8/30/06 |
$ | 11,944.83 | $ | 37.00 | ||||
3.3 Extended Term Operating Expenses. With respect to the Extended Term, the “Base Year” for
the purpose of determining Tenant’s Proportionate Share of Operating Expenses shall be the calendar
year 2003 and Omeros shall commence paying Tenant’s Proportionate Share of increases in Operating
Expenses effective January 1, 2004.
3.4 Right of First Refusal. Provided that Omeros has not been in default under the terms and
conditions of this Lease, Omeros shall have, during the Initial Term, the Extended Term or the
Renewal Term (as defined in section 3.5 below, if renewal is exercised), a continuous
-2-
right of first refusal (the “Right of First Refusal’”) to lease any or all of the space
located on the 26th floor of the Building (the “Right of First Refusal Space”). Omeros’ right to
lease the Right of First Refusal Space is subject and subordinate to all leases and options on the
Right of First Refusal Space in existence as of the date of this Agreement, all of which leases and
options are identified on Exhibit 1 attached hereto, and, notwithstanding anything contained herein
to the contrary, shall terminate nine (9) months prior to the end of the Extended Term if Omeros
has not exercised its Option to Renew under Section 3.5 below. If at any time during the Initial
Term, the Extended Term or the Renewal Term (if renewal is exercised), Landlord shall receive a
bona fide offer from any third-person to lease any portion of the Right of First Refusal Space,
which offer Landlord shall desire to accept, then Landlord shall promptly provide Omeros with
written notice thereof specifying the portion of the Right of First Refusal Space covered by such
offer. Omeros may, within three (3) business days thereafter, elect to lease such portion of the
Right of First Refusal Space, on the terms set forth below, by giving Landlord written notice
thereof within such three (3) business day period. If Omeros elects to lease such portion of the
Right of First Refusal Space in accordance with the provisions of this Section, Omeros’ lease of
such portion of the Right of First Refusal Space shall be on the same terms and conditions as those
set forth in this the Lease as amended by this Agreement with respect to the initial Premises,
except that (a) commissions shall be based on the per square foot amount paid by Landlord with
respect to this Agreement and shall be prorated based on the number of months left in the initial
Term using a straight line amortization schedule, and (b) Basic Rent for the portion of the Right
of First Refusal Space leased by Omeros shall be at the rate then in effect for the Premises
including any periodic adjustments provided for under the Lease. In the event Omeros exercises its
Right of First Refusal, the applicable portion of the Right of First Refusal Space shall (a) if
during the Initial Term of the Lease, be directly leased to Omeros on terms consistent with those
set forth in the Lease as amended by this Agreement, or (b) if during the Extended Term or the
Renewal Term (if renewal is exercised), become part of the “Premises” under the Lease, and in
either case shall be leased for a term running concurrently with the Extended Term or, if renewal
is exercised, the Renewal Term, and Rent with respect to the such space shall commence to be due
and payable, on the date Landlord delivers such space to Omeros free of other tenants and occupants
(the “Right of First Refusal Commencement Date”). Failure of Omeros to exercise its Right of First
Refusal with respect to any portion of the Right of First Refusal Space within the prescribed time
shall waive Omeros’ right as to that portion of the Right of First Refusal Space with respect to
such offer and Landlord shall have the right to lease such portion to the third-party making the
offer. If Omeros duly and timely exercises its Right of First Refusal with respect to any portion
of the Right of First Refusal Space, Landlord and Omeros shall, within ten (10) business days after
Omeros exercises its Right of First Refusal, enter into a direct lease (if during the Initial
Term), or an amendment to this Lease (if during the Extended Term or the Renewal Term)
incorporating the portion of the Right of First Refusal Space leased by Omeros upon the terms set
forth above.
3.5 Option to Renew and Expand. At the end of the Extended Term, Omeros shall have one (1)
option to expand the Premises and extend the Extended Term for a period of five (5) years (the
“Renewal Term”). Such option shall be exercised in the manner set forth below.
(i) The Renewal Term shall be on the same terms and conditions as the Lease except that (a)
the “Premises” for the Renewal Term shall be expanded to include both the existing Premises and the
Gores & Blais Space, (b) Basic Rent for the Renewal Term shall be as set forth herein, and (c) no
additional options to renew shall apply following the expiration of the
-3-
Renewal Term. Written notice (“Omeros’ Election”) of Omeros’ exercise of its option to renew
(“Option to Renew”) the Term of this Lease for the Renewal Term must be given to Landlord no less
than nine (9) months but not more than twelve (12) months prior to the date the Extended Term of
the Lease would otherwise expire. Omeros’ Election shall be binding upon Omeros and shall set
forth the name of the Landlord and Omeros, the Lease date, and the Renewal Term dates.
(ii) Omeros shall not have the right to exercise the Option to Renew during the time that
Omeros is in default under any provisions of this Lease.
(iii) In the event Omeros validly exercises the Option to Renew the term of this Lease as
herein provided, Basic Rent shall be adjusted as of the commencement date of the Renewal Term as
follows:
a) Commencing within ten (10) days after Landlord’s receipt of Omeros’ Election, Landlord and
Omeros shall attempt to agree upon Basic Rent for the Premises for the applicable Renewal Term,
such Basic Rent to equal the estimated “fair market rental value” (as defined below) of the
Premises for the Renewal Term. If the parties are unable to agree upon the Basic Rent within
thirty (30) days, then within thirty (30) days thereafter each party, at its own cost and by giving
notice to the other party, shall appoint a real estate appraiser with at least five (5) years
full-time commercial real estate appraisal experience in the area in which the Premises are located
to appraise and set Basic Rent for the Renewal Term. If a party does not appoint an appraiser
within ten (10) days after the other party has given notice of the name of its appraiser, the
single appraiser appointed shall be the sole appraiser and shall set Basic Rent for the Renewal
Term. If each party shall have so appointed an appraiser, the two appraisers shall meet promptly
and attempt to set the Basic Rent for the Renewal Term. If the two appraisers are unable to agree
within thirty (30) days after the second appraiser has been appointed, they shall attempt to
mutually select a third appraiser meeting the qualifications herein stated within ten (10) days
after the last day the two appraisers are given to set Basic Rent. If the two appraisers are
unable to agree on the third appraiser within such ten (10) day period, either of the parties to
this Lease, by giving five (5) days notice to the other party, may apply to the then presiding
judge of the Superior Court of King County for the selection of a third appraiser meeting the
qualifications stated in this paragraph. Each of the parties shall bear one-half (1/2) of the cost
of appointing the third appraiser and of paying the third appraiser’s fee. The third appraiser,
however selected, shall be a person who has not previously acted in any capacity for either party
or any predecessor in interest to either party.
b) Within thirty (30) days after the selection of the third appraiser, a majority of the
appraisers shall set Basic Rent for the Renewal Term. If a majority of the appraisers are unable
to agree upon the Basic Rent within the stipulated period of time, the three appraisals shall be
added together and their total divided by three (3). The resulting quotient shall be the Basic
Rent for the Premises during the Renewal Term. If, however, the low appraisal and/or the high
appraisal is/are more than five percent (5%) lower and/or higher than the middle appraisal, the low
appraisal and/or the high appraisal shall be disregarded. If only one (1) appraisal is
disregarded, the remaining two (2) appraisals shall be added together and their total divided by
two (2), and the resulting quotient shall be Basic Rent for the Premises during the Renewal Term.
-4-
c) For purposes of determining the Basic Rent for the Renewal Term, including the
determination of Basic Rent by the appraisers, the “fair market rental value” shall be based on the
actual rental rates which ready and willing renewal tenants are paying or would pay, as of the
Renewal Term commencement date, as annual basic rent for a primary renewal premises (as
distinguished from the rent payable for a sublet premises or with respect to an assignment of an
interest in an existing lease) to a ready and willing landlord of such primary renewal premises for
space comparable to the Premises in the Building or, if there are no comparable deals in the
Building, then for space in buildings comparable to the Building in the market in the area in which
the Building is located. Rental rates quoted or used under sublease agreements shall be considered
rates of special circumstances and shall be excluded from the definition of “fair market rental
value”.
4. Commissions. Landlord shall pay Omeros’ broker, Ed Curtis of Washington Partners, a
commission in connection with this Agreement in the amount of $2.20 per rentable square feet of
space in the Premises. The commission will be due one-half on execution of this Agreement and one
half upon the Effective Date.
5. Ratification. Except as expressly set forth herein, the terms and conditions of the Lease
shall remain in full force and effect and are hereby ratified by Landlord, Tenant and Omeros.
-5-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
OMEROS:
OMEROS CORPORATION
By:
|
/s/ Gregory Demopulos | |||
| Its: Chairman & CEO |
TENANT:
NAVIGANT CONSULTING, INC.
By:
|
/s/ Phil Steptoe | |||
| Its: VP & General Counsel |
LANDLORD:
CITY CENTRE ASSOCIATES, a
Delaware general partnership
Delaware general partnership
By:
|
BCC EQUITY L.L.C., a Washington limited liability company, Its Managing Joint Venturer |
By:
|
BENTALL CAPITAL (U.S.), INC., | |||
| a California corporation | ||||
| Its Authorized Agent |
By:
|
/s/ Gary J. Carpenter | |||
| Gary J. Carpenter | ||||
| Executive Vice President |
By:
|
/s/ Betsy Sutherland | |||
| Betsy Sutherland, | ||||
| Vice President and Regional Manager |
-6-
LANDLORD’S ACKNOWLEDGMENT
STATE OF WASHINGTON
|
) | |||||||
| ) | ss. | |||||||
COUNTY OF KING
|
) |
I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgment is the person whose true signature appears on this document.
On this 20th day of September, 2002, before me personally appeared
Gary Carpenter, to me known to be the Executive Vice President of Bentall Capital (U.S.), Inc., the
authorized agent of BCC Equity L.L.C., the managing joint venturer of CITY CENTRE ASSOCIATES, the
general partnership that executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said partnership, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ Ellen L. Martin | ||||
| Notary Public in and for the State of Washington, | ||||
| residing at Seattle My commission expires: 7-23-03 Ellen L. Martin [Type or Print Notary Name] |
||||
(Use This Space for Notarial Seal Stamp)
-7-
STATE OF WASHINGTON
|
) | |||||||
| ) | ss. | |||||||
COUNTY OF KING
|
) |
I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgment is the person whose true signature appears on this document.
On this 20th day of September, 2002, before me personally appeared
Betsy Sutherland, to me known to be the Vice President and Regional Manager of Bentall Capital
(U.S.), Inc., the authorized agent of BCC Equity L.L.C., the managing joint venturer of CITY CENTRE
ASSOCIATES, the general partnership that executed the within and foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of said partnership, for
the uses and purposes therein mentioned, and on oath stated that he was authorized to execute said
instrument.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ Ellen L. Martin | ||||
| Notary Public in and for the State of Washington, | ||||
| residing at Seattle
My commission expires: 7-23-03 Ellen L. Martin [Type or Print Notary Name] |
||||
(Use This Space for Notarial Seal Stamp)
-8-
OMEROS ACKNOWLEDGMENT
STATE OF WASHINGTON |
) | |||||||||||
| ) | ss. | |||||||||||
COUNTY OF KING |
) | |||||||||||
I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgment is the person whose true signature appears on this document.
On this 6th day of September, 2002, before me personally appeared
Gregory Demopulos, to me known to be the Chairman & CEO of OMEROS CORPORATION, the
corporation that executed the within and foregoing instrument, and acknowledged the said instrument
to be the free and voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument and that the seal
affixed, if any, is the corporate seal of said corporation.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ David R. Toll | ||||
| Notary Public in and for the State of Washington, | ||||
| residing at 1420 5th Ave W, Seattle WA 98101 My commission expires: January 18, 2006 David R. Toll [Type or Print Notary Name] |
||||
(Use This Space for Notarial Seal Stamp)
-9-
TENANT ACKNOWLEDGMENT
STATE OF ILLINOIS
|
) | |||||||
| ) | ss. | |||||||
COUNTY OF KING
|
) |
I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgment is the person whose true signature appears on this document.
On this 3 day of September, 2002, before me personally appeared Phil
Steptoe, to me known to be the VP & General of NAVIGANT CONSULTING, INC., the
corporation that executed the within and foregoing instrument, and acknowledged the said instrument
to be the free and voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument and that the seal
affixed, if any, is the corporate seal of said corporation.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ Bonnie E. Fritz | ||||
| Notary Public in and for the State of Illinois, | ||||
| residing at 615 N. Wabash My commission expires: 10/11/2004 Bonnie E. Fritz [Type or Print Notary Name] |
||||
(Use This Space for Notarial Seal Stamp)
-10-
Exhibit 10.23
SECOND AMENDMENT
TO
OFFICE LEASE AGREEMENT
TO
OFFICE LEASE AGREEMENT
THIS SECOND AMENDMENT TO OFFICE LEASE AGREEMENT (this “Amendment”) is dated for reference
purposes the 4th day of January, 2006, by and between CITY CENTRE ASSOCIATES, a Delaware general
partnership (“Landlord”), and OMEROS CORPORATION, a Washington corporation (“Tenant”).
RECITALS
A. Landlord’s predecessor in interest, Bentall City Centre L.L.C., and Tenant’s predecessor in
interest, Scope International, Inc., entered into that certain U.S. Bank Centre Office Lease
Agreement dated as of September 28, 1998, as amended by an Assignment and Amendment of Lease dated
August 1, 2002 (the “First Amendment”) (as amended, the “Lease”) for the lease of certain premises
(the “Premises”) located in the U.S. Bank Centre, 1420 Fifth Avenue, Seattle, Washington, and
commonly know as Suite 2675. Unless otherwise defined in this Amendment, capitalized terms used
herein shall have the same meaning as they are given in the Lease.
B. Tenant has exercised its Option to Renew and Expand pursuant to the terms of Section 3.5 of
the First Amendment. Landlord and Tenant have agreed upon the terms of Tenant’s lease for the
Renewal Term and desire to enter into this Amendment for the purpose of memorializing such terms.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Extension of Term and Expansion of Premises. The Lease term is hereby extended for a
period of five (5) years commencing on September 1, 2006, and expiring on August 31, 2011 (the
“Extended Term”). Except as expressly set forth in this Amendment, all terms and conditions of
the Lease shall apply to the Extended Term. Effective as of the commencement of the Extended
Term, the Premises shall be expanded by the Gores & Blais Space (as defined in the First
Amendment). The parties acknowledge that the Gores & Blais Space contains 9,282 rentable square
feet (as determined in accordance with the 1996 BOMA Standard) and, accordingly, the entire
Premises for the Extended Term will contain 13,156 rentable square feet.
2. Extended Term Basic Rent. The Basic Rent for the Extended Term shall be as follows:
| Months | Monthly Installment | Rent Per Rentable Sq.Ft. | ||||||
9/1/06 — 8/31/11
|
$ | 34,863.40 | $ | 31.80 | ||||
3. Operating Expenses; Tenant’s Proportionate Share. With respect to the Extended Term, the
“Base Year” for the purpose of determining Tenant’s Proportionate Share of Operating
Expenses shall be the calendar year 2006 and Tenant shall commence paying Tenant’s
Proportionate Share of increases in Operating Expenses effective January 1, 2007. With respect to
the Extended Term, Tenant’s Proportionate Share shall be as follows:
1.39% of Total Rentable Area of Building (based on the Building size of 943,575
rentable square feet).
1.52% of Total Rentable Area of Office Tower (based on the Office Tower size of
863,767)
4. Parking. During the Extended Term, Tenant shall have the right to use one (1) parking
stall per 1,200 rentable square feet of the Premises (for a total of eleven (11) parking stalls).
All such parking stalls shall be subject to the terms of the Lease provided, however, that one (1)
reserved stall and three (3) non-reserved stalls of the eleven (11) stalls allocated will be free
of charge during the Extended Term. Tenant shall have the one time right to convert the one (1)
free reserved stall to two (2) free non-reserved stalls by giving Landlord thirty (30) days prior
written notice.
5. Commission. Landlord shall pay Omeros’ broker, Ed Curtis of Washington Partners, a
commission in connection with this Agreement in the amount of $2.50 per rentable square feet of
space in the Premises. The commission, $32,890, will be due within fifteen (15) days of execution
of this Agreement and upon receipt of invoice.
6. Ratification. Except as expressly set forth herein, the terms and conditions of the Lease
shall remain in full force and effect and are hereby ratified by Landlord and Tenant.
[Signatures appear on next page.]
-2-
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written
above.
TENANT:
OMEROS CORPORATION
By:
|
/s/ Gregory A. Demopulos | |||
| Gregory A. Demopulos, M.D. | ||||
| Chairman & CEO |
LANDLORD:
CITY CENTRE ASSOCIATES,
a Delaware general partnership
a Delaware general partnership
By:
|
BCC EQUITY L.L.C., a | |||
| Washington limited liability company, | ||||
| Its Managing Joint Venturer |
By:
|
BENTALL CAPITAL (U.S.), INC., | |||
| a California corporation | ||||
| Its Authorized Agent |
By:
|
/s/ Gary J. Carpenter | |||
| Gary J. Carpenter | ||||
| Executive Vice President |
By:
|
/s/ Betsy Sutherland | |||
| Betsy Sutherland, Carpenter | ||||
| Vice President and Regional Manager |
LANDLORD’S ACKNOWLEDGMENT
STATE OF WASHINGTON |
) | |||||||||||
| ) | ss. | |||||||||||
COUNTY OF KING |
) | |||||||||||
I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgement is the person whose true signature appears on this document.
On this 5th day of January, 2006, before me personally appeared Gary
Carpenter, to me known to be the Executive Vice President of Bentall Capital (U.S.), Inc., the
authorized agent of BCC Equity L.L.C., the managing joint venturer of CITY CENTRE ASSOCIATES, the
general partnership that executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said partnership, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ Stephanie A. Craig | ||||
| Notary Public in and for the State of Washington, | ||||
| residing at Bremerton My commission expires: 11-29-07 Stephanie A. Craig [Type or Print Notary Name] |
||||
(Use This Space for Notarial Seal Stamp)
STATE OF WASHINGTON
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) | |||||||
| ) | ss. | |||||||
COUNTY OF KING
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) |
I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgement is the person whose true signature appears on this document.
On this 5th day of January, 2006, before me personally appeared Betsy
Sutherland, to me known to be the Vice President and Regional Manager of Bentall Capital (U.S.),
Inc., the authorized agent of BCC Equity L.L.C., the managing joint venturer of CITY CENTRE
ASSOCIATES, the general partnership that executed the within and foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of said partnership, for
the uses and purposes therein mentioned, and on oath stated that he was authorized to execute said
instrument.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ Stephanie A. Craig | ||||
| Notary Public in and for the State of Washington, | ||||
| residing at Bremerton My commission expires: 11-29-07 Stephanie A. Craig [Type or Print Notary Name] |
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(Use This Space for Notarial Seal Stamp)
TENANT ACKNOWLEDGEMENT
STATE OF WASHINGTON
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) | |||||||
| ) | ss. | |||||||
COUNTY OF KING
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) |
I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgement is the person whose true signature appears on this document.
On this 4th day of January, 2006, before me personally appeared Gregory A.
Demopulos, M.D., to me known to be the Chairman and Chief Executive Officer of OMEROS CORPORATION,
the corporation that executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said instrument and that
the seal affixed, if any, is the corporate seal of said corporation.
WITNESS my hand and official seal hereto affixed the day and year first above written.
| /s/ Diane C. Smith | ||||
| Notary Public in and for the State of Washington, | ||||
| residing at Bellevue My commission expires: December 16, 2007 Diane C. Smith [Type or Print Notary Name] |
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(Use This Space for Notarial Seal Stamp)
Exhibit 10.24
LEASE AGREEMENT
THIS LEASE AGREEMENT is made as of this 6th day of April, 2000, between ALEXANDRIA
REAL ESTATE EQUITIES, INC., a Maryland corporation (“Landlord”), and PRIMAL, INC., a Washington
corporation (“Tenant”).
Address:
|
1124 Columbia Street, Seattle, Washington | |
Premises:
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That portion of the Project, commonly known as Suite 650, containing approximately 11,577 rentable square feet, as determined by Landlord, as shown on Exhibit A. | |
Project:
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The real property on which the building in which the Premises are located (the “Building”), together with all improvements thereon and appurtenances thereto as described on Exhibit B, excluding any buildings constructed on such real property after the date hereof. |
Base Rent: |
$27,977.75 per month | Rentable Area of Premises: | 11,577 sq. ft. | |||
Rentable Area of Project: |
163,525 sq. ft. | Tenant’s Share of Net | 7.87% | |||
| Building Expenses: | ||||||
Security Deposit: |
$111,911 | Target Commencement | May 1, 2000 | |||
| Date: |
Rent Adjustment |
3.5% | |
Percentage: |
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Base Term: |
60 months from the first day of the first full month of the Term (as defined in Section 2) hereof | |
Permitted Use: |
Research and development laboratory, related office and other related uses consistent with the character | |
| of the Project |
Address for Rent Payment: 135 N. Los Robles Avenue, Suite 250 Pasadena, CA 91101 Attention: Accounts Receivable |
Landlord’s Notice Address: 135 N. Los Robles Avenue, Suite 250 Pasadena, CA 91101 Attention: General Counsel |
|
Tenant’s Notice Address: Primal, Inc. 1124 Columbia Street, Suite 650 Seattle, WA 98122 Attention: Bill Daley |
The following Exhibits and Addenda are attached hereto and incorporated herein by this
reference:
ý EXHIBIT A
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— | PREMISES DESCRIPTION | ý EXHIBIT B | — | DESCRIPTION OF PROJECT | |||||
ý EXHIBIT C
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— | WORK LETTER | ý EXHIBIT D | — | COMMENCEMENT DATE | |||||
ý EXHIBIT E
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— | RULES AND REGULATIONS | ý EXHIBIT F | — | TENANT’S PERSONAL PROPERTY | |||||
ý EXHIBIT G
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— | ESTOPPEL CERTIFICATE | ý EXHIBIT H | — | NONDISTURBANCE AGREEMENT | |||||
ý EXHIBIT I
|
— | LOCATION OF PARKING |
-2-
1. Lease of Premises. Upon and subject to all of the terms and conditions hereof, Landlord
hereby leases the Premises to Tenant and Tenant hereby leases the Premises from Landlord. The
portions of the Project which are for the non-exclusive use of tenants of the Project are
collectively referred to herein as the “Common Areas.” Landlord reserves the right to modify
Common Areas, provided that such modifications do not materially adversely affect Tenant’s use of
the Premises for the Permitted Use. Tenant shall have the right to use the loading area in the
annex level of the Project leased by Corixa Corporation, a Delaware corporation (“Corixa”) under
that certain Columbia Building Lease dated October 28, 1994, and as amended (the “Corixa Lease”)
and the portion of the bio-hazards waste cage facility assigned to Tenant and located on the
basement level of the Building.
2. Delivery; Acceptance of Premises; Commencement Date. Landlord shall use reasonable efforts
to make the Premises available to Tenant for Tenant’s Work under the Work Letter within 5 days of
full execution of this Lease and Tenant’s delivery of evidence of the insurance required hereby and
by the Work Letter (“Delivery” or “Deliver”). If Landlord is reasonably unable to timely Deliver
the Premises, Landlord shall not be liable to Tenant for any loss or damage resulting therefrom,
and this Lease shall not be void or voidable except as provided herein. If Landlord is not
reasonably able to Deliver the Premises within 60 days of the Target Commencement Date for any
reason other than Force Majeure delays, this Lease shall be voidable by Landlord or Tenant by
written notice to the other, and if so voided by either: (a) so long as Tenant is not in default
hereunder, the Security Deposit shall be returned to Tenant, and (b) neither Landlord nor Tenant
shall have any further rights, duties or obligations under this Lease, except with respect to
provisions which expressly survive termination of this Lease. As used herein, the terms “Force
Majeure” shall have the meaning set forth for such terms in Section 24. If neither Landlord nor
Tenant elects to void this Lease within 5 business days of the lapse of such 60 day period, such
right to void this Lease shall be waived and this Lease shall remain in full force and effect.
The “Commencement Date” shall be the earlier of: (i) May 1, 2000; and (ii) the date Tenant
conducts any business in the Premises or any part thereof. Upon request of Landlord, Tenant shall
execute and deliver a written acknowledgment of the Commencement Date and the expiration date of
the Term when such are established in the form attached to this Lease as Exhibit D;
provided, however, Tenant’s failure to execute and deliver such acknowledgment
shall not affect Landlord’s rights hereunder. The “Term” of this Lease shall be the Base Term and
any Extension Terms which Tenant may elect pursuant to Section 40 hereof.
Except as set forth in the Work Letter, if applicable: (i) Tenant shall accept the Premises in
their condition as of the Commencement Date, subject to all applicable laws, ordinances,
regulations, covenants and restrictions; (ii) Landlord shall have no obligation for any defects in
the Premises; and (iii) Tenant’s taking possession of the Premises shall be conclusive evidence
that Tenant accepts the Premises and that the Premises were in good condition at the time
possession was taken. Any occupancy of the Premises by Tenant before the Commencement Date shall
be subject to all of the terms and conditions of this Lease, excluding the obligation to pay Rent.
Tenant agrees and acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the condition of any or all of the Premises or the
Project, and/or the suitability of the Premises or the Project for the conduct of Tenant’s
business, and Tenant waives any implied warranty that the Premises or the Project are suitable for
the Permitted Use. This Lease constitutes the complete agreement of Landlord and Tenant with
respect to the subject matter hereof and supersedes any and all prior representations, inducements,
promises, agreements, understandings and negotiations which are not contained herein. Landlord in
executing this Lease does so in reliance upon Tenant’s representations, warranties, acknowledgments
and agreements contained herein.
3. Rent.
(a) Base Rent. The first month’s Base Rent and the Security Deposit shall be due and payable
on delivery of an executed copy of this Lease to Landlord. Tenant shall pay to Landlord in
advance, without demand, abatement, deduction or set-off, monthly installments of Base Rent on or
before the first day of each calendar month during the Term hereof, in lawful money of the United
States of America, at the office of Landlord for payment of Rent set forth above, or to such other
person or at such other place as Landlord may from time to time designate in writing. Payments of
Base Rent for any fractional calendar month shall be prorated. The obligation of Tenant to pay
Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are
independent obligations. Tenant shall have no right at any time to abate, reduce, or set-off any
Rent (as defined in Section 5) due hereunder except for any abatement as may be expressly provided
in this Lease.
(b) Additional Rent. In addition to Base Rent, Tenant agrees to pay to Landlord as additional
rent (“Additional Rent”): (i) Tenant’s Share of Net Building Expenses (as defined in Section 5),
(ii) the rent and expenses for the parking described in Section 10 hereof, and (iii) any and all
other amounts Tenant assumes or agrees to pay under the provisions of this Lease, including,
without limitation, any and all other sums that may become due by reason of any default of Tenant
or failure to comply with the agreements, terms, covenants and conditions of this Lease to be
performed by Tenant, after any applicable notice and cure period.
4. Base Rent Adjustments. Base Rent shall be increased on each annual anniversary of the
first day of the first full month of the Term of this Lease by multiplying the Base Rent payable
immediately before such adjustment by the Rent Adjustment Percentage and adding the resulting
amount to the Base Rent payable immediately before such adjustment. Base Rent, as so adjusted,
shall thereafter be due as provided herein. Base Rent adjustments for any fractional calendar
month shall be prorated.
5. Operating Expense Payments. Landlord shall deliver to Tenant a written estimate of Net
Building Expenses for each calendar year during the Term (the “Annual Estimate”), which may be
revised by Landlord from time to time during such calendar year. During each month of the Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12 of Tenant’s
Share of the Annual Estimate. Payments for any fractional calendar month shall be prorated.
-2-
“Net Building Expenses” for any period shall mean the Operating Expenses for the Project for
such period less the First Floor Operating Expenses for such period. “First Floor Operating
Expenses” means an amount equal to the First Floor Operating Expense Rate, as defined below,
multiplied by 16,894, the total rentable square feet on the first floor of the Project. “First
Floor Operating Expense Rate” shall mean an initial rate of $8.24 per rentable square foot per
year, which shall be increased by 3% each calendar year commencing on January 1, 2001, including,
without limitation, throughout the Extension Term.
The term “Operating Expenses” means all costs and expenses of any kind or description
whatsoever incurred or accrued each calendar year by Landlord with respect to the Project
(including, without duplication, Taxes (as defined in Section 9), reasonable reserves consistent
with good business practice for future repairs and replacements, capital repairs and improvements
amortized over the lesser of 7 years and the useful life of such capital items, and the costs of
Landlord’s third party property manager or, if there is no third party property manager,
administration rent in the amount of 3.0% of Base Rent), excluding only:
(a) the original construction costs of the Project and costs of renovation prior to the date
of the Lease and costs of correcting defects in such original construction or renovation;
(b) capital expenditures for expansion of the Project;
(c) interest, principal payments of Mortgage (as defined in Section 27) debts of Landlord,
financing costs and amortization of funds borrowed by Landlord, whether secured or unsecured and
all payments of base rent (but not taxes or operating expenses) under any ground lease or other
underlying lease of all or any portion of the Project;
(d) depreciation of the Project;
(e) advertising, legal and space planning expenses and leasing commissions and other costs and
expenses incurred in procuring and leasing space to tenants for the Project, including any leasing
office maintained in the Project, free rent, construction allowances and other lease incentives for
tenants;
(f) legal and other expenses incurred in the negotiation or enforcement of leases;
(g) completing, fixturing, improving, renovating, painting, redecorating or other work, which
Landlord pays for or performs for specific tenants within their premises, and costs of correcting
defects in such work;
(h) costs of utilities outside normal business hours sold to tenants of the Project;
(i) costs to be reimbursed by other tenants of the Project or Taxes to be paid directly by
Tenant or other tenants of the Project, whether or not actually paid;
-3-
(j) salaries, wages, benefits and other compensation paid to officers and employees of
Landlord who are not assigned in whole or in part to the operation, management, maintenance or
repair of the Project;
(k) general organizational, administrative and overhead costs relating to maintaining
Landlord’s existence, either as a corporation, partnership, or other entity, including general
corporate, legal and accounting expenses;
(l) costs (including attorneys’ fees and costs of settlement, judgments and payments in lieu
thereof) incurred in connection with disputes with tenants, other occupants, or prospective
tenants, and costs and expenses, including legal fees, incurred in connection with negotiations or
disputes with employees, consultants, management agents, leasing agents, purchasers or mortgagees
of the Building;
(m) costs incurred by Landlord due to the violation by Landlord, its employees, agents or
contractors or any tenant of the terms and conditions of any lease of space in the Project or any
Legal Requirement (as defined in Section 7);
(n) tax penalties, fines or interest incurred as a result of Landlord’s negligence, inability
or unwillingness to make payment and/or to file any tax or informational returns when due, or from
Landlord’s failure to make any payment required to be made by Landlord hereunder before
delinquency;
(o) overhead and profit increment paid to the Landlord or to subsidiaries or affiliates of
Landlord for goods and/or services in or to the Project to the extent the same exceeds the costs of
such goods and/or services rendered by unaffiliated third parties on a competitive basis;
(p) costs arising from Landlord’s charitable or political contributions or fine art maintained
at the Project;
(q) costs in connection with services (including electricity), items or other benefits of a
type which are not standard for the Project and which are not available to Tenant without specific
charges therefor, but which are provided to another tenant or occupant of the Project, whether or
not such other tenant or occupant is specifically charged therefore by Landlord;
(r) costs incurred in the sale or refinancing of the Project;
(s) net income taxes of Landlord or the owner of any interest in the Project, franchise,
capital stock, gift, estate or inheritance taxes or any federal, state or local documentary taxes
imposed against the Project or any portion thereof or interest therein;
(t) costs incurred by reason of the remediation or other environmental response regarding any
contamination of the Premises or the Project or soils or groundwater thereunder, by Hazardous
Materials other than as described in Section 30 hereof;
-4-
(u) costs of repairs or other work occasioned by fire, windstorm, earthquake or other casualty
or loss in excess of the deductible under the casualty insurance maintained by Landlord pursuant to
Section 17 hereof; and
(v) any expenses otherwise includable within Operating Expenses to the extent actually
reimbursed by persons other than tenants of the Project under leases for space in the Project.
Within 90 days after the end of each calendar year (or such longer period as may be reasonably
required), Landlord shall furnish to Tenant a statement (an “Annual Statement”) showing in
reasonable detail: (a) the total and Tenant’s Share of actual Net Building Expenses for the
previous calendar year, and (b) the total of Tenant’s payments in respect of Net Building Expenses
for such year. If Tenant’s Share of actual Net Building Expenses for such year exceeds Tenant’s
payments of Net Building Expenses for such year, the excess shall be due and payable by Tenant as
Rent within 30 days after delivery of such Annual Statement to Tenant. If Tenant’s payments of Net
Building Expenses for such year exceed Tenant’s Share of actual Net Building Expenses for such year
Landlord shall pay the excess to Tenant within 30 days after delivery of such Annual Statement,
except that after expiration, or earlier termination of the Term, Landlord shall pay the excess to
Tenant after deducting all other amounts due Landlord.
The Annual Statement shall be final and binding upon Tenant unless Tenant, within 30 days
after Tenant’s receipt thereof, shall contest any item therein by giving written notice to
Landlord, specifying each item contested and the reason therefor. If, during such 30 day period,
Tenant reasonably and in good faith questions or contests the correctness of Landlord’s statement
of Tenant’s Share of Net Building Expenses, Landlord will provide Tenant with access to Landlord’s
books and records relating to the operation of the Project and such information as Landlord
reasonably determines to be responsive to Tenant’s questions. If after Tenant’s review of such
information, Landlord and Tenant cannot agree upon the amount of Tenant’s Share of Net Building
Expenses, then Tenant shall have the right to have an independent public accounting firm selected
by Tenant from among the 5 largest in the United States, working pursuant to a fee arrangement
other than a contingent fee (at Tenant’s sole cost and expense) and approved by Landlord (which
approval shall not be unreasonably withheld or delayed), audit and/or review Landlord’s books and
records relating to the operation of the Project and such other information relating to the
operation of the Project for the year in question (the “Independent Review”). The results of any
such Independent Review shall be binding on Landlord and Tenant. If the Independent Review shows
that Tenant’s pro rata share of the Net Building Expenses actually paid by Tenant for the calendar
year in question exceeded Tenant’s obligations for such calendar year, Landlord shall pay the
excess to Tenant within 30 days after delivery of such statement, except that after expiration or
earlier termination of the Term, Landlord shall pay the excess to Tenant after deducting all other
amounts due Landlord. If the Independent Review shows that Tenant’s payments of Tenant’s Share of
Net Building Expenses for such calendar year were less than Tenant’s obligation for the calendar
year, Tenant shall pay the deficiency to the Landlord within 30 days after delivery of such
statement. If the Independent Review shows that Tenant has overpaid Tenant’s pro rata share of Net
Building Expenses by more than 5% then Landlord shall reimburse Tenant for all costs incurred by
Tenant for the Independent Review. Net Building Expenses for the calendar years in which Tenant’s
obligation to share therein
-5-
begins and ends shall be prorated. Notwithstanding anything set forth herein to the contrary,
if the Project is not at least 95% occupied on average during any year of the Term, Tenant’s Share
of Net Building Expenses for such year shall be computed as though the Project had been 95%
occupied on average during such year.
“Tenant’s Share” shall be the percentage set forth on the first page of this Lease as Tenant’s
Share of Net Building Expenses as reasonably adjusted by Landlord for changes in the physical size
of the Premises or the Project occurring after commencement of the Term. Any such measurement
shall be performed in accordance with the 1996 Standard Method of Measuring Floor Area in Office
Buildings as adopted by the Building Owners and Managers Association (ANSI/BOMA Z65.1-1996).
Landlord may equitably increase Tenant’s Share for any item of expense or cost reimbursable by
Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a
portion of the Project that includes the Premises or that varies with occupancy or use. Base Rent,
Tenant’s Share of Net Building Expenses and all other amounts payable by Tenant to Landlord
hereunder are collectively referred to herein as “Rent.”
6. Security Deposit. The Security Deposit shall be held by Landlord as security for the
performance of Tenant’s obligations under this Lease. The Security Deposit is not an advance
rental deposit or a measure of Landlord’s damages in case of Tenant’s Default. Upon each
occurrence of a Default (as defined in Section 20), Landlord may use all or part of the Security
Deposit to pay delinquent payments due under this Lease, and the cost of any damage, injury,
expense or liability caused by such Default, without prejudice to any other remedy provided herein
or provided by law. Upon any such use of all or any portion of the Security Deposit, Tenant shall
pay Landlord on demand the amount that will restore the Security Deposit to its original amount.
Upon bankruptcy or other debtor-creditor proceedings against Tenant, the Security Deposit shall be
deemed to be applied first to the payment of Rent and other charges due Landlord for periods prior
to the filing of such proceedings. Landlord’s obligation respecting the Security Deposit is that
of a debtor, not a trustee; no interest shall accrue thereon. The Security Deposit shall be the
property of Landlord, but shall be paid to Tenant when Tenant’s obligations under this Lease have
been completely fulfilled. Landlord shall be released from any obligation with respect to the
Security Deposit upon transfer of this Lease and the Premises to a person or entity assuming
Landlord’s obligations under this Section 6. Tenant hereby waives the provisions of any law, now
or hereafter in force, which provide that Landlord may claim from a security deposit only those
sums reasonably necessary to remedy defaults in the payment of Rent, to repair damage caused by
Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums
reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or
unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent or invitee
of Tenant. If Tenant shall fully perform every provision of this Lease to be performed by Tenant,
the Security Deposit, or any balance thereof, shall be returned to Tenant (or, at Landlord’s
option, to the last assignee of Tenant’s interest hereunder) within 90 days after the expiration or
earlier termination of this Lease.
7. Use. The Premises shall be used solely for the Permitted Use set forth in the Basic Lease
Provisions, in compliance with all laws, orders, judgments, ordinances, regulations, codes,
directives, permits, licenses, covenants and restrictions now or hereafter applicable to the
Premises,
-6-
and the use and occupancy thereof (collectively, “Legal Requirements”). Tenant shall, upon 5
days’ written notice from Landlord, discontinue any use of the Premises which is declared by any
Governmental Authority (as defined in Section 9) having jurisdiction to be a violation of any Legal
Requirement. Tenant will not use or permit the Premises to be used for any purpose or in any
manner that would void Tenant’s or Landlord’s insurance, increase the insurance risk, or cause the
disallowance of any sprinkler or other credits. Tenant shall reimburse Landlord promptly upon
demand for any additional premium charged for any such insurance policy by reason of Tenant’s
failure to comply with the provisions of this Section or otherwise caused by Tenant’s use and/or
occupancy of the Premises. Tenant will use the Premises in a careful, safe and proper manner and
will not commit waste, overload the floor or structure of the Premises, subject the Premises to use
that would damage the Premises or obstruct or interfere with the rights of Landlord or other
tenants or occupants of the Project, including conducting or giving notice of any auction,
liquidation, or going out of business sale on the Premises, or using or allowing the Premises to be
used for any unlawful purpose. Tenant shall cause any equipment or machinery to be installed in
the Premises so as to reasonably prevent sounds or vibrations from the Premises from extending into
Common Areas, or other space in the Project. Tenant shall not place any machinery or equipment
weighing 500 pounds or more in or upon the Premises or transport or move such items through the
Common Areas of the Project or in the Project elevators without the prior written consent of
Landlord. Except as may be provided under the Work Letter, Tenant shall not, without the prior
written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed, use the Premises in any manner which will require ventilation, air exchange, heating, gas,
steam, electricity or water beyond the existing capacity of the Project as proportionately
allocated to the Premises based upon Tenant’s Share as usually furnished for the Permitted Use.
Tenant, at its sole expense, shall make any alterations or modifications to the interior or
the exterior of the Premises or the Project that are required by Legal Requirements (including,
without limitation, compliance of the Premises with the Americans With Disabilities Act, 42 U.S.C.
§ 12101, et seq. together with regulations promulgated pursuant thereto) related to Tenant’s use or
occupancy of the Premises as distinguished from the general use or occupancy of the Project.
Notwithstanding any other provision herein to the contrary, Tenant shall be responsible for any and
all demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages or
judgments, and all reasonable expenses incurred in investigating or resisting the same (including,
without limitation, reasonable attorneys’ fees, charges and disbursements and costs of suit)
(collectively, “Claims”) arising out of or in connection with Tenant’s obligation to comply with
Legal Requirements, and Tenant shall indemnify, defend, hold and save Landlord harmless from and
against any and all Claims arising out of or in connection with any failure of the Premises to
comply with any Legal Requirement.
8. Holding Over. If, with Landlord’s express written consent, Tenant retains possession of
the Premises after the termination of the Term, (i) unless otherwise agreed in such written
consent, such possession shall be subject to immediate termination by Landlord at any time, (ii)
all of the other terms and provisions of this Lease (including, without limitation, the adjustment
of Base Rent pursuant to Section 4 hereof) shall remain in full force and effect (excluding any
expansion or renewal option or other similar right or option) during such holdover period, (iii)
Tenant shall
-7-
continue to pay Base Rent in the amount payable upon the date of the expiration or earlier
termination of this Lease or such other amount as Landlord may indicate, in Landlord’s sole and
absolute discretion, in such written consent, and (iv) all other payments shall continue under the
terms of this Lease. If Tenant remains in possession of the Premises after the expiration or
earlier termination of the Term without the express written consent of Landlord, (A) Tenant shall
become a tenant at sufferance upon the terms of this Lease except that the monthly rental shall be
equal to 200% of the Rent in effect during the last 30 days of the Term, and (B) Tenant shall be
responsible for all damages suffered by Landlord resulting from or occasioned by Tenant’s holding
over, including consequential damages. No holding over by Tenant, whether with or without consent
of Landlord, shall operate to extend this Lease except as otherwise expressly provided, and this
Section 8 shall not be construed as consent for Tenant to retain possession of the Premises.
Acceptance by Landlord of Rent after the expiration of the Term or earlier termination of this
Lease shall not result in a renewal or reinstatement of this Lease.
9. Taxes. Landlord shall pay, as part of Operating Expenses, all taxes, levies, assessments
and governmental charges of any kind (collectively referred to as “Taxes”) imposed by any federal,
state, regional, municipal, local or other governmental authority or agency, including, without
limitation, quasi-public agencies (collectively, “Governmental Authority”) during the Term,
including, without limitation, all Taxes: (i) imposed on or measured by or based, in whole or in
part, on rent payable to Landlord under this Lease and/or from the rental by Landlord of the
Project or any portion thereof, or (ii) based on the square footage, assessed value or other
measure or evaluation of any kind of the Premises or the Project, or (iii) assessed or imposed by
or on the operation or maintenance of any portion of the Premises or the Project, including
parking, or (iv) assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by, any Governmental Authority, or (v) imposed
as a license or other fee on Landlord’s business of leasing space in the Project. Landlord may
contest by appropriate legal proceedings the amount, validity, or application of any Taxes or liens
securing Taxes. Taxes shall not include any net income taxes imposed on Landlord unless such net
income taxes are in substitution for any Taxes payable hereunder. If any such Tax is levied or
assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at
such times and in such manner as the taxing authority shall require. Tenant shall pay, prior to
delinquency, any and all Taxes levied or assessed against any personal property or trade fixtures
placed by Tenant in the Premises, whether levied or assessed against Landlord or Tenant. If any
Taxes on Tenant’s personal property or trade fixtures are levied against Landlord or Landlord’s
property, or if the assessed valuation of the Project is increased by a value attributable to
improvements in or alterations to the Premises, whether owned by Landlord or Tenant and whether or
not affixed to the real property so as to become a part thereof, higher than the base valuation on
which Landlord from time-to-time allocates Taxes to all tenants in the Project, Landlord shall have
the right, but not the obligation, to pay such Taxes. Landlord’s determination of any excess
assessed valuation shall be binding and conclusive, absent manifest error. The amount of any such
payment by Landlord shall constitute Additional Rent due from Tenant to Landlord immediately upon
demand.
-8-
10. Parking.
(a) Tenant shall have the non-exclusive right, in common with others, to use the Building
Common Areas, subject to the rules and regulations attached hereto as Exhibit E together with such
other reasonable and nondiscriminatory rules and regulations as are hereafter promulgated by
Landlord in its discretion.
(b) Tenant shall be assigned 12 parking stalls to be designated by Landlord and reserved for
Tenant’s use, which parking stalls shall be located as set forth on Exhibit I. Landlord reserves
the right from time-to-time to provide other parking for Tenant, which shall be no farther from the
Building than the farther of Landlord’s two present lots, except for an interim period not
exceeding 18 months in connection with a redevelopment of either such lot, in which case such
replacement parking shall be no more than 5 blocks from the Building. Tenant shall pay as triple
net Additional Rent the sum of 575.00 per month, per stall, which sum shall be increased by 3.5%
per annum. In addition, Tenant shall pay its Allocated Parking Expenses on a monthly basis with
Base Rent. Allocated Parking Expenses shall be subject to the operating expense exclusions set
forth in Article 5.
(c) Tenant agrees not to overburden the guest parking facilities and agrees to cooperate with
Landlord and other tenants in the use of such guest parking. Landlord reserves the right to
determine that guest parking is becoming overcrowded and to limit Tenant’s use thereof. Upon such
determination, Landlord may reasonably allocate guest parking spaces among Tenant and other
tenants. If, after such allocation, Landlord determines that Tenant’s customers, clients, or
invitees are using more than the number of guest parking spaces that would otherwise be
attributable to a reasonable number of guest parking spaces for Tenant’s use, Landlord may require
Tenant to obtain guest parking outside of the Building and the parking lot to the extent of such
unreasonable excess uses. However, nothing in this Section 10(c) is intended to create an
affirmative duty on Landlord to monitor parking.
11. Utilities, Services.
Landlord shall provide, subject to the terms of this Section 11, potable water, electricity,
heat, ventilation, air conditioning, light, power, telephone, sewer, deionized water, steam, carbon
dioxide gas, compressed air, vacuum and other utilities (including gas and fire sprinklers to the
extent the Project is plumbed for such services), refuse and trash collection and janitorial
services (collectively, “Utilities”). Any use by Tenant of Utilities shall be allocated to and
paid by Tenant on such basis as Landlord shall determine for the Project. Tenant shall be entitled
to use its pro rata share of Utilities. Landlord shall pay, as Operating Expenses or subject to
Tenant’s reimbursement obligation, for all Utilities used on the Premises, all maintenance charges
for Utilities, and any storm sewer charges or other similar charges for Utilities imposed by any
governmental entity or Utility provider, and any taxes, penalties, surcharges or similar charges
thereon. Landlord may cause, at Tenant’s expense, any Utilities to be separately metered or
charged directly to Tenant by the provider. Tenant shall pay directly to the Utility provider,
prior to delinquency, any separately metered Utilities and services which may be furnished to
Tenant or the Premises during the Term. Tenant shall pay, as part of Operating Expenses, its share
of all charges for jointly metered Utilities
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based upon consumption, as reasonably determined by Landlord and shall pay the cost of any
after hours Utilities reasonably allocated to it by Landlord. No interruption or failure of
Utilities, from any cause whatsoever other than Landlord’s willful misconduct, shall result in
eviction or constructive eviction of Tenant, termination of this Lease or the abatement of Rent.
Tenant agrees to limit use of water and sewer with respect to Common Areas to normal restroom use.
Landlord’s sole obligation for either providing emergency generators or providing emergency back-up
power to Tenant shall be: (i) to provide emergency generators with not less than the capacity of
the emergency generators located in the Building as of the Commencement Date, and (ii) to contract
with a third party to maintain the emergency generators as per the manufacturer’s standard
maintenance guidelines. Landlord shall have no obligation to provide Tenant with operational
emergency generators or back-up power or to supervise, oversee or confirm that the third party
maintaining the emergency generators is maintaining the generators as per the manufacturer’s
standard guidelines or otherwise. During any period of replacement, repair or maintenance of the
emergency generators when the emergency generators are not operational, including any delays
thereto due to the inability to obtain parts or replacement equipment, Landlord shall have no
obligation to provide Tenant with an alternative back-up generator or generators or alternative
sources of back-up power.
12. Alterations and Tenant’s Property. Any alterations, additions, or improvements made to
the Premises by or on behalf of Tenant, including additional locks or bolts of any kind or nature
upon any doors or windows in the Premises, but excluding installation, removal or realignment of
furniture systems (other than removal of furniture systems owned or paid for by Landlord) not
involving any modifications to the structure or connections (other then by ordinary plugs or jacks)
to Building Systems (as defined in Section 13) (“Alterations”) shall be subject to Landlord’s prior
written consent, which may be given or withheld in Landlord’s sole discretion if any such
Alteration affects the structure or Building Systems. Tenant may construct nonstructural
Alterations in the Premises without Landlord’s prior approval if the aggregate cost of all such
work in any 12 month period does not exceed $25,000 (a “Notice-Only Alteration”), provided Tenant
notifies Landlord in writing of such intended Notice-Only Alteration, and such notice shall be
accompanied by plans, specifications, work contracts and such other information concerning the
nature and cost of the Notice-Only Alteration as may be reasonably requested by Landlord, which
notice and accompanying materials shall be delivered to Landlord not less than 15 business days in
advance of any proposed construction. If Landlord approves any Alterations, Landlord may impose
such conditions on Tenant in connection with the commencement, performance and completion of such
Alterations as Landlord may deem appropriate in Landlord’s sole and absolute discretion. Any
request for approval shall be in writing, delivered not less than 15 business days in advance of
any proposed construction, and accompanied by plans, specifications, bid proposals, work contracts
and such other information concerning the nature and cost of the alterations as may be reasonably
requested by Landlord, including the identities and mailing addresses of all persons performing
work or supplying materials. Landlord’s right to review plans and specifications and to monitor
construction shall be solely for its own benefit, and Landlord shall have no duty to ensure that
such plans and specifications or construction comply with applicable Legal Requirements. Tenant
shall cause, at its sole cost and expense, all Alterations to comply with insurance requirements
and with Legal Requirements and shall implement at its sole cost and expense any alteration or
modification required by Legal Requirements as a result of any Alterations. Tenant shall pay to
Landlord, as
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Additional Rent, on demand an amount equal to 5% of all charges incurred by Tenant or its
contractors or agents in connection with any Alteration to cover Landlord’s overhead and expenses
for plan review, coordination, scheduling and supervision. Before Tenant begins any Alteration,
Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable
law. Tenant shall reimburse Landlord for, and indemnify and hold Landlord harmless from, any
expense incurred by Landlord by reason of faulty work done by Tenant or its contractors, delays
caused by such work, or inadequate cleanup.
Tenant shall furnish security or make other arrangements satisfactory to Landlord to assure
payment for the completion of all Alterations work free and clear of liens, and shall provide
certificates of insurance for workers’ compensation, if applicable, and other coverage in amounts
and from an insurance company satisfactory to Landlord protecting Landlord against liability for
personal injury or property damage during construction. Upon completion of any Alterations, Tenant
shall deliver to Landlord: (i) sworn statements setting forth the names of all contractors and
subcontractors who did the work and final lien waivers from all such contractors and
subcontractors; and (ii) “as built” plans for any such Alteration.
Other than (i) the items, if any, listed on Exhibit F attached hereto, (ii) any items agreed
by Landlord in writing to be included on Exhibit F in the future, and (iii) any trade fixtures,
machinery, equipment and other personal property not paid for with the TI Allowance (as defined in
the Work Letter) which may be removed without material damage to the Premises, which damage shall
be repaired (including capping or terminating utility hook-ups behind walls) by Tenant during the
Term (collectively, “Tenant’s Property”), all property of any kind paid for with the TI Allowance,
all Alterations, real property fixtures, built-in machinery and equipment, built-in casework and
cabinets and other similar additions and improvements built into the Premises so as to become an
integral part of the Premises such as fume hoods which penetrate the roof or plenum area, built-in
cold rooms, built-in warm rooms, walk-in cold rooms, walk-in warm rooms, deionized water systems,
glass washing equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical
equipment and systems, and any power generator and transfer switch (collectively, “Installations”)
shall be and shall remain the property of Landlord during the Term and following the expiration or
earlier termination of the Term, shall not be removed by Tenant at any time during the Term and
shall remain upon and be surrendered with the Premises as a part thereof following the expiration
or earlier termination of this Lease; provided, however, that Landlord shall, at the time its
approval of such Installation is requested or at the time it receives notice of a Notice-Only
Alteration notify Tenant if it has elected to cause Tenant to remove such Installation upon the
expiration or earlier termination of this Lease. If Landlord so elects, Tenant shall remove such
Installation upon the expiration or earlier termination of this Lease and restore any damage caused
by or occasioned as a result of such removal, including, when removing any of Tenant’s Property
which was plumbed, wired or otherwise connected to any of the Building Systems, capping off all
such connections behind the walls of the Premises and repairing any holes. During any such
restoration period, Tenant shall pay Rent to Landlord as provided herein as if said space were
otherwise occupied by Tenant.
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13. Landlord’s Repairs. Landlord, as an Operating Expense, shall maintain all of the
structural, exterior, parking and other Common Areas of the Project, including HVAC, plumbing,
electrical, fire sprinklers, elevators, deionized water, steam, carbon dioxide gas, compressed air,
vacuum and all other building systems serving the Premises and other portions of the Project
(“Building Systems”), in good repair, reasonable wear and tear and uninsured losses and damages
caused by Tenant, its agents, servants, employees, invitees and contractors excluded. Losses and
damages caused by Tenant, its agents, servants, employees, invitees and contractors shall be
repaired by Landlord, to the extent not covered by insurance, at Tenant’s sole cost and expense.
Landlord reserves the right to stop Building System services when necessary (i) by reason of
accident or emergency, or (ii) for planned repairs, alterations or improvements, which are, in the
judgment of Landlord, desirable or necessary to be made, until said repairs, alterations or
improvements shall have been completed. Landlord shall have no responsibility or liability for
failure to supply Building System services during any such period of interruption;
provided, however, that Landlord shall give Tenant 48 hours advance notice of any
planned stoppage of Building System services for routine maintenance, repairs, alterations or
improvements. Tenant shall promptly give Landlord written notice of any repair required by
Landlord pursuant to this Section, after which Landlord shall have a reasonable opportunity to
effect such repair. Landlord shall not be liable for any failure to make any repairs or to perform
any maintenance unless such failure shall persist for an unreasonable time after Tenant’s written
notice of the need for such repairs or maintenance. Tenant waives its rights under any state or
local law to terminate this Lease or to make such repairs at Landlord’s expense and agrees that the
parties’ respective rights with respect to such matters shall be solely as set forth herein.
Repairs required as the result of fire, earthquake, flood, vandalism, war, or similar cause of
damage or destruction shall be controlled by Section 18.
14. Tenant’s Repairs. Subject to Section 13 hereof, Tenant, at its expense, shall repair,
replace and maintain in good condition all portions of the Premises, including, without limitation,
entries, doors, ceilings, interior windows, interior walls, and the interior side of demising
walls. Such repair and replacements may include capital expenditures and repairs whose benefit may
extend beyond the Term. Should Tenant fail to make any such repair or replacement or fail to
maintain the Premises, Landlord shall give Tenant notice of such failure. If Tenant fails to
commence cure of such default within 10 days of Landlord’s notice, and thereafter diligently
prosecute such cure to completion, Landlord may perform such work and shall be reimbursed by Tenant
within 10 days after demand therefor; provided, however, that if such default by Tenant creates or
could create an emergency, Landlord may immediately commence cure of such default and shall
thereafter be entitled to recover the costs of such cure from Tenant. Subject to Sections 17 and
18, Tenant shall bear the full uninsured cost of any repair or replacement to any part of the
Project that results from damage caused by Tenant, its agents, contractors, or invitees and any
repair that benefits only the Premises.
15. Mechanic’s Liens. Tenant shall discharge, by bond or otherwise, any mechanic’s lien filed
against the Premises or against the Project for work claimed to have been done for, or materials
claimed to have been furnished to, Tenant within 10 days after the filing thereof, at Tenant’s sole
cost and shall otherwise keep the Premises and the Project free from any liens arising out of work
performed, materials furnished or obligations incurred by Tenant. Should Tenant fail to discharge
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any lien described herein, Landlord shall have the right, but not the obligation, to pay such
claim or post a bond or otherwise provide security to eliminate the lien as a claim against title
to the Project and the cost thereof shall be immediately due from Tenant as Additional Rent. If
Tenant shall lease or finance the acquisition of office equipment, furnishings, or other personal
property of a removable nature utilized by Tenant in the operation of Tenant’s business, Tenant
warrants that any Uniform Commercial Code Financing Statement executed by Tenant will upon its face
or by exhibit thereto indicate that such Financing Statement is applicable only to removable
personal property of Tenant located within the Premises. In no event shall the address of the
Project be furnished on the statement without qualifying language as to applicability of the lien
only to removable personal property, located in an identified suite held by Tenant.
16. Indemnification. Tenant hereby indemnifies and agrees to defend, save and hold Landlord
harmless from and against any and all Claims for injury or death to persons or damage to property
occurring within or about the Premises, arising directly or indirectly out of use or occupancy of
the Premises or a breach or default by Tenant in the performance of any of its obligations
hereunder, unless caused solely by the willful misconduct or gross negligence of Landlord.
Landlord shall not be liable to Tenant for, and Tenant assumes all risk of damage to, personal
property (including, without limitation, loss of records kept within the Premises). Tenant further
waives any and all Claims for injury to Tenant’s business or loss of income relating to any such
damage or destruction of personal property (including, without limitation, any loss of records).
Landlord shall not be liable for any damages arising from any act, omission or neglect of any
tenant in the Project or of any other third party.
17. Insurance. Landlord shall maintain all insurance against any peril generally included
within the classification “Fire and Extended Coverage,” sprinkler damage (if applicable), vandalism
and malicious mischief covering the full replacement cost of the Project. Landlord shall further
carry commercial general liability insurance with a single loss limit of not less than $2,000,000
for death or bodily injury, or property damage with respect to the Project. Landlord may, but is
not obligated to, maintain such other insurance and additional coverages as it may deem necessary,
including, but not limited to, flood, environmental hazard and earthquake, loss or failure of
building equipment, errors and omissions, rental loss during the period of repair or rebuilding,
workers’ compensation insurance and fidelity bonds for employees employed to perform services and
insurance for any improvements installed by Tenant or which are in addition to the standard
improvements customarily furnished by Landlord without regard to whether or not such are made a
part of the Project. All such insurance shall be included as part of the Operating Expenses. The
Project may be included in a blanket policy (in which case the cost of such insurance allocable to
the Project will be determined by Landlord based upon the insurer’s cost calculations). Tenant
shall also reimburse Landlord for any increased premiums or additional insurance which Landlord
reasonably deems necessary as a result of Tenant’s use of the Premises.
Tenant, at its sole cost and expense, shall maintain during the Term: all risk property
insurance covering the full replacement cost of all property and improvements installed or placed
in the Premises by Tenant at Tenant’s expense; workers’ compensation insurance with no less than
the minimum limits required by law; employer’s liability insurance with such limits as required by
law;
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and commercial general liability insurance, with a minimum limit of not less than $2,000,000
per occurrence for death or bodily injury and not less than $1,000,000 for property damage with
respect to the Premises. The commercial general liability insurance policies shall name Landlord,
its officers, directors, employees, managers, agents, invitees and contractors (collectively,
“Related Parties”), as additional insureds; insure on an occurrence and not a claims-made basis; be
issued by insurance companies which have a rating of not less than policyholder rating of A and
financial category rating of at least Class XII in “Best’s Insurance Guide”; shall not be
cancelable unless 30 days prior written notice shall have been given to Landlord from the insurer;
contain a hostile fire endorsement and a contractual liability endorsement; and provide primary
coverage to Landlord (any policy issued to Landlord providing duplicate or similar coverage shall
be deemed excess over Tenant’s policies). Such policies or certificates thereof shall be delivered
to Landlord by Tenant upon commencement of the Term and upon each renewal of said insurance.
Tenant’s policy may be a “blanket policy” which specifically provides that the amount of insurance
shall not be prejudiced by other losses covered by the policy. Tenant shall, at least 20 days
prior to the expiration of such policies, furnish Landlord with renewals or binders. Tenant agrees
that if Tenant does not take out and maintain such insurance, Landlord may (but shall not be
required to) procure said insurance on Tenant’s behalf and at its cost to be paid as Additional
Rent.
In each instance where insurance is to name Landlord as an additional insured, Tenant shall
upon written request of Landlord also designate and furnish certificates so evidencing Landlord as
additional insured to: (i) any lender of Landlord holding a security interest in the Project or any
portion thereof, (ii) the landlord under any lease wherein Landlord is tenant of the real property
on which the Project is located, if the interest of Landlord is or shall become that of a tenant
under a ground or other underlying lease rather than that of a fee owner, and/or (iii) any
management company retained by Landlord to manage the Project.
The property insurance obtained by Landlord and Tenant shall include a waiver of subrogation
by the insurers and all rights based upon an assignment from its insured, against Landlord or
Tenant, and their respective Related Parties, in connection with any loss or damage thereby insured
against. Neither party nor its respective Related Parties shall be liable to the other for loss or
damage caused by any risk insured against under property insurance required to be maintained
hereunder, and each party waives any claims against the other party, and its respective Related
Parties, for such loss or damage. The failure of a party to insure its property shall not void
this waiver. Landlord and its respective Related Parties shall not be liable for, and Tenant
hereby waives all claims against such parties for, business interruption and losses occasioned
thereby sustained by Tenant or any person claiming through Tenant resulting from any accident or
occurrence in or upon the Premises or the Project from any cause whatsoever. If the foregoing
waivers shall contravene any law with respect to exculpatory agreements, the liability of Landlord
or Tenant shall be deemed not released but shall be secondary to the other’s insurer.
Landlord may require insurance policy limits to be raised to conform with requirements of
Landlord’s lender and/or to bring coverage limits to levels then being generally required of new
tenants within the Project.
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18. Restoration. If at any time during the Term the Project or the Premises are damaged by a
fire or other insured casualty, Landlord shall notify Tenant within 60 days after discovery of such
damage as to the amount of time Landlord reasonably estimates it will take to restore the Project
or the Premises, as applicable. If the restoration time is estimated to exceed 11 months, Landlord
may, in such notice, elect to terminate this Lease as of the date that is 75 days after the date of
discovery of such damage or destruction; provided, however, that notwithstanding
Landlord’s election to restore the Premises, Tenant may elect to terminate this Lease by written
notice to Landlord delivered within 5 business days of receipt of Landlord’s notice electing to
restore the Premises over an 11 month or longer period. Unless either Landlord or Tenant elects to
terminate this Lease, Landlord shall, subject to receipt of sufficient insurance proceeds (with any
deductible to be treated as a current Operating Expense), promptly restore the Premises (excluding
the improvements installed by Tenant or by Landlord and paid for by Tenant), subject to delays
arising from the collection of insurance proceeds, from Force Majeure events or as needed for
Tenant to obtain any license, clearance or other authorization of any kind required to enter into
and restore the Premises issued by any governmental or quasi-governmental agency having
jurisdiction over the use, storage, release or removal of Hazardous Materials (as defined in
Section 30) in, on or about the Premises (collectively referred to herein as “Hazardous Materials
Clearances”); provided, however, that if repair or restoration of the Premises is
not substantially complete as of the end of 11 months from the date of damage or destruction,
Landlord may, in its sole and absolute discretion, elect not to proceed with such repair and
restoration, or Tenant may by written notice to Landlord delivered within 5 business days of the
expiration of such 11 month period, elect to terminate this Lease, in which event Landlord shall be
relieved of its obligation to make such repairs or restoration and this Lease shall terminate as of
the date that is 75 days after the later of: (i) discovery of such damage or destruction, or (ii)
the date all required Hazardous Materials Clearances are obtained.
Tenant, at its expense, shall promptly perform, subject to delays arising from the collection
of insurance proceeds, from Force Majeure (as defined in Section 34) events or to obtain Hazardous
Material Clearances, all repairs or restoration not required to be done by Landlord and shall
promptly re-enter the Premises and commence doing business in accordance with this Lease.
Notwithstanding the foregoing, Landlord may terminate this Lease if the Premises are damaged during
the last 1 year of the Term and Landlord reasonably estimates that it will take more than 2 months
to repair such damage, or if insurance proceeds are not available for such restoration. Rent shall
be abated from the date all required Hazardous Material Clearances are obtained until the Premises
are repaired and restored, in the proportion which the area of the Premises, if any, which is not
usable by Tenant bears to the total area of the Premises, unless Landlord provides Tenant with
other space during the period of repair that is suitable for the temporary conduct of Tenant’s
business. Such abatement shall be the sole remedy of Tenant, and except as provided herein, Tenant
waives any right to terminate the Lease by reason of damage or casualty loss.
The provisions of this Lease, including this Section 18, constitute an express agreement
between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any
part of the Premises, or any other portion of the Project, and any statute or regulation which is
now or may hereafter be in effect shall have no application to this Lease or any damage or
destruction to all
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or any part of the Premises or any other portion of the Project, the parties hereto expressly
agreeing that this Section 18 sets forth their entire understanding and agreement with respect to
such matters.
19. Condemnation. If the whole or any material part of the Premises or the Project is taken
for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of
eminent domain, or by private purchase in lieu thereof (a “Taking” or “Taken”), and the Taking
would in Landlord’s reasonable judgment either prevent or materially interfere with Tenant’s use of
the Premises or materially interfere with or impair Landlord’s ownership or operation of the
Project, then upon written notice by Landlord this Lease shall terminate and Rent shall be
apportioned as of said date. If part of the Premises shall be Taken, and this Lease is not
terminated as provided above, Landlord shall promptly restore the Premises and the Project as
nearly as is commercially reasonable under the circumstances to their condition prior to such
partial Taking and the rentable square footage of the Building, the rentable square footage of the
Premises, Tenant’s Share of Net Building Expenses and the Rent payable hereunder during the
unexpired Term shall be reduced to such extent as may be fair and reasonable under the
circumstances. Upon any such Taking, Landlord shall be entitled to receive the entire price or
award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord
Tenant’s interest, if any, in such award. Tenant shall have the right, to the extent that same
shall not diminish Landlord’s award, to make a separate claim against the condemning authority (but
not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for
moving expenses and damage to Tenant’s trade fixtures, if a separate award for such items is made
to Tenant. Tenant hereby waives any and all rights it might otherwise have pursuant to any
provision of state law to terminate this Lease upon a partial Taking of the Premises or the
Project.
20. Events of Default. Each of the following events shall be a default (“Default”) by Tenant
under this Lease:
(a) Payment Defaults. Tenant shall fail to pay any installment of Rent or any other payment
hereunder when due.
(b) Insurance. Any insurance required to be maintained by Tenant pursuant to this Lease shall
be canceled or terminated or shall expire or shall be reduced or materially changed, or Landlord
shall receive a notice of nonrenewal of any such insurance and Tenant shall fail to obtain
replacement insurance at least 20 days before the expiration of the current coverage.
(c) Abandonment. Tenant shall abandon the Premises.
(d) Improper Transfer. Tenant shall assign, sublease or otherwise transfer or attempt to
transfer all or any portion of Tenant’s interest in this Lease or the Premises except as expressly
permitted herein, or Tenant’s interest in this Lease shall be attached, executed upon, or otherwise
judicially seized and such action is not released within 90 days of the action.
(e) Liens. Tenant shall fail to discharge or otherwise obtain the release of any lien placed
upon the Premises in violation of this Lease within 10 days after any such lien is filed against
the Premises.
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(f) Insolvency Events. Tenant or any guarantor or surety of Tenant’s obligations hereunder
shall: (A) make a general assignment for the benefit of creditors; (B) commence any case,
proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or
to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment
liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or of any substantial part of its
property (collectively a “Proceeding for Relief”); (C) become the subject of any Proceeding for
Relief which is not dismissed within 90 days of its filing or entry; or (D) die or suffer a legal
disability (if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise fail to
maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or other
entity).
(g) Estoppel Certificate or Subordination Agreement. Tenant fails to execute any document
required from Tenant under Sections 23 or 27 within 5 days after a second notice requesting such
document.
(h) Other Defaults. Tenant shall fail to comply with any provision of this Lease other than
those specifically referred to in this Section 20, and, except as otherwise expressly provided
herein, such failure shall continue for a period of 10 days after written notice thereof from
Landlord to Tenant.
Any notice given under Section 20(h) hereof shall: (i) specify the alleged default, (ii)
demand that Tenant cure such default, (iii) be in lieu of, and not in addition to, or shall be
deemed to be, any notice required under any provision of applicable law, and (iv) not be deemed a
forfeiture or a termination of this Lease unless Landlord elects otherwise in such notice; provided
that if the nature of Tenant’s default pursuant to Section 20(h) is such that it cannot be cured by
the payment of money and reasonably requires more than 30 days to cure, then Tenant shall not be
deemed to be in default if Tenant commences such cure within said 30 day period and thereafter
diligently prosecutes the same to completion; provided, however, that such cure shall be completed
no later than 150 days from the date of Landlord’s notice.
21. Landlord’s Remedies.
(a) Payment By Landlord; Interest. Upon a Default by Tenant hereunder, Landlord may, without
waiving or releasing any obligation of Tenant hereunder, make such payment or perform such act.
All sums so paid or incurred by Landlord, together with interest thereon, from the date such sums
were paid or incurred, at the annual rate equal to 12% per annum or the highest rate permitted by
law (the “Default Rate”), whichever is less, shall be payable to Landlord on demand as Additional
Rent. Nothing herein shall be construed to create or impose a duty on Landlord to mitigate any
damages resulting from Tenant’s Default hereunder.
(b) Late Payment Rent. Late payment by Tenant to Landlord of Rent and other sums due will
cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult and impracticable to ascertain. Such costs include, but are not limited to,
processing and accounting charges and late charges which may be imposed on Landlord under any
Mortgage covering the Premises. Therefore, if any installment of Rent due from Tenant is
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not received by Landlord within 5 days after the date such payment is due, Tenant shall pay to
Landlord an additional sum equal to 6% of the overdue Rent as a late charge. The parties agree
that this late charge represents a fair and reasonable estimate of the costs Landlord will incur by
reason of late payment by Tenant. In addition to the late charge, Rent not paid when due shall
bear interest at the Default Rate from the 5th day after the date due until paid.
(c) Remedies. Upon the occurrence of a Default, Landlord, at its option, without further
notice or demand to Tenant, shall have in addition to all other rights and remedies provided in
this Lease, at law or in equity, the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice or demand
whatsoever.
(i) Terminate this Lease, or at Landlord’s option, Tenant’s right to possession only, in which
event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for possession or arrearages
in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other
person who may be occupying the Premises or any part thereof, without being liable for prosecution
or any claim or damages therefor;
(ii) Upon any termination of this Lease, whether pursuant to the foregoing Section 21(c)(i) or
otherwise, Landlord may recover from Tenant the following:
(A) The worth at the time of award of any unpaid rent which has been earned at the time of
such termination; plus
(B) The worth at the time of award of the amount by which the unpaid rent which would have
been earned after termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus
(C) The worth at the time of award of the amount by which the unpaid rent for the balance of
the Term after the time of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus
(D) Any other amount necessary to compensate Landlord for all the detriment proximately caused
by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, specifically including, but not limited to, brokerage
commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion
thereof for a new tenant, whether for the same or a different use, and any special concessions made
to obtain a new tenant; and
(E) At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as
may be permitted from time to time by applicable law.
The term “rent” as used in this Section 21 shall be deemed to be and to mean all sums of every
nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord
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or to others. As used in Sections 21(c)(ii) (A) and (B), above, the “worth at the time of
award” shall be computed by allowing interest at the Default Rate. As used in Section 21(c)(ii)(C)
above, the “worth at the time of award” shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1%.
(iii) Landlord may continue this Lease in effect after Tenant’s Default and recover rent as it
becomes due (Landlord and Tenant hereby agreeing that Tenant has the right to sublet or assign
hereunder, subject only to reasonable limitations). Accordingly, if Landlord does not elect to
terminate this Lease following a Default by Tenant, Landlord may, from time to time, without
terminating this Lease, enforce all of its rights and remedies hereunder, including the right to
recover all Rent as it becomes due.
(iv) Whether or not Landlord elects to terminate this Lease following a Default by Tenant,
Landlord shall have the right to terminate any and all subleases, licenses, concessions or other
consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in
Landlord’s sole discretion, succeed to Tenant’s interest in such subleases, licenses, concessions
or arrangements. Upon Landlord’s election to succeed to Tenant’s interest in any such subleases,
licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such
election, have no further right to or interest in the rent or other consideration receivable
thereunder.
(v) Independent of the exercise of any other remedy of Landlord hereunder or under applicable
law, Landlord may conduct an environmental test of the Premises as generally described in Section
30(d) hereof, at Tenant’s expense.
(d) Effect of Exercise. Exercise by Landlord of any remedies hereunder or otherwise available
shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this
Lease by Landlord, it being understood that such surrender and/or termination can be effected only
by the express written agreement of Landlord and Tenant. Any law, usage, or custom to the contrary
notwithstanding, Landlord shall have the right at all times to enforce the provisions of this Lease
in strict accordance with the terms hereof; and the failure of Landlord at any time to enforce its
rights under this Lease strictly in accordance with same shall not be construed as having created a
custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease
or as having modified the same and shall not be deemed a waiver of Landlord’s right to enforce one
or more of its rights in connection with any subsequent default. A receipt by Landlord of Rent or
other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of
such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been
made unless expressed in writing and signed by Landlord. To the greatest extent permitted by law,
Tenant waives the service of notice of Landlord’s intention to re-enter, re-take or otherwise
obtain possession of the Premises as provided in any statute, or to institute legal proceedings to
that end, and also waives all right of redemption in case Tenant shall be dispossessed by a
judgment or by warrant of any court or judge. Any reletting of the Premises or any portion thereof
shall be on such terms and conditions as Landlord in its sole discretion may determine. Landlord
shall not liable for, nor shall Tenant’s obligations hereunder be diminished
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because of, Landlord’s failure to relet the Premises or collect rent due in respect of such
reletting or otherwise to mitigate any damages arising by reason of Tenant’s Default.
22. Assignment and Subletting.
(a) General Prohibition. Without Landlord’s prior written consent subject to and on the
conditions described in this Section 22, Tenant shall not, directly or indirectly, voluntarily or
by operation of law, assign this Lease or sublease the Premises or any part thereof or mortgage,
pledge, or hypothecate its leasehold interest or grant any concession or license within the
Premises, and any attempt to do any of the foregoing shall be void and of no effect. If Tenant is
a corporation, partnership or limited liability company, the shares or other ownership interests
thereof which are not actively traded upon a stock exchange or in the over-the-counter market, a
transfer or series of transfers whereby 25% or more of the issued and outstanding shares or other
ownership interests of such corporation are, or voting control is, transferred (but excepting
transfers upon deaths of individual owners) from a person or persons or entity or entities which
were owners thereof at time of execution of this Lease to persons or entities who were not owners
of shares or other ownership interests of the corporation, partnership or limited liability company
at time of execution of this Lease, shall be deemed an assignment of this Lease requiring the
consent of Landlord as provided in this Section 22. For purposes of this Section, a transfer of
ownership interests controlling Tenant shall be deemed an assignment of this Lease unless such
ownership interests are publicly traded or unless such ownership interest are issued by Tenant in
an equity financing or result from the conversion of not more than $7,000,000 of debt which by its
original terms was convertible into equity interests.
(b) Permitted Transfers. If Tenant desires to assign, sublease, hypothecate or otherwise
transfer this Lease or sublet the Premises other than pursuant to a Permitted Assignment, as
defined below, then at least 15 business days, but not more than 45 business days, before the date
Tenant desires the assignment or sublease to be effective (the “Assignment Date”), Tenant shall
give Landlord a notice (the “Assignment Notice”) containing such information about the proposed
assignee or sublessee, including the proposed use of the Premises and any Hazardous Materials
proposed to be used or stored in the Premises, the Assignment Date, any relationship between Tenant
and the proposed assignee or sublessee, and all material terms and conditions of the proposed
assignment or sublease, including a copy of any proposed assignment or sublease in its final form,
and such other information as Landlord may deem reasonably necessary or appropriate to its
consideration whether to grant its consent. Landlord may, by giving written notice to Tenant
within 15 business days after receipt of the Assignment Notice: (i) grant or refuse such consent,
in its sole discretion with respect to a proposed assignment, hypothecation or other transfer or
subletting of more than (together with all other then effective subleases) 50% of the Premises, or
grant or refuse such consent, in its reasonable discretion with respect to a proposed subletting of
up to (together with all other then effective subleases) 50% of the Premises (provided that
Landlord shall further have the right to review and approve or disapprove the proposed form of
sublease prior to the effective date of any such subletting), or (ii) terminate this Lease with
respect to the space described in the Assignment Notice as of the Assignment Date (an “Assignment
Termination”). If Landlord elects an Assignment Termination, Tenant shall have the right to
withdraw such Assignment Notice
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by written notice to Landlord of such election within 5 days after Landlord’s notice electing
to exercise the Assignment Termination. If Tenant withdraws such Assignment Notice, this Lease
shall continue in full force and effect. If Tenant does not withdraw such Assignment Notice, this
Lease, and the term and estate herein granted, shall terminate as of the Assignment Date with
respect to the space described in such Assignment Notice. No failure of Landlord to exercise any
such option to terminate this Lease shall be deemed to be Landlord’s consent to the proposed
assignment, sublease or other transfer. Tenant shall reimburse Landlord for all of Landlord’s
reasonable out-of-pocket expenses in connection with its consideration of any Assignment Notice,
not to exceed $5,000 in connection with any single Assignment Notice.
Notwithstanding the foregoing, Landlord’s consent to an assignment of this Lease or a
subletting of any portion of the Premises to any entity controlling, controlled by or under common
control with Tenant shall not be required, provided that Landlord shall have the right to approve
the form of any such sublease or assignment. In addition, Tenant shall have the right to assign
this Lease, upon 30 days prior written notice to Landlord but without obtaining Landlord’s prior
written consent, to a corporation or other entity which is a successor-in-interest to Tenant, by
way of merger, consolidation or corporate reorganization, or by the purchase of all or
substantially all of the assets or the ownership interests of the Tenant provided that (i) such
merger or consolidation, or such acquisition or assumption, as the case may be, is for a good
business purpose and not principally for the purpose of transferring the Lease, and (ii) the net
worth (as determined in accordance with generally accepted accounting principles (“GAAP”)) of the
assignee is not less than the net worth (as determined in accordance with GAAP) of Tenant as of the
date of Tenant’s most current quarterly or annual financial statements, and (iii) such assignee
shall agree in writing to assume all of the terms, covenants and conditions of this Lease arising
after the effective date of the assignment. Any such assignment described in this paragraph is
referred to herein as a “Permitted Assignment” and any person succeeding to Tenant’s rights
hereunder pursuant to a Permitted Assignment is to herein as a “Permitted Assignee.”
(c) Additional Conditions. As a condition to any such assignment or subletting, whether or
not Landlord’s consent is required, Landlord may require:
(i) that any assignee or subtenant agree, in writing at the time of such assignment or
subletting, that if Landlord gives such party notice that Tenant is in default under this Lease,
such party shall thereafter make all payments otherwise due Tenant directly to Landlord, which
payments will be received by Landlord without any liability except to credit such payment against
those due under the Lease, and any such third party shall agree to attorn to Landlord or its
successors and assigns should this Lease be terminated for any reason; provided, however, in no
event shall Landlord or its successors or assigns be obligated to accept such attornment; and
(ii) A list of Hazardous Materials, certified by the proposed assignee or sublessee to be true
and correct, which the proposed assignee or sublessee intends to use or store in the Premises
together with copies of all documents relating to the handling, storage, disposal and emission of
Hazardous Materials by the proposed assignee or subtenant in the Premises or on the Project, prior
to the proposed assignment or subletting, including, without limitation: permits;
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approvals; reports and correspondence; storage and management plans; plans relating to the
installation of any storage tanks to be installed in or under the Project (provided, said
installation of tanks shall only be permitted after Landlord has given its written consent to do
so, which consent may be withheld in Landlord’s sole and absolute discretion); and all closure
plans or any other documents required by any and all federal, state and local governmental agencies
and authorities for any storage tanks installed in, on or under the Project for the closure of any
such tanks. Neither Tenant nor any such proposed assignee or subtenant is required, however, to
provide Landlord with any portion(s) of the such documents containing information of a proprietary
nature which, in and of themselves, do not contain a reference to any Hazardous Materials or
hazardous activities.
(d) No Release of Tenant, Sharing of Excess Rents. Notwithstanding any assignment or
subletting, Tenant and any guarantor or surety of Tenant’s obligations under this Lease shall at
all times remain fully and primarily responsible and liable for the payment of Rent and for
compliance with all of Tenant’s other obligations under this Lease. If the Rent due and payable by
a sublessee or assignee (or a combination of the rental payable under such sublease or assignment
plus any bonus or other consideration therefor or incident thereto) exceeds the rental payable
under this Lease, after reasonable and customary expenses related thereto, including without
limitation reasonable commissions, attorneys’ fees and tenant improvements (excluding however, any
Rent payable under this Section), then Tenant shall be bound and obligated to pay Landlord as
Additional Rent hereunder 50% of such excess rental and other excess consideration within 10 days
following receipt thereof by Tenant. If Tenant shall sublet the Premises or any part thereof,
Tenant hereby immediately and irrevocably assigns to Landlord, as security for Tenant’s obligations
under this Lease, all rent from any such subletting, and Landlord as assignee and as
attorney-in-fact for Tenant, or a receiver for Tenant appointed on Landlord’s application, may
collect such rent and apply it toward Tenant’s obligations under this Lease; except that, until the
occurrence of a Default, Tenant shall have the right to collect such rent.
(e) No Waiver. The consent by Landlord to an assignment or subletting shall not relieve
Tenant or any assignees of this Lease or any sublessees of the Premises from obtaining the consent
of Landlord to any further assignment or subletting nor shall it release Tenant or any assignee or
sublessee of Tenant from full and primary liability under the Lease. The acceptance of Rent
hereunder, or the acceptance of performance of any other term, covenant, or condition thereof, from
any other person or entity shall not be deemed to be a waiver of any of the provisions of this
Lease or a consent to any subletting, assignment or other transfer of the Premises.
(f) Prior Conduct of Proposed Transferee. Notwithstanding any other provision of this Section
22, if (i) the proposed assignee or sublessee of Tenant has been required by any prior landlord,
lender or Governmental Authority to take remedial action in connection with Hazardous Materials
contaminating a property, where the contamination resulted from such party’s action or use of the
property in question, or (ii) the proposed assignee or sublessee is subject to an enforcement order
issued by any governmental authority in connection with the use, disposal or storage of Hazardous
Materials, Landlord shall have the absolute right to refuse to consent to any assignment or
subletting to any such party.
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23. Estoppel Certificate. Tenant shall, within 10 business days of written notice from
Landlord, execute, acknowledge and deliver a statement in writing substantially in the form
attached to this Lease as Exhibit G with the blanks filled in, or on any other form reasonably
requested by a proposed lender or purchaser, (i) certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of such modification and certifying that
this Lease as so modified is in full force and effect) and the dates to which the rental and other
charges are paid in advance, if any, (ii) acknowledging that there are not any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed, and (iii) setting
forth such further information with respect to the status of this Lease or the Premises as maybe
requested thereon. Any such statement may be relied upon by any prospective purchaser or
encumbrancer of all or any portion of the real property of which the Premises are a part. Tenant’s
failure to deliver such statement within such time shall, at the option of Landlord, constitute a
Default under this Lease, and, in any event, shall be conclusive upon Tenant that the Lease is in
full force and effect and without modification except as may be represented by Landlord in any
certificate prepared by Landlord and delivered to Tenant for execution.
24. Quiet Enjoyment. So long as Tenant shall perform all of the covenants and agreements
herein required to be performed by Tenant, Tenant shall, subject to the terms of this Lease, at all
times during the Term, have peaceful and quiet enjoyment of the Premises against any person
claiming by, through or under Landlord.
25. Prorations. All prorations required or permitted to be made hereunder shall be made on
the basis of a 360 day year and 30 day months.
26. Rules and Regulations. Tenant shall, at all times during the Term and any extension
thereof, comply with all reasonable rules and regulations at any time or from time to time
established by Landlord covering use of the Premises and the Project. The current rules and
regulations are attached hereto as Exhibit E. If there is any conflict between said rules and
regulations and other provisions of this Lease, the terms and provisions of this Lease shall
control. Landlord shall not have any liability or obligation for the breach of any rules or
regulations by other tenants in the Project and shall not enforce such rules and regulations in a
discriminatory manner.
27. Subordination. This Lease and Tenant’s interest and rights hereunder are and shall be
subject and subordinate at all times to the lien of any Mortgage now existing or hereafter created
on or against the Project or the Premises, and all amendments, restatements, renewals,
modifications, consolidations, refinancing, assignments and extensions thereof, without the
necessity of any further instrument or act on the part of Tenant; provided, however that so long as
there is no Default hereunder, Tenant’s right to possession of the Premises shall not be disturbed
by the Holder of any such Mortgage. Tenant agrees, at the election of the Holder of any such
Mortgage, to attorn to any such Holder. Tenant agrees upon demand to execute, acknowledge and
deliver a Subordination, Non-disturbance and Attornment Agreement in substantially the form
attached hereto as Exhibit H, or such other instruments, confirming such subordination and
nondisturbance, and such instruments of attornment as shall be requested by any such Holder,
provided any such instruments contain appropriate non-disturbance provisions assuring Tenant’s
quiet enjoyment of the Premises as set
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forth in Section 24 hereof. Notwithstanding the foregoing, any such Holder may at any time
subordinate its Mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant,
and thereupon this Lease shall be deemed prior to such Mortgage without regard to their respective
dates of execution, delivery or recording and in that event such Holder shall have the same rights
with respect to this Lease as though this Lease had been executed prior to the execution, delivery
and recording of such Mortgage and had been assigned to such Holder. The term “Mortgage” whenever
used in this Lease shall be deemed to include deeds of trust, security assignments and any other
encumbrances, and any reference to the “Holder” of a Mortgage shall be deemed to include the
beneficiary under a deed of trust.
28. Surrender. Upon expiration of the Term or earlier termination of Tenant’s right of
possession, Tenant shall surrender the Premises to Landlord in the same condition as received,
subject to any Alterations permitted by Landlord to remain in the Premises, free of Hazardous
Materials brought upon, kept or used in or about the Premises by any person other than Landlord,
its agents, employees, contractors or invitees (or Hazardous Materials brought upon, kept or used
in or about the Project by Tenant or any of its agents, employees, contractors or invitees) and
released of all Hazardous Materials Clearances, broom clean, ordinary wear and tear and casualty
loss and condemnation covered by Sections 18 and 19 excepted. Tenant shall immediately return to
Landlord all keys and/or access cards to parking, the Project, restrooms or all or any portion of
the Premises furnished to or otherwise procured by Tenant. If any such access card or key is lost,
Tenant shall pay to Landlord, at Landlord’s election, either the cost of replacing such lost access
card or key or the cost of reprogramming the access security system in which such access card was
used or changing the lock or locks opened by such lost key. Any Tenant’s Property, Alterations and
property not so removed by Tenant as permitted or required herein shall be deemed abandoned and may
be stored, removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all claims
against Landlord for any damages resulting from Landlord’s retention and/or disposition of such
property. All obligations of Tenant hereunder not fully performed as of the termination of the
Term, including the obligations of Tenant under Section 30 hereof, shall survive the expiration or
earlier termination of the Term, including, without limitation, indemnity obligations, payment
obligations with respect to Rent and obligations concerning the condition and repair of the
Premises.
29. Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
30. Environmental Requirements.
(a) Prohibition/Compliance/Indemnity. Tenant shall not cause or permit any Hazardous
Materials (as hereinafter defined) to be brought upon, kept or used in or about the Premises or the
Project in violation of applicable law by Tenant, its agents, employees, contractors or invitees.
If Tenant breaches the obligation stated in the preceding sentence, or if the presence of
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Hazardous Materials in the Premises during the Term or any holding over results in
contamination of the Premises, the Project or any adjacent property or if contamination of the
Premises, the Project or any adjacent property by Hazardous Materials brought into the Premises by
anyone other than Landlord and Landlord’s employees, agents and contractors otherwise occurs during
the Term or any holding over, Tenant hereby indemnifies and shall defend and hold Landlord, its
officers, directors, employees, agents and contractors harmless from any and all claims, judgments,
damages, penalties, fines, costs, liabilities, or losses (including, without limitation, diminution
in value of the Premises or any portion of the Project, damages for the loss or restriction on use
of rentable or usable space or of any amenity of the Premises or the Project, damages arising from
any adverse impact on marketing of space in the Premises or the Project, and sums paid in
settlement of claims, attorneys’ fees, consultant fees and expert fees) which arise during or after
the Term as a result of such contamination. This indemnification of Landlord by Tenant includes,
without limitation, costs incurred in connection with any investigation of site conditions or any
cleanup, remedial, removal, or restoration work required by any federal, state or local
governmental agency or political subdivision because of Hazardous Materials present in the air,
soil or ground water above, on, or under the Premises. Without limiting the foregoing, if the
presence of any Hazardous Materials on the Premises, the Project or any adjacent property caused or
permitted by Tenant results in any contamination of the Premises, the Project or any adjacent
properly, Tenant shall promptly take all actions at its sole expense and in accordance with
applicable law as are necessary to return the Premises, the Project or any adjacent property to the
condition existing prior to the time of such contamination, provided that Landlord’s approval of
such action shall first be obtained, which approval shall not unreasonably be withheld, conditioned
or delayed so long as such actions would not potentially have any material adverse long-term or
short-term effect on the Premises or the Project.
(b) Business. Landlord acknowledges that it is not the intent of this Section 30 to prohibit
Tenant from using the Premises for the Permitted Use. Tenant may operate its business according to
the custom of the industry so long as the use or presence of Hazardous Materials is strictly and
properly monitored according to all then applicable governmental requirements. As a material
inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business,
Tenant agrees to deliver to Landlord prior to the Commencement Date a list identifying each type of
Hazardous Materials to be present on the Premises and setting forth any and all governmental
approvals or permits required in connection with the presence of such Hazardous Materials on the
Premises (“Hazardous Materials List”). Tenant shall deliver to Landlord an updated Hazardous
Materials List at least once a year and shall also deliver an updated list before any new Hazardous
Material is brought onto the Premises. Tenant shall deliver to Landlord true and correct copies of
the following documents (the “Haz Mat Documents”) relating to the handling, use, storage, disposal
and emission of Hazardous Materials prior to the Commencement Date, or if unavailable at that
time, concurrent with the receipt from or submission to a governmental agency: permits; approvals;
reports and correspondence; storage and management plans, notice of violations of any laws; plans
relating to the installation of any storage tanks to be installed in or under the Project
(provided, said installation of tanks shall only be permitted after Landlord has given Tenant its
written consent to do so, which consent may be withheld in Landlord’s sole and absolute
discretion); and all closure plans or any other documents required by any and all federal, state
and
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local governmental agencies and authorities for any storage tanks installed in, on or under
the Project for the closure of any such tanks. Tenant is not required, however, to provide
Landlord with, any portion(s) of the Haz Mat Documents containing information of a proprietary
nature which, in and of themselves, do not contain a reference to any Hazardous Materials or
hazardous activities. It is not the intent of this Section to provide Landlord with information
which could be detrimental to Tenant’s business should such information become possessed by
Tenant’s competitors.
(c) Tenant Representation and Warranty. Tenant hereby represents and warrants to Landlord
that (i) neither Tenant nor any of its legal predecessors has been required by any prior landlord,
lender or governmental authority at any time to take remedial action in connection with Hazardous
Materials contaminating a property which contamination was permitted by Tenant of such predecessor
or resulted from Tenant’s or such predecessor’s action or use of the property in question, and (ii)
Tenant is not subject to any enforcement order issued by any governmental authority in connection
with the use, disposal or storage of a Hazardous Materials. If Landlord determines that this
representation and warranty was not true as of the date of this lease, Landlord shall have the
right to terminate this Lease in Landlord’s sole and absolute discretion.
(d) Testing. Landlord shall have the right to conduct annual tests of the Premises to
determine whether any contamination has occurred as a result of Tenant’s use. Tenant shall be
required to pay the cost of such annual test of the Premises; provided, however, that if Tenant
conducts its own tests of the Premises using third party contractors and test procedures acceptable
to Landlord which tests are certified to Landlord, Landlord shall accept such tests in lieu of the
annual tests to be paid for by Tenant. In addition, at any time, and from time to time, prior to
the expiration or earlier termination of the Term, Landlord shall have the right to conduct
appropriate tests of the Premises and the Project to determine if contamination has occurred as a
result of Tenant’s use of the Premises. lf contamination has occurred for which Tenant is liable
under this Section 30, Tenant shall pay all costs to conduct such tests. If no such contamination
is found, Landlord shall pay the costs of such tests (which shall not constitute an Operating
Expense). Landlord shall provide Tenant with a copy of all third party, non-confidential reports
and tests of the Premises made by or on behalf of Landlord during the Term without representation
or warranty and subject to a confidentiality agreement. Landlord’s receipt of or satisfaction with
any environmental assessment in no way waives any rights which Landlord may have against Tenant.
(e) Underground Tanks. If underground or other storage tanks storing Hazardous Materials
located on the Premises or the Project are used by Tenant or are hereafter placed on the Premises
or the Project by Tenant, Tenant shall monitor such storage tanks, maintain appropriate records,
implement reporting procedures, properly close any underground storage tanks, and take or cause to
be taken all other actions necessary or required under applicable state and federal law, as such
now exists or may hereafter be adopted or amended in connection with the use, maintenance,
operation and closure of such storage tanks.
(f) Tenant’s Obligations. Tenant’s obligations under this Section 30 shall survive the
expiration or earlier termination of the Lease. During any period of time after the expiration or
earlier termination of this Lease required by Tenant or Landlord to complete the
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removal from the Premises of any Hazardous Materials and the release and termination of any
licenses or permits restricting the use of the Premises, Tenant shall continue to pay the full Rent
in accordance with this Lease for any portion of the Premises not relet by Landlord in Landlord’s
sole discretion, which Rent shall be prorated daily.
(g) Definitions. As used herein, the term “Environmental Requirements” means all applicable
present and future statutes, regulations, ordinances, rules, codes, judgments, orders or other
similar enactments of any governmental authority or agency regulating or relating to health,
safety, or environmental conditions on, under, or about the Premises or the Project, or the
environment, including without limitation, the following: the Comprehensive Environmental
Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; and all state
and local counterparts thereto, and any regulations or policies promulgated or issued thereunder.
As used herein, the term “Hazardous Materials” means and includes any substance, material, waste,
pollutant, or contaminant listed or defined as hazardous or toxic, or regulated by reason of its
impact or potential impact on humans, animals and/or the environment under any Environmental
Requirements, asbestos and petroleum, including crude oil or any fraction thereof, natural gas
liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and
such synthetic gas). As defined in Environmental Requirements, Tenant is and shall be deemed to be
the “operator” of Tenant’s “facility” and the “owner” of all Hazardous Materials brought on the
Premises by Tenant, its agents, employees, contractors or invitees, and the wastes, by-products, or
residues generated, resulting, or produced therefrom.
31. Tenant’s Remedies/Limitation of Liability. Landlord shall not be in default hereunder
unless Landlord fails to perform any of its obligations hereunder within 30 days after written
notice from Tenant specifying such failure (unless such performance will, due to the nature of the
obligation, require a period of time in excess of 30 days, then after such period of time as is
reasonably necessary). Upon any default by Landlord, Tenant shall give notice by registered or
certified mail to any Holder of a Mortgage covering the Premises and to any landlord of any lease
of property in or on which the Premises are located and Tenant shall offer such Holder and/or
landlord a reasonable opportunity to cure the default, including time to obtain possession of the
Project by power of sale or a judicial action if such should prove necessary to effect a cure;
provided Landlord shall have furnished to Tenant in writing the names and addresses of all such
persons who are to receive such notices. All obligations of Landlord hereunder shall be construed
as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease,
Tenant may not terminate this Lease for breach of Landlord’s obligations hereunder. All
obligations of Landlord under this Lease will be binding upon Landlord only during the period of
its ownership of the Premises and not thereafter. The term “Landlord” in this Lease shall mean
only the owner for the time being of the Premises. Upon the transfer by such owner of its interest
in the Premises, such owner shall thereupon be released and discharged from all obligations of
Landlord thereafter accruing, but such obligations shall be binding during the Term upon each new
owner for the duration of such owner’s ownership.
32. Inspection and Access. Landlord and its agents, representatives, and contractors may
enter the Premises at any reasonable time to inspect the Premises and to make such repairs as
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may be required or permitted pursuant to this Lease and for any other business purpose.
Landlord and Landlord’s representatives may enter the Premises during business hours on not less
than 48 hours advance written notice (except in the case of emergencies in which case no such
notice shall be required and such entry may be at any time) for the purpose of effecting any such
repairs, inspecting the Premises, showing the Premises to prospective purchasers and, during the
last year of the Term, to prospective tenants or for any other business purpose. Landlord may
erect a suitable sign on the Premises stating the Premises are available to let or that the Project
is available for sale. Landlord may grant easements, make public dedications, designate Common
Areas and create restrictions on or about the Premises, provided that no such easement, dedication,
designation or restriction materially, adversely affects Tenant’s use or occupancy of the Premises
for the Permitted use. At Landlord’s request, Tenant shall execute such instruments as may be
necessary for such easements, dedications or restrictions. Tenant shall at all times, except in
the case of emergencies, have the right to escort Landlord or its agents, representatives,
contractors or guests while the same are in the Premises, provided such escort does not materially
and adversely affect Landlord’s access rights hereunder.
33. Security. Tenant acknowledges and agrees that security devices and services, if any,
while intended to deter crime may not in given instances prevent theft or other criminal acts and
that Landlord is not providing any security services with respect to the Premises. Tenant agrees
that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with
respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with
any unauthorized entry into the Premises or any other breach of security with respect to the
Premises. Tenant shall be solely responsible for the personal safety of Tenant’s officers,
employees, agents, contractors, guests and invitees while any such person is in, on or about the
Premises and/or the Project. Tenant shall at Tenant’s cost obtain insurance coverage to the extent
Tenant desires protection against such criminal acts.
34. Force Majeure. Landlord shall not be held responsible for delays in the performance of
its obligations hereunder when caused by strikes, lockouts, labor disputes, weather, natural
disasters, inability to obtain labor or materials or reasonable substitutes therefor, governmental
restrictions, governmental regulations, governmental controls, delay in issuance of permits, enemy
or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond
the reasonable control of Landlord (“Force Majeure”).
35. Brokers, Entire Agreement, Amendment. Landlord and Tenant each represents and warrants
that it has not dealt with any broker, agent or other person (collectively, “Broker) in connection
with this transaction and that no Broker brought about this transaction, other than CB Richard
Ellis, Inc. and Kidder, Matthews & Segner. Landlord and Tenant each hereby agree to indemnify and
hold the other harmless from and against any claims by any Broker, other than the Brokers, if any
named in this Section 35, claiming a commission or other form of compensation by virtue of having
dealt with Tenant or Landlord, as applicable, with regard to this leasing transaction. This Lease
may not be amended except by an instrument in writing signed by both parties hereto.
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36. Limitation on Landlord’s Liability. NOTWITHSTANDING ANYTHING SET FORTH HEREIN OR IN ANY
OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY: (A) LANDLORD SHALL NOT BE LIABLE TO
TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS,
DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL TO: TENANT’S PERSONAL PROPERTY OF EVERY KIND
AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT, INVENTORY, SCIENTIFIC
RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS, PRODUCT, SPECIMENS, SAMPLES, AND/OR
SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE
PREMISES AND ANY AND ALL INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL
RECOURSE TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING IN ANY WAY
UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND ANY LIABILITY OF LANDLORD HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO
LANDLORD’S INTEREST IN THE PROJECT; AND (C) IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTED
AGAINST LANDLORD IN CONNECTION WITH THIS LEASE NOR SHALL ANY RECOURSE BE HAD TO ANY OTHER PROPERTY
OR ASSETS OF LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS. EMPLOYEES, AGENTS OR CONTRACTORS.
UNDER NO CIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS
OR CONTRACTORS BE LIABLE FOR INJURY TO TENANT’S BUSINESS OR FOR ANY LOSS OF INCOME OR PROFIT
THEREFROM.
37. Severability. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws, then and in that event, it is the intention of the
parties hereto that the remainder of this Lease shall not be affected thereby. It is also the
intention of the parties to this Lease that in lieu of each clause or provision of this Lease that
is illegal, invalid or unenforceable, there be added, as a part of this Lease, a clause or
provision as similar in effect to such illegal, invalid or unenforceable clause or provision as
shall be legal, valid and enforceable.
38. Signs; Exterior Appearance. Tenant shall not, without the prior written consent of
Landlord, which may be granted or withheld in Landlord’s sole discretion: (i) attach any awnings,
exterior lights, decorations, balloons, flags, pennants, banners, painting or other projection to
any outside wall of the Project, (ii) use any curtains, blinds, shades or screens other than
Landlord’s standard window coverings, (iii) coat or otherwise sunscreen the interior or exterior of
any windows, (iv) place any equipment, furniture or other items of personal property on any
exterior balcony, or (v) paint, affix or exhibit on any part of the Premises or the Project any
signs, notices, window or door lettering, placards, decorations, or advertising media of any type
which can be viewed from the exterior of the Premises. Interior signs on doors and the directory
tablet shall be inscribed, painted or affixed for Tenant by Landlord at the sole cost and expense
of Tenant, and shall be of a size, color and type acceptable to Landlord. Nothing may be placed on
the exterior of corridor walls or corridor doors other than Landlord’s standard lettering. The
directory tablet shall be provided exclusively for the display of the name and location of tenants.
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39. Right to Expand.
(a) Expansion in the Project. Tenant shall have the right, but not the obligation, to expand
the Premises (the “Expansion Right”) to include any space in the Project (the “Expansion Space”)
upon the terms and conditions in this Section. If a vacancy occurs, Landlord shall deliver to
Tenant written notice (the “Expansion Notice”) of the availability of such portion of the Expansion
Space, together with the terms and conditions on which Landlord is prepared to lease to Tenant such
portion of the Expansion Space. Provided that no prior right to expand is exercised by any of Fred
Hutchinson Cancer Research Center, Corixa or The Hope Heart Institute, or Xcyte Therapies, Inc.,
Tenant shall have 10 business days following delivery of the Expansion Notice to deliver to
Landlord written notification of Tenant’s exercise of the Expansion Right. Provided that no right
to expand is exercised by any tenant with superior rights, Tenant shall be entitled to lease such
Expansion Space upon the terms and conditions set forth in the Expansion Notice.
(b) Amended Lease. If: (i) Tenant fails to timely deliver notice accepting the terms of an
Expansion Notice, or (ii) after the expiration of a period of 30 days from the date Tenant gives
notice accepting Landlord’s offer to lease such Expansion Space, no lease amendment or lease
agreement for the Expansion Space has been executed, and Landlord tenders to Tenant an amendment to
this Lease setting forth the terms for the rental of the Expansion Space consistent with those set
forth in the Expansion Notice and otherwise consistent with the terms of this Lease and Tenant
fails to execute such Lease amendment within 10 business days following such tender, Tenant shall
be deemed to have waived its right to lease such Expansion Space.
(c) Exceptions. Notwithstanding the above, the Expansion Right shall not be in effect and may
not be exercised by Tenant:
(i) during any period of time that Tenant is in Default under any provision of the Lease; or
(ii) if Tenant has been in Default under any provision of the Lease 3 or more times, whether
or not the Defaults are cured, during the 12 month period prior to the date on which Tenant seeks
to exercise the Expansion Right.
(d) Termination. The Expansion Right shall terminate and be of no further force or effect
even after Tenant’s due and timely exercise of the Expansion Right, if, after such exercise, but
prior to the commencement date of the Expansion Space, (i) Tenant fails to timely cure any default
by Tenant under the Lease; or (ii) Tenant has Defaulted 3 or more times during the period from the
date of the exercise of the Expansion Right to the date of the commencement of the lease of the
Expansion Space, whether or not such Defaults are cured.
(e) Subordinate. Tenant’s rights in connection with the Expansion Right are and shall be
subject to and subordinate to any expansion or extension rights granted in the Project prior to the
date hereof to Fred Hutchinson Cancer Research Center, Corixa or The Hope Heart Institute and Xcyte
Therapies, Inc.
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(f) Rights Personal. Expansion Rights are personal to Tenant and are not assignable without
Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and
apart from any consent by Landlord to an assignment of Tenant’s interest in the Lease; provided,
however, a Permitted Assignee shall succeed to such Expansion Rights.
(g) No Extensions. The period of time within which any Expansion Rights may be exercised
shall not be extended or enlarged by reason of the Tenant’s inability to exercise the Expansion
Rights.
40. Right to Extend Term. Tenant shall have the right to extend the Term of the Lease upon
the following terms and conditions:
(a) Extension Rights. Tenant shall have the right (the “Extension Right”) to extend the term
of this Lease for 5 years (the “Extension Term”) on the same terms and conditions as this Lease
(other than Base Rent) by giving Landlord written notice of its election to exercise each
Extension Right at least 12 months prior to the expiration of the Base Term of the Lease or the
expiration of any prior Extension Term. Upon the commencement of any Extension Term, Base Rent
shall be payable at the Market Rate (as defined below). Base Rent shall thereafter be adjusted on
each annual anniversary of the commencement of such Extension Term by a percentage as determined by
Landlord and agreed to by Tenant at the time the Market Rate is determined. As used herein,
“Market Rate” shall mean the then market rental rate as determined by Landlord and agreed to by
Tenant, which shall in no event be less than the Base Rent payable as of the date immediately
preceding the commencement of such Extension Term increased by the Rent Adjustment Percentage
multiplied by such Base Rent. In addition, Landlord may impose a market rent for the parking
rights provided hereunder.
If, on or before the date which is 120 days prior to the expiration of the Base Term of this
Lease, or the expiration of any prior Extension Term, Tenant has not agreed with Landlord’s
determination of the Market Rate and the rent escalations during such subsequent Extension Term
after negotiating in good faith, Tenant may by written notice to Landlord not later than 120 days
prior to the expiration of the Base Term of this Lease, or the expiration of any then effective
Extension Term, elect arbitration as described in Section 40(b) below. If Tenant does not elect
such arbitration, Tenant shall be deemed to have waived any right to extend, or further extend, the
Term of the Lease and all of the remaining Extension Rights shall terminate.
(b) Arbitration.
(i) Within 10 business days of Tenant’s notice to Landlord of its election to arbitrate Market
Rate and escalations, each party shall deliver to the other a proposal containing the Market Rate
and escalations that the submitting party believes to be correct (“Extension Proposal”). If either
party fails to timely submit an Extension Proposal, the other party’s submitted proposal shall
determine the Base Rent and escalations for the Extension Term. If both parties submit Extension
Proposals, then Landlord and Tenant shall meet within 7 days after delivery of the last Extension
Proposal and make a good faith attempt to mutually appoint a single Arbitrator (and defined below)
to determine the Market Rate and escalations. If Landlord and Tenant are unable to
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agree upon a single Arbitrator, then each shall, by written notice delivered to the other
within 10 business days after the meeting, select an Arbitrator. If either party fails to timely
give notice of its selection for an Arbitrator, the other party’s submitted proposal shall
determine the Base Rent for the Extension Term. The 2 Arbitrators so appointed shall, within 5
business days after their appointment, appoint a third Arbitrator. If the 2 Arbitrators so
selected cannot agree on the selection of the third Arbitrator within the time above specified,
then either party, on behalf of both parties, may request such appointment of such third Arbitrator
by application to any state court of general jurisdiction in the jurisdiction in which the Premises
are located, upon 10 days prior written notice to the other party of such intent.
(ii) The decision of the Arbitrator(s) shall be made within 30 days after the appointment of a
single Arbitrator or the third Arbitrator, as applicable. The decision of the single Arbitrator
shall be final and binding upon the parties. The average of the two closest Arbitrators in a three
Arbitrator panel shall be final and binding upon the parties. Each party shall pay the fees and
expenses of the Arbitrator appointed by or on behalf of such party and the fees and expenses of the
third Arbitrator shall be borne equally by both parties. If the Market Rate and escalations are
not determined by the first day of the Extension Term, then Tenant shall pay Landlord Base Rent in
an amount equal to the Base Rent in effect immediately prior to the Extension Term and increased by
the Rent Adjustment Percentage until such determination is made. After the determination of the
Market Rate and escalations, the parties shall make any necessary adjustments to such payments made
by Tenant. Landlord and Tenant shall then execute an amendment recognizing the Market Rate and
escalations for the Extension Term.
(iii) An “Arbitrator” shall be any person appointed by or on behalf of either party or
appointed pursuant to the provisions hereof and: (i) shall be (A) a member of the American
Institute of Real Estate Appraisers with not less than 10 years of experience in the appraisal of
improved office and high tech industrial real estate in the greater Seattle metropolitan area, or
(B) a licensed commercial real estate broker with not less than 15 years experience representing
landlords and/or tenants in the leasing of high tech or life sciences space in the greater Seattle
metropolitan area, (ii) devoting substantially all of their time to professional appraisal or
brokerage work, as applicable, at the time of appointment and (iii) be in all respects impartial
and disinterested.
(c) Rights Personal. Extension Rights are personal to Tenant and are not assignable without
Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and
apart from any consent by Landlord to an assignment of Tenant’s interest in the Lease; provided,
however, a Permitted Assignee shall succeed to such Extension Rights.
(d) Exceptions. Notwithstanding anything set forth above to the contrary, Extension Rights
shall not be in effect and Tenant may not exercise any of the Extension Rights:
(i) during any period of time that Tenant is in Default under any provision of this Lease; or
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(ii) if Tenant has been in Default under any provision of this Lease 3 or more times, whether
or not the Defaults are cured, during the 12 month period immediately prior to the date that Tenant
intends to exercise an Extension Right, whether or not the Defaults are cured.
(e) No Extensions. The period of time within which any Extension Rights may be exercised
shall not be extended or enlarged by reason of the Tenant’s inability to exercise the Extension
Rights.
(f) Termination. The Extension Rights shall terminate and be of no further force or effect
even after Tenant’s due and timely exercise of an Extension Right, if, after such exercise, but
prior to the commencement date of an Extension Term, (i) Tenant fails to timely cure any default by
Tenant under this Lease; or (ii) Tenant has Defaulted 3 or more times during the period from the
date of the exercise of an Extension Right to the date of the commencement of the Extension Term,
whether or not such Defaults are cured.
41. Miscellaneous.
(a) Notices. All notices or other communications between the parties shall be in writing and
shall be deemed duly given upon delivery or refusal to accept delivery by the addressee thereof if
delivered in person, or upon actual receipt if delivered by reputable overnight guaranty courier,
addressed and sent to the parties at their addresses set forth above. Landlord and Tenant may from
time to time by written notice to the other designate another address for receipt of future
notices.
(b) Joint and Several Liability. If and when included within the term “Tenant,” as used in
this instrument, there is more than one person or entity, each shall be jointly and severally
liable for the obligations of Tenant.
(c) Financial Information. Tenant shall furnish Landlord with true and complete copies of (i)
Tenant’s most recent audited annual financial statements within 90 days of the end of each of
Tenant’s fiscal years during the Term, (ii) Tenant’s most recent unaudited quarterly financial
statements within 45 days of the end of each of Tenant’s first three fiscal quarters of each of
Tenant’s fiscal years during the Term, (iii) at Landlord’s request from time to time, updated
business plans, including cash flow projections and/or pro forma balance sheets and income
statements, all of which shall be treated by Landlord as confidential information belonging to
Tenant, (iv) corporate brochures and/or profiles prepared by Tenant for prospective investors, and
(v) any other financial information or summaries that Tenant typically provides to its lenders or
shareholders.
(d) Recordation. Neither this Lease nor a memorandum of lease shall be filed by or on behalf
of Tenant in any public record. Landlord may prepare and file, and upon request by Landlord Tenant
will execute, a memorandum of lease.
(e) Interpretation. The normal rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in the interpretation of this Lease or
any exhibits or amendments hereto. Words of any gender used in this Lease shall be
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held and construed to include any other gender, and words in the singular number shall be held
to include the plural, unless the context otherwise requires. The captions inserted in this Lease
are for convenience only and in no way define, limit or otherwise describe the scope or intent of
this Lease, or any provision hereof, or in any way affect the interpretation of this Lease.
(f) Not Binding Until Executed. The submission by Landlord to Tenant of this Lease shall have
no binding force or effect, shall not constitute an option for the leasing of the Premises, nor
confer any right or impose any obligations upon either party until execution of this Lease by both
parties.
(g) Limitations on Interest. It is expressly the intent of Landlord and Tenant at all times
to comply with applicable law governing the maximum rate or amount of any interest payable on or in
connection with this Lease. If applicable law is ever judicially interpreted so as to render
usurious any interest called for under this Lease, or contracted for, charged, taken, reserved, or
received with respect to this Lease, then it is Landlord’s and Tenant’s express intent that all
excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if
the obligation has been or would thereby be paid in full, refunded to Tenant), and the provisions
of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder
reduced, without the necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise called for
hereunder.
(h) Choice of Law. Construction and interpretation of this Lease shall be governed by the
internal laws of the state in which the Premises are located, excluding any principles of conflicts
of laws.
(i) Time. Time is of the essence as to the performance of Tenant’s obligations under this
Lease.
(j) Incorporation by Reference. All exhibits and addenda attached hereto are hereby
incorporated into this Lease and made a part hereof. If there is any conflict between such
exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first
above written.
| TENANT: PRIMAL, INC., a Washington corporation |
||||
| By: | /s/ William F. Daly | |||
| Its: | Chief Executive Officer | |||
| LANDLORD: ALEXANDRIA REAL ESTATE EQUITIES, INC. a Maryland corporation |
||||
| By: | /s/ Joel S. Marcus | |||
| Its: | Chief Executive Officer | |||
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STATE OF WASHINGTON
|
) | |
| ) ss. | ||
COUNTY OF KING
|
) |
On this 07 day of April, 2000, before me personally appeared William F. Daly,
Jr. , to me known to be the Chief Executive Officer of the corporation that executed the
within and foregoing instrument, and acknowledged said instrument to be the free and voluntary
act and deed of said corporation, for the uses and purposes therein mentioned, and on oath
stated that he was authorized to execute said instrument and that the seal affixed is the
corporate seal of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal the day and year
first above written.
(Seal or stamp) |
/s/Joseph Robinson | ||
| (Signature) | |||
| Joseph Robinson | |||
| (Name legibly printed or stamped) | |||
| Notary Public in and for the State of Washington, residing at Seattle. | |||
| My appointment expires 02.09.04 |
STATE OF CALIFORNIA
|
) | |
| ) ss. | ||
COUNTY OF Los Angeles
|
) |
On this 10th day of April, 2000, before me personally appeared
Joel S. Marcus to me known to be the Chief Executive Officer of the
corporation that executed the within and foregoing instrument, and acknowledged said instrument
to be the free and voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument and that the seal
affixed is the corporate seal of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal the day and year
first above written.
(Seal or stamp) |
/s/ Shelly A. Kroll | ||
| (Signature) | |||
| Shelly A. Kroll | |||
| (Name legibly printed or stamped) | |||
| Notary Public in and for the State of California, residing at Los Angeles. | |||
| My Appointment expires 8/10/02 |
EXHIBIT A TO LEASE
DESCRIPTION OF PREMISES
EXHIBIT B TO LEASE
DESCRIPTION OF PROJECT
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EXHIBIT C TO LEASE
WORK LETTER
THIS WORK LETTER dated April 6, 2000 (this “Work Letter”) is made and entered into by and
between ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation (“Landlord”), and PRIMAL,
INC., a Washington corporation (“Tenant”), and is attached to and made a part of the Lease dated
April 6, 2000 (the “Lease”), by and between Landlord and Tenant. Any initially capitalized terms
used but not defined herein shall have the meanings given them in the Lease.
1. General Requirements
(a) Tenant’s Authorized Representative. Tenant designates William F. Daly, Jr. and
(either such individual acting alone, “Tenant’s Representative”) as the only persons
authorized to act for Tenant pursuant to this Work Letter. Landlord shall not be obligated to
respond to or act upon any request, approval, inquiry or other communication (“Communication”) from
or on behalf of Tenant in connection with this Work Letter unless such Communication is in writing
from Tenant’s Representative. Tenant may change either Tenant’s Representative at any time upon
not less than 5 business days advance written notice to Landlord. No period set forth herein for
any approval of any matter by Tenant’s Representative shall be extended by reason of any change in
Tenant’s Representative.
(b) Landlord’s Authorized Representative. Landlord designates Vin Ciruzzi and Jeff Ryan
(either such individual acting alone, “Landlord’s Representative”) as the only persons authorized
to act for Landlord pursuant to this Work Letter. Tenant shall not be obligated to respond to or
act upon any request, approval, inquiry or other Communication from or on behalf of Landlord in
connection with this Work Letter unless such Communication is in writing from Landlord’s
Representative. Landlord may change either Landlord’s Representative at any time upon not less
than 5 business days advance written notice to Tenant. No period set forth herein for any approval
of any matter by Landlord’s Representative shall be extended by reason of any change in Landlord’s
Representative.
(c) Architects, Consultants and Contractors. Landlord and Tenant hereby acknowledge and agree
that the architect (the “TI Architect”) for the Tenant Improvements, the general contractor and any
subcontractors for the Tenant Improvements shall be selected by Tenant, subject to Landlord’s
approval, which approval shall not be unreasonably withheld, conditioned or delayed.
2. Tenant Improvements.
(a) Tenant Improvements Defined. As used herein, “Tenant Improvements” shall mean all
improvements to the Premises desired by Tenant of a fixed and permanent nature. Other
than funding the TI Allowance (as defined below) as provided herein, Landlord shall not have
any obligation whatsoever with respect to the finishing of the Premises for Tenant’s use and
occupancy.
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(b) Tenant’s Space Plans. Tenant shall deliver to Landlord schematic drawings and outline
specifications (the “TI Design Drawings”) detailing Tenant’s requirements for the Tenant
Improvements on or before 60 days’ following the date hereof. Not more than ten 10 business days
thereafter, Landlord shall deliver to Tenant the written objections, questions or comments of
Landlord and the TI Architect with regard to the TI Design Drawings. Tenant shall cause the TI
Design Drawings to be revised to address such written comments and shall resubmit said drawings to
Landlord for approval within 10 business days thereafter. Such process shall continue until
Landlord has approved the TI Design Drawings.
(c) Working Drawings. Not later than 15 business days following the approval of the TI Design
Drawings by Landlord, Tenant shall cause the TI Architect to prepare and deliver to Landlord for
review and comment construction plans, specifications and drawings for the Tenant Improvements (“TI
Construction Drawings”), which TI Construction Drawings shall be prepared substantially in
accordance with the TI Design Drawings. Tenant shall be solely responsible for ensuring that the
TI Construction Drawings reflect Tenant’s requirements for the Tenant Improvements. Landlord shall
deliver its written comments on the TI Construction Drawings to Tenant not later than 10 business
days after Landlord’s receipt of the same; provided, however, that Landlord may not disapprove any
matter that is consistent with the TI Design Drawings. Tenant and the TI Architect shall consider
all such comments in good faith and shall, within 10 business days after receipt, notify Landlord
how Tenant proposes to respond to such comments. Any disputes in connection with such comments
shall be resolved in accordance with Section 2(d) hereof. Provided that the design reflected in
the TI Construction Drawings is consistent with the TI Design Drawings, Landlord shall approve the
TI Construction Drawings submitted by Tenant. Once approved by Landlord, subject to the provisions
of Section 2(d) below, Tenant shall not materially modify the TI Construction Drawings except as
may be reasonably required in connection with the issuance of the TI Permit (as defined in Section
3(b) below).
(d) Approval and Completion. Upon any dispute regarding the design of the Tenant
Improvements, which is not settled within 10 business days after notice of such dispute is
delivered by one party to the other, Tenant shall make the final decision regarding the design of
the Tenant Improvements, provided Tenant acts reasonably and such final decision is either
consistent with or a compromise between Landlord’s and Tenant’s positions with respect to such
dispute, provided further that all costs and expenses resulting from any such decision by Tenant
shall be payable by Tenant, as defined in Section 5(d) below. Any changes to the TI Construction
Drawings following Landlord’s and Tenant’s approval of same requested by Tenant shall be processed
as provided in Section 4 hereof.
3. Performance of Tenant’s Work
(a) Definition of Tenant’s Work. As used herein, “Tenant’s Work” shall mean the work of
constructing the Tenant improvements.
(b) Commencement and Permitting of Tenant’s Work. Tenant shall commence construction of the
Tenant Improvements upon obtaining a building permit (the “TI Permit”) authorizing the construction
of the Tenant Improvements consistent with the TI Construction
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Drawings approved by Landlord. The
cost of obtaining the TI Permit shall be payable by Tenant. Landlord shall assist Tenant in
obtaining the TI Permit. Tenant shall complete Tenant’s work on or before 180 days following the
date hereof.
(c) Selection of Materials, Etc. Where more than one type of material or structure is
indicated on the TI Construction Drawings approved by Tenant and Landlord, the option will be
within Tenant’s reasonable discretion.
4. Changes. Any changes requested by Tenant to the Tenant Improvements after the delivery and
approval by Landlord of the TI Design Drawings, shall be requested and instituted in accordance
with the provisions of this Section 4 and shall be subject to the written approval of Landlord,
such approval not to be unreasonably withheld, conditioned or delayed.
(a) Tenant’s Right to Request Changes. If Tenant shall request changes (“Changes”), Tenant
shall request such Changes by notifying Landlord in writing in substantially the same form as the
AIA standard change order form (a “Change Request”), which Change Request shall detail the nature
and extent of any such Change. Such Change Request must be signed by Tenant’s Representative.
Landlord shall review and approve or disapprove such Change Request within 10 business days
thereafter, provided that Landlord’s approval shall not be unreasonably withheld, conditioned or
delayed.
(b) Implementation of Changes. If Landlord approves such Change, Tenant may cause the
approved Change to be instituted.
5. Costs
(a) Budget For Tenant Improvements. Before the commencement of construction of the Tenant
Improvements, Tenant shall obtain a detailed breakdown, by trade, of the costs incurred or which
will be incurred, in connection with the design and construction of Tenant’s Work (the “Budget”).
The Budget shall be based upon the TI Construction Drawings approved by Landlord and shall include
a payment to Landlord of administrative rent (“Administrative Rent”) equal to 5.0% of the TI Costs
(as hereinafter defined) for monitoring and inspecting the construction of Tenant’s Work, which sum
shall be payable by Tenant. Such Administrative Rent shall include, without limitation, all
out-of-pocket costs, expenses and fees incurred by or on behalf of Landlord arising from, out of,
or in connection with, such monitoring of the construction of the Tenant’s Improvements.
(b) TI Allowance. Landlord shall provide to Tenant a tenant improvement allowance (“TI
Allowance”) of $191,020.50 ($16.50 per rentable square foot of the Premises). The TI Allowance (or
so much thereof as shall have been expended in connection with Tenant’s Work) shall be disbursed
upon substantial completion of Tenant’s Work in a good and workmanlike manner, in accordance with
the TI Construction Drawings and the TI Permit (“Substantial Completion”) and
receipt by Landlord of a Certificate of Substantial Completion in the form of the American
Institute of Architects document G704 executed by the TI Architect and the general contractor, for
the benefit
-5-
of Landlord together with a draw request in Landlord’s standard form, containing such
certifications, lien waivers, inspection reports and other matters as Landlord customarily obtains.
(c) Costs Includable in TI Allowance. The TI Allowance shall be used solely for the payment
of design and construction costs in connection with the construction of the Tenant Improvements,
including, without limitation, the cost of preparing the TI Design Drawings and the TI Construction
Drawings, all costs set forth in the Budget, including Landlord’s Administrative Rent, and the cost
of Changes (collectively, “TI Costs”). Notwithstanding anything to the contrary contained herein,
the TI Allowance shall not be used to purchase any furniture, personal property or other
non-Building System materials or equipment, including, but not be limited to, biological safety
cabinets and other scientific equipment not incorporated into the Improvements.
6. Miscellaneous
(a) Consents. Whenever consent or approval of either party is required under this Work
Letter, that party shall not unreasonably withhold, condition or delay such consent or approval,
except as may be expressly set forth herein to the contrary.
(b) Modification. No modification, waiver or amendment of this Work Letter or of any of its
conditions or provisions shall be binding upon Landlord or Tenant unless in writing signed by
Landlord and Tenant.
(c) Counterparts. This Work Letter may be executed in any number of counterparts but all
counterparts taken together shall constitute a single document.
(d) Governing Law. This Work Letter shall be governed by, construed and enforced in
accordance with the internal laws of the state in which the Premises are located, without regard to
choice of law principles of such State.
(e) Time of the Essence. Time is of the essence of this Work Letter and of each and all
provisions thereof.
(f) Default. Notwithstanding anything set forth herein or in the Lease to the contrary,
Landlord shall not have any obligation to perform any work hereunder or to fund any portion of the
TI Allowance during any period Tenant is in Default under the Lease.
(g) Severability. If any term or provision of this Work Letter is declared invalid or
unenforceable, the remainder of this Work Letter shall not be affected by such determination and
shall continue to be valid and enforceable.
(h) Merger. All understandings and agreements, oral or written, heretofore made between the
parties hereto and relating to Tenant’s Work are merged in this Work Letter, which alone (but
inclusive of provisions of the Lease incorporated herein and the final approved
constructions drawings and specifications prepared pursuant hereto) fully and completely
expresses the agreement between Landlord and Tenant with regard to the matters set forth in this
Work Letter.
-6-
(i) Entire Agreement. This Work Letter is made as a part of and pursuant to the Lease and,
together with the Lease, constitutes the entire agreement of the parties with respect to the
subject matter hereof. This Work Letter is subject to all of the terms and limitation set forth in
the Lease, and neither party shall have any rights or remedies under this Work Letter separate and
apart from their respective remedies pursuant to the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter to be effective on the
date first above written.
| TENANT: PRIMAL, INC., a Washington corporation |
||||
| By: | /s/ William F. Daly, Jr. | |||
| Its: | Chief Executive Officer | |||
| LANDLORD: ALEXANDRIA REAL ESTATE EQUITIES, INC. a Maryland corporation |
||||
| By: | /s/ Joel S. Marcus | |||
| Its: | Chief Executive Officer | |||
-7-
EXHIBIT D TO LEASE
ACKNOWLEDGMENT OF COMMENCEMENT DATE
This ACKNOWLEDGMENT OF COMMENCEMENT DATE is made this 6th day of April, 2000, between Alexandria
Real Estate Equities, Inc., a Maryland corporation (“Landlord”), and Primal, Inc., a Washington
corporation (“Tenant”), and is attached to and made a part of the Lease dated April 6, 2000 (the
“Lease”), by and between Landlord and Tenant. Any initially capitalized terms used but not defined
herein shall have the meanings given them in the Lease.
Landlord and Tenant hereby acknowledge and agree, for all purposes of the Lease, that the
Commencement Date of the Base Term of the Lease is
,
___ and the termination date of the
Base Term of the Lease shall be midnight on ,___.
IN WITNESS WHEREOF, Landlord and Tenant have executed this ACKNOWLEDGMENT OF COMMENCEMENT DATE to
be effective on the date first above written.
| TENANT: PRIMAL, INC., a Washington corporation |
||||
| By: | ||||
| Its: | ||||
| LANDLORD: ALEXANDRIA REAL ESTATE EQUITIES, INC. a Maryland corporation |
||||
| By: | ||||
| Its: | ||||
-8-
EXHIBIT E TO LEASE
Rules and Regulations
1. The sidewalk, entries, and driveways of the Project shall not be obstructed by Tenant, or
its agents, or used by them for any purpose other than ingress and egress to and from the Premises.
2. Tenant shall not place any objects, including antennas, outdoor furniture, etc., in the
parking areas, landscaped areas or other areas outside of its Premises, or on the roof of the
Project.
3. Except for seeing-eye dogs, no animals shall be allowed in the offices, halls, or corridors
in the Project.
4. Tenant shall not disturb the occupants of the Project or adjoining buildings by the use of
any radio or musical instrument or by the making of loud or improper noises.
5. If Tenant desires telegraphic, telephonic or other electric connections in the Premises,
Landlord or its agent will direct the electrician as to where and how the wires may be introduced;
and, without such direction, no boring or cutting of wires will be permitted. Any such
installation or connection shall be made at Tenant’s expense.
6. Tenant shall not install or operate any steam or gas engine or boiler, or other mechanical
apparatus in the Premises, except as specifically approved in the Lease. The use of oil, gas or
inflammable liquids for heating, lighting or any other purpose is expressly prohibited. Explosives
or other articles deemed extra hazardous shall not be brought into the Project.
7. Parking any type of recreational vehicles is specifically prohibited on or about the
Project. Except for the overnight parking of operative vehicles, no vehicle of any type shall be
stored in the parking areas at any time. In the event that a vehicle is disabled, it shall be
removed within 48 hours. There shall be no “For Sale” or other advertising signs on or about any
parked vehicle. All vehicles shall be parked in the designated parking areas in conformity with
all signs and other markings. All parking will be open parking, and no reserved parking, numbering
or lettering of individual spaces will be permitted except as specified by Landlord.
8. Tenant shall maintain the Premises free from rodents, insects and other pests.
9. Landlord reserves the right to exclude or expel from the Project any person who, in the
judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any
manner do any act in violation of the Rules and Regulations of the Project.
10. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or
indifference in the preservation of good order and cleanliness. Landlord shall not be responsible
to
-9-
Tenant for any loss of property on the Premises, however occurring, or for any damage done to
the effects of Tenant by the janitors or any other employee or person.
11. Tenant shall give Landlord prompt notice of any defects in the water, lawn sprinkler,
sewage, gas pipes, electrical lights and fixtures, heating apparatus, or any other service
equipment affecting the Premises.
12. Tenant shall not permit storage outside the Premises including without limitation, outside
storage of trucks and other vehicles, or dumping of waste or refuse or permit any harmful materials
to be placed in any drainage system or sanitary system in or about the Premises.
13. All moveable trash receptacles provided by the trash disposal firm for the Premises must
be kept in the trash enclosure areas, if any, provided for that purpose.
14. No auction, public or private, will be permitted on the Premises or the Project.
15. No awnings shall be placed over the windows in the Premises except with the prior written
consent of Landlord.
16. The Premises shall not be used for lodging, sleeping or cooking or for any immoral or
illegal purposes or for any purpose other than that specified in the Lease. No gaming devices shall
be operated in the Premises.
17. Tenant shall ascertain from Landlord the maximum amount of electrical current which can
safely be used in the Premises, taking into account the capacity of the electrical wiring in the
Project and the Premises and the needs of other tenants, and shall not use more than such safe
capacity. Landlord’s consent to the installation of electric equipment shall not relieve Tenant
from the obligation not to use more electricity than such safe capacity.
18. Tenant assumes full responsibility for protecting the Premises from theft, robbery and
pilferage.
19. Tenant shall not install or operate on the Premises any machinery or mechanical devices of
a nature not directly related to Tenant’s ordinary use of the Premises and shall keep all such
machinery free of vibration, noise and air waves which may be transmitted beyond the Premises.
-10-
EXHIBIT F TO LEASE
TENANT’S PERSONAL PROPERTY
None, except as set forth below:
-11-
EXHIBIT G TO LEASE
ESTOPPEL CERTIFICATE
THIS TENANT ESTOPPEL CERTIFICATE (“Certificate”), dated as of ,___, is executed by
(“Tenant”) in favor of [Buyer], a
, together with its
nominees, designees and assigns (collectively, “Buyer”), and in favor of , together
with its nominees, designees and assigns (collectively, “Lender”).
RECITALS
A. Buyer and (“Landlord”) have entered into that certain Purchase and Sale
Agreement and Joint Escrow Instructions, dated as of
, 20___ (the “Purchase Agreement”),
whereby Buyer has agreed to purchase, among other things, the improved real property located in the
City of
, County of
, State of
,
more particularly described on
Exhibit A attached to the Purchase Agreement (the “Property”).
B. Tenant and Landlord have entered into that certain Lease Agreement, dated as of
(together with all amendments, modifications, supplements, guarantees and
restatements thereof, the “Lease”), for a portion of the Property.
C. Pursuant to the Lease, Tenant has agreed that upon the request of Landlord, Tenant would
execute and deliver an estoppel certificate certifying the status of the Lease.
D. In connection with the Purchase Agreement, Landlord has requested that Tenant execute this
Certificate with an understanding that Lender will rely on the representations and agreements below
in granting to Buyer a loan.
NOW, THEREFORE, Tenant certifies, warrants, and represents to Buyer and Lender as follows:
1. Lease. Attached hereto as Exhibit B is a true, correct and complete copy of the
Lease, including the following amendments, modifications, supplements, guarantees and restatements
thereof, which together represent all of the amendments, modifications, supplements, guarantees and
restatements thereof: ______________________________
____________________________________________________________________________________________
(If none, please state “None.”)
(If none, please state “None.”)
2. Premises. Pursuant to the Lease, Tenant leases those certain premises (the “Premises”)
consisting of approximately rentable square feet within the Property, as more
particularly described in the Lease. In addition, pursuant to the terms of the Lease, Tenant has
the [non-exclusive] right to use parking spaces/the parking area] located on the Property
during the term of the Lease.
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3. Full Force of Lease. The Lease has been duly authorized, executed and delivered by Tenant,
is in full force and effect, has not been terminated, and constitutes a legally valid instrument,
binding and enforceable against Tenant in accordance with its terms, subject only to applicable
limitations imposed by laws relating to bankruptcy and creditor’s rights.
4. Complete Agreement. The Lease constitutes the complete agreement between Landlord and
Tenant for the Premises and the Property, and except as modified by the Lease amendments noted
above (if any), has not been modified, altered or amended.
5. Acceptance of Premises. Tenant has accepted possession of and is currently occupying the
Premises.
6. Lease Term. The term of the Lease commenced on and ends on ,
subject to the following options to extend: . (If none, please state “None.”)
7. Purchase Rights. Tenant has no option, right of first refusal, right of first offer, or
other right to acquire or purchase all or any portion of the Premises or all or any portion of, or interest in, the Property, except as follows:
______________________________________________________________________________________________________________.
(If none, please state “None.”)
______________________________________________________________________________________________________________.
(If none, please state “None.”)
8. Rights of Tenant. Except as expressly stated in this Certificate, Tenant:
(a) has no right to renew or extend the term of the Lease;
(b) has no option or other right to purchase all or any part of the Premises or all or any
part of the Property; and
(c) has no right, title, or interest in the Premises, other than as Tenant under the Lease.
9. Rent.
(a) The obligation to pay rent under the Lease commenced on . The rent under
the Lease is current, and Tenant is not in default in the performance of any of its obligations
under the Lease.
(b) Tenant is currently paying base rent under the Lease in the amount of $ per month.
Tenant has not received and is not presently entitled to any abatement, refunds, rebates,
concessions or forgiveness of rent or other charges, free rent, partial rent, or credits, offsets
or reductions in rent, except as follows:
___________
________________________________________________________________________________________________________________
________________________________________________________________________________________________________________.
(If none, please state “None.”)
________________________________________________________________________________________________________________
________________________________________________________________________________________________________________.
(If none, please state “None.”)
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(c) Tenant’s estimated share of Net Building Expenses, as defined in the Lease, is _____% and
is currently being paid at the rate of $
per month, payable to:
.
(d) There are no existing defenses or offsets against rent due or to become due under the
terms of the Lease, and there presently is no default or other wrongful act or omission by Landlord
under the Lease or otherwise in connection with Tenant’s occupancy of the Premises, nor is there a
state of facts which with the passage of time or the giving of notice or both could ripen into a
default on the part of Tenant, or, to the best knowledge of Tenant, could ripen into a default on
the part of Landlord under the Lease, except as follows:
.
(If none, please state “None.”)
(If none, please state “None.”)
10. Security Deposit. The amount of Tenant’s security deposit held by Landlord under the
Lease is $
11. Prepaid Rent. The amount of prepaid rent, separate from the security deposit, is
$ , covering the period from to .
12. Insurance. All insurance, if any, required to be maintained by Tenant under the Lease is
presently in effect.
13. Pending Actions. There is not pending or, to the knowledge of Tenant, threatened against
or contemplated by the Tenant, any petition in bankruptcy, whether voluntary or otherwise, any
assignment for the benefit of creditors, or any petition seeking reorganization or arrangement
under the federal bankruptcy laws or those of any state.
14. Tenant Improvements. As of the date of this Certificate, to the best of Tenant’s
knowledge, Landlord has performed all obligations required of Landlord pursuant to the Lease; no
offsets, counterclaims, or defenses of Tenant under the Lease exist against Landlord; and no events
have occurred that, with the passage of time or the giving of notice or both, would constitute a
basis for offsets, counterclaims, or defenses against Landlord, except as
follows:
.
(If none, please state “None.”)
(If none, please state “None.”)
15. Assignments by Landlord. Tenant has received no notice of any assignment, hypothecation
or pledge of the Lease or rentals under the Lease by Landlord. Tenant hereby consents to an
assignment of the Lease and rents to be executed by Landlord to Buyer or Lender in connection with
the Loan and acknowledges that said assignment does not violate the provisions of the Lease.
Tenant acknowledges that the interest of the Landlord under the Lease is to be assigned to Lender
solely as security for the purposes specified in said assignment and Lender shall have no duty,
liability or obligation whatsoever under the Lease or any extension or renewal thereof, either by
virtue of said assignment or by any subsequent receipt or collection of rents thereunder, unless
Lender shall specifically undertake such liability in writing. Tenant agrees that upon receipt of
a
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written notice from Buyer or Lender of a default by Landlord under the Loan, Tenant will
thereafter pay rent to Buyer or Lender in accordance with the terms of the Lease.
16. Assignments by Tenant. Tenant has not sublet or assigned the Premises or the Lease or any
portion thereof to any sublessee or assignee. No one except Tenant and its employees will occupy
the Premises. The address for notices to be sent to Tenant is as set forth in the Lease.
17. Environmental Matters. The operation and use of the Premises does not involve the
generation, treatment, storage, disposal or release into the environment of any hazardous
materials, regulated materials and/or solid waste, except those used in the ordinary course of
operating for the Permitted Use, as defined in the Lease, or otherwise used in accordance with all
applicable laws.
18. Succession of Interest. Tenant agrees that, in the event Buyer or Lender succeeds to the
interest of Landlord under the Lease:
(a) Buyer or Lender shall not be liable for any act or omission, of any prior landlord
(including Landlord);
(b) Buyer or Lender shall not be liable for the return of any security deposit unless such
Buyer or Lender has assumed such obligation pursuant to Section 6 of the Lease;
(c) Buyer or Lender shall not be bound by any rent or additional rent which Tenant might have
prepaid under the Lease for more than the current month;
(d) Buyer or Lender shall not be bound by any amendments or modifications of the Lease made
without the prior consent of Buyer or Lender;
(e) Buyer or Lender shall not be subject to any offsets or defenses which Tenant might have
against any prior landlord (including Landlord); and
(f) Buyer or Lender shall not be liable under the Lease to Tenant for the performance of
Landlord’s obligations under the Lease beyond Buyer or Lender’s interest in the Property.
19. Notice of Default. Tenant agrees to give Buyer and Lender a copy of any notice of default
under the Lease served upon Landlord at the same time as such notice is given to Landlord. Tenant
further agrees that if Landlord shall fail to cure such default within the applicable grace period,
if any, provided in the Lease, then Buyer or Lender shall have an additional 60 days within which
to cure such default, or if such default cannot be cured within such 60-day period, such 60-day
period shall be extended so long as Buyer or Lender has commenced and is diligently pursuing the
remedies necessary to cure such default, including, but not limited to, commencement of foreclosure
proceedings, if necessary to effect such cure, in which event the Lease shall not be terminated
while such remedies are being pursued.
-15-
20. Notification by Tenant. From the date of this Certificate and continuing until
, Tenant agrees to immediately notify Buyer and Lender, in writing by registered or
certified mail, return receipt requested, at the following addresses, on the occurrence of any
event or the discovery of any fact that would make any representation contained in this Certificate
inaccurate:
If To Buyer: |
||||
With A Copy To: |
||||
If To Lender: |
||||
Tenant makes this Certificate with the knowledge that it will be relied upon by Buyer and
Lender in agreeing to purchase the Property.
[Signature appears on next page]
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Tenant has executed this Certificate as of the date first written above by the person named
below, who is duly authorized to do so.
TENANT: |
||||||
| a | ||||||
| By: | ||||||
| Name: | ||||||
| Its: | ||||||
-17-
EXHIBIT A TO ESTOPPEL CERTIFICATE
Legal Description
-18-
EXHIBIT B TO ESTOPPEL CERTIFICATE
Copy of Lease
-19-
EXHIBIT H TO LEASE
SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT
ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT is made and entered into as of
(“Agreement”), by and between
, a
together with its nominees, designees and assigns (collectively,
“Landlord”), , a (“Tenant”), and a
(“Mortgagee”).
WHEREAS, Mortgagee is making a loan to Landlord and others evidenced by a certain promissory
note (“Note”), and secured by, among other things, a deed of trust/mortgage to be recorded prior
hereto in the public records of the City of , County of , State of
(“Mortgage”) constituting a lien upon the real property described in Exhibit A hereto (the
“Real Property”); and
WHEREAS,
and Tenant have entered into a Lease Agreement dated as of
,___ (“Lease”), for certain leased premises encompassing
located in , containing approximately
net square feet (hereinafter collectively referred to as “Premises”); and
WHEREAS, the Lease is subordinate to the Mortgage and to the right, title, and interests of
Mortgagee thereto and thereunder; and
WHEREAS, Mortgagee wishes to obtain from Tenant certain assurances that Tenant will attorn to
Mortgagee in the event of a foreclosure by Mortgagee or the exercise of other rights under the
Mortgage; and
WHEREAS, Tenant wishes to obtain from Mortgagee certain assurances that Tenant’s possession of
the Premises will not, subject to the terms and conditions of this Agreement, be disturbed by
reason of a foreclosure of the lien of the Mortgage on the Real Property; and
WHEREAS, Tenant and Mortgagee are both willing to provide such assurances to each other upon
and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the above, the mutual promises hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto mutually agree as follows:
1. Affirmation. Tenant hereby agrees that the Lease now is and shall be subject and
subordinate in all respects to the Mortgage and to all renewals, modifications and extensions
thereof until such time that the Mortgage is released, satisfied or otherwise discharged, subject
to the terms
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and conditions of this Agreement. Landlord and Tenant hereby affirm that the Lease is in full
force and effect and that the Lease has not been modified or amended. Mortgagee hereby confirms
that it is the holder of the Note and the beneficiary of the Mortgage and has full power and
authority to enter into this Agreement.
2. Attornment and Non-Disturbance.
(a) So long as Tenant is not in default under the Lease (beyond Tenant’s receipt of notice
from Landlord and any grace period granted Tenant under the Lease to cure such default) as would
entitle the Landlord to terminate the Lease or would cause, without any further action of the
Landlord, the termination of the Lease or would entitle the Landlord to dispossess Tenant
thereunder then Mortgagee agrees with Tenant that in the event the interest of Landlord shall be
acquired by Mortgagee or in the event Mortgagee comes into possession of or acquires title to the
Real Property by reason of foreclosure or foreclosure sale or the enforcement of the Mortgage or
the Note or other obligation secured thereby or by a conveyance in lieu thereof, or as a result of
any other means then:
(i) Subject to the provisions of this Agreement, Tenant’s occupancy and possession of the
Premises and Tenant’s rights and privileges under the Lease or any extensions, modifications or
renewals thereof or substitutions therefor (in accordance with the Lease and the Mortgage) shall
not be disturbed, diminished or interfered with by Mortgagee during the term of the Lease (or any
extensions or renewals thereof provided for in the Lease);
(ii) Mortgagee will not join Tenant as a party defendant in any action or proceeding for the
purpose of terminating Tenant’s interest and estate under the Lease because of any default under
the Mortgage; and
(iii) The Lease shall continue in full force and effect and shall not be terminated except in
accordance with the terms of the Lease.
(b) Tenant shall be bound to Mortgagee under all of the terms, covenants and conditions of the
Lease for the balance of the term thereof remaining (and any extensions or renewals thereof which
may be effected in accordance with any option contained in the Lease) with the same force and
effect as if Mortgagee were the landlord under the Lease, and Tenant does hereby agree to attorn to
Mortgagee as its landlord, said attornment to be effective and self-operative without the execution
of any other instruments on the part of either party hereto immediately upon Mortgagee’s succeeding
to the interest of Landlord under the Lease. Upon request of Lender, Tenant shall execute and
deliver to Lender an agreement reaffirming such attornment.
(c) If the Mortgage is foreclosed and any party (“Purchaser”) other than Mortgagee purchases
the Premises and succeeds to the interest of Landlord under the Lease, Tenant shall likewise be
bound to Purchaser and Tenant hereby covenants and agrees to attorn to Purchaser in accordance with
all of the provisions of this Agreement; provided, however, that Purchaser shall
have transmitted to Tenant a written document in recordable form, whereby Purchaser agrees to
recognize Tenant as its lessee under the Lease and agrees to be directly bound to Tenant for the
-21-
performance and observance of all the terms and conditions of the Lease required to be
performed or observed by Landlord thereunder, subject to and in accordance with the terms of this
Agreement.
(d) Mortgagee agrees that if Mortgagee shall succeed to the interest of Landlord under the
Lease as above provided, Mortgagee shall be bound to Tenant under all of the terms, covenants, and
conditions of the Lease, and Tenant shall, from and after Mortgagee’s succession to the interest of
Landlord under the Lease, have the same remedies against Mortgagee that Tenant might have had under
the Lease against Landlord if Mortgagee had not succeeded to the interest of Landlord;
provided, however, that Mortgagee (and Purchaser, as the case may be) shall not be:
(i) liable for any act or omission of any prior lessor (including Landlord) occurring prior to
the date that Mortgagee or Purchaser acquired title to the Premises;
(ii) subject to any offsets, counterclaims or defenses which Tenant might have against any
prior lessor (including Landlord);
(iii) bound by any previous payment of rent or additional rent for a period greater than 1
month unless such prepayment shall have been consented to in writing by Mortgagee;
(iv) bound by any amendment or modification of the Lease made after the date of this Agreement
and prior to the date Mortgagee or Purchaser succeeds to the interest of Landlord without
Mortgagee’s written consent;
(v) liable to Tenant for any loss of business or any other indirect or consequential damages
from whatever cause; provided, however, no inference shall be drawn from this
clause (v) that Tenant would otherwise be entitled (or not entitled) to recover for loss of
business or any other indirect or consequential damages; or
(vi) liable for the return of any security deposit unless such deposit has been paid over to
the Mortgagee.
The foregoing shall not be construed to modify or limit any right Tenant may have at law or in
equity against Landlord or any other prior owner of the Real Property.
3. Notices. All notices required or permitted to be given pursuant to this Agreement shall be
in writing and shall be sent postage prepaid, by certified mail, return receipt requested, or other
nationally utilized overnight delivery service. All notices shall be deemed delivered when
received or refused. Rejection or other refusal to accept or inability to deliver because of
changed address of which no notice has been given shall constitute receipt of the notice, demand or
request sent. Any such notice if given to Tenant shall be addressed as follows:
-22-
if given to Landlord shall be addressed as follows:
c/o Alexandria Real Estate Equities, Inc.
135 N. Los Robles Avenue
Suite 250
Pasadena, California 91101
Attention: General Counsel
135 N. Los Robles Avenue
Suite 250
Pasadena, California 91101
Attention: General Counsel
if given to Mortgagee shall be addressed as follows:
4. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The words “foreclosure” and
“foreclosure sale” as used herein shall be deemed to also include the acquisition of Landlord’s
estate in the Real Property by voluntary deed, assignment or other conveyance or transfer in lieu
of foreclosure.
5. Modifications to Lease. Tenant shall not modify or amend the Lease or terminate the same
without Mortgagee’s prior written consent. If Mortgagee fails to provide Tenant with a written
approval of the proposed modification, amendment or termination within 10 business days after
notice to Mortgagee of such proposal, then Mortgagee shall be deemed to have rejected such
proposal.
6. Additional Agreements. Tenant agrees that:
(a) it shall give Mortgagee copies of all notices of default and requests for approval or
consent by Landlord that Tenant gives to Landlord pursuant to the Lease in the same manner as they
are given to Landlord and no such notice or other communication shall be deemed to be effective
until a copy is given to Mortgagee;
(b) in all provisions of the Lease where Landlord is indemnified, the reference to Landlord as
an indemnitee shall be deemed to include Mortgagee and any Purchaser and such agreement of
indemnification shall survive the repayment of the loan secured by the Mortgage and, to the extent
provided in the Lease, the expiration or termination of the Lease;
(c) Tenant shall name Mortgagee and any Purchaser as additional insureds and loss payees, as
applicable and appropriate, on all insurance policies required by the Lease;
(d) this Agreement satisfies any condition or requirement in the Lease relating to the
granting of a non-disturbance agreement by Mortgagee, and if there are inconsistencies between
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the terms and provisions of this Agreement and the terms and provisions of the Lease dealing
with non-disturbance by Mortgagee, the terms and provisions hereof shall be controlling; and
(e) Mortgagee shall have no liability under the Lease until Mortgagee succeeds to the rights
of the Landlord under the Lease, and then only during such period as Mortgagee is the landlord At
all times during which Mortgagee is liable under the Lease, Mortgagee’s liability shall be limited
to Mortgagee’s interest in the Real Property.
7. Mortgagee Cure Rights. If Landlord shall have failed to cure any default within the time
period provided for in the Lease (including any applicable notice and grace periods) and Tennant
exercises any right to terminate the Lease, Mortgagee shall have an additional 30 days within which
to cure such default, or if such default cannot by the exercise of reasonable efforts by Mortgagee
be cured within such period, then such additional time as may be reasonable necessary to effect
such a Cure (including, if necessary, sufficient time to complete foreclosure proceedings) provided
that Mortgagee shall commence and thereafter diligently pursue remedies to cure such default. The
Lease shall not be terminated (i) while such remedies are being diligently pursued or (ii) based
upon a default which is personal to Landlord and therefore not susceptible to cure by Mortgagee or
which requires possession of the Premises to cure. Mortgagee shall in no event be obligated to
cure any such default by Landlord unless it forecloses. Nothing in this Section 7 shall affect any
of Tenant’s termination rights under the Lease due to casualty or condemnation.
8. Direction to Pay. Landlord hereby directs Tenant and Tenant agrees to make all payments of
amounts owed by Tenant under the Lease directly to Mortgagee from and after receipt by Tenant of
notice from Mortgagee directing Tenant to make such payments to Mortgagee. (As between Landlord
and Mortgagee, the foregoing provision shall not be construed to modify any rights of Landlord
under any provisions of the Mortgage or any other instrument securing the Note).
9. Conditional Assignment. With reference to any assignment by Landlord of Landlord’s
interest in the Lease, or the rents payable thereunder, conditional in nature or otherwise, which
assignment is made to Mortgagee, Tenant agrees that the execution thereof by Landlord, and the
acceptance thereof by Mortgagee, shall never be treated as an assumption by Mortgagee of any of the
obligations of Landlord under the Lease unless and until Mortgagee shall have succeeded to the
interest of Landlord. The foregoing sentence shall not affect any of Tenant’s rights against
Landlord under the Lease.
[Signatures on next page]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be properly executed by their
duly authorized representatives as of the date first above written.
TENANT: |
|||||||
| a | |||||||
| By: | |||||||
| Its: | |||||||
| LANDLORD: | [INSERT APPROPRIATE SIGNATURE BLOCK] | ||||||
MORTGAGEE: |
|||||||
| a | |||||||
| By: | |||||||
| Name: | |||||||
| Its: | |||||||
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EXHIBIT A TO SUBORDINATION AGREEMENT
Legal Description
-26-
Exhibit 10.25
LEASE AGREEMENT
THIS LEASE AGREEMENT is made as of this 28th day of September 2001, between
Alexandria Real Estate Equities, Inc., a Maryland corporation (“Landlord”), and PRIMAL, INC., a
Washington corporation (“Tenant”).
Address:
|
1124 Columbia Street, Seattle, WA | |
Premises:
|
That portion of the Project, containing approximately 12,923 rentable square feet, as determined by Landlord, located on Level B of the annex to the Project as shown on Exhibit A. | |
Project:
|
The real property on which the building (the “Building”) in which the Premises are located, together with all improvements thereon and appurtenances thereto as described on Exhibit B. |
Base Rent:
|
$32,307.50 per month | Rentable Area of Premises: | 12,923 sq. ft. | |||||||
Rentable Area of
Project:
|
168,819 sq. ft. | Tenant’s Share of Operating Expenses: | 7.65 | % | ||||||
Security Deposit:
|
$ | 96,922.50 | Commencement Date: | October 1, 2001 | ||||||
Rent Adjustment Percentage: |
Greater of 3.5% or the CPI Adjustment Percentage not to exceed 7.0% | |
Base Term:
|
Beginning on the Commencement Date and ending 10 years from the Rent Commencement Date (as herein defined) | |
Permitted Use:
|
Vivarium and related uses consistent with the character of the Project and otherwise in compliance with the provisions of Section 7 hereof. |
Address for Rent Payment:
|
Landlord’s Notice Address: | |
135 N. Los Robles Avenue, Suite 250
|
135 N. Los Robles Avenue, Suite 250 | |
Pasadena, CA 91101
|
Pasadena, CA 91101 | |
Attention: Accounts Receivable
|
Attention: Corporate Secretary | |
Tenant’s Notice Address: |
||
1124 Columbia Street |
||
Suite 650 |
||
Seattle, WA 98104 |
||
Attention: Leslie Deitz Kaplan |
The following Exhibits and Addenda are attached hereto and incorporated herein by this
reference:
ý EXHIBIT A — PREMISES DESCRIPTION
|
ý EXHIBIT B — DESCRIPTION OF PROJECT | |
ý EXHIBIT C — WORK LETTER
|
ý EXHIBIT D — COMMENCEMENT DATE | |
ý EXHIBIT E — RULES AND REGULATIONS
|
o EXHIBIT F — TENANTS PERSONAL PROPERTY |
1. Lease of Premises. Upon and subject to all of the terms and conditions hereof, Landlord
hereby leases the Premises to Tenant and Tenant hereby leases the Premises from Landlord. The
portions of the Project, which are for the non-exclusive use of tenants of the Project, are
collectively referred to herein as the “Common Areas.” Landlord reserves the right to modify
Common Areas, provided that such modifications do not materially adversely affect Tenant’s use of
the Premises for the Permitted Use. Tenant shall have the right to use the loading area in the
annex level of the Project leased by Corixa Corporation, a Delaware corporation (“Corixa”) under
that certain Columbia Building Lease dated October 28, 1994, as amended (the “Corixa Lease”) and
the portion of the bio-hazards waste cabinets assigned to Tenant and located on the basement level
of the Building.
2. Delivery; Acceptance of Premises; Commencement Date. Landlord shall use reasonable efforts
to make the Premises available to Tenant for Tenant’s Work under the Work Letter upon full
execution of this Lease and Tenant’s delivery of evidence of the insurance required hereby and by
the Work Letter (“Delivery” or “Deliver”). If Landlord fails to timely deliver the Premises,
Landlord shall not be liable to Tenant for any loss or damage resulting therefrom, and this Lease
shall not be void or voidable except as provided herein. If Landlord does not Deliver the Premises
within 60 days of the Target Commencement Date for any reason other than Force Majeure, this Lease
may be terminated by Landlord or Tenant by written notice to the other, and if so terminated by
either: (a) the Security Deposit, or any balance thereof (i.e., after deducting therefrom all
amounts to which Landlord is entitled under the provisions of this Lease), shall be returned to
Tenant, and (b) neither Landlord nor Tenant shall have any further rights, duties or obligations
under this Lease, except with respect to provisions which expressly survive termination of this
Lease. If neither Landlord nor Tenant elects to void this Lease within 5 business days of the
lapse of such 60-day period, such right to void this Lease shall be waived and this Lease shall
remain in full force and effect.
The “Commencement Date” shall be October 1, 2001. Rent shall commence on the Commencement
Date as to 6,215 rentable square feet of the Premises, and shall commence on the earlier of: (i) 90
days after the Commencement Date, and (ii) the date Tenant conducts any business in the Premises or
any part thereof (the “Rent Commencement Date”), with respect to the balance of the Premises. Upon
request of Landlord, Tenant shall execute and deliver a written acknowledgment of the Commencement
Date, the Rent Commencement Data and the expiration date of the Term when such are established in
the form attached to this Lease as Exhibit D; provided, however, Tenant’s failure
to execute and deliver such acknowledgment shall not affect Landlord’s rights hereunder. The
"Term” of this Lease shall be the Base Term.
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Except as set forth in the Work Letter, if applicable: (i) Tenant shall accept the Premises in
their condition as of the Commencement Date, subject to all applicable Legal Requirements (as
defined in Section 7 hereof); (ii) Landlord shall have no obligation for any defects in the
Premises; and (iii) Tenant’s taking possession of the Premises shall be conclusive evidence that
Tenant accepts the Premises and that the Premises were in good condition at the time possession was
taken. Any occupancy of the Premises by Tenant before the Commencement Date shall be subject to
all of the terms and conditions of this Lease.
Tenant agrees and acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the condition of all or any portion of the Premises or
the Project, and/or the suitability of the Premises or the Project for the conduct of Tenant’s
business, and Tenant waives any implied warranty that the Premises or the Project are suitable for
the Permitted Use. This Lease constitutes the complete agreement of Landlord and Tenant with
respect to the subject matter hereof and supersedes any and all prior representations, inducements,
promises, agreements, understandings and negotiations that are not contained herein. Landlord in
executing this Lease does so in reliance upon Tenant’s representations, warranties, acknowledgments
and agreements contained herein.
3. Rent.
(a) Base Rent. The first month’s Base Rent and the Security Deposit shall be due and payable
on delivery of an executed copy of this Lease to Landlord. Tenant shall pay to Landlord in
advance, without demand, abatement, deduction or set-off, monthly installments of Base Rent on or
before the first day of each calendar month during the Term hereof, in lawful money of the United
States of America, at the office of Landlord for payment of Rent set forth above, or to such other
person or at such other place as Landlord may from time to time designate in writing. Payments of
Base Rent for any fractional calendar month shall be prorated. The obligation of Tenant to pay
Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are
independent obligations. Tenant shall have no right at any time to abate, reduce, or set-off any
Rent (as defined in Section 5) due hereunder except for any abatement as may be expressly
provided in this Lease.
(b) Additional Rent. In addition to Base Rent, Tenant agrees to pay to Landlord as additional
rent (“Additional Rent”): (i) Tenant’s Share of “Operating Expenses” (as defined in Section
5), and (ii) any and all other amounts Tenant assumes or agrees to pay under the provisions of
this Lease, including, without limitation, any and all other sums that may become due by reason of
any default of Tenant or failure to comply with the agreements, terms, covenants and conditions of
this Lease to be performed by Tenant, after any applicable notice and cure period.
4. Base Rent Adjustments. Base Rent shall be increased on each annual anniversary of the
first day of the first full month during the Term of this Lease (each an “Adjustment Date”) by
multiplying the Base Rent payable immediately before such Adjustment Date by the Rent Adjustment
Percentage and adding the resulting amount to the Base Rent payable immediately before such
Adjustment Date. Base Rent, as so adjusted, shall thereafter be due as provided herein. Base Rent
adjustments for any fractional calendar month shall be prorated. “CPI Adjustment Percentage” means
(i) a fraction, stated as a percentage, the numerator of which shall be the Index for the calendar
month 3 months before the month in which the Adjustment Date occurs, and the
-3-
denominator of which shall be the Index for the calendar month 3 months before the last
Adjustment Date or, if no prior Base Rent adjustment has been made, 3 months before the first day
of the first full month during the Term of this Lease, less (ii) 1.00. “Index” means the “Consumer
Price Index-All Urban Consumers-Seattle-Tacoma-Bremerton Metropolitan Area, All Items” compiled by
the U.S. Department of Labor, Bureau of Labor Statistics, (1982-84 = 100). If a substantial change
is made in the Index, the revised Index shall be used, subject to such adjustments as Landlord may
reasonably deem appropriate in order to make the revised Index comparable to the prior Index. If
the Bureau of Labor Statistics ceases to publish the Index, then the successor or most nearly
comparable index, as reasonably determined by Landlord, shall be used, subject to such adjustments
as Landlord may reasonably deem appropriate in order to make the new index comparable to the Index.
Landlord shall give Tenant written notice indicating the Base Rent, as adjusted pursuant to this
Section, and the method of computation and Tenant shall pay to Landlord an amount equal to any
underpayment of Base Rent by Tenant within 15 days of Landlord’s notice to Tenant. Failure to
deliver such notice shall not reduce, abate, waive or diminish Tenant’s obligation to pay the
adjusted Base Rent.
5. Operating Expense Payments. Landlord shall deliver to Tenant a written estimate of
Operating Expenses for each calendar year during the Term (the “Annual Estimate”), which may be
revised by Landlord from time to time during such calendar year. During each month of the Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12 of Tenant’s
Share of the Annual Estimate. Payments for any fractional calendar month shall be prorated.
The term “Operating Expenses” means all costs and expenses of any kind or description
whatsoever incurred or accrued each calendar year by Landlord with respect to the Project
(including, without duplication, Taxes (as defined in Section 9), reasonable reserves
consistent with good business practice for future repairs and replacements, capital repairs and
improvements amortized over the lesser of 7 years and the useful life of such capital items, and
the costs of Landlord’s third party property manager or, if there is no third party property
manager, administration rent in the amount of 3.0% of Base Rent), excluding only:
(a) the original construction costs of the Project and renovation prior to the date of the
Lease and costs of correcting defects in such original construction or renovation;
(b) capital expenditures for expansion or redevelopment of all or any portion of the Project;
(c) interest, principal payments of Mortgage (as defined in Section 27) debts of
Landlord, financing costs and amortization of funds borrowed by Landlord, whether secured or
unsecured and all payments of base rent (but not taxes or operating expenses) under any ground
lease or other underlying lease of all or any portion of the Project;
(d) depreciation of the Project (except for capital improvements, the cost of which are
includable in Operating Expenses);
-4-
(e) advertising, legal and space planning expenses and leasing commissions and other costs and
expenses incurred in procuring and leasing space to tenants for the Project, including any leasing
office maintained in the Project, free rent and construction allowances and other lease incentives
for tenants;
(f) legal and other expenses incurred in the negotiation or enforcement of leases;
(g) completing, fixturing, improving, renovating, painting, redecorating or other work, which
Landlord pays for or performs for specific tenants within their premises, and costs of correcting
defects in such work;
(h) costs of utilities outside normal business hours sold to tenants of the Project;
(i) costs to be reimbursed by other tenants of the Project or Taxes to be paid directly by
Tenant or other tenants of the Project, whether or not actually paid;
(j) salaries, wages, benefits and other compensation paid to officers and employees of
Landlord who are not assigned in whole or in part to the operation, management, maintenance or
repair of the Project;
(k) general organizational, administrative and overhead costs relating to maintaining
Landlord’s existence, either as a corporation, partnership, or other entity, including general
corporate, legal and accounting expenses;
(l) costs (including attorneys’ fees and costs of settlement, judgments and payments in lieu
thereof) incurred in connection with disputes with tenants, other occupants, or prospective
tenants, and costs and expenses, including legal fees, incurred in connection with negotiations or
disputes with employees, consultants, management agents, leasing agents, purchasers or mortgagees
of the Building;
(m) costs incurred by Landlord due to the violation by Landlord, its employees, agents or
contractors or any tenant of the terms and conditions of any lease of space in the Project or any
Legal Requirement (as defined in Section 7);
(n) tax penalties, fines or interest incurred as a result of Landlord’s negligence, inability
or unwillingness to make payment and/or to file any tax or informational returns when due, or from
Landlord’s failure to make any payment required to be made by Landlord hereunder before
delinquency;
(o) overhead and profit increment paid to Landlord or to subsidiaries or affiliates of
Landlord for goods and/or services in or to the Project to the extent the same exceeds the costs of
such goods and/or services rendered by unaffiliated third parties on a competitive basis;
(p) costs arising from Landlord’s charitable or political contributions or fine art maintained
at the Project;
-5-
(q) costs in connection with services (including electricity), items or other benefits of a
type which are not standard for the Project and which are not available to Tenant without specific
charges therefor, but which are provided to another tenant or occupant of the Project, whether or
not such other tenant or occupant is specifically charged therefor by Landlord;
(r) costs incurred in the sale or refinancing of the Project;
(s) net income taxes of Landlord or the owner of any interest in the Project, franchise,
capital stock, gift, estate or inheritance taxes or any federal, state or local documentary taxes
imposed against the Project or any portion thereof or interest therein; and
(t) costs incurred by reason of the remediation or other environmental response regarding any
contamination of the Premises or the Project or soils or groundwater thereunder, by Hazardous
Materials other than as described in Section 30 hereof;
(u) costs of repairs or other work occasioned by fire, windstorm, earthquake or other casualty
or loss in excess of the deductible under the casualty insurance maintained by Landlord pursuant to
Section 17 hereof; and
(v) any expenses otherwise includable within Operating Expenses to the extent actually
reimbursed by persons other than tenants of the Project under leases for space in the Project.
Within 90 days after the end of each calendar year (or such longer period as may be reasonably
required), Landlord shall furnish to Tenant a statement (an “Annual Statement”) showing in
reasonable detail: (a) the total and Tenant’s Share of actual Operating Expenses for the previous
calendar year, and (b) the total of Tenant’s payments in respect of Operating Expenses for such
year. If Tenant’s Share of actual Operating Expenses for such year exceeds Tenant’s payments of
Operating Expenses for such year, the excess shall be due and payable by Tenant as Rent within 30
days after delivery of such Annual Statement to Tenant. If Tenant’s payments of Operating Expenses
for such year exceed Tenant’s Share of actual Operating Expenses for such year Landlord shall pay
the excess to Tenant within 30 days after delivery of such Annual Statement, except that after the
expiration, or earlier termination of the Term or if Tenant is delinquent in its obligation to pay
Rent, Landlord shall pay the excess to Tenant after deducting all other amounts due Landlord.
The Annual Statement shall be final and binding upon Tenant unless Tenant, within 30 days
after Tenant’s receipt thereof, shall contest any item therein by giving written notice to
Landlord, specifying each item contested and the reason therefor. If, during such 30 day period,
Tenant reasonably and in good faith questions or contests the correctness of Landlord’s statement
of Tenant’s Share of Operating Expenses, Landlord will provide Tenant with access to Landlord’s
books and records relating to the operation of the Project and such information as Landlord
reasonably determines to be responsive to Tenant’s questions (the “Expense Information”). If after
Tenant’s review of such Expense Information, Landlord and Tenant cannot agree upon the amount of
Tenant’s Share of Operating Expenses, then Tenant shall have the right to have an independent
public accounting firm selected by Tenant from among the 5 largest in the United States, working
pursuant to a fee arrangement other than a contingent fee (at Tenant’s sole cost and expense) and
approved by Landlord (which approval shall not be unreasonably withheld or delayed), audit and/or
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review the Expense Information for the year in question (the “Independent Review”). The
results of any such Independent Review shall be binding on Landlord and Tenant. If the Independent
Review shows that the payments actually made by Tenant with respect to Operating Expenses for the
calendar year in question exceeded Tenant’s Share of Operating Expenses for such calendar year,
Landlord shall at Landlord’s option either (i) credit the excess amount to the next succeeding
installments of estimated Operating Expenses or (ii) pay the excess to Tenant within 30 days after
delivery of such statement, except that after the expiration or earlier termination of the Term or
if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant
after deducting all other amounts due Landlord. If the independent Review shows that Tenant’s
payments with respect to Operating Expenses for such calendar year were less than Tenant’s Share of
Operating Expenses for the calendar year, Tenant shall pay the deficiency to Landlord within 30
days after delivery of such statement. If the Independent Review shows that Tenant has overpaid
with respect to Operating Expenses by more than 5% then Landlord shall reimburse Tenant for all
costs incurred by Tenant for the Independent Review. Operating Expenses for the calendar years in
which Tenant’s obligation to share therein begins and ends shall be prorated. Notwithstanding
anything set forth herein to the contrary, if the Project is not at least 95% occupied on average
during any year of the Term, Tenant’s Share of Operating Expenses for such year shall be computed
as though the Project had been 95% occupied on average during such year.
“Tenant’s Share” shall be the percentage set forth on the first page of this Lease as Tenant’s
Share as reasonably adjusted by Landlord following a measurement of the rentable square footage of
the Project and the Premises to be done by Landlord within 90 days of the Commencement Date, or as
soon as reasonably possible thereafter, and shall be subject to further adjustment for changes in
the physical size of the Premises or the Project occurring thereafter. Any such measurement shall
be performed in accordance with the 1996 Standard Method of Measuring Floor Area in Office
Buildings as adopted by the Building Owners and Managers Association (ANSI/BOMA Z65.1-1996).
Landlord may equitably increase Tenant’s Share for any item of expense or cost reimbursable by
Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a
portion of the Project that includes the Premises or that varies with occupancy or use. Base Rent,
Tenant’s Share of Operating Expenses and all other amounts payable by Tenant to Landlord hereunder
are collectively referred to herein as “Rent.”
6. Security Deposit. Tenant shall deposit with Landlord upon delivery of an executed copy of
this Lease to Landlord security (the “Security Deposit”) for the performance of all of its
obligations in the amount set forth in the Basic Lease Provisions, which security shall be in the
form of either cash or an unconditional and irrevocable letter of credit (the “Letter of Credit”):
(i) in form and substance satisfactory to Landlord, (ii) naming Landlord as beneficiary, (iii)
expressly allowing Landlord to draw upon it at any time from time to time by delivering to the
issuer notice that Landlord is entitled to draw thereunder, (iv) drawable on an FDIC-insured
financial institution satisfactory to Landlord, and (v) redeemable in the state of Landlord’s
choice. If Tenant does not provide Landlord with a substitute Letter of Credit complying with all
of the requirements hereof at least 10 days before the stated expiration date of the then current
Letter of Credit, Landlord shall have the right to draw upon the current Letter of Credit and hold
the funds drawn as the Security Deposit. The Security Deposit shall be held by Landlord as
security for the performance of Tenant’s obligations under this Lease. The Security Deposit is not
an advance rental deposit or a measure of Landlord’s damages in case of Tenant’s default. Upon
each occurrence of a Default (as defined in
-7-
Section 20), Landlord may use all or any part of the Security Deposit to pay
delinquent payments due under this Lease, and the cost of any damage, injury, expense or liability
caused by such Default, without prejudice to any other remedy provided herein or provided by law.
Upon any such use of all or any portion of the Security Deposit, Tenant shall pay Landlord on
demand the amount that will restore the Security Deposit to its original amount. Tenant hereby
waives the provisions of any law, now or hereafter in force, which provide that Landlord may claim
from a security deposit only those sums reasonably necessary to remedy defaults in the payment of
Rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord
may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss
or damage, foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer,
employee, agent or invitee of Tenant. Upon bankruptcy or other debtor-creditor proceedings against
Tenant, the Security Deposit shall be deemed to be applied first to the payment of Rent and other
charges due Landlord for periods prior to the filing of such proceedings. Upon any such use of all
or any portion of the Security Deposit, Tenant shall, within 5 days after demand from Landlord,
restore the Security Deposit to its original amount. If Tenant shall fully perform every provision
of this Lease to be performed by Tenant, the Security Deposit, or any balance thereof (i.e., after
deducting therefrom all amounts to which Landlord is entitled under the provisions of this Lease),
shall be returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest
hereunder) within 90 days after the expiration or earlier termination of this Lease.
If Landlord transfers its interest in the Project or this Lease, Landlord shall either (a)
transfer any Security Deposit then held by Landlord to a person or entity assuming Landlord’s
obligations under this Section 6, or (b) return to Tenant any Security Deposit then held by
Landlord and remaining after the deductions permitted herein. Upon such transfer to such
transferee or the return of the Security Deposit to Tenant, Landlord shall have no further
obligation with respect to the Security Deposit, and Tenant’s right to the return of the Security
Deposit shall apply solely against Landlord’s transferee. The Security Deposit is not an advance
rental deposit or a measure of Landlord’s damages in case of Tenant’s default. Landlord’s
obligation respecting the Security Deposit is that of a debtor, not a trustee and; no interest
shall accrue thereon.
7. Use. The Premises shall be used solely for the Permitted Use set forth in the Basic Lease
Provisions, in compliance with all laws, orders, judgments, ordinances, regulations, codes,
directives, permits, licenses, covenants and restrictions now or hereafter applicable to the
Premises, and the use and occupancy thereof, including, without limitation, the Americans With
Disabilities Act, 42 U.S.C. § 12101, et seq. (together with the regulations promulgated pursuant
thereto, “ADA”) (collectively, “Legal Requirements”). Tenant shall, upon 5 days’ written notice
from Landlord, discontinue any use of the Premises which is declared by any Governmental Authority
(as defined in Section 9) having jurisdiction to be a violation of any Legal Requirement.
Tenant will not use or permit the Premises to be used for any purpose or in any manner that would
void Tenant’s or Landlord’s insurance, increase the insurance risk, or cause the disallowance of
any sprinkler or other credits. Tenant shall reimburse Landlord promptly upon demand for any
additional premium charged for any such insurance policy by reason of Tenant’s failure to comply
with the provisions of this Section or otherwise caused by Tenant’s use and/or occupancy of the
Premises. Tenant will use the Premises in a careful, safe and proper manner and will not commit
waste, overload the floor or structure of the Premises, subject the Premises to use that would
damage the Premises or obstruct or interfere with the rights of Landlord or other tenants or
occupants of the Project, including
-8-
conducting or giving notice of any auction, liquidation, or going out of business sale on the
Premises, or using or allowing the Premises to be used for any unlawful purpose. Tenant shall
cause any equipment or machinery to be installed in the Premises so as to reasonably prevent sounds
or vibrations from the Premises from extending into Common Areas, or other space in the Project.
Tenant shall not place any machinery or equipment weighing 500 pounds or more in or upon the
Premises or transport or move such items through the Common Areas of the Project or in the Project
elevators without the prior written consent of Landlord, which consent shall be granted or refused
within 10 business days of any written request from Tenant. Except as may be provided under the
Work Letter, Tenant shall not, without the prior written consent of Landlord, use the Premises in
any manner which will require ventilation, air exchange, heating, gas, steam, electricity or water
beyond the existing capacity of the Project as proportionately allocated to the Premises based upon
Tenant’s Share as usually furnished for the Permitted Use.
Tenant, at its sole expense, shall make any alterations or modifications to the interior or
the exterior of the Premises or the Project that are required by Legal Requirements (including,
without limitation, compliance of the Premises with the Americans With Disabilities Act, 42 U.S.C.
§ 12101, et seq. (together with regulations promulgated pursuant thereto, “ADA”)) related to
Tenant’s use or occupancy of the Premises. Notwithstanding any other provision herein to the
contrary, Tenant shall be responsible for any and all demands, claims, liabilities, losses, costs,
expenses, actions, causes of action, damages or judgments, and all reasonable expenses incurred in
investigating or resisting the same (including, without limitation, reasonable attorneys’ fees,
charges and disbursements and costs of suit) (collectively, “Claims”) arising out of or in
connection with Legal Requirements, and Tenant shall indemnify, defend, hold and save Landlord
harmless from and against any and all Claims arising out of or in connection with any failure of
the Premises to comply with any Legal Requirement.
8. Holding Over. If, with Landlord’s express written consent, Tenant retains possession of
the Premises after the termination of the Term, (i) unless otherwise agreed in such written
consent, such possession shall be subject to immediate termination by Landlord at any time, (ii)
all of the other terms and provisions of this Lease (including, without limitation, the adjustment
of Base Rent pursuant to Section 4 hereof) shall remain in full force and effect (excluding
any expansion or renewal option or other similar right or option) during such holdover period,
(iii) Tenant shall continue to pay Base Rent in the amount payable upon the date of the expiration
or earlier termination of this Lease or such other amount as Landlord may indicate, in Landlord’s
sole and absolute discretion, in such written consent, and (iv) all other payments shall continue
under the terms of this Lease. If Tenant remains in possession of the Premises after the
expiration or earlier termination of the Term without the express written consent of Landlord, (A)
Tenant shall become a tenant at sufferance upon the terms of this Lease except that the monthly
rental shall be equal to 150% of the Rent in effect during the last 30 days of the Term, and (B)
Tenant shall be responsible for all damages suffered by Landlord resulting from or occasioned by
Tenant’s holding over, including consequential damages. No holding over by Tenant, whether with or
without consent of Landlord, shall operate to extend this Lease except as otherwise expressly
provided, and this Section 8 shall not be construed as consent for Tenant to retain
possession of the Premises. Acceptance by Landlord of Rent after the expiration of the Term or
earlier termination of this Lease shall not result in a renewal or reinstatement of this Lease.
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9. Taxes. Landlord shall pay, as part of Operating Expenses, alt taxes, levies, assessments
and governmental charges of any kind (collectively referred to as “Taxes”) imposed by any federal,
state, regional, municipal, local or other governmental authority or agency, including, without
limitation, quasi-public agencies (collectively, “Governmental Authority”) during the Term,
including, without limitation, all Taxes: (i) Imposed on or measured by or based, in whole or in
part, on rent payable to Landlord under this Lease and/or from the rental by Landlord of the
Project or any portion thereof, or (ii) based on the square footage, assessed value or other
measure or evaluation of any kind of the Premises or the Project, or (iii) assessed or imposed by
or on the operation or maintenance of any portion of the Premises or the Project, including
parking, or (iv) assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by, any Governmental Authority, or (v) imposed
as a license or other fee on Landlord’s business of leasing space in the Project. Landlord may
contest by appropriate legal proceedings the amount, validity, or application of any Taxes or liens
securing Taxes. Taxes shall not include any net income taxes imposed on Landlord unless such net
income taxes are in substitution for any Taxes payable hereunder. If any such Tax is levied or
assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at
such times and in such manner as the taxing authority shall require. Tenant shall pay, prior to
delinquency, any and all Taxes levied or assessed against any personal property or trade fixtures
placed by Tenant in the Premises, whether levied or assessed against Landlord or Tenant. If any
Taxes on Tenant’s personal property or trade fixtures are levied against Landlord or Landlord’s
property, or if the assessed valuation of the Project is increased by a value attributable to
improvements in or alterations to the Premises, whether owned by Landlord or Tenant and whether or
not affixed to the real property so as to become a part thereof, higher than the base valuation on
which Landlord from time-to-time allocates Taxes to all tenants in the Project, Landlord shall have
the right, but not the obligation, to pay such Taxes. Landlord’s determination of any excess
assessed valuation shall be binding and conclusive, absent manifest error. The amount of any such
payment by Landlord shall constitute Additional Rent due from Tenant to Landlord immediately upon
demand.
10. Parking. Tenant shall not have the right to park in any parking areas owned or operated
by Landlord for tenants of the Project under this Lease. Nothing herein alters or in any way
affects Tenant’s parking rights under any other lease by and between Tenant and Landlord with
respect to any portion of the Project.
11. Utilities, Services. Landlord shall provide, subject to the terms of this Section 11,
potable water, steam, compressed air, vacuum, electricity, heat, ventilation, air conditioning,
light, power, telephone, sewer, and other utilities (including gas and fire sprinklers to the
extent the Project is plumbed for such services), refuse and trash collection and janitorial
services (collectively, “Utilities”). Landlord shall pay, as Operating Expenses or subject to
Tenant’s reimbursement obligation, for all Utilities used on the Premises, all maintenance charges
for Utilities, and any storm sewer charges or other similar charges for Utilities imposed by any
Governmental Authority or Utility provider, and any taxes, penalties, surcharges or similar charges
thereon. Landlord may cause, at Tenant’s expense, any Utilities to be separately metered or
charged directly to Tenant by the provider. Tenant shall pay directly to the Utility provider,
prior to delinquency, any separately metered Utilities and services that may be furnished to Tenant
or the Premises during the Term. Tenant shall pay, as part of Operating Expenses, its share of all
charges for jointly metered Utilities based upon consumption, as reasonably determined by Landlord.
No interruption or failure of
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Utilities, from any cause whatsoever other than Landlord’s willful misconduct, shall result in
eviction or constructive eviction of Tenant, termination of this Lease or the abatement of Rent.
Tenant agrees to limit use of water and sewer with respect to Common Areas to normal restroom use.
Landlord’s sole obligation for either providing emergency generators or providing emergency
back-up power to Tenant shall be: (i) to provide emergency generators with not less than the stated
capacity of the emergency generators located in the Building as of the Commencement Date, and (ii)
to contract with a third party to maintain the emergency generators as per the manufacturer’s
standard maintenance guidelines. Landlord shall have no obligation to provide Tenant with
operational emergency generators or back-up power or to supervise, oversee or confirm that the
third party maintaining the emergency generators is maintaining the generators as per the
manufacturer’s standard guidelines or otherwise. During any period of replacement, repair or
maintenance of the emergency generators when the emergency generators are not operational,
including any delays thereto due to the inability to obtain parts or replacement equipment,
Landlord shall have no obligation to provide Tenant with an alternative back-up generator or
generators or alternative sources of back-up power. Tenant expressly acknowledges and agrees that
Landlord does not guaranty that such emergency generators will be operational at all times or that
emergency power will be available to the Premises when needed.
12. Alterations and Tenant’s Property. Any alterations, additions, or improvements made to
the Premises by or on behalf of Tenant, including additional locks or bolts of any kind or nature
upon any doors or windows in the Premises, but excluding installation, removal or realignment of
furniture systems (other than removal of furniture systems owned or paid for by Landlord) not
involving any modifications to the structure or connections (other then by ordinary plugs or jacks)
to Building Systems (as defined in Section 13) (“Alterations”) shall be subject to
Landlord’s prior written consent, which may be given or withheld in Landlord’s sole discretion if
any such Alteration affects the structure or Building Systems. Tenant may construct nonstructural
Alterations in the Premises without Landlord’s prior approval if the aggregate cost of all such
work in any 12 month period does not exceed $25,000 (a “Notice-Only Alteration”), provided Tenant
notifies Landlord in writing of such intended Notice-Only Alteration, and such notice shall be
accompanied by plans, specifications, work contracts and such other information concerning the
nature and cost of the Notice-Only Alteration as may be reasonably requested by Landlord, which
notice and accompanying materials shall be delivered to Landlord not less than 15 business days in
advance of any proposed construction. If Landlord approves any Alterations, Landlord may impose
such conditions on Tenant in connection with the commencement, performance and completion of such
Alterations as Landlord may deem appropriate in Landlord’s sole and absolute discretion. Any
request for approval shall be in writing, delivered not less than 15 business days in advance of
any proposed construction, and accompanied by plans, specifications, bid proposals, work contracts
and such other information concerning the nature and cost of the alterations as may be reasonably
requested by Landlord, including the identities and mailing addresses of all persons performing
work or supplying materials. Landlord’s right to review plans and specifications and to monitor
construction shall be solely for its own benefit, and Landlord shall have no duty to ensure that
such plans and specifications or construction comply with applicable Legal Requirements. Tenant
shall cause, at its sole cost and expense, all Alterations to comply with insurance requirements
and with Legal Requirements and shall implement at its sole cost and expense any alteration or
modification
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required by Legal Requirements as a result of any Alterations. Tenant shall pay to Landlord,
as Additional Rent, on demand an amount equal to 5% of all charges incurred by Tenant or its
contractors or agents in connection with any Alteration to cover Landlord’s overhead and expenses
for plan review, coordination, scheduling and supervision. Before Tenant begins any Alteration,
Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable
law. Tenant shall reimburse Landlord for, and indemnify and hold Landlord harmless from, any
expense incurred by Landlord by reason of faulty work done by Tenant or its contractors, delays
caused by such work, or inadequate cleanup.
Tenant shall furnish security or make other arrangements satisfactory to Landlord to assure
payment for the completion of all Alterations work free and clear of liens, and shall provide (and
cause each contractor or subcontractor to provide) certificates of insurance for workers’
compensation and other coverage in amounts and from an insurance company satisfactory to Landlord
protecting Landlord against liability for personal injury or property damage during construction.
Upon completion of any Alterations, Tenant shall deliver to Landlord: (i) sworn statements setting
forth the names of all contractors and subcontractors who did the work and final lien waivers from
all such contractors and subcontractors; and (ii) “as built” plans for any such Alteration.
Other than (i) the items, if any, listed on Exhibit F attached hereto, (ii) any items agreed
by Landlord in writing to be included on Exhibit F in the future, and (iii) any trade fixtures,
machinery, equipment and other personal property not paid for out of the TI Fund (as defined in the
Work Letter) which may be removed without material damage to the Premises, which damage shall be
repaired (including capping or terminating utility hook-ups behind walls) by Tenant during the Term
(collectively, “Tenant’s Property”), all property of any kind paid for with the TI Fund, all
Alterations, real property fixtures, built-in machinery and equipment, built-in casework and
cabinets and other similar additions and improvements built into the Premises so as to become an
integral part of the Premises such as fume hoods which penetrate the roof or plenum area, built-in
cold rooms, built-in warm rooms, walk-in cold rooms, walk-in warm rooms, deionized water systems,
glass washing equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical
equipment and systems, and any power generator and transfer switch (collectively, “Installations”)
shall be and shall remain the property of Landlord during the Term and following the expiration or
earlier termination of the Term, shall not be removed by Tenant at any time during the Term and
shall remain upon and be surrendered with the Premises as a part thereof in accordance with
Section 28 following the expiration or earlier termination of this Lease; provided,
however, that Landlord shall, at the time its approval of such Installation is requested or
at the time it receives notice of a Notice-Only Alteration notify Tenant if it has elected to cause
Tenant to remove such Installation upon the expiration or earlier termination of this Lease. If
Landlord so elects, Tenant shall remove such Installation upon the expiration or earlier
termination of this Lease and restore any damage caused by or occasioned as a result of such
removal, including, when removing any of Tenant’s Property which was plumbed, wired or otherwise
connected to any of the Building Systems, capping off all such connections behind the walls of the
Premises and repairing any holes. During any such restoration period, Tenant shall pay Rent to
Landlord as provided herein as if said space were otherwise occupied by Tenant.
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13. Landlord’s Repairs. Landlord, as an Operating Expense, shall maintain all of the
structural, exterior, parking and other Common Areas of the Project, including HVAC, plumbing, fire
sprinklers, elevators and all other building systems serving the Premises and other portions of the
Project (“Building Systems”), in good repair, reasonable wear and tear and uninsured losses and
damages caused by Tenant, or by any of Tenant’s agents, servants, employees, invitees and
contractors (collectively, “Tenant Parties”) excluded. Losses and damages caused by Tenant or any
Tenant Party shall be repaired by Landlord, to the extent not covered by insurance, at Tenant’s
sole cost and expense. Landlord reserves the right to stop Building System services when necessary
(i) by reason of accident or emergency, or (ii) for planned repairs, alterations or improvements,
which are, in the judgment of Landlord, desirable or necessary to be made, until said repairs,
alterations or improvements shall have been completed. Landlord shall have no responsibility or
liability for failure to supply Building System services during any such period of interruption;
provided, however, that Landlord shall give Tenant 48 hours advance notice of any
planned stoppage of Building System services for routine maintenance, repairs, alterations or
improvements. Tenant shall promptly give Landlord written notice of any repair required by
Landlord pursuant to this Section, after which Landlord shall have a reasonable opportunity to
effect such repair. Landlord shall not be liable for any failure to make any repairs or to perform
any maintenance unless such failure shall persist for an unreasonable time after Tenant’s written
notice of the need for such repairs or maintenance. Tenant waives its rights under any state or
local law to terminate this Lease or to make such repairs at Landlord’s expense and agrees that the
parties’ respective rights with respect to such matters shall be solely as set forth herein.
Repairs required as the result of fire, earthquake, flood, vandalism, war, or similar cause of
damage or destruction shall be controlled by Section 18.
14. Tenant’s Repairs. Subject to Section 13 hereof, Tenant, at its expense, shall
repair, replace and maintain in good condition all portions of the Premises, including, without
limitation, entries, doors, ceilings, interior windows, interior walls, and the interior side of
demising walls. Such repair and replacements may include capital expenditures and repairs whose
benefit may extend beyond the Term. Should Tenant fail to make any such repair or replacement or
fail to maintain the Premises, Landlord shall give Tenant notice of such failure. If Tenant fails
to commence cure of such default within 10 days of Landlord’s notice, and thereafter diligently
prosecute such cure to completion, Landlord may perform such work and shall be reimbursed by Tenant
within 10 days after demand therefor; provided, however, that if such default by Tenant creates or
could create an emergency, Landlord may immediately commence cure of such default and shall
thereafter be entitled to recover the costs of such cure from Tenant. Subject to Sections
17 and 18, Tenant shall bear the full uninsured cost of any repair or replacement to
any part of the Project that results from damage caused by Tenant or any Tenant Party and any
repair that benefits only the Premises.
15. Mechanic’s Liens. Tenant shall discharge, by bond or otherwise, any mechanic’s lien filed
against the Premises or against the Project for work claimed to have been done for, or materials
claimed to have been furnished to, Tenant within 10 days after the filing thereof, at Tenant’s sole
cost and shall otherwise keep the Premises and the Project free from any liens arising out of work
performed, materials furnished or obligations incurred by Tenant. Should Tenant fail to discharge
any lien described herein, Landlord shall have the right, but not the obligation, to pay such claim
or post a bond or otherwise provide security to eliminate the lien as a claim against title to the
Project and the cost thereof shall be immediately due from Tenant as Additional Rent. If Tenant
shall lease
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or finance the acquisition of office equipment, furnishings, or other personal property of a
removable nature utilized by Tenant in the operation of Tenant’s business, Tenant warrants that any
Uniform Commercial Code Financing Statement executed by Tenant will upon its face or by exhibit
thereto indicate that such Financing Statement is applicable only to removable personal property of
Tenant located within the Premises. In no event shall the address of the Project be furnished on
the statement without qualifying language as to applicability of the lien only to removable
personal property, located in an identified suite held by Tenant.
16. Indemnification. Tenant hereby indemnifies and agrees to defend, save and hold Landlord
harmless from and against any and all Claims for injury or death to persons or damage to property
occurring within or about the Premises, arising directly or indirectly out of use or occupancy of
the Premises or a breach or default by Tenant in the performance of any of its obligations
hereunder, unless caused solely by the willful misconduct or gross negligence of Landlord.
Landlord shall not be liable to Tenant for, and Tenant assumes all risk of damage to, personal
property (including, without limitation, loss of records kept within the Premises). Tenant further
waives any and all Claims for injury to Tenant’s business or loss of income relating to any such
damage or destruction of personal property (including, without limitation, any loss of records).
Landlord shall not be liable for any damages arising from any act, omission or neglect of any
tenant in the Project or of any other third party.
17. Insurance. Landlord shall maintain all risk property and, if applicable, sprinkler damage
insurance covering the full replacement cost of the Project. Landlord shall further procure and
maintain commercial general liability insurance with a single loss limit of not less than
$2,000,000 for bodily injury and property damage with respect to the Project. Landlord may, but is
not obligated to, maintain such other insurance and additional coverages as it may deem necessary,
including, but not limited to, flood, environmental hazard and earthquake, loss or failure of
building equipment, errors and omissions, rental loss during the period of repair or rebuilding,
workers’ compensation insurance and fidelity bonds for employees employed to perform services and
insurance for any improvements installed by Tenant or which are in addition to the standard
improvements customarily furnished by Landlord without regard to whether or not such are made a
part of the Project. All such insurance shall be included as part of the Operating Expenses. The
Project may be included in a blanket policy (in which case the cost of such insurance allocable to
the Project will be determined by Landlord based upon the insurer’s cost calculations).
Tenant, at its sole cost and expense, shall maintain during the Term: all risk property
insurance with business interruption and extra expense coverage, covering the full replacement cost
of all property and improvements installed or placed in the Premises by Tenant at Tenant’s expense;
workers’ compensation insurance with no less than the minimum limits required by law; employer’s
liability insurance with such limits as required by law; commercial general liability insurance,
with a minimum limit of not less than $2,000,000 per occurrence for bodily injury and property
damage with respect to the Premises and pollution legal liability insurance with a minimum limit of
not less than $2,000,000 per occurrence. The commercial general liability insurance policy shall
name Landlord, its officers, directors, employees, managers, agents, invitees and contractors
(collectively, “Landlord Parties”), as additional insureds. The commercial general liability and
any pollution legal liability insurance policies shall insure on an occurrence and not a
claims-made basis; shall be issued by insurance companies which have a rating of not less than
policyholder rating of A and
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financial category rating of at least Class X in “Best’s Insurance Guide”; shall not be
cancelable for nonpayment of premium unless 30 days prior written notice shall have been given to
Landlord from the insurer; contain a hostile fire endorsement and a contractual liability
endorsement; and provide primary coverage to Landlord (any policy issued to Landlord providing
duplicate or similar coverage shall be deemed excess over Tenant’s policies). Such policies or
certificates thereof shall be delivered to Landlord by Tenant upon commencement of the Term and
upon each renewal of said insurance. Tenant’s policy may be a “blanket policy” with an aggregate
per location endorsement which specifically provides that the amount of insurance shall not be
prejudiced by other losses covered by the policy. Tenant shall, at least 5 days prior to the
expiration of such policies, furnish Landlord with renewal certificates.
In each instance where insurance is to name Landlord as an additional insured, Tenant shall
upon written request of Landlord also designate and furnish certificates so evidencing Landlord as
additional insured to: (i) any lender of Landlord holding a security interest in the Project or any
portion thereof, (ii) the landlord under any lease wherein Landlord is tenant of the real property
on which the Project is located, if the interest of Landlord is or shall become that of a tenant
under a ground or other underlying lease rather than that of a fee owner, and/or (iii) any
management company retained by Landlord to manage the Project.
The property insurance obtained by Landlord and Tenant shall include a waiver of subrogation
by the insurers and all rights based upon an assignment from its insured, against Landlord or
Tenant, and their respective officers, directors, employees, managers, agents, invitees and
contractors (“Related Parties”), in connection with any loss or damage thereby insured against.
Neither party nor its respective Related Parties shall be liable to the other for loss or damage
caused by any risk insured against under property insurance required to be maintained hereunder,
and each party waives any claims against the other party, and its respective Related Parties, for
such loss or damage. The failure of a party to insure its property shall not void this waiver.
Landlord and its respective Related Parties shall not be liable for, and Tenant hereby waives all
claims against such parties for, business interruption and losses occasioned thereby sustained by
Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon
the Premises or the Project from any cause whatsoever. If the foregoing waivers shall contravene
any law with respect to exculpatory agreements, the liability of Landlord or Tenant shall be deemed
not released but shall be secondary to the other’s insurer.
Landlord may require insurance policy limits to be raised to conform with requirements of
Landlord’s lender and/or to bring coverage limits to levels then being generally required of new
tenants within the Project.
18. Restoration. If at any time during the Term the Project or the Premises are damaged or
destroyed by a fire or other insured casualty, Landlord shall notify Tenant within 60 days after
discovery of such damage as to the amount of time Landlord reasonably estimates it will take to
restore the Project or the Premises, as applicable (the “Restoration Period”). If the Restoration
Period is estimated to exceed 12 months (the “Maximum Restoration Period”), Landlord may, in such
notice, elect to terminate this Lease as of the date that is 75 days after the data of discovery of
such damage or destruction; provided, however, that notwithstanding Landlord’s
election to restore, Tenant may elect to terminate this Lease by written notice to Landlord
delivered within 5 business
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days of receipt of a notice from Landlord estimating a Restoration Period for the Premises
longer than the Maximum Restoration Period. Unless either Landlord or Tenant so elects to
terminate this Lease, Landlord shall, subject to receipt of sufficient insurance proceeds (with any
deductible to be treated as a current Operating Expense), promptly restore the Premises (excluding
the improvements installed by Tenant or by Landlord and paid for by Tenant, subject to delays
arising from the collection of insurance proceeds, from Force Majeure events or as needed to obtain
any license, clearance or other authorization of any kind required to enter into and restore the
Premises issued by any Governmental Authority having jurisdiction over the use, storage, handling,
treatment, generation, release, disposal, removal or remediation of Hazardous Materials (as defined
in Section 30) in, on or about the Premises (collectively referred to herein as “Hazardous
Materials Clearances”); provided, however, that if repair or restoration of the
Premises is not substantially complete as of the end of the Maximum Restoration Period or, if
longer, the Restoration Period, Landlord may, in its sole and absolute discretion, elect not to
proceed with such repair and restoration, or Tenant may by written notice to Landlord delivered
within 5 business days of the expiration of the Maximum Restoration Period or, if longer, the
Restoration Period, elect to terminate this Lease, in which event Landlord shall be relieved of its
obligation to make such repairs or restoration and this Lease shall terminate as of the date that
is 75 days after the later of: (i) discovery of such damage or destruction, or (ii) the date all
required Hazardous Materials Clearances are obtained, but Landlord shall retain any Rent paid and
the right to any Rent payable by Tenant prior to such election by Landlord or Tenant.
Tenant, at its expense, shall promptly perform, subject to delays arising from the collection
of insurance proceeds, from Force Majeure (as defined in Section 34) events or to obtain
Hazardous Material Clearances, all repairs or restoration not required to be done by Landlord and
shall promptly re-enter the Premises and commence doing business in accordance with this Lease.
Notwithstanding the foregoing, Landlord may terminate this Lease if the Premises are damaged during
the last year of the Term and Landlord reasonably estimates that it will take more than 2 months to
repair such damage, or if insurance proceeds are not available for such restoration. Rent shall be
abated from the date all required Hazardous Material Clearances are obtained until the Premises are
repaired and restored, in the proportion which the area of the Premises, if any, which is not
usable by Tenant bears to the total area of the Premises, unless Landlord provides Tenant with
other space during the period of repair that is suitable for the temporary conduct of Tenant’s
business. Such abatement shall be the sole remedy of Tenant, and except as provided herein, Tenant
waives any right to terminate the Lease by reason of damage or casualty loss.
The provisions of this Lease, including this Section 18, constitute an express
agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all
or any part of the Premises, or any other portion of the Project, and any statute or regulation
which is now or may hereafter be in effect shall have no application to this Lease or any damage or
destruction to all or any part of the Premises or any other portion of the Project, the parties
hereto expressly agreeing that this Section 18 sets forth their entire understanding and
agreement with respect to such matters.
19. Condemnation. If the whole or any material part of the Premises or the Project is taken
for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of
eminent domain, or by private purchase in lieu thereof (a “Taking” or “Taken”), and the Taking
would in Landlord’s reasonable judgment either prevent or materially interfere with Tenant’s
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use of the Premises or materially interfere with or impair Landlord’s ownership or operation
of the Project, then upon written notice by Landlord this Lease shall terminate and Rent shall be
apportioned as of said date. If part of the Premises shall be Taken, and this Lease is not
terminated as provided above, Landlord shall promptly restore the Premises and the Project as
nearly as is commercially reasonable under the circumstances to their condition prior to such
partial Taking and the rentable square footage of the Building, the rentable square footage of the
Premises, Tenant’s Share of Operating Expenses and the Rent payable hereunder during the unexpired
Term shall be reduced to such extent as may be fair and reasonable under the circumstances. Upon
any such Taking, Landlord shall be entitled to receive the entire price or award from any such
Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant’s interest, if
any, in such award. Tenant shall have the right, to the extent that same shall not diminish
Landlord’s award, to make a separate claim against the condemning authority (but not Landlord) for
such compensation as may be separately awarded or recoverable by Tenant for moving expenses and
damage to Tenant’s trade fixtures, if a separate award for such items is made to Tenant. Tenant
hereby waives any and all rights it might otherwise have pursuant to any provision of state law to
terminate this Lease upon a partial Taking of the Premises or the Project.
20. Events of Default. Each of the following events shall be a default (“Default”) by Tenant
under this Lease:
(a) Payment Defaults. Tenant shall fail to pay any installment of Rent or any other payment
hereunder when due; provided, however, that Landlord will give Tenant notice and an opportunity to
cure any failure to pay Rent within 3 days of any such notice not more than once in any 12 month
period and Tenant agrees that such notice shall be in lieu of and not in addition to, or shall be
deemed to be, any notice required by law.
(b) Insurance. Any insurance required to be maintained by Tenant pursuant to this Lease shall
be canceled or terminated or shall expire or shall be reduced or materially changed, or Landlord
shall receive a notice of nonrenewal of any such insurance and Tenant shall fail to obtain
replacement insurance at least 20 days before the expiration of the current coverage.
(c) Other Default. An uncured default occurs under any other lease by and between Landlord
and Tenant after the lapse of all applicable notice and cure periods thereunder.
(d) Improper Transfer. Tenant shall assign, sublease or otherwise transfer or attempt to
transfer all or any portion of Tenant’s interest in this Lease or the Premises except as expressly
permitted herein, or Tenant’s interest in this Lease shall be attached, executed upon, or otherwise
judicially seized and such action is not released within 90 days of the action.
(e) Liens. Tenant shall fail to discharge or otherwise obtain the release of any lien placed
upon the Premises in violation of this Lease within 10 days after any such lien is filed against
the Premises.
(f) Insolvency Events. Tenant or any guarantor or surety of Tenant’s obligations hereunder
shall: (A) make a general assignment for the benefit of creditors; (B) commence any case,
proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or
to
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adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or of any substantial part of its
property (collectively a “Proceeding for Relief”); (C) become the subject of any Proceeding for
Relief which is not dismissed within 90 days of its filing or entry; or (D) die or suffer a legal
disability (if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise fail to
maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or other
entity).
(g) Estoppel Certificate or Subordination Agreement. Tenant fails to execute any document
required from Tenant under Sections 23 or 27 within 5 days after a second notice
requesting such document.
(h) Other Defaults. Tenant shall fail to comply with any provision of this Lease other than
those specifically referred to in this Section 20, and, except as otherwise expressly
provided herein, such failure shall continue for a period of 30 days after written notice thereof
from Landlord to Tenant.
Any notice given under Section 20(h) hereof shall: (i) specify the alleged default, (ii)
demand that Tenant cure such default, (iii) be in lieu of, and not in addition to, or shall be
deemed to be, any notice required under any provision of applicable law, and (iv) not be deemed a
forfeiture or a termination of this Lease unless Landlord elects otherwise in such notice;
provided that if the nature of Tenant’s default pursuant to Section 20(h) is such
that it cannot be cured by the payment of money and reasonably requires more than 30 days to cure,
then Tenant shall not be deemed to be in default if Tenant commences such cure within said 30 day
period and thereafter diligently prosecutes the same to completion; provided,
however, that such cure shall be completed no later than 150 days from the date of
Landlord’s notice.
21. Landlord’s Remedies.
(a) Payment By Landlord; Interest. Upon a Default by Tenant hereunder, Landlord may, without
waiving or releasing any obligation of Tenant hereunder, make such payment or perform such act.
All sums so paid or incurred by Landlord, together with interest thereon, from the date such sums
were paid or incurred, at the annual rate equal to 12% per annum or the highest rate permitted by
law (the “Default Rate”), whichever is less, shall be payable to Landlord on demand as Additional
Rent. Nothing herein shall be construed to create or impose a duty on Landlord to mitigate any
damages resulting from Tenant’s Default hereunder.
(b) Late Payment Rent. Late payment by Tenant to Landlord of Rent and other sums due will
cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult and impracticable to ascertain. Such costs include, but are not limited to,
processing and accounting charges and late charges which may be imposed on Landlord under any
Mortgage covering the Premises. Therefore, if any installment of Rent due from Tenant is not
received by Landlord within 5 days after the date such payment is due, Tenant shall pay to Landlord
an additional sum equal to 6% of the overdue Rent as a late charge. The parties agree that this
late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason
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of late payment by Tenant. In addition to the late charge, Rent not paid when due shall bear
interest at the Default Rate from the 5th day after the date due until paid.
(c) Remedies. Upon the occurrence of a Default, Landlord, at its option, without further
notice or demand to Tenant, shall have in addition to all other rights and remedies provided in
this Lease, at law or in equity, the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice or demand
whatsoever.
(i) Terminate this Lease, or at Landlord’s option; Tenant’s right to possession only, in which
event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for possession or arrearages
in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other
person who may be occupying the Premises or any part thereof, without being liable for prosecution
or any claim or damages therefor;
(ii) Upon any termination of this Lease, whether pursuant to the foregoing Section
21(c)(i) or otherwise, Landlord may recover from Tenant the following:
(A) The worth at the time of award of any unpaid rent which has been earned at the time of
such termination; plus
(B) The worth at the time of award of the amount by which the unpaid rent which would have
been earned after termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus
(C) The worth at the time of award of the amount by which the unpaid rent for the balance of
the Term after the time of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus
(D) Any other amount necessary to compensate Landlord for all the detriment proximately caused
by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, specifically including, but not limited to, brokerage
commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion
thereof for a new tenant, whether for the same or a different use, and any special concessions made
to obtain a new tenant; and
(E) At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as
may be permitted from time to time by applicable law.
The term “rent” as used in this Section 21 shall be deemed to be and to mean all sums of
every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord
or to others. As used in Sections 21(c)(ii)(A) and (B), above, the “worth at the
time of award” shall be computed by allowing interest at the Default Rate. As used in Section
21(c)(ii)(C) above, the “worth at the time of award” shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus
1%.
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(iii) Landlord may continue this Lease in effect after Tenant’s Default and recover rent as it
becomes due (Landlord and Tenant hereby agreeing that Tenant has the right to sublet or assign
hereunder, subject only to reasonable limitations). Accordingly, if Landlord does not elect to
terminate this Lease following a Default by Tenant, Landlord may, from time to time, without
terminating this Lease, enforce all of its rights and remedies hereunder, including the right to
recover all Rent as it becomes due.
(iv) Whether or not Landlord elects to terminate this Lease following a Default by Tenant,
Landlord shall have the right to terminate any and all subleases, licenses, concessions or other
consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in
Landlord’s sole discretion, succeed to Tenant’s interest in such subleases, licenses, concessions
or arrangements. Upon Landlord’s election to succeed to Tenant’s interest in any such subleases,
licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord, of such
election, have no further right to or interest in the rent or other consideration receivable
thereunder.
(v) Independent of the exercise of any other remedy of Landlord hereunder or under applicable
law, Landlord may conduct an environmental test of the Premises as generally described in
Section 30(d) hereof, at Tenant’s expense.
(d) Effect of Exercise. Exercise by Landlord of any remedies hereunder or otherwise available
shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this
Lease by Landlord, it being understood that such surrender and/or termination can be effected only
by the express written agreement of Landlord and Tenant. Any law, usage, or custom to the contrary
notwithstanding, Landlord shall have the right at all times to enforce the provisions of this Lease
in strict accordance with the terms hereof; and the failure of Landlord at any time to enforce its
rights under this Lease strictly in accordance with same shall not be construed as having created a
custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease
or as having modified the same and shall not be deemed a waiver of Landlord’s right to enforce one
or more of its rights in connection with any subsequent default. A receipt by Landlord of Rent or
other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of
such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been
made unless expressed in writing and signed by Landlord. To the greatest extent permitted by taw,
Tenant waives the service of notice of Landlord’s intention to re-enter, re-take or otherwise
obtain possession of the Premises as provided in any statute, or to institute legal proceedings to
that end, and also waives all right of redemption in case Tenant shall be dispossessed by a
judgment or by warrant of any court or judge. Any reletting of the Premises or any portion thereof
shall be on such terms and conditions as Landlord in its sole discretion may determine. Landlord
shall not be liable for, nor shall Tenant’s obligations hereunder be diminished because of,
Landlord’s failure to relet the Premises or collect rent due in respect of such reletting or
otherwise to mitigate any damages arising by reason of Tenant’s Default.
22. Assignment and Subletting.
(a) General Prohibition. Without Landlord’s prior written consent subject to and on the
conditions described in this Section 22, Tenant shall not, directly or indirectly,
voluntarily or
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by operation of law, assign this Lease or sublease the Premises or any part thereof or
mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within
the Premises, and any attempt to do any of the foregoing shall be void and of no effect. If Tenant
is a corporation, partnership or limited liability company, the shares or other ownership interests
thereof which are not actively traded upon a stock exchange or in the over-the-counter market, a
transfer or series of transfers whereby 25% or more of the issued and outstanding shares or other
ownership interests of such corporation are, or voting control is, transferred (but excepting
transfers upon deaths of individual owners) from a person or persons or entity or entities which
were owners thereof at time of execution of this Lease to persons or entities who were not owners
of shares or other ownership interests of the corporation, partnership or limited liability company
at time of execution of this Lease, shall be deemed an assignment of this Lease requiring the
consent of Landlord as provided in this Section 22.
(b) Permitted Transfers. If Tenant desires to assign, sublease, hypothecate or otherwise
transfer this Lease or sublet the Premises other than pursuant to a Permitted Assignment (as
defined below), then at least 15 business days, but not more than 45 business days, before the date
Tenant desires the assignment or sublease to be effective (the “Assignment Date”), Tenant shall
give Landlord a notice (the “Assignment Notice”) containing such information about the proposed
assignee or sublessee, including the proposed use of the Premises and any Hazardous Materials
proposed to be used, stored handled, treated, generated in or released or disposed of from the
Premises, the Assignment Date, any relationship between Tenant and the proposed assignee or
sublessee, and all material terms and conditions of the proposed assignment or sublease, including
a copy of any proposed assignment or sublease in its final form, and such other information as
Landlord may deem reasonably necessary or appropriate to its consideration whether to grant its
consent. Landlord may, by giving written notice to Tenant within 15 business days after receipt of
the Assignment Notice: (i) grant or refuse such consent, in its sole discretion with respect to a
proposed assignment, hypothecation or other transfer or subletting of more than (together with all
other then effective subleases) 50% of the Premises, or grant or refuse such consent, in its
reasonable discretion with respect to a proposed subletting of up to (together with all other then
effective subleases) 50% of the Premises (provided that Landlord shall further have the right to
review and approve or disapprove the proposed form of sublease prior to the effective date of any
such subletting), or (ii) terminate this Lease with respect to the space described in the
Assignment Notice as of the Assignment Date (an “Assignment Termination”). If Landlord elects an
Assignment Termination, Tenant shall have the right to withdraw such Assignment Notice by written
notice to Landlord of such election within 5 days after Landlord’s notice electing to exercise the
Assignment Termination. If Tenant withdraws such Assignment Notice, this Lease shall continue in
full force and effect. If Tenant does not withdraw such Assignment Notice, this Lease, and the
term and estate herein granted, shall terminate as of the Assignment Date with respect to the space
described in such Assignment Notice. No failure of Landlord to exercise any such option to
terminate this Lease shall be deemed to be Landlord’s consent to the proposed assignment, sublease
or other transfer. Tenant shall reimburse Landlord for all of Landlord’s reasonable out-of-pocket
expenses in connection with its consideration of any Assignment Notice not to exceed $5,000 in
connection with any single Assignment Notice.
Notwithstanding the foregoing, Landlord’s consent to an assignment of this Lease or a
subletting of any portion of the Premises to any entity controlled by Tenant shall not be required,
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provided that Landlord shall have the right to approve the form of any such sublease or
assignment. In addition, Tenant shall have the right to assign this Lease, upon 30 days prior
written notice to Landlord but without obtaining Landlord’s prior written consent, to a corporation
or other entity which is a successor-in-interest to Tenant, by way of merger, consolidation or
corporate reorganization, or by the purchase of all or substantially all of the assets or the
ownership interests of Tenant provided that (i) such merger or consolidation, or such acquisition
or assumption, as the case may be, is for a good business purpose and not principally for the
purpose of transferring the Lease, and (ii) the net worth (as determined in accordance with
generally accepted accounting principles (“GAAP”)) of the assignee is not less than the net worth
(as determined in accordance with GAAP) of Tenant as of the date of Tenant’s most current quarterly
or annual financial statements, and (iii) such assignee shall agree in writing to assume all of the
terms, covenants and conditions of this Lease arising after the effective date of the assignment (a
“Permitted Assignment”).
(c) Additional Conditions. As a condition to any such assignment or subletting, whether or
not Landlord’s consent is required, Landlord may require:
(i) that any assignee or subtenant agree, in writing at the time of such assignment or
subletting, that if Landlord gives such party notice that Tenant is in default under this Lease,
such party shall thereafter make all payments otherwise due Tenant directly to Landlord, which
payments will be received by Landlord without any liability except to credit such payment against
those due under the Lease, and any such third party shall agree to attorn to Landlord or its
successors and assigns should this Lease be terminated for any reason; provided,
however, in no event shall Landlord or its successors or assigns be obligated to accept
such attornment; and
(ii) A list of Hazardous Materials, certified by the proposed assignee or sublessee to be true
and correct, which the proposed assignee or sublessee intends to use, store, handle, treat,
generate in or release or dispose of from the Premises, together with copies of all documents
relating to such use, storage, handling, treatment, generation, release or disposal of Hazardous
Materials by the proposed assignee or subtenant in the Premises or on the Project, prior to the
proposed assignment or subletting, including, without limitation: permits; approvals; reports and
correspondence; storage and management plans; plans relating to the installation of any storage
tanks to be installed in or under the Project (provided, said Installation of tanks shall
only be permitted after Landlord has given its written consent to do so, which consent may be
withheld in Landlord’s sole and absolute discretion); and all closure plans or any other documents
required by any and all federal, state and local Governmental Authorities for any storage tanks
installed in, on or under the Project for the closure of any such tanks. Neither Tenant nor any
such proposed assignee or subtenant is required, however, to provide Landlord with any portion(s)
of the such documents containing information of a proprietary nature which, in and of themselves,
do not contain a reference to any Hazardous Materials or hazardous activities.
(d) No Release of Tenant, Sharing of Excess Rents. Notwithstanding any assignment or
subletting, Tenant and any guarantor or surety of Tenant’s obligations under this Lease shall at
all times remain fully and primarily responsible and liable for the payment of Rent and for
compliance with all of Tenant’s other obligations under this Lease. If the Rent due and payable by
a sublessee or assignee (or a combination of the rental payable under such sublease or assignment
plus any bonus or other consideration therefor or incident thereto in any form) exceeds the rental
payable
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under this Lease, (excluding however, any Rent payable under this Section) (“Excess Rent”),
then Tenant shall be bound and obligated to pay Landlord as Additional Rent hereunder 50% of such
Excess Rent within 10 days following receipt thereof by Tenant. If Tenant shall sublet the
Premises or any part thereof, Tenant hereby immediately and irrevocably assigns to Landlord, as
security for Tenant’s obligations under this Lease, all rent from any such subletting, and Landlord
as assignee and as attorney-in-fact for Tenant, or a receiver for Tenant appointed on Landlord’s
application, may collect such rent and apply it toward Tenant’s obligations under this Lease;
except that, until the occurrence of a Default, Tenant shall have the right to collect such rent.
(e) No Waiver. The consent by Landlord to an assignment or subletting shall not relieve
Tenant or any assignees of this Lease or any sublessees of the Premises from obtaining the consent
of Landlord to any further assignment or subletting nor shall it release Tenant or any assignee or
sublessee of Tenant from full and primary liability under the Lease. The acceptance of Rent
hereunder, or the acceptance of performance of any other term, covenant, or condition thereof, from
any other person or entity shall not be deemed to be a waiver of any of the provisions of this
Lease or a consent to any subletting, assignment or other transfer of the Premises.
(f) Prior Conduct of Proposed Transferee. Notwithstanding any other provision of this
Section 22, if (i) the proposed assignee or sublessee of Tenant has been required by any
prior landlord, lender or Governmental Authority to take remedial action in connection with
Hazardous Materials contaminating a property, where the contamination resulted from such party’s
action or use of the property in question, (ii) the proposed assignee or sublessee is subject to an
enforcement order issued by any Governmental Authority in connection with the use, storage,
handling, treatment, generation, release or disposal of Hazardous Materials (including, without
limitation, any order related to the failure to make a required reporting to any Governmental
Authority), or (iii) because of the existence of a pre-existing environmental condition in the
vicinity of or underlying the Project, the risk that Landlord would be targeted as a responsible
party in connection with the remediation of such pre-existing environmental condition would be
materially increased or exacerbated by the proposed use of Hazardous Materials by such proposed
assignee or sublessee, Landlord shall have the absolute right to refuse to consent to any
assignment or subletting to any such party.
23. Estoppel Certificate. Tenant shall, within 10 business days of written notice from
Landlord, execute, acknowledge and deliver a statement in writing in any form reasonably requested
by a proposed lender or purchaser, (i) certifying that this Lease is unmodified and in full force
and effect (or, if modified, stating the nature of such modification and certifying that this Lease
as so modified is in full force end affect) and the dates to which the rental and other charges are
paid in advance, if any, (ii) acknowledging that there are not any uncured defaults on the part of
Landlord hereunder, or specifying such defaults if any are claimed, and (iii) setting forth such
further information with respect to the status of this Lease or the Premises as may be requested
thereon. Any such statement may be relied upon by any prospective purchaser or encumbrancer of all
or any portion of the real property of which the Premises are a part. Tenant’s failure to deliver
such statement within such time shall, at the option of Landlord, constitute a Default under this
Lease, and, in any event, shall be conclusive upon Tenant that the Lease is in full force and
effect and without modification except as may be represented by Landlord in any certificate
prepared by Landlord and delivered to Tenant for execution.
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24. Quiet Enjoyment. So long as Tenant shall perform all of the covenants and agreements
herein required to be performed by Tenant, Tenant shall, subject to the terms of this Lease, at all
times during the Term, have peaceful and quiet enjoyment of the Premises against any person
claiming by, through or under Landlord.
25. Prorations. All prorations required or permitted to be made hereunder shall be made on
the basis of a 360 day year and 30 day months.
26. Rules and Regulations. Tenant shall, at all times during the Term, comply with all
reasonable rules and regulations at any time or from time to time established by Landlord covering
use of the Premises and the Project. The current rules and regulations are attached hereto as
Exhibit E. If there is any conflict between said rules and regulations and other provisions of
this Lease, the terms and provisions of this Lease shall control. Landlord shall not have any
liability or obligation for the breach of any rules or regulations by other tenants in the Project
and shall not enforce such rules and regulations in a discriminatory manner.
27. Subordination. This Lease and Tenant’s interest and rights hereunder are and shall be
subject and subordinate at all times to the lien of any Mortgage now existing or hereafter created
on or against the Project or the Premises, and all amendments, restatements, renewals,
modifications, consolidations, refinancing, assignments and extensions thereof, without the
necessity of any further instrument or act on the part of Tenant; provided, however
that so long as there is no Default hereunder, Tenant’s right to possession of the Premises shall
not be disturbed by the Holder of any such Mortgage. Tenant agrees, at the election of the Holder
of any such Mortgage, to attorn to any such Holder. Tenant agrees upon demand to execute,
acknowledge and deliver such instruments, confirming such subordination, and such instruments of
attornment as shall be requested by any such Holder, provided any such instruments contain
appropriate non-disturbance provisions assuring Tenant’s quiet enjoyment of the Premises as set
forth in Section 24 hereof. Notwithstanding the foregoing, any such Holder may at any time
subordinate its Mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant,
and thereupon this Lease shall be deemed prior to such Mortgage without regard to their respective
dates of execution, delivery or recording and in that event such Holder shall have the same rights
with respect to this Lease as though this Lease had been executed prior to the execution, delivery
and recording of such Mortgage and had been assigned to such Holder. The term “Mortgage” whenever
used in this Lease shall be deemed to include deeds of trust, security assignments and any other
encumbrances, and any reference to the “Holder” of a Mortgage shall be deemed to include the
beneficiary under a deed of trust.
28. Surrender. Upon the expiration of the Term or earlier termination of Tenant’s right of
possession, Tenant shall surrender the Premises to Landlord in the same condition as received,
subject to any Alterations or Installations permitted by Landlord to remain in the Premises, free
of Hazardous Materials brought upon, kept, used, stored, handled, treated, generated in, or
released or disposed of from, the Premises by any person other than a Landlord Party (collectively,
"Tenant HazMat Operations”) and released of all Hazardous Materials Clearances, broom clean,
ordinary wear and tear and casualty loss and condemnation covered by Sections 18 and
19 excepted. At least 3 months prior to the surrender of the Premises, Tenant shall
deliver to Landlord a narrative description of the actions proposed (or required by any
Governmental Authority) to be taken by Tenant in order to surrender the Premises (including any
Installations permitted by Landlord to
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remain in the Premises) at the expiration or earlier termination of the Term, free from any
residual impact from the Tenant HazMat Operations and otherwise released for unrestricted use and
occupancy (the “Surrender Plan”). Such Surrender Plan shall be accompanied by a current listing of
(i) all Hazardous Materials licenses and permits held by or on behalf of any Tenant Party with
respect to the Premises, and (ii) all Hazardous Materials used, stored, handled, treated,
generated, released or disposed of from the Premises, and shall be subject to the review and
approval of Landlord’s environmental consultant. In connection with the review and approval of the
Surrender Plan, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant
such additional non-proprietary information concerning Tenant HazMat Operations as Landlord shall
request. On or before such surrender, Tenant shall deliver to Landlord evidence that the approved
Surrender Plan shall have been satisfactorily completed and Landlord shall have the right, subject
to reimbursement at Tenant’s expense as set forth below, to cause Landlord’s environmental
consultant to inspect the Premises and perform such additional procedures as may be deemed
reasonably necessary to confirm that the Premises are, as of the effective date of such surrender
or early termination of the Lease, free from any residual impact from Tenant HazMat Operations.
Tenant shall reimburse Landlord, as Additional Rent, for the actual out-of pocket expense incurred
by Landlord for Landlord’s environmental consultant to review and approve the Surrender Plan and to
visit the Premises and verify satisfactory completion of the same, which cost shall not exceed
$5,000. Landlord shall have the unrestricted right to deliver such Surrender Plan and any report
by Landlord’s environmental consultant with respect to the surrender of the Premises to third
parties.
If Tenant shall fail to prepare or submit a Surrender Plan approved by Landlord, or if Tenant
shall fail to complete the approved Surrender Plan, or if such Surrender Plan, whether or not
approved by Landlord, shall fail to adequately address any residual effect of Tenant HazMat
Operations in, on or about the Premises, Landlord shall have the right to take such actions as
Landlord may deem reasonable or appropriate to assure that the Premises and the Project are
surrendered free from any residual impact from Tenant HazMat Operations, the cost of which actions
shall be reimbursed by Tenant as Additional Rent, without regard to the limitation set forth in the
first paragraph of this Section 28.
Tenant shall immediately return to Landlord all keys and/or access cards to parking, the
Project, restrooms or all or any portion of the Premises furnished to or otherwise procured by
Tenant. If any such access card or key is lost, Tenant shall pay to Landlord, at Landlord’s
election, either the cost of replacing such lost access card or key or the cost of reprogramming
the access security system in which such access card was used or changing the lock or locks opened
by such lost key. Any Tenant’s Property, Alterations and property not so removed by Tenant as
permitted or required herein shall be deemed abandoned and may be stored, removed, and disposed of
by Landlord at Tenant’s expense, and Tenant waives all claims against Landlord for any damages
resulting from Landlord’s retention and/or disposition of such property. All obligations of Tenant
hereunder not fully performed as of the termination of the Term, including the obligations of
Tenant under Section 30 hereof, shall survive the expiration or earlier termination of the
Term, including, without limitation, indemnity obligations, payment obligations with respect to
Rent and obligations concerning the condition and repair of the Premises.
29. Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
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WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
30. Environmental Requirements.
(a) Prohibition/Compliance/Indemnity. Tenant shall not cause or permit any Hazardous
Materials (as hereinafter defined) to be brought upon, kept, used, stored, handled, treated,
generated in or about, or released or disposed of from, the Premises or the Project in violation of
applicable Environmental Requirements (as hereinafter defined) by Tenant or any Tenant Party. If
Tenant breaches the obligation stated in the preceding sentence, or if the presence of Hazardous
Materials in the Premises during the Term or any holding over results in contamination of the
Premises, the Project or any adjacent property or if contamination of the Premises, the Project or
any adjacent property by Hazardous Materials brought into, kept, used, stored, handled, treated,
generated in or about, or released or disposed of from, the Premises by anyone other than Landlord
and Landlord’s employees, agents and contractors otherwise occurs during the Term or any holding
over, Tenant hereby indemnifies and shall defend and hold Landlord, its officers, directors,
employees, agents and contractors harmless from any and all actions (including, without limitation,
remedial or enforcement actions of any kind, administrative or judicial proceedings, and orders or
judgments arising out of or resulting therefrom), costs, claims, damages (including, without
limitation, punitive damages and damages based upon diminution in value of the Premises or the
Project, or the loss of, or restriction on, use of the Premises or any portion of the Project),
expenses (including, without limitation, attorneys’, consultants’ and experts’ fees, court costs
and amounts paid in settlement of any claims or actions), fines, forfeitures or other civil,
administrative or criminal penalties, injunctive or other relief (whether or not based upon
personal injury, property damage, or contamination of, or adverse effects upon, the environment,
water tables or natural resources), liabilities or losses (collectively, “Environmental Claims”)
which arise during or after the Term as a result of such contamination. This indemnification of
Landlord by Tenant includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, treatment, remedial, removal, or restoration work
required by any federal, state or local Governmental Authority because of Hazardous Materials
present in the air, soil or ground water above, on, or under the Premises. Without limiting the
foregoing, if the presence of any Hazardous Materials on the Premises, the Project or any adjacent
property caused or permitted by Tenant or any Tenant Party results in any contamination of the
Premises, the Project or any adjacent property, Tenant shall promptly take all actions at its sole
expense and in accordance with applicable Environmental Requirements as are necessary to return the
Premises, the Project or any adjacent property to the condition existing prior to the time of such
contamination, provided that Landlord’s approval of such action shall first be obtained, which
approval shall not unreasonably be withheld so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Premises or the Project
(b) Business. Landlord acknowledges that it is not the intent of this Section 30 to
prohibit Tenant from using the Premises for the Permitted Use. Tenant may operate its business
according to prudent industry practices so long as the use or presence of Hazardous Materials is
strictly and properly monitored according to all then applicable Environmental Requirements. As a
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material inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its
business, Tenant agrees to deliver to Landlord prior to the Commencement Date a list identifying
each type of Hazardous Materials to be brought upon, kept, used, stored, handled, treated,
generated on, or released or disposed of from, the Premises and setting forth any and all
governmental approvals or permits required in connection with the presence, use, storage, handling,
treatment, generation, release or disposal of such Hazardous Materials on or from the Premises
(“Hazardous Materials List”). Tenant shall deliver to Landlord an updated Hazardous Materials List
at least once a year and shall also deliver an updated list before any new Hazardous Material is
brought onto, kept, used, stored, handled, treated, generated on, or released or disposed of from,
the Premises. Tenant shall deliver to Landlord true and correct copies of the following documents
(the “Haz Mat Documents”) relating to the use, storage, handling, treatment, generation, release or
disposal of Hazardous Materials prior to the Commencement Date, or if unavailable at that time,
concurrent with the receipt from or submission to a Governmental Authority: permits; approvals;
reports and correspondence; storage and management plans, notice of violations of any Legal
Requirements; plans relating to the installation of any storage tanks to be installed in or under
the Project (provided, said installation of tanks shall only be permitted after Landlord
has given Tenant its written consent to do so, which consent may be withheld in Landlord’s sole and
absolute discretion); all closure plans or any other documents required by any and all federal,
state and local Governmental Authorities for any storage tanks installed in, on or under the
Project for the closure of any such tanks; and a Surrender Plan (to the extent surrender in
accordance with Section 28 cannot be accomplished in 3 months). Tenant is not required,
however, to provide Landlord with any portion(s) of the Haz Mat Documents containing information of
a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous
Materials or hazardous activities. It is not the intent of this Section to provide Landlord with
information which could be detrimental to Tenant’s business should such information become
possessed by Tenant’s competitors.
(c) Tenant Representation and Warranty. Tenant hereby represents and warrants to Landlord
that (i) neither Tenant nor any of its legal predecessors has been required by any prior landlord,
lender or Governmental Authority at any time to take remedial action in connection with Hazardous
Materials contaminating a property which contamination was permitted by Tenant of such predecessor
or resulted from Tenant’s or such predecessor’s action or use of the property in question, and (ii)
Tenant is not subject to any enforcement order issued by any Governmental Authority in connection
with the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials
(including, without limitation, any order related to the failure to make a required reporting to
any Governmental Authority). If Landlord determines that this representation and warranty was not
true as of the date of this lease, Landlord shall have the right to terminate this Lease in
Landlord’s sole and absolute discretion.
(d) Testing. Landlord shall have the right to conduct annual tests of the Premises to
determine whether any contamination of the Premises or the Project has occurred as a result of
Tenant’s use. Tenant shall be required to pay the cost of such annual test of the Premises;
provided, however, that if Tenant conducts its own tests of the Premises using third party
contractors and test procedures acceptable to Landlord which tests are certified to Landlord,
Landlord shall accept such tests in lieu of the annual tests to be paid for by Tenant. In
addition, at any time, and from time to time, prior to the expiration or earlier termination of the
Term, Landlord shall have the right to conduct appropriate tests of the Premises and the Project to
determine if contamination has occurred
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as a result of Tenant’s use of the Premises. In connection
with such testing, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant
such non-proprietary information concerning the use of Hazardous Materials in or about the Premises
by Tenant or any Tenant Party. If contamination has occurred for which Tenant is liable under this
Section 30, Tenant shall pay all costs to conduct such tests. If no such contamination is
found, Landlord shall pay the costs of such tests (which shall not constitute an Operating
Expense). Landlord shall provide Tenant with a copy of all third party, non-confidential reports
and tests of the Premises made by or on behalf of Landlord during the Term without representation
or warranty and subject to a confidentiality agreement. Tenant shall, at its sole cost and
expense, promptly and satisfactorily remediate any environmental conditions identified by such
testing in accordance with all Environmental Requirements. Landlord’s receipt of or satisfaction
with any environmental assessment in no way waives any rights which Landlord may have against
Tenant.
(e) Underground Tanks. If underground or other storage tanks storing Hazardous Materials
located on the Premises or the Project are used by Tenant or are hereafter placed on the Premises
or the Project by Tenant, Tenant shall install, use, monitor, operate, maintain, upgrade and manage
such storage tanks, maintain appropriate records, obtain and maintain appropriate insurance,
implement reporting procedures, properly close any underground storage tanks, and take or cause to
be taken all other actions necessary or required under applicable state and federal Legal
Requirements, as such now exists or may hereafter be adopted or amended in connection with the
installation, use, maintenance, management, operation, upgrading and closure of such storage tanks.
(f) Tenant’s Obligations. Tenant’s obligations under this Section 30 shall survive
the expiration or earlier termination of the Lease. During any period of time after the expiration
or earlier termination of this Lease required by Tenant or Landlord to complete the removal from
the Premises of any Hazardous Materials (including, without limitation, the release and termination
of any licenses or permits restricting the use of the Premises and the completion of the approved
Surrender Plan), Tenant shall continue to pay the full Rent in accordance with this Lease for any
portion of the Premises not relet by Landlord in Landlord’s sole discretion, which Rent shall be
prorated dally.
(g) Definitions. As used herein, the term “Environmental Requirements” means all applicable
present and future statutes, regulations, ordinances, rules, codes, judgments, orders or other
similar enactments of any Governmental Authority regulating or relating to health, safety, or
environmental conditions on, under, or about the Premises or the Project, or the environment,
including without limitation, the following: the Comprehensive Environmental Response, Compensation
and Liability Act; the Resource Conservation and Recovery Act; and all state and local counterparts
thereto, and any regulations or policies promulgated or issued thereunder. As used herein, the
term “Hazardous Materials” means and includes any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, or
regulated by reason of its impact or potential impact on humans, animals and/or the environment
under any Environmental Requirements, asbestos and petroleum, including crude oil or any fraction
thereof, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures
of natural gas and such synthetic gas). As defined in Environmental Requirements, Tenant is and
shall be deemed to be the “operator” of Tenant’s “facility” and the “owner” of all Hazardous
Materials brought on
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the Premises by Tenant or any Tenant Party, and the wastes, by-products, or
residues generated, resulting, or produced therefrom.
31. Tenant’s Remedies/Limitation of Liability. Landlord shall not be in default hereunder
unless Landlord fails to perform any of its obligations hereunder within 30 days after written
notice from Tenant specifying such failure (unless such performance will, due to the nature of the
obligation, require a period of time in excess of 30 days, then after such period of time as is
reasonably necessary). Upon any default by Landlord, Tenant shall give notice by registered or
certified mail to any Holder of a Mortgage covering the Premises and to any landlord of any lease
of property in or on which the Premises are located and Tenant shall offer such Holder and/or
landlord a reasonable opportunity to cure the default, including time to obtain possession of the
Project by power of sale or a judicial action if such should prove necessary to effect a cure;
provided Landlord shall have furnished to Tenant in writing the names and addresses of all
such persons who are to receive such notices. All obligations of Landlord hereunder shall be
construed as covenants, not conditions; and, except as may be otherwise expressly provided in this
Lease, Tenant may not terminate this Lease for breach of Landlord’s oblations hereunder.
All obligations of Landlord under this Lease will be binding upon Landlord only during the
period of its ownership of the Premises and not thereafter. The term “Landlord” in this Lease
shall mean only the owner for the time being of the Premises. Upon the transfer by such owner of
its interest in the Premises, such owner shall thereupon be released and discharged from all
obligations of Landlord thereafter accruing, but such obligations shall be binding during the Term
upon each new owner for the duration of such owner’s ownership.
32. Inspection and Access. Landlord and its agents, representatives, and contractors may
enter the Premises at any reasonable time to inspect the Premises and to make such repairs as may
be required or permitted pursuant to this Lease and for any other business purpose. Landlord and
Landlord’s representatives may enter the Premises during business hours on not less than 48 hours
advance written notice (except in the case of emergencies in which case no such notice shall be
required and such entry may be at any time) for the purpose of effecting any such repairs,
inspecting the Premises, showing the Premises to prospective purchasers and, during the last year
of the Term, to prospective tenants or for any other business purpose. Landlord may erect a
suitable sign on the premises stating the Premises are available to let or that the Project is
available for sale. Landlord may grant easements, make public dedications, designate Common Areas
and create restrictions on or about the Premises, provided that no such easement,
dedication, designation or restriction materially, adversely affects Tenant’s use or occupancy of
the Premises for the Permitted Use. At Landlord’s request, Tenant shall execute such instruments
as may be necessary for such easements, dedications or restrictions. Tenant shall at all times,
except in the case of emergencies, have the right to escort Landlord or its agents,
representatives, contractors or guests while the same are in the Premises, provided such escort does not materially and adversely affect Landlord’s
access rights hereunder.
33. Security. Tenant acknowledges and agrees that security devices and services, if any,
while intended to deter crime may not in given instances prevent theft or other criminal acts and
that Landlord is not providing any security services with respect to the Premises. Tenant agrees
that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with
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respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with
any unauthorized entry into the Premises or any other breach of security with respect to the
Premises. Tenant shall be solely responsible for the personal safety of Tenant’s officers,
employees, agents, contractors, guests and invitees while any such person is in, on or about the
Premises and/or the Project. Tenant shall at Tenant’s cost obtain insurance coverage to the extent
Tenant desires protection against such criminal acts.
34. Force Majeure. Landlord shall not be held responsible for delays in the performance of
its obligations hereunder when caused by strikes, lockouts, labor disputes, weather, natural
disasters, inability to obtain labor or materials or reasonable substitutes therefor, governmental
restrictions, governmental regulations, governmental controls, delay in issuance of permits, enemy
or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond
the reasonable control of Landlord (“Force Majeure”).
35. Brokers, Entire Agreement, Amendment. Landlord and Tenant each represents and warrants
that it has not dealt with any broker, agent or other person (collectively, “Broker”) in connection
with this transaction and that no Broker brought about this transaction. Landlord and Tenant each
hereby agree to indemnify and hold the other harmless from and against any claims by any Broker,
other than the broker, if any named in this Section 35, claiming a commission or other form
of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to
this leasing transaction.
36. Limitation on Landlord’s Liability. NOTWITHSTANDING ANYTHING SET FORTH HEREIN OR IN ANY
OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY: (A) LANDLORD SHALL NOT BE LIABLE TO
TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS,
DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL TO: TENANT’S PERSONAL PROPERTY OF EVERY KIND AND
DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT, INVENTORY, SCIENTIFIC
RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS, PRODUCT, SPECIMENS, SAMPLES, AND/OR
SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE
PREMISES AND ANY AND ALL INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL
RECOURSE TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING IN ANY WAY
UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND ANY LIABILITY OF LANDLORD HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO
LANDLORD’S INTEREST IN THE PROJECT OR ANY PROCEEDS FROM SALE OR CONDEMNATION THEREOF AND ANY
INSURANCE PROCEEDS PAYABLE IN RESPECT OF LANDLORD’S INTEREST IN THE PROJECT OR IN CONNECTION WITH ANY
SUCH LOSS; AND (C) IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTED AGAINST LANDLORD IN
CONNECTION WITH THIS LEASE NOR SHALL ANY RECOURSE BE HAD TO ANY OTHER PROPERTY OR ASSETS OF
LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS. UNDER NO
CIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
CONTRACTORS BE
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LIABLE FOR INJURY TO TENANT’S BUSINESS OR FOR ANY LOSS OF INCOME OR PROFIT
THEREFROM.
37. Severability. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws, than and in that event, it is the intention of the
parties hereto that the remainder of this Lease shall not be affected thereby. It is also the
intention of the parties to this Lease that in lieu of each clause or provision of this Lease that
is illegal, invalid or unenforceable, there be added, as a part of this Lease, a clause or
provision as similar in effect to such illegal, invalid or unenforceable clause or provision as
shall be legal, valid and enforceable.
38. Signs; Exterior Appearance. Tenant shall not, without the prior written consent of
Landlord, which may be granted or withheld in Landlord’s sole discretion: (i) attach any awnings,
exterior lights, decorations, balloons, flags, pennants, banners, painting or other projection to
any outside wall of the Project, (ii) use any curtains, blinds, shades or screens other than
Landlord’s standard window coverings, (iii) coat or otherwise sunscreen the interior or exterior of
any windows, (iv) place any bottles, parcels, or other articles on the window sills, (v) place any
equipment, furniture or other items of personal property on any exterior balcony, or (vi) paint,
affix or exhibit on any part of the Premises or the Project any signs, notices, window or door
lettering, placards, decorations, or advertising media of any type which can be viewed from the
exterior of the Premises. Interior signs on doors and the directory tablet shall be inscribed,
painted or affixed for Tenant by Landlord at the sole cost and expense of Tenant, and shall be of a
size, color and type acceptable to Landlord. Nothing may be placed on the exterior of corridor
walls or corridor doors other than Landlord’s standard lettering. The directory tablet shall be
provided exclusively for the display of the name and location of tenants.
39. Miscellaneous.
(a) Notices. All notices or other communications between the parties shall be in writing and
shall be deemed duly given upon delivery or refusal to accept delivery by the addressee thereof if
delivered in person, or upon actual receipt if delivered by reputable overnight guaranty courier,
addressed and sent to the parties at their addresses set forth above. Landlord and Tenant may from
time to time by written notice to the other designate another address for receipt of future
notices.
(b) Joint and Several Liability. If and when included within the term “Tenant,” as used in
this instrument, there is more than one person or entity, each shall be jointly and severally
liable for the obligations of Tenant
(c) Recordation. Neither this Lease nor a memorandum of lease shall be filed by or on behalf
of Tenant in any public record. Landlord may prepare and file, and upon request by Landlord Tenant
will execute, a memorandum of lease.
(d) Interpretation. The normal rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in the interpretation of this Lease or
any exhibits or amendments hereto. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be held to
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include
the plural, unless the context otherwise requires. The captions inserted in this Lease are for
convenience only and in no way define, limit or otherwise describe the scope or intent of this
Lease, or any provision hereof, or in any way affect the interpretation of this Lease.
(e) Not Binding Until Executed. The submission by Landlord to Tenant of this Lease shall have
no binding force or effect, shall not constitute an option for the leasing of the Premises, nor
confer any right or impose any obligations upon either party until execution of this Lease by both
parties.
(f) Limitations on Interest. It is expressly the intent of Landlord and Tenant at all times
to comply with applicable law governing the maximum rate or amount of any interest payable on or in
connection with this Lease. If applicable law is ever judicially interpreted so as to render
usurious any interest called for under this Lease, or contracted for, charged, taken, reserved, or
received with respect to this Lease, then it is Landlord’s and Tenant’s express intent that all
excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if
the obligation has been or would thereby be paid in full, refunded to Tenant), and the provisions
of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder
reduced, without the necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise called for
hereunder.
(g) Choice of Law. Construction and interpretation of this Lease shall be governed by the
internal laws of the state in which the Premises are located, excluding any principles of conflicts
of laws.
(h) Time. Time is of the essence as to the performance of Tenant’s obligations under this
Lease.
(i) Incorporation by Reference. All exhibits and addenda attached hereto are hereby
incorporated into this Lease and made a part hereof. If there is any conflict between such
exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control.
(j) Notwithstanding any other provision of this Lease, Landlord, for itself and its employees,
agents and contractors, reserves the right to refuse to perform any repairs or services in any
portion of the Premises which, pursuant to Tenant’s routine safety guidelines, practices or custom
or prudent industry practices, require any form of protective clothing or equipment other than
safety glasses. In any such case, Tenant shall contract with parties who are acceptable to
Landlord, in Landlord’s reasonable discretion, for all such repairs and services, and Landlord
shall, to the extent required, equitably adjust Tenant’s Share of Operating Expenses in respect of
such repairs or services to reflect that Landlord is not providing such repairs or services to
Tenant.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first
above written.
| TENANT: Primal, Inc., a Washington corporation |
||||
| By: | /s/ Leslie Dietz Kaplan | |||
| Its: | COO | |||
| LANDLORD: Alexandria Real Estate Equities, Inc., a Maryland corporation |
||||
| By: | /s/ Laurie A. Allen | |||
| Its: | Senior Vice President, Business | |||
| Development & Legal Affairs | ||||
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EXHIBIT A TO LEASE
DESCRIPTION OF PREMISES
(followed by a map of the project)
EXHIBIT B TO LEASE
DESCRIPTION OF PROJECT
(followed by a description and drawing)
EXHIBIT “B”
EXHIBIT C TO LEASE
[Tenant Build]
WORK LETTER
THIS WORK LETTER dated as of September 28, 2001 (this “Work Letter”) is made and entered into
by and between Alexandria Real Estate Equities, Inc., a Maryland corporation (“Landlord”), and
Primal, Inc., a Washington corporation (“Tenant”), and is attached to and made a part of the Lease
dated as of September 28, 2001 (the “Lease”), by and between Landlord and Tenant. Any initially
capitalized terms used but not defined herein shall have the meanings given them in the Lease.
1. General Requirements
(a) Tenant’s Authorized Representative. Tenant designates Leslie Dietz Kaplan and Marcia
Strackhouse (either such individual acting alone, “Tenant’s Representative”) as the only persons
authorized to act for Tenant pursuant to this Work Letter. Landlord shall not be obligated to
respond to or act upon any request, approval, inquiry or other communication (“Communication”) from
or on behalf of Tenant in connection with this Work Letter unless such Communication is in writing
from Tenant’s Representative. Tenant may change either Tenant’s Representative at any time upon
not less than 5 business days advance written notice to Landlord. No period set forth herein for
any approval of any matter by Tenant’s Representative shall be extended by reason of any change in
Tenant’s Representative. Neither Tenant nor Tenant’s Representative shall be authorized to direct
Landlord’s contractors in the performance of Landlord’s Work (as hereinafter defined).
(b) Landlord’s Authorized Representative. Landlord designates Radika Ratna and Vin Ciruzzi
(either such individual acting alone, “Landlord’s Representative”) as the only persons authorized
to act for Landlord pursuant to this Work Letter. Tenant shall not be obligated to respond to or
act upon any request, approval, inquiry or other Communication from or on behalf of Landlord in
connection with this Work Letter unless such Communication is in writing from Landlord’s
Representative. Landlord may change either Landlord’s Representative at any time upon not less
than 5 business days advance written notice to Tenant. No period set forth herein for any approval
of any matter by Landlord’s Representative shall be extended by reason of any change in Landlord’s
Representative. Landlord’s Representative shall be the sole persons authorized to direct
Landlord’s contractors in the performance of Landlord’s Work.
(c) Architects, Consultants and Contractors. Landlord and Tenant hereby acknowledge and agree
that the architect (the “Architect”) for the Tenant Improvements, the general contractor and any
subcontractors for the Tenant Improvements shall be selected by Tenant, subject to Landlord’s
approval, which approval shall not be unreasonably withheld, conditioned or delayed.
(d) Development Schedule. The schedule for design and development of the Tenant Improvements
(as defined below), including without limitation the time periods for delivery of construction
documents and performance, shall be in accordance with the Development Schedule
attached hereto as Schedule A, subject to adjustment as mutually agreed by the parties in
writing or as provided in this Work Letter (the “Development Schedule”).
(e) Landlord’s Obligations. Other than funding the TI Allowance and the Base Building
Allowance (as such terms are defined below) and reviewing and approving or disapproving Tenant’s
submittals as provided herein, Landlord shall not have any obligation whatsoever with respect to
the finishing of the Premises or the Project for Tenant’s use and occupancy.
2. Tenant Improvements.
(a) Definitions. As used herein: “Tenant Improvements” shall mean all improvements to the
Premises desired by Tenant of a fixed and permanent nature. “Base Building Improvements” shall
mean those improvements to the Project generally described on Schedule B attached hereto.
(b) Base Building Improvements. Tenant acknowledges and agrees that:
(i) Landlord has contracted with Corixa Corporation, a Delaware corporation (“Corixa”), for
the construction of the Base Building Improvements pursuant to that certain Work Letter dated as of
September 17, 2001, by and between Landlord and Corixa (the “Corixa Work Letter”), and
(ii) Except for Landlord’s obligation to fund the Base Building Allowance (as defined below)
to Corixa as described in the Corixa Work Letter, Landlord shall have no obligation of any kind
with respect to the design, construction or completion of the Base Building Improvements.
(c) Tenant’s Space Plans. Tenant shall deliver to Landlord schematic drawings and outline
specifications (the “TI Design Drawings”) detailing Tenant’s requirements for the Tenant
Improvements within 30 business days of the date hereof. Not more than 10 business days
thereafter, Landlord shall deliver to Tenant the written objections, questions or comments of
Landlord with regard to the TI Design Drawings. Tenant shall cause the TI Design Drawings to be
revised to address such written comments and shall resubmit said drawings to Landlord for approval
within 10 business days thereafter. Such process shall continue until Landlord has approved the TI
Design Drawings.
(d) Working Drawings. Not later than 45 business days following the approval of the Design
Drawings by Landlord, Tenant shall cause the Architect to prepare and deliver to Landlord for
review and comment construction plans, specifications and drawings for the Tenant Improvements (the
"TI Construction Drawings”), which TI Construction Drawings shall be prepared substantially in
accordance with the TI Design Drawings. Tenant shall be solely responsible for ensuring that the
TI Construction Drawings reflect Tenant’s requirements for the Tenant Improvements. Landlord shall
deliver its written comments on the TI Construction Drawings to Tenant not later than 10 business
days after Landlord’s receipt of the same; provided, however, that Landlord may not
disapprove any matter that is consistent with the TI Design Drawings. Tenant and the Architect
shall consider all such comments in good faith and shall, within 10 business days
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after receipt, notify Landlord how Tenant proposes to respond to such comments. Any disputes
in connection with such comments shall be resolved in accordance with Section 2(d) hereof.
Provided that the design reflected in the TI Construction Drawings is consistent with the TI Design
Drawings, Landlord shall approve the TI Construction Drawings submitted by Tenant. Once approved
by Landlord, subject to the provisions of Section 2(d) below, Tenant shall not materially
modify the TI Construction Drawings except as may be reasonably required in connection with the
issuance of the Building Permit (as defined in Section 3(b) below).
(e) Approval and Completion. Upon any dispute regarding the design of the Tenant
Improvements, which is not settled within 10 business days after notice of such dispute is
delivered by one party to the other, Tenant shall make the final decision regarding the design of
the Tenant Improvements, provided Tenant acts reasonably and such final decision is either
consistent with or a compromise between Landlord’s and Tenant’s positions with respect to such
dispute, provided further that all costs and expenses resulting from any such decision by Tenant
shall be payable out of the TI Fund (as defined in Section 5(d) below). Any changes to the
TI Construction Drawings following Landlord’s and Tenant’s approval of same requested by Tenant
shall be processed as provided in Section 4 hereof.
3. Performance of Tenant’s Work.
(a) Definition of Tenant’s Work. As used herein, “Tenant’s Work” shall mean the work of
constructing the Tenant Improvements.
(b) Commencement and Permitting of Tenant’s Work. Tenant shall commence construction of the
Tenant Improvements upon obtaining a building permit (the “Building Permit”) authorizing the
construction of the Tenant Improvements consistent with the TI Construction Drawings approved by
Landlord. The cost of obtaining the Building Permit shall be payable from the TI Fund. Landlord
shall assist Tenant in obtaining the Building Permit.
(c) Selection of Materials, Etc. Where more than one type of material or structure is
indicated on the TI Construction Drawings approved by Tenant and Landlord, the option will be
within Tenant’s reasonable discretion.
4. Changes. Any changes requested by Tenant to the Tenant Improvements after the delivery and
approval by Landlord of the TI Design Drawings, shall be requested and instituted in accordance
with the provisions of this Section 4 and shall be subject to the written approval of
Landlord, such approval not to be unreasonably withheld, conditioned or delayed.
(a) Tenant’s Right to Request Changes. If Tenant shall request changes (“Changes”), Tenant
shall request such Changes by notifying Landlord in writing in substantially the same form as the
AIA standard change order form (a “Change Request”), which Change Request shall detail the nature
and extent of any such Change. Tenant’s Representative must sign such Change Request. Landlord
shall review and approve or disapprove such Change Request within 10 business days thereafter,
provided that Landlord’s approval shall not be unreasonably withheld, conditioned or delayed.
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(b) Implementation of Changes. If Landlord approves such Change and Tenant funds any Excess
TI Costs (as defined in Section 5(d) below) required in connection with such Charge, Tenant
may cause the approved Change to be instituted.
5. Costs.
(a) Budget For Tenant Improvements. Before the commencement of construction of the Tenant
Improvements, Tenant shall obtain detailed breakdowns, by trade, of the costs incurred or which
will be incurred, in connection with the design and construction of the Tenant Improvements (the
“Budget”). The Budget shall be based upon the TI Construction Drawings approved by Landlord and
shall include a payment to Landlord of administrative rent (“Administrative Rent”) equal to 1.50%
of the Costs (as hereinafter defined) for monitoring and inspecting the construction of Tenant’s
Work, which sum shall be payable from the TI Fund. Such Administrative Rent shall include, without
limitation, all out-of-pocket costs, expenses and fees incurred by or on behalf of Landlord arising
from, out of, or in connection with, such monitoring of the construction of the Tenant
Improvements, and shall be payable out of the TI Fund.
(b) TI Allowance. Landlord shall provide to Tenant a tenant improvement allowance (“TI
Allowance”) of $15.00 per rentable square foot of the Premises. The TI Allowance shall be
disbursed in accordance with this Work Letter. Tenant shall have no right to the use or benefit
(including any reduction to Base Rent) of any portion of the TI Allowance not required for the
construction of (i) the Tenant Improvements described in the TI Construction Drawings approved
pursuant to Section 2(d) or (ii) any Changes to the Tenant Improvements pursuant to
Section 4.
(c) Base Building Allowance. Tenant acknowledges and agrees that the Base Building
Improvements will benefit primarily Level B of the Annex to the Project, where the Premises are
located, and Level C, which Corixa proposes to lease. On condition that Landlord and Corixa enter
into a binding lease (the “Corixa Lease”) for Level C on substantially the terms proposed in that
certain letter dated June 5, 2001, from Landlord to Corixa, Landlord shall provide to Corixa an
allowance for the cost of the Base Building Improvements in an amount not to exceed $750,000 (the
“Base Building Allowance”). The Base Building Allowance shall be disbursed in accordance with the
Corixa Work Letter. Tenant shall have no right to the use or benefit (including any reduction to
Base Rent) of any portion of the Base Building Allowance not required for the construction of (i)
the Base Building Improvements described in the TI Construction Drawings approved pursuant to
Section 2(d) of the Corixa Work Letter or (ii) any Changes to the Base Building
Improvements pursuant to Section 4 of the Corixa Work Letter.
(d) Costs Includable in TI Fund. The TI Fund shall be used solely for the payment of design
and construction costs in connection with the construction of the Tenant Improvements, including,
without limitation, the cost of preparing the TI Design Drawings and the TI Construction Drawings,
all costs set forth in the Budget, including Landlord’s Administrative Rent, and the cost of
Changes (collectively, “TI Costs”). Notwithstanding anything to the contrary contained herein, the
TI Fund shall not be used to purchase any furniture, personal property or other non-Building System
materials or equipment, including, but not be limited to, biological safety cabinets and other
scientific equipment not incorporated into the Tenant Improvements.
-4-
(e) Excess Costs. It is understood and agreed that Landlord is under no obligation to bear
any portion of the cost of any of the Tenant Improvements except to the extent of the TI Allowance.
If at any time and from time-to-time, the remaining TI Costs under the Budget exceed the remaining
unexpended TI Allowance (“Excess Costs”), Tenant shall thereafter pay directly all TI Costs until
the remaining TI Costs under the Budget are equal to or less than the remaining unexpended TI
Allowance. If Tenant fails to make any such payment (i) Landlord shall have no obligation to fund
any additional amounts of the TI Allowance unless and until the remaining TI Costs under the Budget
is equal to or less than the remaining unexpended TI Allowance and (ii) Landlord shall have all of
the rights and remedies set forth in the Lease for nonpayment of Rent, and for purposes of any
litigation instituted with regard to such amounts the same will be considered Rent. Such Excess
Costs, together with the remaining TI Allowance, are herein referred to as the “TI Fund.”
Notwithstanding anything to the contrary set forth in this Section 5(e), Tenant shall be
fully and solely liable for TI Costs and the cost of Minor Variations (as defined below) in excess
of the TI Allowance. If upon Substantial Completion (as defined below) of the Tenant Improvements
and the payment of all sums due in connection therewith there remains any undisbursed TI Fund,
Tenant shall be entitled to such undisbursed TI Fund solely to the extent of any Excess Costs
funded directly by Tenant. The term “Substantial Completion” shall mean the substantial completion
of Tenant’s Work in a good and workmanlike manner, in accordance with the Building Permit subject
to Minor Variations and normal “punch list” items of a non-material nature which do not interfere
with the use of the common areas or the Premises. Upon the Substantial Completion of Tenant’s
Work, the Architect and the general contractor shall execute and deliver, for the benefit of Tenant
and Landlord, a Certificate of Substantial Completion in the form of the American Institute of
Architects document G704. The term “Minor Variations” shall mean any modifications reasonably
required: (i) to comply with all applicable Legal Requirements and/or to obtain or to comply with
any required permit (including the Building Permit); (ii) to comply with any request by Tenant for
modifications to Tenant’s Work; (iii) to comport with good design, engineering, and construction
practices which are not material; or (iv) to make reasonable adjustments for field deviations or
conditions encountered during the construction of Tenant’s Work.
(f) Excess Base Building Costs Funding Obligation. Tenant hereby agrees to fund 48% of any
Base Building Costs in excess of the Base Building Allowance, within 5 days of any notice from
Landlord that such excess Base Building Costs are due and payable. If upon Substantial Completion
(as defined below) of the Base Building Improvements and the payment of all sums due in connection
therewith there remains any undisbursed Base Building Allowance, Tenant shall be entitled to such
undisbursed Base Building Allowance solely to the extent of any excess Base Building Costs actually
funded by Tenant.
(g) Payment for TI Costs. Landlord shall once a month no later than 30 days following receipt
a draw request on Landlord’s standard form containing such certifications, lien waivers, inspection
reports and other matters as Landlord customarily obtains, to the extent of (a) Landlord’s approval
thereof for payment and (b) Landlord’s obligation to pay TI Costs as herein provided reimburse
Tenant for TI Costs paid by Tenant. Upon completion of the Tenant Improvements, Tenant shall
deliver to Landlord: (i) final lien waivers from all such contractors and subcontractors; and (ii)
“as built” plans for such Tenant Improvements, including plans in electronic format.
-5-
6. Miscellaneous.
(a) Consents. Whenever consent or approval of either party is required under this Work
Letter, that party shall not unreasonably withhold, condition or delay such consent or approval,
except as may be expressly set forth herein to the contrary.
(b) Modification. No modification, waiver or amendment of this Work Letter or of any of its
conditions or provisions shall be binding upon Landlord or Tenant unless in writing signed by
Landlord and Tenant.
(c) Counterparts. This Work Letter may be executed in any number of counterparts but all
counterparts taken together shall constitute a single document.
(d) Governing Law. This Work Letter shall be governed by, construed and enforced in
accordance with the internal laws of the state in which the Premises are located, without regard to
choice of law principles of such State.
(e) Time of the Essence. Time is of the essence of this Work Letter and of each and all
provisions thereof.
(f) Default. Notwithstanding anything set forth herein or in the Lease to the contrary,
Landlord shall not have any obligation to perform any work hereunder or to fund any portion of the
TI Fund during any period Tenant is in Default under the Lease.
(g) Severability. If any term or provision of this Work Letter is declared invalid or
unenforceable, the remainder of this Work Letter shall not be affected by such determination and
shall continue to be valid and enforceable.
(h) Merger. All understandings and agreements, oral or written, heretofore made between the
parties hereto and relating to Tenant’s Work are merged in this Work Letter, which alone (but
inclusive of provisions of the Lease incorporated herein and the final approved constructions
drawings and specifications prepared pursuant hereto) fully and completely expresses the agreement
between Landlord and Tenant with regard to the matters set forth in this Work Letter.
(i) Entire Agreement. This Work Letter is made as a part of and pursuant to the Lease and,
together with the Lease, constitutes the entire agreement of the parties with respect to the
subject matter hereof. This Work Letter is subject to all of the terms and limitation set forth in
the Lease, and neither party shall have any rights or remedies under this Work Letter separate and
apart from their respective remedies pursuant to the Lease.
-6-
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter to be effective on the
date first above written.
| TENANT: Primal, Inc., a Washington corporation |
||||
| By: | /s/ Leslie Dietz Kaplan | |||
| Its: | COO | |||
| LANDLORD: Alexandria Real Estate Equities, Inc., a Maryland corporation |
||||
| By: | /s/ Laurie A. Allen | |||
| Its: | Senior Vice President, Business | |||
| Development & Legal Affairs | ||||
-7-
SCHEDULE A TO WORK LETTER
Development Schedule
| Event | Date | |
Execution of lease |
10/19/01 | |
Naming of Tenant’s Representatives |
10/11/01 | |
Delivery of
space plans for Design Drawings pursuant to Section 2(b) of the Work Letter |
9/14/01 | |
Delivery of
Preliminary TI Plans for pursuant to Section 2(c) of the Work Letter |
9/28/01 | |
Delivery of
Construction Drawings pursuant to Section 2(d) of the Work Letter |
10/12/01 | |
Commence construction of Tenant Improvements |
10/15/01 | |
Substantial Completion of Tenant Improvements |
2/15/02 | |
Issuance of Temporary Certificate of Occupancy |
2/15/02 |
SCHEDULE B TO WORK LETTER
Base Building Work
The installation of an approximately 5,000 pound capacity roped hydraulic, hospital style
elevator serving Levels A, B and C of the Annex to the Project. The cab will incorporate front and
rear openings allowing direct access from lower levels to the basement level. The clear cab will
have larger than standard openings to accommodate oversized deliveries, supply carts and other
oversized equipment. Approximate dimensions of the cab should be 95” long, 66” wide and 96” high,
with door openings 48” wide and 84” high.
The installation of new multi-stall, men’s and women’s toilets and housekeeping facilities on
Level B as required per local codes for support to the entire floor.
EXHIBIT D TO LEASE
ACKNOWLEDGMENT OF COMMENCEMENT DATE
This ACKNOWLEDGMENT OF COMMENCEMENT DATE is made as of September 28, 2001, between Alexandria
Real Estate Equities, Inc., a Maryland corporation (“Landlord”), and Primal, Inc., a Washington
corporation (“Tenant”), and is attached to and made a part of the Lease dated as of September 28,
2001 (the “Lease”), by and between Landlord and Tenant. Any initially capitalized terms used but
not defined herein shall have the meanings given them in the Lease.
Landlord and Tenant hereby acknowledge and agree, for all purposes of the Lease, that the
Commencement Date of the Base Term of the Lease is October 1, 2001, the Rent Commencement Date is
December 17, 2001, and the termination date of the Base Term of the Lease shall be midnight on
April 30, 2005.
IN WITNESS WHEREOF, Landlord and Tenant have executed this ACKNOWLEDGMENT OF COMMENCEMENT DATE
to be effective on the data first above written.
| TENANT: Primal, Inc., a Washington corporation |
||||
| By: | /s/ Leslie Dietz Kaplan | |||
| Its: | COO | |||
| LANDLORD: Alexandria Real Estate Equities, Inc., a Maryland corporation |
||||
| By: | /s/ Laurie A. Allen | |||
| Its: | Senior Vice President, Business | |||
| Development & Legal Affairs | ||||
EXHIBIT E TO LEASE
Rules and Regulations
1. The sidewalk, entries, and driveways of the Project shall not be obstructed by Tenant, or
any Tenant Party, or used by them for any purpose other than ingress and egress to and from the
Premises.
2. Tenant shall not place any objects, including antennas, outdoor furniture, etc., in the
parking areas, landscaped areas or other areas outside of its Premises, or on the roof of the
Project.
3. Except for animals assisting the disabled or animals necessary to Tenant’s research and
development activities, no animals shall be allowed in the offices, halls, or corridors in the
Project
4. Tenant shall not disturb the occupants of the Project or adjoining buildings by the use of
any radio or musical instrument or by the making of loud or improper noises.
5. If Tenant desires telegraphic, telephonic or other electric connections in the Premises,
Landlord or its agent will direct the electrician as to where and how the wires may be introduced;
and, without such direction, no boring or cutting of wires will be permitted. Any such
installation or connection shall be made at Tenant’s expense.
6. Tenant shall not install or operate any steam or gas engine or boiler, or other mechanical
apparatus in the Premises, except as specifically approved in the Lease. The use of oil, gas or
inflammable liquids for heating, lighting or any other purpose is expressly prohibited. Explosives
or other articles deemed extra hazardous shall not be brought into the Project.
7. Parking any type of recreational vehicles is specifically prohibited on or about the
Project. Except for the overnight parking of operative vehicles, no vehicle of any type shall be
stored in the parking areas at any time. In the event that a vehicle is disabled, it shall be
removed within 48 hours. There shall be no “For Sale” or other advertising signs on or about any
parked vehicle. All vehicles shall be parked in the designated parking areas in conformity with
all signs and other markings. All parking will be open parking, and no reserved parking, numbering
or lettering of individual spaces will be permitted except as specified by Landlord.
8. Tenant shall maintain the Premises free from rodents, insects and other pests.
9. Landlord reserves the right to exclude or expel from the Project any person who, in the
judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any
manner do any act in violation of the Rules and Regulations of the Project.
10. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or
indifference in the preservation of good order and cleanliness. Landlord shall not be responsible
to Tenant for any loss of properly on the Premises, however occurring, or for any damage done to
the effects of Tenant by the janitors or any other employee or person.
11. Tenant shall give Landlord prompt notice of any defects in the water, lawn sprinkler,
sewage, gas pipes, electrical lights and fixtures, heating apparatus, or any other service
equipment affecting the Premises.
12. Tenant shall not permit storage outside the Premises, including without limitation,
outside storage of trucks and other vehicles, or dumping of waste or refuse or permit any harmful
materials to be placed in any drainage system or sanitary system in or about the Premises.
13. All moveable trash receptacles provided by the trash disposal firm for the Premises must
be kept in the trash enclosure areas, if any, provided for that purpose.
14. No auction, public or private, will be permitted on the Premises or the Project.
15. No awnings shall be placed over the windows in the Premises except with the prior written
consent of Landlord.
16. The Premises shall not be used for lodging, sleeping or cooking or for any immoral or
illegal purposes or for any purpose other than that specified in the Lease. No gaming devices
shall be operated in the Premises.
17. Tenant shall ascertain from Landlord the maximum amount of electrical current which can
safely be used in the Premises, taking into account the capacity of the electrical wiring in the
Project and the Premises and the needs of other tenants, and shall not use more than such safe
capacity. Landlord’s consent to the installation of electric equipment shall not relieve Tenant
from the obligation not to use more electricity than such safe capacity.
18. Tenant assumes full responsibility for protecting the Premises from theft, robbery and
pilferage.
19. Tenant shall not install or operate on the Premises any machinery or mechanical devices of
a nature not directly related to Tenant’s ordinary use of the Premises and shall keep all such
machinery free of vibration, noise and air waves which may be transmitted beyond the Premises.
-2-
EXHIBIT F TO LEASE
TENANT’S PERSONAL PROPERTY
None except as set forth below:
Exhibit 10.26
nura,inc.
1124 Columbia Street
Suite 650
Seattle, WA 98014
1124 Columbia Street
Suite 650
Seattle, WA 98014
October 20, 2003
Alexandria Equities, LLC (“Alexandria Equities”)
135 North Los Robles Ave.
Suite 250
Pasadena, CA 91101
135 North Los Robles Ave.
Suite 250
Pasadena, CA 91101
| Re: | Assignment and Assumption and Modification of Lease Documents (“Agreement”) is made as of October 23, 2003 by and among ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation (“Landlord”), PRIMAL, INC., a Washington corporation (“Tenant”) and NURA, INC., a Delaware corporation (“Assignee”). |
Dear Sirs:
In connection with the execution and delivery of the captioned Agreement, the Assignee will
furnish to Alexandria Equities the following reports:
(i) As soon as practicable after the end of each fiscal year of the Assignee, and in any event
within one hundred twenty (120) days after the end of each fiscal year of the Assignee, an audited
consolidated balance sheet of the Assignee and its subsidiaries, if any, as at the end of such
fiscal year, and audited consolidated statements of income and cash flows of the Assignee and its
subsidiaries, if any, for such year, prepared in accordance with U.S. generally accepted accounting
principles consistently applied, certified by an authorized officer of the Assignee; provided that
if Assignee’s Board of Directors determines that Assignee’s financial statement shall not be
audited in any fiscal year, then Assignee shall be permitted to furnish to Landlord unaudited
financial statements for such fiscal year;
(ii) As soon as practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Assignee, and in any event within forty-five (45) days after the
end of the first, second, and third quarterly accounting periods in each fiscal year of the
Assignee, an unaudited consolidated balance sheet of the Assignee and its subsidiaries, if any, as
of the end of each such quarterly period, and unaudited consolidated statements of
Alexandria Equities, LLC (“Alexandria Equities”)
October 20, 2003
Page 2
October 20, 2003
Page 2
income and cash flows of the Assignee and its subsidiaries, if any, for such period, prepared
in accordance with U.S. generally accepted accounting principles consistently applied, subject lo
changes resulting from normal year-end audit adjustments; and
(iii) As soon as practicable after the date hereof, a written business plan of Assignee,
together with any amendments thereto as and when any such amendments become available.
Alexandria Equities acknowledges and agrees that the information received by it pursuant to
this letter may be confidential and that it will not reproduce, disclose or disseminate such
information to any other person (other than its employees or agents having a need to know the
contents of such information, and its attorneys), unless the Assignee has made such information
available to the public generally.
| Sincerely, nura, inc. |
||||
| By: | /s/ Patrick W. Gray | |||
| Its: | Chief Executive Officer | |||
Accepted and agreed this day of October, 2003
Alexandria Equities, LLC,
a Delaware limited liability company
a Delaware limited liability company
| By: | Alexandria Real Estate Equities, Inc., a Maryland corporation, its managing member |
|||
| By: | /s/ illegible signature | |||
| Its: | Chief Executive Officer | |||
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE DOCUMENTS
This Assignment and Assumption and Modification of Lease Documents (this “Agreement”) is made as of
October 23, 2003 (the “Effective Date”), by and among ALEXANDRIA REAL ESTATE EQUITIES, INC., a
Maryland corporation (“Landlord”), PRIMAL, INC., a Washington corporation (“Tenant”), and NURA,
INC., a Delaware corporation (“Assignee”), with reference to the following Recitals.
RECITALS
A. Landlord and Tenant are parties to that certain Lease Agreement, dated as of April 6, 2000, as
amended by that certain First Amendment to Lease, dated as of June 16, 2000, that certain Amended
and Restated First Amendment to Lease, dated as of August 11, 2000, that certain Second Amendment
to Lease, dated as of May 1, 2001, that certain Third Amendment to Lease, dated as of June 19,
2001, that certain Fourth Amendment to Lease, dated as of October 1, 2001, that certain Fifth
Amendment to Lease, dated as of November 1, 2002, and that certain Sixth Amendment to Lease, dated
as of September 30, 2003 (as amended from time to time, the “Suite 650 Lease”). Pursuant to the
Suite 650 Lease, Tenant leases from Landlord certain premises located at and commonly known as 1124
Columbia Street, Seattle, Washington, Suite 650, as more particularly described in the Suite 650
Lease. All initially capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in the Suite 650 Lease unless the context clearly indicates otherwise.
B. Landlord and Tenant are parties to that certain Lease Agreement, dated as of September 28, 2001
(as amended from time to time, the “Annex Lease”). Pursuant to the Annex Lease, Tenant leases from
Landlord certain premises located at and commonly known as 1124 Columbia Street, Seattle,
Washington, Annex Level B, as more particularly described in the Annex Lease.
C. Landlord and Tenant are parties to that certain Storage Lease, dated as of July 24, 2002 (as
amended from time to time, the “Storage Lease”), pursuant to which Tenant leases from Landlord
certain premises located at and commonly known as 1124 Columbia Street, Seattle Washington, Suite
#056, as more particularly described in the Storage Lease.
D. Tenant and XCyte Therapies Inc., a Washington Corporation (“XCyte”), are parties to that certain
Sublease dated as of July 23, 2003 (as amended, the “XCyte Sublease”). Pursuant to the XCyte
Sublease, XCyte subleases from Tenant a portion of the premises demised under the Suite 650 Lease,
as more particularly described in the XCyte Sublease. Landlord consented to the foregoing sublease
to XCyte pursuant to that certain Consent to Sublease, dated as of July 24, 2003, by and among
Landlord, Tenant and XCyte (the “XCyte Consent”).
E. Tenant and R&J Lab Therapies, Inc., a Washington corporation (“R&J”), are parties to that
certain Sublease, dated as of September 5, 2003 (as amended, the “R&J Sublease”). Pursuant to the
R&J Sublease, R&J subleases from Tenant a portion of the premises demised under the Suite 650
Lease, as more particularly described in the R&J Sublease. Landlord consented to the
foregoing
sublease to R&J pursuant to that certain Consent to Sublease, dated as of September 5, 2003, by and
among Landlord, Tenant and R&J (the “R&J Consent”). The Suite 650 Lease, the Annex Lease, the
XCyte Sublease, the R&J Sublease, the XCyte Consent and the R&J Consent are hereinafter
collectively referred to as the “Assigned Lease Documents.”
F. Subject to the terms and conditions set forth herein, (i) Tenant desires to assign to Assignee,
and Assignee desires to assume, all of Tenant’s right, title and interest in and to the Assigned
Lease Documents, (ii) Landlord desires to consent to the assignment and assumption of the Assigned
Lease Documents, release Tenant from all obligations under the Assigned Lease Documents arising
from and after the Effective Date, and (iii) Landlord, Tenant and Assignee desire to amend the Suite 650
Lease and the Annex Lease effective as of the Effective Date.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Landlord, Tenant and Assignee hereby agree as follows:
1. Assignment. Effective as of the Effective Date, Tenant assigns, sells,
transfers, sets over and delivers to Assignee all of Tenant’s right, title and interest in and to
the Assigned Lease Documents.
2. Assumption. Effective as of the Effective Date, Assignee accepts the foregoing
assignment of the Assigned Lease Documents and assumes and agrees to perform and observe all of the
obligations, covenants, terms and conditions to be performed or observed by Tenant under the
Assigned Lease Documents arising from and after the Effective Date.
3. Consent to Assignment and Assumption; Conditions Precedent. Subject to the terms
of this Section 3, effective as of the Effective Date, (i) Landlord consents to the
foregoing assignment and assumption of the Assigned Lease Documents, and (ii) Landlord releases
Tenant from, and relieves Tenant of, all of Tenant’s obligations under the Assigned Lease Documents
arising from and after the Effective Date. Notwithstanding anything to the contrary set forth
herein, Landlord’s consent set forth in this Section 3, and the modifications to the Suite
650 Lease and Annex Lease set forth in Section 5, are each subject to the following
conditions precedent: (x) Landlord’s receipt of the Assignment Consideration (as hereinafter
defined) on or before the Effective Date and otherwise strictly in accordance with the terms and
conditions set forth in Section 4 below; and (y) the occurrence of the closing of the
transaction contemplated under the Asset Acquisition Agreement (as hereinafter defined) on or
before October 30, 2003. The failure of either of the foregoing conditions precedent shall render
this Agreement null and void without further action by any person, and of no further force and
effect.
4. Assignment Consideration. As consideration for granting its consent to the
assignment of the Assigned Lease Documents and the modification of the Assigned Lease Documents
described in Section 5 below, on or before the Effective Date, Landlord shall be paid or
issued each of the following “Assignment Consideration” strictly in accordance with the following
terms and conditions:
-2-
(a) Two Hundred Thousand Dollars ($200.000.00), which shall be deducted from the security
deposit currently held by Landlord for the Suite 650 Lease and the Annex Lease, and retained by
Landlord on the Effective Date as a fee for granting the consent set forth herein. The remainder
of such security deposit shall be returned to Tenant in accordance with the terms and provisions of
Section 6 below.
(b) 81,967 shares of non-voting common stock of Assignee issued pursuant to that certain Asset
Acquisition Agreement, dated September 25, 2003, by and between Assignee and Tenant (the “Asset
Acquisition Agreement”). Such securities shall be issued by Assignee directly to Alexandria
Equities, LLC, a Delaware limited liability company (“Alexandria Equities”), an affiliate of
Landlord, on or prior to the Effective Date, and shall not be subject to any indemnification
obligations of Tenant pursuant to the Asset Acquisition Agreement. In addition, in connection with
the issuance of such securities to Alexandria Equities, all representations and warranties made by
Assignee in Article 7 of the Asset Acquisition Agreement are hereby incorporated by reference
herein as though fully set forth in this Agreement. Assignee hereby acknowledges that Landlord and
Alexandria Equities are relying upon such representations and warranties in accepting the
securities issued by Assignee pursuant to this Agreement. In addition, Assignee agrees to grant
and make available to Alexandria Equities comparable rights and privileges relating to such
securities as are granted by Assignee to Tenant with respect to the securities issued to Tenant
pursuant to the Asset Acquisition Agreement. Tenant and Assignee agree that if any modification to
the Asset Acquisition Agreement or the transaction contemplated thereunder results in an adjustment
in the proportion of securities to non-securities consideration that Tenant is to receive under the
Asset Acquisition Agreement, an equitable proportionate adjustment shall be made to the amount of
securities which Alexandria Equities is entitled to receive hereunder.
5. Lease Modifications. Effective as of the Effective Date, subject to the
satisfaction of the condition precedent set forth in Section 4 above, Landlord and Assignee
agree that the Suite 650 Lease and Annex Lease are each amended as follows:
(a) Suite 650 Lease Modifications.
(i) The definition of “Security Deposit” set forth on Page 1 of the Suite 650 Lease is deleted
in its entirety and the following definition is substituted in lieu thereof:
“Security Deposit: $93,058.29”
(ii) The expiration date of the Base Term of the Suite 650 Lease is extended to September 30,
2008.
(iii) Tenant’s Notice Address set forth in Page 1 of the Suite 650 Lease is amended to delete
Tenant’s address for notices and to replace it with the following:
“nura, inc., 1124 Columbia Street, Suite 650, Seattle, Washington 98104.”
(iv) The following is added to Section 3(b) of the Suite 650 Lease:
-3-
“Notwithstanding anything to the contrary contained herein, Tenant shall not be
obligated to pay (i) Base Rent for the months of September of 2003, January of 2004
and January of 2005, or (ii) Tenant’s Share of Net Building Expenses attributable to
the month of September of 2003.’’
(v) The first sentence of Section 4 of the Suite 650 Lease is deleted in its entirety, and the
following sentence is substituted in lieu thereof:
“Base Rent shall be increased on October 1, 2004, and on each annual anniversary
thereafter during the Term of this Lease by multiplying the Base Rent payable
immediately before such adjustment by the Rent Adjustment Percentage and adding the
resulting amount to the Base Rent payable immediately before such adjustment.”
(vi) The first sentence of Section 6 of the Suite 650 Lease is deleted in its entirety, and
the following is substituted in lieu thereof:
“Tenant shall deposit with Landlord security (the “Security Deposit”) for the
performance of all of its obligations in the amount set forth in the Basic Lease
Provisions set forth on Page 1 of this Lease, which security shall be in the form of
an unconditional and irrevocable letter of credit (the “Letter of Credit”) (i) in
form and substance satisfactory to Landlord, (ii) naming Landlord as beneficiary,
(iii) expressly allowing Landlord to draw upon it at any time from time to time by
delivering to the issuer notice that Landlord is entitled to draw thereunder, (iv)
drawable on an FDIC-insured financial institution satisfactory to Landlord, and (v)
redeemable in the state of Landlord’s choice. If Tenant does not provide Landlord
with a substitute Letter of Credit complying with all of the requirements hereof at
least 10 days before the stated expiration date of the then current Letter of Credit,
Landlord shall have the right to draw upon the current Letter of Credit and hold the funds drawn as the Security
Deposit.”
(b) Annex Lease Modifications
(i) The definition of “Security Deposit set forth on Page 1 of the Annex Lease is deleted in
its entirety and the following definition is substituted in lieu thereof:
“Security Deposit: $100,314.78.”
(ii) The definition of “Rent Adjustment Percentage” set forth on Page 1 of the Annex Lease is
deleted in its entirety and the following definition is substituted in lieu thereof:
“Rent Adjustment Percentage: 3.5%”
(iii) The expiration date of the Base Term of the Annex Lease is modified to September 30,
2008.
(iv) Tenant’s Notice Address set forth in Page 1 of the Annex Lease is amended to delete
Tenant’s address for notices and to replace it with the following:
-4-
“nura, inc., 1124 Columbia Street, Suite 650, Seattle, Washington 98104.”
(v) The following is added to Section 3(b) of the Annex Lease:
“Notwithstanding anything to the contrary contained herein, Tenant shall not be
obligated to pay (i) Base Rent for the months of September of 2003, January of 2004
and January of 2005, or (ii) Tenant’s Share of Operating expenses attributable to the
month of September of 2003.”
(vi) Section 4 of the Annex Lease is deleted in its entirety, and the following is substituted
in lieu thereof:
“Base Rent shall be increased on October 1, 2004, and on each annual anniversary
thereafter during the Term of this Lease by multiplying the Base Rent payable
immediately before such adjustment by the Rent Adjustment Percentage and adding the
resulting amount to the Base Rent payable immediately before such adjustment. Base Rent, as so adjusted, shall thereafter be due as provided herein. Base Rent
adjustments for any fractional calendar month shall be prorated.”
(vii) Section 6 of the Annex Lease is amended to delete the phrase “either cash or” from the
first sentence thereof.
6. Security Deposits. Landlord and Tenant acknowledge that Landlord currently holds
a security deposit from Tenant in the amount of $111,911.00 with respect to the Suite 650 Lease,
and a security deposit in the amount of $96,922.50 with respect to the Annex Lease. On the
Effective Date, Landlord shall deduct $200,000 from the foregoing security deposits and retain the
same as a portion of the Assignment Consideration pursuant to Section 4 above. The balance
of the security deposits (i.e., $8,833.50) shall be returned by Landlord to Tenant within thirty
(30) days following the Effective Date, less any amounts which Landlord is entitled to deduct
pursuant to Section 6 of the Annex Lease or Section 6 of the Suite 650 Lease. On or before January
1, 2004, Assignee shall deposit with Landlord a new security deposit in the amount of $93,058.29,
in the form of a letter of credit, and otherwise in accordance with Section 6 of the Suite 650
Lease, for the performance of Assignee’s obligations under the Suite 650 Lease. Such deposit shall
constitute the “Security Deposit” required and governed by Section 6 of the Suite 650 Lease (as
amended herein). On or before January 1, 2004, Assignee shall deposit with Landlord a new security
deposit in the amount of $100,314.78, in the form of a letter of credit, and otherwise in
accordance with Section 6 of the Annex Lease, for the performance of Assignee’s obligations under
the Annex Lease. Such deposit shall constitute the “Security Deposit” required and governed by
Section 6 of the Annex Lease (as amended herein).
7. Brokers. Assignee shall pay any broker commissions or fees that may be payable as
a result of the assignment contemplated herein, and Assignee hereby indemnifies and agrees to hold
Landlord harmless from and against any loss or liability arising therefrom or from any other
commissions or fees payable in connection with the assignment contemplated herein.
-5-
8. No Other Modifications of Lease. Except as expressly provided for herein,
nothing contained herein shall be construed to modify, waive, impair, or affect any of the terms,
covenants or conditions contained in any of the Assigned Lease Documents (including Assignee’s
obligation to obtain any required consents for any other or future assignments or sublettings), or
to waive any breach thereof, or any rights or remedies of Landlord thereunder, or to enlarge or
increase Landlord’s obligations or liabilities thereunder, and all terms, covenants and conditions
of the Suite 650 Lease (as modified herein) and Annex Lease (as modified herein) are hereby declared by each of
Landlord, Tenant and Assignee to be in full force and effect.
9. Oral Modifications. This Agreement may not be changed orally, but only by an
agreement in writing signed by Landlord and the party(ies) against whom enforcement of any change
is sought.
10. Integration. This Agreement supersedes all prior or contemporaneous, written
or oral, memoranda, arrangements, agreements, or understandings between the parties hereto related
to the subject matters addressed herein. Any representations, promises, warranties, or statements
made by any party which differ in any way from the terms of this Agreement shall be given no force
or effect.
11. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which when taken together shall constitute
but one and the same instrument. The parties agree that this Agreement may be signed by facsimile,
with originals to follow.
12. Governing Law. This Agreement and the legal relations between the parties hereto
shall be governed by and construed and enforced in accordance with the internal laws of the State
of Washington.
13. Successors and Assigns. This Agreement shall be binding upon Landlord, Tenant,
and Assignee and their respective successors, successors-in-interests, transferees and assigns.
14. Time of Essence. Time is of the essence with respect to each provision of this
Agreement.
15. Authority. Each person executing this Agreement on behalf of a party hereto
represents and warrants that he or she is authorized and empowered to do so and to thereby bind the
party on whose behalf he or she is signing.
16. Attorneys’ Fees. If any party hereto commences an action against the other
party(ies) arising out of or in connection with this Agreement, the prevailing party shall be
entitled to recover from the losing party(ies) reasonable attorneys’ fees and costs of suit.
17. Further Assurances. The parties hereto shall promptly perform, execute and
deliver or cause to be performed, executed and/or delivered any and all acts, deeds and assurances
as the other party(ies) may reasonably require in order to carry out the intent and purpose of this
Agreement.
[Signatures appear on the next page.]
-6-
IN WITNESS WHEREOF, Landlord, Tenant, and Assignee have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
| LANDLORD: | ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation |
|||
| By: | /s/ Peter J. Nelson | |||
| Name: | Peter J. Nelson | |||
| Its: | Senior Vice President & Chief Financial Officer | |||
| TENANT: | PRIMAL, INC., a Washington corporation |
|||
| By: | /s/ Jim D. Johnston | |||
| Name: | Jim D. Johnston | |||
| Its: | Chief Financial Officer | |||
| ASSIGNEE: | NURA, INC., a Delaware corporation |
|||
| By: | /s/ Patrick W. Gray | |||
| Name: | Patrick W. Gray | |||
| Its: | Chief Executive Officer | |||
Exhibit 10.27
ASSIGNMENT, ASSUMPTION AND MODIFICATION OF LEASE DOCUMENTS
This Assignment and Assumption and Modification of Lease Documents (this “Agreement”) is made
as of September 26, 2007 (the “Effective Date”), by and among ALEXANDRIA REAL ESTATE EQUITIES,
INC., a Maryland corporation (“Landlord”), NURA, INC., a Delaware corporation (“Tenant”), and
OMEROS CORPORATION, a Washington corporation (“Assignee”).
RECITALS
A. Landlord and Tenant are parties to that certain Lease Agreement, dated as of April 6, 2000,
as previously amended by an Assignment and Assumption and Modification of Lease Document, dated as
of October 23,2003 (as amended from time to time, the “Suite 650 Lease”). Pursuant to the Suite
650 Lease, Tenant leases from Landlord certain premises located at and commonly known as 1124
Columbia Street, Seattle, Washington, Suite 650, as more particularly described in the Suite 650
Lease (“Suite 650 Premises”). All initially capitalized terms not otherwise defined in this
Agreement shall have the meanings set forth in the Suite 650 Lease unless the context clearly
indicates otherwise.
B. Landlord and Tenant are parties to that certain Lease Agreement, dated as of September 28,
2001, as amended by that certain Assignment and Assumption and Modification of Lease Document,
dated as of October 23, 2003, (as amended from time to time, the “Annex Lease”). Pursuant to the
Annex Lease, Tenant leases from Landlord certain premises located at and commonly known as 1124
Columbia Street, Seattle, Washington, Annex Level B, as more particularly described in the Annex
Lease (“Annex Premises”).
C. Landlord and Tenant are parties to that certain Storage Lease, dated as of July 24, 2002,
as amended by that certain Assignment and Assumption and Modification of Lease Document, dated as
of October 23, 2003, (as amended from time to time, the “Storage Lease”), pursuant to which Tenant
leases from Landlord certain premises located at and commonly known as 1124 Columbia Street,
Seattle Washington, Suite #056, as more particularly described in the Storage Lease.
D. Tenant and C-P Technologies, LP, a Washington limited partnership (“C-P”), are parties to
that certain Sublease, dated as of June 1, 2007 (as amended, the “C-P Sublease”). Pursuant to the
C-P Sublease, C-P subleases from Tenant a portion of the premises demised under the 650 Lease, as
more particularly described in the C-P Sublease. Landlord consented to the foregoing sublease to
C-P pursuant to that certain Consent to Sublease, dated as of August 7, 2007, by and among
Landlord, Tenant and C-P (the “C-P Consent”).
E. Tenant and NT Omics, Inc., a California corporation (“NT Omics”), are parties to that
certain Sublease, dated as of July 1, 2007 (as amended, the “NT Omics Sublease”). Pursuant to the
NT Omics Sublease, NT Omics subleases from Tenant a portion of the premises demised under the 650
Lease, as more particularly described in the NT Omics Sublease. Landlord consented to the
foregoing sublease to NT Omics pursuant to that certain Consent to Sublease, dated as of September
26, 2007, by and among Landlord, Tenant and NT Omics (the “NT Omics Consent”).
F. Subject to the terms and conditions set forth herein, (i) Tenant desires to assign to
Assignee, and Assignee desires to assume, all of Tenant’s right, title and interest in and to the
Suite 650 Lease, the Annex Lease, the Storage Lease, the C-P Sublease and the NT Omics Sublease
(collectively, the “Assigned Lease Documents”), (ii) Landlord desires to consent to the assignment
and assumption of the Assigned Lease Documents, release Tenant from all obligations under the
Assigned Lease Documents arising from and after the Effective Date, and (iii) Landlord and Assignee
desire to amend the Suite 650 Lease and the Annex Lease effective as of the Effective Date.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord, Tenant and Assignee hereby agree as
follows:
1. Assignment. Effective as of the Effective Date, Tenant assigns, sells transfers,
sets over and delivers to Assignee all of Tenant’s right, title and interest in and to the Assigned
Lease Documents.
2. Assumption. Effective as of the Effective Date, Assignee accepts the foregoing
assignment of the Assigned Lease Documents and assumes and agrees to perform and observe all of the
obligations, covenants, terms and conditions to be performed or observed by Tenant under the
Assigned Lease Documents arising from and after the Effective Date.
3. Consent to Assignment and Assumption. Effective as of the Effective Date, (i)
Landlord consents to the foregoing assignment and assumption of the Assigned Lease Documents, and
(ii) Landlord releases Tenant from and relieves Tenant of all of Tenant’s obligations under the
Assigned Lease Documents arising from and after the Effective Date.
4. Lease Modifications. Effective as of the Effective Date, Landlord and Assignee
agree that the Suite 650 Lease and Annex Lease are each amended as follows:
(a) Suite 650 Lease Modifications.
(i) Notice Address. Tenant’s Notice Address set forth in Page 1 of the Suite 650
Lease is amended to delete Tenant’s address for notices and to replace it with Assignee’s address
as follows:
“Omeros Corporation, 1420 Fifth Avenue, Suite 2600, Seattle, Washington
98101.”
(ii) Expansion of Premises. Effective as of the Effective Date, the Premises under
the 650 Lease are hereby expanded to include 137 square feet on the 6th floor of 1124 Columbia
Street, Seattle, WA 98104, as shown and described on Exhibit A attached hereto (the “Suite 640
Space”). From and after the Effective Date the Base Rent payable under the 650 Lease shall be
increased by $228.33 per month and such amount shall be increased annually by the Rent Adjustment
Percentage on the same date that Base Rent for the balance of the Premises is increased.
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No Additional Rent shall be payable for the Suite 640 Space and Tenant’s share of Net Building
Expenses shall not increase.
(iii) Termination of Expansion Right. Tenant shall have no further right to expand
the Premises. Accordingly, Section 39 (Right to Expand) of the Suite 650 Lease is hereby
deleted in its entirety.
(iv) Right to Extend Term. Subsection 40(a) of the Suite 650 Lease is hereby
deleted and replaced with the following:
“(a) Extension Right. Tenant shall have the right (the “First Extension
Right”) to extend the term of this Lease for a period of 3 years (the “First
Extension Term”), and, if the First Extension Right has been exercised,
Tenant shall have the additional right (the “Second Extension Right;” the
First Extension Right and the Second Extension Right may be collectively
referred to herein as the “Extension Rights” or individually as an “Extension
Right”) to extend the term for an additional period of 1 year (the “Second
Extension Term”) on the same terms and conditions as this Lease (other than
Base Rent) by giving Landlord written notice of its election to exercise each
Extension Right at least 12 months prior to the expiration of the Base Term
of the Lease or the expiration of the First Extension Term, as applicable.
Upon the commencement of an Extension Term, Base Rent shall be payable at the
Market Rate (as defined below). Base Rent shall thereafter be adjusted on
each annual anniversary of the commencement of such Extension Term by a
percentage as determined by Landlord and agreed to by Tenant at the time the
Market Rate is determined. As used herein, “Market Rate” shall mean the then
market rental rate as determined by Landlord and agreed to by Tenant, which
shall in no event be less than the Base Rent payable as of the date
immediately preceding the commencement of such Extension Term increased by
the Rent Adjustment Percentage multiplied by such Base Rent. In addition,
Landlord may impose a market rent for the parking rights provided hereunder.
Notwithstanding anything to the contrary contained in this Lease, Tenant’s
Extension Rights granted above may only be exercised if the term of that
certain Lease Agreement, dated as of September 28, 2001 (as amended and
assigned, the “Annex Lease”), to which Landlord and Tenant are now parties,
and which covers the portion of the Building known as Annex Level B, shall be
concurrently extended pursuant to Section 40 of the Annex Lease so
that both this Lease and the Annex Lease expire on the same date.
Accordingly, if the term of the Annex Lease is not extended pursuant to
Section 40 of the Annex Lease, Tenant shall have no right to extend
the term of this Lease pursuant to Section 40 of this Lease.”
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(b) Annex Lease Modification.
(i) Notice Address. Tenant’s notice address set forth on Page 1 of the Annex Lease is
amended to delete Tenant’s address for notices and to replace it with Assignee’s address as
follows:
“Omeros Corporation, 1420 Fifth Avenue, Suite 2600, Seattle, Washington
98101.”
(ii) Right to Extend Term. A new Section 40 is added to the Annex Lease as
follows, which corresponds identically to Section 40 of the Suite 650 Lease:
“40. Right to Extend Term. Tenant shall have the right to extend the Term of
the Lease upon the following terms and conditions:
(a) Extension Right. Tenant shall have the right (the “First Extension
Right”) to extend the term of this Lease for a period of 3 years (the “First
Extension Term”), and, if the First Extension Right has been exercised,
Tenant shall have the additional right (the “Second Extension Right;” the
First Extension Right and the Second Extension Right may be collectively
referred to herein as the “Extension Rights” or individually as an “Extension
Right”) to extend the term for an additional period of 1 year (the “Second
Extension Term”) on the same terms and conditions as this Lease (other than
Base Rent) by giving Landlord written notice of its election to exercise each
Extension Right at least 12 months prior to the expiration of the Base Term
of the Lease or the expiration of the First Extension Term, as applicable.
Upon the commencement of an Extension Term, Base Rent shall be payable at the
Market Rate (as defined below). Base Rent shall thereafter be adjusted on
each annual anniversary of the commencement of such Extension Term by a
percentage as determined by Landlord and agreed to by Tenant at the time the
Market Rate is determined. As used herein, “Market Rate” shall mean the then
market rental rate as determined by Landlord and agreed to by Tenant, which
shall in no event be less than the Base Rent payable as of the date
immediately preceding the commencement of such Extension Term increased by
the Rent Adjustment Percentage multiplied by such Base Rent. In addition,
Landlord may impose a market rent for the parking rights provided hereunder.
Notwithstanding anything to the contrary contained in this Lease, Tenant’s
Extension Rights granted above may only be exercised if the term of that
certain Lease Agreement dated as of April 6, 2000 (as amended and assigned,
the “Suite 650 Lease”), to which Landlord and Tenant are now parties, and
which covers Suites 640 and 650 in the Building, shall be concurrently
extended pursuant to Section 40 of the Suite 650 Lease so that both
this Lease and the Suite 650 Lease expire on the same date. Accordingly, if
the term of the Suite 650 Lease is not extended pursuant to Section
40 of the Suite 650 Lease, Tenant shall have no right to extend the term
of this Lease pursuant to Section 40 of this Lease.
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If, on or before the date which is 120 days prior to the expiration of
the Base Term of this Lease or the expiration of the First Extension Term, as
applicable, Tenant has not agreed with Landlord’s determination of the Market
Rate and the rent escalations during such subsequent Extension Term after
negotiating in good faith, Tenant may by written notice to Landlord not later
than 20 days prior to the expiration of the Base Term of this Lease or the
expiration of the First Extension Term, as applicable, elect arbitration as
described in Section 40(b) below. If Tenant does not elect such
arbitration, Tenant shall be deemed to have waived any right to extend the
term of the Lease and the Extension Rights shall terminate.
(b) Arbitration.
(i) Within 10 business days of Tenant’s notice to Landlord of its
election to arbitrate Market Rate and escalations, each party shall deliver
to the other a proposal containing the Market Rate and escalations that the
submitting party believes to be correct (“Extension Proposal”). If either
party fails to timely submit an Extension Proposal, the other party’s
submitted proposal shall determine the Base Rent and escalations for the
Extension Term. If both parties submit Extension Proposals, then Landlord
and Tenant shall meet within 7 days after delivery of the last Extension
Proposal and make a good faith attempt to mutually appoint a single
Arbitrator (as defined below) to determine the Market Rate and escalations.
If Landlord and Tenant are unable to agree upon a single Arbitrator, then
each shall, by written notice delivered to the other within 10 business days
after the meeting, select an Arbitrator. If either party fails to timely
give notice of its selection for an Arbitrator, the other party’s submitted
proposal shall determine the Base Rent for the Extension Term. The 2
Arbitrators so appointed shall, within 5 business days after their
appointment, appoint a third Arbitrator. If the 2 Arbitrators so selected
cannot agree on the selection of the third Arbitrator within the time above
specified, then either party, on behalf of both parties, may request such
appointment of such third Arbitrator by application to any state court of
general jurisdiction in the jurisdiction in which the Premises are located,
upon 10 days prior written notice to the other party of such intent.
(ii) The decision of the Arbitrator(s) shall be made within 30 days
after the appointment of a single Arbitrator or the third Arbitrator, as
applicable. The decision of the single Arbitrator shall be final and binding
upon the parties. The average of the two closest Arbitrators in a three
Arbitrator panel shall be final and binding upon the parties. Each party
shall pay the fees and expenses of the Arbitrators appointed by or on behalf
of such party and the fees and expenses of the third Arbitrator shall be
borne equally by both parties. If the Market Rate and escalations are not
determined by the first day of the Extension Term, then Tenant shall pay
Landlord Base Rent in an amount equal to the Base Rent in effect immediately
prior to the Extension Term and increased by the Rent Adjustment Percentage
until such
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determination is made. After the determination of the Market Rate and
escalations, the parties shall make any necessary adjustments to such
payments made by Tenant. Landlord and Tenant shall then execute an amendment
recognizing the Market Rate and escalations for the Extension Term.
(iii) An “Arbitrator” shall be any person appointed by or on behalf of
either party or appointed pursuant to the provisions hereof and: (i) shall be
(A) a member of the American Institute of Real Estate Appraisers with not
less than 10 years of experience in the appraisal of improved office and high
tech industrial real estate in the greater Seattle metropolitan area, or (B)
a licensed commercial real estate broker with not less than 15 years
experience representing landlords and/or tenants in the leasing of high tech
or life sciences space in the greater Seattle metropolitan area, (ii)
devoting substantially all of their time to professional appraisal or
brokerage work, as applicable, at the time of appointment and (iii) be in all
respects impartial and disinterested.
(c) Rights Personal. The Extension Rights are personal to Tenant and are not
assignable without Landlord’s consent, which may be granted or withheld in
Landlord’s sole discretion separate and apart from any consent by Landlord to
an assignment of Tenant’s interest in the Lease; provided, however, a
Permitted Assignee shall succeed to such Extension Rights.
(d) Exceptions. Notwithstanding anything set forth above to the contrary,
the Extension Rights shall not be in effect and Tenant may not exercise the
Extension Rights:
(i) during any period of time that Tenant is in Default under any
provision of this Lease; or
(ii) if Tenant has been in Default under any provision of this Lease 3
or more times, whether or not the Defaults are cured, during the 12 month
period immediately prior to the date that Tenant intends to exercise an
Extension Right, whether or not the Defaults are cured.
(e) No Extensions. The period of time within which any Extension Right may
be exercised shall not be extended or enlarged by reason of the Tenant’s
inability to exercise the Extension Rights.
(f) Termination. The Extension Rights shall terminate and be of no further
force or effect even after Tenant’s due and timely exercise of an Extension
Right, if, after such exercise, but prior to the commencement date of an
Extension Term, (i) Tenant fails to timely cure any default by Tenant under
this Lease; (ii) Tenant has Defaulted 3 or more times during the period from
the date of the exercise of an Extension Right to the date of the
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commencement of the Extension Term whether or not such Defaults are cured.”
5. Planned Construction; Quiet Enjoyment. Tenant and Assignee each acknowledges and
agrees that they have been notified of Landlord’s planned construction of a building at the
property adjacent to 1102 Columbia Street, Seattle, Washington (“Construction Activities”), and
that such Construction Activities may adversely impact the quiet enjoyment of the premises being
leased pursuant to the Assigned Lease Documents and Tenant and Assignee waive any claims they may
have against Landlord in connection therewith. Landlord shall, without any obligation to incur any
additional costs in connection with the Construction Activities, use commercially reasonable
efforts to minimize interference with the quiet enjoyment of the premises being leased pursuant to
the Assigned Lease Documents. Landlord acknowledges that Assignee maintains a laboratory animal
facility in the Annex Premises and a wet laboratory, including analytical instruments, in the Suite
650 Premises. Notwithstanding the waiver of claims set forth in this Section 5, if the
Construction Activities materially impair (i) the ability of Assignee to maintain the laboratory
animals and conduct research using such laboratory animals in the Annex Premises (such impairment
being evidenced by the deviation of animal behavior including in routine behavioral models, reduced
litter size or fertility, delayed or stunted growth or development, or animal cannibalism), and/or
(ii) the operation of the analytical instruments in the Suite 650 Premises (as evidenced by the
failure of the instrument system suitability testing or the irreproducibility of instrument
generated data) (collectively, “Material Impairment”), Assignee shall deliver written notice of
such Material Impairment to Landlord within 3 days of the occurrence of such Material Impairment,
along with evidence of the existence of such Material Impairment reasonably acceptable to Landlord,
and a description of the aspect of the Construction Activities that Assignee alleges is the cause
of such Material Impairment. If the parties are unable to agree about the existence or cause of a
Material Impairment, the matter shall be resolved by arbitration by a single arbitrator
(“Arbitrator”) with the qualifications and experience appropriate to resolve the matter and
appointed pursuant to and acting in accordance with the rules of the American Arbitration
Association. If a Material Impairment has occurred, Landlord shall have the right to attempt to
cure the aspect of the Construction Activities that the parties have determined is the cause of
such Material Impairment within 20 days after Landlord’s receipt of notice from Assignee regarding
such Material Impairment. If such aspect has not been cured within such 20 day period, Assignee
shall have the right, upon delivery of prior written notice to Landlord, to terminate (a) the Suite
650 Lease, if the Suite 650 Premises is affected by the Material Impairment, (b) the Annex Lease,
if the Annex Premises is affected by the Material Impairment, or (c) all of the Assigned Lease
Documents. Such right to terminate shall be the sole remedy of Assignee with respect to a Material
Impairment. If Assignee does not elect to exercise its rights to terminate pursuant to this
Section 5 within 5 business days of the lapse of such 20 day cure period, such right to
terminate shall be waived and all of the Assigned Lease Documents shall remain in full force and
effect and Assignee shall have no future rights to terminate pursuant to this Section 5.
If arbitration is required pursuant to the preceding paragraph, the parties shall use
commercially reasonable efforts to cause the arbitration to be completed within 30 days (“Initial
Arbitration Period”) or as soon as reasonably possible thereafter. If the arbitration is not
completed within the Initial Arbitration Period, Landlord shall have the right at any time after
the Initial Arbitration Period to withdraw the dispute from arbitration by electing to terminate
the
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applicable Assigned Lease Document(s) which Assignee has requested be terminated (“Affected
Lease Documents”) and Assignee shall have the right at any time after the Initial Arbitration
Period to withdraw the dispute from arbitration by electing to maintain the Affected Lease
Documents in force. During any dispute regarding a Material Impairment and during any applicable
cure period, Assignee shall be required to continue to pay and perform all of its obligations under
all of the applicable Assigned Lease Documents. If the Arbitrator determines that a Material
Impairment did not exist or if Assignee withdraws from the arbitration following the Initial
Arbitration Period, Assignee shall pay to Landlord a penalty equal to fifty percent (50%) of the
Base Rent payable to Landlord under the Affected Lease Documents (the “Penalty”) for the period
commencing on the expiration of the Initial Arbitration Period and continuing through the earlier
of (i) the resolution of the arbitration, or (ii) the date of Assignee’s withdrawal from the
arbitration. If the Arbitrator determines that a Material Impairment did exist or Landlord elects
to withdraw the dispute from arbitration following the Initial Arbitration Period, Landlord shall
(a) reimburse Assignee for the Base Rent and Operating Expenses paid by Assignee to Landlord under
such Affected Lease Documents applicable to the period between the expiration of the 20 day cure
period (which shall be deemed to have commenced running upon Assignee’s initial notice) provided
for above and the date that the Affected Lease Documents are terminated, and (b) pay to Assignee
the Penalty for the period commencing on the expiration of the Initial Arbitration Period and
continuing through the earlier of (x) the resolution of the arbitration, or (y) the date of
Landlord’s withdrawal from the arbitration. The non-prevailing party, as determined by the
Arbitrator, or the withdrawing party, as the case may be, shall pay all of the prevailing party’s
(or non-withdrawing party’s) reasonable costs of arbitration and reasonable attorneys’ fees.
6. Brokers. Tenant and Assignee represent and warrant to Landlord that no broker
commissions or fees are payable as a result of the assignment and modifications contemplated
herein, and each of Tenant and Assignee hereby indemnifies and agrees to hold Landlord harmless
from and against any loss or liability arising therefrom or from any commissions or fees payable in
connection with the assignment and modifications contemplated herein.
7. No Other Modifications of Lease. Except as expressly provided for herein, nothing
contained herein shall be construed to modify, waive, impair, or affect any of the terms, covenants
or conditions contained in any of the Assigned Lease Documents (including Assignee’s obligation to
obtain any required consents for any other or future assignments or sublettings), or to waive any
breach thereof, or any rights or remedies of Landlord thereunder, or to enlarge or increase
Landlord’s obligations or liabilities thereunder, and all terms, covenants and conditions of the
Suite 650 Lease (as modified herein), Annex Lease (as modified herein) and Storage Lease are hereby
declared by each of Landlord, Tenant and Assignee to be in full force and effect.
8. Oral Modifications. This Agreement may not be changed orally, but only by an
agreement in writing signed by Landlord and the party(ies) against whom enforcement of any change
is sought.
9. Integration. This Agreement supersedes all prior or contemporaneous, written or
oral, memoranda, arrangements, agreements, or understandings between the parties hereto related to
the subject matters addressed herein. Any representations, promises, warranties, or statements
made
-8-
by any party which differ in any way from the terms of this Agreement shall be given no force
or effect.
10. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which when taken together shall constitute but one
and the same instrument. The parties agree that this Agreement may be signed by facsimile, with
original to follow.
11. Governing Law. This Agreement and the legal relations between the parties hereto
shall be governed by and construed and enforced in accordance with the internal laws of the State
of Washington.
12. Successors and Assigns. This Agreement shall be binding upon Landlord, Tenant,
and Assignee and their respective successors, successors-in-interests, transferees and assigns.
13. Time of Essence. Time is of the essence with respect to each provision of this
Agreement.
14. Authority. Each person executing this Agreement on behalf of a party hereto
represents and warrants that he or she is authorized and empowered to do so and to thereby bind the
party on whose behalf he or she is signing.
15. Attorney’s Fees. If any party hereto commences an action against the other
party(ies) arising out of or in connection with this Agreement, the prevailing party shall be
entitled to recover from the losing party(ies) reasonable attorneys’ fees and costs of suit.
16. Further Assurances. The parties hereto shall promptly perform, execute and
deliver or cause to be performed, executed and/or delivered any and all acts, deeds and assurances
as the other party(ies) may reasonably require in order to carry out the intent and purpose of this
Agreement.
[Signatures are on the next page.]
-9-
IN WITNESS WHEREOF, Landlord, Tenant, and Assignee have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
| LANDLORD: | ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation |
|||
| By: | /s/ Jackie Clem | |||
| Name: | Jackie Clem | |||
| Its: | VP — RE LEGAL AFFAIRS | |||
| TENANT: | NURA, INC., a Delaware Corporation |
|||
| By: | /s/ Gregory Demopulos | |||
| Name: | Gregory A. Demopulos, M.D. | |||
| Its: | President | |||
| ASSIGNEE: | OMEROS CORPORATION, a Washington corporation |
|||
| By: | /s/ Gregory A. Demopulos | |||
| Name: | Gregory A. Demopulos, M.D. | |||
| Its: | Chairman and CEO | |||
EXHIBIT A
to
ASSIGNMENT, ASSUMPTION AND MODIFICATION OF LEASE DOCUMENTS
Exhibit 10.28
COMMERCIAL SUPPLY AGREEMENT
This Commercial Supply Agreement (this “Agreement”) is made as of the ___ day of September,
2007 (the “Effective Date”) by and between Omeros Corporation, a Washington corporation, having its
principal offices at 1420 Fifth Avenue, Suite 2600, Seattle, Washington 98101 (“Omeros”), and
Hospira Worldwide Inc., a Delaware corporation, having its principal offices at 275 North Field
Drive, Lake Forest, Illinois 60045 (“Hospira”). Omeros and Hospira previously entered into a
Master Development Agreement, dated May 8, 2007 (the “Development Agreement”), pertaining to the
development of Omeros’ pharmaceutical drug product OMS103HP-S. Omeros and Hospira now desire to
enter into an agreement for the commercial supply of OMS103HP-S by Hospira to Omeros. Therefore,
in consideration of the mutual covenants and obligations set forth below, Omeros and Hospira (the
“Parties” and each a “Party”) agree as follows:
1. DEFINITIONS
The following initially capitalized terms in this Agreement, whether used in the singular or
plural, shall have the respective meanings set forth below:
1.1 “Act” means U.S. Federal Food, Drug and Cosmetic Act, 21 U.S.C. §301 et seq.
1.2 “Affiliate” means any corporation or other entity or enterprise that controls, is
controlled by, or is under common control with, a Party. A corporation or other entity or
enterprise shall be regarded as in control of another corporation, entity or enterprise if it owns
or directly or indirectly controls 50% or more of the voting securities or other ownership interest
of the other corporation, entity or enterprise or if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the corporation or other
entity or enterprise.
1.3 “APIs” means the active pharmaceutical ingredients required for the Processing of Product
as set forth in the Specifications.
1.4 “Applicable Laws” means all laws, ordinances, rules and regulations applicable to the
Product and the Services (including Processing of Product or any aspect thereof) and the
obligations of Hospira or Omeros, as the context requires under this Agreement, including, without
limitation, (a) all applicable federal, state and local laws and regulations, including without
limitation the Act, (b) all applicable FDA regulations promulgated under the Act, (c) all
applicable cGMPs, (d) all applicable guidances promulgated or adopted by FDA, including without
limitation all applicable International Conference on Harmonization (“ICH”) guidances, each as
amended from time to time and (e) all laws and regulations within the Territory, including without
limitation ICH guidances, that are applicable to the Processing of Product for commercial supply.
1.5 “Batch” means the Product, made in accordance with the Specifications, resulting from a
single production run, or any other specific quantity of Product that is mutually agreed upon in
writing by the Parties from time to time.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
1.6 “Batch Records” means Batch-specific manufacturing, packaging and test records and
documentation relating to Processing, packaging and release of each Batch, exception documentation,
deviations/discrepancies and additional documentation generated and/or processed as part of the
production record of the related Batch.
1.7 [†]
1.8 “Certificate of Analysis” means, for each Batch produced, a document prepared by Hospira
setting forth the measured and observable characteristics of Product from the Batch, and confirming
that such Batch meets the Specifications. Each Certificate of Analysis shall include: (a) a
listing of tests performed by or on behalf of Hospira, test date(s), and test results, and a
certification of the accuracy of each of the foregoing; and (b) a reference to or inclusion of the
related Certificate of Compliance. The Parties shall from time to time agree upon a format or
formats for the Certificate of Analysis to be used under this Agreement.
1.9 “Certificate of Compliance” means, for each Batch, a document prepared by Hospira: (a)
listing the manufacturing date, unique Batch number, and quantity of Product in such Batch, and (b)
certifying that such Batch was manufactured in accordance with Applicable Laws, including, without
limitation, cGMP. The Parties shall from time to time agree upon a format or formats for the
Certificate of Compliance to be used under this Agreement. The Certificate of Compliance may be
included within the Certificate of Analysis.
1.10 “cGMP” means current Good Manufacturing Practices as defined in the FDA rules and
regulations, including, without limitation, the United States regulations set forth at 21 CFR Parts
210-211, as appropriate and as the same may be amended from time to time.
1.11 “Confidential Information” means any data, research, development, manufacturing,
marketing, financial, personnel, sales, business, and other non-public, proprietary or technical
information provided by the disclosing Party to the Recipient, including without limitation all
Product Data (which shall be considered Omeros’ Confidential Information even if generated or
provided by Hospira), except any portion of such information that:
(a) is or becomes generally available to the public or within the industry to which
such information relates, other than as a result of a breach of this Agreement; or
(b) is known by Recipient at the time of receipt of the disclosing Party’s information,
as evidenced by Recipient’s contemporaneous written records; or
(c) is provided to Recipient on a non-confidential basis by a third party who has the
legal right to make such disclosure; or
(d) was or is independently developed by or for Recipient without access to or use of
the information of the disclosing Party, as evidenced by Recipient’s contemporaneous written
records.
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1.12 “Deliver” or “Delivery” with respect to Product means, and shall take place upon, the
transfer of possession of Product to Omeros [†] for Product delivered in the United States and [†]
for Product delivered outside of the United States.
1.13 “Develop” or “Development” shall mean the generation, improvement, optimization, transfer
or validation of methods, assays, protocols or processes for Processing, analyzing or testing
Product.
1.14 “Facility” means Hospira’s pharmaceutical manufacturing facility in McPherson, Kansas.
1.15 “FDA” means the United States Food and Drug Administration and any successor agency.
1.16 “Hospira New IP” shall mean all Intellectual Property conceived solely by Hospira during
the course of the performance of the Services pursuant to this Agreement, or conceived by Hospira
prior to this Agreement (other than pursuant to the Development Agreement) and reduced to practice
solely by Hospira during the course of the performance of the Services pursuant to this Agreement,
that is not specific to [†].
1.17 “Intellectual Property” means all intellectual property (whether or not patented or
patentable), including, without limitation, inventions, patents, patent applications, trade
secrets, know-how, copyrights, trademarks, designs, concepts, technical information, manuals,
standard operating procedures, instructions or specifications.
1.18 “Joint New IP” shall mean Intellectual Property conceived or reduced to practice jointly
by Hospira and Omeros excluding all Omeros New IP.
1.19 “Latent Defect” means the failure of any Product delivered to Omeros to meet the current
Specifications at the time of manufacture as a result of the acts or omissions of Hospira or its
employees, subcontractors, agents or other representatives that was not, and could not reasonably
be expected to have been, found by exercise of ordinary care in inspection and testing by Omeros.
For purposes of clarity, the presence of a contaminant from Processing or Hospira’s failure to
comply with cGMPs shall be considered a Latent Defect.
1.20 “Master Batch Record” shall mean the formal set of instructions for Processing of
Product.
1.21 “Materials” means, collectively, all raw materials and other ingredients (excluding APIs)
and packaging and shipping materials required for Processing Product.
1.22 “Minimum Percentage” shall initially mean [†] of Omeros’ Product Requirements and
subsequently any adjusted percentage of Omeros’ Product Requirements as may be mutual agreed in
writing by the Parties in accordance with Section 2.6.1, 3.9.1 or 3.10.6.
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1.23 “Omeros New IP” means any and all Intellectual Property conceived or reduced to practice
by either Party individually or jointly during the course of the performance of this Agreement that
are specific to [†].
1.24 “Omeros’ Product Requirements” means Omeros’ total requirements for commercial sales of
Product in the Territory as well as clinical supplies of Product for the development of additional
therapeutic indications after Launch.
1.25 “Omeros Property” means any chemical and/or biological materials or samples, other
tangible property, and written or electronic documents and records owned by or licensed to Omeros
as of the Effective Date, developed by Omeros in connection with this Agreement, or disclosed or
delivered by or on behalf of Omeros in connection with this Agreement, including, without
limitation, Omeros Confidential Information (including without limitation Product Data) and Omeros’
Intellectual Property (including without limitation Omeros New IP) in tangible or electronic form.
1.26 “Price” means the [†] price of the Product, as set forth on Exhibit B attached
hereto and incorporated herein.
1.27 “Process” or “Processing” shall mean the act or acts of manufacturing, handling, storing,
analyzing, testing, filling, finishing, packaging, inspecting, labeling, preparing for shipment
and/or stability testing of Product by Hospira pursuant to this Agreement.
1.28 “Product” means a liquid formulation of Omeros’ pharmaceutical product, designated as
OMS103HP-S, which contains each of the following APIs: amitriptyline hydrochloride, oxymetazoline
hydrochloride and ketoprofen.
1.29 “Product Data” means all information, documents, records, raw data, specimens, and other
work product that relates to or describes the Services, including the Processing of Product. The
term “Product Data” shall include, without limitation, documents and records pertaining to
Processing of Product, Batch Records, Certificates of Analysis, Certificates of Compliance,
analytical test methods, analytical test results, list of SOPs, Product Specific SOPs, list of
equipment used in the Processing of Product, signed title pages of approved qualification reports
for such equipment, general facility layout details and process trend and variability data, and all
other documents, reports and data prepared, developed or generated by Hospira in connection with
performance of the Services hereunder. The term “Product Data” shall expressly exclude, however,
General SOPs and other information that is Hospira’s confidential information that is not specific
to Omeros or Omeros’ Product and is related to Hospira’s manufacturing processes that are generally
applicable to the products of multiple customers.
1.30 “Recipient” means a Party that receives Confidential Information.
1.31 “Regulatory Authority” means any governmental regulatory agency or authority that is
responsible for regulating any aspect of the development, manufacture, market approval, sale,
distribution, packaging or use of the Product, including, without limitation, as applicable, based
on the Territory on the Effective Date or any expansion of the Territory by mutual written
agreement of the Parties, the FDA, the European Medicines Agency (EMEA), the Japanese
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Ministry of Health, Labour and Welfare (MHLW), the Health Canada – Therapeutic Product
Programme (TPP) and any additional governmental agencies as agreed upon by the Parties based on
expansion of the Territory.
1.32 “Services” means all services performed and activities conducted by Hospira (including,
without limitation, those related to process improvements and Processing of Product, as applicable)
pursuant to this Agreement and the Specifications.
1.33 “SOPs” means Hospira’s standard operating procedures, and includes “General SOPs” that
are not specific to Processing of Product and “Product Specific SOPs” that are specific to the
Processing of Product.
1.34 “Specifications” means the Product attributes listed on Exhibit A attached
hereto, which is incorporated into this Agreement, the Master Batch Record for Product, the master
packaging batch record for the Product, the labeling requirements for the Product, and all other
written specifications and/or instructions for measurable and observable qualities, characteristics
and attributes of Product and all other written requirements, standards, specifications, quality
assurance/quality control testing and release and other attributes pertaining to the Product and/or
Processing of Product, including APIs, other Materials and Third Party suppliers for Processing
Product, that are agreed to by the Parties (and as amended from time to time by Omeros in
consultation with Hospira, including, without limitation, such amendments as may be required to
obtain or maintain approval from the FDA or other Regulatory Authorities).
1.35 “Technical Records” shall mean all books, records (including without limitation the
Master Batch Record and individual Batch Records for Product), test and laboratory data (including,
without limitation, Certificates of Analysis, SOPs and all other Product Data), reports and all
other information relating to the Services performed under this Agreement and the methods, Facility
and equipment used for Processing of Product or other Services.
1.36 “Territory” shall mean [†].
1.37 Additional Definitions.
| Defined Term | Section in which Defined | ||
Agreement
|
Preamble | ||
[†]
|
10.4 | ||
[†]
|
10.4 | ||
Change Order
|
2.4 | ||
Damages
|
9.2 | ||
Development Agreement
|
Recitals | ||
DMF
|
5.2 | ||
Effective Date
|
Preamble | ||
Executives
|
12.2 | ||
Firm Commitment
|
3.9.2 | ||
Firm Purchase Order
|
3.10.1 | ||
General SOPs
|
1.33 |
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| Defined Term | Section in which Defined | ||
Hospira
|
Preamble | ||
Hospira Indemnitees
|
9.2 | ||
ICH
|
1.4 | ||
Indemnified Party
|
9.4 | ||
Indemnifying Party
|
9.4 | ||
Initial Term
|
10.1 | ||
Launch
|
10.4 | ||
Minimum Purchase Requirement
|
3.10.5 | ||
NDA
|
3.9.2 | ||
Omeros
|
Preamble | ||
Omeros Indemnitees
|
9.3 | ||
Party and/or Parties
|
Preamble | ||
Product and Equivalents
|
7.1 | ||
Product Specific SOPs
|
1.33 | ||
Purchase Order
|
3.10.1 | ||
Quality Agreement
|
3.2 | ||
Representative
|
2.5 | ||
Rolling [†] Estimate
|
3.9.1 | ||
Rolling Forecast
|
3.9.2 | ||
Stability Lot Price
|
3.7 | ||
Submission
|
10.4 | ||
Supply Period
|
10.4 | ||
[†]
|
10.6.2 | ||
Term
|
10.1 |
2. COMMERCIAL SUPPLY
2.1 Processing of Product. Omeros hereby engages Hospira, and Hospira hereby agrees, to
Process the Product for commercial sale by Omeros in accordance with the Specifications, and in
compliance with this Agreement and all Applicable Laws (including, without limitation, cGMPs). The
terms of this Agreement shall apply to the exclusion of and shall supersede the terms of any
purchase order, acknowledgement, confirmation, shipping document, or other document.
2.2 Materials and Equipment. Unless otherwise agreed by the Parties in writing, Hospira shall
supply all Materials and standard processing and manufacturing equipment needed for Processing of
Product in accordance with this Agreement and the Specifications, at its sole cost and expense
(including, without limitation, shipping costs in connection with such Materials and equipment).
2.2.1 Non-Standard Equipment. If dedicated or specialized equipment is required to Process
Product for Omeros, Hospira shall specify such equipment to Omeros in writing and, if Omeros agrees
in writing that such equipment is required, Omeros shall reimburse Hospira for
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the cost of
purchasing such equipment, on a pass-through basis, as well as the reasonable cost of installation
and validation of such equipment, all subject to Omeros’ prior written approval or a
separate written agreement between the Parties with respect to such equipment purchase,
installation and validation. Title to such equipment shall be in Omeros’ name and, at Omeros’
request and reasonable expense, shall be returned to Omeros or discarded upon termination of this
Agreement. If Hospira wishes to use such equipment for Processing of a product other than Product
for Omeros, Hospira and Omeros shall meet and discuss the technical and practical ramifications of
such use and appropriate compensation to Omeros, but in no event is Omeros obligated to allow the
use of such equipment for the manufacture of such other product. These provisions shall not apply
to any non-dedicated or non-specialized equipment normally used or required for the manufacture of
pharmaceutical products, or to additional non-dedicated or non-specialized equipment required to
increase production capacity or efficiency at Hospira’s Facility.
2.2.2 Labeling. Hospira shall label Product in accordance with Omeros’ instructions. Label
copy may be modified from time to time by written agreement of the Parties. Omeros shall reimburse
Hospira for Hospira’s actual costs of making any label copy changes and for the cost of any
labeling that Hospira is unable to use due to such label copy changes.
2.3 Omeros’ Responsibilities and Authority. Unless otherwise agreed by the Parties in
writing, Omeros agrees that it will (a) provide APIs for processing of Product in accordance with
the provisions of Section 2.6,; (b) provide appropriate scientific data regarding the Product,
including, without limitation, appropriate and available safety and toxicity data, test methods and
formulation, fill and finish of the Product (as applicable); (c) provide Hospira with commercially
appropriate information necessary to Process the Product; (d) prepare and/or review and, if
acceptable to Omeros, approve all Specifications; and (e) as applicable, prepare all submissions to
Regulatory Authorities, portions of such that are relevant to Hospira which shall be subject to
review by Hospira as set forth in Section 5.8. Other than Processing of Product by Hospira in
accordance with this Agreement, Omeros shall retain sole authority and responsibility in all
matters related to commercialization of the Product.
2.4 Specifications/Amendments/Changes.
2.4.1 Specifications. The Master Batch Record and the Specifications shall be prepared and
maintained in Hospira’s standard format by Hospira, using Omeros’ master formula, other technical
information or standards that may be provided by Omeros, technical support provided by Omeros, and
labeling criteria (if applicable) provided by Omeros, and shall be approved in writing by Omeros.
2.4.2 Changes to Specifications. Except as set forth in Section 2.4.3 below, if either Party
requests a change to the Specifications, Hospira shall provide Omeros with cost estimates for the
additional or repeat work related to such changes. If Omeros approves in writing such additional
or repeat work, Omeros shall be responsible for paying such costs if the changes are specific to
the Product, but not for regulatory mandated or plant upgrade changes that are required for
products in addition to the Product (which shall be approved pursuant to Section 2.4.3). If Omeros
approves such estimated costs, Hospira shall perform such work, and Omeros
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shall pay Hospira’s
reasonable costs for such work within thirty (30) days of completion of such
work; provided that Hospira shall promptly notify Omeros in writing that such work has been
completed. Reimbursement for such additional work or repeat work shall be at the rate of [†].
2.4.3 Regulatory Mandated Change to Specifications. If there is a change in Applicable Laws
that would necessitate a change in the Specifications, Processing or the means or methods of
performance under this Agreement by Hospira, the Parties will meet and confer in good faith to
determine whether and what changes (if any) should be made thereto and/or to the respective
responsibilities of the Parties therefor. Promptly after a request is made by Omeros for any such
change, or the Parties become aware of the change in Applicable Laws necessitating such change,
Hospira shall notify Omeros of any anticipated increase and/or decrease in the Price and any costs,
expenses or fees associated with such change. Omeros shall have the right to approve such change
and, if approved, the right to approve any corresponding revised Price and any reasonable costs,
expenses or fees associated with such change. No change in the Specifications, Product-specific
manufacturing processes, test methods, or other documentation or procedures relating to Processing
of Product or the Services shall be implemented by Hospira, whether initiated by Omeros or
requested or required by any Regulatory Authority, unless and until the Parties have executed a
written agreement documenting such change (“Change Order”), including the implementation date of
such change and any increase or decrease to the Price to reflect costs, expenses, fees or savings
associated with such change. If a Change Order is caused by a change clearly mandated or required
by any Regulatory Authority then approval of such Change Order shall not be withheld.
2.4.4 Increases in Price. [†].
2.5 Meetings; Communications. The Parties shall hold team meetings via teleconference,
videoconference or in person on a regular and periodic basis. Each Party shall appoint a
representative (each a “Representative”) who will have primary responsibility for day-to-day
interactions with the other Party’s Representative concerning the Processing of Product, the
Services and the activities of the Parties in connection with this Agreement. Unless otherwise
mutually agreed by the Parties in writing, all communications between Hospira and Omeros regarding
the Processing of Product, the Services and the activities of the Parties in connection with this
Agreement shall be addressed to or routed directly through (as appropriate) the respective
Representatives of each Party. Hospira shall provide periodic updates to Omeros regarding the
Processing of Product. These updates may be delivered by Hospira verbally, by telephone or
videoconference, or in writing, as mutually agreed upon by the Parties. Hospira shall notify
Omeros as soon as practicable (but in any event within twenty-four (24) hours) of any event or
condition, including without limitation technical deviations as addressed in Subsection 5.6 that is
likely to detrimentally impact or limit Hospira’s performance of the Services or Processing of
Product. Hospira shall notify Omeros as soon as practicable (but in any event within four (4)
business days) of any financial, legal or business condition that is likely to detrimentally impact
or limit Hospira’s performance of the Services or Processing of Product.
2.6. Supply and Processing of Commercial Product; APIs.
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2.6.1 Commercial Product Supply; Minimum Percentage; Hospira Obligations Regarding Processing and
Services. Pursuant to the terms and conditions of this Agreement,
Omeros engages Hospira to supply, and Hospira agrees to manufacture, deliver and sell to Omeros,
Product intended for commercial sale. Hospira shall be obligated to supply, and Omeros shall be
obligated to purchase and take delivery of, the Minimum Percentage of Omeros’ Product Requirements
during the Term, which shall initially be [†] as set forth in Section 1.22. At any time during the
Term, Omeros and Hospira may mutually agree in writing to have Hospira supply and Omeros purchase a
percentage of Omeros’ Product Requirements that is greater than the initial Minimum Percentage as
provided for in Section 1.22. Hospira shall Process Product and perform all other services
(including Services) agreed upon by the Parties: (a) in accordance with the Specifications; (b) in
accordance with the Applicable Laws including, without limitation, cGMPs; and (c) in compliance
with this Agreement.
2.6.2 Active Pharmaceutical Ingredient Supply. Hospira shall manufacture Product for Omeros
from APIs that Omeros shall supply at no cost to Hospira. Omeros shall supply APIs to Hospira in
quantities sufficient to satisfy Hospira’s gross manufacturing requirements of Product for Omeros.
Hospira’s use of APIs received from Omeros shall be limited to Processing of Product for Omeros as
contemplated by this Agreement. Omeros shall deliver or cause to be delivered APIs D.D.P.
(Incoterms 2000) Hospira’s designated Facility pursuant to no-cost purchase orders that Hospira
issues to Omeros. Within thirty (30) days of Hospira’s receipt of any APIs supplied by Omeros
hereunder, Hospira shall (a) perform identification, bacterial endotoxin and microbial limit
testing on the APIs and confirm the shipment quantity, and (b) notify Omeros of any inaccuracies
with respect to quantity or of any claim that any portion of the shipment fails the identification
test. In the event Hospira notifies Omeros of any deficiency in quantity of APIs received, Omeros
shall use reasonable commercial efforts to promptly ship to Hospira, at its own expense, the
quantity of APIs necessary to fulfill the original APIs shipment, unless Hospira and Omeros
mutually agree to a reduction in Product quantity to be Processed in accordance with
Section 3.10.2. Hospira recognizes that the APIs will be procured by Omeros from third parties.
In the event that Omeros is unable to make up any shortage of APIs, Hospira shall be excused from
any resulting delay in the Processing of Product but Omeros shall be bound to any firm Purchase
Orders which have been accepted by Hospira, to be completed once API becomes available. In the
event Hospira notifies Omeros that the APIs shipment does not conform to the Specifications, Omeros
shall have the right to confirm such findings at Hospira’s manufacturing location. If Omeros
determines that such shipment of APIs conformed to the Specifications, the parties shall submit
samples of such shipment to a mutually acceptable independent laboratory for testing. If such
independent laboratory determines that the shipment conformed to the Specifications, Hospira shall
bear all expenses of shipping and testing such shipment samples. If Omeros or such independent
laboratory confirms that such shipment did not meet the Specifications, Omeros shall replace, at no
cost to Hospira, the portion of the APIs which does not conform to the Specifications and bear all
expenses of shipping and testing the shipment samples.
2.6.3 API Title. Omeros shall retain title to the APIs while in Hospira’s possession and
Hospira shall assume all responsibility and risk for the safekeeping, storage and handling of APIs
delivered hereunder and accepted by Hospira.
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2.6.4 Replacement of API. If, due to any negligent act or omission or willful misconduct on
Hospira’s part in the examination of APIs supplied by Omeros, Product Processed
hereunder fails to conform with the Product Specifications, Hospira’s sole liability in such
case shall be limited to replacement of non-conforming Product, at no additional cost to Omeros,
with conforming Product using APIs that Hospira shall purchase from Omeros at [†]. If APIs
are lost or destroyed in connection with the Processing of Product by Hospira, Hospira’s sole
liability in such case, [†], shall be limited to replacement of such APIs with APIs that Hospira
shall purchase from Omeros at [†].
2.6.5 API Reimbursement. [†]
3. DELIVERY; PRODUCT ACCEPTANCE/REJECTION; FORECASTING; PAYMENT
3.1 Delivery of Product. Omeros will arrange the transportation of Product with Omeros
approved carriers. Hospira shall provide product together with corresponding Certificates of
Analysis in accordance with the shipping and packaging instructions set forth in the Specifications
or otherwise provided in advance by Omeros and agreed to by Hospira (including any special
packaging or shipping conditions or labeling requirements), on or before the date(s) specified for
delivery in any Purchase Order. Delivery by Hospira shall be made FOB origin (U.S.) or FCA
Hospira’s facility (international) (Incoterms 2000) at the designated location(s) specified by
Hospira. All freight, handling, insurance, duties, taxes and shipping expense will be borne by
Omeros. Title to Product shall pass to Omeros upon delivery of Product to the carrier selected by
Omeros. Hospira shall be responsible for providing all quality and commercial shipping
documentation as set forth in the Specifications or as otherwise required under Applicable Laws or
by agreement of the Parties. At no additional expense to Omeros for assistance, Hospira will
cooperate with Omeros and Omeros’ carrier to arrange for transportation of Product at Omeros’
expense from the Facility to the destination(s) specified by Omeros. Risk of loss or damage to
Product and responsibility to insure shall pass to Omeros upon delivery to Omeros on Hospira’s
dock.
3.2 Quality Control; Certificates. Hospira shall perform quality control tests to ensure that
each Batch is produced in accordance with Applicable Laws, including cGMP, and conforms to the
Specifications. All quality control test results and copies thereof shall be made available to
Omeros upon written request of Omeros. A separate quality agreement between Hospira and Omeros
(“Quality Agreement”) will be signed prior to cGMP production of the Product, so that Omeros and
Hospira may set forth certain quality responsibilities of the Parties as they relate to the
Processing of Product in connection with this Agreement. In the event of any conflict between the
Quality Agreement and this Agreement, the terms of this Agreement shall control. Any testing
performed by or on behalf of Hospira (including tests to confirm that each Batch meets the
Specifications), which shall be performed at Hospira’s sole cost and expense, may be used by Omeros
for final release of each Batch without additional testing by Omeros. Notwithstanding the
foregoing, Omeros may conduct its own release testing of each Batch, and in accordance with
Subsection 3.3 shall determine whether such Batch is conforming. Omeros (in its sole discretion)
shall determine the form and substance of any release testing information that is submitted to a
Regulatory Authority(ies). At the time of Delivery of each
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Batch, Hospira shall send to Omeros a
signed Certificate of Analysis with respect to such Batch and a signed Certificate of Compliance
(which may be included in the Certificate of Analysis).
Upon Omeros’ request, within thirty (30) days following the Delivery of each Batch, Hospira
shall provide Omeros with properly completed copies of Batch Records for such Batch prepared in
accordance with the Specifications and Applicable Laws, unless otherwise set forth in the Quality
Agreement. Omeros shall be responsible for all shipment validation and quality control.
3.3 Inspection; Acceptance or Rejection. All Product Processed pursuant to this Agreement
shall be received by Omeros subject to Omeros’ right to conduct inspections and performance testing
of such Product. Omeros or its designee shall examine Product Delivered hereunder promptly after
actual receipt thereof by Omeros or its designee utilizing such methodology as Omeros shall
implement from time to time in its sole discretion.
3.3.1 Rejection. Omeros shall have thirty (30) days from the date of actual receipt by Omeros
or its designee of each shipment of Product from Hospira in which to evaluate and accept or reject
such shipment of Product. Omeros shall be permitted to reject any shipment of Product as
non-conforming if (a) Hospira fails to timely provide an accurate Certificate of Analysis and/or
truthful Certificate of Compliance, (b) Product does not meet the Specifications, or (c) Product
was not Processed in accordance with Applicable Laws, including cGMP. If Omeros does not notify
Hospira in writing of Omeros’ rejection of such shipment of Product within thirty (30) days from
the date of receipt thereof by Omeros or its designee, Omeros shall be deemed to have accepted such
shipment of Product, except that Omeros shall retain the right to revoke acceptance of Product for
a Latent Defect pursuant to Section 3.3.3.
3.3.2 Product Quantity. If the quantity of Product produced in any Batch fails to meet the
quantity specified in the applicable Purchase Order, then the Parties shall meet to discuss in good
faith one or more possible remedies to resolve the shortage.
3.3.3 Latent Defect. If, after Omeros’ acceptance or deemed acceptance of a shipment of
Product, Omeros discovers a Latent Defect, Omeros shall notify Hospira within thirty (30) days
after such discovery of the Latent Defect, and Omeros shall have the right to revoke acceptance of
such shipment of Product by notifying Hospira thereof in writing. Upon such notice, such shipment
of Product shall be deemed rejected hereunder and the terms of Subsections 3.3.4 and 3.4 shall
apply.
3.3.4 Disagreement Regarding Non-Conformity. In the event Omeros rejects a shipment of
Product for non-conformance in accordance with Subsection 3.3.1 or revokes acceptance of a shipment
of Product under Subsection 3.3.3, Hospira shall have the right within thirty (30) days thereafter
to sample and re-test such shipment of Product. If Hospira (a) agrees that such shipment of
Product is non-conforming, then the terms of Subsection 3.4 shall apply, or (b) disagrees with
Omeros’ determination that such shipment of Product is non-conforming, Hospira shall so notify
Omeros in writing within such thirty (30) day period. If Hospira disagrees with Omeros’
determination that Product is non-conforming, then Hospira and Omeros shall cause an outside
testing laboratory or consultant agreeable to both of them to perform comparative tests and/or
analyses on samples of the alleged non-conforming Product. The testing laboratory’s or
consultant’s results shall be in writing and shall be final and binding, save
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for manifest error on
the face of its report. Unless otherwise agreed to by Hospira and Omeros in writing, the costs
associated with such testing and review shall be borne by the Party against
whom the outside testing laboratory or consultant rules. The outside testing laboratory or
consultant shall be required to enter into written undertakings of confidentiality no less
burdensome than those set forth herein. Hospira shall furnish the outside testing laboratory or
consultant such instructions regarding the storage, handling and potential hazards of any Product
as are provided to or developed by Hospira by or on behalf of Omeros.
3.4 Remedies for Non Conforming Product. In the event that Hospira agrees that a shipment of
Product is non-conforming, or if the outside testing laboratory or consultant determines that such
Product is non-conforming, then, at Omeros’ election, Hospira shall [†]. Upon Hospira’s
instructions, Omeros shall destroy or return, at Hospira’s cost, the non-conforming Product.
3.5 Custody of Omeros Property. In connection with this Agreement, the Parties agree that
Hospira will have custody over certain Omeros Property. It is understood that such Omeros
Property, to the extent practicable, will be clearly labeled by Hospira as belonging to Omeros, and
that Hospira shall bear the risk of loss for any Omeros Property during the time that such Omeros
Property is in the possession of Hospira. Title to Omeros Property shall at all times remain in
Omeros or its assigns, and Hospira shall not pledge to any third party a security or other interest
in the Omeros Property, nor shall Hospira allow the Omeros Property to be otherwise encumbered.
Hospira shall at all times employ the measures specified by Omeros, and take such measures as are
otherwise reasonably required, to protect Omeros Property from risk of loss or damage at all stages
of Processing the Product and the Services hereunder. Hospira shall immediately notify Omeros if
at any time it believes any Omeros Property has been damaged, lost or stolen. Hospira shall not
use any Omeros Property for any purpose other than performing its obligations under this Agreement.
Upon any request by Omeros, Hospira shall immediately return to Omeros all Omeros Property,
including all copies thereof, in conformance with any directions provided by Omeros therefore,
except that Hospira shall retain reserve samples of Product as provided in Subsection 3.6.
3.6 Retention Samples; Storage. Hospira shall retain and store, in accordance with the
Specifications, samples of each Batch of Product at the Facility at no cost to Omeros until the
date that is thirteen (13) months after the expiration date of each such Batch (or for such longer
period as may be required by applicable Regulatory Authorities or Applicable Laws). Thereafter, if
requested by Omeros, Hospira and Omeros shall negotiate in good faith and enter into a contract for
continued storage of such Product samples, at Omeros’ reasonable cost and expense; provided,
however, that at any time following the initial storage period set forth above, if Hospira decides
that it will no longer store such samples or Omeros decides it does not wish to continue to have
Hospira store such samples, such Party shall provide no less than sixty (60) days’ written notice
to the other Party, during which time Omeros will instruct Hospira to either return such samples to
Omeros or a third party designated by Omeros, or to destroy such samples. Hospira shall comply
with such instructions from Omeros, provided that Omeros shall reimburse Hospira its reasonable
out-of-pocket costs incurred in returning or destroying such samples.
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3.7 Marketed Product Stability Samples. Hospira shall, in accordance with SOPs, pull
stability samples of Product and either (a) retain, store and test such stability samples in
accordance with the Specifications, or (b) ship such stability samples to Omeros or a third
party designated by Omeros in accordance with the Specifications. Hospira shall provide Omeros at
least sixty (60) days advance written notice prior to disposition of any stability samples after
specified storage times have elapsed, and Omeros shall provide instructions on disposal, continued
storage or shipment of such samples at Omeros’ reasonable expense. Upon Omeros’ written request,
Hospira shall provide stability testing of the Product in accordance with ICH guidance at a total
cost of [†] (the “Stability Lot Price”) put up on stability testing in accordance with a time point
matrix to be mutually agreed in writing and, upon such agreement, appended and incorporated into
this Agreement as Exhibit C.. The Stability Lot Price shall be invoiced on a pro-rata basis for
each stability time point completed. The Stability Lot Price is based on an assumed shelf life of
[†], and should the shelf life increase or decrease the Stability Lot Price shall be adjusted
proportionately.
3.8 Price; Adjustments; Payment
3.8.1 Initial Product Pricing. Hospira shall invoice Omeros upon shipment of Product by
Hospira, at the Price [†] of Product set forth in Exhibit B of this Agreement.
3.8.2 Price Adjustments. [†].
3.8.3 Payment Terms. [†]. Omeros shall make payment of any undisputed portion of such
invoices within [†] after Omeros’ receipt of each such invoice, unless otherwise specifically set
forth in this Agreement. If Omeros should default on any undisputed, due and owing payment,
interest shall accrue on any undisputed amount that is overdue at the rate of [†] per month or the
maximum rate allowed by law, whichever is lower.
3.9 Product Forecasts.
3.9.1 Rolling [†] Estimate. No later than [†], Omeros shall provide Hospira with a written
estimate of Omeros’ [†] quantity of commercial Product that represents the Minimum Percentage of
Omeros’ Product Requirements for the first [†] of the Term, such estimate to be used by Hospira
solely for [†] planning purposes. Omeros shall not incur any liabilities if such estimate is not
met. If Hospira notifies Omeros (and such notification shall be provided to Omeros in writing)
that it will be unable to supply Product in accordance with Omeros’ estimate, Omeros shall have the
right, in its sole discretion, [†]. Thereafter, by
[†], Omeros shall update such rolling [†]
estimate (“Rolling [†] Estimate”) for the period commencing on [†]. Upon receipt of each Rolling
[†] Estimate, Hospira shall, within [†] days after such receipt, provide Omeros a written (a)
acceptance of such estimate (and in such event, Hospira shall plan to allocate its capacity in a
manner consistent with such Rolling [†] Estimate), or (b) rejection of such estimate. In the event
Hospira rejects any updated Rolling [†] Estimate, Hospira and Omeros shall meet as soon as possible
to discuss in good faith the quantities of Product that Hospira would have capacity to provide to
Omeros during [†] covered by the Rolling [†] Estimate, and any amount agreed to shall be
memorialized by the Parties in writing in a revised Rolling [†] Estimate. In such event and in
Omeros’ discretion, Omeros shall have the right to [†].
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3.9.2 Notification and Rolling Forecast. Omeros will provide Hospira with written notice when
a new drug application (“NDA”) to market Product is submitted to FDA. Hospira
and Omeros will cooperate in scheduling and estimating initial commercial Batches of the
Product. On or before the first (1st) day of each calendar month, beginning at least
[†] prior to the anticipated date of commencement of commercial manufacture (excluding process
validation batches), Omeros shall provide to Hospira an [†] rolling forecast of the quantities of
Product that Omeros intends to order from Hospira during such period (“Rolling Forecast”). The
first [†] of such Rolling Forecast shall constitute a binding order of Omeros and a supply
commitment of Hospira for the quantities of Product specified therein (“Firm Commitment”), and the
following [†] of the Rolling Forecast shall be a good faith estimate, the [†] of such [†] period
which is binding to the extent set forth in the Supply and Purchase Commitment described in Section
3.10.4 below.
3.10 Purchase Orders; Supply and Purchase Commitment.
3.10.1 Purchase Orders. On or before the first (1st) day of each calendar month,
Omeros shall submit a purchase order (each a “Purchase Order”) to Hospira covering Omeros’
purchases of Product pursuant to the [†] of the Firm Commitment that is effective as of such first
day, and shall specify the Delivery dates for the Product included in such Purchase Order. Hospira
will use commercially reasonable good faith efforts to accept and meet the Delivery date specified
by Omeros in the Purchase Order. Omeros shall not, without the written consent of Hospira,
designate a Product Delivery date in a Purchase Order that is earlier than [†]calendar days from
the date on which Omeros submits the Purchase Order. For each Purchase Order, Hospira shall
provide (a) a confirmation of acceptance of the Purchase Order based on the Product Delivery date
specified by Omeros, or (b) a proposed modification of the Purchase Order offering to accept the
Purchase Order based on an alternate Product Delivery date. Upon (a) Omeros’ receipt of Hospira’s
confirmation of acceptance of the unchanged Purchase Order, or (b) Hospira’s receipt of Omeros’
written confirmation accepting the modified Purchase Order with the alternate Product Delivery
date, such Purchase Order shall become a “Firm Purchase Order.” If Hospira subsequently finds that
it is unable to meet the specified Product Delivery date for a Firm Purchase Order, Hospira shall
promptly notify Omeros and provide to Omeros an alternative Product Delivery date (which shall not
be more than fifteen (15) calendar days later than the initial Product Delivery date designated in
the Firm Purchase Order).
3.10.2 Purchase Order Changes. In the event that Omeros requests any change to the Delivery
date set forth in a Firm Purchase Order, Hospira shall attempt to accommodate the Delivery date
change within reasonable manufacturing capabilities and efficiencies. [†]. Hospira shall also
advise Omeros of the reasonable costs associated with making any such Delivery date change (if
any), and Omeros shall be deemed to have accepted the obligation to pay Hospira for such
associated, reasonable costs if Omeros indicates in writing to Hospira that Hospira should proceed
to make the change. Hospira shall charge Omeros the amount agreed upon in writing by Omeros for
making any such Delivery date change. If Omeros cancels a Firm Purchase Order, Hospira shall be
relieved of its obligation relating to such order, but Omeros will not be relieved of its
obligation of payment unless Hospira agrees to such cancellation in writing [†]. Subject to
Hospira’s compliance with the terms of Section 2.6.4, if Omeros (a) does not supply sufficient API
to Process Product in accordance with a given Firm Purchase Order, or (b) acts in any other
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manner, not including any change requested by Omeros due to changes in regulatory or other Applicable Law
or to ensure that the Product meets the Specifications, to directly and effectively
interfere with Hospira’s ability to perform in accordance with a given Firm Purchase, Omeros
shall remain liable for the full amount of the Firm Purchase Order, regardless of whether such
Product is Processed by Hospira or whether Omeros takes Delivery of any such Processed Product [†].
Notwithstanding the foregoing, Hospira shall use its commercially reasonable efforts to supply
Omeros with quantities of Product which are in excess of the quantities specified in a Firm
Purchase Order, subject to Hospira’s other supply commitments and manufacturing and equipment
capacity.
3.10.3 Agreement Controls. In the event of a conflict between the terms of any Firm Purchase
Order and this Agreement, this Agreement shall control.
3.10.4 Supply and Purchase Commitment. Hospira shall supply Omeros with the quantity of
Product ordered by Omeros in each Firm Purchase Order, unless the quantity of Product ordered for
any calendar quarter exceeds [†] thereafter, in which event Hospira shall use commercially
reasonable efforts to supply quantities in excess of these amounts.
3.10.5 Purchase Commitment. Following completion of the first [†] of the Initial Term, Omeros
covenants to purchase from Hospira not less than [†] of the Rolling Forecast
during the [†] of the Initial Term thereafter (the “Minimum Purchase Requirement”). Omeros may
shift any portion of its Firm Commitment to the [†] of the Rolling Forecast so long as its Minimum
Purchase Requirement is met. In lieu of Omeros taking Delivery of each such [†] Minimum Purchase
Requirements of Product, Omeros shall have the option, to be exercised in writing if elected by
Omeros, to pay for its Minimum Purchase Requirement at the Price set forth in Exhibit B and
waive Hospira’s Processing and Delivery obligations for the corresponding amount of Product. In
the latter event, Hospira shall invoice Omeros for the amount payable to meet the Minimum Purchase
Requirement, and Omeros shall pay Hospira such amount within [†] after receipt of Hospira’s
invoice.
3.10.6 Failure/Inability to Supply.
(a) At Least [†]. If Hospira fails to, or is unable to, supply Omeros with at least [†]
of the quantity of Product ordered by Omeros pursuant to the greater of (i) all Firm Purchase
Orders received during [†], or (ii) Omeros’ Firm Commitment for any [†].
(b) At Least [†]. If Hospira fails to, or is unable to, supply Omeros with at least [†]
of the quantity of Product ordered by Omeros pursuant to the greater of (i) all Firm Purchase
Orders received during [†], or (ii) Omeros’ Firm Commitment for any [†], then promptly thereafter
Hospira’s and Omeros’ senior executives shall meet to develop a corrective action plan and/or
remedy. If such mutually acceptable corrective action plan and/or remedy is not developed and
mutually agreed [†] after the first meeting of such executives, then Omeros shall have the right,
in its sole discretion, to either [†].
3.11 Rework. Hospira will not rework or reprocess Product unless authorized in advance by
Omeros in writing and there is a validated process for such rework or reprocessing of Product.
Re-inspection does not constitute rework or reprocessing.
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3.12 Product Recalls. In the event that any Product is recalled due to (a) the request,
directive or order of any Regulatory Authority or other national government authority, (b) the
order of a court of competent jurisdiction, or (c) a voluntary recall instituted by Omeros, Omeros
shall coordinate such recall, and the Parties shall take all appropriate actions to carry out such
recall and shall cooperate with any governmental investigations surrounding such recall. The cost
of any such recall shall be borne by Hospira if the recall results from the failure of the Product
to meet Specifications or Hospira’s breach of this Agreement,
including, without limitation, breach of Hospira's warranties under
Section 4.1 of this Agreement [†]. Further, Hospira shall at
Hospira’s expense, replace any recalled Batches and shall purchase replacement APIs or other
Materials from Omeros for such replacement Product at Omeros purchase cost/kg as set forth in
Section 2.6.3; [†]. The cost of any other recall shall be borne exclusively by Omeros. For
purposes of this Agreement, recall expenses shall include, without limitation, the expenses of
notification and destruction or return of the recalled Product, cost of the recalled Product, and
any costs associated with the APIs and other Materials for and Processing and distribution of
replacement Product, but shall not include lost profits of either Party.
3.13 Hazardous Waste. Hospira shall be responsible for destruction of any and all hazardous
waste, including, without limitation, rejected or recalled Product, rejected, excess or unsuitable
APIs or other Materials, remainder, residue and refuse, subject first to completion of any
retention periods and activities specified in this Agreement, in accordance with the Applicable
Laws. Omeros shall bear the expense of destruction of hazardous waste, except for any hazardous
waste resulting from Hospira’s breach of this Agreement, including, without limitation, breach of
any warranty under Section 4.1 herein, for which hazardous waste Hospira shall bear the expense.
3.14 Cold Storage Fee. A cold storage fee shall be due and payable to Hospira if Omeros
stores Product at Hospira’s plant for longer than thirty (30) days after Product’s final release.
The fee shall be [†] or any part thereof.
3.15 Shipments per Batch. Hospira shall make [†] shipments to Omeros of Product per Batch at
no charge to Omeros. Any additional shipments of Product per Batch requested shall be at a fee of
[†] per shipment plus shipping costs.
4. REPRESENTATIONS AND WARRANTIES
4.1 Hospira Representations and Warranties. Hospira represents and warrants that: (a) it has
the full power, right and authority to execute and deliver this Agreement; (b) it shall use
commercially reasonable best efforts to perform its obligations hereunder; (c) it will assign
professional personnel, qualified to perform the Services in a manner consistent with the technical
requirements of the Processing of Product; (d) none of its officers, directors, employees,
Affiliates, contractors or agents has been debarred or, to Hospira’s knowledge, threatened with
debarment under the Generic Drug Enforcement Act or convicted of a crime which could lead to
debarment, and it has not utilized, and will not utilize, the services of any individual or entity
in the performance of any Services that has been debarred or threatened with debarment under the
Generic Drug Enforcement Act, convicted of a crime that could lead to debarment or subject to any
other penalty or sanction by the FDA; (e) it will conduct the Services in conformity with
Applicable Laws including applicable cGMP, the procedures and
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parameters set forth in the Specifications, and generally accepted professional standards, and
the event of any conflicts between the foregoing requirements, the most stringent requirement shall
be met so long as consistent with all Applicable Laws; (f) each Certificate of Analysis will
reflect the results of the tests conducted on the Batch of Product to which it relates, each
Certificate of Compliance will be accurate and true, and the Batch Records delivered to Omeros will
accurately reflect in all material respects the processes and procedures followed by Hospira in
Processing Product as set forth in the Specifications; (g) the Product shall not have been and
shall not be adulterated, misbranded, misused, contaminated, tampered with or otherwise altered,
mishandled while in the custody and control of Hospira; and (h) it will not transfer to any third
party any Product, other than (i) for the purpose of tests at any outside testing laboratory or
consultant, as provided under Subsection 3.3.4, (ii) to Omeros’ designee or (iii) to any
subcontractor approved in accordance with Subsection 6.1. In the event that Hospira receives
notice of the debarment or threatened debarment of any individual or entity utilized by Hospira in
connection with the Product, Hospira shall notify Omeros in writing immediately, and Omeros shall
have the right to terminate this Agreement upon written notice without further cost or liability,
except for payments of accrued and unpaid obligations to the date of termination. Hospira further
represents and warrants that it has obtained (or will obtain prior to Processing Product or
performance of other Services), and will remain in compliance with during the term of this
Agreement, all permits, licenses and other authorizations which are required under Applicable Laws
for the Processing of Product or performance of other Services hereunder.
4.2 Mutual Representations and Warranties. Each Party hereby represents and warrants to the
other Party that: (a) the person executing this Agreement is authorized to execute this Agreement;
(b) this Agreement is legal and valid and the obligations binding upon such Party are enforceable
by their terms; and (c) the execution, delivery and performance of this Agreement does not conflict
with any agreement, instrument or understanding, oral or written, to which such Party may be bound,
nor violate any law or regulation of any court, governmental body or administrative or other agency
having jurisdiction over it.
4.3 Omeros Representations and Warranties. Omeros represents and warrants:
(a) if Omeros supplies APIs to Hospira for use in Processing the Product, then all such
Omeros’ supplied API at the time of delivery to Hospira shall be in conformity with the applicable
Specifications and shall not be adulterated or misbranded within the meaning of the Act; (b)
Hospira’s Processing of Product and performance of the Services pursuant to the Specifications will
not, to Omeros’ knowledge, violate any third party proprietary right; and (c) Omeros will not sell
Product into any jurisdiction unless and until Omeros receives any necessary Regulatory Authority
approvals.
5. RECORDS; REGULATORY MATTERS
5.1 Technical Records. Hospira shall maintain complete, true and accurate Technical Records
in accordance with Applicable Laws and as is reasonably necessary to support Omeros’ regulatory
filings with respect to Product. Hospira shall store all Technical Records for the longer of a
period of at least [†] from the relevant Product manufacturing date or the period required under
Applicable Laws, after which Hospira may dispose of the Technical Records or return the Technical
Records (excluding General SOPs and any Confidential
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Information of Hospira) to Omeros in accordance with Omeros’ express written instructions
therefore. In the absence of such instructions, Hospira shall notify Omeros in writing of its
intent to dispose of the Technical Records and request Omeros’ instructions as to their disposal.
If Omeros does not respond to such notice within sixty (60) days after receipt thereof, or in any
event prior to the later destruction of such records, Hospira may destroy such records at its
discretion and expense. Hospira shall, at any time upon Omeros’ written request and at Omeros’
reasonable expense, return the Technical Records to Omeros or transfer the Technical Records to any
third party designated by Omeros.
5.2 Drug Master File; Regulatory Filings. Hospira shall file and maintain the appropriate
drug master file (“DMF”) and related reference applications (e.g., site master file) in accordance
with the Applicable Laws in the Territory for its Processing of each Product under this Agreement,
at Hospira’s sole expense. Upon request by Omeros, Hospira shall make selected portions (including
all portions relevant to the Processing of the Product) of its DMF and related reference
applications, and all Technical Records available for inspection by authorized representatives of
the FDA and other Regulatory Authorities. At Omeros’ request and as agreed upon by Hospira,
Hospira shall prepare some or all sections of Omeros’ regulatory filings (including without
limitation chemistry, manufacturing and control sections) for a Product that pertain to Hospira’s
Processing activities hereunder, or at Omeros’ request shall assist Omeros in preparing such
sections; provided that Omeros shall compensate Hospira for its reasonable out-of-pocket costs and
expenses associated with such preparation activities. Hospira shall provide any additional
information, and otherwise cooperate as reasonably requested by Omeros, at Omeros’ reasonable cost
and expense, in support of any regulatory filings related to Product, including in the preparation
and maintenance of such regulatory filings, which regulatory filings shall be filed by Omeros at
its sole cost and expense in its sole discretion and shall be the sole and exclusive property of
Omeros.
5.3 Communications with Regulatory Authorities. Omeros shall be solely responsible for all
contacts and communications with any Regulatory Authority with respect to all matters relating to
Product. At Omeros’ request and expense, Hospira shall make appropriate personnel reasonably
available for meetings with Regulatory Authorities related to Hospira’s Processing of Product or
other Services. Other than during an audit or inspection by any Regulatory Authority, Hospira
shall have no contact or communication with any Regulatory Authority regarding a Product or
regarding Hospira’s Processing activities or other Services related to Product without the prior
written consent of Omeros, which consent may be granted or withheld in Omeros’ sole discretion,
except as provided in Subsection 5.6 or as required by Applicable Law or a Regulatory Authority.
Hospira shall notify Omeros immediately, and in no event later than two (2) business days, after
receiving any contact or communication from any Regulatory Authority that in any way directly
relates to Product or Hospira’s Processing activities or other Services.
5.4 Compliance. Hospira shall comply in all material respects with all regulatory
requirements with respect to Product that are imposed upon Hospira (as the provider of Services
hereunder) by Applicable Law from time to time, including, but not limited to, those relating to
environmental, health, and safety matters. Omeros shall comply in all material respects with all
regulatory requirements with respect to Product that are imposed upon Omeros (as the holder of
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any Investigational New Drug application or New Drug Application and any similar global
applications with respect to Product) by Applicable Law from time to time.
5.5 Audits; Right of Access. Hospira shall permit Omeros personnel and authorized
representative(s), or shall ensure that Omeros personnel and authorized representative(s) shall be
entitled (a) to inspect, observe and audit the Processing of Product and other Services, the
Facility and any other locations at which Product may be Processed with Omeros’ consent, (b) to
examine the condition of the Materials, Omeros Property, and Product stored at the Facility, and
(c) to examine all Product Data, Technical Records and all other documentation related to this
Agreement, including, without limitation, maintenance logs for the purposes of ensuring compliance
with cGMP and Hospira’s trade secrets and other Confidential Information related to its
manufacturing processes to the extent relevant to the Processing of Product and/or other Services
performed by Hospira hereunder, not to exceed [†] (except “for cause” audits as set forth below in
this Subsection) during the term of this Agreement, subject to reasonable notice and prior approval
by Hospira, such approval not to be unreasonably withheld, during regular business hours, and for a
period not to exceed [†]; provided that such Omeros personnel and/or authorized representative(s)
shall be bound to obligations of confidentiality pursuant to this Agreement or pursuant to a
separate, executed confidentiality agreement that imposes an obligation of confidentiality no less
onerous than the obligation imposed pursuant to Section 8 of this Agreement. Notwithstanding these
limitations, Omeros personnel and/or representatives shall be entitled to observe the Processing of
Product and other Services at any time upon reasonable notice and for a reasonable duration during
regular business hours (including during any shift that is engaged in Processing of Product or
performance of other Services). Omeros shall be entitled to conduct “for cause” audits following
issuance of Form 483s or similar reports delivered by Regulatory Authorities to Hospira pertaining
to the Processing of Product, performance of other Services, or the occurrence of other events
which are likely to adversely affect the Processing of Product or other Services as frequently as
requested by Omeros at reasonable times and for reasonable duration (which may exceed [†] days)
until Hospira has corrected such deficiencies, subject to Hospira approval, such approval not to be
unreasonably withheld. Hospira shall audit its permitted subcontractors and suppliers for
compliance with the Specifications and Applicable Laws, including cGMP according to Hospira’s
standard subcontractor audit procedures, if the subcontractors are chosen by Hospira. Omeros shall
be responsible for audit of all subcontractors and suppliers that have been selected by Omeros in
lieu of subcontractors and suppliers recommended or routinely used by Hospira. During Omeros’
audits of the Facility, Omeros shall have the right to confirm Hospira’s compliance with Hospira’s
standard operating procedures for auditing subcontractors and suppliers for any Products Processed
or other Services performed under this Agreement.
5.6 Regulatory Inspections. Hospira shall advise Omeros no later than the next day that is
not a Saturday, Sunday or federal or state holiday if an authorized agent of any Regulatory
Authority or any other regulatory body plans to visit the Facility, and makes an inquiry regarding
Hospira’s Processing of Product or performance of other Services regarding any part of the Facility
that is used in Processing of Product or performance of other Services. Omeros shall have the
right to be present at any visit directly relating to the Product or otherwise with Hospira’s
approval, which approval shall not be unreasonably withheld, and to review in advance and comment
on any response to the communication or investigation submitted by
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Hospira (but no more than [†] Omeros personnel shall be present during any such visit).
Hospira shall cooperate fully with Omeros in providing the information needed for any such
communication. Hospira shall provide to Omeros copies of any Form 483s or equivalent documents
delivered by such Regulatory Authority or regulatory body as a result of such visit, to the extent
that the 483 or other document specifically mentions Product. Portions of the 483 or other
document not relating to Product will be redacted.
5.7 Product Complaints. Omeros shall maintain customer complaint and adverse event files in
accordance with Applicable Laws. Any such complaints received by Hospira shall be forwarded to
Omeros. Omeros shall be responsible for the review of the complaint or adverse event to determine
the need for an investigation or the need to report to the FDA, as required by Applicable Laws.
Omeros shall provide Hospira copies of all Product performance or manufacturing-related complaints
that relate directly to Processing of Product by Hospira and require investigation, as well as
copies of the results of such investigation. Hospira shall cooperate and assist Omeros in any such
investigations and shall fully report findings of any investigation it conducts to Omeros. Omeros
shall make specific complaint and adverse event files available for inspection, to the extent
required by any Regulatory Authority, during inspection of Hospira’s facilities.
5.8 Hospira Right to Review. Hospira shall have the right to review and consult on those
portions of Omeros’ proposed regulatory submissions relating to Hospira’s Processing procedures
before any submissions are filed with appropriate Regulatory Authorities. Omeros shall use
commercially reasonable efforts to provide Hospira with no less than fifteen (15) business days to
review any such proposed regulatory submissions and Hospira will use commercially reasonable
efforts to expedite any review. Omeros shall provide copies and consult with Hospira and Hospira
may advise Omeros in responding to questions from the Regulatory Authorities regarding Omeros’
submission(s) for Product. Omeros shall provide to Hospira for its files a final copy of the
Chemistry, Manufacturing and Controls section of any such regulatory submission(s) related to
Hospira’s Processing.
6. SUBCONTRACTORS
6.1 Conditions. [†] Hospira shall be responsible, and shall remain liable, for the
performance of all of its obligations under this Agreement and for any breach by any subcontractor.
Omeros shall have the right to audit and inspect all subcontractors (including, without
limitation, all vendors and testing contractors) with whom Hospira may enter into agreements in the
performance of Services. Such audit and inspection rights shall be substantially similar to the
rights of Omeros to audit and inspect Hospira under this Agreement. Hospira shall ensure that all
agreements with such subcontractors include provisions to maintain the confidentiality of Omeros’
Confidential Information, and shall provide Omeros rights with respect to such subcontractors that
are substantially similar to the access rights granted to Omeros under Subsection 5.5 above.
7. INTELLECTUAL PROPERTY
7.1 Ownership of Intellectual Property. Except as expressly set forth in this Agreement or as
the Parties may otherwise agree in writing, each Party owns, and shall continue
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20
to own, its existing Intellectual Property as of the Effective Date of this Agreement, and its
Intellectual Property developed, acquired or obtained by such Party after the Effective Date of
this Agreement independently of the other Party and the Services, without conferring any interest
therein on the other Party. [†] The parties recognize that Hospira is in the business of
developing, manufacturing, and selling generic pharmaceutical products. Nothing in this provision
is intended to prohibit Hospira from independently developing, manufacturing, and/or selling any
pharmaceutical product provided that Hospira does not utilize, refer to, and/or rely upon any [†]
in the development, manufacturing, and/or sale of such product in contravention of the exclusive
license granted to Omeros herein. The preceding sentence does not in any way convey to Hospira any
right or license to Omeros’ Intellectual Property, including without limitation the New Omeros IP,
or to Omeros’ Confidential Information, or limit Hospira’s obligations with respect to the same as
provided in this Agreement.
7.2 License to Hospira. During the Term, Omeros hereby grants to Hospira a royalty-free,
non-exclusive license, without a right to sublicense, to use and exploit Intellectual Property
owned by or licensed to Omeros and used in connection with the Processing of Product, solely to the
extent necessary to Process Product for Omeros under the terms and conditions of this Agreement.
7.3 Product Data. All Product Data, including, without limitation, all Batch Records and
other Product-specific Technical Records generated or obtained by Hospira in connection with this
Agreement, and all Specifications, including, without limitation, Master Batch Records generated or
obtained by Hospira in connection with this Agreement, but excluding General SOPs, shall be the
sole and exclusive property of Omeros and shall be deemed to be Omeros’ Confidential Information.
Upon expiration or termination of this Agreement or the earlier request of Omeros, Hospira shall
send to Omeros at Omeros’ sole and reasonable expense, complete copies of all Product Data and
Specifications in written and (where available) editable electronic form. The Product Data shall
be prepared, documented and communicated by Hospira in a manner consistent with the Specifications
or as otherwise instructed by Omeros.
7.4 No Implied Right or License. Nothing contained in this Agreement shall be implied to
grant to either Party any right or license with respect to the other Party’s Intellectual Property
or Confidential Information of the other Party, except as specifically provided in this Agreement.
8. CONFIDENTIALITY
8.1 Confidential Information. Each Party agrees that the disclosing Party has and shall
retain sole and exclusive rights of ownership in all Confidential Information disclosed or owned by
such Party. Each Recipient agrees that during the term of this Agreement and for [†] thereafter it
will not use any Confidential Information of the disclosing Party except for the purposes of
performing under this Agreement, unless otherwise agreed by the Parties in writing. Each Recipient
agrees not to disclose any Confidential Information of the disclosing Party to others (except to
Recipient’s employees, consultants, professional advisors, agents and Affiliates who reasonably
require disclosure of such Confidential Information to achieve the purposes of this Agreement and
who are bound to the Recipient by like obligations as to confidentiality no
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21
less stringent than those set forth herein) during the term of this Agreement and for [†]
thereafter without the prior written consent of the disclosing Party. Hospira agrees that with
respect to the Product Data, the Specifications and the Omeros New IP, which are included in
Omeros’ Confidential Information, these obligations of non-use and confidentiality shall subsist
beyond five years after the termination of this Agreement. Each Party agrees to maintain and
follow reasonable procedures to prevent unauthorized disclosure or use of the other Party’s
Confidential Information and to prevent it from becoming disclosed or being accessed by
unauthorized persons. Each Party agrees that it may disclose to authorized persons only such
Confidential Information of the disclosing Party as is necessary for each such authorized person to
perform its responsibilities under this Agreement. Recipient shall advise the disclosing Party of
any disclosure, loss, or use of Confidential Information of the disclosing Party in violation of
this Agreement as soon as practicable. Each Party agrees to return or destroy the Confidential
Information of the other Party, whether in written, graphic, electronic or other tangible form,
upon written request, provided, however, that legal counsel for each Party may retain an archival
copy of Confidential Information solely for purposes of ensuring compliance with this Agreement.
8.2 Disclosure of this Agreement. The terms of this Agreement shall be considered each
Party’s Confidential Information, and accordingly except for disclosures expressly permitted under
this Agreement, neither Party may release any information to any third party regarding the terms of
this Agreement without the prior written consent of the other Party except as required by law or
regulation. Notwithstanding the foregoing, the terms of this Agreement may be disclosed by Omeros
to its existing or potential investors, acquirers, merger partners, commercial partners,
shareholders, directors and professional advisors as long as such parties are subject to similar
conditions of confidentiality.
8.3 Permitted Disclosures. Notwithstanding anything to the contrary, a Party may disclose the
Confidential Information of the other Party only to the extent such disclosure is reasonably
necessary : (a) to secure patent protection for an Intellectual Property developed pursuant to this
Agreement consistent with the ownership set forth in Subsection 7.1; or (b) to comply with
Applicable Law, requirements of any Regulatory Authority or other regulatory or governmental
agency, including without limitation the FDA, the Securities and Exchange Commission, the Federal
Trade Commission and/or the Department of Justice, or judicial order from a court of competent
jurisdiction; or (c) in order to conduct pre-clinical or clinical trials or seek regulatory
approval to market Product. Prior to making any such permitted disclosures, however, the
disclosing Party shall give reasonable advance notice to other Party with as much detail as
possible in relation to the disclosure. Each Party agrees that it shall cooperate fully and in a
timely manner with the other Party with respect to all such permitted disclosures, including
determining what information should be released and requests for confidential treatment of
Confidential Information of either Party included in any such disclosure; provided that in no event
shall a Party be required to delay any filing or release unreasonably hereunder.
8.4 Remedies. Because of the unique nature of the Confidential Information, each Recipient
acknowledges and agrees that the disclosing Party may suffer irreparable injury if the Recipient
fails to comply with the obligations set forth in this Section 8, and that monetary damages may be
inadequate to compensate the disclosing Party for such breach. Accordingly,
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each Recipient agrees that the disclosing Party will, in addition to any other remedies
available to it at law, in equity or otherwise, without the requirement to post a bond, be entitled
to seek injunctive relief and/or specific performance to enforce the terms, or prevent or remedy
the violation, of this Section 8. This provision shall not constitute a waiver by either Party of
any rights to damages or other remedies which it may have pursuant to this Agreement or otherwise.
| 9. | NO WARRANTY; LIMITATION OF LIABILITY; INDEMNIFICATION; INSURANCE |
9.1 No Warranty; Limitation of Liability. EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH
PARTY DISCLAIMS ALL CONDITIONS, REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY
OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OTHER THAN THAT THE PRODUCT MEETS THE SPECIFICATIONS, OR ANY WARRANTY OF
NON-INFRINGEMENT OF THIRD PARTY RIGHTS. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY, ANY OF ITS
AFFILIATES OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS,
LICENSORS OR PARTNERS BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL OR
PUNITIVE DAMAGES OR LIABILITIES (INCLUDING, WITHOUT LIMITATION, SUCH DAMAGES OR LIABILITIES FOR
LOSS OF PROFITS, BUSINESS, USE OR OTHER ECONOMIC ADVANTAGE) ARISING OUT OF OR IN ANY WAY RELATED TO
THIS AGREEMENT (INCLUDING PERFORMANCE OR FAILURE TO PERFORM HEREUNDER), EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY THEREOF, AND REGARDLESS OF THE LEGAL OR EQUITABLE THEORY (CONTRACT,
TORT, OR OTHERWISE).
9.2 Omeros’ Indemnification. Omeros shall indemnify, defend and hold harmless Hospira and its
officers, employees and agents (collectively, the “Hospira Indemnitees”) from and against any and
all liabilities, obligations, penalties, claims, judgments, demands, suits, costs and expenses
(including, without limitation, reasonable attorneys’ fees) (any of the foregoing, “Damages”)
arising out of or occurring as a result of a claim or demand made by an unaffiliated third party
against a Hospira Indemnitee for property damage or personal injury (including, without limitation,
death), in connection with: (a) Omeros’ storage, promotion, labeling, marketing, distribution, use
or sale of Product; (b) Omeros’ negligence, wrongful act or willful misconduct; (c) any breach by
Omeros of its obligations, representations, warranties or covenants under this Agreement; (d) the
lack of safety or efficacy of the APIs or Product; or (e) any violation of any patent or
proprietary right of any third party relating to the APIs, Specifications or Product other than
Hospira’s General SOPs or other Hospira developed Development or Processing procedures used in the
Processing of Product pursuant to this Agreement, except to the extent that any such Damages are
caused by (i) any failure of the Product to meet the Specifications or any Latent Defect in the
Product caused by a Hospira Indemnitee, (ii) the gross negligence or willful misconduct of a
Hospira Indemnitee, (iii) by the breach by a Hospira Indemnitee of its obligations,
representations, warranties or covenants under this Agreement, including, without limitation,
failure to comply with the Specifications or any Applicable Laws, (iv) by the violation of any
patent or proprietary Intellectual Property
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right of any third party that was known to Hospira and was not known to Omeros at the time of
such violation, (v) the purchase, transportation, storage, use, handling or disposal of any
hazardous substances in connection with performance of the Services by a Hospira Indemnitee, or
(vi) any claim that the Processing or performance of Services by a Hospira Indemnitee pursuant to
Hospira’s General SOPs or other Hospira developed Development or Processing procedures violates a
proprietary Intellectual Property right of any third party (except to the extent that such claim
results from the Specifications or other instructions or directions from Omeros).
9.3 Hospira’s Indemnification. Hospira shall indemnify, defend and hold harmless Omeros and
its officers, employees, and agents (collectively, the “Omeros Indemnitees”), from and against any
and all Damages arising out of or occurring as a result of a claim or demand made by an
unaffiliated third party against an Omeros Indemnitee for property damage or personal injury
(including, without limitation, death) in connection with: (a) Hospira’s negligence or willful
misconduct; (b) any failure of the Product to meet the Specifications, any Latent Defect in the
Product caused by Hospira; (c) any breach by Hospira of its obligations, representations,
warranties or covenants under this Agreement, including, without limitation, Hospira’s failure to
comply with the Specifications or any breach by Hospira of the Applicable Laws; (d) Hospira’s
purchase, transportation, storage, use, handling or disposal of any hazardous substances in
connection with performance of the Services; or (e) any claim that the Processing or performance of
Services by Hospira pursuant to Hospira’s General SOPs or other Hospira developed Development or
Processing procedures violates a proprietary Intellectual Property right of any third party (except
to the extent that such claim results from the Specifications or other instructions or directions
from Omeros), except to the extent that any such Damages are caused by; (i) the gross negligence or
willful misconduct of an Omeros Indemnitee, or (ii) by the breach by an Omeros Indemnitee of its
obligations, representations, warranties or covenants under this Agreement.
9.4 Procedure. In the event that any third party claim, action or suit is instituted against
a Party (the “Indemnified Party”) or its employees, officers or agents in respect of which
indemnity may be sought pursuant to this Section 9, the Indemnified Party will promptly notify the
other Party (the “Indemnifying Party”) in writing (provided that the failure to give such notice
promptly will not prejudice the rights of an Indemnified Party, except to the extent that the
failure to give such prompt notice materially adversely affects the ability of the Indemnifying
Party to defend the claim, action or suit). Promptly after the Indemnified Party gives such
written notice, the Indemnifying Party and the Indemnified Party shall meet to discuss how to
respond to such claim, action or suit. The Indemnifying Party shall control the defense of such
claim, action or suit. The Indemnified Party shall cooperate with the Indemnifying Party in the
defense of such claim, action or suit, at the expense of the Indemnifying Party. In any such
proceeding, the Indemnified Party shall also have the right to retain its own counsel at its own
expense. The Indemnifying Party shall not be liable for Damages with respect to a claim, action or
suit settled or compromised by the Indemnified Party without the Indemnifying Party’s prior written
consent. No offer of settlement, settlement or compromise by the Indemnifying Party shall be
binding on an Indemnified Party without the Indemnified Party’s prior written consent (which
consent shall not be unreasonably withheld, conditioned or delayed), unless such settlement fully
releases the Indemnified Party without any liability, loss, cost or obligation to
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such Indemnified Party, provided, however, that the Indemnifying Party shall have no authority
to take any action as part of any such defense or settlement that invalidates or otherwise
compromises or renders unenforceable the Indemnified Party’s Intellectual Property without the
Indemnified Party’s express prior written consent.
9.5 Insurance. Each Party will procure and maintain, at its own expense, for the duration of
the Agreement, and for [†] thereafter if written on a claims made or occurrence reported form, the
types of insurance specified below with carriers rated A- VII or better with A. M. Best or like
rating agencies:
(a) Workers’ Compensation accordance with applicable statutory requirements and each party
shall provide a waiver of subrogation in favor of the other party;
(b) Employer’s Liability with a limit of liability in an amount of not less than [†]; and
(c) Commercial General Liability including premises operations, products & completed
operations, blanket contractual liability, personal injury and advertising injury including fire
legal liability for bodily injury and property damage in an amount not less than [†] per occurrence
and [†] in the aggregate;
Each Party shall include the other party and their subsidiaries, affiliates, directors,
officers, employees and agents as additional insured’s with respect to Commercial General Liability
and Excess Liability but only as their interest may appear by written contract. Each Party shall
make available to the other Party, at such other Party’s request, evidence of its maintenance of
insurance in satisfaction of its obligations under this Subsection 9.5. In the case of
cancellation, non-renewal or material change in said coverage, Each Party shall promptly provide to
the other Party with a new certificate of insurance evidencing that the coverage meets the
requirements in this Subsection 9.5. Each Party agrees that its insurance shall act as primary and
noncontributory from any other valid and collectible insurance maintained by the other Party. Each
party may, at its option, satisfy, in whole or in part, its obligation under this Subsection 9.5
through its self- insurance program, subject to the other party’s review and approval of the
sufficiency of such program.
10. TERM; TERMINATION
10.1 Term. This Agreement shall be effective as of the Effective Date, and shall continue for
[†] after the date of the first commercial sale of Product (the “Initial Term”), unless earlier
terminated in accordance with this Agreement. This Agreement shall automatically renew for up to
[†] additional [†] periods, commencing at the expiration of the Initial Term and any extensions
thereof, unless either Omeros or Hospira should terminate the Agreement by giving the other Party
written notice of intent to terminate at least [†] prior to the expiration of the Initial Term or
any extension thereof. The Initial Term as it may be extended shall be referred to herein as the
“Term.”
10.2 Termination for Cause. Either Party shall have the right to terminate this Agreement (a)
for an uncured material breach by the other Party; or (b) for bankruptcy or insolvency of the other
Party, as further specified herein below in this Subection 10.2. In the
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event that a Party materially breaches this Agreement, the other Party shall deliver written
notice to the breaching Party describing such breach in detail, which notice shall include a
statement of the non-breaching Party’s intent to terminate this Agreement unless such breach is
remedied. If the breaching Party does not cure such breach within sixty (60) days following
receipt of such written notice from the non-breaching Party, the non-breaching Party may terminate
this Agreement by sending a written notice of termination to the breaching Party In the event
that a Party goes into liquidation, or seeks the benefit of any bankruptcy or insolvency act, or a
receiver or trustee is appointed for its property or estate, or it makes an assignment for the
benefit of creditors, whether any of the aforesaid events be the outcome of the voluntary act of
such Party or otherwise, and such procedures are not terminated within ninety (90) days, the other
Party may terminate this Agreement by sending a written notice of termination to such Party.
10.3 Termination by Omeros. Omeros shall have the right to terminate this Agreement at any
time, without penalty:
10.3.1 for all countries, if, prior to Launch of the Product in any country in the Territory,
[†].
10.3.2 on a country by country basis within the Territory, if, at any time before or after
Launch of the Product in such country(ies) in the Territory: [†].
10.3.3 for all countries, if, after Launch of the Product in any country in the Territory:
[†].
Except as specified above, termination of this Agreement as to any country in the Territory
shall not automatically terminate this Agreement for any remaining countries in the Territory.
10.4 [†]
10.5 Termination by Mutual Consent. The Parties may terminate this Agreement at any time by
mutual written consent.
10.6 Effects of Termination.
10.6.1 Return of Omeros Property and Product. Upon expiration or earlier termination of this
Agreement for any reason, Hospira shall return to Omeros all Omeros Property and Product (other
than samples retained under Subsection 3.6) within thirty (30) days after the date of such
expiration or termination.
10.6.2 [†]
10.6.3 Inventory. Upon termination pursuant to this Section 10, and except in instances of
breach by Hospira including without limitation failure of Product to meet Specifications, Omeros
shall purchase all inventory on hand and, if applicable, work in progress and reimburse Hospira for
Hospira’s cost of all supplies purchased and on hand or on order, if such supplies were ordered by
Hospira based on firm purchase orders or Omeros’ estimates of its requirements
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of Product, and such supplies cannot be reasonably used by Hospira for other purposes.
Hospira shall invoice Company for all amounts due hereunder.
11. FORCE MAJEURE
11.1 Excuse from Performance. Either Party shall be excused from performing its respective
obligations under this Agreement if its performance is delayed or prevented by any event beyond
such Party’s reasonable control, including, but not limited to, acts of God, fire, explosion,
weather, disease, war, insurrection, civil strife, riots, government action, earthquake, terrorism,
or power failure; provided that such performance shall be excused only to the extent of and during
such disability and the affected Party shall use commercially reasonable efforts to resume
performance as soon as reasonably practicable. Any time specified for completion of performance
during or subsequent to the occurrence of any or all such events shall be automatically extended
for a commercially reasonable period of time to enable the affected Party to recover from such
disability. Hospira shall immediately notify Omeros if, by reason of any of the events referred to
herein, Hospira is unable to meet any such time for performance. Capacity constraints due to the
volume of business at Hospira shall not be deemed a force majeure event. If Hospira experiences a
force majeure event that interferes with Processing of Product at Hospira’s Facility, Hospira
shall, at Omeros’ discretion and request, cooperate in good faith with Omeros in expeditiously
transferring Processing to another of Hospira’s facilities, if available. The Parties shall
mutually discuss and implement in good faith an agreed-upon action plan for such transfer. The
Parties understand and agree that Omeros has chosen the excipient and primary container packaging
component suppliers listed in the Specifications and Hospira has agreed to such suppliers. In the
event that Hospira has reasonably objected in writing to the use of such suppliers based on
demonstrable quality or reliability concerns, and Omeros has unreasonably refused alternate
suppliers proposed by Hospira for reasons other than demonstrable quality or reliability concerns,
then under such circumstances, Hospira shall not have any liability to Omeros, nor shall Hospira be
deemed to be in breach of this Agreement, if Hospira is unable to supply Product to Omeros due to a
failure of such suppliers to provide such excipients and/or primary container packaging components
to Hospira.
12. MISCELLANEOUS
12.1 Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to conflicts of laws or rules thereof.
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12.2 Dispute Resolution. In the event of a dispute arising from the performance of this
Agreement, each Party agrees to notify the other Party of the specific complaints or points of
disagreement, and to use its good faith efforts to resolve any such disputes without legal action.
Except for a dispute arising under Subsection 3.3 (which shall be resolved in accordance with
Subsection 3.3.4), in the event such good faith efforts fail, such dispute shall be first referred
to authorized executives of each Party (collectively, “Executives”) for resolution, upon one Party
providing the other Party with written notice that such dispute exists and has not been resolved.
The Executives shall attempt to resolve such dispute through good faith discussions prior to
instituting any civil action to resolve such dispute.
12.3 Independent Contractors. For purposes of this Agreement, Hospira shall be deemed to be
an independent contractor and not an agent or employee of Omeros or a joint venturer with Omeros,
and nothing in this Agreement shall be construed to create any other relationship between Hospira
and Omeros. Neither Party shall have any right, power, or authority to assume, create, or incur
any expense, liability or obligation, expressed or implied, on behalf of the other Party. Hospira
shall be solely responsible for withholding and payment of all appropriate state and federal taxes,
including social security payments, with respect to all of its employees.
12.4 Importer of Record. In the event any APIs or other Materials supplied by Omeros are
imported into the United States for delivery to Hospira, Omeros shall be the importer of record of
such APIs or other Materials, unless otherwise agreed with Hospira.
12.5 Severability/Enforceability. If any provision(s) of this Agreement shall be held
invalid, illegal, or unenforceable by a court of competent jurisdiction, this Agreement shall
continue in full force and effect without said provision(s), consistent with the intent of the
Parties at the time of its execution. If deletion of such provision materially alters the basis of
this Agreement, then the Parties shall negotiate a good faith alternative.
12.6 Modification/Waiver. This Agreement may not be altered, amended, or modified (nor shall
any obligation or breach be deemed waived) in any way, unless such alteration, amendment or
modification is in writing and signed by the Parties (or unless such waiver is in writing and
signed by the waiving Party). The failure of a Party to enforce any provision(s) of this Agreement
shall not be construed to be a waiver of the right of such Party to thereafter enforce that
provision or any other provision or right.
12.7 Notices. All notices and demands required or permitted to be given or made pursuant to
this Agreement shall be in writing and shall be deemed given if delivered personally or by
facsimile transmission (receipt verified), mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by express courier service, properly addressed to the address
of the Party to be notified as shown below:
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If to Hospira:
Hospira Worldwide Inc.
D-988, Building H1
275 North Field Drive
Lake Forest, Illinois 60045
Attention: VP & GM, One2One Global Contract Manufacturing Services
Facsimile: 224-212-3210
D-988, Building H1
275 North Field Drive
Lake Forest, Illinois 60045
Attention: VP & GM, One2One Global Contract Manufacturing Services
Facsimile: 224-212-3210
With a copy to:
Hospira, Inc.
Building H1, Dept NLEG
275 North Field Drive
Lake Forest, Illinois 60045
Attention: General Counsel
Facsimile: 224-212-2088
Building H1, Dept NLEG
275 North Field Drive
Lake Forest, Illinois 60045
Attention: General Counsel
Facsimile: 224-212-2088
If to Omeros:
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, Washington 98101
Attention: Chief Executive Officer
With a copy to: Vice President, Patent & General Counsel
Facsimile: 206-264-7856
1420 Fifth Avenue, Suite 2600
Seattle, Washington 98101
Attention: Chief Executive Officer
With a copy to: Vice President, Patent & General Counsel
Facsimile: 206-264-7856
or to such other address as to which either Party may notify the other. Any notice sent by
facsimile transmission shall be followed within twenty-four (24) hours by a signed notice sent by
first class mail, postage prepaid or by express courier service.
12.8 Assignability. Neither Party may assign its rights and/or delegate its obligations under
this Agreement without the other Party’s prior written consent (which shall not be unreasonably
withheld or delayed); provided that either Party may assign or transfer this Agreement to any
successor in interest (whether by merger, acquisition, asset purchase or otherwise) to all or
substantially all of its business to which this Agreement relates, provided that the assigning
Party shall provide written notice to the other within thirty (30) days prior to such assignment.
The obligations and rights under this Agreement shall be binding upon all permitted assigns.
12.9 Public Announcements. Subject to disclosures permitted under Subsections 8.1, 8.2 and
8.3 or as otherwise required by law or regulation, no public announcement relating to this
Agreement shall be made by either Party without the prior written consent of the other Party, and
neither Party shall use the other Party’s name, trademark or trade name, or the name of any
employee of the other Party, in any advertising or news release (including, without limitation, any
posting on the worldwide web) without the prior written consent of the other Party.
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12.10 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors and permitted assigns.
12.11 Survival. The following Sections and Subsections shall survive the termination or
expiration of this Agreement for any reason: Sections 1 (to the extent definitions are embodied in
the following Sections and Subsections), 4, 5, 7, 8, 9, 11 and 12 and Subsections 2.2.1, 3.1 (for
Processed Product), 3.2, 3.3, 3.4 (except for replacement of non-conforming Product), 3.6 and 3.7
(with respect to retention of samples), 3.12, 3.13, 5.1-5.4, 5.6, 5.7, 5.8 and 10.6.
12.12 Integration. This Agreement including any Exhibits hereto, shall constitute the entire
Agreement between the Parties with respect to the subject matter hereof, and shall supersede all
prior communications, understandings, and agreements (including any prior confidentiality
agreement) with respect thereto.
12.13 Counterparts. This Agreement may be executed by original or facsimile signature in two
or more counterparts, each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
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IN WITNESS THEREOF, the Parties have caused this Agreement to be duly executed as of the
Effective Date.
| OMEROS CORPORATION |
||||
| By: | /s/ Gregory A. Demopulos | |||
| Gregory A. Demopulos, M.D. | ||||
| Chairman & CEO | ||||
| HOSPIRA WORLDWIDE, INC. |
||||
| By: | /s/ Thomas Moore | |||
| Thomas Moore | ||||
| President, Global Pharmaceuticals | ||||
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EXHIBIT A
PRODUCT ATTRIBUTES
Commercial Product
| § | Manufactured at Hospira’s McPherson, Kansas facility [†] | |
| § | [†] | |
| § | [†] | |
| § | [†] | |
| § | [†] | |
| § | Bulk APIs to be supplied by Omeros, [†]. | |
| § | [†] | |
| § | Release testing to be performed by Hospira with issuance of a Certificate of Analysis | |
| § | [†] |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
EXHIBIT B
PRODUCT PRICING
[†]
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
EXHIBIT C
PRODUCT STABILITY MATRIX
A stability time point matrix shall be mutually agreed in writing.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Exhibit 10.29
EXCLUSIVE LICENSE AND SPONSORED RESEARCH AGREEMENT
between
OMEROS CORPORATION and the UNIVERSITY OF LEICESTER
This license agreement (the “Agreement”) is made effective the 10th day of June 2004 (the
“Effective Date”) between Omeros Corporation, a Washington corporation having a principal place of
business at 1420 Fifth Avenue, Suite 2600, Seattle WA 98101 USA (“Omeros”) and the University of
Leicester, having a principal place of business at University Road, Leicester LE1 7RH, United
Kingdom (“Leicester”).
WHEREAS Leicester owns rights to certain technology related to mannan-binding lectin
associated serine protease-2 (“MASP-2”) and a MASP-2 related plasma protein of 19 kDa commonly
referred to as “MAp19”, which technology was developed in whole or in part by Wilhelm J. Schwaeble,
Ph.D., (“Dr. Schwaeble” or the “Principal Investigator”) and Cordula M. Stover, Ph.D. (“Dr.
Stover”), both employees of Leicester, and has obtained ownership of related technology developed
by Teizo Fujita (“Dr. Fujita”) of the Fukushima Medical University, School of Medicine
(“Fukushima”); and
WHEREAS Omeros wishes to undertake an exclusive license in Leicester’s MASP-2 and MAp19
technology (including the related technology developed by Dr. Fujita), and to sponsor further
research to develop Leicester’s MASP-2 and MAp19 technology at Leicester under the direction of the
Principal Investigator; and
WHEREAS Leicester wishes to grant Omeros an exclusive license in Leicester’s
MASP-2 and MAp19 technology (including the related technology developed by Dr. Fujita) in
return for potential royalty payments and sublicense revenue sharing, and to accept payment for
such sponsored research;
NOW THEREFORE, in consideration for the mutual covenants and obligations set forth herein as
well as other good and valuable consideration, the parties hereby agree as follows:
| 1 | Definitions | |
| 1.1 | Reference to “Leicester” and “Omeros” in regards to any intellectual property right developed by the respective party shall be construed to refer to the respective party as well as the respective party’s employees, officers, directors, consultants and agents. | |
| 1.2 | “Intellectual Property Rights” shall mean all inventions, ideas, discoveries, issued, reissued or reexamined patents, pending and future patent applications, continuation, continuation-in-part and divisional patent applications, utility models, inventor’s certificates, trade secrets, know-how, copyrights and trademarks. | |
| 1.3 | “Sponsored Research” shall mean all research activities carried out by Leicester and/or its employees (as may be agreed by Leicester and Omeros) with the financial sponsorship, in whole or in part, by Omeros in accordance with Section 2 herein below or as otherwise agreed. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 1.4 | “Leicester IP” shall mean all Intellectual Property Rights owned or held by Leicester, including without limitation all such Intellectual Property Rights arising from the work of Dr. Schwaeble, Dr. Stover, and/or other Leicester employees as well as that acquired under an assignment agreement from Dr. Fujita, prior to the Effective Date of this Agreement, or developed or obtained by Leicester after the Effective Date of this Agreement both (a) independently of Omeros (as determined by inventorship under US law with respect to any patents and patent applications) and (b) independently of the Sponsored Research, provided however that in the event and to the extent that such independently developed Intellectual Property Rights arise as the direct result of sponsorship by a not-for-profit enterprise in accordance with Section 4.3 herein, such independently developed Intellectual Property Rights shall be included within the scope of the license granted herein only if Leicester or Leicester employee(s) obtain an assignment or release of such independently developed Intellectual Property Rights from such not-for-profit enterprise, which assignment or release Leicester shall exert all reasonable efforts to obtain or to cause its employees to obtain, provided always that any of the Intellectual Property Rights described above in this section 1.4 are directly related to compositions, antibodies and/or methods for the inhibition of MASP-2 and/or MAp19 and/or the diagnosis and/or treatment of MASP-2 or MAp19 mediated disorders and/or deficiency syndromes, as well as methods, polynucleotides, polypeptides, sequences and tools related to the development and production of MASP-2 or MAp19 antibodies including without limitation murine, human, humanized and recombinant antibodies, murine lines in which MASP-2 or MAp19 genes have been knocked-out or knocked-in, and all Intellectual Property Rights in the subject matter disclosed or claimed in the draft patent application entitled Genetically modified non-human mammals and cells filed in the British Patent Office on 10 June 2004 and attached hereto as Exhibit A [†]. | |
| 1.5 | “Omeros IP” shall mean all Intellectual Property Rights owned or held by Omeros prior to the Effective Date of this Agreement, or developed or obtained by Omeros after the Effective Date of this Agreement independently of Leicester (as determined by inventorship under US law with respect to any patents and patent applications), including without limitation all such Intellectual Property Rights related to methods and pharmaceuticals or other agents to inhibit pain, inflammation, cartilage loss, vasospasm, smooth muscle spasm, restenosis, or tumor cell adhesion, and/or to accelerate recovery of joint motion and function, for use in surgical procedures (including without limitation arthroscopic, cardiovascular, urologic and general surgical procedures), other medical procedures, and/or for treatment of cartilaginous disorders, and drug delivery methods and systems. | |
| 1.6 | “Joint IP” shall mean (a) all Intellectual Property Rights in technology that is developed jointly (as determined by inventorship with respect to any patents and patent applications) by Omeros and Leicester (as may be agreed by Leicester and Omeros) during the Sponsored Research Term (as that term is defined in Section 2.2 herein), and (b) all Intellectual Property Rights arising from and as the direct result of the Sponsored Research. Should Dr. Schwaeble or other Leicester employees enter into a consulting agreement with Omeros for general scientific consulting such as in the field of |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| inflammation, then to the extent that such scientific consulting services may pertain to MASP-2 and MAp19, the results of such scientific consulting services will be treated as part of the Joint IP. However, the parties acknowledge herein that research by Dr. Schwaeble and other Leicester employees on behalf of Omeros related to MASP-2 and MAp19 will be carried out in major part through the Sponsored Research. | ||
| 1.7 | [†] | |
| 1.8 | “Licensed Products” shall mean all antibodies, inhibitors and all other products that, were it not for the license granted to Omeros under this Agreement, infringe, or the use, manufacture, offer for sale or sale of which infringe any valid and subsisting claim(s) of any issued patent or any patentable claim(s) of any pending patent application included within the Leicester IP in the country or countries in which such products are offered for sale, sold, manufactured or used, excluding all products that would be included within the Licensed Products in accordance with the above definition only because they are products that infringe any claim(s) within the [†]. | |
| 1.9 | “Licensed Research Products” shall mean any antibodies that are not Licensed Products and which are produced or developed as the direct result of use of murine line(s) that, were it not for the license granted to Omeros under this Agreement, infringe, or the use of which infringe, any valid and subsisting claim(s) of any issued patent or any patentable claim(s) of any pending patent application for such murine line(s) included within the Leicester IP in the country or countries in which such lines are propagated or used. | |
| 1.10 | “Net License Proceeds” shall mean the total of the gross monetary amounts invoiced and collected by Omeros for Licensed Products and Licensed Research Products (or that portion of the value of any combination product attributed to a Licensed Product or a Licensed Research Product included therein) used, manufactured, directly sold or directly distributed by Omeros, less (a) the sum of the following actual and customary deductions where applicable: cash, trade, or quantity discounts; sales, use, tariff, import/export duties or other excise taxes, and any other governmental taxes imposed on particular sales; transportation charges and allowances; commissions to third party sales agents; and credits to customers because of rejections or returns and (b) any accrued Omeros IP Legal Fees (as defined below) not previously deducted. For purposes of this paragraph, the acquisition of Licensed Products and Licensed Research Products from Omeros as part of an acquisition of all or a substantial part of the assets of Omeros’ business to which this Agreement pertains shall not be considered a manufacture, sale or distribution. | |
| 1.11 | “Net Sublicense Proceeds” shall mean the total of all sublicense royalties or sublicense fees received by Omeros from third parties to which Omeros grants a sublicense under the Leicester IP for the manufacture, sale or distribution of Licensed Products or Licensed Research Products, and which were not included in the Net License Proceeds, less any accrued Omeros IP Legal Fees not previously deducted, provided however that the Net Sublicense Proceeds shall not include any fees or payments from such third parties to Omeros to support research and development efforts, to purchase equity in Omeros, or for any other purpose other than as compensation for sublicense rights. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 1.12 | “Omeros IP Legal Fees” shall mean the sum of all legal fees and costs incurred by Omeros to (a) evaluate, apply for, prosecute and maintain any Intellectual Property Rights included within the Leicester IP, including without limitation any such fees and costs paid by Omeros as reimbursement to Leicester for such fees and costs incurred by Leicester, and (b) obtain or assist Leicester in obtaining or attempting to obtain clear, defensible, lawful and uncontested title to the Leicester IP, including without limitation all such fees and costs incurred in [†]. | |
| 1.13 | “Third Party License Fees” shall mean all royalties or other fees paid by Omeros to third parties for a license from such third parties under Intellectual Property Rights owned or held by such third parties for the manufacture, use, offer for sale, sale or distribution of Licensed Products or Licensed Research Products, but shall exclude that portion of any such third party royalties or other fees paid by Omeros attributed to items sold in combination with the Licensed Products or the Licensed Research products, which items are not Licensed Products or Licensed Research products. | |
| 2 | Sponsored Research | |
| 2.1 | Leicester shall perform research to be conducted by or under the direction of the Principal Investigator (as may be agreed between Leicester and Omeros), directed to advancing the technology included in the Leicester IP or related technology concerning the characterization and inhibition of MASP-2 or MAp19, supported by the financial sponsorship of Omeros, and without the use of third party sponsorship that would provide any intellectual property rights in the results of the Sponsored Research to such third party, in accordance with one or more research plans (“Research Plans”) agreed to in advance in writing between Leicester and Omeros. An initial Research Plan is attached hereto as Exhibit B. No Research Plan or any amendment thereto shall be effective until executed by Leicester and Omeros, and upon mutual execution shall be automatically incorporated into this Agreement. Each Research Plan shall define scientific aims, objectives and activities, a budget and a timeline for performance of Sponsored Research during the corresponding time period. | |
| 2.2 | The Sponsored Research shall be completed over a term (the “Sponsored Research Term”) that will initially run for a period of one (1) year from the appointment or designation of appropriate and mutually acceptable staff at Leicester, and that is extendable annually upon mutual written agreement for a total term of three (3) years from the Effective Date of this Agreement or as may otherwise be mutually agreed in writing. If Omeros or Leicester does not wish to extend the Sponsored Research Term for the second or the third year, such party shall provide the other party notice of non-extension at least ninety (90) days prior to the end of the preceding year. The Sponsored Research Term shall run independently of the License Term (as defined herein below) of this Agreement. Termination of this Agreement shall result in termination of the Sponsored Research Term, but termination of the Sponsored Research Term, such as in accordance with Section 14.4 herein, shall not affect the overall status of this Agreement or the License Term. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 2.3 | Leicester shall supply all necessary personnel, administrative management, facilities, equipment and supplies to enable timely completion of the Sponsored Research. Reimbursement for Leicester’s costs and expenses for the Sponsored Research shall be provided only to the extent agreed to in writing in the applicable Research Plan. Each Research Plan will be completed diligently by Leicester using best efforts in accordance with prevailing professional standards and all applicable laws, regulations and Leicester’s official policies. Should the Principal Investigator become unavailable to complete any Research Plan, Leicester and Omeros may agree on a substitute investigator, and in the event that a mutually acceptable substitute is not available, either party may terminate the Sponsored Research Term. | |
| 2.4 | Within thirty (30) days of the end of each quarter of the Sponsored Research Term, Leicester shall submit a status report in written and electronic form (“Status Report”) summarizing the results of the research completed during that quarter, except that annually within thirty (30) days of the end of each year of the Sponsored Research Term or at such other point in time as may be mutually agreed in writing, Leicester shall submit a final status report in written and electronic form (“Final Report”) detailing the results of the research completed during such year of the Sponsored Research Term. Upon Omeros’ request, Leicester shall complete all requested corrections and make reasonable revisions to each Status Report and/or Final Report to place it into a form suitable to meet Omeros’ objectives, including potential use of any Status Report and/or any Final Report as part of any regulatory submissions. | |
| 2.5 | In full and complete consideration for the Sponsored Research completed by Leicester during the Sponsored Research Term in accordance with the Research Plan(s), Omeros shall pay Leicester [†] for the first year, and unless a change in the level of Sponsored Research work is agreed to in writing in subsequent Research Plans, this amount shall be increased by [†] per year plus, in the event of continued use of a Leicester laboratory technician in performing Sponsored Research activities after the first year of the Sponsored Research Term, any increase in fees due to British national standard pay scale changes applicable on a pro rata basis to such Leicester laboratory technician’s Sponsored Research activities, for each mutually agreed subsequent year of the Sponsored Research Term throughout which Sponsored Research is carried out (i.e., a total of [†] if the Sponsored Research Term is extended for a total three-year period and the level of Sponsored Research work during each year remains constant), payable at the rate of [†] of the annual amount per quarter within thirty (30) days of the end of each quarter within the Sponsored Research Term, provided however that no payment shall be due for any quarter prior to the receipt and acceptance by Omeros of a Status Report or any Final Report, as appropriate, for the respective quarter or year. | |
| 2.6 | Omeros and the Principal Investigator shall collaborate on any proposed scientific publications of Sponsored Research data and results, including a discussion of authorship and contents. Leicester shall furnish Omeros with copies of any publication or written or oral disclosure that is proposed by Leicester, including, without limitation, disclosures in papers or abstracts or at research seminars, lectures, professional meetings, or poster sessions, at least sixty (60) days prior to the proposed date for submission for publication |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| or disclosure. During such 60-day period, Omeros shall have the right to review and comment on such publication for accuracy and protection of confidential information. Additionally, upon Omeros’ written request during the foregoing 60-day period, the proposed submission for publication or disclosure shall be delayed until Omeros has completed the filing of patent applications directed to information contained in such proposed publication or disclosure or based on Omeros’ reasonable determination that publication should be delayed due to other business considerations, but in no event will such delay exceed an additional ninety (90) days following the initial 60-day period without Leicester’s written consent, which consent shall not be unreasonably withheld. Omeros shall have the right, in its sole discretion, to use, disclose, disseminate and publish (with due acknowledgement of authorship) all data and results arising out of the Sponsored Research for any and all purposes, including without limitation in and for submissions to any regulatory agencies and in marketing any products including, but not limited to, Licensed Products and Licensed Research Products. | ||
| 3 | Ownership of Intellectual Property | |
| 3.1 | All Leicester IP shall remain owned or held by Leicester to the same extent as would be the case were it not for this Agreement. | |
| 3.2 | All Omeros IP shall remain owned or held by Omeros to the same extent as would be the case were it not for this Agreement. | |
| 3.3 | All Joint IP shall be jointly owned by Omeros and Leicester, i.e., Omeros and Leicester each shall hold a 50% undivided joint ownership interest in all Joint IP. | |
| 4 | Grant Of License | |
| 4.1 | Leicester hereby grants to Omeros for the term of this Agreement a royalty-bearing, world-wide exclusive license in the Leicester IP for the research, development, manufacture, use, sale, offering for sale, distribution, exportation and importation of any and all products and the practice of all methods within the Leicester IP, including without limitation the exclusive right to develop, manufacture, use, sell, offer for sale, distribute, export and import the Licensed Products and the Licensed Research Products and to use all murine lines within the Leicester IP for all purposes including without limitation the research, development and production of antibody products. | |
| 4.2 | Leicester hereby grants to Omeros a fully-paid up, irrevocable, world-wide exclusive license in and to Leicester’s joint ownership interest in the Joint IP, for the manufacture, use, sale, offering for sale, distribution, exportation and importation of any and all products and the practice of all methods encompassed by the Joint IP. | |
| 4.3 | Subject to publication approval and timing procedures consistent with Section 2.6 herein, Leicester shall retain the right to use the Leicester IP and the Joint IP for the purpose of conducting non-commercial, academic research, including research sponsored by not-for-profit entities, which shall not include the performance of research sponsored (directly or |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| indirectly) by or on behalf of any for-profit entity that is in direct competition with Omeros in a technology, product or research tool that is the subject of the Leicester IP or Joint IP. | ||
| 4.4 | Omeros shall have the right to grant sublicenses in the Leicester IP and the Joint IP under this Agreement subject, with respect to the Leicester IP, to Omeros’ obligations to share sublicense revenues as set forth in Section 5. | |
| 4.5 | As part of the licenses granted to Omeros under Sections 4.1 and 4.2, Leicester agrees to transfer and provide and/or make available to Omeros upon request progeny from the licensed murine lines, cell lines, biological materials and any other research materials encompassed by or included within the Leicester IP and/or the Joint IP to which Leicester has appropriate rights and access, all such materials being provided on the basis of Omeros reimbursing Leicester for Leicester’s actual cost in providing such materials but for no additional consideration. | |
| 4.6 | Leicester also grants to Omeros a right of first refusal for an exclusive license in all of Leicester’s Intellectual Property Rights, for which Omeros has not already been granted a license hereunder, and for which Leicester has all necessary rights to offer such first refusal, and Leicester shall exert reasonable efforts to obtain such necessary rights, in (1) any commercially applicable technology that arises during the Term of this Agreement and is directly related to MASP-2 and/or MAp19 as more fully defined in the Leicester IP and the Joint IP, and (2) any technology that has been developed through the contribution of both Omeros and Leicester after the Sponsored Research Term. | |
| 5 | Royalties and Sublicense Revenue | |
| 5.1 | Omeros shall pay Leicester on a quarterly basis a royalty for Licensed Products of [†] of the that portion of the Net License Proceeds realized during each respective quarter from Licensed Products (the “Licensed Product Royalty”), provided however that Omeros shall be entitled to deduct from the Licensed Product Royalty any accrued Third Party License Fees paid by Omeros on the Licensed Products not already deducted, but in no event shall Third Party License Fees be permitted to be deducted to an extent that such Third Party License Fees would reduce the Licensed Product Royalty by greater than [†] for any given quarter. | |
| 5.2 | Omeros shall pay Leicester on a quarterly basis a royalty for Licensed Research Products (the “Licensed Research Products Royalty”) of (a) [†] of that portion of the Net License Proceeds realized from Licensed Research Products during each respective quarter during and only during the first [†] period following initial introduction of the relevant product to a commercial market, and (b) [†] of that portion of the Net License Proceeds realized from Licensed Research Products during each respective quarter after the first [†] period until such time that any third party should introduce into a commercial market a competing product that does not infringe the Leicester IP, after which third-party introduction no further Licensed Research Products Royalty shall be payable for the relevant product, provided however that Omeros shall be entitled to deduct from the |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| Licensed Research Products Royalty any accrued Third-Party License Fees paid by Omeros on Licensed Research Products not already deducted, but in no event shall Third-Party License Fees be permitted to be deducted to an extent that such Third Party License Fees would reduce the Licensed Research Products Royalty by greater than [†] for any given quarter. | ||
| 5.3 | Omeros shall pay Leicester on a quarterly basis a share of that portion of the Net Sublicense Proceeds collected by Omeros on Licensed Products and collected by Omeros (“Sublicensed Product Revenue Share”) from sublicensed third parties during each respective quarter, such Sublicensed Product Revenue Share being either (a) [†] for any sublicenses in connection with the Licensed Products granted hereunder prior to the earlier of (i) [†], or (ii) the second year anniversary of the Effective Date of this Agreement, or (b) [†] for any sublicenses in connection with the Licensed Products granted hereunder thereafter. | |
| 5.4 | Omeros shall pay Leicester on a quarterly basis a “Sublicensed Research Product Revenue Share” that is (a) an initial percentage share (“First Share Percentage”) of that portion of the Net Sublicense Proceeds realized from Licensed Research Products and collected by Omeros from sublicensed third parties during each respective quarter during and only during the first [†] period following initial introduction to a commercial market of the relevant antibody product by the respective sublicensee, and (b) a subsequent percentage share (“Second Share Percentage”) of that portion of the Net Sublicense Proceeds realized from Licensed Research Products and collected by Omeros from sublicensed third parties during each respective quarter after the initial [†] period. For any sublicenses in connection with Licensed Research Products granted hereunder prior to the earlier of (i) [†], or (ii) the second year anniversary of the Effective Date of this Agreement, the First Share Percentage shall be [†] and the Second Share Percentage shall be [†]. For any sublicenses in connection with Licensed Research Products granted hereunder thereafter, the First Share Percentage shall be [†] and the Second Share Percentage shall be [†]. | |
| 5.5 | Omeros shall promptly provide Leicester with a copy of all sublicenses granted by Omeros in the Leicester IP and/or the Joint IP under this Agreement. | |
| 5.6 | Following receipt from the University of the results of all Sponsored Research and the completion of all other necessary and beneficial research activities by Omeros and/or by others to support appropriate government regulatory submissions by Omeros, [†], Omeros shall use reasonable efforts, based on reasonable commercial prudence, to diligently develop and introduce to the market one or more Licensed Products and/or Licensed Research Products. Ongoing performance of research and/or development efforts to generate or further advance one or more Licensed Products and/or Licensed Research Products by Omeros, internally at Omeros and/or under contract with Leicester and/or a third party, shall be deemed to be diligent efforts under this Section 5.6. | |
| 5.7 | It is Omeros’ current intent to commercially develop and seek regulatory clearance to clinically test and then market an inhibitor of MASP-2 and/or MAp19 activity following |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| Leicester’s identification of selective and high-affinity inhibitors of MASP-2 and MAp19 activity and demonstration by Leicester of the therapeutic benefit of such inhibitors in animal models. Within three months of the identification by Omeros of a Licensed Product or Licensed Research Product that is determined by Omeros to be a viable and optimal clinical development candidate, Omeros will submit a development plan to Leicester that sets forth Omeros’ planned activities and estimated timing for the development, regulatory approval and market introduction of one or more Licensed Products and/or Licensed Research products. Assuming anticipated and adequate progress is made in the Sponsored Research [†], Omeros anticipates the identification of an initial potential candidate for a Licensed Product or Licensed Research Product that is a potential clinical development candidate within two years of the commencement of the Sponsored Research. The foregoing statements within this Section 5.7 and such development plan are or will be provided as indications of current or future intentions only, and shall have no binding effect on Omeros, nor shall it give rise to any right or obligation to either party, and any modification, alteration or failure to meet any of these intentions shall have no impact on this Agreement. | ||
| 6 | Payments | |
| 6.1 | Quarterly royalty and sublicense revenue payments shall be made in British Pounds Sterling by Omeros to Leicester within sixty (60) days of the end of the quarter. Payments shall be computed based on a conversion from any other denomination to British Pounds Sterling for any revenues received or costs and expenses incurred by Omeros during the relevant quarter or other reporting period, as provided herein, using the prevailing exchange rate in effect at the date and time that funds are transferred from Omeros’ account to Leicester’s account (in the case of payment by wire transfer) or at the date and time of issuance of a check by Omeros (in the case of payment by check). Each quarterly payment shall be accompanied by a report specifying (a) the source of the royalties itemized by product and country, (b) any Omeros IP Legal Fees or Third Party License Fees that were deducted from gross proceeds to determine Net License Proceeds or Net Sublicense Proceeds as provided in Sections 1.10 or 1.11 of this Agreement, and (c) the total of all discounts, returns, credits and commissions deducted from gross proceeds to determine Net License Proceeds or Net Sublicense Proceeds as provided in Sections 1.10 or 1.11 of this Agreement. Following the two-year anniversary of the Effective Date of this Agreement, in the event that Omeros receives no such quarterly royalty and sublicense revenue in any given quarter, it shall nevertheless submit a quarterly report to that effect to Leicester within sixty (60) days of the end of the quarter. | |
| 6.2 | Leicester reserves the right to employ a certified public accountant to review and reconcile the directly relevant accounting records and procedures of Omeros as they relate to the determination of royalties or sublicense revenue fees under Section 5 herein during reasonable business hours and no more than twice a year, and Omeros agrees to make available at Omeros’ place of business all such directly relevant accounting records for that purpose within 30 (thirty) days of written request by Leicester. The cost of such review shall be borne by Leicester, unless it is found that Omeros under-paid a quarterly royalty or sublicense revenue fees for any quarter by an amount of 10% (ten percent) or |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| greater, in which case the cost of such review shall be borne by Omeros. | ||
| 6.3 | In the event any royalty or sublicense revenue fee payments due under Section 5 herein are not timely paid by Omeros, Omeros shall pay to Leicester interest charges on such late payments at a rate of [†] per annum. | |
| 6.4 | Not withstanding anything to the contrary herein, Omeros shall have no obligation to pay any royalties or sublicense revenue fees under Section 5 for any product based on any patent claim that has been declared invalid or unenforceable by a court or governmental body of competent jurisdiction or based on any patent claim that is not enforceable in the jurisdiction(s) where such products are manufactured, used, sold, offered for sale, imported or distributed. | |
| 7 | License Progress | |
| 7.1 | Omeros shall on an annual basis, commencing on the one-year anniversary of the Effective Date of this Agreement and annually thereafter, deliver to Leicester within thirty (30) days after the end of the respective year a written progress report detailing the status of Omeros’ efforts to fund, patent, develop and commercialize Licensed Products and Licensed Research Products. | |
| 8 | Patent Prosecution | |
| 8.1 | Omeros shall have the sole right at its discretion to apply for, prosecute and maintain patents for inventions included within the Leicester IP and the Joint IP (“Patent Filings”) in the name of the legally appropriate inventors and/or parties to this agreement and/or jointly with third parties as may be legally appropriate, provided however that (a) Omeros shall bear all cost and expense for all such Patent Filings, subject to the right to deduct Omeros IP Legal Fees as set forth herein, (b) Omeros shall keep Leicester timely informed of the progress of all Patent Filings and timely provide Leicester copies of all official documentation related to such Patent Filings, (c) at Omeros’ discretion and until such time that Omeros provides a written request for transfer of responsibility, Leicester shall continue at Omeros’ cost with the prosecution of any patent applications for the Leicester IP it may have filed prior to the Effective Date of this Agreement, subject to consultation with and direction from Omeros prior to taking any substantive action, but in any event Omeros shall assume responsibility for prosecuting the patent application attached as Exhibit A hereto within two months following the later of the filing of such patent application by Leicester or the Effective Date of this Agreement, and (d) Omeros shall exert commercially reasonable efforts to diligently pursue all Patent Filings to issuance or final determination of unpatentability, provided however that if Omeros determines at its sole discretion to not make Patent Filings for any commercially significant inventions within the Leicester IP or the Joint IP in any countries of commercial significance, or abandons any Patent Filing prior to issuance or final determination of unpatentability, Omeros shall give Leicester advance written notice of such determination, Leicester shall have the right thereafter to elect upon written notice to Omeros to pursue such Omeros abandoned Patent Filings at Leicester’s sole expense, |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| and such Omeros abandoned Patent Filings shall be excluded from the scope of the licenses granted under this Agreement. | ||
| 8.2 | Omeros shall reimburse Leicester for Leicester’s reasonable documented legal fees and costs paid by Leicester for any patent applications prepared and/or filed or prosecuted by Leicester for inventions within the Leicester IP prior to the effective date of this Agreement or in accordance with Section 8.1 above. Payment for such reimbursed expenses shall be made within thirty (30) days of Omeros’ having received a receipt-documented invoice from Leicester, provided however that Leicester represents that all such legal fees and costs incurred by Leicester prior to the effective date of this Agreement shall not exceed [†]. | |
| 8.3 | Leicester shall promptly provide written disclosure to Omeros of any inventions, improvements, or applications included within the Leicester IP or Joint IP conceived, developed, made or arising before or during the term of this Agreement. Leicester will provide all reasonable assistance, including review of documents and the execution of all documents and causing Leicester’s employees to review and execute all documents, necessary to make, prosecute, maintain and enforce the Patent Filings, all for no additional consideration but with reimbursement by Omeros of Leicester’s reasonable expenses for such assistance. | |
| 8.4 | Leicester shall promptly provide written disclosure to Omeros of any and all potentially material prior art known prior to the Effective Date of this Agreement or that becomes known during the License Term of this Agreement to any Leicester employee that is associated with this Agreement, the Sponsored Research, the Leicester IP or the Joint IP. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 9 | Representations, Warranties and Other Obligations of Omeros | |
| 9.1 | Omeros represents and warrants that it has the requisite corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder. | |
| 9.2 | Omeros has and will maintain reasonably adequate insurance coverage for employment practices and general liability for all its activities under this Agreement. Prior to Omeros’ marketing of any Licensed Product, Licensed Research Products, or product encompassed by the Joint IP, or making any such products available for use in any human patients, Omeros will obtain and maintain reasonably adequate product liability insurance. | |
| 10 | Representations, Warranties and Other Obligations of Leicester | |
| 10.1 | Leicester has disclosed to Omeros the existence of the [†] and information as to the development of the Leicester IP, and Leicester warrants that it has made reasonable efforts to ascertain the details of such development and that it reasonably believes the same to be true. [†]. | |
| 10.2 | [†] | |
| 10.3 | [†] | |
| 10.4 | Leicester represents and warrants, subject to the disclosure referred to in Section 10.1, that it is the owner of all right, title and interest in any and all inventions included within the Leicester IP and the Joint IP made or to be made wholly or jointly by Leicester employees, including without limitation those made by Dr. Schwaeble and Dr. Stover, and shall cause Dr. Schwaeble and Dr. Stover to each execute this Agreement to confirm their agreement to be bound to the same extent as Leicester with respect to all relevant provisions of this Agreement. | |
| 10.5 | Leicester represents and warrants that it is the owner of all right, title and interest in any and all inventions that were made wholly or jointly by Dr. Fujita that are included within the Leicester IP, has obtained an assignment from Dr. Fujita together with a release of all such rights from Fukushima, has provided to Omeros a true copy of such assignment and release, is under no restriction or obligation with respect to Dr. Fujita or Fukishima that is inconsistent in any way with Leicester’s obligations under this Agreement, and that Omeros shall have no obligation to compensate Dr. Fujita or Fukushima as the result of Omeros’ exercise of its rights and fulfillment of its obligations under this Agreement. | |
| 10.6 | Subject to [†] as discussed in Section 10.1 above, Leicester represents and warrants to Omeros that as far as it is aware, after having used reasonable efforts to ascertain relevant facts and having formed a reasonable belief as to their truth, it has the lawful right to grant the licenses conveyed under this Agreement, and that the Leicester IP and the Joint IP are unencumbered by any third party obligation, commitment, restriction or license. [†]. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 10.7 | [†], Leicester warrants that it is not aware of any third party rights that would be infringed as a result of Omeros’ fulfilling the terms of this Agreement. | |
| 10.8 | Leicester has and will maintain reasonably adequate insurance coverage for employment practices and general liability for all its activities under this Agreement. | |
| 10.9 | THE WARRANTIES SET FORTH EXPRESSLY IN THIS AGREEMENT ARE THE SOLE WARRANTIES MADE BY EITHER PARTY TO THE OTHER AND THERE ARE NO OTHER WARRANTIES, REPRESENTATIONS OR GUARANTEES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED, REGARDING THE LICENSED PRODUCTS, THE LICENSED RESEARCH PRODUCTS, OR OTHER PRODUCTS, INCLUDING WITHOUT LIMITATION ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. | |
| 11 | Confidentiality | |
| 11.1 | Leicester and Omeros hereby affirm and incorporate by reference the terms of the Mutual Nondisclosure Agreement between the parties dated September 23, 2003 concerning the subject matter of this Agreement, a copy of which is attached hereto as Exhibit C, except to the extent that the terms of such nondisclosure agreement may conflict with the terms of this Agreement, in which case the terms of this Agreement shall prevail. The parties further agree that the mutual obligations of nondisclosure and non-use set forth in such Mutual Nondisclosure Agreement shall subsist for a period of five (5) years after the termination of this Agreement. | |
| 11.2 | The terms of this Agreement shall be maintained in strict confidence by both Leicester and Omeros, and may not be disclosed by either party without the consent of the other party, except as may be required under a court order or decree or as required to comply with any governmental law, rule or regulation, and Omeros may disclose the terms of this Agreement to Omeros’ current and potential employees, directors, consultants, shareholders, investors and corporate partners. | |
| 12 | Indemnification | |
| 12.1 | Each party (the “Indemnifying Party”) shall indemnify, hold harmless and defend the other party and its employees, officers, directors, consultants and agents (the “Indemnified Party”) against any and all claims, suits, losses, liabilities, damages, costs, fees, and expenses (“Claims”) resulting from or arising directly out of the Indemnifying Party’s breach of any representation, warranty or obligation under this Agreement, or the Indemnifying Party’s exercise of the rights and obligations under this license or any sublicense, except that such obligation to indemnify, hold harmless and defend shall not extend to any Claims to the extent such Claims result from or arise directly from the negligence or misconduct of the Indemnified Party. This indemnification does not include any indemnity in relation to product performance or product liability, and furthermore does not include any incidental, consequential or special damages. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 13 | Enforcement of Patent Rights | |
| 13.1 | If either party learns of the infringement of any patent or other intellectual property right included in the Leicester IP or the Joint IP, that party shall promptly notify the other party of such infringement and will provide the other party with all evidence of infringement in the notifying party’s possession. Both parties shall use their best efforts in cooperation with each other to terminate third party infringement without litigation. | |
| 13.2 | Omeros shall have the sole right at its discretion to enforce the Leicester IP and the Joint IP against third party infringers, including the initiation of any civil action in Omeros’ name, at Omeros’ sole cost, in which event any award, judgment, settlement or damages collected shall belong solely to Omeros without duty to account to Leicester. In the event that it is necessary for Omeros to join Leicester as a party to any such civil action, Leicester shall join such action for no additional compensation but at Omeros’ sole expense, and any award, judgment, settlement or damages collected shall belong solely to Omeros without duty to account to Leicester. | |
| 13.3 | If Omeros unreasonably declines to initiate enforcement of the Leicester IP and the Joint IP against any third party infringer within ninety (90) days of a written demand from Leicester to do so, then Leicester shall have the sole right at its discretion to enforce the Leicester IP and the Joint IP against such third party infringer, including the initiation of any civil action in Leicester’s name, at Leicester’s sole cost, in which event any award, judgment, settlement or damages collected shall belong solely to Leicester without duty to account to Omeros. | |
| 14 | Term and Termination | |
| 14.1 | Unless terminated earlier as set forth in Section 14.2 or 14.3 herein below, this Agreement shall subsist so long as there is any pending patent application within the Leicester IP or the Joint IP, any patent application in the process of being prepared for filing as agreed to by Omeros and Leicester or any valid and subsisting claim included within any patent, utility model or inventor’s certificate within the Leicester IP or the Joint IP (the “License Term”). | |
| 14.2 | Omeros may terminate this Agreement by providing ninety (90)-days advance written notice of termination under this Section 14.2 to Leicester, with or without cause, [†]. | |
| 14.3 | Either party may terminate this Agreement at any time in the event that the other party (a) breaches any material obligation of this Agreement by first submitting written notice of breach to the breaching party, which breach is not substantially cured within ninety (90) days of the receipt of such notice, followed by written notice of termination then being sent to the breaching party, or (b) declares or is adjudged by a court of competent jurisdiction to be insolvent, bankrupt or in receivership, and such insolvency, bankruptcy or receivership materially limits such party’s ability to perform its obligation under this Agreement, excluding reorganizations entered into by such party with the consent of the other party, which consent shall not be unreasonably withheld. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 14.4 | Omeros may at any time terminate its sponsorship of the Sponsored Research by providing ninety (90)-days advance written notice of termination under this Section 14.4 to Leicester, with or without cause, at any time, in which event Sections 2.1 — 2.3 herein shall cease to be effective, and Sections 2.4 and 2.5 shall cease to be effective after all reports are provided and accepted and all payments are made for Sponsored Research performed in accordance with the applicable Research Plan prior to such notice, but the remainder of this Agreement shall continue in full force and effect for the License Term, including all rights and obligations of both parties hereunder. In the event of Omeros’ termination of its sponsorship of the Sponsored Research under this Section 14.4, Omeros shall pay to Leicester any and all non-cancelable sums reasonably incurred or committed to by Leicester prior to receipt of the notice of termination. | |
| 14.5 | The provisions of Sections 2.6 (Publication), 3 (Ownership of Intellectual Property), 4.2 – 4.6 (License as applicable to Joint IP and right of first refusal), 8 (Patent Prosecution as applicable to Joint IP), 9 and 10 (Representations and Warranties and Other Obligations), 11 (Confidentiality), 12 (Indemnification), 13 (Enforcement as applicable to Joint IP), 15 (Use of Names) and 16 (Miscellaneous) above shall survive expiration or termination of this Agreement for the period set forth therein or, if no period is set forth therein, then indefinitely. | |
| 15 | Use of Names | |
| 15.1 | Nothing contained in this Agreement confers any right to either party to use in advertising, publicity, or other promotional activities any name, trade name, trademark, or other designation of the other party hereto, and neither party shall make such use without the prior written consent of the other party, provided however Omeros may through written, oral or electronic communication disclose the existence of this Agreement and the names of Leicester, Dr. Schwaeble, Dr. Stover, Dr. Fujita and other of Leicester’s employees and consultants to Omeros’ current and potential employees, directors, consultants, shareholders, investors and corporate partners, and as required to comply with any governmental law, rule or regulation. | |
| 16 | Miscellaneous | |
| 16.1 | This Agreement including all appendices and exhibits attached thereto or incorporated by reference therein constitutes the entire understanding of the parties hereto regarding the subject matter of this Agreement, and no other representation, agreement, promise or undertaking altering, modifying, taking from or adding to the terms of this Agreement shall have any effect unless the same is reduced to writing and duly executed by the parties hereto. In the event of any conflict between the main body of this Agreement and any attachments thereto or documents incorporated by reference therein, the provisions of the main body of this Agreement shall control. | |
| 16.2 | Either party’s failure to enforce any provision of this Agreement will not be considered a waiver of future enforcement of that or any other provision. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 16.3 | The laws of the state of Delaware, United States, without regard to its conflict-of-laws provisions, shall govern this Agreement, its interpretation and its enforcement, and any disputes arising out of or related to this Agreement. | |
| 16.4 | The parties agree that, except as provided herein below, any claim or controversy arising out of or relating to this Agreement or breach thereof shall be settled by arbitration in the state of Delaware, United States, in accordance with the commercial rules of the American Arbitration Association by a panel of three arbitrators, one selected by each party and the third selected by the other two arbitrators. In any such arbitration proceeding, judgment upon the award rendered by the arbitrator shall be final and binding upon the parties and may be entered by either party in any court or forum of competent jurisdiction as provided herein below. Notwithstanding the foregoing, both parties agree that any claims or controversies concerning the validity or enforceability of any intellectual property, or the actual or threatened disclosure or misuse of confidential information, may alternately be resolved by a civil action in any court of competent jurisdiction as provided herein below, and both parties further agree that each shall retain the right to seek injunctive relief in any court of competent jurisdiction as provided herein below to prevent a breach, threatened breach or continuing breach of this Agreement which would cause irreparable injury (e.g., breaches of confidentiality or the like). | |
| 16.5 | Any civil action prosecuted or instituted by either party as permitted herein above with respect to any matters arising out of or related to this Agreement shall be brought in either the United States District Court located in the state of Delaware, United States (if federal subject matter jurisdiction therein lies) or the Superior Court for the state of Delaware, United States (if there is no subject matter jurisdiction in federal court), and each party hereby consents to the jurisdiction and venue of such courts for such purposes. | |
| 16.6 | In the event that it is necessary for either party of this Agreement to take legal action to enforce any of the terms, conditions or rights contained herein, or to defend any such action, then the prevailing party in such action shall be entitled to recover from the other party all reasonable attorneys fees, costs and expenses related to such legal action. | |
| 16.7 | In the event that any portion of this Agreement is held invalid or unenforceable by a court of law, that provision will be construed and reformed to permit enforcement of the provision to the maximum extent permissible consistent with the parties’ original intent, and if such construction is not possible, such provision shall be struck from this Agreement, and the remainder of the Agreement shall remain in full force and effect as if such provision had never been part of this Agreement. | |
| 16.8 | For the purposes of this Agreement, the parties hereto are independent contractors, and nothing in this Agreement shall be construed to place them in the relationship of partners, principal and agent, employer/employee or joint venturers. Except as provided expressly herein, each party agrees that it shall have no authority to bind or obligate the other party, nor shall any party hold itself out as having such authority. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 16.9 | Neither party will be liable for failure or delay in performing any obligation under this Agreement, or will be considered in breach of this Agreement, if such failure or delay is due to a natural disaster or any cause reasonably beyond such party’s control, provided that such party resumes performance as soon as possible following the end of the event that caused such delay or failure of performance. | |
| 16.10 | Neither party may assign this Agreement, or any obligation or right under this Agreement, in whole or in part, without the other party’s prior written consent, which consent will not be unreasonably withheld. This Section shall not be construed in any way to limit Omeros’ rights to grant, at Omeros’ sole discretion, sublicenses hereunder. Leicester consents to Omeros’ assignment of this Agreement in whole or in part in connection with the merger, consolidation or transfer of all or substantially all of that portion of Omeros’ assets to which this Agreement relates. Subject to these restrictions, this Agreement will be binding upon and will inure to the benefit of the parties’ permitted successors and assignees. | |
| 16.11 | Any notice required or permitted to be given hereunder by either party shall be in writing and shall be (a) delivered personally, (b) sent by registered mail, return receipt requested, postage prepaid, (c) sent by an internationally recognized courier service guaranteeing next-day delivery, charges prepaid, or (d) delivered by facsimile (with the original promptly sent by any of the foregoing manners) to the addresses or facsimile numbers of the other party set forth below, or at such other addresses as may from time to time be furnished by similar notice by either party. The effective date of any notice hereunder shall be the date of receipt by the receiving party. |
If to Omeros:
|
If to Leicester: | |
Omeros Corporation
|
University of Leicester | |
1420 Fifth Avenue, Suite 2600
|
University Road | |
Seattle, WA 98101
|
Leicester, LE1 7RH | |
U.S.A.
|
United Kingdom | |
Attention: Gregory A. Demopulos, M.D.,
|
Attention: Research and | |
Chairman & CEO
|
Business Development Office | |
And copy to: Marcia S. Kelbon, |
||
Patent & General Counsel |
||
Fax: (206) 264.7856
|
Fax: +44 (0) 116.252.2028 | |
Phone: (206) 623.4688
|
Phone: +44 (0) 116.252.2347 |
| 16.12 | This Agreement may be executed in one or more counterparts, each of which will be considered an original, and all of which will constitute the same instrument. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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IN WITNESS WHEREOF, Omeros and Leicester have each acknowledged and accepted this Agreement by
causing it to have been signed by their respective duly authorized officials.
| OMEROS CORPORATION | UNIVERSITY OF LEICESTER | |||||||
By:
|
/s/ Gregory A. Demopulos
|
By: | /s/ Clare O’Neill
|
|||||
Name:
|
Gregory A. Demopulos, M.D. | Name: | Clare O’Neill | |||||
Title:
|
Chairman & CEO | Title: | Business Development Manager | |||||
Date:
|
7/6/04 | Date: | 10th June 2004 | |||||
Fax:
|
206.264.7856 | Fax: | 0044 116 252 2028 | |||||
The above Exclusive License and Sponsored Research Agreement is acceptable to the
undersigned investigators, who agree to abide by the terms set forth therein.
| WILHELM J. SCHWAEBLE, PH.D. | CORDULA M. STOVER, PH.D. | |||||||
Signed:
|
/s/ Wilhelm J. Schwaeble | Signed: | /s/ Cordula M. Stover | |||||
Title:
|
Professor of Immunology | Title: | Lecturer in Immunology | |||||
Date:
|
10/06/04 | Date: | 10 June 04 | |||||
Fax:
|
0044-116-252-5030 | Fax: | 0044-116-252-5030 | |||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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EXHIBIT A
To the Exclusive License and Sponsored Research Agreement
Between Omeros Corporation and the University of Leicester
PATENT APPLICATION
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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EXHIBIT B
To the Exclusive License and Sponsored Research Agreement
Between Omeros Corporation and the University of Leicester
RESEARCH PLAN
1st-Year Research Program Outline – Omeros and University of Leicester
The following are the research aims of the Sponsored Research program for the first year. All
activities to meet the aims are to be carried out by Leicester (“Dr. Schwaeble’s lab”) except for
those aims noted for performance by Omeros, other investigators or contractors. Aims indicated as
to be performed by Omeros or third parties are provided herein for reference purposes only and
shall not be interpreted as any obligation on the part of Omeros. Specific aims and corresponding
timeline may be modified as mutually agreed in writing by Dr. Wilhelm Schwaeble and Omeros.
Aims as set forth will extend into a second year of the Sponsored Research Program.
Specific Aims:
[†]
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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EXHIBIT C
To the Exclusive License and Sponsored Research Agreement
Between Omeros Corporation and the University of Leicester
MUTUAL CONFIDENTIALITY AGREEMENT
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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Exhibit 10.30
RESEARCH AND DEVELOPMENT AGREEMENT
FIRST AMENDMENT
This is an amendment effective 1 October 2005 (this “Amendment”) of the Exclusive License and
Sponsored Research Agreement dated 10 June 2004 (the “Agreement”) between Omeros Corporation, a
Washington corporation having a principal place of business at 1420 Fifth Avenue, Suite 2600,
Seattle WA 98101 USA (“Omeros”) and the University of Leicester, having a principal place of
business at University Road, Leicester LE1 7RH, United Kingdom (“Leicester”). All capitalized
terms used in this Amendment shall have the same meaning as set forth in the Agreement unless
otherwise defined below.
Omeros and Leicester have determined that certain rights to the [†] may be held by the Medical
Research Council, a United Kingdom governmental institution having a place of business at 20 Park
Crescent, London, United Kingdom, W1B 1AL (“MRC”). Omeros is currently in negotiations with, and
anticipates entering into, an exclusive license and sponsored research agreement with MRC (the “MRC
Agreement”) concerning MRC’s rights to the [†]. Leicester and Omeros wish to facilitate Omeros’
entry into the MRC Agreement, to enable collaborative research related to MASP-2 by Omeros,
Leicester and MRC, and to facilitate development and commercialization of MASP-2 technology by
Omeros. Omeros and Leicester therefore agree that the Agreement shall be amended as follows, with
sections of this Amendment being numbered to match corresponding Sections of the Agreement.
2.2 Sponsored Research
| 2.1 | In accordance with Section 2.1 of the Agreement, a collaborative research plan for a second year (“Second Year Research Plan”) of the Sponsored Research Term is attached hereto as Exhibit A and is hereby incorporated into the Agreement. The Second Year Research Plan provides a budget and specific aims and activities to be carried out by Leicester with the sponsorship of Omeros, as specified in specific aims 2 and 4 set forth therein (“Second Year Leicester Research”), subject to any modifications that may be agreed to in writing by Omeros and Leicester. The Second Year Research Plan also describes research aims and activities that are projected to be carried out by Omeros (specific aim 3) and MRC (specific aim 1), subject to entry by Omeros into the MRC Agreement. The specific aims 1 and 3, and the experimental models of specific aim 5, are set forth for reference purposes only, are not binding on Omeros, and may or may not be authorized, carried out and performed at Omeros’ sole discretion. | |
| 2.2 | In accordance with Section 2.2 of the Agreement, the Sponsored Research Term is hereby acknowledged to have been extended for a second year, commencing 1 September 2005. | |
| 2.5 | Section 2.5 of the of the Agreement is hereby amended to provide that the total compensation to be paid by Omeros to Leicester for Sponsored Research completed by Leicester in accordance with the Agreement and the Second Year Research Plan during the second year of the Sponsored Research Term shall be [†]. This Leicester |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
1
| compensation amount is contingent upon alternate funding being secured for the services of Russell Wallis, Ph.D. to work at MRC and/or Leicester on the collaborative research program during the second year of the Sponsored Research Term. Should such funding not be available through the MRC Agreement, as currently anticipated by the parties, or other means, Omeros will increase the Leicester compensation amount to provide funding for such services at a mutually agreed level. |
5. Royalties and Sublicense Revenue
| 5.1 | Omeros and Leicester acknowledge that Omeros may deduct accrued Third Party Royalties from the [†] Licensed Product Royalty payable to Leicester, up to [†] of the Licensed Product Royalty, as more fully set forth in Section 5.1 of the Agreement. Subject to entry into the MRC Agreement, Omeros intends to pay MRC a royalty that is equivalent to the License Product Royalty payable to Leicester for Licensed Products that may be subject to the MRC Agreement, with an equivalent third party royalty deduction. MRC is a third party relative to Omeros and Leicester, and Leicester is a third party relative to MRC and Omeros. Subject to entry into the MRC Agreement on such a basis, Leicester acknowledges that Omeros will be obligated to pay net royalties, after deduction of third party royalties, of [†] to Leicester and [†] to MRC, of Net Licensed Proceeds for Licensed Products that may be subject to the MRC Agreement, and will no longer be able to deduct any additional third party royalties | |
| Therefore, subject to entry into the MRC Agreement on the above basis, Omeros and Leicester hereby agree that, if the total royalties owed by Omeros to all parties for Licensed Products, including without limitation the Licensed Product Royalty payable to Leicester, any royalties payable to MRC, [†], and any “stacking fee(s)” or other royalties payable to third parties to develop, manufacture and commercialize the Licensed Products (all together the “Total Royalty Percentage”), exceeds [†] of the Net Licensed Proceeds, then [†] of the difference between the Total Royalty Percentage and [†] shall be deducted from the Licensed Product Royalty payable to Leicester, provided, however that the Licensed Product Royalty may not be reduced by such deductions to less than [†]. | ||
| 5.3 | Subject to entry into the MRC Agreement, Leicester further agrees to up to a [†] maximum reduction in the Sublicensed Product Revenue Share, as set forth in Section 5.3 of the Agreement, by deducting the amount of Net Sublicense Proceeds payable by Omeros to MRC for sublicensing of Licensed Products subject to the MRC Agreement. | |
| Omeros represents and warrants that, unless otherwise agreed to in writing by Omeros and Leicester and subject to entry by Omeros into the MRC Agreement, the total exclusive license compensation (not including Sponsored Research compensation) payable to Leicester under the Agreement, as amended by this Amendment, shall be equal to the total compensation payable to MRC under the MRC agreement for any Licensed Products that are subject to both the exclusive license granted under the Leicester Agreement and the exclusive license granted under the MRC Agreement. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
2
All other provisions of the Agreement, including Sections 1 through 16 inclusive, as amended
above, shall continue unchanged in full force and effect.
This Amendment is accepted and acknowledged by each party, as of the effective date set forth
herein above, through the signature of its authorized representative(s) below:
| OMEROS CORPORATION | UNIVERSITY OF LEICESTER | |||||
By:
|
/s/ Gregory A. Demopulos | By: | /s/ Clare O’Neill | |||
Name:
|
Gregory A. Demopulos, M.D. | Name: | Clare O’Neill | |||
Title:
|
Chairman & CEO | Title: | Deputy Head, Business Development | |||
Date:
|
10/10/05 | Date: | 5-10-05 | |||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
3
EXHIBIT A
SECOND YEAR RESEARCH PLAN
OMEROS AND UNIVERSITY OF LEICESTER
Sponsor: Omeros Corporation
Research Institution: University of Leicester
Investigator: Prof. Wilhelm Schwaeble
Research Period: Second year, commencing 1 September 2005
Research Aims and Activities
Attachment 1 hereto sets for the research aims of the Sponsored Research program to be
completed during the second year. All activities to meet specific aims 2 and 4 are to be carried
out by Leicester (“Prof. Schwaeble’s lab”). Aims indicated as to be performed by Omeros or third
parties are provided herein for reference purposes only and shall not be interpreted as any
obligation on the part of Omeros. Specific aims and the corresponding timeline may be modified as
mutually agreed in writing by Prof. Wilhelm Schwaeble and Omeros.
Budget for Second Year
The total consideration to be paid to Leicester for all Sponsored Research to be carried out during
the second year of the Sponsored Research program, including without limitation full and complete
payment for all services, materials, facilities, overhead and indirect costs, is as follows:
Animal housing and breeding:
|
[†] | |
Oversight by Prof. Schwaeble:
|
[†] | |
Total:
|
[†] | |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
1
Exhibit 10.31
EXCLUSIVE LICENSE AND SPONSORED RESEARCH AGREEMENT
between
OMEROS CORPORATION and MEDICAL RESEARCH COUNCIL
This license agreement (the “Agreement”) is made effective the 31st day of October 2005 (the
“Effective Date”) between Omeros Corporation, a Washington corporation having a principal place of
business at 1420 Fifth Avenue, Suite 2600, Seattle WA 98101 USA (“Omeros”) and Medical Research
Council, a United Kingdom governmental institution having a place of business at 20 Park Crescent,
London, United Kingdom, W1B 1AL (“MRC”).
WHEREAS MRC owns rights to certain technology related to mannan-binding lectin associated
serine protease-2 (“MASP-2”), which technology was developed in part by Anthony C. Willis (“Mr.
Willis”) working in an MRC laboratory under the direction of Professor Kenneth B. M. Reid (“Dr.
Reid”), both employees of MRC;
WHEREAS Omeros holds an exclusive, worldwide license to rights owned by the University of
Leicester (“Leicester”) related to the MASP-2 technology due to the development in part of the
MASP-2 technology by Leicester’s employees;
WHEREAS Omeros wishes to undertake an exclusive license to MRC’s rights in the MASP-2
technology, and to sponsor further research by MRC to develop the MASP-2 technology at MRC, under
the direction of Dr. Reid, working in collaboration with Omeros and Leicester; and
WHEREAS MRC wishes to grant Omeros an exclusive license in MRC’s rights to the MASP-2
technology in return for potential royalty payments and sublicense revenue sharing, and to accept
payment for such sponsored research;
NOW THEREFORE, in consideration for the mutual covenants and obligations set forth herein as
well as other good and valuable consideration, the parties hereby agree as follows:
| 1 | Definitions | |
| 1.1 | Reference to “MRC” and “Omeros” in regards to any intellectual property right developed by the respective party shall be construed to refer to the respective party as well as the respective party’s employees, officers, directors, consultants and agents. | |
| 1.2 | “Intellectual Property Rights” shall mean all inventions, ideas, discoveries, issued, reissued or reexamined patents, pending and future patent applications, continuation, continuation-in-part and divisional patent applications, utility models, inventor’s certificates, trade secrets, know-how, copyrights and trademarks. | |
| 1.3 | “Sponsored Research” shall mean all research activities carried out by MRC and/or its employees (as may be agreed by MRC and Omeros) with the financial sponsorship, in whole or in part, by Omeros in accordance with Section 2 herein below or as otherwise agreed. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 1.4 | “MRC IP” shall mean all Intellectual Property Rights owned or held by MRC, including without limitation all such Intellectual Property Rights arising from the work of Mr. Willis, Dr. Reid and/or other MRC employees, prior to the Effective Date of this Agreement, or developed or obtained by MRC after the Effective Date of this Agreement both (a) independently of Omeros (as determined by inventorship under US law with respect to any patents and patent applications) and (b) independently of the Sponsored Research, provided always that any of the Intellectual Property Rights described above in this section 1.4 are directly related to compositions, antibodies and/or methods for the inhibition of MASP-2 and/or the diagnosis and/or treatment of MASP-2 mediated disorders and/or deficiency syndromes, as well as methods, polynucleotides, polypeptides, sequences and tools related to the development and production of MASP-2 antibodies, including without limitation murine, human, humanized and recombinant antibodies, MASP-2 inhibitors, [†]. | |
| 1.5 | “Omeros IP” shall mean all Intellectual Property Rights owned or held by Omeros prior to the Effective Date of this Agreement, or developed or obtained by Omeros after the Effective Date of this Agreement independently of MRC (as determined by inventorship under US law with respect to any patents and patent applications), including without limitation all such Intellectual Property Rights (a) related to MASP-2 obtained by Omeros under license from Leicester (including without limitation all MASP-2 and MAp19 rights conveyed under the Omeros-Leicester Agreement of 10 June 2004) or developed by Omeros independently of MRC by Omeros and (b) related to methods and pharmaceuticals or other agents to inhibit pain, inflammation, cartilage loss, vasospasm, smooth muscle spasm, restenosis, or tumor cell adhesion, and/or to accelerate recovery of joint motion and function, for use in surgical procedures (including without limitation arthroscopic, cardiovascular, urologic and general surgical procedures), other medical procedures, and/or for treatment of cartilaginous disorders, and drug delivery methods and systems. | |
| 1.6 | “Joint IP” shall mean (a) all Intellectual Property Rights in technology that is developed jointly (as determined by inventorship with respect to any patents and patent applications) by Omeros and MRC (as may be agreed by MRC and Omeros) during the Sponsored Research Term (as that term is defined in Section 2.2 herein), and (b) all Intellectual Property Rights arising from and as the direct result of the Sponsored Research. Joint IP may or may not also be jointly developed with Leicester or other third party, which will not change the nature of the Intellectual Property Rights as Joint IP so long as the first sentence of this Section applies. Should any MRC employee enter into a consulting agreement with Omeros for general scientific consulting such as in the field of inflammation, then to the extent that such scientific consulting services may pertain to MASP-2, the results of such scientific consulting services will be treated as part of the Joint IP. However, the parties acknowledge herein that research by MRC employees on behalf of Omeros related to MASP-2 will be carried out in major part through the Sponsored Research. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 1.7 | [†] | |
| 1.8 | “Licensed Products” shall mean all antibodies, inhibitors and all other products that, were it not for the license granted to Omeros under this Agreement, infringe, or the use, manufacture, offer for sale or sale of which infringe any valid and subsisting claim(s) of any issued patent or any patentable claim(s) of any pending patent application included within the MRC IP in the country or countries in which such products are offered for sale, sold, manufactured or used, excluding all products that would be included within the Licensed Products in accordance with the above definition only because they are products that [†]. | |
| 1.9 | “Net License Proceeds” shall mean the total of the gross monetary amounts invoiced and collected by Omeros for Licensed Products (or that portion of the value of any combination product attributed to a Licensed Product included therein) used, manufactured, directly sold or directly distributed by Omeros, less (a) the sum of the following actual and customary deductions where applicable: cash, trade, or quantity discounts; sales, use, tariff, import/export duties or other excise taxes, and any other governmental taxes imposed on particular sales; transportation charges and allowances; commissions to third party sales agents; and credits to customers because of rejections or returns and (b) any accrued Omeros IP Legal Fees (as defined below) not previously deducted. For purposes of this paragraph, the acquisition of Licensed Products from Omeros as part of an acquisition of all or a substantial part of the assets of Omeros’ business to which this Agreement pertains shall not be considered a manufacture, sale or distribution. | |
| 1.10 | “Net Sublicense Proceeds” shall mean the total of all sublicense royalties or sublicense fees received by Omeros from third parties to which Omeros grants a sublicense under the MRC IP for the manufacture, sale or distribution of Licensed Products, and which were not included in the Net License Proceeds, less any accrued Omeros IP Legal Fees not previously deducted, provided however that the Net Sublicense Proceeds shall not include any fees or payments from such third parties to Omeros to support research and development efforts, to purchase equity in Omeros, or for any other purpose other than as compensation for sublicense rights. | |
| 1.11 | “Omeros IP Legal Fees” shall mean the sum of all legal fees and costs incurred by Omeros to (a) evaluate, apply for, prosecute and maintain any Intellectual Property Rights included within the MRC IP, including without limitation any such fees and costs paid by Omeros as reimbursement to MRC for such fees and costs incurred by MRC, and (b) obtain or assist MRC in obtaining or attempting to obtain clear, defensible, lawful and uncontested title to the MRC IP, including without limitation all such fees and costs incurred in [†]. | |
| 1.12 | “Third Party License Fees” shall mean all royalties or other fees paid by Omeros to third parties for a license from such third parties under Intellectual Property Rights owned or held by such third parties for the manufacture, use, offer for sale, sale or distribution of Licensed Products, but shall exclude that portion of any such third party royalties |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| (including without limitation royalties payable to Leicester) or other fees paid by Omeros attributed to items sold in combination with the Licensed Products, which items are not Licensed Products. | ||
| 2 | Sponsored Research | |
| 2.1 | MRC shall perform research to be conducted by or under the direction of Dr. Reid and another MRC senior research investigator (the “MRC Co-investigator”) working under the direction of Dr. Reid as may be agreed between MRC and Omeros (Dr. Reid and the MRC Co-investigator collectively “MRC Investigators”), directed to advancing the technology included in the MRC IP or related technology concerning the characterization and inhibition of MASP-2, supported by the financial sponsorship of Omeros, and without the use of third party sponsorship that would provide any intellectual property rights in the results of the Sponsored Research to such third party, in accordance with one or more research plans (“Research Plans”) agreed to in advance in writing between MRC and Omeros. An initial Research Plan is attached hereto as Exhibit A. The Research Plans may involve collaborative research efforts by Omeros, MRC and/or Leicester as may be agreed between MRC and Omeros. No Research Plan or any amendment thereto shall be effective until executed by MRC and Omeros, and upon mutual execution shall be automatically incorporated into this Agreement. Each Research Plan shall define scientific aims, objectives and activities, a budget and a timeline for performance of Sponsored Research during the corresponding time period. | |
| 2.2 | The Sponsored Research shall be completed over a term (the “Sponsored Research Term”) of thirty four months (34 months) commencing 1 November 2005 or as may otherwise be mutually agreed in writing. If Omeros or MRC wishes to terminate the Sponsored Research Term early, such party shall provide the other party notice of non-extension at least ninety (90) days prior to the end of any given year of the Sponsored Research term, i.e., by 3 August of such year. In the event of a breach of this Agreement by MRC during the Sponsored Research Term, Omeros may terminate the Sponsored Research Term as provided in accordance with Section 14.4 below at its sole discretion, without penalty. If Omeros should terminate the Sponsored Research Term as provided in accordance with Section 14.4 below for any other reason before completion of the full Sponsored Research Term, or upon completion of the full Sponsored Research Term, Omeros will reimburse MRC for any legally required severance payable to the MRC Co-investigator due solely to the termination or conclusion of the Sponsored Research, not to exceed [†], provided, however that MRC will utilize its best efforts to minimize or avoid the need for any such payment, including without limitation efforts to find other support for the MRC Co-investigator, and provided further that MRC shall provide Omeros with documentation of the legal requirement for and amount of any such severance. The Sponsored Research Term shall run independently of the License Term (as defined herein below) of this Agreement. Termination of this Agreement shall result in termination of the Sponsored Research Term, but termination of the Sponsored Research Term, such as in accordance with this Section 2.2 or Section 14.4 herein, shall not affect the overall status of this Agreement or the License Term. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 2.3 | MRC shall supply all necessary personnel, administrative management, facilities, equipment and supplies to enable timely completion of the Sponsored Research, including both of the MRC Investigators, for the duration of the Sponsored Research Term. Reimbursement for MRC’s costs and expenses for the Sponsored Research shall be provided only to the extent agreed to in writing in the applicable Research Plan. Each Research Plan will be completed diligently by MRC using best efforts in accordance with prevailing professional standards and all applicable laws, regulations and MRC’s official policies. Should the MRC Investigators become unavailable to complete any Research Plan, MRC and Omeros may agree on a substitute investigator, and in the event that a mutually acceptable substitute is not available, either party may terminate the Sponsored Research Term. | |
| 2.4 | Within thirty (30) days of the end of each quarter of the Sponsored Research Term, MRC shall submit a status report in written and electronic form (“Status Report”) summarizing the results of the research completed during that quarter, except that annually within thirty (30) days of the end of each year of the Sponsored Research Term or at such other point in time as may be mutually agreed in writing, MRC shall submit a final status report in written and electronic form (“Final Report”) detailing the results of the research completed during such year of the Sponsored Research Term. Upon Omeros’ request, MRC shall complete all requested corrections and make reasonable revisions to each Status Report and/or Final Report to place it into a form suitable to meet Omeros’ objectives, including potential use of any Status Report and/or any Final Report as part of any regulatory submissions. | |
| 2.5 | In full and complete consideration for the Sponsored Research completed by MRC during the Sponsored Research Term in accordance with the Research Plan(s), Omeros shall pay MRC a total of [†] over the Sponsored Research Term in accordance with the annual schedule set forth in Exhibit A, unless the Sponsored Research Terms is terminated earlier in accordance with the provisions of this Section 2, in which case no further scheduled payments shall be payable, or unless a change in the level of Sponsored Research work is agreed to in writing in subsequent Research Plans, and subject to the following potential adjustment based on the British national pay scale. The salary portion of the compensation amount payable during each year includes a projected increase for changes in the British national standard pay scale, and shall be adjusted up or down annually to reflect actual changes in the British national standard pay scale. Compensation for each year of the Sponsored Research Term shall be payable at the rate of twenty five percent (25%) of the annual amount per quarter, with a first quarterly payment due and payable upon the start of the year, second and third quarterly payments due and payable four and eight months, respectively, from the start of the year, and a fourth quarterly payment due and payable upon the later of the end of the year or acceptance of a Final Report for such year; provided, however, that no payment shall be due for any quarter prior to the receipt and acceptance by Omeros of a Status Report or any Final Report, as appropriate, for the respective quarter or year. All undisputed payments that have become due and payable shall be paid within thirty (30) days of receipt of an invoice from MRC. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 2.6 | Omeros and the MRC Investigators shall collaborate on any proposed scientific publications of Sponsored Research data and results, including a discussion of authorship and contents. MRC shall furnish Omeros with copies of any publication or written or oral disclosure that is proposed by MRC, including, without limitation, disclosures in papers or abstracts or at research seminars, lectures, professional meetings, or poster sessions, at least sixty (60) days prior to the proposed date for submission for publication or disclosure. During such 60-day period, Omeros shall have the right to review and comment on such publication for accuracy and protection of confidential information. Additionally, upon Omeros’ written request during the foregoing 60-day period, the proposed submission for publication or disclosure shall be delayed until Omeros has completed the filing of patent applications directed to information contained in such proposed publication or disclosure or based on Omeros’ reasonable determination that publication should be delayed due to other business considerations, but in no event will such delay exceed an additional ninety (90) days following the initial 60-day period without MRC’s written consent, which consent shall not be unreasonably withheld. Omeros shall have the right, in its sole discretion, to use, disclose, disseminate and publish (with due acknowledgement of authorship) all data and results arising out of the Sponsored Research for any and all purposes, including without limitation in and for submissions to any regulatory agencies and in marketing any products including, but not limited to, Licensed Products. | |
| 3 | Ownership of Intellectual Property | |
| 3.1 | All MRC IP shall remain owned or held by MRC to the same extent as would be the case were it not for this Agreement. | |
| 3.2 | All Omeros IP shall remain owned or held by Omeros to the same extent as would be the case were it not for this Agreement. | |
| 3.3 | All Joint IP shall be jointly owned by Omeros and MRC, i.e., Omeros and MRC each shall hold a 50% undivided joint ownership interest in all Joint IP, provided however that Omeros and MRC recognize that third party collaborators such as Leicester may also have an ownership interest in intellectual property included in the Joint IP, which third party ownership interest shall not be impacted or determined by this Agreement. | |
| 4 | Grant Of License | |
| 4.1 | MRC hereby grants to Omeros for the term of this Agreement a royalty-bearing, world-wide exclusive license in the MRC IP for the research, development, manufacture, use, sale, offering for sale, distribution, exportation and importation of any and all products and the practice of all methods within the MRC IP, including without limitation the exclusive right to develop, manufacture, use, sell, offer for sale, distribute, export and import the Licensed Products for all purposes including without limitation the research, development and production of antibody or other MASP-2 inhibitor products. | |
| 4.2 | MRC hereby grants to Omeros a fully paid-up, irrevocable, world-wide exclusive license in and to MRC’s joint ownership interest in the Joint IP, for the manufacture, use, sale, |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| offering for sale, distribution, exportation and importation of any and all products and the practice of all methods encompassed by the Joint IP. | ||
| 4.3 | Subject to publication approval and timing procedures consistent with Section 2.6 herein, MRC shall retain the right to use the MRC IP and the Joint IP for the purpose of conducting non-commercial, academic research, including research sponsored by not-for-profit entities, which shall not include the performance of research sponsored (directly or indirectly) by or on behalf of any for-profit entity that is in direct competition with Omeros in a technology, product or research tool that is the subject of the MRC IP or Joint IP. | |
| 4.4 | Omeros shall have the right to grant sublicenses in the MRC IP and the Joint IP under this Agreement subject, with respect to the MRC IP, to Omeros’ obligations to share sublicense revenues as set forth in Section 5. | |
| 4.5 | As part of the licenses granted to Omeros under Sections 4.1 and 4.2, MRC agrees to transfer and provide and/or make available to Omeros upon request biological materials and any other research materials and know-how encompassed by or included within the MRC IP and/or the Joint IP to which MRC has appropriate rights and access, all such materials being provided on the basis of Omeros reimbursing MRC for MRC’s actual cost in providing such materials but for no additional consideration. | |
| 4.6 | MRC also grants to Omeros a right of first refusal for an exclusive license in all of MRC’s Intellectual Property Rights, for which Omeros has not already been granted a license hereunder, and for which MRC has all necessary rights to offer such first refusal, and MRC shall exert reasonable efforts to obtain such necessary rights, in (1) any commercially applicable technology that arises during the Term of this Agreement and is directly related to MASP-2 as more fully defined in the MRC IP and the Joint IP, and (2) any technology that has been developed through the contribution of both Omeros and MRC after the Sponsored Research Term. | |
| 5 | Royalties and Sublicense Revenue | |
| 5.1 | Omeros shall pay MRC on a quarterly basis a royalty for Licensed Products of [†] of that portion of the Net License Proceeds realized during each respective quarter from Licensed Products (the “Licensed Product Royalty”). Not withstanding the above, if the total royalties owed by Omeros to all parties for Licensed Products, including without limitation the Licensed Product Royalty payable to MRC, royalties payable to Leicester, [†] and any “stacking fee(s)” or other royalties payable to third parties to develop, manufacture or commercialize the Licensed Products (all together the “Total Royalty Percentage”), exceeds [†] of the Net Licensed Proceeds for any quarter, then [†] of the difference between the Total Royalty Percentage and [†] shall be deducted from the Licensed Product Royalty payable to MRC for such quarter, provided, however that the Licensed Product Royalty for such quarter may not be reduced by such deductions to less than [†]. | |
| 5.2 | Omeros shall pay MRC on a quarterly basis a share of that portion of the Net Sublicense |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| Proceeds collected by Omeros on Licensed Products and collected by Omeros (“Sublicensed Product Revenue Share”) from sublicensed third parties during each respective quarter, such Sublicensed Product Revenue Share being either (a) [†] for any sublicenses in connection with the Licensed Products granted hereunder prior to the earlier of (i) the establishment of MRC’s clear, defensible, lawful and uncontested title in, or other mutually acceptable rights relative to, [†], or (ii) the second year anniversary of the Effective Date of this Agreement, or (b) [†] for any sublicenses in connection with the Licensed Products granted hereunder thereafter. | ||
| 5.3 | Omeros shall promptly provide MRC with a copy of all sublicenses granted by Omeros in the MRC IP and/or the Joint IP under this Agreement. | |
| 5.4 | Following receipt from the University of the results of all Sponsored Research and the completion of all other necessary and beneficial research activities by Omeros and/or by others to support appropriate government regulatory submissions by Omeros, [†], Omeros shall use reasonable efforts, based on reasonable commercial prudence, to diligently develop and introduce to the market one or more Licensed Products. Ongoing performance of research and/or development efforts to generate or further advance one or more Licensed Products by Omeros, internally at Omeros and/or under contract with MRC and/or a third party, shall be deemed to be diligent efforts under this Section 5.4. | |
| 5.5 | It is Omeros’ current intent to commercially develop and seek regulatory clearance to clinically test and then market an inhibitor of MASP-2 activity following identification of selective and high-affinity inhibitors of MASP-2 activity and demonstration of the therapeutic benefit of such inhibitors in animal models, such identification and demonstration to be completed collaboratively by MRC, Leicester and/or Omeros. Within three months of the identification by Omeros of a Licensed Product that is determined by Omeros to be a viable and optimal clinical development candidate, Omeros will submit a development plan to MRC that sets forth Omeros’ planned activities and estimated timing for the development, regulatory approval and market introduction of one or more Licensed Products. Assuming anticipated and adequate progress is made in the Sponsored Research [†], Omeros anticipates the identification of an initial potential candidate for a Licensed Product or Licensed Research Product that is a potential clinical development candidate within two years of the commencement of the Sponsored Research. The foregoing statements within this Section 5.5 and such development plan are or will be provided as indications of current or future intentions only, and shall have no binding effect on Omeros, nor shall it give rise to any right or obligation to either party, and any modification, alteration or failure to meet any of these intentions shall have no impact on this Agreement. | |
| 6 | Payments | |
| 6.1 | Quarterly royalty and sublicense revenue payments shall be made in British Pounds Sterling by Omeros to MRC within sixty (60) days of the end of the quarter. Payments shall be computed based on a conversion from any other denomination to British Pounds Sterling for any revenues received or costs and expenses incurred by Omeros during the |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| relevant quarter or other reporting period, as provided herein, using the prevailing exchange rate in effect at the date and time that funds are transferred from Omeros’ account to MRC’s account (in the case of payment by wire transfer) or at the date and time of issuance of a check by Omeros (in the case of payment by check). Each quarterly payment shall be accompanied by a report specifying (a) the source of the royalties itemized by product and country, (b) any Omeros IP Legal Fees or Third Party License Fees that were deducted from gross proceeds to determine Net License Proceeds or Net Sublicense Proceeds as provided in Sections 1.9 or 1.9 of this Agreement, and (c) the total of all discounts, returns, credits and commissions deducted from gross proceeds to determine Net License Proceeds or Net Sublicense Proceeds as provided in Sections 1.9 or 1.9 of this Agreement. Following the two-year anniversary of the Effective Date of this Agreement, in the event that Omeros receives no such quarterly royalty and sublicense revenue in any given quarter, it shall nevertheless submit a quarterly report to that effect to MRC within sixty (60) days of the end of the quarter. | ||
| 6.2 | MRC reserves the right to employ a certified public accountant to review and reconcile the directly relevant accounting records and procedures of Omeros as they relate to the determination of royalties or sublicense revenue fees under Section 5 herein during reasonable business hours and no more than twice a year, and Omeros agrees to make available at Omeros’ place of business all such directly relevant accounting records for that purpose within 30 (thirty) days of written request by MRC. The cost of such review shall be borne by MRC, unless it is found that Omeros under-paid a quarterly royalty or sublicense revenue fees for any quarter by an amount of 10% (ten percent) or greater, in which case the cost of such review shall be borne by Omeros. | |
| 6.3 | In the event any royalty or sublicense revenue fee payments due under Section 5 herein are not timely paid by Omeros, Omeros shall pay to MRC interest charges on such late payments at a rate of [†]. | |
| 6.4 | Not withstanding anything to the contrary herein, Omeros shall have no obligation to pay any royalties or sublicense revenue fees under Section 5 for any product based on any patent claim that has been declared invalid or unenforceable by a court or governmental body of competent jurisdiction or based on any patent claim that is not enforceable in the jurisdiction(s) where such products are manufactured, used, sold, offered for sale, imported or distributed. | |
| 7 | License Progress | |
| 7.1 | Omeros shall on an annual basis, commencing on the one-year anniversary of the Effective Date of this Agreement and annually thereafter, deliver to MRC within thirty (30) days after the end of the respective year a written progress report detailing the status of Omeros’ efforts to fund, patent, develop and commercialize Licensed Products. | |
| 8 | Patent Prosecution | |
| 8.1 | Omeros shall have the sole right at its discretion to apply for, prosecute and maintain patents for inventions included within the MRC IP and the Joint IP (“Patent Filings”) in |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| the name of the legally appropriate inventors and/or parties to this agreement and/or jointly with third parties as may be legally appropriate, provided however that (a) Omeros shall bear all cost and expense for all such Patent Filings, subject to the right to deduct Omeros IP Legal Fees as set forth herein, (b) Omeros shall keep MRC timely informed of the progress of all Patent Filings and timely provide MRC copies of all official documentation related to such Patent Filings, and (c) Omeros shall exert commercially reasonable efforts to diligently pursue all Patent Filings to issuance or final determination of unpatentability, provided however that if Omeros determines at its sole discretion to not make Patent Filings for any commercially significant inventions within the MRC IP or the Joint IP in any countries of commercial significance, or abandons any Patent Filing prior to issuance or final determination of unpatentability, Omeros shall give MRC advance written notice of such determination, MRC shall have the right thereafter to elect upon written notice to Omeros to pursue such Omeros abandoned Patent Filings at MRC’s sole expense (together with Leicester if applicable), and such Omeros abandoned Patent Filings shall be excluded from the scope of the licenses granted under this Agreement. | ||
| 8.2 | MRC shall promptly provide written disclosure to Omeros of any inventions, improvements, or applications included within the MRC IP or Joint IP conceived, developed, made or arising before or during the term of this Agreement. MRC will provide all reasonable assistance, including review of documents and the execution of all documents and causing MRC’s employees to review and execute all documents, necessary to make, prosecute, maintain and enforce the Patent Filings, all for no additional consideration but with reimbursement by Omeros of MRC’s reasonable expenses for such assistance. | |
| 8.3 | MRC shall promptly provide written disclosure to Omeros of any and all potentially material prior art known prior to the Effective Date of this Agreement or that becomes known during the License Term of this Agreement to any MRC employee that is associated with this Agreement, the Sponsored Research, the MRC IP or the Joint IP. | |
| 9 | Representations, Warranties and Other Obligations of Omeros | |
| 9.1 | Omeros represents and warrants that it has the requisite corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder. | |
| 9.2 | Omeros has and will maintain reasonably adequate insurance coverage for employment practices and general liability for all its activities under this Agreement. Prior to Omeros’ marketing of any Licensed Product, or product encompassed by the Joint IP, or making any such products available for use in any human patients, Omeros will obtain and maintain reasonably adequate product liability insurance. | |
| 10 | Representations, Warranties and Other Obligations of MRC | |
| 10.1 | MRC has disclosed to Omeros the existence of the [†] and information as to the development of the MRC IP, and MRC warrants that it has made reasonable efforts to ascertain the details of such development and that it reasonably believes the same to be true. [†]. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 10.2 | [†] | |
| 10.3 | [†] | |
| 10.4 | MRC represents and warrants, subject to the disclosure referred to in Section 10.1 with respect [†] and to any rights owned by Leicester, that MRC is the owner of all other right, title and interest in any and all inventions included within the MRC IP and the Joint IP made or to be made wholly or jointly by MRC employees, including without limitation those made by Mr. Willis and Dr. Reid, and shall cause Mr. Willis and Dr. Reid to each execute this Agreement to confirm their agreement to be bound to the same extent as MRC with respect to all relevant provisions of this Agreement. | |
| 10.5 | Subject to [†] as discussed in Section 10.1 above and to any rights owned by Leicester, MRC represents and warrants to Omeros that as far as it is aware, after having used reasonable efforts to ascertain relevant facts and having formed a reasonable belief as to their truth, it has the lawful right to grant the licenses conveyed under this Agreement, and that the MRC IP and the Joint IP are unencumbered by any third party obligation, commitment, restriction or license. [†] | |
| 10.6 | [†] and any rights owned by Leicester, MRC warrants that it is not aware of any third party rights that would be infringed as a result of Omeros’ fulfilling the terms of this Agreement. | |
| 10.7 | MRC has and will maintain reasonably adequate insurance coverage for employment practices and general liability for all its activities under this Agreement. | |
| 10.8 | THE WARRANTIES SET FORTH EXPRESSLY IN THIS AGREEMENT ARE THE SOLE WARRANTIES MADE BY EITHER PARTY TO THE OTHER AND THERE ARE NO OTHER WARRANTIES, REPRESENTATIONS OR GUARANTEES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED, REGARDING THE LICENSED PRODUCTS, OR OTHER PRODUCTS, INCLUDING WITHOUT LIMITATION ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. | |
| 11 | Confidentiality | |
| 11.1 | MRC and Omeros hereby affirm and incorporate by reference the terms of the Mutual Nondisclosure Agreement between the parties dated 9 May 2005 concerning the subject matter of this Agreement, a copy of which is attached hereto as Exhibit B, except to the extent that the terms of such nondisclosure agreement may conflict with the terms of this Agreement, in which case the terms of this Agreement shall prevail. The parties further agree that the mutual obligations of nondisclosure and non-use set forth in such Mutual Nondisclosure Agreement shall subsist for a period of five (5) years after the termination of this Agreement. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 11.2 | The terms of this Agreement shall be maintained in strict confidence by both MRC and Omeros, and may not be disclosed by either party without the consent of the other party, except as may be required under a court order or decree or as required to comply with any governmental law, rule or regulation, and Omeros may disclose the terms of this Agreement to Omeros’ current and potential employees, directors, consultants, shareholders, investors and corporate partners. | |
| 12 | Indemnification | |
| 12.1 | Each party (the “Indemnifying Party”) shall indemnify, hold harmless and defend the other party and its employees, officers, directors, consultants and agents (the “Indemnified Party”) against any and all claims, suits, losses, liabilities, damages, costs, fees, and expenses (“Claims”) resulting from or arising directly out of the Indemnifying Party’s breach of any representation, warranty or obligation under this Agreement, or the Indemnifying Party’s exercise of the rights and obligations under this license or any sublicense, except that such obligation to indemnify, hold harmless and defend shall not extend to any Claims to the extent such Claims result from or arise directly from the negligence or misconduct of the Indemnified Party. This indemnification does not include any indemnity in relation to product performance or product liability, and furthermore does not include any incidental, consequential or special damages. | |
| 13 | Enforcement of Patent Rights | |
| 13.1 | If either party learns of the infringement of any patent or other intellectual property right included in the MRC IP or the Joint IP, that party shall promptly notify the other party of such infringement and will provide the other party with all evidence of infringement in the notifying party’s possession. Both parties shall use their best efforts in cooperation with each other to terminate third party infringement without litigation. | |
| 13.2 | Omeros shall have the sole right at its discretion to enforce the MRC IP and the Joint IP against third party infringers, including the initiation of any civil action in Omeros’ name, at Omeros’ sole cost, in which event any award, judgment, settlement or damages collected shall belong solely to Omeros without duty to account to MRC. In the event that it is necessary for Omeros to join MRC as a party to any such civil action, MRC shall join such action for no additional compensation but at Omeros’ sole expense, and any award, judgment, settlement or damages collected shall belong solely to Omeros without duty to account to MRC. | |
| 13.3 | If Omeros unreasonably declines to initiate enforcement of the MRC IP and the Joint IP against any third party infringer within ninety (90) days of a written demand from MRC to do so, then MRC shall have the sole right at its discretion to enforce the MRC IP and the Joint IP against such third party infringer, including the initiation of any civil action in MRC’s name, at MRC’s sole cost, in which event any award, judgment, settlement or damages collected shall belong solely to MRC without duty to account to Omeros. | |
| 14 | Term and Termination |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 14.1 | Unless terminated earlier as set forth in Section 14.2 or 14.3 herein below, this Agreement shall subsist so long as there is any pending patent application within the MRC IP or the Joint IP, any patent application in the process of being prepared for filing as agreed to by Omeros and MRC or any valid and subsisting claim included within any patent, utility model or inventor’s certificate within the MRC IP or the Joint IP (the “License Term”). | |
| 14.2 | Omeros may terminate this Agreement by providing ninety (90) days advance written notice of termination under this Section 14.2 to MRC, with or without cause, at any time [†]. | |
| 14.3 | Either party may terminate this Agreement at any time in the event that the other party (a) breaches any material obligation of this Agreement by first submitting written notice of breach to the breaching party, which breach is not substantially cured within ninety (90) days of the receipt of such notice, followed by written notice of termination then being sent to the breaching party, or (b) declares or is adjudged by a court of competent jurisdiction to be insolvent, bankrupt or in receivership, and such insolvency, bankruptcy or receivership materially limits such party’s ability to perform its obligation under this Agreement, excluding reorganizations entered into by such party with the consent of the other party, which consent shall not be unreasonably withheld. | |
| 14.4 | Omeros may at any time terminate its sponsorship of the Sponsored Research by providing ninety (90) days advance written notice of termination under this Section 14.4 to MRC, for cause as specified in Section 2.2 above or at any time due to failure to perform any Research Plan or other breach of this Agreement by MRC, or without cause as specified in, and subject to reimbursement of any severance fees that may be payable in accordance with, Section 2.2 above, in which event Sections 2.1 — 2.3 herein shall cease to be effective, and Sections 2.4 and 2.5 shall cease to be effective after all reports are provided and accepted and all payments are made for Sponsored Research performed in accordance with the applicable Research Plan prior to such notice, but the remainder of this Agreement shall continue in full force and effect for the License Term, including all rights and obligations of both parties hereunder. In the event of Omeros’ termination of its sponsorship of the Sponsored Research, Omeros shall pay to MRC any and all non-cancelable sums reasonably incurred or committed to by MRC prior to receipt of the notice of termination. | |
| 14.5 | The provisions of Sections 2.6 (Publication), 3 (Ownership of Intellectual Property), 4.2 — 4.6 (License as applicable to Joint IP and right of first refusal), 8 (Patent Prosecution as applicable to Joint IP), 9 and 10 (Representations and Warranties and Other Obligations), 11 (Confidentiality), 12 (Indemnification), 13 (Enforcement as applicable to Joint IP), 15 (Use of Names) and 16 (Miscellaneous) above shall survive expiration or termination of this Agreement for the period set forth therein or, if no period is set forth therein, then indefinitely. | |
| 15 | Use of Names | |
| 15.1 | Nothing contained in this Agreement confers any right to either party to use in |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| advertising, publicity, or other promotional activities any name, trade name, trademark, or other designation of the other party hereto, and neither party shall make such use without the prior written consent of the other party, provided however Omeros may through written, oral or electronic communication disclose the existence of this Agreement and the names of MRC, Dr. Reid, Mr. Willis and other of MRC’s employees and consultants to Omeros’ current and potential employees, directors, consultants, shareholders, investors and corporate partners, and as required to comply with any governmental law, rule or regulation. | ||
| 16 | Miscellaneous | |
| 16.1 | This Agreement including all appendices and exhibits attached thereto or incorporated by reference therein constitutes the entire understanding of the parties hereto regarding the subject matter of this Agreement, and no other representation, agreement, promise or undertaking altering, modifying, taking from or adding to the terms of this Agreement shall have any effect unless the same is reduced to writing and duly executed by the parties hereto. In the event of any conflict between the main body of this Agreement and any attachments thereto or documents incorporated by reference therein, the provisions of the main body of this Agreement shall control. | |
| 16.2 | Either party’s failure to enforce any provision of this Agreement will not be considered a waiver of future enforcement of that or any other provision. | |
| 16.3 | The laws of the state of Delaware, United States, without regard to its conflict-of-laws provisions, shall govern this Agreement, its interpretation and its enforcement, and any disputes arising out of or related to this Agreement. | |
| 16.4 | The parties agree that, except as provided herein below, any claim or controversy arising out of or relating to this Agreement or breach thereof shall be settled by arbitration in the state of Delaware, United States, in accordance with the commercial rules of the American Arbitration Association by a panel of three arbitrators, one selected by each party and the third selected by the other two arbitrators. In any such arbitration proceeding, judgment upon the award rendered by the arbitrator shall be final and binding upon the parties and may be entered by either party in any court or forum of competent jurisdiction as provided herein below. Notwithstanding the foregoing, both parties agree that any claims or controversies concerning the validity or enforceability of any intellectual property, or the actual or threatened disclosure or misuse of confidential information, may alternately be resolved by a civil action in any court of competent jurisdiction as provided herein below, and both parties further agree that each shall retain the right to seek injunctive relief in any court of competent jurisdiction as provided herein below to prevent a breach, threatened breach or continuing breach of this Agreement which would cause irreparable injury (e.g., breaches of confidentiality or the like). | |
| 16.5 | Any civil action prosecuted or instituted by either party as permitted herein above with respect to any matters arising out of or related to this Agreement shall be brought in either the United States District Court located in the state of Delaware, United States (if |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| federal subject matter jurisdiction therein lies) or the Superior Court for the state of Delaware, United States (if there is no subject matter jurisdiction in federal court), and each party hereby consents to the jurisdiction and venue of such courts for such purposes. | ||
| 16.6 | In the event that it is necessary for either party of this Agreement to take legal action to enforce any of the terms, conditions or rights contained herein, or to defend any such action, then the prevailing party in such action shall be entitled to recover from the other party all reasonable attorneys fees, costs and expenses related to such legal action. | |
| 16.7 | In the event that any portion of this Agreement is held invalid or unenforceable by a court of law, that provision will be construed and reformed to permit enforcement of the provision to the maximum extent permissible consistent with the parties’ original intent, and if such construction is not possible, such provision shall be struck from this Agreement, and the remainder of the Agreement shall remain in full force and effect as if such provision had never been part of this Agreement. | |
| 16.8 | For the purposes of this Agreement, the parties hereto are independent contractors, and nothing in this Agreement shall be construed to place them in the relationship of partners, principal and agent, employer/employee or joint venturers. Except as provided expressly herein, each party agrees that it shall have no authority to bind or obligate the other party, nor shall any party hold itself out as having such authority. | |
| 16.9 | Neither party will be liable for failure or delay in performing any obligation under this Agreement, or will be considered in breach of this Agreement, if such failure or delay is due to a natural disaster or any cause reasonably beyond such party’s control, provided that such party resumes performance as soon as possible following the end of the event that caused such delay or failure of performance. | |
| 16.10 | Neither party may assign this Agreement, or any obligation or right under this Agreement, in whole or in part, without the other party’s prior written consent, which consent will not be unreasonably withheld. This Section shall not be construed in any way to limit Omeros’ rights to grant, at Omeros’ sole discretion, sublicenses hereunder. MRC consents to Omeros’ assignment of this Agreement in whole or in part in connection with the merger, consolidation or transfer of all or substantially all of that portion of Omeros’ assets to which this Agreement relates. Subject to these restrictions, this Agreement will be binding upon and will inure to the benefit of the parties’ permitted successors and assignees. | |
| 16.11 | Any notice required or permitted to be given hereunder by either party shall be in writing and shall be (a) delivered personally, (b) sent by registered mail, return receipt requested, postage prepaid, (c) sent by an internationally recognized courier service guaranteeing next-day delivery, charges prepaid, or (d) delivered by facsimile (with the original promptly sent by any of the foregoing manners) to the addresses or facsimile numbers of the other party set forth below, or at such other addresses as may from time to time be furnished by similar notice by either party. The effective date of any notice hereunder shall be the date of receipt by the receiving party. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| If to Omeros: | If to MRC: | |||
| Omeros Corporation | Medical Research Council | |||
| 1420 Fifth Avenue, Suite 2600 | 20 Park Crescent | |||
| Seattle, WA 98101 | London | |||
| U.S.A. | United Kingdom | |||
| W1B 1AL | ||||
| Attention: Gregory A. Demopulos, M.D., | Attention: Graham Wagner, | |||
| Chairman & CEO | Associate Director Licensing | |||
| and Agreements | ||||
| And copy to: Marcia S. Kelbon, | ||||
| Patent & General Counsel | ||||
| Fax: (206) 264.7856 | Fax: +44.207.291.5325 | |||
| Phone: (206) 623.4688 | Phone: +44.207.291.5317 |
| 16.12 | This Agreement may be executed in one or more counterparts, each of which will be considered an original, and all of which will constitute the same instrument. |
IN WITNESS WHEREOF, Omeros and MRC have each acknowledged and accepted this Agreement by
causing it to have been signed by their respective duly authorized officials.
| OMEROS CORPORATION | MEDICAL RESEARCH COUNCIL | |||||||
| By: | /s/ Gregory A. Demopulos
|
By: | /s/ Graham Wagner | |||||
| Name: | Gregory A. Demopulos, M.D.
|
Name: | Graham Wagner | |||||
| Title: | Chairman & CEO
|
Title: | Associate Director Licensing and Agreements | |||||
| Date: | 11/16/07
|
Date: | 10th November 2005 | |||||
| Fax: | 206.264.7856
|
Fax: | +44 207 291 5325 | |||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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The above Exclusive License and Sponsored Research Agreement is acknowledged by the
undersigned investigators, who agree to abide by the terms set forth therein.
| PROFESSOR KENNETH B. M. REID | MRC CO – INVESTIGATOR | |||||||
Signed:
|
Signed: | |||||||
Title:
|
Director, MRC Immunochemistry Unit | Title: | ||||||
Date:
|
Date: | |||||||
Fax:
|
Fax: | |||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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EXHIBIT A
To the Exclusive License and Sponsored Research Agreement
Between Omeros Corporation and the Medical Research Council
RESEARCH PLAN
Sponsor: Omeros Corporation
Research Institution: Medical Research Council (MRC)
Investigator: Dr. Ken Reid
Research Period: First year, commencing 1 November 2005
Research Aims and Activities
Attachment 1 hereto sets for the research aims of the Sponsored Research program to be
completed during the first year. All activities to meet specific aim 1 are to be carried out by
MRC (“Dr. Reid’s lab”). Aims indicated as to be performed by Omeros or third parties, and all
animal models in specific aim 5, are provided herein for reference purposes only and shall not be
interpreted as any obligation on the part of Omeros or MRC. Specific aims and the corresponding
timeline may be modified as mutually agreed in writing by Dr. Ken Reid and Omeros.
Budget
The total consideration to be paid to MRC for all Sponsored Research to be carried out during
the first through third years of the Sponsored Research Term, including without limitation full and
complete payment for all services, materials, facilities, overhead and indirect costs, but
excluding reimbursement for any legally required severance that may be payable as provided for is
Section 2.2 of this Agreement above, is as follows:
Year 1 (1 November 2005 — 31 October 2006):
[†]
Year 2 (1 November 2006 — 31 October 2007):
[†]
Year 3 (1 November 2007 — 31 August 2008):
[†]
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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EXHIBIT B
To the Exclusive License and Sponsored Research Agreement
Between Omeros Corporation and Medical Research Council
MUTUAL CONFIDENTIALITY AGREEMENT
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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Exhibit 10.32
AMENDMENT dated 8 May 2007
of the
EXCLUSIVE LICENSE AND SPONSORED RESEARCH AGREEMENT
dated 31 October 2005
dated 31 October 2005
By and between
MEDICAL RESEARCH COUNCIL and OMEROS CORPORATION
This is an amendment (this “Amendment”) effective 8 May 2007 of the Exclusive License and
Sponsored Research Agreement between Medical Research Council (“MRC”) and Omeros Corporation
(“Omeros”) dated 31 October 2005 (“the Agreement”). All initial capitalized terms used herein
below shall have the same definition as set forth in the Agreement.
Section 2.5 of the Agreement provides for payments for Sponsored Research during each year of
a three year Sponsored Research Term to be paid on a quarterly basis, with twenty five percent
(25%) of the annual amount to be paid each quarter. In as much as the third year of the Sponsored
Research Terms comprises only a ten (10) month Sponsored Research period, not withstanding the
payment schedule set forth in Section 2.5 of the Agreement, Omeros and MRC hereby agree that
payments during the third year of the Sponsored Research Term shall be due and payable as follows:
| Quarterly Payment | Amount | Due Date | ||
1st
|
[†] | 1 November 2007 | ||
2nd
|
[†] | 1 March 2008 | ||
3rd
|
[†] | 1 July 2008 | ||
4th
|
[†] | 31 August 2008 |
The total amount of funding for the third year of the Sponsored Research Term [†], as well as
each party’s right to terminate the Agreement early in accordance with the provisions of Section 14
of the Agreement, and all other terms of the Agreement remain unchanged and in force.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
This Amendment is accepted and acknowledged by each party, as of the effective date set forth
herein above, through the signature of its authorized representatives below:
| MEDICAL RESEARCH COUNCIL | OMEROS CORPORATION | |||||||||
By:
|
/s/ Anne Marie Coriat
|
By: | /s/ Gregory A. Demopulos
|
|||||||
Name:
|
Anne Marie Coriat PhD
|
Name: | Gregory A. Demopulos, M.D.
|
|||||||
Title:
|
Head of MRC Centre, Oxforshire
|
Title: | Chairman & CEO
|
|||||||
| MRC Centre Oxfordshire | ||||||||||
| MRC Harwell | ||||||||||
| DIDCOT | ||||||||||
| Oxfordshire OX11 0RD | ||||||||||
| Tel: 01235 841000 | ||||||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Exhibit 10.33
FUNDING AGREEMENT
This Funding Agreement (“Agreement”) is made as of December 18, 2006 (the
“Effective Date”) by and between The Stanley Medical Research Institute, a 501(c)(3)
corporation organized under the laws of Connecticut and having a place of business at 8401
Connecticut Avenue, Suite 200 Chevy Chase, MD 20815 (“SMRI”), and Omeros Corporation, a
corporation organized under the laws of Washington State and having its principal place of business
at 1420 Fifth Avenue, Suite 2600 Seattle, WA 98101 (“Omeros”) (together with SMRI, the
“Parties” and each, a “Party”).
WHEREAS, Omeros has a program for the development of a PDE10 inhibitor as a therapeutic
candidate for the treatment of schizophrenia and/or other neuropsychiatric disorders; and
WHEREAS, SMRI desires to fund, with a combination of grant and equity financing, certain
development work with respect to Omeros’ PDE10 program on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the
Parties agree as follows:
1 Certain Definitions.
1.1 Defined Terms. Following is a list of the defined terms used in this Agreement and,
where applicable, the section references where they are defined.
“Administrative Expenses” shall have the meaning set forth on Exhibit A.
“Affiliate” means, with respect to a particular Party, a person, corporation,
partnership, or other entity that controls, is controlled by or is under common control with such
Party. For the
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
purposes of the definition, the word “control” (including, with correlative meaning, the terms
“controlled by” or “under common control with”) means the actual power, either directly or
indirectly through one or more intermediaries, to direct or cause the direction of the management
and policies of such entity, whether by the ownership of at least fifty percent (50%) of the voting
stock of such entity, or by contract or otherwise.
“Combination Product” means any product containing both (i) the Product, and (ii) one
or more other therapeutically active ingredients.
“Commercialization Expenses” shall have the meaning set forth on Exhibit A.
“Commercially Reasonable Efforts” shall mean the application of a material level of
effort, expertise and resources that is generally consistent with industry standards for companies
of Omeros’ size, capitalization and development stage to, as appropriate, research, develop and
commercialize a Product where such research, development and commercialization are technically
feasible, devoting the same degree of attention and diligence to such efforts that is substantially
and materially consistent with industry standards for companies of Omeros’ size, capitalization and
development stage and for products at a comparable stage of development, with the objective of
launching Products in one or more countries as soon as commercially practicable.
“Commercial Sale” means sale of the Product by Omeros, its Affiliates or licensees,
following Regulatory Approval. Sales for test marketing, sampling, promotional uses, clinical
trial purposes or compassionate or similar use shall not be considered to constitute a Commercial
Sale.
“Confidentiality Agreement” shall have the meaning set forth in Section 3.2.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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“Cost of Goods Sold”. shall have the meaning set forth on Exhibit A.
“Currency Adjustments” shall have the meaning set forth on Exhibit A.
“Direct Investment” means all internal and external expenses directly attributable to
the Program, including, without limitation, all related research and development costs (including,
without limitation, clinical, regulatory and Patents costs), program acquisition costs, FTE costs,
dedicated equipment and laboratory supplies, and laboratory space.
“Early Royalties” shall have the meaning set forth in Section 2.6.
“FDA” means the United States Food and Drug Administration, or any successor entity.
“First Commercial Sale” means the first Commercial Sale to a third party.
“FTE” shall mean the equivalent of a full-time employee’s working days over a twelve
(12) month period (including normal vacations, sick days and holidays). The portion of an FTE
devoted by an employee to a Program over a year shall be determined by dividing the number of full
days during any twelve (12)-month period devoted by such employee to the program by the total
number of working days during the twelve (12)-month period.
“Grant Funds” shall mean grant funds paid to Omeros under the Agreement by SMRI.
“Intellectual Property Rights” means all of the following, whether U.S. or non-U.S.:
(a) Patents; (b) trademarks, service marks, trade dress, logos, tradenames, service names,
domain names, Internet websites and corporate names and registrations and applications for
registration thereof; (c) copyrights, copyrightable works, and registrations and applications for
registration
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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thereof, including copyrights relating to computer programs; (d) mask works and registrations
and applications for registration thereof; (e) trade secrets; (f) computer programs; (g) biological
materials, bioassays, cell lines, clones, molecules, protocols, reagents, experiments, lab results,
tests and all other tangible or intangible proprietary information; and (h) other proprietary
rights whether or not relating to any of the foregoing (including without limitation associated
goodwill and remedies against infringements thereof and rights of protection of an interest therein
under the laws of all jurisdictions).
“Interruption” shall occur if at any time before the First Commercial Sale of a
Product, Omeros, its Affiliates, licensees, sublicensees, transferees and/or successors, all cease
to conduct, or to cause to have conducted Commercially Reasonable Efforts with respect to the
research, development and/or commercialization of a Product, including without limitation
regulatory, patent and business partnering activities concerning a Product, for a period of [†]
consecutive days; provided, however, that any cessation of such activities due to a regulatory
process, availability of compounds, materials or necessary processes, the procurement of
Intellectual Property Rights, any dispute or legal proceeding concerning third party Intellectual
Property Rights that are necessary to the research, development and/or commercialization of a
Product, or any other material factor not reasonably within Omeros’, its Affiliates’, licensees’,
transferees’ and/or successors’ control (e.g., strikes, terrorism, natural disasters, war), that
renders the research, development and/or commercialization impracticable shall be excused and shall
not constitute an Interruption.
“Interruption License” shall have the meaning set forth in Section 3.1.4.
“IPO” shall have the meaning set forth in Section 2.3.1.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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“JPAC” shall have the meaning set forth in Section 3.7.1.
“JPAC Reports” shall have the meaning set forth in Section 3.7.1.
“Milestone” shall have the meaning set forth in Section 2.2.2.
“Net Income” shall have the meaning set forth on Exhibit A.
“Net Program Conveyance Proceeds” shall have the meaning set forth in Section 2.6.
“Net Sales” shall have the meaning set forth in on Exhibit A.
“Omeros Designee” shall have the meaning set forth in Section 3.7.1.
“Patents” means inventions, patents, patent applications (including provisional
applications), patent disclosures and all related continuation, continuation-in-part, divisional,
reissue, re-examination, utility, model, certificate of invention and design patents,
registrations, applications for registrations and any term extension or other governmental action
which provides rights beyond the original expiration date of any of the foregoing.
“PDE10” means phosphodiesterase 10.
“Phase 2 Clinical Trial” means a human clinical trial evaluating the efficacy and
safety of the Product in any country that would satisfy the requirements of 21 CFR §312.21(b).
“Phase 3 Clinical Trial” means a human clinical trial evaluating the efficacy and
safety of the Product in any country that would satisfy the requirements of 21 CFR §312.21(c).
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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“Product” means any therapeutic product developed under this Agreement that inhibits
or modulates PDE10.
“Program” means research and development activities, including without limitation
clinical and regulatory activities, relating to PDE10 and the development of the Product.
“Program IP” shall have the meaning set forth in Section 3.1.1.
“Program Conveyance” shall have the meaning set forth in Section 2.6.
“Regulatory Approval” means an approval, if any, by the health regulatory authority in
a given country or jurisdiction, required for the sale/marketing and, if necessary, pricing of the
Product for use in humans for a given indication.
“Royalties” shall have the meaning set forth in Section 2.5.
“SEC” means the United States Securities and Exchange Commission, or any successor
entity.
“Series E Shares” shall have the meaning set forth in Section 2.2.1(b).
“SMRI Designee” shall have the meaning set forth in Section 3.7.1.
“SMRI Royalty Share” shall have the meaning set forth in Section 2.5.
“SPA” shall have the meaning set forth in Section 2.2.1(b).
“Third Party Expenses” shall have the meaning set forth in Section 5.9.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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“Third Party Royalties” shall have the meaning set forth on Exhibit A.
2 The Funding.
2.1 The Funds. SMRI shall provide Omeros with up to nine million dollars ($9,000,000) of
combined equity and grant funding set forth below.
2.2 Disbursement of Funds to Omeros.
2.2.1 Upfront Payment. Upon execution of this Agreement, SMRI shall:
(a) make a cash payment of $1.3M to Omeros as Grant Funds; and
(b) purchase $1.3M of Omeros Series E preferred stock (the “Series E Shares”) at a
purchase price per share of $5.00, pursuant to the Series E Preferred Stock Purchase Agreement
dated March 16, 2004 as attached hereto as Exhibit B including the most recent Addendum
thereto substantially in the form included in Exhibit B (collectively the “SPA”).
Upon the purchase of such Series E Shares, SMRI shall also execute and become a party to that
certain Amended and Restated Investors’ Rights Agreement, attached hereto as Exhibit C, by
and among Omeros and certain investors named therein.
2.2.2 Milestones. In addition to the Upfront Payment set forth above, SMRI may at its
option make the following additional payments: (i) further equity investments in Omeros in
accordance with Section 2.3 below; and (ii) further grant funding upon achievement of the
following milestones (the “Milestones”).
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| Grant | ||||||
| Stage | Payment Milestone | Equity | Funding | |||
Preclinical Development
|
Upon achievement of a Product candidate that meets the following preclinical criteria: | Up to $1.2MM | Up to $1.9MM | |||
| [†] | ||||||
Phase 1 Clinical Program
|
Upon filing of Investigational New Drug Application with the FDA | Up to $0.6MM | Up to $2.7MM | |||
| Totals (including Upfront Equity and Grant Payments) | Up to $3.1MM | Up to $5.9MM | ||||
2.2.3 Achievement of Milestones. Upon achievement of a Milestone, Omeros shall notify SMRI
as set forth in Section 3.7.2 below. SMRI and Omeros shall meet promptly, in person or by
teleconference, in order to determine whether SMRI will make and Omeros will accept a further
equity investment plus associated grant funding with respect to such Milestone up to the amounts
set forth in Section 2.2.2 as may be mutually agreed. SMRI shall make any agreed upon
further payments of further equity investment plus associated grant funding to Omeros within thirty
(30) days of determination of the JPAC that a Milestone has been satisfied and achieved. It is the
intent of the Parties that the total equity investment(s) made by SMRI under this Agreement equal
34-35% of the total funding (including equity investments plus Grant Funds) provided by SMRI to
Omeros under this Agreement.
2.3 Equity for Milestone Payments.
2.3.1 Terms of Investment. The equity purchased by SMRI for the Milestones shall be either
(i) Series E Shares in accordance with the SPA, if purchased prior to Omeros’ initial public
offering (“IPO”) or (ii) unregistered common stock of Omeros, registrable within 90 days of
issuance and priced at the average closing ask price for Omeros’ common stock for the five trading
days
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preceding the closing of the equity investment, less a discount of 0 to 10%, such discount to be
mutually agreed by Omeros and SMRI, if purchased after the IPO. Omeros shall provide SMRI written
notice in the event that it files a Form S-1 with the United States Securities and Exchange
Commission (the “SEC”) within ten (10) days following such filing.
2.3.2 Option to Purchase Equity Early. During a thirty (30)-day period following receipt
by SMRI of notification of Omeros’ filing of Form S-1 with the SEC, SMRI shall have the right to
purchase Series E Shares at a purchase price of five dollars ($5.00) per share, provided, such
equity investment is made concurrent with payment by SMRI to Omeros of the corresponding grant
funding.
2.4 Additional Funding. SMRI may optionally purchase additional equity in Omeros and/or
provide Omeros with additional grant funding, subject to the mutual agreement of the Parties. Such
additional investment may be in an amount equal to as much as [†] of the total costs associated
with the Phase 2 Clinical Trials and Phase 3 Clinical Trials for the Product candidate. The
parties agree to negotiate in good faith concerning such additional funding; provided, however,
SMRI shall not be obligated to make such additional equity investment or pay such additional grant
funding, and Omeros shall not be obligated to sell such additional equity or accept such additional
grant funding.
2.5 SMRI Royalty. In consideration of SMRI’s payment of the Grant Funds and its agreement
to license Program IP to Omeros, except as provided in Section 2.6, beginning the first
calendar year after the First Commercial Sale occurs, Omeros shall pay SMRI royalties
(“Royalties”) equal to [†] of Omeros’ Net Income in any given year (the “SMRI Royalty
Share”) subject to maximum payment amounts as follows:
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| Royalty Equal to the | ||
| following multiple of | ||
| Royalties | Grant Funds | |
1. For any portion of Grant Funds
paid within [†] of date of receipt
by Omeros of such portion of the
Grant Funds
|
[†] | |
2. For any portion of the Grant
Funds remaining after payments in
subparagraph 1 above that are repaid
within [†] of date of receipt by
Omeros of such portion of the Grant
Funds
|
[†] | |
3. For any portion of the Grant
Funds remaining after payment in
subparagraph 2 above that are repaid
within [†] of the date of receipt by
Omeros of such portion of the Grant
Funds
|
[†] |
Omeros shall pay the SMRI Royalty Share within sixty (60) days of the end of each calendar
quarter. Omeros may prepay the royalty set forth in the table above, at any time, without penalty
or premium, at its option. If there are no Commercial Sales of the Product, or if Omeros
terminates the Program for any reason, Omeros shall have no obligation to pay Royalties thereafter.
SMRI shall have the right to audit Omeros’ financial statements to the extent directly
relevant to the computation of Omeros’ Net Income and the SMRI Royalty, at reasonable times
following advance request and no more frequently that once per year. SMRI shall bear the fees and
expenses in connection with any such audit, except that if an error in Omeros’ Net Income of more
than five percent (5%) is discovered from any such audit, then Omeros shall bear the reasonable
costs of such audit.
2.6 Assignment and Sublicensing. In the event that Omeros conveys to a third party all or
substantially all of its rights to and title in the Program, by assignment, sale, exclusive
license/sublicense or other conveyance, including all rights related to the Product and the Program
IP
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(a “Program Conveyance”) without reservation of any commercialization right, separate from
and independently of the assignment, sale, exclusive license/sublicense or other conveyance of any
other of Omeros’ programs or assets, for a net amount after deducting (a) all of Omeros’ costs
associated with such sale and (b) Omeros’ Direct Investment (“Net Program Conveyance
Proceeds”), that exceeds Omeros’ Direct Investment, Omeros shall make early payment of the SMRI
Royalty up to a maximum amount equal to [†] of the total of the Net Program Conveyance Proceeds
(the “Early Royalties”). The Early Royalties shall not exceed the total of the Grant Funds
multiplied by the applicable multiple set forth in Section 2.5. The obligation to pay
royalties remaining after any Early Royalty payment in accordance with the preceding sentence of
this Section 2.6 shall be assumed by any third party assignee or other successor of title
to the Program as provided in Sections 5.2 and 5.3, and shall be retained by Omeros in the case of
any license/sublicense of the Program.
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3 Intellectual Property; Confidentiality; Indemnification; Covenants.
3.1 Intellectual Property.
3.1.1 Ownership. All Intellectual Property Rights created, conceived or reduced to
practice in connection with the Program and during the course of this Agreement by Omeros and/or by
SMRI (the “Program IP”), as well as all of Omeros’ pre-existing Intellectual Property
Rights related to PDE10, shall be owned by Omeros. SMRI shall, and hereby does, grant an exclusive
license to Omeros to any and all of SMRI’s other right, title and interest in and related to any
Program IP (and shall require and cause SMRI’s employees and contractors to assign all of their
rights, title and interest in and to any Program IP to SMRI. Further, SMRI shall execute and
deliver (and shall require and cause its employees and contractors to execute and deliver), upon
the request of Omeros, any assignments, powers of attorney, declarations or other instruments, and
take any actions, as may be necessary or desirable to confirm Omeros’ ownership of the Program IP
and to assist Omeros in applying for, prosecuting, maintaining and enforcing the Program IP
including any Patent included therein.
3.1.2 No Rights in Omeros’ Intellectual Property. Except as provided in Section
3.1.4, there shall be no license, express or implied, granted to SMRI in connection with this
Agreement to any of Omeros’ Intellectual Property, including without limitation, the Program IP.
3.1.3 Abandonment. Notwithstanding any contrary provision contained herein, prior to
Omeros (or any Affiliate, licensee, sublicensee, transferee or successor of Omeros) abandoning
any Patent or patent application related to the Program IP (including abandonment for failure to pay any required
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fees), Omeros shall promptly notify SMRI, or cause SMRI to be notified, of such pending
abandonment, whereupon SMRI shall have the right and opportunity to assume title to the
applicable Patent and/or patent application and to maintain the issued patent or continue the
prosecution of the patent application at SMRI’s own expense. Omeros hereby agrees to exercise
its good faith efforts to obtain such consents, on SMRI’s behalf, as may be necessary,
advisable and/or appropriate for SMRI to exercise its rights under this Section 3.1.3.
Thereafter, prior to SMRI (or any Affiliate, licensee, sublicensee, transferee or successor
of SMRI) abandoning any such assumed Patent or patent application related to the Program and
any Product, Omeros shall have the right and opportunity to reassume title to such assumed
Patent or patent application under the same conditions as provided for SMRI above in this
subsection 3.1.3.
3.1.4 Interruption License. Effective as of the Effective Date, Omeros hereby grants to
SMRI with respect to the Program the following option to take a license (the “Interruption
License”), which shall become exercisable by SMRI in the event of an Interruption:
(a) An exclusive (even as to Omeros except for research purposes) worldwide license, with the
right to sublicense, under the Program IP to develop, manufacture, have manufactured, use, sell,
offer to sell and import Products, together with a nonexclusive worldwide license, with the right
to sublicense, to any other Intellectual Property Right in the Program solely to the extent
necessary for SMRI to develop, manufacture, have manufactured, use, sell, offer to sell and import
Products.
(b) In the event that Omeros transfers all or substantially all of its rights and obligations
to develop and commercialize a Product to a third party by virtue of a Program Conveyance, Omeros
shall use reasonable good faith efforts to obtain reversion rights from the third party. The time
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required for such rights to revert to Omeros shall be excused and shall not constitute an
Interruption. Upon reversion to Omeros of such rights in the Product, the Interruption License
shall again become exercisable by SMRI in the event of an Interruption, in which case such
reversion rights shall flow to the benefit of SMRI. Except for such reversion rights that Omeros
might obtain from any third party, such third party shall not be subject to the obligations of the
Interruption License.
(c) The Interruption License shall be deemed to constitute intellectual property as defined in
Section 365(n) of the U.S. Bankruptcy Code. Omeros agrees that SMRI, as a licensee of such rights,
shall retain and may exercise all of its rights and elections under the U.S. Bankruptcy Code;
provided, however, that nothing in this Agreement shall be deemed to constitute a
present exercise of such rights and elections.
(d) In connection with this Section 3.1.4, Omeros shall deliver to SMRI, within thirty
(30) days of the occurrence of an Interruption, all materials and data generated in the performance
of the Program, and all other materials and data that Omeros may own and/or control that are
required by SMRI to use and practice and applicable technology.
(e) In the event that the Interruption License becomes effective, in lieu of any other
royalties pursuant to this Agreement (other than royalties or payments under Sections 2.5 and 2.6
previously paid by Omeros to SMRI in accordance with this Agreement), the Parties shall share
equally any amount SMRI receives with respect to the Program or any Product (including amounts
received in connection with sublicenses of the Interruption License), provided that, SMRI’s share
shall increase and Omeros’ share shall decrease by [†] SMRI spends in addition to the Grant
Funds and equity investment pursuant to this Agreement with respect to the research, development
and/or
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commercialization of the Product after the effective date of the Interruption License,
except that, in no event shall Omeros’ share decrease below [†]. Thus, for example, if SMRI’s
expenditures after the effective date of the Interruption License are [†], SMRI’s share will
increase to [†] and Omeros’ share will decrease to [†].
3.2 Confidentiality; Use of Names. The terms and existence of this Agreement, as well as
any information disclosed to SMRI by Omeros in connection with this Agreement and the Program,
including without limitation the Program reporting pursuant to Section 3.7, shall be considered
“Confidential Information” and subject to, and governed by, the terms of that certain
Confidentiality Agreement by and between SMRI and Omeros dated August 8, 2006 (the
“Confidentiality Agreement”); provided, however, that each party shall be permitted to
disclose the terms and existence of this Agreement to its respective employees, officers,
directors, consultants and professional advisors, and Omeros shall be permitted to disclose the
terms and existence of this Agreement to its current and prospective shareholders, investors and
commercial partners. Except as permitted above in this Section 3.2 with respect to disclosure of
the existence and terms of this Agreement, neither party shall use the other party’s name without
the other party’s written consent, including without limitation for any promotional or marketing
purposes.
3.3 Indemnification. Omeros agrees to indemnify, defend, and hold SMRI harmless from and
against any liability, losses, damages, and expense (including reasonable attorney’s fees and
costs) arising from any third party claim, action or proceeding to the extent shown by a court of
competent jurisdiction to have arisen from: (a) injuries to persons or damages which occur on
Omeros’ premises, (b) the negligence or intentional misconduct of Omeros, except in each of (a) and (b), to
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the extent caused by the negligence or intentional misconduct of SMRI, and (c) the knowing
infringement of any patent by Omeros. In the event of an Interruption and exercise by SMRI of its
option to take an Interruption License under Section 3.1.4 herein, SMRI agrees to indemnify,
defend, and hold Omeros harmless from and against any liability, losses, damages, and expense
(including reasonable attorney’s fees and costs) arising from any third party claim, action or
proceeding to the extent shown by a court of competent jurisdiction to have arisen from: (a)
injuries to persons or damages which occur on SMRI’s premises, (b) the negligence or intentional
misconduct of SMRI, except in each of (a) and (b), to the extent caused by the negligence or
intentional misconduct of Omeros, and (c) the knowing infringement of any patent by SMRI.
3.4 Insurance. Omeros shall maintain at its own expense, with a reputable insurance
carrier reasonably acceptable to SMRI, coverage for Omeros, its Affiliates, and their respective
employees written on a per occurrence basis, commensurate with a reasonable assessment of the risks
associated with the research efforts being conducted by Omeros, which insurance will name SMRI as
an additional insured. Such insurance shall include without limitation errors and omissions
insurance encompassing claims relating to the performance and lack of performance of Omeros’
obligations under this Agreement and comprehensive general liability insurance for claims relating
to the performance and lack of performance of Omeros’ obligations under this Agreement and
comprehensive general liability insurance for claims for damages arising from bodily injury
(including death) and property damages arising out of acts or omissions of an Omeros Party which
will be specifically endorsed to cover Omeros’ indemnification obligations under Section 3.3.
Maintenance of such insurance coverage will not relieve Omeros of any responsibility under this
Agreement for damages in excess of insurance limits or otherwise. On or prior to the Effective
Date,
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Omeros shall provide SMRI with an insurance certificate from the insurer(s) evidencing each
insurance coverage and the insurer’s agreement to notify SMRI at least sixty (60) days in advance
of any cancellation or modification of such insurance coverage. At its request, SMRI may review
Omeros’ insurance coverage with relevant Omeros officials from time to time.
3.5 DISCLAIMER OF WARRANTY; LIMITATION OF LIABILITY. THE PARTIES RECOGNIZE THAT RESEARCH
AND DEVELOPMENT IS INHERENTLY UNCERTAIN AND NONE OF THE PARTIES HERETO MAKE ANY REPRESENTATIONS,
WARRANTIES, OR GUARANTIES OF ANY KIND WITH RESPECT TO THE SUCCESS OF THE PROGRAM OR THE PRODUCT.
EXCEPT WITH RESPECT TO BREACHES OF THE CONFIDENTIALITY AGREEMENT OR THE INTELLECTUAL PROPERTY
PROVISIONS OF SECTION 3.1 ABOVE, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
HERETO, OR TO ANY THIRD PARTY, FOR ANY LIABILITY, DAMAGES, OR EXPENSE INCLUDING SPECIAL, DIRECT,
INDIRECT, CONSEQUENTIAL DAMAGES OR OTHER ECONOMIC LOSS IN CONNECTION WITH THIS AGREEMENT.
3.6 Operation of the Program.
3.6.1 General. Subject to Section 3.6.2 below, Omeros shall (i) use Commercially
Reasonable Efforts to achieve the milestones set forth herein and ultimately commercialize a
Product, (ii) use the Grant Funds furnished by SMRI solely for the Program in Omeros’ sole
discretion; provided that, it is Omeros’ intention to expend amounts on the Program that exceed the
Grant Funds and amounts of SMRI’s equity investment under this Agreement.
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3.6.2 Personnel; Outsourcing. Omeros will maintain an in-house chemist to supervise, and
consulting chemists to assist with, the Program, which chemists shall be reasonably acceptable to
and approved by SMRI, such approval not to be unreasonably conditioned, withheld or delayed. SMRI
agrees that [†], Omeros’ Senior Group Leader, Medicinal Chemistry, with support from consultants
[†], are acceptable to SMRI for purposes of this Section 3.6.2. Further, SMRI shall have
the right to approve contract research organizations and consultants selected for outsourced
chemistry work, such approval not to be unreasonably conditioned, withheld or delayed.
3.7 Joint Program Advisory Committee; Program Reporting.
3.7.1 Composition and Purposes. During the term of the Research Program, a Joint Program Advisory
Committee (“JPAC”) shall facilitate communication between the Parties, and make
recommendations, with respect to the Program. The JPAC shall consist of four (4) members, two (2)
of whom shall be designated by Omeros (the “Omeros Designees”), and two (2) of whom
shall be designated by SMRI (the “SMRI Designees”). Each party (a) shall select a
Program Coordinator from among its designees to the JPAC (who may be changed at any time or from
time to time by such Party), and (b) may change any of its designees to the JPAC at any time or
from time to time. The Program Coordinator of Omeros shall serve as the Chairperson of the JPAC.
The initial Omeros Designees and the initial SMRI Designees shall be identified by the respective
Parties within thirty (30) days of the execution of this Agreement.
Without limiting the generality of the foregoing, the JPAC shall:
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(a) consider, review, reevaluate and discuss the research plan, evaluate any proposed
revisions to the research plan, and give its recommendations regarding any proposed amendments to
the research plan;
(ii) monitor the progress of the Program, and make recommendations to Omeros’ research team as
needed on next steps to implement the Program;
(iii) determine whether the Milestones have been satisfied and achieved; and
(iv) provide periodic meeting reports on the status of the Program to SMRI (the “JPAC
Reports”), which JPAC Reports shall not include the chemical structure of any Products or
Product candidates in recognition of the serious harm to the Program and Omeros that could result
from the disclosure of such structures.
3.7.2 Meetings. The JPAC shall meet no less frequently than once in each six (6) month
period during the Research Program; provided, however, that the JPAC shall meet
more frequently if requested by either Program Coordinator. The first meeting of the JPAC shall be
held within ninety (90) days of the Effective Date. Meetings of the JPAC shall be held at such
times and locations as may be mutually agreed upon by the Program Coordinators, which times and
locations shall be communicated in writing (including, without limitation, by email) to the other
members of the JPAC with reasonable advance notice of the meeting. Members of the JPAC may attend
each meeting either in person or by means of telephone or other telecommunications device that
allows all participants to hear and speak at such meeting simultaneously. At least ten (10)
business days prior to each meeting, Omeros shall deliver (including by email) to SMRI a written
report detailing the
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progress made on the Program since the last meeting of the JPAC. Within
twenty (20) days after the date of each meeting, the Omeros Designees shall prepare and deliver (including by email) to the
SMRI Designees written minutes of such meeting setting forth in detail all discussions and/or
recommendations of the JPAC made at such meeting, which such minutes shall be subject to the prior
approval of SMRI’s Program Coordinator, but which minutes shall not include the chemical structure
of any Products or Product candidates.
3.7.3 Expenses. Each Party shall pay its own expenses (including travel and lodging
expenses) incurred in connection with its participation on the JPAC.
3.7.4 Reporting. After the completion of the Program and until the First Commercial Sale,
Omeros shall report in writing on an annual basis on the progress of the Program.
3.8 Board. At Omeros’ request and discretion, [†], will join Omeros’ Board of Directors.
It is understood that, if [†] joins Omeros’ Board, he would attend some Board Meetings by
videoconference or teleconference. Omeros would provide [†] with Directors’ and Officers’
liability coverage and an indemnification agreement (attached hereto as Exhibit D)
consistent with coverage and indemnification provided to other members of Omeros’ Board. Such
coverage and/or indemnification agreement may be amended in connection with Omeros’ IPO. In
keeping with legal requirements for Washington corporations, [†] will be subject to the normal
fiduciary and confidentiality obligations of a board member. It is anticipated that Omeros will
keep SMRI informed of the progress of the Program through the JPAC Reports.
4 Term and Termination.
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4.1 Term. The term of this Agreement shall commence on the Effective Date and shall
extend, unless sooner terminated in accordance with the provisions of this Section 4, until
the date that Omeros has fulfilled its Grant Funds repayment obligations, if any, pursuant to this
Agreement.
4.2 Mutual Agreement. The Parties may terminate this Agreement at any time by written
agreement of Omeros and SMRI.
4.3 Termination for Breach.
4.3.1 In the event that Omeros shall be in material breach or default of a material obligation
under this Agreement or the Confidentiality Agreement and shall fail to remedy such breach or
default within sixty (60) days after receipt of written notice thereof given by SMRI, SMRI shall be
entitled to terminate this Agreement upon written notice to Omeros at any time after such sixty
(60) day period.
4.3.2 In the event that SMRI shall be in material breach or default of a material obligation under
this Agreement or the Confidentiality Agreement and shall fail to remedy such breach or default
within sixty (60) days after receipt of written notice thereof given by Omeros, Omeros shall be
entitled to terminate this Agreement upon written notice to SMRI at any time after such sixty (60)
day period.
4.4 Survival. Termination of this Agreement for any reason shall not release a Party from
any liability which at the time of such termination has already accrued to the other Party,
including Omeros’ remaining obligations, if any, to complete repayment of the Grant Funds pursuant
to this Agreement. The terms of Sections 2.5, 2.6, 3.1, 3.2, 3.4, Section 5 and this Section 4.4
shall survive
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any termination or expiration of this Agreement, except that the terms of Subsection 3.1.4
(Interruption License) shall not survive the termination of this Agreement under Section 4.3.2 of
this Agreement due to SMRI’s material breach or default. Except as otherwise provided in this
Section 4.4, all rights and obligations of the Parties under this Agreement shall terminate upon
the expiration or termination of this Agreement.
5 Miscellaneous.
5.1 Notice. Any notice or other communication required by this Agreement shall be made in
writing and given by prepaid, first class, certified mail, return receipt requested, and shall be
deemed to have been served on the date received by the addressee at the following address or such
other address as may from time to time be designated by the recipient Party in writing:
If to SMRI:
The Stanley Medical Research Institute
8401 Connecticut Avenue, Suite 200
Chevy Chase, MD 20815
Attn: Executive Director
The Stanley Medical Research Institute
8401 Connecticut Avenue, Suite 200
Chevy Chase, MD 20815
Attn: Executive Director
With copies to:
Bingham McCutchen
3000 K Street, N.W., Suite 300
Washington, DC 20007
Attn: Kenneth I. Schaner, Esq.
Bingham McCutchen
3000 K Street, N.W., Suite 300
Washington, DC 20007
Attn: Kenneth I. Schaner, Esq.
If to Omeros:
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101
Attn: Chief Executive Officer
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101
Attn: Chief Executive Officer
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With copies to:
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101
Attn: General Counsel
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101
Attn: General Counsel
5.2 Assignment. This Agreement may not be assigned by either Party without the prior
written consent of the other Party, except that Omeros may assign this Agreement, without such
prior written consent, to a third party that succeeds to all or substantially all of Omeros’
business and assets relating to this Agreement whether by sale, merger, acquisition, change of
control, operation of law or otherwise; provided that any such permitted assignee or transferee
shall be bound by the terms and conditions of this Agreement except as provided in Subsection
3.1.4(b) above.
5.3 License. Omeros may, at its sole discretion, license any or all of the rights in the
Product and/or the Program to any third party. Should Omeros choose to enter into such a licensing
arrangement, the Parties shall remain bound to the terms and conditions of this Agreement.
5.4 Disclosure. In the event that Omeros terminates the Program due to lack of commercial
viability of the Product, Omeros shall, subject to applicable legal and regulatory requirements,
disclose such termination to its shareholders.
5.5 Entire Agreement. This Agreement together with the Confidentiality Agreement set forth
the entire agreement between the Parties with respect to the subject matter herein and replace and
supersede all prior discussions and agreements between them with respect to such subject matter
hereof. This Agreement and the Confidentiality Agreement may not be changed or modified except by
written agreement of the Parties.
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5.6 Relationship of the Parties. Nothing in this Agreement shall be construed to create a
partnership or joint venture between the Parties, nor shall any Party’s employees or agents be
considered the employees or agents of any other. Neither Party shall have any express or implied
right or authority to assume or create any obligation on behalf of, or in the name of, the other
Party or to bind the other Party to any contract, agreement or other obligation with any third
party.
5.7 Governing Law. This Agreement and performance by the parties hereunder shall be
construed in accordance with the laws of the State of Washington, U.S.A., without regard to
provisions on the conflicts of laws.
5.8 Publicity. Omeros shall have the sole right to issue a press release announcing the
transactions contemplated by this Agreement, subject to SMRI’s prior approval of the text of such
press release, which shall not be unreasonably conditioned, withheld or delayed.
5.9 Expenses. All fees and expenses incurred in connection with this Agreement, including
all legal, accounting, financial advisory, consulting and all other fees and expenses of third
parties (“Third Party Expenses”) incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions contemplated
hereby, shall be the obligation of the respective party incurring such fees and expenses, [†]. No
broker fees shall be paid in connection with any funding provided to Omeros by SMRI.
5.10 Headings; Signatures. Headings included herein are for convenience only, do not form
a part of this Agreement and shall not be used in any way to construe or interpret this Agreement.
Any reference to “third party” in this Agreement shall mean any person or entity which is not a
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Party, including, without limitation, any affiliate of any Party. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument. This Agreement may be executed by facsimile signature.
5.11 Waiver. No waiver by a Party of any right or remedy hereunder shall be valid unless
the same shall be in writing and signed by the Party giving such waiver. No waiver by a Party with
respect to any default, misrepresentation, or breach of warranty or covenant hereunder shall be
deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
5.12 Validity of Agreement. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a term or provision that
is valid and enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so modified.
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IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute
this Agreement.
| THE STANLEY MEDICAL | OMEROS CORPORATION | |||||||||
| RESEARCH INSTITUTE | ||||||||||
By:
|
/s/ Michael B. Knable | By: | /s/ Gregory A. Demopulos | |||||||
Name:
|
Michael B. Knable, DO | Name: | Gregory A. Demopulos, M.D. | |||||||
Title:
|
Executive Director | Title: | Chairman & CEO | |||||||
Date:
|
12/18/06 | Date: | 12/15/06 | |||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Signature Page to
Funding Agreement
Exhibit Index
| Exhibit | Description | |
Exhibit A
|
Certain Defined Terms | |
Exhibit B
|
Form of Stock Purchase Agreement | |
Exhibit C
|
Form of Investors’ Rights Agreement | |
Exhibit D
|
Form of Indemnification Agreement |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Exhibit Index to
Funding Agreement
EXHIBIT A
DEFINED TERMS RELATING TO NET INCOME AND COMMERCIALIZATION EXPENSES
“Net Income” means income resulting from the Commercial Sale of the Product by Omeros, or
its Affiliate or sublicensee, and shall be equal to Net Sales minus Commercialization
Expenses minus an assumed income tax rate of thirty percent (30%) after taking into account
the deduction accorded Omeros for purposes of calculating taxable income for royalties payable to
SMRI pursuant to this Agreement.
“Net Sales” means the amount invoiced or otherwise billed by Omeros or its Affiliates or
its licensees for sales of the Product to a third party purchaser, less the following to the extent
included in such billing or otherwise actually allowed or incurred with respect to such sales:
(a) trade and quantity discounts other than early pay cash discounts and which effectively
reduce the selling price and are appropriately deducted from sales under appropriate accounting
principles, consistently applied;
(b) returns, rebates, chargebacks and other allowances;
(c) retroactive price reductions that are actually allowed or granted;
(d) sales commissions paid to third party distributors and/or selling agents, in amounts
customary to the trade;
(e) a fixed amount equal to [†] of the amount invoiced to cover bad debt, sales or excise
taxes, early payment cash discounts, transportation and insurance, custom duties, and other
governmental charges; and
(f) the standard inventory cost of devices or delivery systems used for dispensing or
administering the Product (such as syringes and inhalation devices, but excluding packaging).
With respect to sales of Combination Products, Net Sales in any country shall be calculated on
the basis of the gross invoice price of the Product sold in that country in the absence of the one
or more additional therapeutically active ingredients contained in the Combination Products. In
the event that the Product is sold in a country only as a Combination Product, Net Sales shall be
calculated on the basis of the gross invoice price of the Combination Product multiplied by a
fraction, the numerator of which shall be the average gross invoice price (converted to United
States Dollars) of the Product in any country(ies) in which the Product is sold in the absence of
the one or more additional therapeutically active ingredients contained in the Combination Product
and the denominator of which shall be the average gross invoice price (converted to United States
Dollars) of the Combination Product in those same countries. In the event that the Product is sold
only as the Combination Product in a country and only as the Product alone in any and all other
countries in which the Product is sold, the Net Sales for the Combination Product shall be
calculated based on the
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
-2-
average gross invoice price (converted to United States Dollars) of the Product sold in such
other country(ies). The deductions set forth in paragraphs (a) through (f) above will be applied in
calculating Net Sales for a Combination Product. In the event that the Product is not sold
anywhere in the world as the Product alone and is sold only as a Combination Product, Omeros shall
reasonably determine the value of the Product relative to the other therapeutically active
ingredients contained in the Combination Product.
“Commercialization Expenses” means Cost of Goods Sold, plus Marketing Expenses
plus Administrative Expenses, plus Third Party Royalties plus Currency
Adjustments.
“Cost of Goods Sold” If the Product is manufactured by one or more third parties, The Cost
of Goods Sold shall equal the actual costs incurred and payable to such third part(ies) by Omeros
for such manufacture (including importation, transportation, handling and logistic charges for
delivery to Omeros to the extent incurred by Omeros and any applicable royalties, other than Third
Party Royalties, payable by Omeros). Cost of Goods Sold shall also include any inventory-related
costs incurred prior to First Commercial Sale to ensure supply of the Product for First Commercial
Sale. If the Product is manufactured by Omeros, then the “Cost of Goods Sold” shall mean Omeros’
actual fully burdened cost for manufacturing the Product, determined in accordance with generally
accepted accounting principles, consistently applied.
“Marketing Expenses” means all direct selling, promotional and medical expenses (including
costs of post-approval clinical studies of the Product) incurred with respect to detailing,
distribution and sampling and marketing of the Product.
“Administrative Expenses” means indirect expenses incurred in supporting the
commercialization of the Product following commercial launch of the Product.
“Third Party Royalties” means any royalty or other fee payments to any third party paid
directly on the manufacture, importation, use, offer for sale or sale of the Product in order to
avoid infringement of any third party right with respect to the manufacture, importation, use,
offer for sale or sale of the Product.
“Currency Adjustments” means quarterly adjustments to actual amounts received by Omeros for
that portion of Net Sales of the Product received in currencies other than United States Dollars.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
-3-
Exhibit 10.34
DATED 20 April 2007
Scottish Biomedical Limited
Telford Pavilion, Todd Campus,
West of Scotland Science Park,
Glasgow, G20 0XA, Scotland, U.K.
Telford Pavilion, Todd Campus,
West of Scotland Science Park,
Glasgow, G20 0XA, Scotland, U.K.
“Scottish Biomedical” or “SB”
and
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101, U.S.A.
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101, U.S.A.
“Omeros”
SERVICES AND MATERIALS AGREEMENT
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
BUSINESS TERMS AND CONDITIONS / MATERIAL TRANSFER AND USE AGREEMENT
| 1 | BASIS OF THE SALE |
| 1.1 | SB shall provide the Services and Materials as set out in the attached Schedules A and B (and C if mutually agreed), subject to these conditions, which shall govern the contract for the provision of the Services and Materials to the exclusion of any other terms and conditions subject to which any request or provision for the Services and Materials is made or purported to be made by Omeros or Scottish Biomedical. | |
| 1.2 | Whereas nura, inc. and Scottish Biomedical entered into agreements on the 25th February 2005 and 8th August 2005, some of which terms continue to apply to the parties and their work under this agreement, as modified by an amendment referenced in the following Section 1.3. | |
| 1.3 | Whereas Omeros and SB agree to execute, concurrent with execution of this Services and Material Agreement, the Assignment and Amendment to the prior agreement of 25th February 2005, attached hereto as Exhibit I. | |
| 1.4 | Whereas Omeros acquired nura, inc. on 7th September 2006 | |
| 1.5 | These parties, SB and Omeros, now wish to extend their work together as outlined with this Agreement. | |
| 1.6 | No variation to these conditions shall be binding unless agreed in writing between the authorised representatives of Scottish Biomedical and Omeros. | |
| 1.7 | Scottish Biomedical’s employees or agents are not authorised to make any representations concerning the Services unless confirmed by an authorized official of Scottish Biomedical in writing. | |
| 1.8 | Omeros’ employees or agents are not authorised to make any representations concerning the Services unless confirmed by the Chief Executive Officer of Omeros in writing. |
WARRANTIES
| 1.9 | Scottish Biomedical warrants that it will perform the Services and supply the Materials in accordance with this Agreement including all attached Schedules and with reasonable care and skill, and in accordance with all applicable laws and regulations for the location of the provision of such Services and Materials, but does not guarantee, except where described herein, any particular outcome or results will arise as a result of the provision of the Services or that the Materials will be fit for any specific purpose. | |
| 1.10 | Save as set out in Clause 2 Scottish Biomedical neither gives nor makes any express warranty to Omeros. | |
| 1.11 | EXCEPT AS EXPRESSLY PROVIDED HEREIN, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS, SCOTTISH BIOMEDICAL AND OMEROS EACH DISCLAIMS ALL IMPLIED REPRESENTATIONS, WARRANTIES, CONDITIONS, OBLIGATIONS OR DUTIES OF EVERY NATURE (INCLUDING, WITHOUT LIMITATION, ANY EQUITABLE, COMMON LAW OR STATUTORY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, QUALITY, MERCHANTABILITY AND / OR SATISFACTORINESS) IN RESPECT OF THE SERVICES AND MATERIALS, ON THE PART OF SCOTTISH BIOMEDICAL, AND IN RESPECT OF ANY COMPOUNDS PROVIDED FOR ANALYSIS, ON THE PART OF OMEROS. ACCORDINGLY, ALL SUCH IMPLIED REPRESENTATIONS, WARRANTIES, CONDITIONS, OBLIGATIONS OR DUTIES ARE EXCLUDED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS. NOTHING IN THIS |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
2
AGREEMENT SHALL HOWEVER OPERATE TO LIMIT OR EXCLUDE ANY LIABILITY FOR FRAUD OR DEATH OR PERSONAL
INJURY CAUSED BY EITHER PARTY’S NEGLIGENCE.
| 1.12 | Each party agrees that the foregoing exclusions of express and/or implied warranties and the limitations and exclusions of liability set out in Clause 2 are in all respects fair and reasonable having regard to:- |
| (a) | the complexity and novelty of the Services and/or the Materials; | ||
| (b) | the price / fees to be paid pursuant to this Agreement; and | ||
| (c) | the relative resources of the parties. |
| 2 | LIMITATION OF LIABILITY |
| 2.1 | The following provisions set out Scottish Biomedical’s entire liability (including any liability for the acts and omissions of its employees, agents or sub-contractors) to Omeros in respect of: | |
| 2.2 | any breach of its contractual obligations arising under this Agreement; | |
| 2.2.1 | any indemnity granted by Scottish Biomedical under this Agreement; and | |
| 2.2.2 | any representation (other than fraudulent misrepresentation), statement or delictual or tortious act or omission including negligence arising under or in connection with this Agreement. | |
| 2.3 | Other than in respect of death and personal injury caused by Scottish Biomedical’s negligence, or in relation to any liability which by law may not be limited or excluded, or in relation to any liability due to Scottish Biomedical’s gross negligence or wilful misconduct, Scottish Biomedical’s liability with regard to any other matter, aspect, fact or thing arising from or relating to this Agreement shall in no event exceed the sums paid and due to be paid hereunder as at the date of the matter giving rise to the claim under the Schedules attached to this Agreement. | |
| 2.4 | Other than in respect of death and personal injury caused by a party’s negligence, or in relation to any other liability which by law may not be limited or excluded, or in relation to any liability due to a party’s gross negligence or wilful misconduct, each party shall not be liable to the other party for any consequential or indirect loss or loss of profit, business, data, revenue, goodwill or anticipated savings which arises out of or in connection with this Agreement. |
| 3 | INTELLECTUAL PROPERTY |
| 3.1 | Omeros acknowledges that the background know-how, production and assay methodology supplied by Scottish Biomedical under this Agreement is the property of Scottish Biomedical. |
| 3.2 | Scottish Biomedical and Omeros each agree and acknowledge that any and all Results or other intellectual property generated or created under this Agreement are the sole and exclusive property of Omeros. Scottish Biomedical agrees to execute any assignments and declarations or render such other assistance as may be necessary to confirm Omeros’ ownership of such Results and intellectual property, including any patents filed for or obtained based thereon. Such reasonable time (charged at [†]) and |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| costs expended on Omeros’ behalf in this regard shall be reimbursed to Scottish Biomedical through payment of invoices raised at the end of each month where there is such activity by Scottish Biomedical. |
| 3.3 | Scottish Biomedical agrees and acknowledges that all compounds and derivatives generated or provided by Scottish Biomedical under this Agreement or provided by Omeros for Scottish Biomedical’s analysis under this Agreement are the sole and exclusive property of Omeros. | |
| 3.4 | Scottish Biomedical agrees to transfer to Omeros, at no additional charge, all know-how, techniques, synthesis methods and materials developed by Scottish Biomedical for Omeros under this or any prior Agreement to enable Omeros to synthesis or cause to be synthesized all compounds and derivatives made by Scottish Biomedical for Omeros under this or any prior Agreement; provided, however, that if any of Scottish Biomedical’s pre-existing proprietary know-how, techniques, methods or materials that were not developed for Omeros under this or any prior agreement are reasonably necessary to permit Omeros to carry out or cause such synthesis, then Omeros’ right to use such pre-existing proprietary know-how, techniques, methods or materials shall be limited to a non-exclusive license for purposes of carrying out or causing such synthesis. |
| 4 | CONFIDENTIAL INFORMATION |
| 4.1 | The parties acknowledge and agree to observe their respective obligations of Confidentiality as included in their Mutual Confidentiality Agreement of October 4, 2006 (“Mutual CDA”), which Mutual CDA is hereby expressly incorporated into this Agreement. The parties shall, in accordance with the terms of the Mutual CDA, treat as secret and confidential, and take all proper precautions to protect any information disclosed by each of them to the other in connection with the provision of the Services / Materials including but not limited to any Results and the subject matter of any Patent or Know-how as well as information concerning the parties, this Agreement, and either of their businesses and activities generally or any such information which may come to its knowledge in whatever form or manner imparted or received. Subject as herein provided, and except as provided in the Mutual CDA, any disclosure of such information shall be limited to those employees, agents, servants or staff of both parties who need the information for the purposes of the provision of the Services / Materials and any such disclosures shall be on such terms as to preserve the effect of this Clause (Confidential Information). All compounds and derivatives generated or provided by Scottish Biomedical under this Agreement, or provided by Omeros for Scottish Biomedical’s analysis under this Agreement, and all data and results generated under this Agreement shall be considered and treated as Omeros’ Confidential Information. |
| 5 | TERMINATION |
| 5.1 | This Agreement shall terminate upon completion of eighteen months from commencement, commencement date being the date when this Agreement has been signed by both parties, subject always to any extension to the duration of the provision of the Services / Materials and License agreed between the parties in writing and subject to the provisions of the contract surviving termination including Warranties |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| (Sections 1.9-1.12), Limitation of Liability (Section 2), Intellectual Property (Section 3), Confidential Information (Section 4), Governing Law (Section 7), Assignment (Section 9), Records Maintenance (Section 10) and the provisions of Sections 13-15. Termination of this Agreement shall not affect the status of all prior agreements between Omeros and Scottish Biomedical or any continuing obligations thereunder, including the Mutual CDA and the prior agreements dated 25th February 2005 (as amended by Exhibit I hereto) and 8th August 2005. |
| 5.2 | Either party may terminate this Agreement forthwith: |
| 5.3 | if the other party has a winding up order made against it or, except for the purposes of reconstruction, has a resolution for voluntary winding up passed in respect of it, or has a liquidator, receiver or administrator appointed over it; |
| 5.4 | in the event of non-performance or breach by the other party of any of its obligations in respect of the Services / Material provision after the giving of written notice by the party not in default to the defaulting party requiring performance of the obligations and the defaulting party remaining in breach of its obligations one (1) month after the receipt thereof. | |
| 5.5 | Omeros may terminate this Agreement, with or without cause, upon forty-five (45) days prior written notice to Scottish Biomedical. Provided no other Service and Materials Module is ongoing, either party may terminate this agreement upon written notice to the other party or at the end of any Service and Materials Module described in the Schedules attached hereto. In the case of receipt of a notice of termination from Omeros, Scottish Biomedical shall stop work, and Omeros shall be responsible for payment of all Services and Materials performed, and all noncancellable obligations, as of the date of receipt of notice. |
| 6 | PAYMENT TERMS |
As full and complete consideration for all Materials and Services provided and obligations
undertaken in accordance with this Agreement, SB shall issue an invoice at the end of each
month for the value of work completed as agreed for that month in the Schedules attached
hereto.
All invoices shall be payable by Omeros within thirty (30) days of the date of receipt of
invoice from SB, which “receipt” includes faxed copies of invoices.
Payment shall be deposited by electronic transfer to Scottish Biomedical’s bank account,
without deduction of charges:
[†]
Or such other bank account as may be nominated in writing by Scottish Biomedical to Omeros.
| 7 | GOVERNING LAW |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
5
This Agreement shall be governed and construed in accordance with the law of the state of
Delaware, USA. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the US Federal courts located in the State of Delaware, USA, as regards any claim, dispute
or matter arising out of or relating to this Agreement and its implementation and effect.
| 8 | SUBCONTRACTING |
Scottish Biomedical shall not subcontract out any of the Services under this Agreement
without Omeros’ written consent. Omeros hereby consents to Scottish Biomedical’s
subcontracting of certain PDE10 screening work to [†] as described in the attached
schedules; provided, however, that Scottish Biomedical
(i) receives [†]’s written agreement and undertaking to comply with the obligations of
Sections 3 and 4 and other sections, as may be applicable, of this Agreement to the same
extent as such obligations apply to Scottish Biomedical, (ii) provides Omeros with a copy of
such written undertaking, and (iii) shall be responsible for all consideration owed to [†]
and for [†]’s performance of its obligations in accordance with this Agreement.
| 9 | ASSIGNMENT |
Neither party may assign this Agreement, or any obligation or right under this Agreement, in
whole or in part, without the other party’s prior written consent, which consent will not be
unreasonably withheld. Scottish Biomedical consents to Omeros’ assignment of this Agreement
in whole or in part in connection with the merger, acquisition consolidation or transfer of
all or substantially all of that portion of Omeros’ assets to which this Agreement relates.
Subject to these restrictions, this Agreement will be binding upon and will inure to the
benefit of the parties’ permitted successors and assignees.
| 10 | RECORDS MAINTENANCE |
Scottish Biomedical will maintain complete and accurate written and electronic records,
accounts, notes, reports and data relating to its performance of the Services and provision
of the Materials (the “Records”). Scottish Biomedical will without added charge retain all
of the Records after Scottish Biomedical completes all Services performed and Materials
provided for a period of five (5) years. Scottish Biomedical will notify Omeros at least
two months before any Records are to be disposed. If at any time Omeros requests receipt of
the original Records, Scottish Biomedical will send the original Records to Omeros at
Omeros’ expense.
| 11 | AUDITS AND ANSPECTIONS |
Omeros’ representatives may visit Scottish Biomedical’s facilities at reasonable times and
with reasonable frequency during normal business hours to observe the progress of the
Services and to examine documents, facilities, Records, equipment, and any other relevant
resources pertaining to the Services and Materials. If Scottish Biomedical receives a
request from any regulatory agency to inspect any portion of Scottish Biomedical’s
facilities related to the performance of the Services or provision of the Materials, or
receives any notice of deficiency from a regulatory agency, Scottish Biomedical will notify
Omeros in advance and shall fully inform Omeros of the results of such inspection or notice.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| 12 | INDEPENDENT CONTRACTORS |
The relationship of the parties under this Agreement is that of independent contractors, and
this Agreement will not be construed to imply that either party is the agent, employee, or
joint venture partner of the other.
| 13 | USE OF NAMES |
Except as may be required by law or regulation after first providing reasonable advance
notice to the other party, neither party may disclose the existence of this Agreement or its
terms, or use the other party’s name in any promotional, advertising or other materials
without the prior written consent of the other party. Scottish Biomedical hereby consents
to Omeros’ disclosure of this Agreement and Scottish Biomedical’s name to Omeros’ current
and potential employees, consultants, directors, shareholders, investors and partners as
having provided the Services and Materials.
| 14 | THIRD PARTY INTELLECTUAL PROPERTY |
Each party undertakes and agrees to respect the valid intellectual property rights of any
third party that relates to the Services and the Materials, and will notify the other party
if they are aware that the provision of any proposed Services or Materials infringes any
known third party intellectual property rights.
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| 15 | CONSTRUCTION |
If any provision of this Agreement is held to be unenforceable, that provision will be
construed and reformed to permit enforcement to the maximum extent permissible consistent
with the parties’ original intent, and the remainder of this Agreement will continue in full
force and effect. Either party’s failure to enforce any provision of this Agreement will
not be considered a waiver of future enforcement of that or any other provision.
SUBSCRIBED for and on behalf of SCOTTISH BIOMEDICAL LIMITED at Glasgow on the 24th day of April 2007 by Stephen Hammond its Director before the following witness: |
/s/ Stephen Hammond
|
|||
Witness Name:
|
/s/ Eric Smith
|
|||
Eric Smith
|
Witness | |||
Occupation: |
||||
Chartered
Accountant |
||||
SUBSCRIBED for and on behalf of
OMEROS CORPORATION, 1420 Fifth
Avenue, Suite 2600, Seattle, WA
98101, at Seattle on the 20th day
of April 2007 by Gregory A.
Demopulos, M.D., its Chairman and
Chief Executive Officer
(authorised official), before the
following witness:
|
/s/ Gregory A. Demopulos
|
|||
Witness Name:
|
/s/ Marcia S. Kelbon
|
|||
Marcia S. Kelbon
|
Witness | |||
Address: 1420 Fifth Avenue, Suite 2600, Seattle, WA 98101... |
||||
Occupation: |
||||
Vice President, General Counsel Omeros Corporation |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
8
SCHEDULE A
PROJECT SPECIFICATION
PROJECT SPECIFICATION
Detailed within is the project outline to be implemented for a lead optimization programme to
identify novel PDE10 inhibitors for Omeros.
SB will undertake a PDE10 medicinal chemistry programme to identify potent and bio available PDE10
inhibitors which are specifically aimed at the generation of a Phase I clinical candidate (the
“Project”). To achieve this SB aims to produce a compound that has:
| • | [†] |
SB shall provide written monthly reports to Omeros summarizing [†]. The reports also shall
summarize chemical routes used.
The Project activity will last for a minimum of 3 months, this being the duration of Module 1,
unless terminated in accordance with the provisions of this Agreement.
[†]
[†]
Each subsequent “Module” shall be undertaken only upon mutual agreement in advance, including a
monetary value computed in accordance with Schedule B, by a Module Schedule setting out the
details, expected duration and deliverables (template at Schedule C). Each Module Schedule shall
be signed by an authorised official of each party, preferably before the end of the current Module,
but in any event before commencement of that subsequent Module for which fees will be paid by
Omeros.
Unless otherwise agreed between Omeros and Scottish Biomedical, should there be any gap of greater
than thirty (30) days between (i) Omeros’ receipt from Scottish Biomedical and [†] of all final
data, compounds and derivatives deliverable for any module and (ii) Omeros’ execution of a Services
and Materials Module (Schedule C) authorizing the commencement of the next module, then Scottish
Biomedical reserves the right to re-state timescales and re-allocate / change the personnel it
allocates to Omeros’ work, depending on its other resource and business requirements. Any changes
of personnel shall be with scientists with similar skill levels.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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| Module | Description | Scheduled Duration | Comments | |||
All
|
Project Manager: Colin Dick. | throughout | ||||
[†]
|
[†] | [†] | [†] |
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SCHEDULE B
PROJECT PLAN AND FEES
I. Project Plan
The previous collaboration between Nura and Scottish Biomedical resulted in the identification of
novel patentable compounds that [†]. As described in greater detail in Schedule A, to optimise this
advanced lead series we will begin to synthesise the [†] compounds, listed in Appendix 1 attached
hereto, that will address the issues of metabolic stability and solubility.
A. Communication
[†] will resume as Project Leader and will head Scottish Biomedical’s Project Team with [†] as lead
chemist. During the project, at the end of each week, photocopies of all chemistry lab books will
be sent to Omeros as a pdf together with a summary of work completed and in progress.
The Project Team at SB will review the data and discuss future plans at a weekly teleconference
with Omeros ([†]).
However, lines of communication are open between Omeros and Scottish Biomedical on an ad hoc basis.
B. Assay Specifications
[†]
C. Compound Purity Checks on SB Synthesized Compounds
[†]
II. Chemistry
A. Description
Scottish Biomedical’s chemists will re-commence the project. [†]
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B. Monthly resource / fees
1. Module 1
[†]
2. Subsequent Modules
If subsequent modules are agreed, it is anticipated that chemistry staffing for the Service will be
continuing at that level of resource. Therefore, unless otherwise agreed, the SB fee for chemistry
work during any agreed modules after module 1 will be [†] per month, or a pro-rated portion of this
fee for periods of less than a full month.
The above monthly fee for Module 1 and any subsequent modules includes, in addition to the SB
chemists, all standard materials and consumables, plus appropriate Project Management of this
element. This provision includes production of compounds / [†] where ordered by Omeros /
teleconferences etc.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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III. Biology
A. General Description
PDE Selectivity Testing at SB, PDE10 screening at [†], as described below.
SB has allowed for the equivalent of 1 full-time SB biologist to undertake all this work at SB,
plus additional SB biology resources/personnel for [†].
B. Specific Description and Monthly resource / fees
1. PDE Selectivity Testing
a. Specific Description
[†]
b. Monthly resource / fees
i. Module 1
[†]
ii. Subsequent Modules
Thereafter – pricing on per compound / per well basis for any agreed subsequent modules, as
follows:
The fee for select [†] testing per well is:
per batch* of : |
||||
[†] wells
|
$ [†] per well | |||
| [†] wells | $ [†] per well | |||
[†] wells
|
$ [†] per well |
| * | SB shall await Omeros instructions prior to commencing testing so as to control batch size, subject to any mutually agreed time constraints. Such instruction shall be issued by e-mail from [†] or such other Omeros personnel as may be subsequently designated by Omeros in writing. | |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
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2. PDE10 Screening at [†]
a. Specific Description
PDE10 screening will be carried out at [†], with SB to Project Manage the Collaboration.
Scottish Biomedical will assist the [†] in setting up and validating the reconstructed vector and
subsequent protein production as well as instruction on the PDE assay.
b. Monthly resource / fees
i. Module 1:
[†]
ii. Subsequent Modules
Thereafter – pricing on per compound / per well basis for any agreed subsequent modules, as
follows:
The fee for [†] testing per well is:
per batch* of : |
||||
[†] wells
|
$ [†] per well | |||
| [†] wells | $ [†] per well | |||
[†] wells
|
$ [†] per well |
| * | SB shall await Omeros instructions prior to commencing testing so as to control batch size, subject to any mutually agreed time constraints. |
IV. Total fees (Chemistry + Biology)
A. Module 1 = 3 months
[†]
B. Subsequent Modules: Monthly fees from month 4 onwards:
The fee for each month from month 4 onwards, that may be agreed for any subsequent modules, is
Chemistry at [†] (or pro-rated for any period of less than a full month) plus an invoice for all
agreed PDE selectivity testing at SB per the above pricing and PDE10 screening at [†] per the above
pricing completed during such month.
Should the Project continue beyond 1st April 2008 then all SB /[†]prices will
increase for inflation by [†]with effect from that date.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
14
V. Testing of Compounds Supplied by Omeros
A. [†] Testing for compounds supplied by Omeros
Should Omeros wish to have [†] carried out by Scottish Biomedical separately from compound
production then the fee is $ [†]. This fee would cover an SB chemist to spend time to provide [†]
knowledge to the project. Looking at synthetic feasibility/literature searching/patents for
potential compounds
B. PDE Selectivity Testing by SB of Omeros supplied Compounds
1) The fee for PDE IC50 testing, for select PDEs* per well is:
per batch** of : |
||||
[†] wells
|
$ [†] per well | |||
| [†] wells | $ [†] per well | |||
[†] wells
|
$ [†] per well |
| * | IC50 testing for selected PDE1-5, 7-9, 11 to be completed at SB. | |
| ** | SB shall await Omeros instructions prior to commencing testing so as to control batch size, subject to any mutually agreed time constraints. |
C. PDE10 Screening at [†]of Omeros supplied Compounds
The fee for PDE10 IC50 testing, per well is:
per batch* of : |
||||
[†] wells
|
$ [†] per well | |||
| [†] wells | $ [†] per well | |||
[†] wells
|
$ [†] per well |
| * | SB shall await Omeros instructions prior to commencing testing so as to control batch size, subject to any mutually agreed time constraints. |
This rate is offered to Omeros whilst the project is ongoing as part of the overall project for
simplicity. However should Omeros require such PDE10 screening following completion of the overall
SB work then SB reserves the right to re-quote for this testing.
† DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION
15
SCHEDULE C
MODULE TEMPLATE
OMEROS CORPORATION
MODULE X
under the terms and conditions of
SERVICES AND MATERIALS AGREEMENT dated 20 April 2007
Module Title:
Module Initiation Date:
Service Provider: Scottish Biomedical Limited
1. Scope of Work. Scottish Biomedical will
2. Deliverables. Scottish Biomedical will, for each compound, deliver to Omeros: (a) a
report summarizing the results of all testing completed; and (b) a copy of all original data.
3. Timeline. Scottish Biomedical will use reasonable efforts to provide test results
within xxxxx weeks of receipt of compounds for testing from Omeros.
4. Compensation. As full and complete consideration for all Services provided and
obligations undertaken under this Task Order, Omeros shall pay Scottish Biomedical US $ .
Final payment shall be due upon . Where the module duration is > 1 month then SB shall
invoice at the end of each month for the appropriate portion of the agreed fee within the module,
and invoice the balance due for the module upon completion. All SB invoices shall be paid within
thirty (30) days of receipt.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
16
The above Module is accepted and acknowledged by each party through the signature of its authorized
representative below, and is effective as of (date)
| SCOTTISH BIOMEDICAL LIMITED | OMEROS CORPORATION | |||||||||
By:
|
By: | |||||||||
Name:
|
Name: | Gregory A. Demopulos, M.D. | ||||||||
Title:
|
Title: | Chairman & CEO | ||||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
17
Appendix 1
Proposed
alterations to current [†].
[†].
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
18
EXHIBIT I
ASSIGNMENT AND AMENDMENT dated 20 April 2007
of the
SERVICES AND MATERIALS AGREEMENT dated 25 February 25 2005
By and between
SCOTTISH BIOMEDICAL LIMITED T/A “SCOTTISH BIOMEDICAL”
and NURA, INC.
This is an assignment and amendment (this “Amendment”) effective 20 April 2007, between Scottish
Biomedical Limited T/A “Scottish Biomedical” (“Scottish Biomedical”), Omeros Corporation (“Omeros”)
and nura, inc. (“Nura”) of the Services and Material Agreement dated February 25, 2005 (“this
Agreement”, which term shall not be construed herein to refer to any former or subsequent agreement
between any of the parties) between Scottish Biomedical and Nura, a copy of which is attached
hereto as Exhibit A, related to Nura’s PDE10 program.
Whereas Omeros acquired Nura effective August 11, 2006, with Nura now being a wholly owned
subsidiary of Omeros and all of Nura’s research programs having been transferred to Omeros; and
Whereas Omeros and Scottish Biomedical wish to have Scottish Biomedical provide additional services
to Omeros related to Omeros’ PDE10 program on a fee basis under a separate agreement, and Omeros
and Scottish Biomedical wish to amend this Agreement to clarify and provide for continuing
obligations there under;
Therefore, in consideration of the above and other good and valuable consideration, the parties
hereby agree as follows:
Assignment:
Nura hereby assigns to Omeros all of Nura’s rights and obligations under this Agreement, to be
enjoyed by and binding on Omeros to the same extent as enjoyed by and binding on Nura, Omeros
hereby accepts such assignment, and Scottish Biomedical hereby consents to and acknowledges such
assignment. Nura shall have no further right or obligation under this Agreement or this Amendment.
Amendment:
Scottish Biomedical and Omeros agree that this Agreement is hereby amended as follows:
All references to Nura are to be understood and interpreted as referring to Omeros.
Subsection 5.1 of Section 5 (Termination) of this Agreement is amended to read as follows:
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
1
| 5.1 | This Agreement shall terminate upon completion of twelve months from commencement, commencement date being the date when this Agreement was signed by both parties, subject always to any extension to the duration of the provision of the Services / Materials and License agreed between the parties and subject to the following provisions of this Agreement that shall survive termination: Section 3 (Intellectual Property); Section 4 (Confidential Information), Section 7 (Governing Law), Section 8 (Assignment) and the Module 2 Milestone and Royalty provisions (patent filings, clinical development, regulatory approval, commercial sales) set forth in the Project Specification Schedule to this Agreement. |
Section 7 (Governing Law) of this Agreement is amended to read as follows:
| 7 | GOVERNING LAW |
| This Agreement shall be governed and construed in accordance with the law of the state of Delaware, USA. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the US Federal courts located in the State of Delaware, USA, as regards any claim, dispute or matter arising out of or relating to this Agreement and its implementation and effect. |
The following new Section 8 (Assignment) is added to this Agreement:
| 8 | ASSIGNMENT | |
| Neither party may assign this Agreement, or any obligation or right under this Agreement, in whole or in part, without the other party’s prior written consent, which consent will not be unreasonably withheld. Scottish Biomedical consents to Omeros’ assignment of this Agreement in whole or in part in connection with the merger, acquisition consolidation or transfer of all or substantially all of that portion of Omeros’ assets to which this Agreement relates. Subject to these restrictions, this Agreement will be binding upon and will inure to the benefit of the parties’ permitted successors and assignees. |
The Project Specification Schedule, Module 2, Milestone and Royalty Table of this Agreement is
replaced with the following definitions and amended table to read as follows:
The costs for provision of this library are set forth in the following table, in which terms used
are defined as follows:
“Scottish Biomedical Library Compound” refers to a compound screened and selected during the
performance of this Agreement from Scottish Biomedical’s compound library pre-existing prior to
this Agreement.
“Scottish Biomedical Series” means a series of structurally related novel compounds initially
synthesized by Scottish Biomedical during the performance of this Agreement which are derivatives
of a Scottish Biomedical Library Compound.
“Derivative” means a novel compound initially synthesized by Scottish Biomedical, during the
performance of this Agreement or during the performance of a separate agreement between Scottish
Biomedical and Omeros, which is a chemical derivative of a Scottish Biomedical Library Compound.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
2
“Subject Patent Application” means, for each unrelated Scottish Biomedical Series, the first patent
application filed by Omeros anywhere in the world claiming as novel chemical entities such Scottish
Biomedical Series or a subset of such Scottish Biomedical Series.
“Net Revenue” means revenue received by Omeros (cash or monetary equivalents) less the sum of the
following actual and customary deductions where applicable: cash, trade, or quantity discounts;
sales, use, tariff, import/export duties or other excise taxes, and any other governmental taxes
imposed on particular sales; transportation charges and allowances; commissions to third party
sales agents; and credits to customers because of rejections or returns.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
3
[†]
|
[†] | |
Royalties
|
[†] |
For purposes of clarity, not withstanding anything to the contrary above, Omeros and Scottish
Biomedical agree that the above milestone and royalty payment provisions shall not apply to any
compound synthesized or developed by [†] for which Omeros is required to pay milestones and/or
royalties to [†] or [†]’s successor-in-interest.
Continued Agreement
All other provisions of this Agreement including all attachments thereto, as amended herein above,
shall continue in full force and effect during the term of this Agreement.
This Amendment is accepted and acknowledged by each party, as of the Effective Date set forth
herein above, through the signature of its authorized representative(s) below:
| SCOTTISH BIOMEDICAL LIMITED | OMEROS CORPORATION | |||||||||
By:
|
/s/ Stephen Hammond
|
By: | /s/ Gregory A. Demopulos
|
|||||||
Name:
|
Stephen Hammond |
Name: | Gregory A. Demopulos, M.D. | |||||||
Title:
|
Chief Executive
|
Title: | Chairman & CEO | |||||||
| NURA, INC. | ||||||||||
| By: | /s/ Gregory A. Demopulos
|
|||||||||
| Name: | Gregory A. Demopulos, M.D. | |||||||||
| Title: | President | |||||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
4
EXHIBIT A
Copy of SERVICES AND MATERIALS AGREEMENT dated 25 February 2005
By and between
SCOTTISH BIOMEDICAL LIMITED TIA “SCOTTISH BIOMEDICAL”
and NURA, INC.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
5
DATED (February 25/2005)
SCOTTISH BIOMEDICAL LIMITED TIA “SCOTTISH BIOMEDICAL”
and
Nura Inc. “The Client”
SERVICES AND MATERIALS AGREEMENT
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
SCOTTISH
BIOMEDICAL
BUSINESS TERMS AND CONDITIONS / MATERIAL TRANSFER AND USE AGREEMENT
BUSINESS TERMS AND CONDITIONS / MATERIAL TRANSFER AND USE AGREEMENT
| 1 | BASIS OF THE SALE |
| 1.1 | Scottish Biomedical shall provide the Services and Materials as set out in the Schedule, subject to these conditions, which shall govern the contract for the provision of the Services and Materials to the exclusion of any other terms and conditions subject to which any request for the Services and Materials is made or purported to be made by The Client. | |
| 1.2 | No variation to these conditions shall be binding unless agreed in writing between the authorised representatives of Scottish Biomedical and The Client. | |
| 1.3 | Scottish Biomedical’s employees or agents are not authorised to make any representations concerning the Services unless confirmed by Scottish Biomedical in writing. | |
| 1.4 | Scottish Biomedical shall grant a 12-month non-exclusive licence to The Client to use its production and assay methodology under the terms and conditions of this Agreement. | |
| 1.5 | The Client shall not provide any Material originating from Scottish Biomedical to any third party whatsoever and shall not grant any sub-licenses over the assay methodology licensed to it by Scottish Biomedical, without the specific written permission of Scottish Biomedical. Scottish Biomedical hereby gives permission as part of these Terms that it or The Client shall supply Materials from Scottish Biomedical as part of this Agreement to ComGenex of Hungary. |
WARRANTIES
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
2
| 1.6 | Scottish Biomedical warrants that it will perform the Services and supply the Materials with reasonable care and skill but does not guarantee any particular outcome or results will arise as a result of the provision of the Services or that the Materials will be fit for any specific purpose. | |
| 1.7 | Save as set out in Clause 2 Scottish Biomedical neither gives nor makes any express warranty to The Client. | |
| 1.8 | TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS, SCOTTISH BIOMEDICAL DISCLAIMS ALL IMPLIED REPRESENTATIONS, WARRANTIES, CONDITIONS, OBLIGATIONS OR DUTIES OF EVERY NATURE (INCLUDING, WITHOUT LIMITATION, ANY EQUITABLE, COMMON LAW OR STATUTORY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, QUALITY, MERCHANTABILITY AND/OR SATISFACTORINESS) IN RESPECT OF THE SERVICES AND MATERIALS. ACCORDINGLY, ALL SUCH IMPLIED REPRESENTATIONS, WARRANTIES, CONDITIONS, OBLIGATIONS OR DUTIES ARE EXCLUDED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS. NOTHING IN THIS AGREEMENT SHALL HOWEVER OPERATE TO LIMIT OR EXCLUDE ANY LIABILITY FOR FRAUD OR DEATH OR PERSONAL INJURY CAUSED BY SCOTTISH BIOMEDICAL’S NEGLIGENCE. | |
| 1.9 | The Client agrees that the foregoing exclusions of express and/or implied warranties and the limitations and exclusions of liability set out in Clause 2 are in all respects fair and reasonable having regard to: |
| (a) | the complexity and novelty of the Services and/or the Materials; | ||
| (b) | the price / fees to be paid pursuant to this Agreement; and | ||
| (c) | the relative resources of the parties. |
| 2 | LIMITATION OF LIABILITY |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
3
| 2.1 | The following provisions set out Scottish Biomedical’s entire liability (including any liability for the acts and omissions of its employees, agents or sub-contractors) to The Client in respect of: | |
| 2.2 | any breach of its contractual obligations arising under this Agreement; | |
| 2.2.1 | any indemnity granted by Scottish Biomedical under this Agreement; and | |
| 2.2.2 | any representation (other than fraudulent misrepresentation), statement or delictual or tortious act or omission including negligence arising under or in connection with this Agreement. | |
| 2.3 | Other than in respect of death and personal injury caused by Scottish Biomedical’s negligence, or in relation to any liability which by law may not be limited or excluded, Scottish Biomedical’s liability with regard to any other matter, aspect, fact or thing arising from or relating to this Agreement shall in no event exceed the sums paid [and due to be paid] hereunder as at the date of the matter giving rise to the claim under the Final Proposal Document [or, where the Proposal consists of a series of Tasks, only in respect of the sums paid [and due to be paid] for the relevant Task(s)]. | |
| 2.4 | Other than in respect of death and personal injury caused by Scottish Biomedical’s negligence, or in relation to any other liability which by law may not be limited or excluded, Scottish Biomedical shall not be liable for any consequential or indirect loss or loss of profit, business, data, revenue, goodwill or anticipated savings which arises out of or in connection with this Agreement. | |
| 3 | INTELLECTUALPROPERTY | |
| 3.1 | The Client acknowledges that the production and assay methodology supplied under this Agreement is the property of Scottish Biomedical. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
4
| 3.2 | Scottish Biomedical and The Client each agree and acknowledge that any Results or other intellectual property generated or created under this Agreement are the property of The Client; provided, however that all such Results and other intellectual property shall be subject to a first position security interest in favour of Scottish Biomedical securing The Client’s payment obligations under this Agreement. | |
| 4 | CONFIDENTIAL INFORMATION | |
| 4.1 | The parties acknowledge and agree to observe their respective obligations of Confidentiality. The parties shall treat as secret and confidential, and take all proper precautions to protect, any information disclosed by each of them to the other in connection with the provision of the Services / Materials including but not limited to any Results and the subject matter of any Patent or Know-how as well as information concerning the parties, this Agreement, and either of their businesses and activities generally or any such information which may come to its knowledge in whatever form or manner imparted or received. Subject as herein provided, any disclosure of such information shall be limited to those employees, agents, servants or staff of both parties who need the information for the purposes of the provision of the Services / Materials and any such disclosures shall be on such terms as to preserve the effect of this Clause (Confidential Information). | |
| 4.2 | The Client shall ensure that [†] observes these Confidentiality provisions. | |
| 5 | TERMINATION | |
| 5.1 | This Agreement shall terminate upon completion of twelve months from commencement, commencement date being the date when the Agreement has been signed by both parties, subject always to any extension to the duration of the provision of the Services / Materials and License agreed between the parties and subject to the provisions of the contract surviving |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
5
| termination including Confidential Information / Confidentiality / Milestone Payments and Royalty Fees. | ||
| 5.2 | Either party may terminate this Agreement forthwith: | |
| 5.3 | if the other party has a winding up order made against it or, except for the purposes of reconstruction, has a resolution for voluntary winding up passed in respect of it, or has a liquidator, receiver or administrator appointed over it; | |
| 5.4 | in the event of non-performance or breach by the other party of any of its obligations in respect of the Services / Material provision after the giving of written notice by the party not in default to the defaulting party requiring performance of the obligations and the defaulting party remaining in breach of its obligations one (1) month after the receipt thereof. | |
| 5.5 | Upon termination The Client shall return to Scottish Biomedical all copies of the methodologies supplied to it under the Agreement and cease to use them. | |
| 6 | PAYMENT TERMS | |
| The Client shall be issued with an initial invoice on signing of the agreement to the value of 30% of the total due under the Agreement or 30% of the total initial order placed by The Client. | ||
| The Client shall be issued with a second invoice to the value of 30% of the total due mid-way through the agreed work programme, and then a final invoice shall be issued for the balance due under the Agreement (or total initial order) once all the Services and Materials have been completed / provided. | ||
| Each invoice shall be payable by The Client within 30 days of the date of invoice from Scottish Biomedical. | ||
| Payment shall be deposited by electronic transfer to Scottish Biomedical’s bank account: [†] |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
6
GOVERNING LAW
This Agreement shall be governed and construed in accordance with the law of Scotland. Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the Scottish courts as
regards any claim, dispute or matter arising out of or relating to this Agreement and its
implementation and effect.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
7
SUBSCRIBED for and on behalf of
SCOTTISH BIOMEDICAL LIMITED
at Glasgow on the day of 2005
by its Director before the following
witness:
|
/s/ Stephen Hammond
|
|||
Witness Name
|
/s/ illegible signature | Witness | ||
Occupation: Principal Scientist |
||||
SUBSCRIBED for and on behalf of
Nura Inc.
at Seattle on the 25th day of
February, 2005
by Patrick Gray its Chief Executive
Officer before the following witness:-
|
/s/ Patrick Gray
|
|||
Witness Name: Mark Benjamin Witness
|
/s/ Mark Benjamin
|
|||
Address 1124 Columbia Street, Seattle, WA, 98034 USA |
||||
Occupation Chief Business Officer, Nura
Inc. |
||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
8
SCHEDULE
PROJECT SPECIFICATION
Module 1
|
Provision of Purified Human PDE10Al, Assay Details and Technical Support | |
[†] |
||
Module 2
|
Provision of Scottish Biomedical’s [†] Compound PDE10 Enriched Library | |
[†] |
||
Module 3
|
Human PDE1-11 Profiling, Single Point Screens | |
[†] |
||
Module 4
|
Human PDE1-11 profiling, Comprehensive IC50 Determination | |
[†] |
||
Module 5
|
Purchase of Scottish Biomedical’s [†] Compound PDE10 Enriched Library | |
[†] |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
9
Exhibit 10.35
AMENDMENT dated 30 April 2007
of the
SERVICES AND MATERIALS AGREEMENT dated 20 April 2007
By and between
SCOTTISH BIOMEDICAL LIMITED T/A “SCOTTISH BIOMEDICAL”
and OMEROS CORPORATION
This is an amendment (this “Amendment”) effective 30 April 2007, between Scottish Biomedical
Limited T/A “Scottish Biomedical” (“Scottish Biomedical”) and Omeros Corporation (“Omeros”) of the
Services and Materials Agreement dated 20 April 2007 (“the Agreement”) related to Omeros’ PDE10
program.
The Agreement is hereby amended to replace original Appendix 1 (pages 20-22 of the Agreement)
with the corrected Appendix 1 attached hereto (amended pages 20-22).
All other terms of the Agreement remain unchanged and in force. This Amendment is accepted
and acknowledged by each party, as of the effective date set forth herein above, through the
signature of its authorized representatives below:
| SCOTTISH BIOMEDICAL LIMITED | OMEROS CORPORATION | |||||||
By:
|
/s/ Eric Smith | By: | /s/ Gregory A. Demopulos | |||||
Name:
|
Eric Smith | Name: | Gregory A. Demopulos, M.D. | |||||
Title:
|
Finance Director | Title: | Chairman & CEO | |||||
† DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION
Amended 20
Appendix 1
Proposed alterations to current catechols.
[†]
† DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION
Amended
21
Exhibit 10.36
Drug Product Development and Clinical Supply Agreement
THIS AGREEMENT (“Agreement”) is effective as of the 20th day of January 2006 (“Effective Date”).
BY AND BETWEEN:
OMEROS CORPORATION, a corporation organized and existing under the laws of Washington, with its
principal offices located at 1420 Fifth Avenue, Suite 2600, Seattle, Washington 98101 (hereinafter
referred to as “CLIENT”)
AND:
ALTHEA TECHNOLOGIES, INC., a Delaware corporation, with a place of business located at 11040
Roselle Street, San Diego, CA 92121 (hereinafter referred to as “ALTHEA”);
WHEREAS CLIENT has formulations and/or know-how related to each Drug Product, as defined below;
WHEREAS ALTHEA has the expertise and the manufacturing facility suitable for the Production of Drug
Product;
WHEREAS, CLIENT wishes to have ALTHEA Produce Drug Product and ALTHEA wishes to Produce Drug
Product for CLIENT;
NOW, THEREFORE, in consideration of the premises and the undertakings, terms, conditions and
covenants set forth below, the parties hereto agree as follows:
Article 1, DEFINITIONS.
| 1.1 | AFFILIATE of a party hereto shall mean any entity that controls or is controlled by such party, or is under common control with such party. For purposes of this definition, an entity shall be deemed to control another entity if it owns or controls, directly or indirectly, at least fifty percent (50%) of the voting equity of another entity (or other comparable interest for an entity other than a corporation). | ||
| 1.2 | APPLICABLE LEGAL REQUIREMENTS shall mean all laws, rules, regulations, ordinances, guidance, guidelines, and standards of any international, national, state, or local governmental authority that are applicable to the Development, Production, or other services described in a particular Project Plan or to other activities or obligations under this Agreement, including without limitation (a) cGMP, to the extent applicable as set forth in a Project Plan, (b) all |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| other applicable regulations and regulatory guidance promulgated by the FDA and (c) applicable International Conference on Harmonisation Guidance. | |||
| 1.3 | BATCH shall mean a specific quantity of a Drug Product comprising a number of units mutually agreed upon between CLIENT and ALTHEA, and that (a) is intended to have uniform character and quality within specified limits, and (b) is produced according to a single manufacturing order during the same cycle of manufacture. | ||
| 1.4 | APIs shall mean the active pharmaceutical ingredients, as set forth in the Project Plan, to be supplied by CLIENT for use in Production of Drug Product. | ||
| 1.5 | cGMP shall mean current Good Manufacturing Practices as defined in the FDA rules and regulations, 21 CFR Parts 210-211. | ||
| 1.6 | CANCELLATION FEES shall mean the fees that may be payable by CLIENT in the event that CLIENT cancels the Production of any Batch of Drug Product set forth in the Project Plan, as further described and set forth in Section 3.3. | ||
| 1.7 | COMPONENTS shall mean all Components used by ALTHEA in Production of Drug Product under this Agreement. Components are listed in the Project Plan and are identified as Components supplied by CLIENT (“CLIENT Supplied Components”) or Components supplied by ALTHEA (“ALTHEA Supplied Components”). | ||
| 1.8 | CONFIDENTIAL INFORMATION shall mean all information and data provided by one party to the other party except any portion of such information and data which: |
| (i) | is known to the recipient as evidenced by its written records before receipt thereof from the disclosing party; | ||
| (ii) | is disclosed to the recipient by a third person who has the legal right to make such disclosure; | ||
| (iii) | is or becomes part of the public domain through no fault of the recipient; or | ||
| (iv) | the recipient can reasonably establish by its written records is independently developed by recipient without use of the information disclosed by the disclosing party. |
| 1.9 | ALTHEA SOPs shall mean ALTHEA’s applicable Standard Operating Procedures which shall be reviewed and approved by CLIENT prior to entering into each Project Plan. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 1.10 | DEVELOPMENT shall mean studies conducted by ALTHEA to develop a process to Produce Drug Product, in accordance with the Specifications and cGMP. Development activities shall be identified in the Project Plan. | ||
| 1.11 | DRUG PRODUCT shall mean each of CLIENT’s pharmaceutical product(s) for which CLIENT is engaging ALTHEA hereunder to Produce bulk or finished dosage form, as further set forth in an applicable Project Plan, for development and/or clinical use only by CLIENT or its designees. | ||
| 1.12 | FDA shall mean the United States Food and Drug Administration or any successor entity thereto. | ||
| 1.13 | FD&C ACT shall mean the United States Federal Food, Drug and Cosmetic Act, 21 U.S.C. Section 301, et seq., as may be amended from time to time. | ||
| 1.14 | IND shall mean an Investigational New Drug Application for Drug Product, as defined in the rules and regulations promulgated by FDA, including without limitation 21 CFR 312.3. | ||
| 1.15 | LABELING shall mean all labels and other written, printed, or graphic matter upon: (i) Drug Product or any container, carton, or wrapper utilized with Drug Product or (ii) any written material accompanying Drug Product. | ||
| 1.16 | MASTER BATCH RECORD (MBR) shall mean the formal set of instructions for Production of Drug Product. The MBR shall be developed and maintained in ALTHEA’s standard format by ALTHEA, using CLIENT’s master formula and technical support, and shall be approved in writing by CLIENT. | ||
| 1.17 | PRODUCTION or PRODUCE shall mean the formulation, filling, packaging, inspection, labeling, and/or testing of Drug Product by ALTHEA, as further set forth in the applicable Project Plan and as the context requires. | ||
| 1.18 | PRODUCT SPECIFICATION SHEET shall mean a listing of the analytical testing and corresponding Specifications, to be performed on the APIs and/or Drug Product in connection with the stability program and as further described in the applicable Project Plan. | ||
| 1.19 | PROJECT PLAN shall mean each document agreed upon by the parties from time to time that contains the parameters for Production of a Drug Product by ALTHEA hereunder. Each Project Plan shall be initially developed by ALTHEA and, if acceptable to CLIENT, agreed to in writing by CLIENT. Each Project Plan shall include the details of the project relating to a particular Drug Product, including without limitation (a) the scope of work to be performed and deliverables to be delivered by ALTHEA, (b) the Purchase Price that CLIENT will pay for the work to be performed by ALTHEA, (c) the timeline for performance of work by ALTHEA, and (d) the Quality Management Agreement applicable to the work to be performed by ALTHEA under the Project Plan. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| Prior to commencing Production of any Drug Product, ALTHEA shall deliver two (2) signed originals of the Project Plan to CLIENT. CLIENT shall review the Project Plan and, if CLIENT finds the Project Plan acceptable, shall sign both originals of the Project Plan and return one (1) fully executed original to ALTHEA. Each fully executed Project Plan shall be incorporated herein by reference and made a part of this Agreement. In the event of any inconsistency between the terms within the body of this Agreement and the terms contained in any Project Plan, including without limitation any Quality Management Agreement within any such Project Plan, the terms within the body of this Agreement shall govern. ALTHEA shall have no obligation for Production of a Drug Product until CLIENT has executed and returned the Project Plan for such Drug Product to ALTHEA. | |||
| 1.20 | PURCHASE PRICE shall mean the amount to be paid by CLIENT for Development, Production, and any other services to be performed by ALTHEA as specified in each Project Plan. | ||
| 1.21 | REGULATORY AUTHORITY shall mean those agencies or authorities responsible for regulation of Drug Product in the United States and overseas, including without limitation FDA. ALTHEA shall have no obligation to Produce Drug Product in compliance with the requirements of a Regulatory Authority other than FDA unless specified in the applicable Project Plan or the other terms of this Agreement. | ||
| 1.22 | RELEASED EXECUTED BATCH RECORD shall mean the completed batch record and associate deviation reports, investigation reports, and Certificates of Analysis created for each Batch of Drug Product. | ||
| 1.23 | SPECIFICATIONS shall mean those specifications set forth in the Product Specification Sheet and the Master Batch Record for Drug Product, and to the extent that ALTHEA is required to test the APIs, for the APIs. |
Article 2, DEVELOPMENT AND PRODUCTION OF DRUG PRODUCT.
| 2.1 | General, Initiation: |
| (a) | ALTHEA shall, and shall cause all permitted Subcontractors to, perform all Development, Production, and other services hereunder (i) in a professional manner and in accordance with high standards of care and diligence consistent with industry practices, (ii) in compliance with the terms and conditions of this Agreement, including without limitation the applicable Project Plans and the schedules included therein, (iii) in compliance with all Applicable Legal Requirements, and (iv) in compliance with the applicable ALTHEA SOPs, and (e) in compliance with all reasonable direction and requests of CLIENT. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| (b) | Upon execution of this Agreement and the corresponding Project Plan for each Drug Product, ALTHEA shall, to the extent set forth in the Project Plan, commence Development of such Drug Product pursuant to the timeline set forth in the Project Plan. Upon execution of this Agreement and the corresponding Project Plan for each Drug Product, ALTHEA shall commence Production of such Drug Product pursuant to the Project Plan. |
| 2.2 | Documentation: The Master Batch Record shall be reviewed and approved by ALTHEA and by CLIENT in writing (including by letter, e-mail or by signing the Master Batch Record) prior to commencement of Production. Any material change to an approved Master Batch Record will be reviewed and approved by ALTHEA and by CLIENT in writing (including by letter, e-mail or by signing a change order) prior to said change being implemented. Each Batch of Drug Product shall be Produced by using a copy of the Master Batch Record. Each copy of the Master Batch Record for such Batch of Drug Product shall be assigned a unique batch number. Any deviation from the manufacturing process specified in the Master Batch Record must be documented in the copy of the Master Batch Record for that Batch. ALTHEA shall provide CLIENT in a timely manner with required supporting Development and Production documentation and any other information required for regulatory filings related to the Drug Product in a form reasonably suitable for CLIENT’s submission to the FDA or other Regulatory Authority, including without limitation Master Batch Records, other batch records, protocols, other written processes and procedures directly related to the CLIENT’s Drug Product and any other documents that are reasonably necessary or useful for CLIENT to use and/or transfer all methods and other work product resulting from the Development and Production services performed by ALTHEA under this Agreement. Employees, consultants, agents or contractors of CLIENT or CLIENT’s Affiliates shall have the right to reference or submit the foregoing to the applicable Regulatory Authorities in support of an IND or other regulatory filing related to the Drug Product, or otherwise in support of CLIENT’s efforts to develop, conduct clinical trials for, formulate, manufacture, test, and seek regulatory approval for the Drug Product. | ||
| 2.3 | APIs and Components Supply: CLIENT, at its sole cost and expense (including, without limitation, shipping costs), shall supply to ALTHEA, in a timely manner, (a) all APIs required to satisfy the terms of this Agreement and (b) any other CLIENT Supplied Components, all to be delivered to ALTHEA as set forth in the applicable Project Plan for Production of such Drug Product. Except as may specifically be set forth in the Project Plan, on receipt of the APIs and CLIENT Supplied Components as set forth above, ALTHEA’s sole obligation with respect to evaluation of the APIs and CLIENT Supplied Components shall be to review the accompanying certificate of analysis to confirm that the APIs and CLIENT Supplied Components (if applicable) conform with the Specifications and component specifications, respectively. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 2.4 | APIs and Component Delivery Delays: ALTHEA shall have no responsibility for delays in delivery of Drug Product caused by delays in receipt of APIs to be supplied by CLIENT under a Project Plan or other CLIENT Supplied Components. Notwithstanding anything in this Agreement to the contrary, in the event that ALTHEA receives the APIs for Production of Drug Product from CLIENT with less time than set forth in the applicable Project Plan prior to the scheduled date of Production of such Drug Product, but within sufficient time to Produce such Drug Product on such scheduled date as determined by ALTHEA in its reasonable discretion, ALTHEA may charge CLIENT up to an additional fee of [†] for labor or expenses resulting from such delay incurred by ALTHEA, which shall be paid promptly to ALTHEA prior to Production, and ALTHEA shall Produce such Drug Product as per the original schedule. Notwithstanding anything in this Agreement to the contrary, in the event that ALTHEA receives the APIs for Production of Drug Product from CLIENT with less time than set forth in the applicable Project Plan prior to the scheduled date of Production of such Drug Product, and without sufficient time to Produce such Drug Product on the scheduled date as determined by ALTHEA in its reasonable discretion, ALTHEA shall reschedule Production of such Drug Product and shall charge CLIENT the applicable Cancellation Fee, if any, as further set forth in Section 3.3. | ||
| 2.5 | Importer of Record: In the event any material or equipment to be supplied by CLIENT, including without limitation CLIENT Supplied Components and APIs, is imported into the United States for delivery to ALTHEA (“Imported Goods”), CLIENT shall be the “Importer of Record” of such Imported Goods. As the Importer of Record, CLIENT shall be responsible for all aspects of the Imported Goods including, without limitation (a) customs and other regulatory clearance of Imported Goods, (b) payment of all tariffs, duties, customs, fees, expenses and charges payable in connection with the importation and delivery of the Imported Goods, and (c) keeping all records, documents, correspondence and tracking information required by applicable laws, rules and regulations arising out of or in connection with the importation or delivery of the Imported Goods. | ||
| 2.6 | Material Safety Data Sheet: CLIENT shall provide ALTHEA a Material Safety Data Sheet for APIs and, if available, for each Drug Product. ALTHEA shall immediately notify CLIENT of any unusual health or environmental occurrence relating to Drug Product, including, but not limited to any claim or complaint by any employee of ALTHEA or any of its Affiliates or third party that the operations of ALTHEA pursuant to this Agreement have resulted in any adverse health or safety effect on an employee or third party. ALTHEA agrees to advise CLIENT immediately of any unexpected safety or toxicity problems of which it becomes aware regarding the Drug Product. | ||
| 2.7 | Vendor and Supplier Audit and Certification: CLIENT shall be provided the opportunity to and shall have the right to certify and audit all Drug Product- related vendors and suppliers, the identity of which shall be provided to CLIENT by ALTHEA upon request by CLIENT, and if CLIENT does not so certify and audit such vendors and suppliers, shall be deemed to have approved ALTHEA’S |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| selection of vendors and suppliers by way of signing this agreement. If CLIENT has a reasonable objection to any of ALTHEA’s vendors or suppliers, CLIENT shall so inform ALTHEA and the parties shall work together in good faith to identify an alternate supplier or otherwise resolve the issue. ALTHEA shall inform CLIENT in writing of any change in ALTHEA’s suppliers and vendors used in the Production of Drug Product. Except for the CLIENT Supplied Components identified in a Project Plan, the cost for all materials and ALTHEA Supplied Components, including any required testing and evaluation, which shall be performed by ALTHEA, shall be included in the Purchase Price. | |||
| 2.8 | Storage; Delivery Terms: ALTHEA shall store all APIs and all Drug Product under conditions that comply with the Specifications, any requirements set forth in the Project Plan, and any other reasonable written instructions of CLIENT, as applicable. Notwithstanding anything herein seemingly to the contrary, ALTHEA shall be liable for risk of loss of APIs, CLIENT Supplied Components and Drug Product while in the possession of ALTHEA. ALTHEA shall ship all Drug Product to CLIENT or to CLIENT’s designated consignee under conditions that comply with the Specifications, any requirements set forth in the Project Plan, and any other reasonable written instructions of CLIENT, as applicable. All shipments shall be shipped FOB ALTHEA, by a common carrier designated by CLIENT, at CLIENT’s expense; provided, however, ALTHEA shall be responsible for the loading of the Drug Product on departure and shall bear risk of loss and all costs of such loading. CLIENT shall procure, at its cost, insurance covering damage or loss of Drug Product during shipping. All shipping instructions of CLIENT shall be accompanied by the name and address of the recipient and the shipping date. | ||
| 2.9 | Exporter of Record: CLIENT shall be the exporter of record for any Drug Product shipped out of the United States, as CLIENT shall be and shall remain the owner of the Drug Product, as between the parties. CLIENT warrants that all shipments of Drug Product exported from the United States will be made in compliance with all applicable United States export laws and regulations and all applicable import laws and regulations into the country of importation. | ||
| CLIENT shall be responsible for obtaining and paying for any licenses or other governmental authorization(s) necessary for the exportation from the United States. CLIENT shall select and pay the freight forwarder who shall solely be CLIENT’s agent. CLIENT and its freight forwarder shall be solely responsible for preparing and filing the Shipper’s Export Declaration and any other documentation required for the export. | |||
| 2.10 | Foreign Corrupt Practices Act. CLIENT acknowledges that it is not the agent of ALTHEA and represents and warrants that it has not, and covenants that it will not, pay anything of value to any government employee in connection with the resale of the Product. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 2.11 | Deposits and Payment for Drug Product and Development: Promptly upon execution of each Project Plan, CLIENT shall pay to ALTHEA [†] of the total fees of each Project Plan, unless otherwise set forth in the Project Plan. Thereafter, ALTHEA will invoice CLIENT monthly based on the specific services completed and/or milestones met during the month. A payment schedule may be set forth in each Project Plan. CLIENT shall pay all invoices within thirty (30) days of receipt by CLIENT. Any payment due under this Agreement not received within the times noted above shall bear interest at the lesser of (a) the maximum rate permitted by law, and (b) 1.5% per month on the outstanding balance compounded monthly. Not withstanding the above provisions of this Section 2.11, CLIENT may withhold until resolved payment of any invoices that are disputed in good faith due to any Drug Product or other deliverable failing to meet standards set forth in the applicable Project Plan. | ||
| 2.12 | Default in Payment Obligations: In addition to all other remedies available to ALTHEA in the event of a CLIENT default, if CLIENT fails to make payments as required hereunder, ALTHEA may take appropriate measures to assure prompt and full payment, including any one of the following measures: refuse to Produce any Drug Product until CLIENT’s account is paid in full; modify the foregoing terms of payment; place the account on a letter of credit basis; require full or partial payment in advance; suspend deliveries of Drug Product until CLIENT provides assurance of performance reasonably satisfactory to ALTHEA, or take other reasonable means as ALTHEA may determine. | ||
| 2.13 | Returns: Drug Product returned by third parties is the responsibility of CLIENT. | ||
| 2.14 | Subcontractors. ALTHEA shall not subcontract to any third parties (in such capacity, “Subcontractors”) any Development, Production, or other services that ALTHEA is obligated to perform under this Agreement without, in each case, CLIENT’s prior written approval, at CLIENT’s sole discretion. If ALTHEA proposes use of Subcontractors for particular services, CLIENT may require access to such Subcontractors for audit purposes. If CLIENT preapproves a Subcontractor in writing, (a) ALTHEA shall enter into an agreement with such Subcontractor that requires Subcontractor to meet all performance standards hereunder, that contains confidentiality and non-use terms at least as strict as those set forth in Article 9 below, that includes intellectual property rights and obligations consistent with those set forth in Article 10 below, and that includes any other terms necessary to ensure that ALTHEA meets its obligations under this Agreement, and (b) no such subcontracting by ALTHEA shall relieve ALTHEA of, and ALTHEA shall remain primarily liable for, its obligations under this Agreement. The parties may, at their discretion, designate in a Project Plan certain Subcontractors approved by CLIENT for services to be performed under that particular Project Plan. | ||
| 2.15 | Drug Product Substitution. At CLIENT’s request, from time to time, ALTHEA shall substitute for Production that has been scheduled under a Project Plan another Drug Product of CLIENT or its designee. ALTHEA shall accept each such |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| substitution unless CLIENT and ALTHEA agree, in their reasonable discretion and after a good-faith discussion and reasonable evaluation of relevant factors, that such particular substitution is not feasible for technical reasons. In the event of any such substitution, the parties shall negotiate in good faith to amend the Project Plan as appropriate, including without limitation by adjusting the dates, deadlines and Purchase Price set forth in the Project Plan to the extent impacted by such Drug Product substitution. |
Article 3, TERM AND TERMINATION.
| 3.1 | Term: Unless sooner terminated pursuant to Section 3.2 herein, this Agreement shall commence on the date first above written and will continue until one (1) year after the satisfactory completion of Development and Production and all other services set forth in all outstanding Project Plans, as well as the satisfactory delivery of all deliverables set forth in all outstanding Project Plans (the “Term”). Notwithstanding the foregoing, the parties shall be free to extend the Term by mutual written agreement even if no Project Plans are outstanding, in contemplation of entering into Project Plans in the future. | ||
| 3.2 | Termination: This Agreement may be terminated at any time upon the occurrence of any of the following events: |
| 3.2.1 | Termination for Breach: Either party may terminate this Agreement upon the breach of any provision of this Agreement by the other party if such breach is not cured by the breaching party within thirty (30) calendar days (or such additional time reasonably necessary to cure such default provided the breaching party has commenced a cure within the thirty (30) day period and is diligently pursuing completion of such cure) after receipt by the breaching party of written notice of such default. At the option of the non-breaching party, such termination may be with respect to the entire Agreement, or only with respect to the Project Plan that is subject to the breach. | ||
| 3.2.2 | Termination for Financial Matters: This Agreement may be terminated immediately by either party by giving the other party written notice thereof in the event such other party makes a general assignment for the benefit of its creditors, or proceedings of a case are commenced in any court of competent jurisdiction by or against such party seeking (a) such party’s reorganization, liquidation, dissolution, arrangement or winding up, or the composition or readjustment of its debts, (b) the appointment of a receiver or trustee for or over such party’s property, or (c) similar relief in respect of such party under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debt, and such proceedings shall continue undismissed, or |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| an order with respect to the foregoing shall be entered and continue unstated, for a period of more than sixty (60) days without the entry of an order by a court of competent jurisdiction or other action by a duly appointed receiver or trustee that will ensure performance by such other party. | |||
| 3.2.3 | Termination by Omeros: This Agreement or any Project Plan may by terminated by CLIENT without cause by providing written notice of termination to Althea, which action shall subject Omeros to the payment of any penalties that may be applicable for any uncompleted Project Plan(s) as provided in Section 3.3(b) below. |
| 3.3 | Payment on Termination; Cancellation Fees: |
| (a) | In the event of the termination of this Agreement, CLIENT shall reimburse ALTHEA for (a) its documented, reasonable out-of-pocket costs for all ALTHEA Supplied Components ordered prior to termination and not cancelable at no cost to ALTHEA, (b) all work-in-process commenced by ALTHEA that has been performed in accordance with the terms of this Agreement and applicable Project Plan(s), and (c) all finished Drug Product produced and delivered in accordance with the terms of this Agreement and applicable Project Plan(s) that is delivered to CLIENT. | ||
| (b) | In the event of cancellation by CLIENT of the Production of any Batch set forth in a Project Plan that has been scheduled by written agreement of ALTHEA and CLIENT or in the event of termination of this Agreement prior to completion of any such scheduled Batch, ALTHEA shall use its best efforts to sell the manufacturing time and capacity created as a result of such cancellation or termination to another customer and otherwise mitigate ALTHEA’s losses. In the event that the manufacturing time and capacity created as a result of CLIENT’s cancellation of Production of any such scheduled Batch or the termination of this Agreement prior to completion of any such scheduled Batch has not been sold by ALTHEA, except for any cancellation or termination by CLIENT pursuant to Section 3.2.1, ALTHEA may at its option charge CLIENT and CLIENT shall then pay the Cancellation Fees as hereinafter set forth: (i) CLIENT is subject to a charge of [†] of the budgeted Batch price if the Batch is canceled less than [†] from the scheduled fill date, (ii) a charge of [†] of the budgeted Batch price if the Batch is canceled less than [†] from the scheduled fill date, and (iii) a charge of [†] of the budgeted Batch price if the Batch is canceled less than [†] from the scheduled fill date. In addition, CLIENT must compensate ALTHEA for any documented, reasonable out-of-pocket costs for all ALTHEA Supplied Components ordered by ALTHEA prior to termination and not cancelable at no cost to ALTHEA, non-cancelable materials ordered or testing completed by ALTHEA, except to any extent such costs have been paid in accordance with Section 3.3.(a) above. For |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| purposes of the foregoing, one (1) week is equivalent to seven (7) days. Following termination or upon notice that CLIENT has cancelled Production of a Batch, as applicable, ALTHEA shall ship all completed Drug Product and all Components and other materials for which CLIENT is obligated to reimburse ALTHEA pursuant to the foregoing, to CLIENT at CLIENT’s cost and per CLIENT’s instructions. CLIENT shall make payment for all expenses described in Section 3.3 thirty (30) days from receipt of the invoice. Notwithstanding anything herein to the contrary, CLIENT shall have no obligation to pay any Cancellation Fees or other amounts to ALTHEA in the event that this Agreement is terminated by CLIENT pursuant to Section 3.2.1 above. |
| 3.4 | Survival: Termination, expiration, cancellation or abandonment of this Agreement through any means or for any reason shall be without prejudice to the rights and remedies of either party with respect to any antecedent breach of any of the provisions of this Agreement. The provisions of Sections 3, 6, 9, 10, 11, 12, 13, 14, and 15 hereof shall survive expiration or termination of this Agreement for the time period set forth therein, or if no time period is set forth therein, then indefinitely. |
Article 4, CERTIFICATES OF ANALYSIS AND MANUFACTURING COMPLIANCE.
| 4.1 | Certificates of Analysis: At CLIENT’s cost and expense, as set forth in the applicable Project Plan, ALTHEA shall test, or cause to be tested by third parties, in accordance with the Specifications, each Batch of Drug Product Produced pursuant to this Agreement before delivery to CLIENT. A certificate of analysis for each Batch delivered shall set forth the items tested, Specifications, and test results. ALTHEA shall also ensure that all batch Production and control records have been reviewed and approved by the appropriate quality control unit and shall so indicate on the final page of the Released Executed Batch Record. ALTHEA shall send, or cause to be sent, such certificates and the Released Executed Batch Record to CLIENT prior to the shipment of Drug Product (unless Drug Product is shipped under quarantine). Unless otherwise set forth in the applicable Project Plan, ALTHEA shall also provide samples of all Batches of Drug Product Produced under this Agreement, as further described in Section 5.1 below. Unless otherwise set forth in the Project Plan, CLIENT shall test, or cause to be tested, for final release, each Batch of Drug Product as meeting the Specifications. As required by the FDA (see Section 5.2 below), CLIENT assumes full responsibility for final release of each Batch of Drug Product. All costs associated with ALTHEA performing testing and providing certificates of analysis and other documentation as set forth in this Section 5.1 shall be deemed included within the Purchase Price set forth in the applicable Project Plan and Client shall pay no additional amounts therefore. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 4.2 | Manufacturing Compliance: ALTHEA shall advise CLIENT immediately if an authorized agent of FDA or any other Regulatory Authority visits ALTHEA’s manufacturing facility and makes an inquiry regarding ALTHEA’s Production of Drug Product for CLIENT or otherwise communicates orally or in writing with ALTHEA about any Drug Product for which services are performed hereunder. In the event of an inspection of an ALTHEA facility relating to a Drug Product or any services performed for CLIENT hereunder, CLIENT may send, at its own expense, representatives to the ALTHEA Facility to participate in any portion of such inspection directed to the Drug Product or the services performed under this Agreement. ALTHEA shall supply CLIENT with copies of any written communications from any Regulatory Authority that relate to the Drug Product or the services performed hereunder, whether such communications arise out of a facility inspection or otherwise. ALTHEA shall provide CLIENT with a copy of each proposed written response to a Regulatory Authority for CLIENT’s review and comment prior to ALTHEA’s submission of such response. ALTHEA shall give all due consideration to any CLIENT comments to each such proposed ALTHEA response, provided CLIENT responds in a timely fashion. Manufacturing deviations and investigations which occur during Production of Drug Product and which are not reasonably likely, in CLIENT’s reasonable discretion, to cause the Production to be non-compliant with cGMP, shall not be deemed to cause such Drug Product to be non-conforming. | ||
| 4.3 | Reserve Samples: CLIENT shall be responsible for obtaining and maintaining sufficient quantities of APIs and Drug Product reserve samples pursuant to cGMP. | ||
| 4.4 | Annual Quality Review: CLIENT shall be responsible for evaluating, at least annually, the quality standards of Drug Product to determine the need for changes in Specifications, manufacturing processes, and/or controlled documents. CLIENT shall supply ALTHEA a copy of the evaluation and recommendations, if any. | ||
| 4.5 | Retention of Records: ALTHEA shall maintain complete and accurate distribution and shipment, manufacturing, analytical, validation, and other records as specified in cGMP related to the Development, Production, and any other services performed hereunder (collectively, the “Production Records”). ALTHEA shall retain all Production Records in accordance with Applicable Legal Requirements, including without limitation cGMP. ALTHEA shall, upon CLIENT’s reasonable request and at CLIENT’s expense, make all Production Records available to CLIENT for inspection and, for Production Records directly pertaining to CLIENT’s Drug Products, copying. ALTHEA shall, prior to destroying any Production Records, provide written notice to CLIENT and permit CLIENT the opportunity to take possession of such records, at CLIENT’s expense. | ||
| 4.6 | Customer Complaints: CLIENT, as required by cGMP, shall maintain complaint files. All specific CLIENT Drug Product-related complaints received by ALTHEA shall be forwarded to CLIENT. CLIENT shall be responsible for |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| the review of the complaint to determine the need for an investigation or the need to report to the FDA as required by cGMP. CLIENT shall send to ALTHEA all Drug Product performance or manufacturing-related complaints which require investigation. ALTHEA shall conduct an investigation for each Drug Product performance or manufacturing-related complaint and shall report findings and follow-up of each investigation to CLIENT in a timely manner. CLIENT shall make these complaint files available to ALTHEA in the event they are required during an FDA inspection. | |||
| 4.7 | Audits: | ||
| CLIENT, upon prior written notice and during normal business hours, shall have the right to inspect ALTHEA Batch records, Production Records, and any other written and electronic files and documentation related to Development, Production, and/or other services performed hereunder and the portions of ALTHEA’s facility used for Production of Drug Product. CLIENT may conduct routine audits once annually and audits for reasonable cause with appropriate prior notice and consideration of ALTHEA’s schedule as frequently as CLIENT reasonably deems necessary. Each party shall bear its own costs associated with all such CLIENT audits. The Quality Management Agreement set forth in the applicable Project Plan shall govern the parties’ obligations with respect to the results of such audits. | |||
| 4.8 | Regulatory Compliance: Unless otherwise stated, ALTHEA is responsible for compliance with all Applicable Legal Requirements related to Production of pharmaceutical products, Development and Production of Drug Product, and any other services performed by ALTHEA under this Agreement. CLIENT shall be responsible for compliance with all Applicable Legal Requirements related to the use of Drug Product after it has been Produced and delivered by ALTHEA to CLIENT hereunder, which responsibility shall include, without limitation, all contact with the FDA regarding the such use. | ||
| 4.9 | Person in the Plant. CLIENT shall have the right to designate one representative of CLIENT to be present at any time in the ALTHEA facility during normal business hours during the Term of this Agreement to observe the Production of Drug Product. While at the facility, such representative of CLIENT shall be restricted to such areas as are directly relevant to the manufacture of the Drug Product and such other areas as may be otherwise authorized by ALTHEA, and shall comply with all applicable ALTHEA policies and procedures and may, at ALTHEA’s option, be escorted by ALTHEA personnel. |
Article 5, ACCEPTANCE OF DRUG PRODUCT.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 5.1 | Non-Conforming Drug Product: Within fifteen (15) calendar days from the date of Production of any Batch pursuant to the Project Plan, ALTHEA shall promptly forward to CLIENT, or CLIENT’s designee, samples of such Batch. Within sixty (60) calendar days after receipt by CLIENT of the samples of the Batch and the Released Executed Batch Record for the Batch, CLIENT shall determine whether Drug Product conforms to the Drug Product Specifications, the Master Batch Record, ALTHEA’s current SOPs, and the Project Plan (collectively the “Product Requirements”). |
| 5.1.1 | If (a) any Batch of Drug Product is approved by CLIENT as conforming to the Product Requirements, or (b) CLIENT fails to notify ALTHEA within the applicable time period set forth above, or such longer period as may be agreed, that any Batch of Drug Product does not conform to the Product Requirements, then CLIENT shall be deemed to have accepted the Drug Product and waived its right to revoke acceptance. | ||
| 5.1.2 | If CLIENT believes any Batch of Drug Product does not conform to the Product Requirements, it shall notify ALTHEA by telephone, including a detailed explanation of the non-conformity, and shall confirm such notice in writing via overnight delivery to ALTHEA. Upon receipt of such notice, ALTHEA will investigate such alleged non-conformity, and (i) if ALTHEA agrees such Drug Product is non-conforming, deliver to CLIENT a corrective action plan within thirty (30) calendar days after receipt of CLIENT’s written notice of non-conformity, or such additional time as is reasonably required if such investigation or plan requires data from sources other than CLIENT or ALTHEA, or (ii) if ALTHEA disagrees with CLIENT’s determination that the Batch of Drug Product is non-conforming, ALTHEA shall so notify CLIENT by telephone within the thirty (30) calendar day period and confirm such notice in writing by overnight delivery. | ||
| 5.1.3 | If the parties dispute whether a Batch of Drug Product is conforming or non-conforming, samples of the Batch of Drug Product will be submitted to a mutually acceptable laboratory or consultant for resolution, whose determination of conformity or non-conformity, and the cause thereof if non-conforming, shall be binding upon the parties. Unless the Batch is determined to be non-conforming as set forth in this Section 5. 3 due to the fault of ALTHEA, CLIENT shall bear the costs of such laboratory or consultant. |
| 5.2 | Remedies for Non Conforming Product: In the event ALTHEA agrees, or the laboratory described in Section 5.1.3 above determines, that the Batch of Drug Product is non-conforming as a result of the negligent or willful act or omission of ALTHEA, [†] or ALTHEA’s breach of this Agreement, then ALTHEA, at CLIENT’s option, shall either (i) at ALTHEA’s expense, and subject to CLIENT, at CLIENT’s expense, supplying the replacement APIs, replace such non-conforming Drug Product within sixty (60) calendar days from receipt of replacement APIs from CLIENT, or (ii) refund the Purchase Price of the non- |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| conforming Drug Product to CLIENT (provided that CLIENT has made payment for the non-conforming Drug Product). The remedies described in this Section 5.2 shall not act to limit ALTHEA’s indemnification obligations to the extent provided in Section 13.2 of this Agreement. |
| 5.3 | Non-conforming APIs: If Drug Product is rejected by CLIENT, and such Drug Product’s failure to meet the Product Requirements is the result of non-conforming APIs, then such non-conformity shall be deemed not to be non-conforming solely as a result of the negligence of ALTHEA. |
Article 6, DRUG PRODUCT RECALLS.
| 6.1 | Drug Product Recalls: In the event CLIENT shall be required to recall any Drug Product because such Drug Product may violate local, state or federal laws or regulations, the laws or regulations of any applicable foreign government or agency or the Drug Product Specifications, or in the event that CLIENT elects to institute a voluntary recall, CLIENT shall be responsible for coordinating such recall. CLIENT promptly shall notify ALTHEA if any Drug Product is the subject of a recall and the basis for such recall. CLIENT shall provide ALTHEA with a copy of all documents concerning such recall that are related to the Development or Production services provided by ALTHEA to CLIENT. ALTHEA shall cooperate with CLIENT in connection with any recall, at CLIENT’s expense. CLIENT shall be responsible for all of the costs and expenses of such recall, except to any extent that ALTHEA may have an obligation to indemnify CLIENT in accordance with the provisions of Section 13.2. |
Article 7, FORCE MAJEURE; FAILURE TO SUPPLY.
| 7.1 | Force Majeure Events: Failure of either party to perform under this Agreement (except the obligation to make payments) shall not subject such party to any liability to the other if such failure is caused by any cause beyond the reasonable control of the affected party, including without limitation acts of God, acts of terrorism, fire, explosion, flood, drought, war, riot, sabotage, embargo, strikes or other labor trouble, or compliance with any new order or regulation of any government entity that could not reasonably be anticipated, provided that written notice of such event is promptly given to the other party and that the affected party resumes performance hereunder as soon as reasonably possible. | ||
| 7.2 | Failure to Supply: If ALTHEA fails to supply all or any material part of Drug Product ordered by CLIENT, CLIENT may require ALTHEA to supply the undelivered Drug Product or a lesser quantity at a future date agreed upon by ALTHEA and CLIENT, at no additional cost to CLIENT. The provisions of this Section 7.2 shall be without prejudice to CLIENT’s rights under Section 3.2 and 13.2 and remedies provided for thereunder. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Article 8, CHANGES IN PRODUCTION.
| 8.1 | Changes to Master Batch Records and Product Specifications: ALTHEA agrees to inform CLIENT within fifteen (15) days of the result of any regulatory development or changes to Drug Product-specific SOPs that materially affect the Production of Drug Product. ALTHEA shall notify CLIENT of and receive written approval from CLIENT for changes to Master Batch Records and Drug Product Specifications prior to the Production of subsequent Batches of Drug Product. | ||
| 8.2 | Product-Specific Changes: If facility, equipment, process or system changes are required of ALTHEA as a result of new requirements that FDA or any other Regulatory Authority promulgates after initiation of the Project Plan, and such regulatory changes apply primarily to the Production and supply of one or more Drug Products, then CLIENT and ALTHEA will review such requirements and agree in writing to such facility, equipment, process or system changes, and CLIENT shall bear 100% of the reasonable costs thereof. In the event that CLIENT chooses not to bear the costs of such changes, then CLIENT may cancel any uninitiated Production of Drug Product without incurring any Cancellation Fees or other penalties hereunder. |
Article 9, CONFIDENTIALITY.
| 9.1 | Confidentiality: It is contemplated that in the course of the performance of this Agreement each party may, from time to time, disclose its Confidential Information to the other party. Except as otherwise set forth herein, (a) neither party shall disclose the other party’s Confidential Information to any third party, and (b) neither party shall use the other party’s Confidential Information except for purposes consistent with this Agreement. Each party agrees to take the same measures that it takes to protect its own Confidential Information, and at a minimum all reasonable steps, to prevent disclosure of the other party’s Confidential Information to third parties. No provision of this Agreement shall be construed so as to preclude disclosure of Confidential Information as may be reasonably necessary to secure from any governmental agency or Regulatory Authority approvals or licenses or to obtain patents with respect to the Drug Product. | ||
| 9.2 | Prior Confidentiality Agreement: This Agreement, by reference, incorporates the Confidentiality Agreement signed by CLIENT and ALTHEA on June 14, 2005, which is made a part hereof as though fully set forth herein. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 9.3 | Third Party Disclosure: ALTHEA shall be permitted to disclose Drug Product information to Subcontractors approved by CLIENT in accordance with Section 2.14 above in connection with performance of by Subcontractors of their obligations with respect to Drug Product, provided that such Subcontractors shall be subject to confidentiality obligations at least as stringent as those set forth herein. In addition, either party may disclose Confidential Information of the other party to those Affiliates, agents and consultants who need to know such information to accomplish the purposes of this Agreement (collectively, “Permitted Recipients”); provided such Permitted Recipients are bound to maintain such Confidential Information in confidence under written agreements with confidentiality obligations at least as stringent as those set forth herein. Nothing in this Section 9 shall be construed to limit CLIENT’s ability to use and disclose Confidential Information related to its Drug Product(s) as part of any submission to FDA or other regulatory authority. | ||
| 9.4 | Litigation and Governmental Disclosure: Each party may disclose Confidential Information hereunder to the extent such disclosure is reasonably necessary for (a) prosecuting or defending litigation, (b) complying with applicable governmental statutes or regulations or with judicial or administrative process, or (c) CLIENT’s conduct of pre-clinical or clinical trials of Drug Product, provided that if a party is required by law, regulation, or judicial or administrative process, or as a result of litigation, to make any such disclosure of the other party’s Confidential Information, the party subject to such legal requirement or litigation will, when reasonably practicable, give reasonable advance notice to the other party of such disclosure requirement and will use good faith efforts to assist such other party to secure a protective order or confidential treatment of such Confidential Information required to be disclosed. | ||
| 9.5 | Limitation of Disclosure: The parties agree that, except as otherwise may be required by applicable laws, regulations, rules or judicial or administrative orders, including without limitation the rules and regulations promulgated by the United States Securities and Exchange Commission, and except as may be authorized in Sections 9.4 or 9.6, no information concerning this Agreement and the transactions contemplated herein shall be made public by either party without the prior written consent of the other. | ||
| 9.6 | Publicity. Except as part of any regulatory submission by CLIENT, or except as may be otherwise required by law or regulation after first providing reasonable advance notice to the other party, or except as otherwise expressly set forth herein, neither party may use the other party’s name in any promotional material, advertising, press releases, or other materials without in each case the prior written consent of the other party. ALTHEA hereby consents to CLIENT’s disclosure of this Agreement and ALTHEA’s name to CLIENT’s current and potential employees, consultants, directors, professional advisors, shareholders, investors and business partners. | ||
| 9.7 | Return of Confidential Information. Upon the expiration or any termination of this Agreement, each party shall, upon the request of the other party, return such |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| other party’s Confidential Information to such other party, provided, however, that the party returning such Confidential Information shall be entitled to retain one copy of all such Confidential Information to ensure its compliance with this Agreement and/or any Applicable Legal Requirements. | |||
| 9.8 | Duration of Confidentiality: All obligations of confidentiality and non-use imposed upon the parties under this Agreement shall expire ten (10) years after the expiration or earlier termination of this Agreement. |
Article 10, INTELLECTUAL PROPERTY.
| 10.1 | Existing Intellectual Property: Except as the parties may otherwise expressly agree in writing or as set forth herein, each party shall continue to own its patents, trademarks, service marks, trade dress, copyrights, trade secrets, proprietary methods, discoveries, inventions, compositions, products, procedures, know-how, data, reports, programs, processes, protocols, written or electronic writings, illustrations, images, and any other form of proprietary rights (collectively, “Intellectual Property”) that exist as of the Effective Date, without conferring any interests therein on the other party, except as expressly provided herein. Without limiting the generality of the preceding sentence, CLIENT shall retain all right, title and interest arising under the United States Patent Act, the United States Trademark Act, the United States Copyright Act and all other applicable laws, rules and regulations in and to all Intellectual Property of Client (collectively, “CLIENT’s Existing Intellectual Property”), including without limitation all Drug Products, APIs (where applicable), all Labeling and trademarks associated therewith. Neither ALTHEA nor any third party shall acquire any right, title or interest in CLIENT’s Intellectual Property by virtue of this Agreement or otherwise. ALTHEA shall retain all right, title and interest in and to all Intellectual Property owned by ALTHEA (“ALTHEA’s Existing Intellectual Property”), except as provided in Section 10.2 below. | ||
| 10.2 | New ALTHEA Inventions: ALTHEA shall own all right, title and interest in and to Inventions that are conceived, reduced to practice, or created solely by ALTHEA’s Representatives during the course of performance under this Agreement if such Inventions are not specific to CLIENT’s Drug Products and are generally applicable to products that are not competitive with (i.e., do not directly or indirectly reduce the market for) CLIENT’s pharmaceutical products (“ALTHEA Inventions”). ALTHEA hereby grants CLIENT a fully paid-up, irrevocable non-exclusive license to (a) all ALTHEA Inventions solely to the extent necessary or beneficial for CLIENT to develop, manufacture, commercialize and market its pharmaceutical products and (b) any of ALTHEA’s Existing Intellectual Property that ALTHEA incorporates into the Development or Production of CLIENT’s Drug Products, solely to the extent necessary or beneficial for CLIENT to develop, manufacture, commercialize and market CLIENT’s Drug Products. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 10.3 | New CLIENT Inventions: For purposes of this Agreement, “Invention” shall mean information relating to any innovation, improvement, development, discovery, computer program, device, trade secret, method, know-how, process, technique or the like, whether or not written or otherwise fixed in any form or medium, regardless of the media on which contained and whether or not patentable or copyrightable. CLIENT shall own all right, title and interest in and to Inventions that are conceived, reduced to practice, or created solely by CLIENT’s employees, officers, consultants or agents (“Representatives”) during the course of performance under this Agreement. CLIENT shall also own all right, title and interest in and to (a) Inventions that are conceived, reduced to practice, or created by ALTHEA’s Representatives, solely or jointly with CLIENT’s Representatives or third parties, during the course of performance under this Agreement or as a result of receiving CLIENT’s Confidential Information, including without limitation all such Inventions that relate to any improvement, modification or advancement of CLIENT’s Drug Products and all methods and procedures for analyzing, testing, formulating, manufacturing, packaging or using CLIENT’s Drug Products, but excluding all ALTHEA Inventions (as defined below), and (b) all other work product, methods, procedures, reports and data resulting from ALTHEA’s performance under this Agreement that directly relate to CLIENT’s Drug Products. | ||
| 10.4 | Rights in Intellectual Property: The party owning Inventions or other Intellectual Property as set forth herein above shall have the world wide right to control the drafting, filing, prosecution, maintenance and enforcement of patents covering the Inventions and Intellectual Property, including decisions about the countries in which to file patent applications. Patent costs associated with the patent activities described in this Section shall be borne by the sole owner. Each party will cooperate with the other party in the filing and prosecution of patent applications, including the execution of assignments to confirm title as set forth above and further including but not be limited to, furnishing supporting data and affidavits for the prosecution of patent applications and completing and signing forms needed for the prosecution, assignment and maintenance of patent applications. | ||
| 10.5 | Confidentiality of Intellectual Property: Each Party’s Inventions and Intellectual Property shall be deemed to be the Confidential Information of the party owning such Intellectual Property as provided herein above. The protection of each party’s Confidential Information is described in Article 9. Any disclosure of information by one party to the other under the provisions of this Section 10 shall be treated as the disclosing party’s Confidential Information under this Agreement. It shall be the responsibility of the party preparing a patent application to obtain the written permission of the other party to use or disclose the other party’s Confidential Information in the patent application before the application is filed and for other disclosures made during the prosecution of the patent application. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Article 11, REPRESENTATIONS AND WARRANTIES.
| 11.1 | Mutual Representations: Each party hereby represents and warrants that (a) the person executing this Agreement on behalf of such party is authorized to execute this Agreement; (b) this Agreement is legal and valid and the obligations binding upon such party are enforceable by their terms; and (c) the execution, delivery and performance of this Agreement does not conflict with any agreement, instrument or understanding, oral or written, to which such party may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it. | ||
| 11.2 | ALTHEA Warranty: ALTHEA represents and warrants that Drug Product shall be Produced in accordance with cGMP. ALTHEA further represents and warrants that it has obtained (or will obtain prior to Producing Drug Product), and will remain in compliance with during the term of this Agreement, all permits, licenses and other authorizations (the “Permits”) which are required under Applicable Legal Requirements or as specified in the Project Plan, the Master Batch Records, the Specifications or the ALTHEA SOPs; provided, however, ALTHEA shall have no obligation to obtain Permits relating to the sale, marketing, commercial distribution or use of APIs or Drug Product or with respect to the Labeling of Drug Product. ALTHEA further represents and warrants that the Drug Product supplied hereunder shall not be adulterated or misbranded within the meaning of the FD&C Act or comparable law, provided, however, that the warranty in this sentence shall not apply to any such adulteration or misbranding that occurred due to information provided by CLIENT or that occurred after the Drug Product leaves ALTHEA’s control. ALTHEA further represents and warrants that it shall perform all Development, Production, and other services hereunder in full compliance with all Applicable Legal Requirements and all other requirements of this Agreement. ALTHEA makes no representation or warranty with respect to the sale, marketing, commercial distribution or use of the APIs or as to printed materials supplied by CLIENT or its consignee. ALTHEA further represents and warrants that all Drug Product supplied hereunder shall be transferred free and clear of any liens or encumbrances of any kind arising through ALTHEA or its Affiliates or their respective agents. ALTHEA further represents and warrants that it has no knowledge of any patents or other Intellectual Property rights that would be violated by ALTHEA’s performance hereunder. | ||
| 11.3 | Disclaimer of Warranties: Except for those warranties set forth in Sections 11.1 and 11.2 of this Agreement, neither party makes any warranties, written, oral, express or implied, with respect to Drug Product or the Development and Production of Drug Product. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT HEREBY ARE DISCLAIMED BY ALTHEA AND BY CLIENT. NO WARRANTIES OF EITHER PARTY MAY BE CHANGED BY THE |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| ORAL STATEMENT OF ANY REPRESENTATIVE OF SUCH PARTY. CLIENT accepts Drug Product subject to the terms hereof. | |||
| 11.4 | CLIENT Warranties: CLIENT warrants that (a) it has the right to give ALTHEA any information provided by CLIENT hereunder, and that ALTHEA has the right to use such information for the Production of Drug Product, and (b) CLIENT has no knowledge of any (i) patents or other Intellectual Property rights that would be infringed by ALTHEA’s performance hereunder. CLIENT further warrants that the APIs provided to ALTHEA hereunder (c) conforms to the APIs Specifications and (d) is not adulterated or misbranded within the meaning of the FD&C Act. |
Article 12, LIMITATION OF LIABILITY AND WAIVER OF SUBROGATION.
| 12.1 | Limitation of Liability: CLIENT’s sole and exclusive remedy for breach of this Agreement is limited to those remedies set forth in Article 5, at CLIENT’s election, to either replace the non-conforming Drug Product or reimburse CLIENT for the Purchase Price for the non-conforming Drug Product and as provided in Article 6, [†] (b) ALTHEA’s grossly negligent act or omission or willful misconduct, or (c) any breach by ALTHEA of the Applicable Legal Requirements. Under no circumstances shall either party be liable hereunder to the other party for the other party’s loss of use or profits or other incidental, indirect, special, punitive, or consequential damages, losses or expenses suffered by the other party, including but not limited to the cost of cover or the cost of a recall (except as provided in Article 6) in connection with, or by reason of the Production and delivery of Drug Product under this Agreement whether such claims are founded in tort or contract. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 12.2 | Waiver of Subrogation: All ALTHEA Supplied Components and equipment used by ALTHEA in the Production of Drug Product (collectively, “ALTHEA Property”) shall remain the property of ALTHEA and ALTHEA assumes risk of loss for such property until delivery of Drug Product to a common carrier as specified under Section 2.8, at which point the ALTHEA Supplied Components that have been incorporated into the Drug Product shall be deemed owned by CLIENT as further described in Section 2.8 above. ALTHEA hereby waives any and all rights of recovery against CLIENT and its Affiliates, and against any of their respective directors, officers, employees, agents or representatives, for any loss or damage to ALTHEA Property to the extent the loss or damage is covered or could be covered by insurance (whether or not such insurance is described in this Agreement). CLIENT assumes all risk of loss for all CLIENT Supplied Components, all APIs supplied by CLIENT, and all Drug Product (collectively, “CLIENT Property”) while such CLIENT Property is in CLIENT’s possession. CLIENT hereby waives any and all rights of recovery against ALTHEA and its Affiliates, and against any of their respective directors, officers, employees, agents or representatives, for any loss or damage to the CLIENT Property to the extent the loss of damage is covered or could be covered by insurance (whether or not such insurance is described in this Agreement). | ||
| 12.3 | Waiver of Claims: In connection with providing Development services, ALTHEA represents only that it will use reasonable care and will comply fully with the terms hereof in providing information solely as it relates to development studies, formulation, primary packaging and manufacturing process development. Except as otherwise expressly set forth herein, ALTHEA makes no representation or warranty relating to the stability, efficacy, safety, or toxicity of Drug Product developed, formulated, packaged or manufactured in accordance with the Development services provided by ALTHEA. |
Article 13, INDEMNIFICATION.
| 13.1 | CLIENT Indemnification: CLIENT shall indemnify, defend and hold harmless ALTHEA and its Affiliates, and any of their respective directors, officers, employees, subcontractors and agents (collectively the “ALTHEA Indemnified Parties”) from and against any and all liabilities, obligations, penalties, claims, judgments, demands, actions, disbursements of any kind and nature, suits, losses, damages, costs and expenses (including, without limitation, reasonable attorney’s fees) arising out of or in connection with property damage or personal injury (including without limitation death) suffered by any third party (collectively “Claims”) arising directly out of (a) CLIENT’s storage, promotion, labeling, marketing, distribution, use or sale of APIs or Drug Product, (b) CLIENT’s negligence or willful misconduct or omission, or (c) CLIENT’s breach of this Agreement. Notwithstanding the foregoing, CLIENT shall have no obligations under this Section 13.1 to the extent that any such Claim arises out of the negligence or willful misconduct or omission of any of the ALTHEA Indemnified Parties or the breach by ALTHEA of its obligations under this Agreement. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 13.2 | ALTHEA Indemnification: ALTHEA shall indemnify, defend and hold harmless CLIENT and its Affiliates and any of their respective directors, officers, employees, subcontractors and agents (collectively the “CLIENT Indemnified Parties”) from and against any and all Claims arising directly out of (a) the negligent act or omission of any of the ALTHEA Indemnified Parties (provided that ALTHEA’s liability under this subsection (a) only shall be limited to the amounts paid to ALTHEA by Omeros under this Agreement), (b) the grossly negligent act or omission or intentional misconduct of any of the ALTHEA Indemnified Parties, (c) the breach by any of the ALTHEA Indemnified Parties of any of the Applicable Legal Requirements or (d) the breach by any of the ALTHEA Indemnified Parties of Article 9 (Confidentiality) or Article 10 (Intellectual Property) above. Notwithstanding the foregoing, ALTHEA shall have no obligations under this Section 13.2 to the extent that any such Claim arises out of (i) the negligence or willful misconduct or omission of any of the CLIENT Indemnified Parties, or (ii) the breach by CLIENT of any of its obligations under this Agreement. | ||
| 13.3 | Indemnitee Obligations: A party (the “Indemnitee”) which intends to claim indemnification under this Article 13 shall promptly notify the other party (the “Indemnitor”) in writing of any action, claim or other matter in respect of which the Indemnitee or any of its Affiliates, or any of their respective directors, officers, employees, subcontractors, or agents, intend to claim such indemnification; provided, however, that failure to provide such notice within a reasonable period of time shall not relieve the Indemnitor of any of its obligations hereunder except to the extent the Indemnitor is prejudiced by such failure. The Indemnitee shall permit, and shall cause its Affiliates, and their respective directors, officers, employees, subcontractors and agents to permit, the Indemnitor, at its discretion, to settle any such action, claim or other matter, and the Indemnitee agrees to the complete control of such defense or settlement by the Indemnitor. Notwithstanding the foregoing, the Indemnitor shall not enter into any settlement that would adversely affect the Indemnitee’s rights hereunder, or impose any obligations on the Indemnitee in addition to those set forth herein, in order for it to exercise such rights, without Indemnitee’s prior written consent, which shall not be unreasonably withheld or delayed. No such action, claim or other matter shall be settled without the prior written consent of the Indemnitor, which shall not be unreasonably withheld or delayed. The Indemnitee, its Affiliates, and their respective directors, officers, employees, subcontractors and agents shall fully cooperate with the Indemnitor and its legal representatives in the investigation and defense of any action, claim or other matter covered by the indemnification obligations of this Article 13. The Indemnitee shall have the right, but not the obligation, to be represented in such defense by counsel of its own selection and at its own expense. | ||
| 13.4 | Injunction: In the event that the Production or sale of a Drug Product is enjoined due to alleged infringement by either party of the proprietary rights of a third party, such action shall be deemed a breach of this Agreement by CLIENT and subject to the terms of Article 3, except to the extent that any such injunction |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| arises out of ALTHEA’s use of its standard methods, techniques, and processes that ALTHEA uses generally in performing services for its customers. |
Article 14, INSURANCE.
| 14.1 | CLIENT Insurance: CLIENT shall procure and maintain, during the Term of this Agreement and for a period one (1) year beyond the expiration date of Drug Product, Commercial General Liability Insurance, including without limitation, Product Liability and Contractual Liability coverage (the “CLIENT Insurance”). The CLIENT Insurance shall cover amounts not less than [†] combined single limit and shall be with an insurance carrier reasonably acceptable to ALTHEA. ALTHEA shall be named as an additional insured on the CLIENT Insurance and, upon ALTHEA’s written request, CLIENT promptly shall deliver a certificate of CLIENT Insurance and endorsement of additional insured to ALTHEA evidencing such coverage. If CLIENT fails to furnish such certificates or endorsements, or if at any time during the Term of this Agreement ALTHEA is notified of the cancellation or lapse of the CLIENT Insurance, and CLIENT fails to rectify the same within ten (10) calendar days after notice from ALTHEA, in addition to all other remedies available to ALTHEA hereunder, ALTHEA, at its option, may obtain the CLIENT Insurance and CLIENT promptly shall reimburse ALTHEA for the cost of the same. Any deductible and/or self insurance retention shall be the sole responsibility of CLIENT. | ||
| 14.2 | ALTHEA Insurance: ALTHEA shall procure and maintain, during the Term of this Agreement and for a period of one (1) year beyond the expiration date of Drug Product, Commercial General Liability Insurance, including without limitation, Product Liability and Contractual Liability coverage (the “ALTHEA Insurance”). The ALTHEA Insurance shall cover amounts not less than [†] combined single limit. CLIENT shall be named as an additional insured on the ALTHEA Insurance and, upon CLIENT’s written request, ALTHEA promptly shall deliver a certificate of ALTHEA Insurance and endorsement of additional insured to CLIENT evidencing such coverage. If ALTHEA fails to furnish such certificates or endorsements, or if at any time during the Term of this Agreement CLIENT is notified of the cancellation or lapse of the ALTHEA Insurance, and ALTHEA fails to rectify the same within ten (10) calendar days after notice from CLIENT, in addition to all other remedies available to CLIENT hereunder, CLIENT, at its option, may obtain the ALTHEA Insurance and ALTHEA promptly shall reimburse CLIENT for the cost of the same. Any deductible and/or self insurance retention shall be the sole responsibility of ALTHEA. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Article 15, GENERAL PROVISIONS.
| 15.1 | Notices: All notices hereunder shall be delivered by facsimile (confirmed by overnight delivery), or by overnight delivery with a reputable overnight delivery service, to the following address of the respective parties: |
| If to CLIENT: | ||||||
| Omeros Corporation | ||||||
| 1420 Fifth Avenue, Suite 2600 | ||||||
| Seattle, WA 98101 | ||||||
| Attention: | Chairman & CEO | |||||
| And copy to: | General Counsel | |||||
| Fax: (206) 264.7856 | ||||||
| Phone: (206) 623.4688 | ||||||
| If to ALTHEA: | Althea Technologies, Inc. | |||||
| 11040 Roselle Street | ||||||
| San Diego, CA 92121 | ||||||
| Attn: Alan Moore | ||||||
| Executive Vice President and Chief Business Officer | ||||||
| Telephone: | (858) 882-0123 | |||||
| Facsimile: | (858) 882-0133 | |||||
For specific inquiries, the following ALTHEA responsible parties may be contacted directly:
Project Manager
|
Rick Hancock | |||
Quality Control and Quality Assurance Manager |
Roy Musil | |||
Materials Manager
|
Melissa Rosness |
For specific inquiries, the following CLIENT responsible parties may be contacted directly:
Project Manager
|
||||
Quality Control Manager |
||||
Materials Manager |
||||
Quality Assurance Manager |
| Notices shall be effective on the day following the date of transmission if sent by facsimile, and on the second business day following the date of delivery to the overnight delivery service if sent by overnight delivery. A party may change its address listed above by notice to the other party given in accordance with this section. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| 15.2 | Entire Agreement; Amendment: The parties hereto acknowledge that this Agreement, including any Project Plans executed in accordance with the terms hereof and any other documents expressly incorporated by reference, sets forth the entire agreement and understanding of the parties and supercedes all prior written or oral agreements or understandings with respect to the subject matter hereof. No modification of any of the terms of this Agreement, or any amendments thereto, shall be deemed to be valid unless in writing and signed by an authorized agent or representative of both parties hereto. No course of dealing or usage of trade shall be used to modify the terms and conditions herein. In the event of any inconsistency between the terms within the body of this Agreement and the terms contained in any Project Plan, including without limitation any Quality Management Agreement within any such Project Plan, the terms within the body of this Agreement shall govern. | ||
| 15.3 | Waiver: None of the provisions of this Agreement shall be considered waived by any party hereto unless such waiver is agreed to, in writing, by authorized agents of both parties. The failure of a party to insist upon strict conformance to any of the terms and conditions hereof, or failure or delay to exercise any rights provided herein or by law shall not be deemed a waiver of any rights of any party hereto. | ||
| 15.4 | Obligations to Third Parties: Each party warrants and represents that this Agreement is not inconsistent with any contractual obligations, expressed or implied, undertaken with any third party. | ||
| 15.5 | Assignment: This Agreement shall be binding upon and inure to the benefit of the successors or permitted assigns of each of the parties and may not be assigned or transferred by either party without the prior written consent of the other, which consent will not be unreasonably withheld or delayed, except that no consent shall be required in the case of a transaction involving the merger, consolidation or sale of all or substantially all of that portion of the assigning party’s business assets to which this Agreement relates and the resulting entity assumes all the obligations under this Agreement. ALTHEA may, without such consent, assign this Agreement to an Affiliate of ALTHEA, provided that all Development, Production, and other services to be performed hereunder shall continue to be performed at the same facility at which they were previously performed or at which it was contemplated by the parties that they would be performed, and provided further that the assignee assumes all obligations of ALTHEA under this Agreement. No assignment shall relieve any party of responsibility for the performance of its obligations hereunder. | ||
| 15.6 | Successors and Assigns: This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their successors and permitted assigns. | ||
| 15.7 | Taxes: CLIENT shall pay all national, state, municipal or other sales, use, excise, import, property, value added, or other similar taxes, assessments or tariffs assessed upon or levied against the sale of Drug Product to CLIENT |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
| pursuant to this Agreement or the sale or distribution of Drug Product by CLIENT (or at CLIENT’s sole expense, defend against the imposition of such taxes and expenses). ALTHEA shall notify CLIENT of any such taxes that any governmental authority is seeking to collect from ALTHEA, and CLIENT may assume the defense thereof in ALTHEA’s name, if necessary, and ALTHEA agrees to fully cooperate in such defense to the extent of the capacity of ALTHEA, at CLIENT’s expense. Any such taxes, assessment, or tariffs to be paid by CLIENT hereunder shall be separately itemized on invoices provided to CLIENT. ALTHEA shall pay all national, state, municipal or other taxes on the income resulting from the sale by ALTHEA of the Drug Product to CLIENT under this Agreement, including but not limited to, gross income, adjusted gross income, supplemental net income, gross receipts, excess profit taxes, or other similar taxes. | |||
| 15.8 | Independent Contractor: ALTHEA shall act as an independent contractor for CLIENT in providing the services required hereunder and shall not be considered an agent of, or joint venturer with, CLIENT. Unless otherwise provided herein to the contrary, ALTHEA shall furnish all expertise, labor, supervision, machining and equipment necessary for performance hereunder and shall obtain and maintain all building and other Permits and licenses required by public authorities. | ||
| 15.9 | Governing Law: This Agreement is being delivered and executed in the State of California. In any action brought regarding the validity, construction and enforcement of this Agreement, it shall be governed in all respects by the laws of the State of California, without regard to the principals of conflicts of laws. | ||
| 15.10 | Attorney’s Fees: The successful party in any litigation or other dispute resolution proceeding to enforce the terms and conditions of this Agreement shall be entitled to recover from the other party reasonable attorney’s fees and related costs involved in connection with such litigation or dispute resolution proceeding. | ||
| 15.11 | Severability: In the event that any term or provision of this Agreement shall violate any applicable statute, ordinance, or rule of law in any jurisdiction in which it is used, or otherwise be unenforceable, such provision shall be ineffective to the extent of such violation without invalidating any other provision hereof. | ||
| 15.11 | Headings, Interpretation: The headings used in this Agreement are for convenience only and are not part of this Agreement. | ||
| 15.12 | Facsimile Copies, Counterparts: This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute the same instrument. This Agreement shall be effective upon full execution by facsimile or original, and a facsimile signature shall be deemed to be and shall be as effective as an original signature. |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
IN WITNESS WHEREOF, the parties hereto have each caused this Drug Product Development and Clinical
Supply Agreement to be executed by their duly-authorized representatives as of the Effective Date
above written.
| OMEROS CORPORATION | ALTHEA TECHNOLOGIES, INC | |||||||||
By:
|
/s/ Gregory A. Demopulos | By: | /s/ W. Alan Moore | |||||||
Name:
|
Gregory A. Demopulos, M.D. | Name: | W. Alan Moore | |||||||
Title:
|
Chairman & CEO | Title: | Executive VP and CBO | |||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Project Plan for cGMP Fill and
Finish and Stability Testing
Finish and Stability Testing
Prepared for:
Wayne Gombotz, Ph.D.
Vice President, Pharmaceutical Operations
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101
206-623-4688 (phone)
206-264-7856 (fax)
Vice President, Pharmaceutical Operations
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101
206-623-4688 (phone)
206-264-7856 (fax)
Prepared by:
Althea Technologies 11040
Roselle Street San Diego,
CA 92121 858-882-0123
858-882-0133 (fax)
Roselle Street San Diego,
CA 92121 858-882-0123
858-882-0133 (fax)
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
TABLE OF CONTENTS
| 1. | Outline of Deliverables | |
| 2. | Detailed Description of Deliverables and Pricing Summary | |
| 3. | Specifications and Stability Testing Outlines | |
| 4. | Quality Agreement | |
| 5. | Project Total | |
| 6. | Authorizations |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
1. Outline of Deliverables
A. Timing of Deliverables
[†]
B. Summary of Deliverables to Omeros Corporation
[†]
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
2. Detailed Description of Deliverables and Pricing Summary
A. Detailed Description of Fill and Finish Deliverables and Pricing Summary
| Service Description | Units | Unit Price | Total Price | |||||||||
[†] |
[†] | [†] | [†] | |||||||||
[†] |
[†] | [†] | [†] | |||||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
A. Detailed Description of Fill and Finish Deliverables and Pricing Summary continued
| Service Description | Units | Unit Price | Total Price | |||||||||
[†] |
[†] | [†] | [†] | |||||||||
FILL AND FINISH TOTAL |
[†] | |||||||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
B. Detailed Description of Stability Testing and Analytical Transfer Deliverables and
Pricing Summary
| Service Description | Units | Unit Price | Total Price | |||||||||
[†] |
[†] | [†] | [†] | |||||||||
[†] |
[†] | [†] | [†] | |||||||||
[†] |
[†] | [†] | [†] | |||||||||
| Stability and Analytical Transfer Total | [†] | |||||||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
C. Payment Schedule
[†]
| Milestone | Invoice Amount | |||
[†] |
[†] | |||
[†]
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSIONT |
3. Specifications
| Assay | Test | Specification | ||
[†]
|
[†] | [†] |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Stability Testing Outlines
[†]
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
4. Quality Agreement
[†]
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
5. Summary Pricing
[†]
|
[†] |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
6. Authorizations
IN WITNESS WHEREOF, the parties hereto have each caused this Project Plan to be executed by
their duly-authorized representatives as of January 20, 2006.
| OMEROS CORPORATION | ALTHEA TECHNOLOGIES, INC | |||||||||
By:
|
/s/ Gregory A. Demopulos
|
By: | /s/ Rick Hancock
|
|||||||
Name:
|
Gregory A. Demopulos, M.D. | Name: | Rick Hancock | |||||||
Title:
|
Chairman & CEO | Title: | COO | |||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Exhibit 10.37
Project Plan for
Non-GMP and cGMP
Fill and Finish of OMS302
Non-GMP and cGMP
Fill and Finish of OMS302
Prepared for:
Wayne Gombotz, Ph.D.
Vice President, Pharmaceutical Operations
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101
206-623-4688 (phone)
206-264-7856 (fax)
Vice President, Pharmaceutical Operations
Omeros Corporation
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101
206-623-4688 (phone)
206-264-7856 (fax)
Prepared by:
Althea Technologies
11040 Roselle Street
San Diego, CA 92121
858-882-0123
858-882-0133 (fax)
11040 Roselle Street
San Diego, CA 92121
858-882-0123
858-882-0133 (fax)
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
TABLE OF CONTENTS
| 1. | Outline of Deliverables | |
| 2. | Detailed Description of Deliverables and Pricing Summary | |
| 3. | Specifications and Stability Testing Outlines | |
| 4. | Quality Agreement | |
| 5. | Project Total | |
| 6. | Authorizations |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
1. Outline of Deliverables
A. Timing of Deliverables
1. Contract Approval (May 31, 2007)
2. Initial HPLC Assay Transfer (May-July 2007)
3. Non-GMP API Delivered to Althea (July 2007)
4. Non-GMP OMS302 Product, [†] and Placebo Fills (July 16-20, 2007)
5. Non-GMP Product Released (6 weeks after completion of the fill)
6. GMP Documentation Preparation (Product Batch Records) (September 2007)
7. GMP API Delivered to Althea (September 2007)
8. GMP OMS302 Product Fill (October 8-9, 2007)
9. GMP [†] Product Fill (October 10-11, 2007)
10. Released GMP Product Lot, C of A and Audited Batch Records (6 weeks after completion of the fill)
2. Initial HPLC Assay Transfer (May-July 2007)
3. Non-GMP API Delivered to Althea (July 2007)
4. Non-GMP OMS302 Product, [†] and Placebo Fills (July 16-20, 2007)
5. Non-GMP Product Released (6 weeks after completion of the fill)
6. GMP Documentation Preparation (Product Batch Records) (September 2007)
7. GMP API Delivered to Althea (September 2007)
8. GMP OMS302 Product Fill (October 8-9, 2007)
9. GMP [†] Product Fill (October 10-11, 2007)
10. Released GMP Product Lot, C of A and Audited Batch Records (6 weeks after completion of the fill)
B. Summary of Deliverables to Omeros Corporation
This is a Project Plan dated May 31, 2007 under the Drug Product Development and Supply Agreement
dated January 20, 2006 between Althea Technologies, Inc. and Omeros Corporation
Project: Non-GMP and cGMP Production of OMS302 (“Product”) per cGMP Master Batch Record to be
developed by Althea and approved by Omeros.
Non-GMP OMS302 Product Vials |
1 x 400 | |
Non-GMP [†]Product Vials |
1 x 400 | |
Non-GMP Placebo Vials |
1 x 400 | |
cGMP OMS302 Product Vials |
1 x 3,000 | |
cGMP [†] Product Vials |
1 x 3,000 | |
Audited Batch Records |
2 | |
Audited Test Results |
2 | |
Cs of A |
5 | |
DMF Reference Letter |
1 |
Miscellaneous
|
||
2 Site Visits for Inspection/Audit, 2 auditors at a time.
|
||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
2. Detailed Description of Deliverables and Pricing Summary
A. Detailed Description of Fill and Finish Deliverables and Pricing Summary
| Service Description | Units | Unit Price | Total Price | |||||
| Media Fill Validation | 3 x 3000 | [†] | [†] | |||||
-
|
Media fill validation performed in accordance with ICH guidelines of 3 x 3000 2 mL glass vials. | |||||||
| Non-GMP Aseptic Fill and Finish (Product and Placebo) | ~400 vials/fill (OMS302 Product) | [†] Per Fill |
[†] | |||||
-
|
Omeros to supply all released API- [†] | Discounted Unit Price: | ||||||
-
|
Althea to purchase and release citric acid | ~400 vials/fill | ||||||
| monohydrate, sodium citrate and WFI. | [†] | |||||||
-
|
Althea to purchase and release vials, stoppers and seals as specified in completed product survey | ~400 vials per fill |
[†] Per Fill |
|||||
-
|
Non-GMP batch record preparation for product and placebo fills | (Placebo) | ||||||
-
|
Non-GMP filling of formulated bulk and placebo into 5 mL glass vials | |||||||
-
|
Standard label preparation- additional charges may apply for non-standard labels. | |||||||
-
|
Release testing to include sterility, Endotoxin, pH, appearance, osmolality, potency, purity, identity and USP particulate. Samples of the product will be sent to Omeros for potency testing. | |||||||
-
|
Fill may be performed in either Althea’s clean room filling suites or in a hood in a Class 10,000 room | |||||||
-
|
Two domestic shipments | |||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
A. Detailed Description of Fill and Finish Deliverables and Pricing Summary continued
| Service Description | Units | Unit Price | Total Price | |||||
| GMP Aseptic Fill and Finish (OMS302 Product) | 3000 Vials | [†] | [†] | |||||
-
|
Omeros to supply all released APIs | |||||||
-
|
Althea to purchase and release citric acid monohydrate and sodium citrate dihydrate buffer. | |||||||
-
|
Althea to purchase and release vials, stoppers and seals as specified in completed product survey | |||||||
-
|
GMP batch record preparation | |||||||
-
|
GMP aseptic filling of formulated bulk into 2 mL clear glass vials | |||||||
-
|
Standard label preparation- additional charges may apply for non-standard labels. | |||||||
-
|
Release testing to include sterility (Nelson or Northview Labs), Endotoxin, pH, appearance, osmolality, potency, purity, identity and USP particulate (Quadrants). Samples will be sent to Omeros for potency testing. | |||||||
| GMP Aseptic Fill and Finish ([†] Product) | 3000 Vials | [†] | [†] | |||||
-
|
Omeros to supply all released API | |||||||
-
|
Althea to purchase and release citric acid monohydrate and sodium Citrate dihydrate buffer. | |||||||
-
|
Althea to purchase and release vials, stoppers and seals as specified in completed product survey | |||||||
-
|
GMP batch record preparation | |||||||
-
|
GMP aseptic filling of formulated bulk into 2 mL clear glass vials | |||||||
-
|
Standard label preparation- additional charges may apply for non-standard labels. | |||||||
-
|
Release testing to include sterility (Nelson or Northview Labs), Endotoxin, pH, appearance, ,osmolality, potency, purity, identity and USP particulate (Quadrants). Samples will be sent to Omeros for potency testing. | |||||||
| Fill and Finish Total | [†] | |||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
B. Detailed Description of Stability Testing and Analytical Transfer Deliverables and
Pricing Summary
| Service Description | Units | Unit Price | Total Price | |||||
HPLC Transfer and Qualification
- Transfer of HPLC method, including all SOPs
and protocols. Assay qualification.
|
1 | [†] | [†] | |||||
Final Product (Non-GMP OMS302 Product Only- No
Placebo) Stability Program Setup and Maintenance
|
2 Storage Conditions | [†] | [†] | |||||
Includes storage, execution and management of a 18
month stability program described below at two
temperatures with the option of extending the
program to 24 months. Also includes the issuance
of a C of A at
each time interval and stability condition. |
||||||||
Final Product (Non-GMP [†] Only- No Placebo)
Stability Program Setup and Maintenance
|
2 Storage Conditions | [†] | [†] | |||||
Includes storage, execution and management of an 18
month stability program described below at two
temperatures with the option of extending the
program to 24 months. Also includes the issuance
of a C of A at
each time interval and stability condition. |
||||||||
Final Product (GMP Product OMS302) Stability
Program Setup and Maintenance
|
2 Storage Conditions | [†] | [†] | |||||
Includes storage, execution and management of an 18
month stability program described below at two
temperatures with the option of extending the
program to 24 months. Also includes the issuance
of a C of A at
each time interval and stability condition. |
||||||||
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
B. Detailed Description of Stability Testing and Analytical Transfer Deliverables and
Pricing Summary Continued
| Service Description | Units | Unit Price | Total Price | |||
Final Product (GMP Product [†] Only- No Placebo)
Stability Program Setup and Maintenance
|
2 Storage Conditions | [†] | [†] | |||
Includes storage, execution and management of an 18
month stability program described below at two
temperatures with the option of extending the
program to 24 months. Also includes the issuance
of a C of A at
each time interval and stability condition. |
||||||
Stabiity and Analytical Transfer Total
|
[†] |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
C. Payment Schedule
The above Fill and Finish and Stability and Analytical Transfer pricing will be [†]. The
total budgeted [†] shall be payable in accordance with the following schedule in response to
invoices to be submitted by Althea monthly for milestones completed during the month. Invoices
will be paid by Omeros in accordance with Section 2.11 of the Development and Supply Agreement.
| Milestone | Invoice Amount | |
Execution of Project Plan (advance payment — [†] of Fill and Finish)*
|
[†] | |
Completion of HPLC Transfer and Qualification
|
[†] | |
Completion of Non-GMP OMS302 Product Fill and Finish
|
[†] | |
Completion of Non-GMP Placebo Product Fill and Finish
|
[†] | |
Completion of Non-GMP [†] Product Fill and Finish
|
[†] | |
Setup of Non-GMP Product Stability Program ([†] of Stability Program
Price for OMS302)
|
[†] | |
Delivery of Stability Data for Each Time Point (1, 3, 6, 9, 12 and
18 Month) for the Non-GMP OMS203 a Product Stability Program (each
at [†] of Program Price)
|
[†]/timepoint | |
Setup of Non-GMP Product Stability Program ([†] of Stability Program
Price for [†])
|
[†] | |
Delivery of Stability Data for Each Time Point (1, 3, 6, 9, 12 and
18 Month) for the Non-GMP [†]Product Stability Program (each at [†]
of Program Price)
|
[†]/timepoint | |
Completion of GMP OMS302 Product Fill ([†] of batch price)
|
[†] | |
Approval of Released cGMP OMS302 Product by Omeros within the
timeframe described in section 5.1, Non-Conforming Drug Product in
the Development and Supply Agreement ([†] of batch price)
|
[†] | |
Completion of GMP [†] Product Fill ([†] of batch price)
|
[†] | |
Approval of Released cGMP [†] Product by Omeros within the timeframe
described in section 5.1, Non-Conforming Drug Product in the
Development and Supply Agreement ([†] of batch price)
|
[†] | |
Setup of cGMP OMS302 Product Stability Program ([†] of Stability
Program Price)
|
[†] | |
Setup of cGMP [†] Product Stability Program ([†] of Stability
Program Price)
|
[†] | |
Delivery of Stability Data for Each Time Point (1, 3, 6, 9, 12 and
18 Month) for the GMP OMS302 Product Stability Program (each at [†]
of Program Price)
|
[†]/timepoint | |
Delivery of Stability Data for Each Time Point (1, 3, 6, 9, 12 and
18 Month) for the GMP [†] Product Stability Program (each at [†] of
Program Price)
|
[†]/timepoint |
| * | In the event that the Project Plan is terminated early, any portion of the advance payment remaining (less any penalties that may be due in accordance with Section 3.3(b) of the Development and Supply Agreement) shall be promptly refunded to Omeros. | |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
3. Specifications and Components
| Assay | Test | Specification | ||
Purity
|
HPLC | Report Result; % area of each individual Related Substances peak and total % Related Substances | ||
Potency
|
HPLC | Report Result; % Label claim [†] HCL and % Label claim [†] | ||
Identity
|
HPLC | Retention time of parent compound matches retention time of drug substance reference standards | ||
Appearance
|
Visual per Althea SOP | Clear colorless solution free of visible particulates | ||
pH
|
USP [†] | [†] | ||
Osmolality
|
USP [†] | Report Result | ||
Sterility
|
USP [†] | Sterile | ||
Particulate Count
|
USP [†] | Particulates >/= [†]/Unit Particulates >/= [†]/Unit |
||
Endotoxin
|
LAL USP [†] | [†]/mL |
Component Specifications
| Component | Description | Althea Part Number | ||
Vial
|
West 5 mL, 20 mm opening-68000318, | RM-551 | ||
Stopper
|
West 20 mm Daikyo Fluortec D777-1 Gray-19500120 | RM-512 | ||
Seal
|
20 mm Purple Flip-Off Truedge West-542027 | RM-711 | ||
Filter |
Excipients
| Excipients | Catalog Number | |
Citric acid Monohydrate USP
|
EM Science — EM-0002425B | |
Sodium Citrate (Dihydrate USP)
|
EM Science — EM-SX0442-1 |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Stability Testing Outlines
Proposed Stability Program (Non-GMP Product Only- No Placebo)- Two Storage Conditions
Assay |
1 | 3 | 6 | 9 | 12 | 18 | ||||||||||||||||||
HPLC |
X | X | X | X | X | X | ||||||||||||||||||
Appearance |
X | X | X | X | X | X | ||||||||||||||||||
pH |
X | X | X | X | X | X | ||||||||||||||||||
USP Particulates |
X | |||||||||||||||||||||||
Sterility |
X | |||||||||||||||||||||||
Endotoxin |
X |
Proposed Stability Program (Product)- Two Storage Conditions
Assay |
1 | 3 | 6 | 9 | 12 | 18 | ||||||||||||||||||
HPLC |
X | X | X | X | X | X | ||||||||||||||||||
Appearance |
X | X | X | X | X | X | ||||||||||||||||||
pH |
X | X | X | X | X | X | ||||||||||||||||||
USP Particulates |
X | |||||||||||||||||||||||
Sterility |
X | |||||||||||||||||||||||
Endotoxin |
X |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
4. Quality Agreement
Purpose
The Quality Management Agreement has been developed to define the regulatory compliance roles
and responsibilities of Omeros Corporation (Omeros) and Althea Technologies (Althea). The
Quality Management Agreement shall constitute part of the agreement between Omeros and Althea
and may be revised from time to time on the basis of mutual agreement of the parties. In the
event of a conflict between the provisions of the Drug Product Development and Clinical Supply
Agreement and Quality Management Agreement, the provisions of the Drug Product Development and
Clinical Supply Agreement shall prevail.
Definitions
“Agreement” shall mean the Drug Product Development and Clinical Supply Agreement executed
between Omeros and Althea on January 20, 2006.
“cGMP” shall mean Current Good Manufacturing Practices as promulgated under the US Federal Food
Drug and Cosmetic Act and 21 CFR sections 210, 211, 600 and 610
“Party” means either Omeros or Althea
“Parties” means both Omeros and Althea
“Products” shall mean Omeros drug products and all intermediate precursors
Regulatory Activities
Roles of the parties
Omeros will be the holder the IND or equivalent and the holder of the registration submission
and subsequent license. Althea will support these submissions as a contract manufacturer under
the direction of Omeros.
Regulatory submissions
Omeros will be responsible for the submission of documentation to regulatory authorities in
support of the Products. Althea will provide Omeros with the information necessary to complete
regulatory submissions in a timely and effective manner.
Althea and Omeros will mutually agree upon responses, which Omeros will make, to FDA questions
and requests regarding production processes and product testing relevant to Althea.
Inspections
Omeros will inform Althea in a timely fashion when regulatory agencies are seeking to schedule
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inspections concerning the Products at Althea’s facilities.
Omeros will be permitted two representatives during the opening, closing and daily wrap up portions
of the inspection at Althea’s facilities.
Althea’s communication and commitments with regulatory inspectors will be limited to matters
outside of Omeros’ regulatory submissions, and Omeros will be informed of all such communication
and commitments that could impact Omeros’ regulatory submissions. Althea and Omeros will mutually
agree upon responses, which Omeros will make, to FDA questions and requests regarding production
processes and product testing. Omeros will determine and make all other responses to regulatory
authorities.
Compliance
Roles of the parties
Althea, in its activities under the Agreement, is responsible for cGMP, other applicable guidelines
and Althea SOPs.
Omeros, in its activities under the Agreement, is responsible for cGMP and applicable guidelines
and with confirming Althea’s cGMP, other applicable guidelines and Althea SOPs.
Audits
In addition to other audit rights provided for in Section 4.7 of the Agreement, Omeros has the
right to perform one audit of Althea facilities, laboratories and warehouses each year for the
purposes of confirming Althea’s compliance with cGMP, applicable guidelines and Althea SOPs in the
manufacture, testing and validation of the Product. The audit will be limited to 2 business days to
occur on mutually agreed upon dates.
Omeros may also perform an annual audit of each Althea subcontractor involved in the manufacture,
testing and validation of the Product, providing that Omeros provides Althea with prior written
notification of its intent to audit. Althea will provide commercially reasonable efforts to
facilitate the scheduling and execution of Omeros’ audits of subcontractors.
In addition to the annual compliance audit, Omeros may also audit Althea and its subcontractors in
the event of failure or recall of a product lot.
At the conclusion of each audit, Omeros will hold a wrap up meeting with Althea and/or its
subcontractors to review all significant audit observations.
Within 60 days of each audit it performs at Althea and its subcontractors, Omeros will provide
Althea with a written report of its observations and recommendations. Within 60 days of receipt of
Omeros’ audit report, Althea and/or its subcontractors will provide a written response to Omeros
including a response to all Omeros observations and details regarding corrective actions.
Documentation
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Althea is responsible for generating and maintaining records of equipment usage, cleaning and
maintenance.
Althea is responsible for developing documentation to support the manufacturing, testing and
validation of the Product. All documents and procedures which are specific to the product must be
approved by Omeros prior to implementation. Althea will provide Omeros with copies of all documents
used in the production, testing and validation of the Product.
Changes to documentation will be implemented according to the Change Control section of this
document.
Althea is responsible for maintaining Product batch production and testing records for the period
of product expiry plus one year. Written authorization from Omeros QA is required prior to the
movement or destruction of Product records. When Althea is no longer willing or able to store
Product records, Omeros may have the records destroyed, or transferred to an alternate storage
location at Omeros’ expense.
Product Release
Althea and Omeros will each identify a Quality Assurance representative who will function as the
points of contact between the companies for the purposes of communication regarding product release
and regulatory compliance activities.
Althea will propose sources and specifications for raw materials and components to be used in the
manufacture of the Product. Omeros will be responsible for approving all sources for raw materials
and components used in the manufacture of the Product.
Althea and Omeros will mutually agree upon testing specifications for the Product. The parties will
mutually agree in writing to all changes to specification prior to implementation.
Althea may subcontract some or all of the Product testing subject to prior written approval by
Omeros.
Althea is responsible for control and monitoring of the Product manufacturing process and
production facility.
Althea is responsible for reviewing product lot records, test results and specifications and
determining whether to reject the lot or issue Althea’s release to Omeros QA. Omeros QA is
responsible for the formal release of each Product lot.
Althea will issue a Certificate of Analysis and Certification of Compliance to Omeros for each lot
that receives Althea’s release. The Certificate of Analysis will contain a summary of the product
test results, specifications and test methods. The Certificate of Compliance will contain a
statement signed by Althea’s QA representative stating that the lot has been manufactured and
tested in compliance with cGMP, Althea procedures and applicable guidelines.
Omeros may request additional documentation to support its review and release of Product lots,
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including but not limited to copies of Batch Production Records, testing results, raw data from
Product testing and in-process test results.
Omeros will make reasonable efforts to release each lot within 90 days of receipt of the
Certificate of Analysis, Certificate of Compliance and requested documents.
Althea will store and ship the Product according to written Omeros instructions and in compliance
with cGMP.
Product Recall
Omeros is responsible for instituting and facilitating a Product recall.
Omeros will notify Althea in a timely fashion when a Product recall may be due to issues related to
the manufacturing of the Products.
In the event that a Product recall may be due to manufacture of the Products, Althea will provide
Omeros complete information regarding the relevant Product lots including, but not limited to trace
trees, equipment and facility data, etc. Althea will provide this information to Omeros within 10
business days of receipt of the request from Omeros.
At Omeros’ request and under Omeros’ direction, Althea will support communication with regulatory
authorities.
Change Control
All changes to procedures, documents and equipment used in the manufacture, testing and validation
of the Product must be mutually approved by Althea and Omeros in writing prior to implementation.
Validation
All validation specific to the Product must be executed according to protocols approved prior to
execution by Omeros.
Althea will provide Omeros with copies of all validation reports used to support manufacture and
testing of the Product, upon request.
Investigations
Althea will notify Omeros of all excursions, deviations, observations and investigations which
could impact past, current or future lots of the Product.
Althea will notify Omeros of all Product testing failures within 2 business days, and prior to
initiating retesting.
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All investigations concerning the Product and conducted at Althea will be reviewed and approved by
Althea and Omeros.
Product
Supply Roles of the parties
Althea will perform manufacture, testing and validation of the Products in its facilities.
Omeros is authorized to have 2 representatives present at Althea’s manufacturing facilities during
Product manufacture, testing and/or validation. Additional Omeros representatives may be permitted
when mutually agreed with Althea.
Authorization of production
Manufacture of the Product at Althea will be authorized in accordance with the Agreement
Lot numbers
Althea is responsible for assigning and tracking unique identifier numbers to each lot of raw
material, component, product intermediate and Product.
Dates of production and expiration
The dates of manufacture will be determined by, and documented in, the Batch Production Records.
The expiration date of the Product will be determined by Omeros.
Dispute Resolution
Disputes concerning the acceptability of Product lots or general compliance issues will be resolved
by the Quality Assurance representatives of the Parties. If the dispute is not resolved after 30
days, either Party may upon written notification to the other request that the dispute be resolved
according to the provisions of the Agreement.
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5. Summary Pricing
Fill and Finish Total |
[†] | |||
Stability and Analytical Transfer Total |
[†] | |||
Project Total |
[†] | |||
Discounted Project Total |
[†] |
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6. Authorizations
IN WITNESS WHEREOF, the parties hereto have each caused this Project Plan to be executed by
their duly-authorized representatives as of June 4, 2007.
| OMEROS CORPORATION | ALTHEA TECHNOLOGIES, INC | |||||||||
By:
|
/s/ Gregory A. Demopulos | By: | /s/ Melissa Rosness | |||||||
Name:
|
Gregory A. Demopulos, M.D. | Name: | Melissa Rosness | |||||||
Title:
|
Chairman & CEO | Title: | Director, Contract Management | |||||||
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Exhibit 10.38
MASTER SERVICES AGREEMENT
THIS MASTER SERVICES AGREEMENT (“Agreement”) is made and entered into effective January
27th, 2005 (the “Effective Date”), by and between NURA, Inc. (hereinafter “Nura”),
having a place of business at 1124 Columbia Street, Seattle WA, 98104, USA, and ComGenex, Inc.
(hereinafter “ComGenex” or “CGX), having a place of business at Zahony u 7, H-1031 Budapest,
Hungary, altogether referred to as Parties.
WHEREAS, Nura is engaged in the discovery and development of active substances against
diseases of the central nervous system and is planning to outsource a specific project that
involves the molecular target of Phosphodiesterase enzyme 10 (“PDE10” or “PDE10a”) as described in
Appendix A, and
WHEREAS, ComGenex is engaged in the business of providing complex drug discovery services
including but not limited to molecular biology, protein expression, assay development and high
throughput screening, chemical research and analysis, chemistry consulting, chemical synthesis,
manufacturing of specialty chemical products, chemoinformatics and related services, and undertakes
such as an independent company, understanding that neither ComGenex nor its employees or agents
shall be considered an employee of Nura; nor a participant in any programs, insurance or other
benefits extended to Nura’s employees; and,
NOW, THEREFORE, in consideration of the mutual covenants set forth below, the Parties hereby
agree as follows:
A. ComGenex Services: ComGenex shall provide to Nura complex drug discovery research
services (“Services”), including as detailed above and as agreed upon in writing from time to time
by the parties and set forth in Appendix B for each such project (the “Projects”). The parties
acknowledge and accept that successful completion of all projects is not guaranteed but shall be
completed by ComGenex on a best efforts basis. Nura and ComGenex shall agree upon, and specify in
the Appendix B the parameters of the Projects, the compensation to be paid for the Services, and
the time frame in which the Services are to be provided, subject to the terms of this Agreement.
Such Services may include, but are not limited to, the following:
1. Molecular Biology Services: ComGenex shall provide to Nura at Nura’s request and as
described in Appendix B, cloning and protein expression, assay development, high throughput
screening, and protein structure determination.
2. Medicinal Chemistry Research Services: ComGenex shall provide to Nura at Nura’s
request advice on design and synthesis of organic compounds, and for the completion of the
manufacture of such organic compounds.
3. Technical Assistance: ComGenex shall provide to Nura, at Nura’s request synthetic
chemical research, chemical library preparation, hit/lead evolution and/or optimization chemistry,
analysis and analytical method development, process development and process optimization studies,
and manufacturing of specialty chemicals.
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4. Technical Consultations: ComGenex shall be available to Nura via telephone at such
times as are requested by Nura and are mutually agreeable to ComGenex for technical consultations
with Nura’s research and development personnel.
B. Specific Duties of ComGenex:
1. In assuming responsibility for undertaking this Agreement, ComGenex will, on a best efforts
basis:
a) Perform molecular biology, chemistry and complex drug discovery services including protein
expression, assay development, high throughput screening, medicinal chemistry, chemistry
consulting, synthetic chemical research, combinatorial chemical synthesis, hit/lead evolution and
optimization chemistry, process development and process optimization studies, and manufacturing of
specialty chemicals for any Projects entered into, as described in Appendix B attached hereto.
b) Provide technical consultation, technical assistance and product development assistance, as
defined, for any Projects entered into.
c) Develop or utilize existing analytical methods that will allow determination of the
identity and quantification of the purity of any compounds delivered.
d) Provide compounds in the time frame set forth in Appendix B attached hereto, and
immediately notify Nura if any delays are encountered.
2. In assuming responsibility for undertaking this Agreement, ComGenex will:
a) Interact with Nura’s scientists as is deemed by ComGenex reasonably necessary and
appropriate in the conduct of the Projects outlined in Appendix B.
b) Provide as part of the Project research reports to Nura describing the results upon the
completion of individual Projects.
C. Specific Duties of Nura: Nura will:
1. Provide assistance such as is deemed reasonable and appropriate by Nura in the conduct of a
fully integrated research project team effort.
2. Interact with and communicate with ComGenex reasonably and respond to all reasonable
requests to provide necessary and appropriate Project guidance.
3. Agree to pay ComGenex for the Services to be performed by ComGenex as set forth in the
schedule of payments as shown in Appendix C.
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D. Term and Termination:
1. This Agreement shall commence on the Effective Date and shall terminate eighteen months
after the Effective Date; provided however that Nura may elect to extend this Agreement for up to
an additional 18 months by written notification to ComGenex. Extension of this Agreement shall be
subject to future written Agreement.
2. The representations and warranties contained in this Agreement, as well as those rights
and/or obligations contained in the terms of this Agreement which by their intent or meaning have
validity beyond the term hereof, including without limitation Sections D, E, H, and I hereof, shall
survive the expiration or termination of this Agreement.
E. Financials:
1. Nura will pay to ComGenex the amount set forth, and at the indicated times set forth in
Appendix C. Nura will pay to ComGenex a first installment to help to cover the running cost of
Projects (“Cost Coverage”), and Nura will pay a milestone fee (“Milestone Fee’) upon completion of
each individual subprojects — both as described in Appendix C.
2. The Cost Coverage component in each Project will be paid in monthly installments as listed
in the Appendix C. Unless otherwise agreed in writing by the parties, Nura will not be obliged to
pay any Cost Coverage beyond that specified in Appendix C, including those cases in which a project
is not completed within the period shown in Appendix B. However once a milestone is reached and
achieved, Nura shall pay the milestone fee (“Milestone Fee”) as set forth in Appendix C.
3. To cover the start and initiation of the Projects, Nura will pay a down-payment of [†]
within 15 days of the Effective Date. This down-payment will be credited using the following
payment schedule: Each invoice issued by ComGenex will be reduced by 25% until the down-payment is
fully eliminated, as described in Appendix C.
4. In addition to the above payment obligations Nura or any of its licensees will pay to
ComGenex the following development related milestone fees for any and each compounds, chemical
entity or active substance, specifically developed under this Agreement that enters preclinical or
clinical development or any of the above representing the therapeutically active part of an
experimental pharmaceutical product developed under this Agreement that enters preclinical or
clinical development. For clarity, for any single compound, chemical entity or active substance
that reaches the listed milestone below, the associated fee shall be paid only once to ComGenex, by
either Nura or a licensee of Nura, whichever shall achieve such milestone first.
[†]
|
[†] | |
[†]
|
[†] | |
[†]
|
[†] | |
[†]
|
[†] | |
[†]
|
[†] | |
[†]
|
[†] |
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Royalty payment by Nura or any of its licensees will be due to ComGenex in the event of any
and each compound, chemical entity or active substance specifically developed under this Agreement
representing the therapeutically active part of a product is marketed by Nura and/or a licensee or
any other third party. The resulting royalty rate will be [†].
5. Outsourced projects that are outlined in Appendix D will be reimbursed to ComGenex by Nura.
These payments are in addition to the payments detailed in Appendix C.
6. Except as set otherwise all payments will be 15 days from the date of invoice.
Notices:
All notices associated with this Agreement shall be by first class mail or courier, addressed
to the respective parties as follows:
To ComGenex:
ComGenex, Inc.
Attn: Laszlo Urge, Ph.D. CEO
Zahony u. 7.
Budapest, Hungary H-1031
Attn: Laszlo Urge, Ph.D. CEO
Zahony u. 7.
Budapest, Hungary H-1031
To Nura:
Nura, Inc.
Attn: Patrick W. Gray, Ph.D., CEO
1124 Columbia Street
Seattle WA, 98104
Attn: Patrick W. Gray, Ph.D., CEO
1124 Columbia Street
Seattle WA, 98104
The above named persons are acting on behalf of their respective organizations and may be
changed on an as needed basis.
F. Assignment: This Agreement may not be assigned or otherwise transferred by either
party without the prior written consent of the other party, with such consent not to be
unreasonably withheld; provided, however, that Nura or ComGenex may, without such consent, assign
this Agreement and its rights and obligations hereunder to its Affiliates and parent corporations,
or in connection with the transfer or sale of all or substantially all of the business to which
this Agreement pertains, or in the event of its merger or consolidation or change in control or
similar transaction. Any purported assignment in violation of the preceding sentences shall be
void. Any permitted assignee shall assume all obligations of its assignee under this Agreement.
“Affiliate” shall mean any company which directly or indirectly controls or is controlled by or is
under common control with a party hereto by means of ownership of more than fifty percent (50%) of
the voting stock or similar interest in said company.
G. Safety: Each of the parties agrees that if it becomes aware of any safety hazard
relating to any compound supplied or developed under this Agreement that it shall promptly notify
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the other party with all information in its possession or control concerning such safety
hazard. Nura recognizes that the toxic effect of the compounds supplied or developed under this
Agreement is not known and it may be toxic or harmful to human health. Nura agrees to take
reasonably necessary precautions when handling such compounds. ComGenex will not be held
responsible in any form if after delivery of such compounds to Nura the compounds cause harmful
effects to any of Nura’s employees, contractors, consultants or any other parties.
H. Entire Agreement:
1. Except as provided herein with respect to the Appendices affixed hereto and the obligations
provided in the CONFIDENTIAL DISCLOSURE AGREEMENT dated as of December 13, 2004 between parties,
this Agreement represents the entire agreement of the parties with respect to the subject matter
hereof and supersedes all prior communications, understandings and agreements with respect thereto.
2. No waiver, change or modification of the provisions of this Agreement shall be effective
unless it is in writing and signed by a duly authorized officer of ComGenex and Nura. Additional
Appendices describing Projects in writing and signed by a duly authorized officer of ComGenex and
Nura shall constitute part of this Agreement.
I. Miscellaneous:
1. The Parties agree that from time to time they may make public announcement relating to the
collaboration, where certain information pertaining to the collaboration is disclosed in the form
of a press release, press conference, an announcement associated with trade show, or reports for
television or other media. No such public announcements are permitted under this Agreement without
the express written approval of the other party.
2. ComGenex represents and warrants that it will render the services hereunder in accordance
with prevailing high professional standards and will make all reasonable efforts to produce
consistently high levels of accuracy and expertise and to meet timetables set forth under this
Agreement, and as described in Appendices B and C for completion of services. ComGenex further
represents and warrants that ComGenex and any third party personnel assigned to perform services
under this Agreement shall, in the opinion of ComGenex, have the skills necessary to efficiently
perform such services and produce chemicals, data and/or reports, as the case may be, in a form and
of a quality reasonably suitable to Nura.
3. ComGenex is an independent company and nothing in this Agreement shall be construed to
create a partnership, joint venture or employment relationship between the parties.
4. If any provision hereof shall be determined to be invalid or unenforceable, such
determination shall not affect the validity of the other provisions of this Agreement.
5. This Agreement shall be governed in accordance with the laws of the State of Washington,
USA, without regard to the conflicts of law provisions thereof.
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6. Waiver by either party or the failure by either party to claim a breach of any provision of
this Agreement shall not be deemed to constitute a waiver or estoppel with respect to any
subsequent breach of any provision hereof.
7. If any dispute arises with regard to the performance of this contract by either party, a
good faith effort will be made by the parties to resolve such dispute by negotiation. If the
parties fail to resolve the dispute through negotiation, each party shall have the right to pursue
any other remedies legally available to resolve the dispute. The substantially prevailing party in
any proceeding conducted to interpret or enforce this Agreement shall be entitled to be reimbursed
by the other party for its reasonable attorneys’ fees and costs.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly
authorized representatives as of the date first written above.
| COMGENEX, INC. | NURA. INC. | |||||||||
By:
|
/s/ Dr. Laszlo Urge
|
By: | /s/ Patrick W. Gray
|
|||||||
Name:
|
Laszlo Urge
|
Name: | Patrick W. Gray
|
|||||||
Title:
|
CEO, Director
|
Title: | CEO
|
|||||||
Date:
|
07 Feb 2005
|
Date: | 27 Jan 2005
|
|||||||
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Appendix A
To that certain Master Services Agreement by and between Nura Inc., and ComGenex Inc.
Materials Provided by Nura to ComGenex
[†]
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Appendix B
To that certain Master Services Agreement by and between Nura Inc., and ComGenex Inc.
To the extent that any term or provision set forth in this Appendix B is inconsistent with any
term or provision set forth in the Master Services Agreement, the Master Agreement shall be
controlling.
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Table of Contents
MASTER SERVICES AGREEMENT |
1 | |||
TABLE OF CONTENTS |
9 | |||
OBJECTIVE |
11 | |||
DEFINITIONS |
11 | |||
BACKGROUND |
11 | |||
PROJECT SUMMARY |
12 | |||
MILESTONES |
12 | |||
SUBPROJECT 1: LEAD CANDIDATE GENERATION |
12 | |||
SUBPROJECT 2: PROVISION OF HUMAN PDE10A. CLONING AND EXPRESSION |
12 | |||
SUBPROJECT 3: ASSAY DEVELOPMENT, HTS |
12 | |||
SUBPROJECT 4: COMPOUND OPTIMIZATION |
12 | |||
TERMS |
13 | |||
INTELLECTUAL PROPERTY RIGHTS |
13 | |||
ANNEXES |
14 | |||
ANNEX 1: DETAILED PROJECT PLAN |
14 | |||
[†] |
||||
Subproject 1: Lead Candidate Generation |
20 | |||
[†] |
||||
Subproject 2: Provision of human PDE10a. Closing and expression |
23 | |||
[†] |
||||
Subproject 3: Assay development, HTS |
25 | |||
[†] |
||||
Subproject 4: Compound Optimization |
26 | |||
[†] |
||||
PAYMENTS |
35 | |||
DOWN PAYMENT |
35 | |||
COST COVERAGE PAYMENTS |
35 | |||
MILESTONE FEES |
36 | |||
Milestone1 |
36 | |||
Milestone2 |
37 | |||
[†] |
38 | |||
Milestone3 |
39 |
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Objective
The objective is to create a potent, selective PDE10a inhibitor with drug-like properties that
crosses the blood brain barrier. Potency should be less than [†] and selectivity greater than [†]
fold against other PDEs.
Definitions
| • | Patentable Lead Candidate |
Biologically active chemical entities, which are not covered by patent, and which may be
transformed into a clinically useful drug by subsequent modification/optimization.
| • | Focused library |
A set of compounds in silico selected or screened for binding preferably to a specific
biological target. The compounds are prepared by individual or parallel synthesis where the
building blocks are connected to each other in many possible variations.
| • | Advanced Lead |
Compounds that possess desired properties (potency, selectivity, physicochemical,
pharmacokinetic and toxicological characteristics) set by the Lead Criteria against the particular
target.
| • | Lead Criteria |
A set of criteria, mutually agreed to by the parties and included as Annex 3.
| • | Target |
The biological target (binding partner) of the lead compounds to be developed (PDE10a).
Background
Following the ongoing communication with Nura Inc., the above objectives were defined. In
order to achieve these objectives three parallel approaches were discussed:
[†]
According to the discussions the following division of responsibility was defined:
Nura responsibility:
[†]
ComGenex:
[†]
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Project Summary
Subproject 1: Lead Candidate Generation
[†]
Subproject 2: Provision of human PDE1Oa. Cloning and expression
[†]
Subproject 3: Assay development, HTS
[†]
Subproject 4: Compound Optimization
[†]
Terms
Intellectual Property Rights
ComGenex shall retain no rights to any compound delivered to Nura. ComGenex shall have sole
ownership of all right, title, and interest in and to ComGenex patent rights and ComGenex
technology as well as any invention arising from ComGenex’ platform or technology that are not
specific to the compounds or the related chemistry applied under this project.
No conflict
During the term of this Agreement, ComGenex will not participate in any program which has, as
its goal, the development of compounds which target PDE10.
[†]
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Subproject 1: Lead Candidate Generation
[†]
Subproject 2: Provision of human PDE10a. Cloning and expression
[†]
Subproject 3: Assay development, HTS
[†]
Subproject 4: Compound Optimization
[†]
Annex 2: Definitions of the targeted Lead Criteria
Potent, selective PDE10a inhibitors with drug-like properties that cross the blood brain
barrier. [†]
The above definitions are subjected to change during the whole project upon agreement of the
Parties.
Annex 3: Initial Target information
cAMP and cAMP-inhibited cGMP 3’,5’-cyclic phosphodiesterase 10A (PDE10a) belongs to the cyclic
nucleotide phosphodiesterase family. It plays a role in signal transduction by regulating the
intracellular concentration of cyclic nucleotides. This enzyme can hydrolyze both cAMP and cGMP,
having a higher affinity for cAMP.
PDE10a is abundant in the putamen and caudate nucleus regions of brain and testis, it is
moderately expressed in the thyroid gland, pituitary gland, thalamus and cerebellum. The protein
is composed of a C-terminal catalytic domain containing two putative divalent metal sites and an
N-terminal regulatory domain, which contains one putative cGMP-binding region. Several members of
the PDE family were crystallized and a there is a wide range of known substrates and inhibitors.
Annex 4: CGX’ Know-how
Genetic engineering, protein expression and renaturation.
At ComGenex we have extensive experience in genetic engineering and expressing sequences
across various expression systems. We have developed unique protein renaturation capabilities for
high yielding expression of functional proteins of your choice. We are active in the field of
assay development and high-throughput screening.
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RefoldAll™ is modular protein production service from subcloning and fermentation to protein
purification, where renaturation is the key element of the process. With the integration of a
combinatorial approach and sophisticated parameter optimization, we offer fast and efficient
renaturation screens for your proteins.
XpressXpert™ is a comprehensive modular protein expression service which delivers purified
recombinant proteins according to client supplied DNA sequence data. We provide the following
discrete modules:
| • | cloning, subcloning | |
| • | target oriented choice of expression system | |
| • | protein expression in: E. coli, insect cells, mammalian cells | |
| • | protein purification development | |
| • | production scale-up |
Darvas F., Dorman G., Papp A., Urge L., Molnár T., Borbola I., Lorincz Z. and Ambrus G.
Development of a High-throughput Cytotoxicity Screening Method for Early Compound Filtering. 2004.
Society for Biomolecular Screening 10th Anniversary Conference and Exhibition, Orlando,
USA (September 11-15, 2004)
Narayan M., Welker E. and Scheraga H.A. 2003. Native Conformational Tendencies in Unfolded
Polypeptides: Development of a Novel Method To Assess Native Conformational Tendencies in the
Reduced Forms of Multiple Disulfide-Bonded Proteins. J. Am. Chem. Soc. 125 (8); 2036-2037.
Ambrus G., Gal P., Kojima M., Szilagyi K., Balczer J., Antal J., Graf L., Laich A., Moffatt B.
E., Schwaeble W., Sim R. B. and Zavodszky P. 2003. Natural Substrates and Inhibitors of
Mannan-Binding Lectin-Associated Serine Protease-1 and -2: A Study on Recombinant Catalytic
Fragments. J. Immunol. 170, 1374-1382.
Welker E., Narayan M., Wedemeyer W. J. and Scheraga H. A. 2001. Structural determinants of
oxidative folding in proteins. PNAS, 98, 2312-2316.
Kardos J., Gal P., Szilagyi L., Thielens N. M., Szilagyi K., Lorincz Z., Kulcsar P., Graf L.,
Arlaud G. J. and Zavodszky P. 2001. The role of the individual domains in the structure and
function of the catalytic region of a modular serine protease, C1r J. Immunol 167, 5202-5208.
Scheraga H. A., Wedemeyer, W. J. and Welker E. 2001. Bovine Pancreatic Ribonuclease A:
Oxidative and Conformational Folding Studies. Methods in Enyzmology, 341: 189-221.
EMIL™ -based analogue generation
ComGenex has developed a knowledge base and software with Prof. Toshio Fujita (Kyoto) for
bioanalogous lead evolution. The entry structures (validated hits, initial leads) are first
imported into our EMIL software to create the bioanalogous expansion of the chemical space defined
by the original hit molecules.
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EMIL (Example Mediated Innovation for Lead Evolution) incorporates a knowledge base
(collection of structural “evolution” examples) and an interactive search engine. By analyzing
large number of biologically active compounds, several thousand structural “evolution” examples
(from simple bioisosteric structural replacements to bioanalogous drastic skeletal changes) were
identified and collected from literature into the EMIL database as virtual transformation rules.
The resulting candidate lead structures could exhibit improved pharmacological/ pharmacokinetic
characteristics, and help to reach novel intellectual property (IP) position.
Fujita T., Adachi M., Akamatsu M., Asao M. and Fukami H. Background and Features of EMIL, A
System for Database-aided Bioanalogous Structural Transformation of Bioactive Compounds. 1995.
QSAR and Drug Design: New Developments and Applications, Pharmacochemistry Library, Vol. 23 (Ed.
Fujita T), pp. 235-273. Elsevier, Amsterdam, 1995.
Papp A., Fujita T. and Darvas F. The implementation of an expert system for evolving
pharmaceutical leads. Eurocombi 1, Budapest, July 1-5, 2001.
Darvas F, Fujita T. and Papp A. A Web-based Tool for Building Bioanalogous Libraries, DDJ
Japan, Tokyo, Jan 28, 2002.
EMIL™-Select™ for target family-based drug design
In the post-genomic drug discovery large enzyme families are investigated parallel in order
design selective inhibitors for many related isoforms in one combined research effort.
Chemogenomics is a bioinformatics-driven approach to explore the ligand-target knowledge space
based on the genetic (sequence homology) divergence of target family members.
This design approach identifies the major molecular determinants of the target-family
(privileged structures/ special recognition features) and virtual transformations leading
selectivity within the family. Using the knowledge base, which is an extension of the original
EMIL™ concept (EMIL-Select™) scaffolds or robust inhibitors can be transformed into selective
inhibitors (‘selectivity jumping’).
Darvas F., Dorman G., Papp A., Szommer T., Ambrus G., Fujita T., Urge L. Novel chemogenomics
approach to design selective MMP inhibitors, Society for Biomolecular Screening 10th
Anniversary Conference and Exhibition, Orlando, USA (September 1115, 2004).
Darvas F., Dorman G., Krajcsi P., Puskas L., Kovari Z., Lorincz Z. and Urge L. 2004. Recent
advances in chemical genomics. Curr. Med. Chem. (in press).
Lead Multiplier™ technology
ComGenex’ Lead Multiplier™ technology is designed to integrate proprietary chemoinformatics
tools in order to select, optimize and prioritize novel chemically distinct lead classes (de novo
focused libraries) against particular targets for hit validation and lead explosion.
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The program utilizes a unique medicinal chemistry knowledge based expert system, a proprietary
similarity search tool, in silico pharmacokinetic filtering and diversity assessing methods. Lead
Multiplier™ Focused Library demonstrates pharmaceutically relevant structural complexity and at the
same time remains chemically distant from the original lead structures.
Successful applications:
Dorman G, Gulyas-Forro A, Darvas G, Urge L, Sasvari-Szekely M, Sziraki M. Bioanalogous
structure evolution for new lead generation. Design and discovery of novel dopamine transporter
inhibitors. ISMC2004, Copenhagen, August 15-1 9, 2004.
Patents:
Development of novel compounds for reversing Multi-Drug Resistance, (ComGenex with Solvo
Biotech), Hung Pat Appl. P01-05401; 2001.
Compounds having inhibitive activity of phosphatidylinositol 3-kinase and methods of use
thereof. (ComGenex with Echelon Bioscience, Salt Lake City, UT, two joint patents filed in 2004
for two separate compound series, PCT 21958.PROV, PCT 21780.PROV).
CMT™ (ComGenex Matrix Technology)
ComGenex has developed its proprietary HT parallel chemistry platform, referred to as ComGenex
Matrix Technology (CMT™). It utilizes manual and robotized parallel synthesis stations of
different size that reflects the cascading diversity building approach. CMT™ is practically a
technological line that also contains state-of-the-art selection methods database management,
reaction piloting, HT purification and analytics.
Examples for successful application of CMT™:
Varga L, Nagy T, Kovesdi I, Benet-Buchholz J, Dorman D, Urge L. and Darvas F. 2003.
Solution-phase parallel synthesis of 4,6-diaryl-pyrimidine-2-ylamines and
2-amino-5,5-disubstituted-3,5-dihydro-imidazol-4-ones via a rearrangement, Tetrahedron, 59 (5)
655-662.
Gerencser J., Panka G., Nagy T., Egyed O., Dorman G., Urge L. and Darvas F. 2004. A
versatile procedure for the parallel preparation of 3-imidazo[l,2-a]pyridin-3-yl-propionic acid
derivatives involving Meldrum’s acid, J. Comb. Chem. (in press).
Innovative chemical technologies:
—H-Cube: A microfluidics-based continuous flow hydrogenation device
This novel device, which is co-developed with Thales Nanotechnologies, (www.thalesnano.com)
enables high-yield hydrogenation with improved selectivity.
Darvas F., Godorhazy L., Panka G., Bucsai A. and Dorman G. Development and application of
microchannel flowreactor for parallel hydrogenation. ACS, Philadelphia, August 22-28, 2004.
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Jones R., Godorhazy L., Panka G., Szalay D., Dorman G., Urge L. and Darvas F. A compact,
continuous flow device for high-pressure heterogeneous hydrogenation, J. Comb. Chem. (in press).
—MW: microwave heating
Integration of microwave heating into CMT enables to perform difficult chemical
transformations, multicomponent reactions that are typically carried out in low yield and long
reaction time.
Urge L. Integration of Microwave assisted chemistry into high-throughput chemistry platform.
The Pros and Cons. Conference on Microwave-Assisted Organic Synthesis, Boston, Nov. 11-13, 2004.
In silico ADME (BBB penetration, CNS likeness) prediction
ComGenex together with CompuDrug has developed a software family (Pallas™), which helps to
filter out, compounds early in the drug discovery pipeline, practically in the design phase. The
software allows the prediction of physicochemical parameters (pKa, LogP, LogD), metabolism, and
toxicity.
Darvas F., Keseru G., Papp A., Dorman G., Urge I., Krajcsi P. 2002. In silico and Ex Silico
ADME Approaches for Drug Discovery, Current Topics in Medicinal Chemistry, 2, 1269-1277.
Dorman
G. and Darvas F. 2002. HT Prediction, Virtual and Experimental Screening of Drug
Absorption, In: HT ADMETox estimation based on in vitro and in silico approaches, F. Damas, G.
Dorrnan (Eds.), BioTechniques Press, Eaton Publishing, Westborough, MA, USA. 25-40pp.
Molnar L.., Keseru G., Papp A., Gulyas Z. and Darvas F. 2004. A Neural Network Based
Prediction of Octanol-Water Partition Coefficients Using Atomic5 Fragmental Descriptors, Bioorg.
Med. Chem. Letters, 14(4), 851 -853
ChemprobeTM tethering strategy
ComGenex has developed a novel tethering strategy where a representative subset is designed
around the core structure of known active compounds or combinatorial compound libraries with
appropriate terminal functional groups.
Dorman G., Reynolds D., Puskas L., Urge L. and Damas F. Immobilized surrogate compound
libraries for rapid affinity profiling Eurocombi-2, Copenhagen, Jun 29-July 3,2003
Hackler L., Dorman G., Kele Z., Urge L., Damas F. and Puskas L. 2003. Development of chemicaly
modified glass surfaces for nucleic acid, protein and small molecule microarrays, Mol. Div. 7,
25-36
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FlashTag™ covalent labeling strategy
The major feature of covalent-bond forming libraries is a creation of a stable linkage between
small molecules and biopolymers targeted by the ligand or substrate toward the active site. As the
stable covalent linkage survives proteolysis, chemical fragmentation and sequencing, and the small
molecule trapped within the active site during the entire manipulation, this technique enables the
identification of the binding site. Combining with chemprobe™ combinatorial tethering approach the
architecture of the binding site can be investigated.
Dorman G. and Prestwich G.D. 2000. Using Photolabile Ligands in Drug Discovery and
Development. Trends in Biotech. 18(2): 64-77
Dorman G., Krajcsi P. and Damas F. 2001. Chemical Library Approaches to Target Validation in
the Post-Genomic Era. Current Drug Discovery (October 2001), pp 21-24
Dorman G. and Damas F.2004. Utilizing small molecules in chemical genomics: toward HT
approaches, In: Chemical Genomics, Eds. Ferenc Darvas, Andras Gut™ Gyogy Dorman, Marcel Dekker, New
York, Basel, 2004, pp. 137-197
Diversity selection: the ED1 concept
ComGenex developed and employ for selection and library characterization a novel diversity
assessing approach, the Explicit Diversity Index (EDI). It combines structural dissimilarity and
core representativeness.
Gulyas-Forro A., Dorman G., Papp A., Gulyas Z., Urge L. and Darvas F. Explicit Diversity Index
(EDI): A Novel Measure for Assessing the Diversity of Compound Databases, J. Chem. Inf Comp. Sci.
(in press)
Multiparametric QSAR approach
Ferenc Darvas developed a multiparametric QSAR design approach and successfully employed in
the area of CNS active drug design which lead to the development of deramciclane (The compound is
presently in Phase-IV at Orion, Pfizer — Pharmacia Upjohn.)
Darvas F., Lopata A., Budai Z. and Petocz L. 1984. Computer Assisted Design of a Novel Type of
Tranquillant. QSAR and Strategies in the Design of Bioactive Compounds, 5th European Symp. on QSAR,
Bad Segeberg,l984 (Ed. Seydal JK), pp. 324-327. VCH, Weinheim, Germany.
Darvas F., Lopata A., Budai Z. and Petocz L. 1984. Prediction of Therapeutical lndex for a
Novel Type of Tranquillant. QSAR in Toxicology and Xenobiochemistry, Bad Segeberg, Germany,1985
(Ed. Tichy M), pp. 324-327. Elsevier, Amsterdam.
Parallel Lead Optimization Approach
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The core of the ComGenex’ Parallel Lead Optimization Program is HT medicinal chemistry
supported by QSAR modeling and EMIL™ (example-Mediated Innovation for Lead Evolution). Other
supporting elements are: broad spectrum of in silico and in vitro ADMETox methods; complementing
with ADMETox prefiltered screening libraries; ActiVerse™, prescreened targeted libraries;
FlashTag™, a photomarker library for covalent protein tagging; HT Analytical services. ComGenex
integrated these approaches into a service package, allowing the R&D activities to proceed
simultaneously shortening the average preclinical development phase.
Krajcsi P., Dorman G., Karancsi T., Papp A., Kalman F., Nagy T., Szabo I., Urge L. and Darvas
F. Parallel Lead Optimization Program Supported by EMlL Expert System — SBS, Den Haag, Sept
23-26, 2002
Darvas F., Krajcsi P., Urge L., Dorman G., Karancsi T., Papp A., and Fujita T. Lead
Optimization Program with Parallel Design — DDJapan, Jan 28-31, 2002
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Confidential
Appendix C
To that certain Master Services Agreement by and between Nura Inc., and ComGenex Inc.
To the extent that any term or provision set forth in this Appendix C is inconsistent with any
term or provision set forth in the Master Services Agreement, the Master Agreement shall be
controlling.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
Payments
Down Payment
| Amount due | Amount to be paid | |
January 27, 2005
|
[†] |
Cost Coverage Payments
| Amount due | Amount billed | Amount to be paid | ||
Milestone 1 |
||||
February 15, 2005
|
[†] | [†] | ||
March 15, 2005
|
[†] | [†] | ||
April 15, 2005
|
[†] | [†] | ||
Subtotal
|
[†] | |||
Milestone 2 |
||||
May 15, 2005
|
[†] | [†] | ||
June 15, 2005
|
[†] | [†] | ||
July 15, 2005
|
[†] | [†] | ||
August 15, 2005
|
[†] | [†] | ||
Subtotal
|
[†] | |||
Milestone 3 |
||||
September 15, 2005
|
[†] | [†] | ||
October 15, 2005
|
[†] | [†] | ||
November 15, 2005
|
[†] | [†] | ||
December 15, 2005
|
[†] | [†] | ||
Subtotal
|
[†] | |||
Total
|
[†] | [†] |
Down Payment and Cost Coverage Payments are due within 15 days after receipt by Nura of the
appropriate invoice from ComGenex.
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
-2-
Milestone fees
Milestone Fee Payments are due within 15 days after receipt by Nura of the appropriate invoice
from ComGenex. Each invoice shall be accompanied by a report from ComGenex detailing the
particular tasks relating to the invoice and accomplished by ComGenex according to the “Project”
plan pursuant to Appendix B.
Milestone 1
| Subproject 1 | If CGX delivers to Nura | Fee Due | ||
[†]
|
[†] | [†] |
| Subproject 2 | If CGX delivers to Nura | Fee Due | ||
[†]
|
[†] | [†] |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
-3-
Milestone 2
| Subproject 1 | If CGX delivers to Nura | Fee Due | ||
[†]
|
[†] | [†] |
| Subproject 2 | If CGX delivers to Nura | Fee Due | ||
[†]
|
[†] | [†] |
| Subproject 3 | If CGX delivers to Nura | Fee Due | ||
[†]
|
[†] | [†] |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
-4-
Optional items to Milestone 2
To be paid as Milestone Fee only (cost coverage is incorporated in the Milestone Fee).
Optional items to be performed only at the written request of Nura.
| Optional | If CGX delivers to Nura | Fee Due | ||
[†]
|
[†] | [†] |
The cost and the fee for the following optional items will be determined later
Preliminary biological screening
in vitro screening
| • | [†] |
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Milestone 3
| Subproject 3 | If CGX delivers to Nura | Fee Due | ||
[†]
|
[†] | [†] |
| Subproject 4 | If CGX delivers to Nura | Fee Due | ||
[†]
|
[†] | [†] |
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-6-
Optional items to Milestone 3
To be paid as Milestone Fee only (costTo be paid as Milestone Fee only (cost coverage is
incorporated in the Milestone Fee).
Optional items to be performed only at the written request of Nura.
| Optional | If CGX delivers to Nura | Fee Due | ||
[†]
|
[†] | [†] |
| † | DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION |
-7-
Appendix D
To that certain Master Services Agreement by and between Nura Inc.,
and ComGenex Inc.
To that certain Master Services Agreement by and between Nura Inc.,
and ComGenex Inc.
Confidential
Parties agree that the following costs will be reimbursed to ComGenex by Nura Inc:
1, Reasonable costs for obtaining commercially available recombinant PDE10a that is supplied to
facilitate early stage assay development. This cost incurs until sufficient amounts of recombinant
PDE10a from internal sources become available for assay development and screening.
2, If Nura requests optional selectivity screening as described in Appendix B; the costs of
selectivity studies to be performed on various PDE isotypes with ComGenex compounds.
3, If Nura requests real time PCR experiments, or other cell based assays that are not detailed in
Appendix B, the cost of these studies are borne by Nura.
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-8-
Exhibit 21.1
Subsidiaries of the Registrant
Subsidiary
|
Jurisdiction of Incorporation | |
nura, inc.
|
Delaware |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption “Experts” and to the use of our report
dated July 20, 2007, with respect to the consolidated financial statements of Omeros Corporation
included in the Registration Statement (Form S-1) and related Prospectus of Omeros Corporation for
the registration of shares of its common stock.
/s/ Ernst
& Young LLP
Seattle, Washington
January 8, 2008
January 8, 2008
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption “Experts” and to the use of our report
dated July 20, 2007, with respect to the financial statements of nura, inc. included in the
Registration Statement (Form S-1 No) and related Prospectus of Omeros Corporation for the
registration of shares of its common stock.
/s/ Ernst
& Young LLP
Seattle, Washington
January 8, 2008
January 8, 2008
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of Omeros Corporation of
our report dated December 2, 2005 relating to the financial statements of nura, inc., which appears
in such Registration Statement. We also consent to the reference to us under the heading “Experts”
in such Registration Statement.
/s/
PricewaterhouseCoopers LLP
Seattle, Washington
January 8, 2008
January 8, 2008
|
Wilson Sonsini Goodrich & Rosati professional corporation |
January 9,
2008
VIA OVERNIGHT MAIL
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington DC 20549
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington DC 20549
Re: Registration Statement on Form S-1 for Omeros Corporation
Ladies and Gentlemen:
Transmitted herewith is the Registration Statement on Form S-1 (the “Registration Statement”),
together with certain exhibits thereto, filed pursuant to the Securities Act of 1933, as amended
(the “Act”), by Omeros Corporation, a Washington corporation (“Omeros”). The Registration
Statement registers shares of Omeros’ Common Stock to be offered in an initial public offering.
Manually executed signature pages and consents have been executed prior to the time of this
electronic filing and will be retained by Omeros for five years. Please be advised that the
$4,519.50 registration fee for the Registration Statement was previously transferred to the
Commission’s account by federal wire transfer as required pursuant to Rule 13(c) of Regulation S-T.
We respectfully request that you provide us with a letter of comments (if any) regarding the
Registration Statement at your earliest convenience. Please note that Omeros intends to include
the numbers in the 2007 Director Compensation, Summary Compensation
and Grant of Plan-Based Awards tables now designated by asterisks in the first
amendment to the Form S-1 after completion of the audit of Omeros'
2007 Financial Statements.
Please note that, concurrently with this filing, Omeros has submitted a request for
confidential treatment pursuant to Rule 406 relating to an exhibit to the Registration Statement.
If you should have any questions regarding the above or the Registration Statement, please do
not hesitate to call the undersigned or Mark J. Handfelt of this office at (206) 883-2500. We look
forward to hearing from you soon.
| Very truly yours, | ||
| WILSON SONSINI GOODRICH & ROSATI, Professional Corporation |
||
| /s/ Craig Sherman | ||
| Craig Sherman, Esq. |
cc:
|
Gregory A. Demopulos, M.D. | |
| Omeros Corporation | ||
| Mark J. Handfelt, Esq. | ||
| Wilson Sonsini Goodrich & Rosati, Professional Corporation | ||
| Jonathan E. Kahn, Esq. | ||
| Morrison & Foerster LLP |
701 Fifth Avenue, Suite 5100, Seattle, WA 98104-7036 • 206.883.2500 Tel • 206.883.2699 Fax • www.wsgr.com
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