Document:

Exhibit 10.17

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of November 14, 2013 (the “Effective Date”) between SILICON VALLEY BANK, a California corporation (“Bank”), and TRACON PHARMACEUTICALS, INC., a Delaware corporation (“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.  The parties agree as follows:

 

1                                         ACCOUNTING AND OTHER TERMS

 

Accounting terms not defined in this Agreement shall be construed following GAAP.  Calculations and determinations must be made following GAAP.  Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Code to the extent such terms are defined therein.

 

2                                         LOAN AND TERMS OF PAYMENT

 

2.1                               Promise to Pay.  Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.

 

2.1.1                     Term Loan.

 

(a)                                 Availability.  Bank shall make one (1) term loan available to Borrower in an amount equal to the Term Loan Amount on or about the Effective Date subject to the satisfaction of the terms and conditions of this Agreement.

 

(b)                                 Repayment of Term Loan.

 

(i)                                     Interest-Only Payments.  Borrower shall make monthly payments of interest-only commencing on the first (1st) Business Day of the first (1st) month following the month in which the Funding Date occurs with respect to the Term Loan and continuing thereafter during the Interest-Only Period, on the first (1st) Business Day of each successive month.

 

(ii)                                  Principal and Interest Payments.  Borrower shall repay the Term Loan in twenty-seven (27) consecutive equal monthly payments of principal and accrued but unpaid interest commencing on the first (1st) Business Day of the first (1st) month after the Interest-Only Period (the “Conversion Date”), in amounts that would fully amortize the Term Loan, as of the Conversion Date, over the Repayment Period.  The Final Payment and all unpaid principal and accrued and unpaid interest on the Term Loan are due and payable in full on the Term Loan Maturity Date.

 

(c)                                  Voluntary Prepayment.  Borrower shall have the option to prepay the Term Loan in full, provided Borrower (i) shall provide written notice to Bank of its election to prepay the Term Loan at least ten (10) days prior to such prepayment and (ii) pays, on the date of such prepayment, (a) all outstanding principal and accrued but unpaid interest, plus (b) the Final

 

 

Payment, plus (c) all other sums, including Bank Expenses, if any, that shall have become due and payable.

 

(d)                                 Mandatory Prepayment Upon an Acceleration.  If the Term Loan is accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Bank an amount equal to the sum of (i) all outstanding principal and accrued but unpaid interest, plus (ii) the Final Payment, plus (iii) all other sums, including Bank Expenses, if any, that shall have become due and payable.

 

(e)                                  Mandatory Prepayment Upon Redemption.  If Borrower shall receive a Redemption Request (as defined in Borrower’s Restated Certificate of Incorporation, as amended), Borrower shall immediately, and prior to any payment in respect of any such Redemption Request, pay to Bank an amount equal to the sum of (i) all outstanding principal and accrued but unpaid interest, plus (ii) the Final Payment, plus (iii) all other sums, including Bank Expenses, if any, that shall have become due and payable.

 

2.2                               Payment of Interest on the Credit Extensions.

 

(a)                                 Interest Rate.  Subject to Section 2.2(b), the principal amount outstanding for the Term Loan shall accrue interest at a fixed per annum rate equal to five percent (5.0%), which shall be payable monthly.

 

(b)                                 Default Rate.  Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is four percentage points (4.0%) above the rate that is otherwise applicable thereto (the “Default Rate”).  Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations.  Payment or acceptance of the increased interest rate provided in this Section 2.2(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.

 

(c)                                  Payment; Interest Computation.  Interest is payable monthly on the first calendar day of each month and shall be computed on the basis of a 360-day year for the actual number of days elapsed.  In computing interest, (i) all payments received after 12:00 p.m. Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension.

 

2.3                               Fees.  Borrower shall pay to Bank the following:

 

(a)                                 Good Faith Deposit.  Borrower has paid to Bank a good faith deposit of Ten Thousand Dollars ($10,000) (the “Good Faith Deposit”) to initiate Bank’s due diligence review process, which amount shall be applied to Bank Expenses, provided that, in the event the Good Faith Deposit exceeds Bank Expenses incurred through the Effective Date, the remaining amount will be credited to the Designated Deposit Account; and

 

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(b)                                 Expenses.  All Bank Expenses (including reasonable and invoiced attorneys’ fees and expenses, plus reasonable and invoiced out-of-pocket expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due (or, if no stated due date, promptly following demand by Bank).

 

(c)                                  Fees Fully Earned.  Unless otherwise provided in this Agreement or in a separate writing by Bank, Borrower shall not be entitled to any credit, rebate, or repayment of any fees earned by Bank pursuant to this Agreement notwithstanding any termination of this Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder.  Bank may deduct amounts owing by Borrower under the clauses of this Section 2.3 pursuant to the terms of Section 2.4(c).  Bank shall provide Borrower written notice of deductions made from the Designated Deposit Account pursuant to the terms of the clauses of this Section 2.3.

 

2.4                               Payments; Application of Payments; Debit of Accounts.

 

(a)                                 All payments to be made by Borrower under any Loan Document shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 12:00 p.m. Pacific time on the date when due.  Payments of principal and/or interest received after 12:00 p.m. Pacific time are considered received at the opening of business on the next Business Day.  When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.

 

(b)                                 Bank has the exclusive right to determine the order and manner in which all payments with respect to the Obligations may be applied.  Borrower shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement.

 

(c)                                  Bank may debit any of Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when due.  These debits shall not constitute a set-off.

 

2.5                               Withholding.  Payments received by Bank from Borrower under this Agreement will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority (including any interest, additions to tax or penalties applicable thereto).  Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to Bank, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it would have received had no withholding or deduction been required, and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority.  Borrower will, upon reasonable request, furnish Bank with proof reasonably satisfactory to Bank indicating that

 

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Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower.  The agreements and obligations of Borrower contained in this Section 2.5 shall survive the termination of this Agreement.

 

3                                         CONDITIONS OF LOANS

 

3.1                               Conditions Precedent to Initial Credit Extension.  Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:

 

(a)                                 duly executed original signatures to the Loan Documents;

 

(b)                                 a duly executed original signature to the Warrant;

 

(c)                                  the Operating Documents and long-form good standing certificates of Borrower and its Subsidiaries certified by the Secretary of State (or equivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and each jurisdiction in which Borrower and each Subsidiary is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;

 

(d)                                 duly executed original signatures to the completed Borrowing Resolutions for Borrower;

 

(e)                                  certified copies, dated as of a recent date, of financing statement searches, as Bank may reasonably request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens, or have been, or in connection with the initial Credit Extension will be, terminated or released;

 

(f)                                   the Perfection Certificate executed by Borrower;

 

(g)                                  a bailee’s waiver in favor of Bank duly executed by Catalent Pharma Solutions, Inc. with respect to its location at 10381 Decatur Road, Philadelphia, PA 19154;

 

(h)                                 a copy of Borrower’s Registration Rights Agreement and/or Investors’ Rights Agreement and any amendments thereto;

 

(i)                                     evidence reasonably satisfactory to Bank that the insurance policies and endorsements required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses and cancellation notice to Bank (or endorsements reflecting the same) in favor of Bank; and

 

(j)                                    payment of the fees and Bank Expenses then due as specified in Section 2.3 hereof.

 

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3.2                               Conditions Precedent to all Credit Extensions.  Bank’s obligations to make each Credit Extension, including the initial Credit Extension, are subject to the following conditions precedent:

 

(a)                                 timely receipt of an executed Payment/Advance Form;

 

(b)                                 the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the Payment/Advance Form and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension.  Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in this Agreement remain true, accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and

 

(c)                                  Bank determines to its satisfaction that there has not been any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations; and there has not been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank.

 

3.3                               Covenant to Deliver.  Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension.  Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in Bank’s sole discretion.

 

3.4                               Procedures for Borrowing.  Subject to the prior satisfaction of all other applicable conditions to the making of a Credit Extension set forth in this Agreement, to obtain a Credit Extension, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Pacific time on the Funding Date of the Credit Extension.  Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form executed by a Responsible Officer or his or her designee.  Bank may rely on any telephone notice given by a person who Bank believes is a Responsible Officer or designee.  Bank shall credit Credit Extensions to the Designated Deposit Account.  Bank may make Credit Extensions under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Credit Extensions are necessary to meet Obligations that have become due.

 

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4                                         CREATION OF SECURITY INTEREST

 

4.1                               Grant of Security Interest.  Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.

 

Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank.  Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that may have superior priority to Bank’s Lien in this Agreement).

 

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations and obligations with respect to Bank Services that have been cash collateralized pursuant to the terms of this Section 4.1) are satisfied in full, and at such time, Bank shall, at Borrower’s sole cost and expense, terminate its security interest in the Collateral and all rights therein shall revert to Borrower.  In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any.  In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then at least one hundred five percent (105.0%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least one hundred ten percent (110.0%), of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters of Credit.

 

4.2                               Priority of Security Interest.  Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that are permitted pursuant to the terms of this Agreement to have superior priority to Bank’s Lien under this Agreement).  If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.

 

4.3                               Authorization to File Financing Statements.  Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral, by Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code.

 

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5                                         REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants as follows:

 

5.1                               Due Organization, Authorization; Power and Authority.  Borrower is duly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business.  In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled “Perfection Certificate”.  Borrower represents and warrants to Bank that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type, and is organized in the jurisdiction, set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement).  If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrower’s organizational identification number.

 

The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict with or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals that have already been obtained and are in full force and effect or filings required to perfect Bank’s Liens) or (v) conflict with, contravene, constitute a default or breach under, or result in or permit the termination or acceleration of, any material agreement by which Borrower is bound.  Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower’s business.

 

5.2                               Collateral.  Borrower has good title to, rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens.  Borrower has no Collateral Accounts at or with any bank or financial institution other than Bank or Bank’s Affiliates except for the Collateral Accounts described in the Perfection Certificate delivered to Bank in connection herewith and which Borrower has taken such actions as are necessary to give Bank a perfected security interest

 

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therein, pursuant to the terms of Section 6.6(b).  The Accounts are bona fide, existing obligations of the Account Debtors.

 

The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate.  None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2.

 

All material inventory is in all material respects of good and marketable quality, free from material defects.

 

Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate.  Each Patent which it owns or purports to own and which is material to Borrower’s business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower’s business has been judged invalid or unenforceable, in whole or in part.  To the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material adverse effect on Borrower’s business.

 

Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License.

 

5.3                               Litigation.  There are no actions or proceedings pending or, to the knowledge of any Responsible Officer, threatened in writing by or against Borrower or any of its Subsidiaries involving more than Fifty Thousand Dollars ($50,000) individually or in the aggregate.

 

5.4                               No Material Deviation in Financial Statements.  All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations.  There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank.

 

5.5                               Solvency.  The fair salable value of Borrower’s consolidated assets (including goodwill minus disposition costs) exceeds the fair value of Borrower’s liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.

 

5.6                               Regulatory Compliance.  Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.  Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).  Borrower (a) has complied in all material respects with all Requirements of Law, and (b) has not violated any Requirements of Law the violation of which could reasonably be expected to have a material adverse effect on its business.  None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge,

 

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by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally.  Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.

 

5.7                               Subsidiaries; Investments.  Borrower does not own any stock, partnership, or other ownership interest or other equity securities except for Permitted Investments.

 

5.8                               Tax Returns and Payments; Pension Contributions.  Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except (a) to the extent such taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor, or (b) if such taxes, assessments, deposits and contributions do not, individually or in the aggregate, exceed Ten Thousand Dollars ($10,000).

 

To the extent Borrower defers payment of any contested taxes, Borrower shall (i) notify Bank in writing of the commencement of, and any material development in, the proceedings, and (ii) post bonds or take any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien.” Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by Borrower in excess of Ten Thousand Dollars ($10,000).  Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

5.9                               Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions solely as working capital to fund its general business requirements and not for personal, family, household or agricultural purposes.

 

5.10                        Full Disclosure.  No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

 

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5.11                        Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of any Responsible Officer.

 

6                                         AFFIRMATIVE COVENANTS

 

Borrower shall do all of the following:

 

6.1                               Government Compliance.

 

(a)                                 Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations.  Borrower shall comply, and have each Subsidiary comply, in all material respects, with all laws, ordinances and regulations to which it is subject.

 

(b)                                 Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in the Collateral.  Borrower shall promptly provide copies of any such obtained Governmental Approvals to Bank.

 

6.2                               Financial Statements, Reports, Certificates.  Provide Bank with the following:

 

(a)                                 Monthly Financial Statements.  As soon as available, but no later than forty-five (45) days after the last day of each month, a company prepared consolidated and consolidating balance sheet and income statement covering Borrower’s consolidated and consolidating operations for such month certified by a Responsible Officer and in a form reasonably acceptable to Bank (the “Monthly Financial Statements”);

 

(b)                                 Monthly Compliance Certificate. Within forty-five (45) days after the last day of each month and together with the Monthly Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank may reasonably request;

 

(c)                                  Annual Operating Budget and Financial Projections.  Prior to the earlier of seven (7) days after approval by Borrower’s board of directors or sixty (60) days after to the end of each fiscal year of Borrower, (i) annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower, and (ii) annual financial projections for the following fiscal year (on a quarterly basis) as approved by Borrower’s board of directors, together with any related business forecasts used in the preparation of such annual financial projections;

 

(d)                                 Annual Audited Financial Statements.  As soon as available, but no later than one hundred eighty (180) days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an

 

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unqualified opinion (which may be qualified as to the status of Borrower as a going concern) on the financial statements from an independent certified public accounting firm acceptable to Bank in its reasonable discretion, provided that Ernst & Young LLP and any other regional or nationally recognized certified public accounting firm shall be deemed to be acceptable to Bank;

 

(e)           Other Statements.  Within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or to any holders of Subordinated Debt;

 

(f)            SEC Filings.  In the event that Borrower becomes subject to the reporting requirements under the Exchange Act within five (5) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be.  Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the Internet at Borrower’s website address; provided, however, Borrower shall promptly notify Bank in writing (which may be by electronic mail) of the posting of any such documents;

 

(g)           Legal Action Notice.  A prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Fifty Thousand Dollars ($50,000) or more;

 

(h)           Other Financial Information.  Other financial information reasonably requested by Bank; and

 

(i)            Redemption Request.  Within one (1) Business Day of receipt by Borrower, a copy of any Redemption Request (as defined in Borrower’s Restated Certificate of Incorporation, as amended).

 

6.3          Inventory; Returns.  Keep all material Inventory in good and marketable condition, free from material defects.  Returns and allowances between Borrower and its Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date.  Borrower must promptly notify Bank of all returns, recoveries, disputes and claims that involve more than One Hundred Thousand Dollars ($100,000).

 

6.4          Taxes; Pensions.  Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.

 

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6.5          Insurance.

 

(a)           Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Bank may reasonably request.  Insurance policies shall be in a form, with financially sound and reputable insurance companies that are not Affiliates of Borrower, and in amounts that are reasonably satisfactory to Bank.  Bank acknowledges that the insurance maintained by Borrower as of the Effective Date complies with this Section 6.5 for Borrower’s business and operations as they exist as of the Effective Date.  All property policies shall have a lender’s loss payable endorsement showing Bank as lender loss payee.  All liability policies shall show, or have endorsements showing, Bank as an additional insured.  Bank shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral.

 

(b)           Proceeds payable under any property policy are, at Bank’s option, payable to Bank on account of the Obligations.

 

(c)           At Bank’s request, Borrower shall deliver certified copies of insurance policies and evidence of all premium payments.  Each provider of any such insurance required under this Section 6.5 shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to Bank, that it will give Bank thirty (30) days prior written notice before any such policy or policies shall be materially altered or canceled.  If Borrower fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Bank deems prudent.

 

6.6          Operating Accounts.

 

(a)           Maintain its primary operating and other deposit accounts and securities accounts with Bank and/or Bank’s Affiliates.

 

(b)           Provide Bank five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial institution other than Bank or Bank’s Affiliates.  For each Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder, which control agreements may not be terminated without the prior written consent of Bank.  The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to Bank by Borrower as such.

 

6.7          Reserved.

 

6.8          Protection of Intellectual Property Rights.

 

(a)       (i) Protect, defend and maintain the validity and enforceability of its material Intellectual Property; (ii) promptly advise Bank in writing of material infringements or any other event that could reasonably be expected to materially and adversely affect the value of its

 

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Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent.

 

(b)           Provide written notice to Bank within ten (10) Business Days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public).  Borrower shall take such commercially reasonable steps as Bank requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this Agreement and the other Loan Documents.

 

6.9          Litigation Cooperation.  From the date hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.

 

6.10        Access to Collateral; Books and Records.  Allow Bank, or its agents, at reasonable times, on three (3) Business Days’ notice (provided no notice is required if an Event of Default has occurred and is continuing), to inspect the Collateral and audit and copy Borrower’s Books.  Such inspections or audits shall be conducted no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank shall determine is necessary.  The foregoing inspections and audits shall be at Borrower’s expense.  In the event Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or seeks to reschedule the audit with less than ten (10) days written notice to Bank, then (without limiting any of Bank’s rights or remedies), if requested by Bank in writing, Borrower shall pay Bank a fee of One Thousand Dollars ($1,000) plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.

 

6.11        Formation or Acquisition of Subsidiaries.  Notwithstanding and without limiting the negative covenants contained in Section 7.3 and 7.7 hereof, at the time that Borrower forms any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the Effective Date, Borrower shall (a) cause any such new Subsidiary that is a Domestic Subsidiary to provide to Bank a joinder to the Loan Agreement to cause such Subsidiary to become a co-borrower hereunder, together with such appropriate financing statements and/or Control Agreements, all in form and substance reasonably satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary), (b) provide to Bank appropriate certificates and powers and financing statements, pledging all (or 65% with respect to any Foreign Subsidiary) of the direct or beneficial ownership interest in such new Subsidiary, in form and substance reasonably satisfactory to Bank, and (c) provide to Bank all other documentation in form and substance reasonably satisfactory to Bank, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above.  Any document,

 

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agreement, or instrument executed or issued pursuant to this Section 6.11 shall be a Loan Document.

 

6.12        Further Assurances.  Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement.

 

7                                         NEGATIVE COVENANTS

 

Borrower shall not do any of the following without Bank’s prior written consent:

 

7.1          Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment that is, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in the ordinary course of business of Borrower; (c) consisting of Permitted Liens and Permitted Investments; (d) consisting of the sale or issuance of any stock of Borrower permitted under Section 7.2 of this Agreement; (e) consisting of Borrower’s use or transfer of money or Cash Equivalents in the ordinary course of its business for the payment of ordinary course business expenses in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents; and (f) of non-exclusive licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business and licenses that could not result in a legal transfer of title of the licensed property but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States.

 

7.2          Changes in Business, Management, Ownership or Business Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) fail to provide notice to Bank of any Key Person departing from or ceasing to be employed by Borrower within ten (10) Business Days after his or her departure from Borrower; or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than forty-nine percent (49%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering or to venture capital or private equity investors so long as Borrower identifies to Bank the venture capital or private equity investors at least seven (7) Business Days prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction).

 

Borrower shall not, without at least thirty (30) days prior written notice to Bank:  (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than One Hundred Thousand Dollars ($100,000) in Borrower’s assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of One Hundred Thousand Dollars ($100,000) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5)

 

14

 

change any organizational number (if any) assigned by its jurisdiction of organization.  If Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of One Hundred Thousand Dollars ($100,000) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then such bailee shall execute and deliver a bailee agreement in form and substance reasonably satisfactory to Bank, unless such Collateral is only expected to be at such location for less than 90 days (provided that if any such Collateral is for any reason held at such location for more than 90 days, Borrower shall promptly cause such bailee to then execute and deliver a bailee agreement in form and substance reasonably satisfactory to Bank).  Notwithstanding anything to the contrary contained in this Section 7.2 and without limiting anything contained in this Section 7.2, the Collateral shall be maintained at no more than three (3) bailee locations which are not subject to a bailee agreement in form and substance reasonably satisfactory to Bank.

 

7.3          Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person (including, without limitation, by the formation of any Subsidiary).  A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.

 

7.4          Indebtedness.  Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

 

7.5          Encumbrance.  Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens; permit any Collateral not to be subject to the first priority security interest granted herein; or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person that directly or indirectly prohibits, or has the effect of prohibiting, Borrower from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Lien” herein.

 

7.6          Maintenance of Collateral Accounts.  Maintain any Collateral Account except pursuant to the terms of Section 6.6(b) hereof.

 

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7.7          Distributions; Investments.  (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock (other than repurchases pursuant to the terms of employment agreements, employee stock purchase plans, employee restricted stock agreements, stockholder rights plans, director or consultant stock option plans, or similar plans, so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, and the aggregate amount of all such repurchases does not exceed Fifty Thousand Dollars ($50,000) per fiscal year); or (b) directly or indirectly make any Investment (including, without limitation, by the formation of any Subsidiary) other than Permitted Investments, or permit any of its Subsidiaries to do so.

 

7.8          Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for (a) transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person and (b) Subordinated Debt permitted under Section 7.9.

 

7.9          Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt that would increase the amount thereof, provide for earlier or greater principal, interest, or other payments thereon, or adversely affect the subordination thereof to Obligations owed to Bank.

 

7.10        Compliance.  Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to (a) meet the minimum funding requirements of ERISA, (b) prevent a Reportable Event or Prohibited Transaction, as defined in ERISA, from occurring, or (c) comply with the Federal Fair Labor Standards Act, the failure of any of the conditions described in clauses (a) through (c) which could reasonably be expected to have a material adverse effect on Borrower’s business; or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

8                                         EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:

 

8.1          Payment Default.  Borrower fails to (a) make any payment of principal or interest on any Credit Extension when due, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day grace

 

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period shall not apply to payments due on the Term Loan Maturity Date).  During the cure period, the failure to make or pay any payment specified in clause (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);

 

8.2          Covenant Default.

 

(a)           Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, 6.8(b), 6.10, 6.11, or 6.12 or violates any covenant in Section 7; or

 

(b)           Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period).  Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above;

 

8.3          Material Adverse Change.  A Material Adverse Change occurs;

 

8.4          Attachment; Levy; Restraint on Business.

 

(a)   (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary) in excess of Fifty Thousand Dollars ($50,000), or (ii) a notice of lien or levy is filed against any of Borrower’s assets by any Governmental Authority, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or

 

(b)   (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting all or any material part of its business;

 

8.5          Insolvency.  (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);

 

8.6          Other Agreements.  There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Fifty Thousand Dollars ($50,000); or (b) any

 

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breach or default by Borrower or Guarantor, the result of which could have a material adverse effect on Borrower’s or any Guarantor’s business;

 

8.7          Judgments; Penalties.  One or more fines, penalties or final judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower by any Governmental Authority, and the same are not, within ten (10) days after the entry, assessment or issuance thereof, discharged, satisfied, or paid, or after execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Credit Extensions will be made prior to the satisfaction, payment, discharge, stay, or bonding of such fine, penalty, judgment, order, or decree);

 

8.8          Misrepresentations.  Borrower or any Person acting for Borrower makes any representation, warranty or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;

 

8.9          Subordinated Debt.  A default or breach occurs under any agreement between Borrower and any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement with Bank, or any creditor that has signed such an agreement with Bank breaches any terms of such agreement; or

 

8.10        Governmental Approvals.  Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) causes, or could reasonably be expected to cause, a Material Adverse Change, or (ii) adversely affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction, except where such failure to hold such Governmental Approval could not reasonably be expected to cause a Material Adverse Change.

 

9                                         BANK’S RIGHTS AND REMEDIES

 

9.1          Rights and Remedies.  Upon the occurrence and during the continuance of an Event of Default, Bank may, without notice or demand, do any or all of the following:

 

(a)           declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);

 

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(b)           stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank;

 

(c)           for any Letters of Credit, demand that Borrower (i) deposit cash with Bank in an amount equal to at least 105% (110% for Letters of Credit denominated in a Foreign Currency) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit remaining undrawn (plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit;

 

(d)           terminate any FX Contracts;

 

(e)           verify the amount of, demand payment of and performance under, and collect any Accounts and General Intangibles, settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, notify any Person owing Borrower money of Bank’s security interest in such funds;

 

(f)            make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral.  Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates.  Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien that appears to be prior or superior to its security interest and pay all expenses incurred.  Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;

 

(g)           apply to the Obligations (i) any balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;

 

(h)           ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale and sell the Collateral.  Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit;

 

(i)            place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

 

(j)            demand and receive possession of Borrower’s Books; and

 

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(k)           exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

 

9.2          Power of Attorney.  Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to:  (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral, regardless of whether an Event of Default has occurred, until all Obligations have been satisfied in full and Bank is under no further obligation to make Credit Extensions hereunder.  Bank’s foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank’s obligation to provide Credit Extensions terminates.

 

9.3          Protective Payments.  If Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document or which may be required to preserve the Collateral, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral.  Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter.  No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default.

 

9.4          Application of Payments and Proceeds Upon Default.  If an Event of Default has occurred and is continuing, Bank shall have the right to apply in any order any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations.  Bank shall pay any surplus to Borrower by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency.  If Bank, directly or indirectly, enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.

 

9.5          Bank’s Liability for Collateral.  So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for:  (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d)

 

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any act or default of any carrier, warehouseman, bailee, or other Person.  Borrower bears all risk of loss, damage or destruction of the Collateral.

 

9.6          No Waiver; Remedies Cumulative.  Bank’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given.  Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative.  Bank has all rights and remedies provided under the Code, by law, or in equity.  Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and Bank’s waiver of any Event of Default is not a continuing waiver.  Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.

 

9.7          Demand Waiver.  Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.

 

10                                  NOTICES

 

All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered:  (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below.  Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.

 

	
If to Borrower:
    	
 
    	
Tracon Pharmaceuticals, Inc.
    
	
 
    	
 
    	
8910 University Center Lane, Suite 700
    
	
 
    	
 
    	
San Diego, CA 92122
    
	
 
    	
 
    	
Attn: H. Casey Logan, Chief Business Officer
    
	
 
    	
 
    	
Fax: 858-550-0786
    
	
 
    	
 
    	
Email: clogan@traconpharma.com
    
	
 
    	
 
    	
Website URL: www.traconpharma.com
    
	
 
    	
 
    	
 
    
	
If to Bank:
    	
 
    	
Silicon Valley Bank
    
	
 
    	
 
    	
4370 La Jolla Village Drive, Suite 1050
    
	
 
    	
 
    	
San Diego, CA 92122
    
	
 
    	
 
    	
Attn: Igor DaCruz
    
	
 
    	
 
    	
Fax: (858) 622-1424
    
	
 
    	
 
    	
Email: idacruz@svb.com
    

 

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11                                  CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE

 

Except as otherwise expressly provided in any of the Loan Documents, California law governs the Loan Documents without regard to principles of conflicts of law.  Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank.  Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court.  Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in Section 10, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS.  THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court.  The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive.  The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers.  All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed.  If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior

 

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Court for such relief.  The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings.  The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings.  The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge.  The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a).  Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies.  The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

 

This Section 11 shall survive the termination of this Agreement.

 

12                                  GENERAL PROVISIONS

 

12.1        Termination Prior to Maturity Date; Survival.  All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations have been satisfied.  So long as Borrower has satisfied the Obligations (other than inchoate indemnity obligations, any other obligations which, by their terms, are to survive the termination of this Agreement, and any Obligations under Bank Services Agreements that are cash collateralized in accordance with Section 4.1 of this Agreement), this Agreement may be terminated prior to the Term Loan Maturity Date by Borrower in accordance with Section 2.1.1.  Those obligations that are expressly specified in this Agreement as surviving this Agreement’s termination shall continue to survive notwithstanding this Agreement’s termination.

 

12.2        Successors and Assigns.  This Agreement binds and is for the benefit of the successors and permitted assigns of each party.  Borrower may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s discretion).  Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents (other than the Warrant, as to which assignment, transfer and other such actions are governed by the terms thereof).  Notwithstanding the foregoing, prior to the occurrence of an Event of Default, Bank shall not assign any interest in the Loan Documents to an operating company which is a direct competitor of Borrower.

 

12.3        Indemnification.  Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against (i) all obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (ii) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower (including reasonable attorneys’ fees and expenses), except for Claims

 

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and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.

 

This Section 12.3 shall survive until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run.

 

12.4        Time of Essence.  Time is of the essence for the performance of all Obligations in this Agreement.

 

12.5        Severability of Provisions.  Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

 

12.6        Correction of Loan Documents.  Bank may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties.

 

12.7        Amendments in Writing; Waiver; Integration.  No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought.  Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document.  Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver.  The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.

 

12.8        Counterparts.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

 

12.9        Confidentiality.  In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made:  (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, “Bank Entities”); (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use its best efforts to obtain any prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein.  Confidential information does not include information that is either: (i) in the public domain or in Bank’s possession when

 

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disclosed to Bank, or becomes part of the public domain (other than as a result of its disclosure by Bank in violation of this Agreement) after disclosure to Bank; or (ii) disclosed to Bank by a third party if Bank does not know that the third party, is prohibited from disclosing the information.

 

Bank Entities may use anonymous forms of confidential information for aggregate datasets, for analyses or reporting, and for any other uses not expressly prohibited in writing by Borrower.  The provisions of the immediately preceding sentence shall survive termination of this Agreement.

 

12.10      Attorneys’ Fees, Costs and Expenses.  In any action or proceeding between Borrower and Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.

 

12.11      Electronic Execution of Documents.  The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.

 

12.12      Captions.  The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

 

12.13      Construction of Agreement.  The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement.  In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.

 

12.14      Relationship.  The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement.  The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract.

 

12.15      Third Parties.  Nothing in this Agreement, whether express or implied, is intended to:  (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.

 

13                                  DEFINITIONS

 

13.1        Definitions.  As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular includes the plural, and numbers denoting amounts that are set off

 

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in brackets are negative.  As used in this Agreement, the following capitalized terms have the following meanings:

 

“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.

 

“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

 

“Affiliate” is, with respect to any Person, each other 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.

 

“Agreement” is defined in the preamble hereof.

 

“Bank” is defined in the preamble hereof.

 

“Bank Entities” is defined in Section 12.9.

 

“Bank Expenses” are all reasonable and invoiced audit fees and out-of-pocket costs and expenses (including reasonable and invoiced attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings and those identified as Bank Expenses in Section 9.3 hereof) or otherwise incurred with respect to Borrower.

 

“Bank Services” are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s various agreements related thereto (each, a “Bank Services Agreement”).

 

“Borrower” is defined in the preamble hereof.

 

“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

 

“Borrowing Resolutions” are, with respect to any Person, those resolutions substantially in the form attached hereto as Exhibit C.

 

“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.

 

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“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; and (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue.

 

“Claims” is defined in Section 12.3.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

 

“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.

 

“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit D.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

 

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“Control Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.

 

“Conversion Date” is defined in Section 2.1.1(b)(ii).

 

“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.

 

“Credit Extension” is the Term Loan or any other extension of credit by Bank for Borrower’s benefit under this Agreement.

 

“Default Rate” is defined in Section 2.2(b).

 

“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Designated Deposit Account” is the multicurrency account denominated in Dollars, account number *******4031, maintained by Borrower with Bank.

 

“Dollars,” “dollars” or use of the sign “$” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.

 

“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.

 

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.

 

“Effective Date” is defined in the preamble hereof.

 

“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.

 

“Event of Default” is defined in Section 8.

 

“Exchange Act” is the Securities Exchange Act of 1934, as amended.

 

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“Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due in accordance with Section 2.1.1 above, equal to the Term Loan Amount multiplied by the Final Payment Percentage.

 

“Final Payment Percentage” is seven percent (7.0%).

 

“Foreign Currency” means lawful money of a country other than the United States.

 

“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

 

“Funding Date” is any date on which a Credit Extension is made to or for the account of Borrower, which shall be a Business Day.

 

“FX Contract” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency on a specified date.

 

“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination.

 

“General Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

 

“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

 

“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

 

“Guarantor” is any Person providing a Guaranty in favor of Bank (if any).

 

“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit,

 

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(b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.

 

“Indemnified Person” is defined in Section 12.3.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

“Intellectual Property” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:

 

(a)           its Copyrights, Trademarks and Patents;

 

(b)           any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;

 

(c)           any and all source code;

 

(d)           any and all design rights which may be available such Person;

 

(e)           any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and

 

(f)            all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.

 

“Interest-Only Period” means the period commencing on the first (1st) Business Day following a Funding Date and continuing through the last calendar day of the month that is six (6) months from the Effective Date.

 

“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.

 

“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Charles Theuer as of the Effective Date, and (b) Chief Business Officer, who is H. Casey Logan as of the Effective Date.

 

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“Letter of Credit” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application, guarantee, indemnity, or similar agreement.

 

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

 

“Loan Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, the Warrant, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement by Borrower and/or any Guarantor with or for the benefit of Bank in connection with this Agreement or Bank Services, all as amended, restated, or otherwise modified.

 

“Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.

 

“Obligations” are Borrower’s obligation to pay when due any debts, principal, interest, fees, Bank Expenses, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents (other than the Warrant), or otherwise, including, without limitation, any interest accruing alter Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and the performance of Borrower’s duties under the Loan Documents (other than the Warrant).

 

“Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

 

“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

 

“Payment/Advance Form” is that certain form attached hereto as Exhibit B.

 

“Perfection Certificate” is defined in Section 5.1.

 

“Permitted Indebtedness” is:

 

(a)           Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;

 

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(b)           Indebtedness existing on the Effective Date and shown on the Perfection Certificate;

 

(c)           Subordinated Debt;

 

(d)           unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

 

(e)           Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;

 

(f)            Indebtedness in an aggregate principal amount not to exceed One Hundred Thousand Dollars ($100,000) secured by Permitted Liens; and

 

(g)           extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investments” are:

 

(a)           Investments shown on the Perfection Certificate and existing on the Effective Date;

 

(b)           Investments consisting of Cash Equivalents;

 

(c)           Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;

 

(d)           Investments consisting of deposit accounts in which Bank has a perfected security interest;

 

(e)           Investments accepted in connection with Transfers permitted by Section 7.1;

 

(f)            Investments consisting of the creation of a Subsidiary for the purpose of consummating a merger transaction permitted by Section 7.3 of this Agreement, which is otherwise a Permitted Investment;

 

(g)           Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed Fifty Thousand Dollars ($50,000) in the aggregate in any fiscal year;

 

(h)           Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors;

 

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(i)            Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;

 

(j)            Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (j) shall not apply to Investments of Borrower in any Subsidiary; and

 

(k)           non-cash Investments in joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support.

 

“Permitted Liens” are:

 

(a)           Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;

 

(b)           Liens for taxes, fees, assessments or other government charges or levies, either not due and payable or being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c)           purchase money Liens and Liens in respect of capitalized lease obligations (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than One Hundred Thousand Dollars ($100,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;

 

(d)           Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed Fifty Thousand Dollars ($50,000) and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

 

(e)           Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

 

(f)            Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c); provided that any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

 

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(g)           leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein;

 

(h)           licenses of Intellectual Property permitted under Section 7.1;

 

(i)            Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and

 

(j)            Liens in favor of other financial institutions arising in connection with Borrower’s deposit and/or securities accounts held at such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit and/or securities accounts.

 

“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

 

“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.

 

“Repayment Period” is a period of time commencing on the Conversion Date and ending on the Term Loan Maturity Date.

 

“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Responsible Officer” is any of the Chief Executive Officer, President, Chief Business Officer or Controller of Borrower.

 

“Restricted License” is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Bank’s right to sell any Collateral.

 

“SEC” shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.

 

“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or

 

34

 

other similar agreement in form and substance reasonably satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.

 

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.  Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or Guarantor.

 

“Term Loan” is a loan made by Bank pursuant to the terms of Section 2.1.1 hereof.

 

“Term Loan Amount” is an amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000).

 

“Term Loan Maturity Date” is August 1, 2016.

 

“Term Loan Payment” is defined in Section 2.1.1(b).

 

“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.

 

“Transfer” is defined in Section 7.1.

 

“Warrant” is that certain Warrant to Purchase Stock dated as of the Effective Date executed by Borrower in favor of Bank.

 

[Signature page follows.]

 

35

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.

 

	
BORROWER:
    	
 
    
	
 
    	
 
    
	
TRACON   PHARMACEUTICALS, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Charles Theuer
    	
 
    
	
 
    	
Name: Charles   Theuer
    	
 
    
	
 
    	
Title: CEO
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
BANK:
    	
 
    
	
 
    	
 
    
	
SILICON VALLEY BANK
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Kevin Wallace
    	
 
    
	
 
    	
Name: Kevin Wallace
    	
 
    
	
 
    	
Title: Vice   President
    	
 
    

 

[Signature Page to Loan and Security Agreement]

 

 

EXHIBIT A

 

The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

 

all Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include (a) more than 65% of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Borrower of any Foreign Subsidiary which shares entitle the holder thereof to vote for directors or any other matter, (b) any interest of Borrower as a lessee under an Equipment lease if Borrower is prohibited by the terms of such lease from granting a security interest in such lease or under which such an assignment or Lien would cause a default to occur under such lease; provided, however, that upon termination of such prohibition, such interest shall immediately become Collateral without any action by Borrower or Bank.; and (c) any Intellectual Property; provided, however, the Collateral shall include all Accounts and all proceeds of Intellectual Property.  If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property solely to the extent necessary to permit perfection of Bank’s security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property.

 

1

 

EXHIBIT B

 

Loan Payment/Advance Request Form.

 

DEADLINE FOR SAME DAY PROCESSING IS NOON Pacific Time.

 

	
Fax To: (858) 622-1424
    	
Date:
    	
 
    	
 
    

 

	
 

LOAN PAYMENT:
    	
 
    
	
 
    	
 
    
	
TRACON PHARMACEUTICALS, INC.
    	
 
    
	
From Account #
    	
 
    	
 
    	
To Account #
    	
 
    	
 
    
	
 
    	
(Deposit Account #)
    	
 
    	
 
    	
(Loan Account #)
    	
 
    
	
Principal $
    	
 
    	
 
    	
and/or Interest $
    	
 
    	
 
    
	
Authorized Signature:
    	
 
    	
 
    	
Phone Number:
    	
 
    	
 
    
	
Print Name/Title:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
											

 

	
LOAN ADVANCE:
    	
 
    
	
 
    	
 
    
	
Complete Outgoing Wire Request   section below if all or a portion of the funds from this loan advance are for   an outgoing wire.
    	
 
    
	
 
    	
 
    
	
From Account #
    	
 
    	
 
    	
To Account #
    	
 
    	
 
    
	
 
    	
(Loan Account #)
    	
 
    	
 
    	
(Deposit Account #)
    	
 
    
	
Amount of Advance $
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
All Borrower’s representations and   warranties in the Loan and Security Agreement are true, correct and complete   in all material respects on the date of the request for an advance; provided,   however, that such materiality qualifier shall not be applicable to any   representations and warranties that already are qualified or modified by   materiality in the text thereof; and provided, further that those   representations and warranties expressly referring to a specific date shall   be true, accurate and complete in all material respects as of such date:

 

 
    	
 
    
	
Authorized Signature:
    	
 
    	
 
    	
Phone Number:
    	
 
    	
 
    
	
Print Name/Title:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
										

 

	
 

OUTGOING WIRE REQUEST:
    	
 
    
	
 
    	
 
    
	
Complete only if all or a portion of funds from   the loan advance above is to be wired.
    	
 
    
	
 
    	
 
    
	
Deadline for same day processing is noon,   P.S.T.
    	
 
    
	
 
    	
 
    
	
Beneficiary Name:
    	
 
    	
 
    	
Amount of Wire: $
    	
 
    	
 
    
	
Beneficiary Bank:
    	
 
    	
 
    	
Account Number:
    	
 
    	
 
    
	
City and State:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Beneficiary Bank Transit (ABA) #:
    	
 
    	
 
    	
Beneficiary Bank Code (Swift, Sort,   Chip, etc.):
    	
 
    
	
 
    	
 
    	
(For   International Wire Only)
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Intermediary Bank:
    	
 
    	
 
    	
Transit (ABA) #:
    	
 
    	
 
    
	
For Further Credit to:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
										

 

	
 

Special Instruction:
    	
 
    	
 
    
	
 
    	
 
    
	
By signing below, I (we) acknowledge and   agree that my (our) funds transfer request shall be processed in accordance   with and subject to the terms and conditions set forth in the   agreements(s) covering funds transfer service(s), which   agreements(s) were previously received and executed by me (us).
    	
 
    
	
 
    	
 
    
	
Authorized Signature:
    	
 
    	
 
    	
2nd Signature (if required):
    	
 
    	
 
    
	
Print Name/Title:
    	
 
    	
 
    	
Print Name/Title:
    	
 
    	
 
    
	
Telephone #:
    	
 
    	
 
    	
Telephone #:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
											

 

 

EXHIBIT C

 

BORROWING RESOLUTIONS

 

[see attached]

 

1

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

	
TO:
    	
SILICON VALLEY BANK
    	
Date:
    	
 
    
	
FROM:
    	
TRACON PHARMACEUTICALS. INC.
    	
 
    	
 
    

 

The undersigned authorized officer of TRACON PHARMACEUTICALS, INC. (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for the period ending                                with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.8 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.  Attached are the required documents supporting the certification.  The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.  The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.  Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

	
Reporting Covenant
    	
 
    	
 
    	
Required
    	
 
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Monthly financial statements with Compliance   Certificate
    	
 
    	
 
    	
Monthly within 45 days
    	
 
    	
 
    	
Yes No
    
	
Annual financial statement (CPA Audited) + CC
    	
 
    	
 
    	
FYE within 180 days
    	
 
    	
 
    	
Yes No
    
	
Annual Board Approved Financial Projections
    	
 
    	
 
    	
Within earlier of 7 days of approval or 6   days after FYE
    	
 
    	
 
    	
Yes No
    
	
10-Q, 10-K and 8-K
    	
 
    	
 
    	
Within 5 days after filing with SEC (if   applicable)
    	
 
    	
 
    	
Yes No
    

 

The following are the exceptions with respect to the certification above:  (If no exceptions exist, state “No exceptions to note.”)

 

	
 
    
	
 
    

 

	
TRACON PHARMACEUTICALS, INC.
    	
BANK USE ONLY
    
	
 
    	
 
    
	
 
    	
Received by:
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
AUTHORIZED SIGNER
    
	
Name:
    	
 
    	
 
    	
Date:
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
Verified:
    	
 
    
	
 
    	
 
    	
AUTHORIZED SIGNER
    
	
 
    	
Date:
    	
 
    
	
 
    	
 
    
	
 
    	
Compliance Status:
    	
Yes  No
    
									

 

2

 

FIRST AMENDMENT
 TO
 LOAN AND SECURITY AGREEMENT

 

This First Amendment to Loan and Security Agreement (this “Amendment”) is entered into this 4th day of June, 2014, by and between Silicon Valley Bank (“Bank”) and Tracon Pharmaceuticals, Inc., a Delaware corporation (“Borrower”), whose address is 8910 University Center Lane, Suite 700, San Diego, CA 92122.

 

RECITALS

 

A.        Bank and Borrower have entered into that certain Loan and Security Agreement dated as of November 14, 2013 (as the same may from time to time be amended, modified, supplemented or restated, the “Loan Agreement”).

 

B.        Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

 

C.        Borrower has requested that Bank amend the Loan Agreement to (i) make available to Borrower an additional growth capital loan facility and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.

 

D.        Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.         Definitions.  Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

 

2.         Amendments to Loan Agreement.

 

2.1       Section 2.1 (Promise to Pay).  The following new Section 2.1.2 is hereby added to Section 2.1:

 

2.1.2    Growth Capital Loan.

 

(a)        Availability.  Subject to the terms and conditions of this Agreement, Bank agrees to make advances to Borrower (each a “Growth Capital Advance” and collectively the “Growth Capital Advances”), from time to time, prior to the Growth Capital Commitment Termination Date, in an aggregate amount not to exceed the Growth Capital Loan Commitment.  After repayment, no Growth Capital Advance may be reborrowed.

 

1

 

(i)         Bank shall make one (1) Growth Capital Advance to Borrower in a principal amount equal to Five Million Dollars ($5,000,000) of the Growth Capital Loan Commitment on or about the First Amendment Date.

 

(ii)        The remaining Two Million Five Hundred Thousand Dollars ($2,500,000) of the Growth Capital Loan Commitment (the “Second Tranche”) shall be available through the Growth Capital Commitment Termination Date, provided Borrower delivers to Bank evidence reasonably satisfactory to Bank that Borrower has commenced the Inlyta combination Phase 2b trial.  Only one Growth Capital Advance shall be permitted under the Second Tranche.

 

(b)        Repayment of Growth Capital Advance.

 

(i)         Interest-Only Payments.  For each Growth Capital Advance, Borrower shall make monthly payments of interest-only commencing on the first (1st) Business Day of the first (1st) month following the month in which the Funding Date occurs with respect to such Growth Capital Advance and continuing thereafter during the Growth Capital Interest-Only Period, on the first (1st) Business Day of each successive month.

 

(ii)        Principal and Interest Payments.  For each Growth Capital Advance outstanding as of the last day of the Growth Capital Interest-Only Period, Borrower shall make twenty-four (24) consecutive equal monthly payments of principal and accrued but unpaid interest commencing on the first (1st) Business Day of the first (1st) month after the Growth Capital Interest-Only Period (the “Growth Capital Conversion Date”), in amounts that would fully amortize the applicable Growth Capital Advance, as of the Growth Capital Conversion Date, over the Growth Capital Repayment Period.  The Growth Capital Final Payment and all unpaid principal and accrued and unpaid interest on each Growth Capital Advance are due and payable in full on the Growth Capital Maturity Date.

 

(c)        Voluntary Prepayment.  Borrower shall have the option to prepay all Growth Capital Advances in full, provided Borrower (i) shall provide written notice to Bank of its election to prepay the Growth Capital Advances at least ten (10) days prior to such prepayment and (ii) pays, on the date of such prepayment, (a) all outstanding principal and accrued but unpaid interest, plus (b) the Prepayment Fee, plus (c) the Growth Capital Final Payment, plus (d) all other sums, including Bank Expenses, if any, that shall have become due and payable.

 

(d)       Mandatory Prepayment Upon an Acceleration.  If the Growth Capital Advances are accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Bank an amount equal to the sum of (i) all outstanding principal and accrued but unpaid interest, plus (ii) the Prepayment Fee, plus (iii) the Growth Capital Final Payment, plus (iv) all other sums, including Bank Expenses, if any, that shall have become due and payable.

 

2

 

(e)        Mandatory Prepayment Upon Redemption.  If Borrower shall receive a Redemption Request (as defined in Borrower’s Restated Certificate of Incorporation, as amended), Borrower shall immediately, and prior to any payment in respect of any such Redemption Request, pay to Bank an amount equal to the sum of (i) all outstanding principal and accrued but unpaid interest, plus (ii) the Prepayment Fee, plus (iii) the Growth Capital Final Payment, plus (iv) all other sums, including Bank Expenses, if any, that shall have become due and payable.

 

2.2       Section 2.2 (Payment of Interest on the Credit Extensions).  Section 2.2(a) is amended in its entirety and replaced with the following:

 

(a)        Interest Rate.

 

(i)         Term Loan.  Subject to Section 2.2(b), the principal amount outstanding for the Term Loan shall accrue interest at a fixed per annum rate equal to five percent (5.0%), which shall be payable monthly.

 

(ii)        Growth Capital Advances.  Subject to Section 2.2(b), the principal amount outstanding for each Growth Capital Advance shall accrue interest at a fixed per annum rate equal to four and one half percent (4.50%), which shall be payable monthly.

 

2.3       Section 8.1 (Payment Default).  The parenthetical in Section 8.1(b) is hereby amended by adding “or the Growth Capital Maturity Date” immediately after “the Term Loan Maturity Date”.

 

2.4       Section 12.1 (Termination Prior to Maturity Date; Survival).  The second sentence in Section 12.1 is amended in its entirety and replaced with the following:

 

So long as Borrower has satisfied the Obligations (other than inchoate indemnity obligations, any other obligations which, by their terms, are to survive the termination of this Agreement, and any Obligations under Bank Services Agreements that are cash collateralized in accordance with Section 4.1 of this Agreement), this Agreement may be terminated prior to the Term Loan Maturity Date and/or the Growth Capital Maturity Date by Borrower in accordance with Sections 2.1.1 and/or 2.1.2, respectively.

 

2.5       Section 12.2 (Successors and Assigns).  The parenthetical in the third sentence of Section 12.2 is hereby amended by adding “and the Growth Capital Warrant” immediately after “the Warrant”.

 

2.6       Section 13 (Definitions).  The following terms and their respective definitions are hereby added to Section 13.1 in their appropriate alphabetical order:

 

“First Amendment Date” means June 4, 2014.

 

“Growth Capital Advance” is defined in Section 2.1.2(a).

 

“Growth Capital Commitment Termination Date” is October 31, 2014.

 

3

 

“Growth Capital Conversion Date” is defined in Section 2.1.2(b).

 

“Growth Capital Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due in accordance with Section 2.1.2 above, equal to the original principal amount of the applicable Growth Capital Advance multiplied by the Growth Capital Final Payment Percentage.

 

“Growth Capital Final Payment Percentage” is nine percent (9.0%).

 

“Growth Capital Interest-Only Period” means, for any Growth Capital Advance, the period commencing on the first (1st) Business Day following the Funding Date of such Growth Capital Advance and continuing through November 30, 2014.

 

“Growth Capital Loan Commitment” is Seven Million Five Hundred Thousand Dollars ($7,500,000).

 

“Growth Capital Maturity Date” is November 1, 2016.

 

“Growth Capital Repayment Period” is a period of time commencing on the Growth Capital Conversion Date and ending on the Growth Capital Maturity Date.

 

“Growth Capital Warrant” is that certain Warrant to Purchase Stock dated as of the First Amendment Date executed by Borrower in favor of Bank.

 

“Prepayment Fee” shall be, with respect to the prepayment of any portion of any Growth Capital Advance, an amount equal to two percent (2%) of the outstanding principal balance of such Growth Capital Advance or portion thereof being prepaid, provided that no Prepayment Fee shall be charged if the Growth Capital Advances hereunder are replaced with a new facility from Bank or Bank’s Affiliates.

 

“Second Tranche” is defined in Section 2.1.2(a).

 

2.7       Section 13 (Definitions).  The following terms and their respective definitions set forth in Section 13.1 are amended in their entirety and replaced with the following:

 

“Credit Extension” is the Term Loan, the Growth Capital Advances or any other extension of credit by Bank for Borrower’s benefit under this Agreement.

 

“Loan Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, the Warrant, the Growth Capital Warrant, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement by Borrower and/or any Guarantor with or for the benefit of Bank in connection with this Agreement or Bank Services, all as amended, restated, or otherwise modified.

 

4

 

“Obligations” are Borrower’s obligation to pay when due any debts, principal, interest, fees, Bank Expenses, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents (other than the Warrant and the Growth Capital Warrant), or otherwise, including, without limitation, any interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and the performance of Borrower’s duties under the Loan Documents (other than the Warrant and the Growth Capital Warrant).

 

3.         Limitation of Amendments.

 

3.1       The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

 

3.2       This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

 

4.         Representations and Warranties.  To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

 

4.1       Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

 

4.2       Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

 

4.3       The organizational documents of Borrower most recently delivered to Bank remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

 

4.4       The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

 

4.5       The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

 

5

 

4.6       The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

 

4.7       This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

 

5.         Integration.  This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.

 

6.         Counterparts.  This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

 

7.         Effectiveness.  This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrower’s delivery to Bank of a duly executed signature to the Growth Capital Warrant, and (c) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Amendment.

 

[Signature page follows.]

 

6

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

 

	
BANK
    	
BORROWER
    
	
 
    	
 
    
	
Silicon Valley Bank
    	
Tracon Pharmaceuticals, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Anthony Flores
    	
 
    	
By:
    	
/s/ C. Theuer
    
	
Name:
    	
Anthony Flores
    	
 
    	
Name:
    	
C. Theuer
    
	
Title:
    	
Vice President
    	
 
    	
Title:
    	
CEO
    

 

 

 

 

[signature page of First Amendment to Loan and Security Agreement]Exhibit 10.18

 

	
 
    	
***Text Omitted and Filed Separately with

the Securities and Exchange Commission.

Confidential Treatment Requested Under

17 C.F.R. Sections 200.80(b)(4) and 230.406.
    

 

PUBLIC HEALTH SERVICE

 

COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
 FOR EXTRAMURAL-PHS CLINICAL RESEARCH

 

 

 

This Agreement is based on the model Cooperative Research and Development Agreement (“CRADA”) adopted by the U.S. Public Health Service (“PHS”) Technology Transfer Policy Board for use by components of the National Institutes of Health (“NIH”), the Centers for Disease Control and Prevention (“CDC”), and the Food and Drug Administration (“FDA”), which are agencies of the PHS within the Department of Health and Human Services (“HHS”).

 

This Cover Page identifies the Parties to this CRADA:

 

The U.S. Department of Health and Human Services, as represented by

National Cancer Institute

an Institute, Center, or Division (hereinafter referred to as the “ICD”) of the

National Institutes of Health

 

and

 

Tracon Pharmaceuticals, Inc.,

hereinafter referred to as the “Collaborator,”

having offices at 4510 Executive Drive, Suite 330, San Diego, CA 92121,

created and operating under the laws of Delaware.

 

 

	
PHS ECT-CRADA
    	
CRADA Ref. No.02663
    	
MODEL ADOPTED June 18, 2009
    
	
Page 1 of 24

 
    	
 
    	
 
    
	
 
    	
TRACON PHARMA – CONFIDENTIAL DOCUMENT
    	
 
    

 

 

COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
 FOR EXTRAMURAL-PHS CLINICAL RESEARCH

 

Article 1.            Introduction

 

This CRADA between ICD and Collaborator will be effective when signed by the Parties, which are identified on both the Cover Page and the Signature Page (page 22).  The official contacts for the Parties are identified on the Contacts Information Page (page 23).  Publicly available information regarding this CRADA appears on the Summary Page (page 24).  The research and development activities that will be undertaken by ICD, ICD’s contractors or grantees, and Collaborator in the course of this CRADA are detailed in the Research Plan, attached as Appendix A.  The staffing, funding, and materials contributions of the Parties are set forth in Appendix B.  Any changes to the model CRADA are set forth in Appendix C.

 

Article 2.            Definitions

 

The terms listed in this Article will carry the meanings indicated throughout the CRADA.  To the extent a definition of a term as provided in this Article is inconsistent with a corresponding definition in the applicable sections of either the United States Code (U.S.C.) or the Code of Federal Regulations (C.F.R.), the definition in the U.S.C. or C.F.R. will control.

 

“Adverse Drug Experience” or “ADE” means an Adverse Event associated with the use of the Test Article, that is, an event where there is a reasonable possibility that the Test Article may have caused the event (a relationship between the Test Article and the event cannot be ruled out), in accordance with the definitions of 21 C.F.R. Part 310, 305, or 312, or other applicable regulations.

 

“Adverse Event” or “AE” means any untoward medical occurrence in a Human Subject administered Test Article.  An AE does not necessarily have a causal relationship with the Test Article, that is, it can be any unfavorable and unintended sign (including an abnormal laboratory finding), symptom, or disease temporally associated with the use of the Test Article, whether or not it is related to it.  See FDA Good Clinical Practice Guideline (International Conference on Harmonisation (ICH) E6: “Good Clinical Practice: Consolidated Guidance, 62 Federal Register 25, 691 (1997)).

 

“Affiliate” means any corporation or other business entity controlled by, controlling, or under common control with Collaborator at any time during the term of the CRADA.  For this purpose, “control” means direct or indirect beneficial ownership of at least fifty percent (50%) of the voting stock or at least fifty percent (50%) interest in the income of the corporation or other business entity.

 

“Annual Report” means the report of progress of an IND-associated investigation that the Sponsor must submit to the FDA within sixty (60) days of the anniversary of the effective date of the IND (pursuant to 21 C.F.R. § 312.33).

 

 

	
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“Background Invention” means an Invention conceived and first actually reduced to practice before the Effective Date.

 

“Clinical Data in ICD’s Possession and Control” means all Raw Data that ICD employees create directly; and all copies of Raw Data and Summary Data that ICD obtains from Clinical Investigators or contractors performing CRADA activities.

 

“Clinical Investigator” means, in accordance with 21 C.F.R. § 312.3, an individual who actually conducts a clinical investigation, that is, who directs the administration or dispensation of Test Article to a subject, and who assumes responsibility for studying Human Subjects, for recording and ensuring the integrity of research data, and for protecting the welfare and safety of Human Subjects.

 

“Clinical Research Site(s)” means the site(s) at which the Protocol(s) described in the Research Plan will be performed.

 

“Collaborator Materials” means all tangible materials not first produced in the performance of this CRADA that are owned or controlled by Collaborator and used in the performance of the Research Plan.  The term “Collaborator Materials” does not include “Test Article” (defined below).

 

“Confidential Information” means confidential scientific, business, financial information, or Identifiable Private Information provided that Confidential Information does not include:

 

(a)          information that is publicly known or that is available from public sources;

 

(b)          information that has been made available by its owner to others without a confidentiality obligation;

 

(c)          information that is already known by the receiving Party, or information that is independently created or compiled by the receiving Party without reference to or use of the provided information; or

 

(d)          information that relates to potential hazards or cautionary warnings associated with the production, handling, or use of the subject matter of the Research Plan.

 

“Cooperative Research and Development Agreement” or “CRADA” means this Agreement, entered into pursuant to the Federal Technology Transfer Act of 1986, as amended (15 U.S.C. §§ 3710a et seq.), and Executive Order 12591 of April 10, 1987.

 

“CRADA Data” means information developed by or on behalf of the Parties in the performance of the Research Plan, excluding Raw Data.

 

“CRADA Materials” means all tangible materials first produced in the performance of the Research Plan other than CRADA Data.

 

 

	
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“CRADA Principal Investigator(s)” or “CRADA PI(s)” means the person(s) designated by the Parties who will be responsible for the scientific and technical conduct of the Research Plan.

 

“CRADA Subject Invention” means any Invention of either or both Parties, conceived or first actually reduced to practice in the performance of the Research Plan.

 

“Drug Master File” or “DMF” is described in 21 C.F.R. Part 314.420.  A DMF is a submission to the FDA that may be used to provide confidential detailed information about facilities, processes, or articles used in the manufacturing, processing, packaging, and storing of one or more human drugs.

 

“Effective Date” means the date of the last signature of the Parties executing this Agreement.

 

“Government” means the Government of the United States of America.

 

“Human Subject” means, in accordance with the definition in 45 C.F.R. § 46.102(f), a living individual about whom an investigator conducting research obtains:

 

(a)          data through intervention or interaction with the individual; or

(b)          Identifiable Private Information.

 

“ICD Materials” means all tangible materials not first produced in the performance of this CRADA that are owned or controlled by ICD and used in the performance of the Research Plan.

 

“IND” means an “Investigational New Drug Application,” filed in accordance with 21 C.F.R. Part 312 under which clinical investigation of an experimental drug or biologic (Test Article) is performed in Human Subjects in the United States or intended to support a United States licensing action.

 

“Identifiable Private Information” or “IPI” about a Human Subject means private information from which the identity of the subject is or may readily be ascertained.  Regulations defining and governing this information include 45 C.F.R. Part 46 and 21 C.F.R. Part 50.

 

“Institutional Review Board” or “IRB” means, in accordance with 45 C.F.R. Part 46, 21 C.F.R. part 56, and other applicable regulations, an independent body comprising medical, scientific, and nonscientific members, whose responsibility is to ensure the protection of the rights, safety, and well-being of the Human Subjects involved in a study.

 

“Invention” means any invention or discovery that is or may be patentable or otherwise protected under Title 35 of the United States Code, or any novel variety of plant which is or may be protectable under the Plant Variety Protection Act, 7 U.S.C. §§ 2321 et seq.

 

 

	
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“Investigator’s Brochure” means, in accordance with the definition in 21 C.F.R. § 312.23(a)(5), a document containing information about the Test Article, including animal screening, preclinical toxicology, and detailed pharmaceutical data, including a description of possible risks and side effects to be anticipated on the basis of prior experience with the drug or related drugs, and precautions, such as additional monitoring, to be taken as part of the investigational use of the drug.

 

“Patent Application” means an application for patent protection for a CRADA Subject Invention with the United States Patent and Trademark Office (“U.S.P.T.O.”) or the corresponding patent-issuing authority of another nation.

 

“Patent” means any issued United States patent, any international counterpart(s), and any corresponding grant(s) by a non-U.S. government in place of a patent.

 

“Placebo” means an inactive substance identical in appearance to the material being tested that is used to distinguish between drug action and suggestive effect of the material under study.

 

“Protocol” means the formal, detailed description of a study to be performed as provided for in the Research Plan.  It describes the objective(s), design, methodology, statistical considerations, and organization of a trial.  For the purposes of this CRADA, the term, Protocol, for clinical research involving Human Subjects, includes any and all associated documents, including informed consent forms, to be provided to Human Subjects and potential participants in the study.

 

“Raw Data” means the primary quantitative and empirical data first collected from experiments and clinical trials conducted within the scope of this CRADA.

 

“Research Plan” means the statement in Appendix A of the respective research and development commitments of the Parties.  The Research Plan should describe the provisions for sponsoring the IND, clinical and safety monitoring, and data management.

 

“Sponsor” means, in accordance with the definition in 21 C.F.R. § 312.3, an organization or individual who assumes legal responsibility for supervising or overseeing clinical trials with Test Articles, and is sometimes referred to as the IND holder.

 

“Steering Committee” means the research and development team whose composition and responsibilities with regard to the research performed under this CRADA are described in Appendix A.

 

“Summary Data” means any extract or summary of the Raw Data, generated either by or, on behalf of, ICD or by, or on behalf of, Collaborator.  Summary Data may include extracts or summaries that incorporate IPI.

 

 

	
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“Test Article” means, in accordance with 21 C.F.R. § 50.3(j), any drug (including a biological product), medical device, food additive, color additive, electronic product, or any other article subject to regulation under the Federal Food, Drug, and Cosmetic Act that is intended for administration to humans or animals, including a drug or biologic as identified in the Research Plan and Appendix B, that is used within the scope of the Research Plan.  The Test Article may also be referred to as Investigational Agent, Study Material, or Study Product.

 

Article 3.            Cooperative Research and Development

 

3.1         Performance of Research and Development.  The research and development activities to be carried out under this CRADA will be performed by the Parties identified on the Cover Page, as well as ICD’s contractors or grantees as described in the Research Plan. However, ICD’s contractors or grantees are not Parties to the CRADA, and this CRADA does not grant to Collaborator any rights to Inventions made by ICD’s contractors or grantees.  The CRADA PIs will be responsible for coordinating the scientific and technical conduct of this project on behalf of their employers.  Any Collaborator employees who will work at ICD facilities will be required to sign a Guest Researcher or Special Volunteer Agreement appropriately modified in view of the terms of this CRADA.

 

3.2         Research Plan.  The Parties recognize that the Research Plan describes the collaborative research and development activities they will undertake and that interim research goals set forth in the Research Plan are good faith guidelines. Should events occur that require modification of these goals, then by mutual agreement the Parties can modify them through an amendment, according to Paragraph 13.6.

 

3.3         Use and Disposition of Collaborator Materials and ICD Materials.  The Parties agree to use Collaborator Materials and ICD Materials only in accordance with the Research Plan and Protocol(s), not to transfer these materials to third parties except in accordance with the Research Plan and Protocol(s) or as approved by the owning or providing Party, and, upon expiration or termination of the CRADA, to dispose of these materials as directed by the owning or providing Party.

 

3.4         Third-Party Rights in Collaborator’s CRADA Subject Inventions.  If Collaborator has received (or will receive) support of any kind from a third party in exchange for rights in any of Collaborator’s CRADA Subject Inventions, Collaborator agrees to ensure that its obligations to the third party are both consistent with Articles 6 through 8 and subordinate to Article 7 of this CRADA.

 

3.5         Disclosures to ICD.  Prior to execution of this CRADA, Collaborator agrees to disclose to ICD all instances in which outstanding royalties are due under a PHS license agreement and in which Collaborator had a PHS license terminated in accordance with 37 C.F.R. § 404.10.  These disclosures will be treated as Confidential Information upon request by Collaborator in accordance with the definition in Article 2 and Paragraphs 8.3 and 8.4.

 

 

	
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3.6         Clinical Investigator Responsibilities.  The Clinical Investigator will be required to submit, or to arrange for submission of, each Protocol associated with this CRADA to all appropriate IRBs, and for ensuring that the IRBs are notified of the role of Collaborator in the research.  In addition to the Protocol all associated documents, including informational documents and advertisements, must be reviewed and approved by the appropriate IRB(s) before starting the research at each Clinical Research Site.  The research will be done in strict accordance with the Protocol(s) and no substantive changes in a finalized Protocol will be made unless mutually agreed upon, in writing, by the Parties.  Research will not commence (or will continue unchanged, if already in progress) until each substantive change to a Protocol, including those required by either the FDA or the IRB, has been integrated in a way acceptable to the Parties, submitted to the FDA (if applicable) and approved by the appropriate IRBs.

 

3.7         Investigational Applications.

 

3.7.1     If an IND is required either ICD or Collaborator, as indicated in the Research Plan, will submit an IND, and all Clinical Investigators must have completed registration documents on file (1572 forms).

 

3.7.2     If ICD elects to file its own IND, Collaborator agrees to provide ICD background data and information necessary to support the IND.  Collaborator further agrees to provide a letter of cross-reference to all pertinent regulatory filings sponsored by Collaborator.  Collaborator’s employees will be reasonably available to respond to inquiries from the FDA regarding information and data contained in the Collaborator’s IND, DMF, other filings, or other information and data provided to ICD by the Collaborator pursuant to this Article 3.  If ICD has provided information or data to assist Collaborator in its IND filing, ICD will provide a letter of cross reference to its IND and respond to inquiries related to information provided by ICD, as applicable.

 

3.7.3     If Collaborator supplies Confidential Information to ICD in support of an IND filed by ICD, this information will be protected in accordance with the corresponding confidentiality provisions of Article 8.

 

3.7.4     Collaborator may sponsor its own clinical trials and hold its own IND for studies performed outside the scope of this CRADA.  These studies, however, should not adversely affect the ability to accomplish the goal of the Research Plan, for example, by competing for the same study population.  All data from those clinical trials are proprietary to Collaborator for purposes of this CRADA.

 

3.8         Test Article Information and Supply.  Collaborator agrees to provide ICD without charge and on a schedule that will ensure adequate and timely performance of the research, a sufficient quantity of formulated and acceptably labeled, clinical-grade Test Article (and, as required by the Protocol(s), Placebo) to complete the clinical trial(s) agreed to and approved under this CRADA.  Collaborator will provide a Certificate of

 

 

	
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Analysis to ICD for each lot of the Test Article provided.

 

3.9         Test Article Delivery and Usage.  Collaborator will ship the Test Article and, if required, Placebo to ICD or its designee in containers marked in accordance with 21 C.F.R. § 312.6.  ICD agrees that the Clinical Investigators will keep appropriate records and take reasonable steps to ensure that the Test Article is used in accordance with the Protocol(s) and applicable FDA regulations.  In addition, ICD agrees that the Test Article (and all Confidential Information supplied by Collaborator relating to the Test Article) will be used solely for the conduct of the CRADA research and development activities.  Furthermore, ICD agrees that no analysis or modification of the Test Article will be performed without Collaborator’s prior written consent.  At the completion of the Research Plan, any unused quantity of Test Article will be returned to Collaborator or disposed as directed by Collaborator.  Pharmacy contacts at ICD or its designee will be determined by ICD and communicated to Collaborator.

 

3.10       Monitoring.

 

3.10.1   The Sponsor or its designee will be primarily responsible for monitoring clinical sites and for assuring the quality of all clinical data, unless otherwise stated in the Research Plan.  Monitoring will comply with FDA Good Clinical Practice (International Conference on Harmonisation (ICH) E6: “Good Clinical Practice: Consolidated Guidance; 62 Federal Register 25, 691 (1997)).  The other Party may also perform quality assurance oversight.  The monitor will communicate significant Protocol violations and submit documentation of monitoring outcomes on Protocol insufficiencies to the other Party in a timely manner.

 

3.10.2   Subject to the restrictions in Article 8 concerning IPI, and with reasonable advance notice and at reasonable times, ICD will permit Collaborator or its designee(s) access to clinical site(s) to monitor the conduct of the research, as well as to audit source documents containing Raw Data, to the extent necessary to verify compliance with FDA Good Clinical Practice and the Protocol(s).

 

3.11       FDA Meetings/Communications.  All meetings with the FDA concerning any clinical trial within the scope of the Research Plan will be discussed by Collaborator and ICD in advance.  Each Party reserves the right to take part in setting the agenda for, to attend, and to participate in these meetings.  The Sponsor will provide the other Party with copies of FDA meeting minutes, all transmittal letters for IND submissions, IND safety reports, formal questions and responses that have been submitted to the FDA, Annual Reports, and official FDA correspondence, pertaining either to the INDs under this CRADA or to the Clinical Investigators on Protocols performed in accordance with the Research Plan, except to the extent that those documents contain the proprietary information of a third party or dissemination is prohibited by law.

 

Article 4.            Reports

 

4.1         Interim Research and Development Reports.  The CRADA PIs should exchange

 

 

	
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information regularly, in writing.  This exchange may be accomplished through meeting minutes, detailed correspondence, circulation of draft manuscripts, Steering Committee reports, copies of Annual Reports and any other reports updating the progress of the CRADA research.  However, the Parties must exchange updated Investigator’s Brochure, formulation and preclinical data, and toxicology findings, as they become available.

 

4.2         Final Research and Development Reports.  The Parties will exchange final reports of their results within six (6) months after the expiration or termination of this CRADA.  These reports will set forth the technical progress made; any publications arising from the research; and the existence of invention disclosures of potential CRADA Subject Inventions and/or any corresponding Patent Applications.

 

4.3         Fiscal Reports.  If Collaborator has agreed to provide funding to ICD under this CRADA and upon the request of Collaborator, then concurrent with the exchange of final research and development reports according to Paragraph 4.2, ICD will submit to Collaborator a statement of all costs incurred by ICD for the CRADA.  If the CRADA has been terminated, ICD will specify any costs incurred before the date of termination for which ICD has not received funds from Collaborator, as well as for all reasonable termination costs including the cost of returning Collaborator property or removal of abandoned Collaborator property, for which Collaborator will be responsible.

 

4.4         Safety Reports.  In accordance with FDA requirements, the Sponsor will establish and maintain records and submit safety reports to the FDA, as required by 21 C.F.R. § 312.32 and 21 C.F.R. 812.150(b)(1), or other applicable regulations.  In the conduct of research under this CRADA, the Parties will comply with specific ICD guidelines and policies for reporting ADEs and AEs, as well as procedures specified in the Protocol(s).  The Sponsor must provide the other Party with copies of all Safety Reports concurrently with their submission to the FDA, and with any other information affecting the safety of Human Subjects in research conducted under this CRADA.

 

4.5         Annual Reports.  The Sponsor will provide the other Party a copy of the Annual Report concurrently with the submission of the Annual Report to the FDA.  Annual Reports will be kept confidential in accordance with Article 8.

 

Article 5.            Staffing, Financial, and Materials Obligations

 

5.1         ICD and Collaborator Contributions.  The contributions of any staff, funds, materials, and equipment by the Parties are set forth in Appendix B.  The Federal Technology Transfer Act of 1986, 15 U.S.C. § 3710a(d)(1) prohibits ICD from providing funds to Collaborator for any research and development activities under this CRADA.

 

5.2         ICD Staffing.  No ICD employees will devote 100% of their effort or time to the research and development activities under this CRADA.  ICD will not use funds provided by Collaborator under this CRADA for ICD personnel to pay the salary of any permanent ICD employee.  Although personnel hired by ICD using CRADA funds will focus principally on CRADA research and development activities, Collaborator acknowledges

 

 

	
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that these personnel may nonetheless make contributions to other research and development activities, and the activities will be outside the scope of this CRADA.

 

5.3         Collaborator Funding.  Collaborator acknowledges that Government funds received by Collaborator from an agency of the Department of Health and Human Services may not be used to fund ICD under this CRADA.  If Collaborator has agreed to provide funds to ICD then the payment schedule appears in Appendix B and Collaborator will make payments according to that schedule.  If Collaborator fails to make any scheduled payment, ICD will not be obligated to perform any of the research and development activities specified herein or to take any other action required by this CRADA until the Rinds are received.  ICD will use these funds exclusively for the purposes of this CRADA.  Each Party will maintain separate and distinct current accounts, records, and other evidence supporting its financial obligations under this CRADA and, upon written request, will provide the other Party a Fiscal Report according to Paragraph 4.3, which delineates all payments made and all obligated expenses, along with the Final Research Report described in Paragraph 4.2.

 

5.4         Capital Equipment.  Collaborator’s commitment, if any, to provide ICD with capital equipment to enable the research and development activities under the Research Plan appears in Appendix B.  If Collaborator transfers to ICD the capital equipment or provides funds for ICD to purchase it, then ICD will own the equipment.  If Collaborator loans capital equipment to ICD for use during the CRADA, Collaborator will be responsible for paying all costs and fees associated with the transport, installation, maintenance, repair, removal, or disposal of the equipment, and ICD will not be liable for any damage to the equipment.

 

Article 6.            Intellectual Property

 

6.1         Ownership of CRADA Subject Inventions, CRADA Data, and CRADA Materials.  Subject to the Government license described in Paragraph 7.5, the sharing requirements of Paragraph 8.1 and the regulatory filing requirements of Paragraph 8.2, the producing Party will retain sole ownership of and title to all CRADA Subject Inventions, all copies of CRADA Data, and all CRADA Materials produced solely by its employee(s).  The Parties will own jointly all CRADA Subject Inventions invented jointly and all CRADA Materials developed jointly.  A PHS contractors or grantee’s rights in data it generates will not be affected by this CRADA.

 

6.2         Reporting.  The Parties will promptly report to each other in writing each CRADA Subject Invention reported by their respective personnel, and any Patent Applications filed thereon, resulting from the research and development activities conducted under this CRADA.  Each Party will report all CRADA Subject Inventions to the other Party in sufficient detail to determine inventorship, which will be determined in accordance with U.S. patent law.  These reports will be treated as Confidential Information in accordance with Article 8.  Formal reports will be made by and to the Patenting and Licensing Offices identified on the Contacts Information Page herein.

 

 

	
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6.3         Filing of Patent Applications.  Each Party will make timely decisions regarding the filing of Patent Applications on the CRADA Subject inventions made solely by its employee(s), and will notify the other Party in advance of filing.  Collaborator will have the first opportunity to file a Patent Application on joint CRADA Subject Inventions and will notify PHS of its decision within [...***...] days of an Invention being reported or at least [...***...] days before any patent filing deadline, whichever occurs sooner.  If Collaborator fails to notify PHS of its decision within that time period or notifies PHS of its decision not to file a Patent Application, then PHS has the right to file a Patent Application on the joint CRADA Subject Invention.  Neither Party will be obligated to file a Patent Application.  Collaborator will place the following statement in any Patent Application it files on a CRADA Subject Invention: “This invention was created in the performance of a Cooperative Research and Development Agreement with the [INSERT into Agency’s model as appropriate: National Institutes of Health, Food and Drug Administration, Centers for Disease Control and Prevention], an Agency of the Department of Health and Human Services.  The Government of the United States has certain rights in this invention.” If either Party files a Patent Application on a joint CRADA Subject Invention, then the filing Party will include a statement within the Patent Application that clearly identifies the Parties and states that the joint CRADA Subject Invention was made under this CRADA.

 

6.4         Patent Expenses.  Unless agreed otherwise, the Party filing a Patent Application will pay all preparation and filing expenses, prosecution fees, issuance fees, post issuance fees, patent maintenance fees, annuities, interference expenses, and attorneys’ fees for that Patent Application and any resulting Patent(s).  If a license to any CRADA Subject Invention is granted to Collaborator, then Collaborator will be responsible for all expenses and fees, past and future, in connection with the preparation, filing, prosecution, and maintenance of any Patent Applications and Patents claiming exclusively licensed CRADA Subject Inventions and will be responsible for a pro-rated share, divided equally among all licensees, of those expenses and fees for non-exclusively licensed CRADA Subject Inventions.  Collaborator may waive its exclusive option rights at any time, and incur no subsequent financial obligation for those Patent Application(s) or Patent(s).

 

6.5         Prosecution of Patent Applications.  The Party filing a Patent Application will provide the non-filing Party with a copy of any official communication relating to prosecution of the Patent Application within thirty (30) days of transmission of the communication.  Each Party will also provide the other Party with the power to inspect and make copies of all documents retained in the applicable Patent Application or Patent file.  The Parties agree to consult with each other regarding the prosecution of Patent Applications directed to joint CRADA Subject Inventions.  If Collaborator elects to file and prosecute Patent Applications on joint CRADA Subject Inventions, then Collaborator agrees to use the U.S.P.T.O. Customer Number Practice and/or grant VHS a power(s) of attorney (or equivalent) necessary to assure PHS access to its intellectual property rights in these Patent Applications.  PHS and Collaborator will cooperate with each other to obtain necessary signatures on Patent Applications, assignments, or other documents.

 

***Confidential Treatment Requested

 

 

	
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Article 7.            Licensing

 

7.1         Background Inventions.  Other than as specifically stated in this Article 7, nothing in this CRADA will be construed to grant any rights in one Party’s Background Invention(s) to the other Party, except to the extent necessary for the Parties to conduct the research and development activities described in the Research Plan.

 

7.2         Collaborator’s License Option to CRADA Subject Inventions.  With respect to Government rights to any CRADA Subject Invention made solely by an ICD employee(s) or made jointly by an ICD employee(s) and a Collaborator employee(s) for which a Patent Application was filed, PBS hereby grants to Collaborator an exclusive option to elect an exclusive or nonexclusive commercialization license.  The license will be substantially in the form of the appropriate model PHS license agreement and will fairly reflect the nature of the CRADA Subject Invention, the relative contributions of the Parties to the CRADA Subject Invention and the CRADA, a plan for the development and marketing of the CRADA Subject Invention, the risks incurred by Collaborator, and the costs of subsequent research and development needed to bring the CRADA Subject Invention to the marketplace.  The field of use of the license will not exceed the scope of the Research Plan.

 

7.3         Exercise of Collaborator’s License Option.  To exercise the option of Paragraph 7.2 Collaborator must submit a written notice to the PHS Patenting and Licensing Contact identified on the Contacts Information Page (and provide a copy to the ICD Contact for CRADA Notices) within [...***...] months after either (i) Collaborator receives written notice from PHS that the Patent Application has been filed or (ii) the date on which Collaborator files the Patent Application.  The written notice exercising this option will include a completed “Application for License to Public Health Service Inventions” and will initiate a negotiation period that expires [...***...] months after the exercise of the option.  If PHS has not responded in writing to the last proposal by Collaborator within this [...***...] month period, the negotiation period will be extended to expire [...***...] after PHS so responds, during which [...***...] Collaborator may accept in writing the final license proposal of PHS.  In the absence of Collaborator’s exercise of the option, or upon election of a nonexclusive license, PHS will be free to license the CRADA Subject Invention to others.  These time periods may be extended at the sole discretion of PHS upon good cause shown in writing by Collaborator.

 

7.4         Government License in ICD Sole CRADA Subject Inventions and Joint CRADA Subject Inventions.  Pursuant to 15 U.S.C. § 3710a(b)(1)(A), for CRADA Subject Inventions owned solely by ICD or jointly by ICD and Collaborator, and licensed pursuant to the option of Paragraph 7.2, Collaborator grants to the Government a nonexclusive, nontransferable, irrevocable, paid-up license to practice the CRADA Subject Invention or have the CRADA Subject Invention practiced throughout the world by or on behalf of the Government.  In the exercise of this license, the Government will not publicly disclose trade secrets or commercial or financial information that is privileged or confidential within the meaning of 5 U.S.C. § 552(b)(4) or which would be 

 

***Confidential Treatment Requested

 

 

	
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considered privileged or confidential if it had been obtained from a non-federal party.

 

7.5         Government License in Collaborator Sole CRADA Subject Inventions.  Pursuant to 15 U.S.C. § 3710a(b)(2), for CRADA Subject Inventions made solely by an employee of  Collaborator, Collaborator grants to the Government a nonexclusive, nontransferable, irrevocable, paid-up license to practice the CRADA Subject Invention or have the CRADA Subject Invention practiced throughout the world by or on behalf of the Government for research or other Government purposes.

 

7.6         Third Party License.  Pursuant to 15 U.S.C. § 3710a(b)(1)(B), if PHS grants Collaborator an exclusive license to a CRADA Subject Invention made solely by an ICD employee or jointly with a Collaborator employee, the Government will retain the right to require Collaborator to grant to a responsible applicant a nonexclusive, partially exclusive, or exclusive sublicense to use the CRADA Subject Invention in Collaborator’s licensed field of use on terms that are reasonable under the circumstances; or, if Collaborator fails to grant a license, to grant a license itself.  The exercise of these rights by the Government will only be in exceptional circumstances, and only if the Government determines (i) the action is necessary to meet health or safety needs that are not reasonably satisfied by Collaborator, (ii) the action is necessary to meet requirements for public use specified by federal regulations, and such requirements are not reasonably satisfied by Collaborator; or (iii) Collaborator has failed to comply with an agreement containing provisions described in 15 U.S.C. § 3710a(c)(4)(B).  The determination made by the Government under this Paragraph is subject to administrative appeal and judicial review under 35 U.S.C. § 203(2).

 

7.7         Third-Party Rights In ICD Sole CRADA Subject Inventions.  For a CRADA Subject Invention conceived prior to the Effective Date solely by an ICD employee that is first actually reduced to practice after the Effective Date in the performance of the Research Plan, the option offered to Collaborator in Paragraph 7.2 may be restricted if, prior to the Effective Date, PHS had filed a Patent Application and has either offered or granted a license in the CRADA Subject Invention to a third party.  Collaborator nonetheless retains the right to apply for a license to any such CRADA Subject Invention in accordance with the terms and procedures of 35 U.S.C. § 209 and 37 C.F.R. Part 404.

 

7.8         Joint CRADA Subject Inventions Not Exclusively Licensed by Collaborator.  If Collaborator does not acquire an exclusive commercialization license in a joint CRADA Subject Invention in all fields of use then, for those fields of use not exclusively licensed to Collaborator, each Party will have the right to use the joint CRADA Subject Invention and to license its use to others, and each Party will cooperate with the other, as necessary, to fulfill international licensing requirements.  The Parties may agree to a joint licensing approach for any remaining fields of use.

 

Article 8.            Rights of Access and Publication

 

8.1         Right of Access to CRADA Data and CRADA Materials.  ICD and Collaborator agree to exchange all CRADA Data and to share all CRADA Materials.  If the CRADA is 

 

 

	
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terminated, both parties agree to provide CRADA Materials in quantities needed to complete the Research Plan.  Such provision will occur before the termination date of the CRADA or sooner, if required by the Research Plan. If Collaborator possesses any human biological specimens from clinical trials under the CRADA, the specimens must be handled as described in the Protocol or as otherwise directed by ICD before the termination date of the CRADA.

 

8.2         Use of CRADA Data and CRADA Materials.  The Parties will be free to utilize CRADA Data and CRADA Materials internally for their own purposes, consistent with their obligations under this CRADA.  ICD may share CRADA Data or CRADA Materials with any contractors, grantees, or agents it has engaged to conduct the CRADA research and development activities, provided the obligations of this Article 8.2 are simultaneously conveyed.  Collaborator may share CRADA Data or CRADA Materials with any contractors, Affiliates, or agents it has engaged to conduct the CRADA research and development activities, provided the obligations of this Article 8.2 are simultaneously conveyed.

 

8.2.1     CRADA Data.

Collaborator and ICD will use reasonable efforts to keep CRADA Data confidential until published or until corresponding Patent Applications are filed.  To the extent permitted by law, each Party will have the right to use any and all CRADA Data in and for any regulatory filing by or on behalf of the Party.

 

8.2.2     CRADA Materials.

Collaborator and ICD will use reasonable efforts to keep descriptions of CRADA Materials confidential until published or until corresponding Patent Applications are filed.  Collaborator acknowledges that the basic research mission of PHS includes sharing with third parties for further research those research resources made in whole or in part with NIH funding.  Consistent with this mission and the tenets articulated in “Sharing of Biomedical Research Resources: Principles and Guidelines for Recipients of NIH Research Grants and Contracts,” December 1999, available at http://ott.od.nih.gov/NewPages/RTguide_final.html, following publication either Party may make available to third parties for further research those CRADA Materials made jointly by both PHS and Collaborator.  Notwithstanding the above, if those joint CRADA Materials are the subject of a pending Patent Application or a Patent, or were created using a patent-pending or patented material or technology, the Parties may agree to restrict distribution or freely distribute them.  Either Party may distribute those CRADA Materials made solely by the other Party only upon written consent from that other Party or that other Party’s designee.

 

8.3         Confidential Information.  Each Party agrees to limit its disclosure of Confidential Information to the amount necessary to carry out the Research Plan, and will place a confidentiality notice on all this information.  A Party orally disclosing Confidential Information to the other Party will summarize the disclosure in writing and provide it to the other Party within fifteen (15) days of the disclosure.  Each Party receiving 

 

 

	
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Confidential Information agrees to use it only for the purposes described lo the Research Plan.  Either Party may object to the designation of information as Confidential Information by the other Party.

 

8.4         Protection of Confidential Information.  Confidential Information will not be disclosed, copied, reproduced or otherwise made available to any other person or entity without the consent of the owning or providing Party except as required by a court or administrative body of competent jurisdiction, or federal law or regulation.  Each Party agrees to use reasonable efforts to maintain the confidentiality of Confidential Information, which will in no instance be less effort than the Party uses to protect its own Confidential Information.  Each Party agrees that a Party receiving Confidential Information will not be liable for the disclosure of that portion of the Confidential Information which, after notice to and consultation with the disclosing Party, the receiving Party determines may not be lawfully withheld, provided the disclosing Party has been given a reasonable opportunity to seek a court order to enjoin disclosure.

 

8.5         Human Subject Protection.  The research to be conducted under this CRADA involves Human Subjects or human tissues within the meaning of 45 C.F.R. Part 46, and all research to be performed under this CRADA will conform to applicable federal laws and regulations.  Additional information is available from the HHS Office for Human Research Protections (http://www.hhs.gov/ohrp/).

 

8.6         Duration of Confidentiality Obligation.  The obligation to maintain the confidentiality of Confidential Information will expire at the earlier of the date when the information is no longer Confidential Information as defined in Article 2 or [...***...] years after the expiration or termination date of this CRADA, except for IPI, for which the obligation to maintain confidentiality will extend indefinitely.  Collaborator may request an extension to this term when necessary to protect Confidential Information relating to products not yet commercialized.

 

8.7         Publication.  The Parties are encouraged to make publicly available the results of their research and development activities.  Before either Party submits a paper or abstract for publication or otherwise intends to publicly disclose information about a CRADA Subject Invention, CRADA Data, or CRADA Materials, the other Party will have thirty (30) days to review proposed manuscripts and three (3) days to review proposed abstracts to assure that Confidential Information is protected.  Either Party may request in writing that the proposed publication or other disclosure be delayed for up to thirty (30) additional days as necessary to file a Patent Application.

 

8.8         Clinical Investigators’ Research and Development Activities.  Although this CRADA does not grant to Collaborator any rights to Inventions made or Raw Data generated by ICD’s contractors or grantees, as they are not parties to this CRADA, ICD agrees that:

 

8.8.1     Subject to the other provisions of Article 8 of this CRADA, ICD will maintain, to the extent permitted by law, all Clinical Data in ICD’s Possession and Control as Confidential Information, and make them available to Collaborator for its own use 

 

***Confidential Treatment Requested

 

 

	
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and for exclusive use in obtaining regulatory approval for the commercial marketing of Test Article and relied CRADA Subject Inventions.

 

8.8.2     With regard to Collaborator’s Confidential Information, ICD will require the Clinical Investigators to agree to confidentiality provisions at least as restrictive as those provided in this CRADA and to Collaborator’s use of data in accordance with Paragraph 8.8.1 for obtaining regulatory approval for marketing Test Article.

 

8.8.3     If Collaborator wants access to Raw Data or any other data in the possession of the Clinical Investigators working with Test Article, Collaborator must first contact the CRADA PI.  Collaborator will bear any costs associated with Raw Data provided in formats customized for Collaborator.

 

8.8.4     Collaborator’s right to access Clinical Data in ICD’s Possession and Control under Paragraph 8.8 is dependent upon Collaborator’s continued development and commercialization of Investigational Agent.  If Collaborator fails to continue development or commercialization of Investigational Agent without the transfer of its development efforts to another party within [...***...] days of discontinuation, ICD has the right to make Clinical Data in ICD’s Possession and Control available to a third party.

 

Article 9.            Representations and Warranties

 

9.1         Representations of ICD.  ICD hereby represents to Collaborator that:

 

9.1.1     ICD has the requisite power and authority to enter into this CRADA and to perform according to its terms, and that ICD’s official signing this CRADA has authority to do so.

 

9.1.2     To the best of its knowledge and belief, neither ICD nor any of its personnel involved in this CRADA is presently subject to debarment or suspension by any agency of the Government which would directly affect its performance of the CRADA.  Should ICD or any of its personnel involved in this CRADA be debarred or suspended during the term of this CRADA, ICD will notify Collaborator within thirty (30) days of receipt of final notice.

 

9.2         Representations and Warranties of Collaborator.  Collaborator hereby represents and warrants to ICD that:

 

9.2.1     Collaborator has the requisite power and authority to enter into this CRADA and to perform according to its terms, and that Collaborator’s official signing this CRADA has authority to do so.

 

9.2.2     Neither Collaborator nor any of its personnel involved in this CRADA, including Affiliates, agents, and contractors are presently subject to debarment or suspension by any agency of the Government.  Should Collaborator or any of its 

 

***Confidential Treatment Requested

 

 

	
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personnel involved in this CRADA be debarred or suspended during the term of this CRADA, Collaborator will notify ICD within thirty (30) days of receipt of final notice.

 

9.2.3     Subject to Paragraph 12.3, and if and to the extent Collaborator has agreed to provide funding under Appendix B, Collaborator is financially able to satisfy these obligations in a timely manner.

 

9.2.4     The Test Article provided has been produced in accordance with the FDA’s current Good Manufacturing Practice set out in 21 C.F.R. §§ 210-211, and ICH QA7, and meets the specifications cited in the Certificate of Analysis and Investigator’s Brochure provided.

 

Article 10.         Expiration and Termination

 

10.1       Expiration.  This CRADA will expire on the last date of the term set forth on the Summary Page.  In no case will the term of this CRADA extend beyond the term indicated on the Summary Page unless it is extended in writing in accordance with Paragraph 13.6.

 

10.2       Termination by Mutual Consent.  ICD and Collaborator may terminate this CRADA at any time by mutual written consent.

 

10.3       Unilateral Termination.  Either ICD or Collaborator may unilaterally terminate this CRADA at any time by providing written notice at least sixty (60) days before the desired termination date.  ICD may, at its option, retain funds transferred to ICD before unilateral termination by Collaborator for use in completing the Research Plan.  If Collaborator terminates this Agreement before the completion of all approved or active Protocol(s), then Collaborator will supply enough Test Article (and Placebo, if applicable) to complete these Protocol(s) unless termination is for safety concerns.

 

10.4       Funding for ICD Personnel.  If Collaborator has agreed to provide funding for ICD personnel and this CRADA is mutually or unilaterally terminated by Collaborator before its expiration, then Collaborator agrees that funds for that purpose will be available to ICD for a period of [...***...] months after the termination date or until the expiration date of the CRADA, whichever occurs sooner.  If there are insufficient funds to cover this expense, Collaborator agrees to pay the difference.

 

10.5       New Commitments.  Neither Party will incur new expenses related to this CRADA after expiration, mutual termination, or a notice of a unilateral termination and will, to the extent feasible, cancel all outstanding commitments and contracts by the termination date.  Collaborator acknowledges that ICD will have the authority to retain and expend any funds for up to [...***...] year subsequent to the expiration or termination date to cover any unpaid costs obligated during the term of the CRADA in undertaking the research and development activities set forth in the Research Plan.

 

***Confidential Treatment Requested

 

 

	
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10.6       Collaborator Failure to Continue Development.  If Collaborator suspends development of the Test Article without the transfer of its active development efforts, assets, and obligations to a third party within [...***...] days of discontinuation, Collaborator agrees that ICD may continue developing the Test Article.  In that event, the following will apply:

 

10.6.1   Collaborator agrees to transfer to ICD all information necessary to enable ICD to contract for the manufacture of the Test Article and, unless abandoned for reasons relating to safety as determined by the data safety monitoring board, to provide the Test Article (and Placebo, if any) in Collaborator’s inventory to ICD.

 

10.6.2   Further, Collaborator hereby grants to ICD a nonexclusive, irrevocable, world-wide, paid-up license to practice, or have practiced for or on behalf of the Government, any Background Invention that Collaborator may currently have or will obtain on the Test Article, its manufacture, or on any method of using the Test Article for the indication(s) described in the Research Plan, including the right to sublicense to third parties.

 

Article 11.         Disputes

 

11.1       Settlement.  Any dispute arising under this CRADA which is not disposed of by agreement of the CRADA Principal Investigators will be submitted jointly to the signatories of this CRADA.  If the signatories, or their designees, are unable to jointly resolve the dispute within thirty (30) days after notification thereof, the Assistant Secretary for Health (or his/her designee or successor) will propose a resolution.  Nothing in this Paragraph will prevent any Party from pursuing any additional administrative remedies that may be available and, after exhaustion of such administrative remedies, pursuing all available judicial remedies.

 

11.2       Continuation of Work.  Pending the resolution of any dispute or claim pursuant to this Article 11, the Parties agree that performance of all obligations will be pursued diligently.

 

Article 12.         Liability

 

12.1       NO WARRANTIES.  EXCEPT AS SPECIFICALLY STATED IN ARTICLE 9, THE PARTIES MAKE NO EXPRESS OR IMPLIED WARRANTY AS TO ANY MATTER WHATSOEVER, INCLUDING THE CONDITIONS OF THE RESEARCH OR ANY INVENTION OR MATERIAL, WHETHER TANGIBLE OR INTANGIBLE, MADE OR DEVELOPED UNDER OR OUTSIDE THE SCOPE OF THIS CRADA, OR THE OWNERSHIP, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE RESEARCH OR ANY INVENTION OR MATERIAL, OR THAT A TECHNOLOGY UTILIZED BY A PARTY IN THE PERFORMANCE OF THE RESEARCH PLAN DOES NOT INFRINGE ANY THIRD-PARTY PATENT RIGHTS.

 

12.2       Indemnification and Liability.  Collaborator agrees to hold the Government harmless

 

***Confidential Treatment Requested

 

 

	
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and to indemnify the Government for all liabilities, demands, damages, expenses and losses arising out of the use by Collaborator for any purpose of the CRADA Data, CRADA Materials or CRADA Subject Inventions produced in whole or part by ICD employees under this CRADA, unless due to the negligence or willful misconduct of ICD, its employees, or agents.  The Government has no statutory authority to indemnify Collaborator.  Each Party otherwise will be liable for any claims or damages it incurs in connection with this CRADA, except that ICD, as an agency of the Government, assumes liability only to the extent provided under the Federal Tort Claims Act , 28 U.S.C. Chapter 171.

 

12.3       Force Majeure.  Neither Party will be liable for any unforeseeable event beyond its reasonable control and not caused by its own fault or negligence, which causes the Party to be unable to perform its obligations under this CRADA, and which it has been unable to overcome by the exercise of due diligence.  If a force majeure event occurs, the Party unable to perform will promptly notify the other Party.  It will use its best efforts to resume performance as quickly as possible and will suspend performance only for such period of time as is necessary as a result of the force majeure event.

 

Article 13.         Miscellaneous

 

13.1       Governing Law.  The construction, validity, performance and effect of this CRADA will be governed by U.S. federal law, as applied by the federal courts in the District of Columbia.  If any provision in this CRADA conflicts with or is inconsistent with any U.S. federal law or regulation, then the U.S. federal law or regulation will preempt that provision.

 

13.2       Compliance with Law.  ICD and Collaborator agree that they will comply with, and advise any contractors, grantees, or agents they have engaged to conduct the CRADA research and development activities to comply with, all applicable Executive Orders, statutes, and HHS regulations relating to research on human subjects (45 C.F.R. Part 46, 21 C.F.R. Parts 50 and 56) and relating to the appropriate care and use of laboratory animals (7 U.S.C. §§ 2131 et seq.; 9 C.F.R. Part 1, Subchapter A).  ICD and Collaborator will advise any contractors, grantees, or agents they have engaged to conduct clinical trials for this CRADA that they must comply with all applicable federal regulations for the protection of Human Subjects, which may include the Standards for Privacy of Individually Identifiable Health Information set forth in 45 C.F.R. Part 164.  Collaborator agrees to ensure that its employees, contractors, and agents who might have access to a “select agent or toxin” (as that term is defined in 42 C.F.R. §§ 73.4-73.5) transferred from ICD is properly licensed to receive the “select agent or toxin.”

 

13.3       Waivers.  None of the provisions of this CRADA will be considered waived by any Party unless a waiver is given in writing to the other Party.  The failure of a Party to insist upon strict performance of any of the terms and conditions hereof, or failure or delay to exercise any rights provided herein or by law, will not be deemed a waiver of any rights of any Party.

 

 

	
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13.4       Headings.  Titles and headings of the articles and paragraphs of this CRADA are for convenient reference only, do not form a part of this CRADA, and will in no way affect its interpretation.

 

13.5       Severability.  The illegality or invalidity of any provisions of this CRADA will not impair, affect, or invalidate the other provisions of this CRADA.

 

13.6       Amendments.  Minor modifications to the Research Plan may be made by the mutual written consent of the CRADA Principal Investigators.  Substantial changes to the CRADA, extensions of the term, or any changes to Appendix C will become effective only upon a written amendment signed by the signatories to this CRADA or by their representatives duly authorized to execute an amendment.  A change will be considered substantial if it directly expands the range of the potential CRADA Subject Inventions, alters the scope or field of any license option governed by Article 7, or requires a significant increase in the contribution of resources by either Party.

 

13.7       Assignment.  Neither this CRADA nor any rights or obligations of any Party hereunder shall be assigned or otherwise transferred by either Party without the prior written consent of the other Party.  The Collaborator acknowledges the applicability of 41 U.S.C. § 15, the Anti Assignment Act, to this Agreement.  The Parties agree that the identity of the Collaborator is material to the performance of this CRADA and that the duties under this CRADA are nondelegable.

 

13.8       Notices.  All notices pertaining to or required by this CRADA will be in writing, signed by an authorized representative of the notifying Party, and delivered by first class, registered, or certified mail, or by an express/overnight commercial delivery service, prepaid and properly addressed to the other Party at the address designated on the Contacts Information Page, or to any other address designated in writing by the other Party.  Notices will be considered timely if received on or before the established deadline date or sent on or before the deadline date as verifiable by U.S. Postal Service postmark or dated receipt from a commercial carrier.  Notices regarding the exercise of license options will be made pursuant to Paragraph 7.3.  Either Party may change its address by notice given to the other Party in the manner set forth above.

 

13.9       Independent Contractors.  The relationship of the Parties to this CRADA is that of independent contractors and not agents of each other or joint venturers or partners.  Each Party will maintain sole and exclusive control over its personnel and operations.

 

13.10    Use of Name; Press Releases.  By entering into this CRADA, the Government does not directly or indirectly endorse any product or service that is or will be provided, whether directly or indirectly related to either this CRADA or to any patent or other intellectual-property license or agreement that implements this CRADA by Collaborator, its successors, assignees, or licensees.  Collaborator will not in any way state or imply that the Government or any of its organizational units or employees endorses any product or services.  Each Party agrees to provide proposed press releases that reference or rely upon

 

 

	
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the work under this CRADA to the other Party for review and comment at least five (5) business days before publication.  Either Party may disclose the Title and Abstract of the CRADA to the public without the approval of the other Party.

 

13.11    Reasonable Consent.  Whenever a Party’s consent or permission is required under this CRADA, its consent or permission will not be unreasonably withheld.

 

13.12    Export Controls.  Collaborator agrees to comply with U.S. export law and regulations.  If Collaborator has a need to transfer any CRADA Materials made in whole or in part by ICD, or ICD Materials, or ICD’s Confidential Information to a person located in a country other than the United States, to an Affiliate organized under the laws of a country other than the United States, or to an employee of Collaborator in the United States who is not a citizen or permanent resident of the United States, Collaborator will acquire any and all necessary export licenses and other appropriate authorizations.

 

13.13    Entire Agreement.  This CRADA constitutes the entire agreement between the Parties concerning the subject matter of this CRADA and supersedes any prior understanding or written or oral agreement.

 

13.14    Survivability.  The provisions of Paragraphs 3.3, 3.4, 3.8, 4.2, 4.3, 5.3, 5.4, 6.1-9.2, 10.3-10.6, 11.1, 11.2, 12.1-12.3, 13.1-13.3, 13.7, 13.10 and 13.14 will survive the expiration or early termination of this CRADA.

 

 

SIGNATURES BEGIN ON THE NEXT PAGE

 

 

	
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PUBLIC HEALTH SERVICE

COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT

FOR EXTRAMURAL-PHS CLINICAL RESEARCH

 

 

SIGNATURE PAGE

 

ACCEPTED AND AGREED

 

BY EXECUTING THIS AGREEMENT, EACH PARTY REPRESENTS THAT ALL STATEMENTS MADE HEREIN ARE TRUE, COMPLETE, AND ACCURATE TO THE BEST OF ITS KNOWLEDGE.  COLLABORATOR ACKNOWLEDGES THAT IT MAY BE SUBJECT TO CRIMINAL, CIVIL, OR ADMINISTRATIVE PENALTIES FOR KNOWINGLY MAKING A FALSE, FICTITIOUS, OR FRAUDULENT STATEMENT OR CLAIM.

 

 

	
FOR ICD:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Douglas R. Lowy, M.D.
    	
 
    	
Dec. 10, 2010
    	
 
    
	
Douglas R. Lowy, M.D.
    	
 
    	
Date
    
	
Deputy Director, National Cancer Institute
    	
 
    	
 
    

 

 

 

	
FOR COLLABORATOR:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Bryan R. Leigh, MD
    	
 
    	
12/22/10
    	
 
    
	
Bryan R. Leigh, MD
    	
 
    	
Date
    
	
Chief Medical Officer, Tracon Pharmaceuticals, Inc.
    	
 
    	
 
    

 

 

	
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PUBLIC HEALTH SERVICE

COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT

FOR EXTRAMURAL-PHS CLINICAL RESEARCH

 

 

CONTACTS INFORMATION PAGE

 

CRADA Notices

 

	
For ICD:

 

Technology Transfer Center

6120 Executive Blvd., Suite 450

Rockville, MD 20852

Tel. 301-496-0477

Fax: 301-402-2117
    	
 
    	
For Collaborator:

 

Bryan Leigh, MD

Tracon Pharmaceuticals, Inc.

4510 Executive Drive, Suite 330

San Diego, CA 92121

Tel: 858-550-0780 x236

Fax: 858-550-0786
    

 

 

Patenting and Licensing

 

	
For ICD:

 

Division Director, Division of Technology Development and Transfer

NIH Office of Technology Transfer

6011 Executive Boulevard, Suite 325

Rockville, Maryland 20852-3804

Tel: 301-496-7057

Fax: 301-402-0220
    	
 
    	
For Collaborator (if separate from above):

 

Bryan Leigh, MD

Tracon Pharmaceuticals, Inc.

4510 Executive Drive, Suite 330

San Diego, CA 92121

Tel: 858-550-0780 x236

Fax: 858-550-0786
    

 

 

Delivery of Materials Identified In Appendix B (if any)

 

	
For ICD:

 

N/A
    	
 
    	
For Collaborator:

 

N/A
    

 

 

	
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PUBLIC HEALTH SERVICE

COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT

FOR EXTRAMURAL-PHS CLINICAL RESEARCH

 

 

SUMMARY PAGE

 

EITHER PARTY MAY, WITHOUT FURTHER CONSULTTON OR PERMISSON,
 RELEASE THIS SUMMARY PAGE TO THE PUBLIC.

 

TITLE OF CRADA:      Clinical Development of Tracon Pharmaceuticals, Inc.’s TRC105, an anti-CD105 antibody, as an Anti-Cancer Agent

 

	
PHS [ICD] Component:
    	
 
    	
National Cancer Institute
    
	
ICD CRADA Principal Investigators:
    	
 
    	
Drs. Kevin Conlon and Jeffrey Abrams
    
	
 
    	
 
    	
 
    
	
Collaborator:
    	
 
    	
Tracon Pharmaceuticals, Inc.
    
	
Collaborator CRADA Principal Investigator:
    	
 
    	
Dr. Bryan Leigh
    
	
Term of CRADA:
    	
 
    	
Five (5) years from the Effective Date
    

 

 

ABSTRACT OF THE RESEARCH PLAN:

Tracon Pharmaceuticals, Inc. and the Division of Cancer Treatment and Diagnosis of the National Cancer Institute have entered into a Cooperative Research and Development Agreement (“CRADA”) under which they will collaborate on the non-clinical and clinical development of TRC105, an anti-CD105 monoclonal antibody, as an anti-cancer-agent.

 

 

	
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Confidential
    	
 
    	
NCI – Tracon CRADA (NCI# 02663), Appendix A
    

 

APPENDIX A:  RESEARCH PLAN

 

Title of CRADA

 

Clinical Development of Tracon Pharmaceuticals, Inc.’s TRC105, an anti-CD105 antibody,

as an Anti-Cancer Agent

 

NCI Principal Investigators

Dr. Kevin Conlon

Dr. Jeffrey Abrams

 

Collaborator Principal Investigator

Dr. Bryan Leigh

 

Term of CRADA

Five (5) years from the Effective Date

 

1.                                    RESEARCH GOAL OF CRADA

 

The overall goal of this research project is to collaborate with Tracon Pharmaceuticals, Inc. (hereafter “Collaborator” or “Tracon”) on the non-clinical and clinical development of Collaborator’s proprietary investigational agent TRC105 (Investigational Agent), to demonstrate its safety and efficacy in patients with various types of cancers.  Throughout the Research Plan the terms Investigational Agent and TRC105 will be used interchangeably.

 

2.                                    SCIENTIFIC BACKGROUND

 

Tumors rely on angiogenesis to grow and metastasize, and angiogenesis inhibitors have demonstrated clinical benefit in patients with cancer.  CD105 is a member of the transforming growth factor beta (TGF-b) receptor family that is selectively expressed by proliferating endothelial cells and is essential for endothelial cell proliferation.  Expression of CD105 is induced by cellular hypoxia through hypoxia-inducible factor-1-.  CD105 is highly expressed on tumor vessel endothelium of all types of solid cancer and exerts its effect by modulating the signaling of multiple TGF-b receptor signaling complexes.  In the absence of CD105, TGF- b receptor activation inhibits endothelial cell proliferation and angiogenesis.  However, in the presence of CD105, TGF-b receptor signaling is modified to promote endothelial cell proliferation and angiogenesis.

 

3.                                    BACKGROUND AND CONTRIBUTIONS OF COLLABORATOR

 

Tracon Pharmaceuticals, Inc. is a biotechnology company developing targeted therapies for cancer.  The company seeks to address the unmet needs of cancer patients with product candidates that focus on cellular targets specifically implicated in cancer growth and angiogenesis.

 

Tracon has developed TRC105, an antiangiogenic monoclonal antibody directed against human CD105, also known as endoglin.  The antibody is a chimeric IgG1 kappa

 

 

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immunoglobulin with murine variable regions and human constant regions.  [...***...].

 

Tracon has conducted IND-enabling preclinical studies to evaluate TRC105 with regards to mechanism of action, safety, and efficacy.  In vitro, TRC105 inhibits endothelial cell proliferation, induces endothelial cell apoptosis, and potently engages antibody-dependent cell mediated cytotoxicity (ADCC).  TRC105 was well-tolerated by nonhuman primates in a Good Laboratory Practice (GLP) toxicology study.

 

Tracon has filed an IND and initiated a phase 1 first-in-human multicenter open-label dose-escalation trial of TRC105 in patients with advanced solid cancers for whom curative therapy is unavailable.  The primary objectives of the Tracon study are to characterize the safety profile of TRC105 as a monotherapy for solid cancers and to determine a recommended phase 2 dose.  Initial results have shown that TRC105 has a good safety profile and clinical activity.

 

Tracon is currently collaborating with the Center for Cancer Research, NCI under the terms of an intramural CRADA (NCI CRADA #2467) that is focused on the treatment of prostate cancer with TRC105.  NCI has initiated a phase 2 trial of TRC105 monotherapy in patients with castrate-resistant prostate cancer.

 

Additional clinical trials of TRC105 for the treatment of cancer are planned.  In collaboration with the Gynecologic Oncology Group, Tracon is preparing a phase 2 study of TRC105 monotherapy in recurrent epithelial ovarian cancer.  Tracon is also sponsoring a phase 1b study of TRC105 in combination with capecitabine for metastatic breast cancer at the [...***...].

 

4.                                    DESCRIPTION OF THE CRADA RESEARCH PLAN

 

The Division of Cancer Treatment and Diagnosis (DCTD), NCI and Collaborator are interested in the evaluation of Investigational Agent in a clinical development program that includes various tumor types.  DCTD will sponsor phase 1 and phase 2 clinical trials with the Investigational Agent that will help determine the safety, efficacy and the potential spectrum of Investigational Agent anti-tumor activity.  DCTD and Collaborator are also interested in evaluating Investigational Agent in combination with other novel investigational agents.

 

DCTD may also support intramural and extramural Non-Clinical Studies that focus on identifying assays for monitoring the biological activity of Investigational Agent, as well as studies for combination of Investigational Agent with other active anti-cancer agents.  These Non-Clinical Studies are aimed to support the clinical trials that will be conducted under the CRADA, and might involve convening a meeting of scientific experts and ultimately sponsoring core laboratories with expertise in the performance of appropriate assays with patient material.

 

In addition, DCTD may also support assay development via internal mechanisms (DCTD

 

***Confidential Treatment Requested

 

 

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Clinical Support Assays).  These assay development studies (described below) will be conducted using internal NCI resources and are intended to further the clinical development of Investigational Agent and provide information regarding targets and assay development to the broader research community.

 

5.                                    RESPECTIVE CONTRIBUTIONS OF THE PARTIES

 

A.                                Joint Responsibilities

 

1.                                    Steering Committee and Communication Plan

 

A Steering Committee will be employed by the Parties to exchange information and data and to discuss and to plan the proposed and ongoing clinical research.  The Steering Committee shall be composed of the CRADA Principal Investigators from both Parties.  In addition, other NCI and Collaborator staff with expertise in toxicology, pharmacology, pharmaceutical development, project management and other disciplines, as pertinent to the current development stage of the Investigational Agent at the time of the meeting, will be participating members.  Both Parties shall report regularly to the Steering Committee on the progress of the clinical research and development efforts covered by this CRADA, will review the current progress, and will make any required decisions.  The routes of communication, format of written minutes, etc. will be determined at the Steering Committee meetings and will be driven by the needs of the project.

 

The Steering Committee will function under the oversight of Co-Chairs, one from NCI and one from the Collaborator.  NCI’s Steering Committee Co-Chair will be appointed by the DCTD Division Director and report to the DCTD Division Director or his or her designee.  Steering Committee meeting minutes summarizing all key decisions and issues under discussion will be provided to all the Steering Committee members and to the DCTD Division Director within ten (10) days of each meeting.  Steering Committee decisions will be made by consensus.

 

In addition to the Steering Committee, a Project Team comprised of NCI and Collaborator scientific members will be assembled for the purpose of discussing the DCTD Clinical Support Assays.  This Project Team will be a collaborative body to approve projects described in Section 5C1 of this Appendix A which outlines the DCTD Clinical Support Assays.  This Project Team will be a collaborative body charged with the planning and successful execution of experimental objectives.  It is intended that study areas approved by the Project Team will be broad enough in scope to allow all necessary experiments to realize the goal of said research without further approval from the Project Team.  Submission of new projects/areas of inquiry will be addressed by the Project Teams within seven (7) days of receipt.  Disagreements between DCTD and Collaborator will be discussed by the Steering Committee and/or Project Team who may recommend a course of action.  In the event that Project Team is unable to reach consensus, it will be the Division Director’s responsibility to resolve any

 

 

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impasse.  The Division Director will confer with representatives of the Collaborator before making any decision.  Project Teams will meet quarterly, or more often if necessitated by results or submission of a new project/area of inquiry.

 

2.                                    The DCTD and Collaborator will explore the clinical utility of Investigational Agent for various cancers.  As sensitive tumor types are identified, it will be important to develop combinations of Investigational Agent and other active anti-cancer agents and to compare Investigational Agent and Investigational Agent combinations with standard therapy for these tumor types.  Adjuvant studies may be important in diseases where Investigational Agent has activity and where there is a high risk of recurrence following initial primary therapy.

 

3.                                    Both Parties shall collaborate in the collection and analysis of data generated under the Research Plan.

 

4.                                    Both Parties will work closely together to ensure that the clinical studies move forward expeditiously.

 

B.                                 Collaborator Responsibilities

 

[...***...]

 

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[...***...]

 

C.                                DCTD Responsibilities

 

1.                                    [...***...]

 

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[...***...]

 

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[...***...]

 

5.                                    Investigational Drug Steering Committee (IDSC)

 

The NCI Clinical Trials Working Group has mandated the formation of the Investigational Drug Steering Committee (IDSC).  The IDSC is designed to provide DCTD with broad external scientific and clinical input for the design and prioritization of phase 1 and phase 2 trials with agents for which CTEP sponsors an IND.  Membership of the IDSC includes the principal investigators of phase 1 U01 grants and phase 2 N01 contracts, representatives from the NCI Cooperative Groups, NCI staff members, and additional representatives with expertise in biostatistics, correlative science technologies, radiation oncology, etc., as well as patient advocates and community oncologists, as needed.  Experts with specific expertise will be included as ad hoc members for consideration of specific agents.  Periodically, the IDSC will assess, from a strategic perspective, CTEP investigational agent development plans, agent portfolios, and LOIs submitted by investigators to determine whether the clinical development plan for an agent should be modified.  When requested by CTEP, the IDSC will provide input on LOIs to assist in CTEP decision-making.  All participating members will be vetted for conflict of interest and are under confidentiality agreements with DCTD.

 

The IDS C is described in greater detail on p. 23 of the report of the Cancer Trials Working Group of National Cancer Advisory Board (http://integratedtrials.nci.nih.gov/ict/CTWG_report_June2005.pdf)

 

***Confidential Treatment Requested

 

 

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6.                                    The DCTD will evaluate each of the active studies as they progress to ensure that the appropriate questions are being addressed and to ensure that the studies are modified as required based on the developing data.  The DCTD will utilize its existing procedures and mechanisms to follow the clinical studies to ensure that all studies meet the pertinent FDA regulations.

 

6.                                    RELATED INTELLECTUAL PROPERTY AND OTHER RELATED AGREEMENTS OF THE PARTIES

 

NCI Patents and Patents Applications:

 

None

 

Tracon Patent Property Covering TRC105:

Tracon Pharmaceuticals has licensed the following patent applications from Health Research.  Health Research is not a Party to this CRADA.  [...***...]

 

Issued Patents

 

[...***...]

 

***Confidential Treatment Requested

 

 

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[...***...]

 

 

Patents Pending

 

 

[...***...]

 

***Confidential Treatment Requested

 

 

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Related Agreements between Parties:

 

A Confidential Disclosure Agreement, identified by NCI as CDA #7779, was executed on May 27, 2009 (“CDA”) to permit the exchange of information on two Tracon agents.  Upon execution of this CRADA, the CDA as it pertains to TRC105 is hereby superseded and succeeded by the terms of this CRADA as of the date of execution of this CRADA.

 

At the time of execution of this CRADA, there are no Material Transfer Agreements, Clinical Trial Agreements, or other Cooperative Research and Development Agreements or Materials Cooperative Research and Development Agreements related to this CRADA between the Parties.

 

 

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APPENDIX B

 

Financial and Staffing Contributions of the Parties

 

For NIH:

 

The NCI will conduct clinical and Non-Clinical Studies of Investigational Agent under its intramural and extramural research program, and DCTD Clinical Support Assays, as described in Appendix A.  The NCI estimates that one to three person-years per year of effort will be dedicated to its participation in the Non-Clinical Studies, DCTD Clinical Support Assays; clinical studies, Steering Committee meetings, updates to its IND, compiling data, and drug management and monitoring in support of the clinical trials.  PHS shall, in addition to its Principal Investigators provide sufficient staffing to execute and fulfill the obligations of the CRADA.

 

NCI will provide no funding to Collaborator for collaborative research and development pursuant to this CRADA, inasmuch as financial contributions by the U.S. government to non-Federal parties under a CRADA is prohibited under the Federal Technology Transfer Act of 1986 (15 U.S.C. 3710a(d)(1)).

 

For Collaborator:

 

Personnel:

 

Collaborator intends to commit one to three person-years per year of effort to permit the timely execution of the studies implemented under this CRADA.  More specifically, this staffing shall include Collaborator full-time employees, consultants to the company, external contract agencies and contract research organizations.  If Collaborator elects to perform any portion of the Research Plan through a contractor or consultant, Collaborator agrees to incorporate into such contract all provisions necessary to ensure that the work of such contractors or consultants is governed by the terms of the CRADA, including, but not limited to, the provision for the assignment of inventions of the contractor or consultant to Collaborator.

 

Investigational Agent:

 

Collaborator will provide to NCI, free of charge, bulk and formulated Investigational Agent in sufficient quantities to complete the studies, including Non-Clinical Studies, DCTD Clinical Support Assays and clinical studies, agreed pursuant to this CRADA.  Additionally, Collaborator will provide bulk and formulated Investigational Agent in sufficient quantities to complete any other studies sponsored by the NCI under this CRADA that are mutually agreeable to NCI and Collaborator.  Furthermore, Collaborator will provide Certificates of Analysis to NCI for each lot of finished product provided which verify the suitability of Investigational Agent for use in the scheduled DCTD Clinical Support Assays, Non-Clinical Studies or clinical trial Protocols.

 

 

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Clinical Data Collection Support Funding Directly to Contractors:

 

CTEP/DCTD utilizes the contract services of two companies for assistance in the monitoring of DCTD-sponsored clinical trials.  Collaborator will be responsible for making arrangements directly with the appropriate DCTD contractors to receive reports from DCTD-sponsored trials.  This will include quarterly reports, adverse event reports and summary reports.  The contractor for the phase 2 and 3 studies will provide these reports electronically in a format compatible with Collaborator’s database.  The NCI phase 1 contractor will also provide reports directly to Collaborator.  Contact information for each of the DCTD contractors will be provided as needed.  Collaborator will make payment arrangements as necessary directly with such contractor(s).

 

Collaborator may make only reasonable requests for access to CRADA Data and Raw Data or any other information that is in the possession of NCI Extramural Investigators.  The information will be provided according to a mutually agreed upon plan between the NCI, the Collaborator, and the NCI Extramural Investigator(s), and only in accordance with the guidelines and policies of the responsible Data Monitoring Committee.  Collaborator will be responsible for the costs associated with any unusually burdensome requests, such as a request that the data be provided in a format which is different than that normally collected.  Should Collaborator choose to review copies of patient research records, such a review will be at Collaborator’s expense and occur after notification and agreement of the NCI Extramural Investigators and only after all patient identifiers have been removed.

 

Funding to NCI:

 

(1)  CTEP/DCTD utilizes contract services for assistance in carrying out its responsibilities as a sponsor of clinical trials.  Collaborator agrees to provide $20,000.00 per year per phase 1 or phase 2 clinical trial during the term of the CRADA to supplement the CTEP/DCTD support contract costs and other reasonable and necessary expenses incurred by NCI in carrying out its responsibilities under this CRADA.  CTEP/DCTD plans to activate [...***...] phase 1 and/or 2 clinical trials per year during the five (5) year term of this CRADA using Investigational Agent.  Collaborator’s funding to support the clinical trials will be up to a maximum of $500,000 per year for the term of the CRADA.  Funding for studies in excess of the [...***...] clinical trials planned hereunder, and that could be active at the same time, will be by Amendment to the CRADA.  Further, funding for randomized phase 2 and phase 3 clinical trials may be negotiated by the Parties and added by Amendment to this CRADA.

 

(2)  Collaborator, at its discretion, may also provide up to $[...***...] per year during the term of the CRADA to support analytical assays, those focusing on identifying new assays for monitoring the biological activity of Investigational Agent, and correlative studies associated with clinical Protocols which are approved by both Parties and made a part of the Research Plan.  Such funds provided by Collaborator may be used for, but are not limited to, costs of tissue biopsies, including sample acquisition, storage and shipping costs.

 

(3)  Collaborator agrees to provide up to $5,000.00 per year for transportation and associated costs to support the participation of DCTD staff at selected scientific or development meetings, where such participation will substantially foster development of 

 

***Confidential Treatment Requested

 

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Investigational Agent.  Collaborator and DCTD must mutually agree to the activities that are appropriate under this Agreement. Travel costs are limited by the Federal Travel Rules and Regulations for all government staff whether paid for by government funds or CRADA funds.  Collaborator may provide direct support, under the 348 travel mechanism, for the travel and lodging costs for attendance of NCI staff at selected scientific or development meetings.  Both Collaborator and NCI must agree that the activities would be appropriate under this Agreement, and acceptance of Collaborator’s support of NCI’s participation in the activities will be contingent upon appropriate NCI approval.  Travel costs for such travel are also limited by the Federal Travel Rules and Regulations for all government staff whether paid for by government funds or Collaborators.

 

(4)  Collaborator also agrees to provide a one-time payment of $20,000.00 during the term of the CRADA to support regulatory filings by CTEP.

 

Collaborator’s payment schedule will be as follows:

 

At the end of each calendar year during the term of this CRADA, Collaborator will receive an invoice from NCI for funding to support activities (1) through (3) above.  Collaborator will make a payment in January of the following year.  The payment will be prorated for all studies activated or completed in the previous calendar year.  The one-time payment for $20,000 to support (4) above will be included in the invoice at the end of the year the CTEP IND is filed.

 

Any additional funding will not be added to this CRADA without an appropriate written executed Amendment pursuant to Article 13.6.

 

No funds provided under this CRADA by Collaborator will be used by NCI to pay the salary of full-time tenured federal employees.

 

Payment Information:

 

Checks for monies payable directly to the NCI should be made payable to the National Cancer Institute and addressed to:

 

Regulatory Affairs Branch

Attn: Dr. Sherry Ansher

National Cancer Institute

6130 Executive Blvd., Suite 7111

Rockville, MD 20852

 

All checks should be marked with a clear reference to the NCI CRADA Number, NCI CRADA #02663, and Title: “Clinical Development of TRACON Pharmaceuticals, Inc.’s TRC105, an anti-CD105 antibody, as an Anti-Cancer Agent.” Should NCI require electronic deposit of any monies payable under this CRADA, NCI agrees to provide Collaborator with the appropriate account information.

 

 

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Materials/Equipment Contributions:

 

NCI will not provide ICD Materials for use under this CRADA and Collaborator will not provide Collaborator Materials for use under this CRADA.  If NCI decides to provide ICD Materials for use under this CRADA, or if Collaborator decides to provide Collaborator Materials for use under this CRADA, those materials will be transferred under a cover letter that identifies them and states that they are being provided under the terms of the CRADA.  Collaborator will not provide capital equipment for use under this CRADA.

 

 

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APPENDIX C

 

Exceptions or Modifications to this CRADA

 

Additions and deletions within Articles of the Extramural Clinical Trial CRADA appear as underline and strikeout, respectively.

 

Article 1 is modified to read as follows:

 

Article 1.            Introduction

 

This CRADA between ICD and Collaborator will be effective when signed by the Parties, which are identified on both the Cover Page and the Signature Page (page 22).  The official contacts for the Parties are identified on the Contacts Information Page (page 23).  Publicly available information regarding this CRADA appears on the Summary Page (page 24).  The research and development activities that will be undertaken by ICD, ICD’s contractors or grantees, and Collaborator in the course of this CRADA are detailed in the Research Plan, attached as Appendix A.  The staffing, funding, and materials contributions of the Parties are set forth in Appendix B.  Any changes to the model CRADA are set forth in Appendix C.  An example of typical terms for a Material Transfer Agreement (“MTA”) for the transfer of Investigational Agent from NCI to NCI Extramural Investigators is attached as Appendix D.  For this Agreement, ICD means NCI.  Since CTEP and DCTD within the NCI are responsible for the Research Plan, ICD, NCI, DCTD and CTEP ma be used interchangeably in this Agreement when a specific program is responsible for an activity.

 

The following Article 2 Definitions are modified to read as follows:

 

“Clinical Data in ICD’s Possession and Control” means all Raw Data that ICD employees create directly; and all copies of Raw Data and Summary Data that ICD obtains from Clinical Investigators or contractors performing CRADA activities.

 

“CRADA Materials” means all tangible materials first produced in the performance of the Research Plan other than CRADA Data, Collaborator Materials, ICD Materials, or Test Article.  CRADA Materials do not include specimens collected from Human Subjects.

 

“Raw Data” means the primary quantitative and empirical data first collected from experiments and clinical trials conducted within the scope of this CRADA.  Raw Data includes case report forms and/or source documents.

 

“Test Article” means, in accordance with 21 C.F.R. § 50.3(j), any drug (including a biological product), medical device, food additive, color additive, electronic product, or any other article subject to regulation under the Federal Food, Drug, and Cosmetic Act that is intended for administration to humans or animals, including a drug or biologic as identified in the Research Plan and Appendix B, that is used within the scope of the Research Plan.  The Test Article may

 

 

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also be referred to as Investigational Agent, Study Material, or Study Product.  For this Agreement, Investigational Agent means TRC105.

 

Add the new Definitions to Article 2 as follows:

 

“Biomarker” means a biological marker that can be used to guide therapeutic administration of a drug, including, but not limited to: (i) predict whether or not a patient is likely to be sensitive or resistant to treatment with a certain therapeutic agent; or (ii) to guide any aspect of clinical practice (e.g. dosing, safety, efficacy and response).

 

“Contract” means a Funding Agreement that is a research and development mechanism that provides that the contractor perform for the benefit of the Government, with an expectation of completion of the stated research goals and the delivery of a report, data, materials or other product.  Generally, Contracts are administered under the Federal Acquisition Regulations (FAR) codified at Title 48 C.F.R., Chapter 1 or the Health Services Acquisition Regulations (HSAR) codified at Title 48 C.F.R., Chapter 3.

 

“Cooperative Agreement” means a Funding Agreement that is a species of a Grant, whereby the funding Federal agency intends to be substantially involved in carrying out the research program.

 

“CTA” means Clinical Trial Agreement.

 

“CTEP” means the Cancer Therapy Evaluation Program, DCTD, NCI, a program within NCI which plans, assesses and coordinates all aspects of clinical trials including extramural clinical research programs, internal resources, treatment methods and effectiveness, and compilation and exchange of data.

 

“DTP” means Developmental Therapeutics Program, DCTD, NCI, the program within the NCI which coordinates pre-clinical development of agents to be evaluated in DCTD-sponsored clinical trials.

 

“DCTD” means Division of Cancer Treatment and Diagnosis, NCI.

 

“DCTD Clinical Support Assays” means assays aimed at enhancing the understanding of the mechanism of action of Investigational Agent and its targets and optimizing DCTD’s clinical development program.  DCTD’s work may include such activities as the development of assays to detect target modulation, Biomarker studies, and pharmacodynamic analyses performed in conjunction with the NCI-sponsored clinical studies.  These studies will be performed by DCTD employees and contractors who are obligated to assign any and all intellectual property to the Public Health Service (PHS).  Although DCTD Clinical Support Assays are non-clinical in nature, for the purpose of this CRADA, they are treated separately from Non-Clinical Studies (defined below) as the approval process and oversight for DCTD Clinical Support Assays and Non-Clinical Studies are different.

 

 

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“Funding Agreement” means a Contract, Grant, or Cooperative Agreement entered into between a Federal agency and another party for the performance of experimental, developmental or research work funded in whole, or in part, by the Federal Government.

 

“Grant” means a Funding Agreement that is an award of financial assistance which may be provided for support of basic research in a specific field of interest to the funding Federal agency.

 

“Multi-Party Data” means data from studies sponsored by NCI pursuant to CTAs or CRADAs, where such data are collected under Protocols and Non-Clinical Studies involving combinations of investigational agents supplied from more than one CTA or CRADA collaborator.

 

“NCI” means the National Cancer Institute, National Institutes of Health, Department of Health and Human Services.

 

“NCI Intramural Investigator” means an investigator who is an NCI employee.

 

“NCI Extramural Investigator” means an investigator who is not an NCI employee and who is supported by NCI Funding Agreements.

 

“Non-Clinical Investigator” means any individual who conducts, directs, or assumes responsibility for Non-Clinical Studies Non-Clinical Investigators will include NCI Intramural and NCI Extramural investigators.

 

“NCI Investigator” includes any of NCI Intramural Investigator, NCI Extramural Investigator, Non-Clinical Investigator or an investigator who conducts the DCTD Clinical Support Assays.

 

“Non-Clinical Studies” means exploratory in vitro, in vivo, and ex vivo studies using defined biological models including cell lines, xenograft models, circulating tumor cells, normal tissue, blood and any of its components and shall include ancillary correlative studies, proof-of-mechanism and proof-of-principle assays, development of imaging techniques, and evaluation of target linkage.  Non-Clinical Studies may include studies using human materials derived from clinical trials (such as primary, metastatic, or circulating tumor cells, normal tissue, blood and any of its components).  This defined term shall be limited to studies under this CRADA.  Non-Clinical Studies can be performed by Clinical Investigators or Non-Clinical Investigators.  Non-Clinical Studies under this CRADA shall not include DCTD Clinical Support Assays.

 

“Protocol Review Committee” (or “PRC”) means the CTEP/DCTD committee that reviews and approves studies involving NCI investigational agents and/or activities supported by NCI.

 

 

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Article 3.7 is modified to read as follows:

 

3.7         Investigational New Drug Applications.

 

3.7.1     If an IND is required either ICD or Collaborator, DCTD, NCI, as indicated in the Research Plan, will prepare and submit an IND(s) and all Clinical Investigators participating in DCTD-sponsored clinical trials must have completed registration documents on file (1572 forms) with CTEP.

 

3.7.2     If ICD elects to file its own IND, To support the DCTD IND(s), Collaborator agrees to provide ICD DCTD background data and information necessary to support the IND(s).  Collaborator further agrees to provide a letter of cross-reference to all pertinent regulatory filings including an IND and/or DMF sponsored by Collaborator.  Collaborator’s employees will be reasonably available to respond to inquiries from the FDA regarding information and data contained in the Collaborator’s IND, DMF, other filings, or other information and data provided to ICD DCTD by the Collaborator pursuant to this Article 3.  If ICD DCTD has provided information or data to assist Collaborator in its IND filing, ICD DCTD will provide a letter of cross reference to its IND and respond to inquiries related to information provided by ICDDCTD, as applicable.

 

3.7.3     If Collaborator supplies Confidential Information to ICD DCTD in support of an IND filed by ICDDCTD, this information will be protected in accordance with the corresponding confidentiality provisions of Article 8.

 

3.7.4     Collaborator may sponsor its own clinical trials and hold its own IND for studies performed outside the scope of this CRADA.  These studies, however, should not adversely affect the ability to accomplish the goal of the Research Plan, for example, by competing for the same study population.  All data from those clinical trials are proprietary to Collaborator for purposes of this CRADA.  Collaborator will permit DCTD to review and use such data for regulatory purposes for DCTD-sponsored clinical trials which are performed under this CRADA.

 

3.7.5     In the event that Canadian institutions are participating on DCTD-sponsored clinical trials, Collaborator will need to assist in the submission of the regulatory documents to the Canadian Health Products and Food Branch to allow for such participation.  This may include a letter of cross-reference to an existing Clinical Trials Application or a DMF, including supporting documentation on the production of the Investigational Agent.  The forms and procedures for preparing Canadian Clinical Trials Application are available at http://www.hc-sc.gc.ca/dhp-

 

 

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mps/prodpharma/applic-demande/form/index-eng.php

 

3.7.6     In the event that other international Clinical Research Sites are participating on the NCI-sponsored protocols, Collaborator will assist the international participant in the submission of necessary regulatory documents to allow for such participation.  The international participant will work directly with the Collaborator to obtain the necessary regulatory documents.

 

Article 3.8 is modified to read as follows:

 

3.8       Test Article Investigational Agent Information and Supply.

 

3.8.1     Collaborator agrees to provide ICD DCTD without charge and on a schedule that will ensure adequate and timely performance of the research, a sufficient quantity of formulated and acceptably labeled, clinical-grade Test Article Investigational Agent (and, as required by the Protocol(s), Placebo) to complete the clinical trial(s) agreed to and approved under this CRADA.  Investigational Agent should be suitable for shipment to all countries and sites participating in DCTD-sponsored clinical trials.  DCTD does not maintain country-specific Investigational Agent supplies.  Collaborator will provide a Certificate of Analysis to ICD DCTD for each lot of the Test Article Investigational Agent provided.  It is understood that DCTD shall take responsibility for and reasonable steps to maintain appropriate records and assure appropriate supply, handling, storage, distribution and usage of these materials in accordance with the terms of this Agreement, the Protocol(s) and any applicable laws and regulations relating thereto.

 

3.8.2     Collaborator agrees to supply sufficient inventory to ensure adequate and timely supply of Investigational Agent for mutually agreed upon  Protocol(s).  DCTD will provide updated forecasts of amounts of Investigational Agent anticipated for ongoing and anticipated studies.  Collaborator further agrees to provide draft Investigational Agent labels to the NCI Pharmaceutical Management Branch (PMB) for review and agrees to reasonable labeling revisions to comply with DCTD label guidelines.  NCI NSC (National Service Center) numbers will be required to be on the label of Investigational Agent for all DCTD-sponsored clinical trials.

 

3.8.3     Furthermore, Collaborator agrees to provide without charge Investigational Agent or unformulated analytical grade Investigational Agent or metabolites, if available, to DCTD to supply to NCI Investigators

 

 

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for the development of mutually agreed upon Non-Clinical Studies such as analytical assays and ancillary correlative studies conducted in conjunction with DCTD-sponsored Protocols.  These studies will be approved by the PRC and conducted according to mutually approved clinical Protocols.

 

3.8.4     Collaborator agrees to allow Investigational Agent to be distributed to NCI Investigators for mutually agreeable Non-Clinical Studies designed to enhance the basic understanding and development of Investigational Agent.  These will include [...***...] and other pertinent requests.  Each study will be proposed by the NCI Investigator and will be approved by both the NCI and Collaborator.  All NCI Extramural Investigators will sign Material Transfer Agreements (MTAs) substantially in the form attached hereto as Appendix D that acknowledge the proprietary nature of the Investigational Agent to Collaborator and include intellectual property and publication provisions.

 

3.8.5     Collaborator agrees to provide Investigational Agent to DCTD for DCTD to conduct DCTD Clinical Support Assays aimed at enhancing the understanding of the mechanism of action of Investigational Agent and its targets and optimizing its clinical development program.

 

3.8.6     Collaborator agrees to provide to the PMB the Investigator’s Brochure (IB) for Investigational Agent and all subsequent revisions/editions.  In addition to being filed to the CTEP IND, the IB will be on file in the PMB and will be distributed to all investigators participating on a clinical trial using the Investigational Agent.  Distribution will be accompanied by a statement about the confidentiality of the document and it is anticipated that distribution will be electronic.  All electronic distribution will be done using Adobe Acrobat PDF.  Any IB received by the PMB that is not in this format will be converted before distribution.  Hard copy IBs should be sent to IB Coordinator, Pharmaceutical Management Branch, CTEP, DCTD, NCI, 6130 Executive Blvd, Room 7149, Rockville, MD 20852.  Electronic versions should be mailed to the IB Coordinator at IBCoordinator@mail.nih.gov.

 

Article 3.9 is modified to read as follows:

 

3.9         Test Article Investigational Agent Delivery and Usage.  Collaborator will ship the Test Article Investigational Agent and, if required, Placebo to ICD NCI or its designee in containers marked in accordance with 21 C.F.R. § 312.6. ICD NCI agrees that the Clinical Investigators will keep appropriate records and take reasonable steps to ensure 

 

***Confidential Treatment Requested

 

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Confidential
    	
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that the Test Article Investigational Agent is used in accordance with the Protocol(s) and applicable FDA regulations.  In addition, ICD NCI agrees that the Test Article Investigational Agent (and all Confidential Information supplied, by Collaborator relating to the Test Article Investigational Agent) will be used solely for the conduct of the CRADA research and development activities.  Furthermore, ICD NCI agrees that no analysis or modification of the Test Article Investigational Agent will be performed without Collaborator’s prior written consent.  At the completion of the Research Plan, any unused quantity of Test Article Investigational Agent will be returned to Collaborator or disposed as directed by Collaborator.  Pharmacy contacts at ICD or its designee will be determined by ICD and communicated to Collaborator.  The contact person for NCI will be Mr. Charles Hall, Chief, Pharmaceutical Management Branch (Telephone Number 301-496-5725) and the Collaborator contact will be Ms. Bonne Adams, Vice President, Clinical Operations (Telephone Number 858-550-0780 x228).

 

Article 3.10 is modified to read as follows:

 

3.10                    Auditing and Monitoring.

 

3.10.1        The Sponsor or its designee DCTD, NCI will be primarily responsible for monitoring clinical site Clinical Research Sites and for assuring the quality of all clinical data, unless otherwise stated in the Research Plan.  Monitoring Auditing will comply with the DCTD guidelines as described on the CTEP website at: http://ctep.info.nih.gov/branches/ctmb/clinicalTrials/monitoring_coop_coop_ctsu. htm. FDA Good Clinical Practice (International Conference on Harmonisation (ICH) E6: “Good Clinical Practice: Consolidated Guidance; 62 Federal Register 25, 691 (1997)).  The other Party may also perform quality assurance oversight.  The monitor will communicate significant Protocol violations and submit documentation of monitoring outcomes on Protocol insufficiencies to the other Party in a timely manner.  NCI clinical trials must be conducted in accordance with the FDA Good Clinical Practices (GCP).

 

3.10.2        Subject to the restrictions in Article 8 concerning IPI, and with reasonable advance notice and at reasonable times, ICD will permit seek permission for Collaborator or its designee(s) to access Clinical Research Sites toclinical site(s) to monitor audit the conduct of the research at times convenient to Clinical Research Sites, and to obtain updates on ongoing clinical trials.  Collaborator may also make arrangements with ICD as well as to audit source documents containing Raw Data, at the completion of a Protocol and at Collaborator’s expense, to the extent necessary to verify compliance with FDA Good Clinical Practice and the Protocol(s).

 

Article 3.11 is modified to read as follows:

 

3.11                    FDA Meetings/Communications.  All formal meetings with the FDA concerning any

 

 

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clinical trial within the scope of the Research Plan will be discussed by Collaborator and ICD in advance.  Each Party reserves the right to take part in setting the agenda for, to attend, and to participate in these meetings.  The Sponsor will provide the other Party with copies of FDA meeting minutes, all transmittal letters for IND submissions, IND safety reports, formal questions and responses that have been submitted to the FDA, Annual Reports, and official FDA correspondence, pertaining either to the INDs under this CRADA or to the Clinical Investigators on Protocols performed in accordance with the Research Plan, except to the extent that those documents contain the proprietary information of a third party or dissemination is prohibited by law.

 

Add a new Article 3.12 as follows:

 

3.12                    Steering Committee and CRADA Research.  The Parties agree to establish a Steering Committee comprising at least the CRADA Principal Investigators to conduct and monitor the proposed and ongoing clinical studies and non-clinical research of the Investigational Agent in accordance with the CRADA Research Plan.  Members of the Steering Committee shall continue to remain employed by their respective employers under their respective terms of employment.

 

In addition to the Steering Committee, a Project Team comprised of NCI and Collaborator scientific members will be assembled for the purpose of discussing the DCTD Clinical Support Assays.  This Project Team will be a collaborative body to approve projects described under “Respective Contributions of the Parties” of Appendix A of this CRADA which outlines the DCTD Clinical Support Assays.  Manuscripts and presentations related to these studies will be handled in accordance with Article 8.7 of this CRADA.

 

Additional CRADA information, including Steering Committee meeting reports, Protocol Review Committee records, clinical Protocols, IND and general regulatory information, and non-clinical and clinical data in NCI’s possession and control shall remain on file with NCI.

 

Article 4.2 is modified to read as follows:

 

4.2                            Final Research and Development Reports.  The Parties will exchange final reports of their results within six (6) months after the expiration or termination of this CRADA.  These reports will set forth the technical progress made; any publications arising from the research; and the existence of invention disclosures of potential CRADA Subject Inventions and/or any corresponding Patent Applications.  Abstracts and publications provided to CTEP by investigators and further provided by CTEP to Collaborator will fulfill this final report obligation.  With respect to clinical studies, a copy of the IND Annual Report will also fulfill this reporting obligation.

 

 

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Article 4.4 is modified to read as follows:

 

4.4                            Safety Reports.  In accordance with FDA requirements, the Sponsor will establish and maintain records and submit safety reports to the FDA, as required by 21 C.F.R. § 312.32 and 21 C.F.R. 812.150(b)(1), or other applicable regulations.  In the conduct of research under this CRADA, the Parties will comply with specific ICD guidelines and policies for reporting ADEs and AEs, as well as procedures specified in the Protocol(s).  The Sponsor must provide the other Party with copies of all Safety Reports concurrently with their submission to the FDA, and with any other information affecting the safety of Human Subjects in research conducted under this CRADA.  DCTD shall report all serious and unexpected possible, probable and definite Adverse Events to FDA in accordance with the reporting obligations of 21 CFR 312.32 and will, within 24 to 48 hours of notification to FDA, forward all such reports to Collaborator.  All other Adverse Event reports received by DCTD shall be reported to the FDA consistent with 21 CFR 312.32 and 312.33.  In the event that Collaborator informs the FDA of any serious and/or unexpected Adverse Events, Collaborator must notify the NCI at the same time by sending the reports to CTEPSupportAE@tech-res.com.  NCI will then notify the Clinical Investigator(s) conducting studies under DCTD-sponsored Protocols, if appropriate.

 

Article 4.5 is modified to read as follows:

 

4.5                            Annual Reports.  The Sponsor DCTD will provide the other Party Collaborator a copy of the Annual Report concurrently with the submission of the Annual Report to the FDA.  Annual Reports will be kept confidential in accordance with Article 8.  Collaborator will provide DCTD with a copy of its Annual Report to the FDA if Collaborator is sponsoring studies of Investigational Agent under its own IND.

 

Article 6.1 is modified to read as follows:

 

6.1                            Ownership of CRADA Subject Inventions, CRADA Data, and CRADA Materials.  Subject to the Government license described in Paragraph 7.5, the sharing requirements of Paragraph 8.1 and the regulatory filing requirements of Paragraph 8.2, the producing Party will retain sole ownership of and title to all CRADA Subject Inventions, all copies of CRADA Data, and all CRADA Materials produced solely by its employee(s).  The Parties will own jointly all CRADA Subject Inventions invented jointly and all CRADA Materials developed jointly.  A PHS contractor’s or grantee’s rights in data it generates will not be affected by this CRADA.  The Parties acknowledge that certain ICD contractors, including those who may perform DCTD Clinical Support Assays, are obligated to assign any and all intellectual property to NIH.

 

Article 7.2 is modified to read as follows:

 

7.2                            Collaborator’s License Option to CRADA Subject Inventions.  With respect to Government rights to any CRADA Subject Invention made solely by an ICD employee(s)

 

 

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or made jointly by an ICD employee(s) and a Collaborator employee(s) for which a Patent Application was filed, PHS hereby grants to Collaborator (i) an irrevocable, perpetual, paid-up, nonexclusive, nontransferable, royalty free, world-wide license under PHS’ interest in such CRADA Subject Invention, for internal research and development purposes (including clinical trials) only related to the Investigational Agent; and (ii) an exclusive option to elect an exclusive, or co-exclusive, if applicable, or nonexclusive commercialization license.  The option to elect a co-exclusive license shall apply when a CRADA Subject Invention is also a CRADA Subject Invention under another CRADA resulting from mutually agreed upon studies as described in Article 8.9 and the field of use of this co-exclusive license shall be to the use of the combination of the Investigational Agent with another agent(s) commensurate with the scope of the Research Plan.  The license will be substantially in the form of the appropriate model PHS license agreement and will fairly reflect the nature of the CRADA Subject Invention, the relative contributions of the Parties to the CRADA Subject Invention and the CRADA, a plan for the development and marketing of the CRADA Subject Invention, the risks incurred by Collaborator, and the costs of subsequent research and development needed to bring the CRADA Subject Invention to the marketplace.  The field of use of the license will not exceed the scope of the Research Plan.

 

Article 7.6 is modified to read as follows:

 

7.6                            Third Party License.  Pursuant to 15 U.S.C. § 3710a(b)(1)(B), if PHS grants Collaborator an exclusive, or co-exclusive, license to a CRADA Subject Invention made solely by an ICD employee or jointly with a Collaborator employee, the Government will retain the right to require Collaborator to grant to a responsible applicant a nonexclusive, partially exclusive, or exclusive sublicense to use the CRADA Subject Invention in Collaborator’s licensed field of use on terms that are reasonable under the circumstances; or, if Collaborator fails to grant a license, to grant a license itself.  The exercise of these rights by the Government will only be in exceptional circumstances and only if the Government determines (i) the action is necessary to meet health or safety needs that are not reasonably satisfied by Collaborator, (ii) the action is necessary to meet requirements for public use specified by federal regulations, and such requirements are not reasonably satisfied by Collaborator; or (iii) Collaborator has failed to comply with an agreement containing provisions described in 15 U.S.C. § 3710a(c)(4)(B).  The determination made by the Government under this Paragraph is subject to administrative appeal and judicial review under 35 U.S.C. § 203(2).

 

Paragraph 1 of Article 8.2 is modified to read as follows: .

 

8.2                            Use of CRADA Data and CRADA Materials.  The Parties will be free to utilize CRADA Data and CRADA Materials internally for their own purposes, consistent with their obligations under this CRADA.  ICD may share CRADA Data or CRADA Materials with any contractors, grantees, or agents it has engaged to conduct the CRADA research and development activities, provided the obligations of this Article 8.2 are

 

 

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simultaneously conveyed.  Collaborator may share CRADA Data or CRADA Materials with any contractors, Affiliates, development partners or agents it has engaged to conduct the CRADA research and development activities, provided the obligations of this Article 8.2 are simultaneously conveyed.  Collaborator shall not transfer CRADA Data to any third party other than those set forth in this section without the written permission of the NCI.  Following NCI’s permission, Collaborator and such third party shall enter into a Confidential Disclosure Agreement with confidentiality terms at least as stringent as those set forth herein.  Collaborator can then transfer the CRADA Data to such third party.

 

Article 8.6 is modified to read as follows:

 

8.6                            Duration of Confidentiality Obligation.  The obligation to maintain the confidentiality of Confidential Information will expire at the earlier of the date when the information is no longer Confidential Information as defined in Article 2 or [...***...] years after the expiration or termination date of this CRADA, except for IPI, for which the obligation to maintain confidentiality will extend indefinitely.  Collaborator may request an extension to this term when necessary to protect Confidential Information relating to products not yet commercialized.

 

Article 8.7 is modified to read as follows:

 

8.7                            Publication.  The Parties are encouraged to make publicly available the results of their research and development activities.  However, Collaborator will not publish or publically disclose any CRADA Data provided by NCI under the CRADA without NCI’s permission.  Before either Party Collaborator or NCI submits a paper or abstract for publication or otherwise intends to publicly disclose information about a CRADA Subject Invention, CRADA Data, or CRADA Materials, the other Party will have thirty (30) days to review proposed manuscripts and three (3) days to review proposed abstracts to assure that Confidential Information is protected.  Either Party may request in writing that the a proposed publication or other disclosure be delayed for up to thirty (30) additional days as necessary to file a Patent Application.  Manuscripts to be submitted for publication by NCI investigators will be sent to NCI’s Regulatory Affairs Branch [NCICTEPpubs@mail.nih.gov] for forwarding to Collaborator for review as soon as they are received and in compliance with the timelines outlined above.  Abstracts to be presented by NCI Investigators will be sent to NCI’s Regulatory Affairs Branch [NCICTEPpubs@mail.nih.gov] for forwarding to Collaborator as soon as they are received, preferably no less than three (3) days prior to submission, but prior to presentation or publication, to allow for preservation of U.S. or foreign patent rights.

 

Article 8.8 is modified to read as follows:

 

8.8                            Clinical Investigators’ and Non-Clinical Investigators’ Research and Development Activities.  In pursuing the development of Investigational Agent pursuant to this

 

***Confidential Treatment Requested

 

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CRADA, NCI may utilize contractors and extramural investigators that are not NCI employees for part or all of the completion of this Research Plan, which may cover Non-Clinical Studies and clinical studies, through Funding Agreements and other agreements.  Participation in DCTD-sponsored clinical trials by these investigators shall be determined after competitive solicitation and review of Protocol Letters of Intent (LOIs) and study protocols by CTEP, NCI.  All Funding Agreements and other agreements for the conduct of extramural Non-Clinical Studies and clinical trials will include the Intellectual Property Option to Collaborator Terms of Award Addition (including any updates), offering Collaborator first rights of negotiation to extramural Inventions (web site: http://ctep.cancer.gov/industryCollaborations2/intellectual_property.htm).  Although this CRADA does not grant to Collaborator any rights to Inventions made or Raw Data generated by ICD’S NCI’s contractors or grantees Extramural Investigators, as they are not parties to this CRADA, ICD NCI agrees that:

 

8.8.1                Subject to the other provisions of Article 8 of this CRADA, ICD will maintain, to the extent permitted by law, all Clinical Data in ICD’s Possession and Control as Confidential Information, and make them available to Collaborator for its own use and for exclusive use in obtaining regulatory approval for the commercial marketing of Test Article and related CRADA Subject Inventions.

 

8.8.1 2    With regard to Collaborator’s Confidential Information, ICD NCI will require the Clinical NCI Extramural Investigators to agree to confidentiality provisions at least as restrictive as those provided in this CRADA and to Collaborator’s use of data in accordance with Paragraph 8.8.1 for obtaining regulatory approval for marketing Test Article Investigational Agent.

 

8.8.2 3    If Collaborator wants access to Raw Data or any other data in the possession of the Clinical NCI Extramural Investigators working with Test Article Investigational Agent under a Funding Agreement or other agreements, Collaborator must first contact the CRADA PI Regulatory Affairs Branch (RAB), CTEP, NCI [Telephone 301-496-7912; anshers@mail.nih.gov].  Subsequent to authorization by RAB, Collaborator may directly contact the NCI Investigators.  Collaborator will bear any costs associated with Raw Data provided in formats customized for Collaborator, which costs will be paid by Collaborator directly to the NCI Investigators.  Collaborator’s access to Raw Data is only for regulatory purposes.

 

8.8.34        Collaborator’s right to access Clinical Data in ICD’s Possession and Control under Paragraph 8.8 is dependent upon Collaborator’s continued development and commercialization of Investigational Agent.  If Collaborator fails to continue development or commercialization of Investigational Agent without the transfer of its development efforts to another party within [...***...] days of discontinuation, ICD NCI has the right to make Clinical CRADA Data in ICD’s Possession and Control and Raw Data available to a third party.

 

***Confidential Treatment Requested

 

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Add a new Article 8.9 as follows:

 

8.9                            Multi-Party Data Rights.  For clinical Protocol(s) and Non-Clinical Study(ies) where Investigational Agent is used in combination with another investigational agent supplied to NCI pursuant to a CTA or CRADA between NCI and an entity not a Party to this CRADA [hereinafter referred to as “Third Party”], the access and use of Multi-Party Data by the Collaborator and Third Party shall be co-exclusive as follows:

 

8.9.1                NCI will provide both Collaborator and Third Party with notice regarding the existence and nature of the agreements governing their collaborations with NIH, the design of the proposed combination Protocol(s) or Non-Clinical Study(ies), and the existence of any obligations that might restrict NCI’s participation in the proposed combination Protocols or Non-Clinical Study(ies).

 

8.9.2                Collaborator shall agree to permit use of the Multi-Party Data from these trials by Third Party to the extent necessary to allow Third Party to develop, obtain regulatory approval for, or commercialize its own investigational agent(s).  However, this provision will not apply unless Third Party also agrees to Collaborator’s reciprocal use of Multi-Party Data.

 

8.9.3                Collaborator and Third Party must agree in writing prior to the commencement of the combination Protocol(s) or Non-Clinical Study(ies) that each will use the Multi-Party Data solely for the development, regulatory approval, and commercialization of its own investigational agent(s).

 

Add a new Article 8.10 as follows:

 

8.10                    Access, review and receipt of Identifiable Private Information.  Collaborator access to and review of Identifiable Private Information shall be only for on-site quality auditing.  Collaborator will receive Identifiable Private Information only if necessary for purposes of satisfying FDA or other health authorities’ reporting requirements, and for internal research purposes, directly related to obtaining regulatory approval of Investigational Agent.  Collaborator is prohibited from access, review, receipt, or use of such information for other purposes.  All IRB approved Protocols and informed consent documents related to this CRADA will clearly describe this practice.  If the Collaborator will have access to Identifiable Private Information, the Protocol and the informed consent must clearly state (i) the existence of the Collaborator; (ii) the Collaborator’s access to Identifiable Private Information, if any; and (iii) the extent to which confidentiality will be maintained.  For clinical Protocol(s) involving a Third Party, the other party’s access, review, receipt, or use of Identifiable Private Information shall be subject to the same limitations as described in this Article 8.10.

 

 

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Article 10.5 is modified to read as follows:

 

10.5                    New Commitments.  Neither Party will incur new expenses related to this CRADA after expiration, mutual termination, or a notice of a unilateral termination and will, to the extent feasible, cancel all outstanding commitments and contracts by the termination date.  Collaborator acknowledges that ICD will have the authority to retain and expend any funds for up to [...***...] subsequent to the expiration or termination date to cover any unpaid costs obligated during the term of the CRADA in undertaking the research and development activities set forth in the Research Plan.

 

Article 10.6 is modified to read as follows:

 

10.6                    Collaborator Failure to Continue Development.  If Collaborator suspends development of the Test Article Investigational Agent without the transfer of its active development efforts, assets, and obligations to a third party within [...***...] days of discontinuation, Collaborator agrees that ICD may continue developing the Test Article Investigational Agent.  In that event, the following will apply:

 

10.6.1        Collaborator agrees to transfer to ICD all information necessary to enable ICD to contract for the manufacture of the Test Article Investigational Agent and, unless abandoned for reasons relating to safety as determined by the data safety monitoring board, to provide the Test Article Investigational Agent (and Placebo, if any) in Collaborator’s inventory to ICD or arrange for an independent contractor to manufacture and provide Investigational Agent to NCI for (i) [...***...] years or (ii) until [...***...].

 

10.6.2        Further, Collaborator hereby grants to ICD a nonexclusive, irrevocable, world-wide, paid-up license to practice, or have practiced for or on behalf of the Government, any Background Invention that Collaborator may currently have or will obtain on the Test Article Investigational Agent, its manufacture, or on any method of using the Test Article Investigational Agent for the indication(s) described in the Research Plan, including the right to sublicense to third parties.

 

Article 13.7 is modified to read as follows:

 

13.7                    Assignment.  Neither this CRADA nor any rights or obligations of any Party hereunder shall be assigned or otherwise transferred by either Party without the prior written consent of the other Party.  The Collaborator acknowledges the applicability of 41 U.S.C. § 15, the Anti Assignment Act, to this Agreement.  The Parties agree that the identity of the Collaborator is material to the performance of this CRADA and that the duties under this CRADA are nondelegable.  Collaborator shall have the right to assign this Agreement to its Affiliates.

 

***Confidential Treatment Requested

 

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Article 13.9 is modified to read as follows:

 

13.9                    Independent Contractors.  The relationship of the Parties to this CRADA is that of independent contractors and not agents of each other or joint venturers or partners.  Each Party will maintain sole and exclusive control over its personnel and operations.  If Collaborator elects to perform any portion of the Research Plan through a contractor or consultant, Collaborator agrees to incorporate into such contract all provisions necessary to ensure that the work of such contractor or consultants is governed by the terms of the CRADA, including, but not limited to a provision for the assignment of Inventions of the contractor or consultant to the Collaborator.

 

In conducting a portion of the CRADA research, it may be necessary for NCI to utilize the services of NCI’s contractors or subcontractors.  As described in Article 8.8, certain contractors perform under Funding Agreements, which include an Intellectual Property Option to Collaborator Terms of Award Addition offering Collaborator first rights of negotiation to extramural Inventions (web site: http://ctep.cancer.gov/industryCollaborations2/intellectual_property.htm).

 

Other NCI contractors or subcontractors, including those performing the DCTD Clinical Support Assays, may be subject to a Determination of Exceptional Circumstances (35 U.S.C. § 202(a)(ii)), through which their rights in Inventions made using the Investigational Agent are assigned to the Government.  Such Inventions are then subject to the terms of this CRADA.

 

Article 13.12 is modified to read as follows:

 

13.12            Export Controls.  Collaborator agrees to comply with U.S. export law and regulations, including 21 U.S.C. 382 and 21 CFR Part 312.110.  If Collaborator has a need to transfer any CRADA Materials made in whole or in part by ICD, or ICD Materials, or ICD’s Confidential Information to a person located in a country other than the United States, to an Affiliate organized under the laws of a country other than the United States, or to an employee of Collaborator in the United States who is not a citizen or permanent resident of the United States, Collaborator will acquire any and all necessary export licenses and other appropriate authorizations.

 

Article 13.13 is modified to read as follows:

 

13.13            Entire Agreement.  This CRADA constitutes the entire agreement between the Parties concerning the subject matter of this CRADA and supersedes any prior understanding or written or oral agreement., including, without limitation, the Confidential Disclosure Agreement (CDA) executed by the Parties on May 27, 2009 (NCI CDA# 07779) that will expire on May 26, 2014.  Upon execution of this CRADA, the CDA, as it pertains to TRC105, is hereby superseded and succeeded by the terms of this CRADA.

 

 

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Article 13.14 is modified to read as follows:

 

13.14            Survivability.  The provisions of Paragraphs 3.3, 3.4, 3.8, 4.2, 4.3, 4.4, 5.3, 5.4, 6.1-9.2, 10.3-10.6, 11.1, 11.2, 12.1-12.3, 13.1-13,3, 13.7, 13.10 and 13.14 will survive the expiration or early termination of this CRADA.

 

 

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APPENDIX D

 

MATERIAL TRANSFER AGREEMENT

 

Provider:                                       Division of Cancer Treatment and Diagnosis, National Cancer Institute

 

Recipient:                                 University School of Medicine

 

Recipient’s Investigator:  Dr. John Doe, Ph.D., as an employee of the University School of Medicine

 

1.            Provider agrees to transfer to Recipient’s Investigator the following Research Material:

 

1.0 mg of Agent X (NSC 00000), an agent proprietary to Company A, Inc. (Company)

 

2.            THIS RESEARCH MATERIAL MAY NOT BE USED IN HUMANS.  The Research Material will only be used for research purposes by Recipient’s Investigator in his/her laboratory, for the Research Project described below, under suitable containment conditions.  This Research Material will not be used by for-profit recipients for screening, production or sale, for which a commercialization license may be required.  Recipient agrees to comply with all Federal rules and regulations applicable to the Research Project and the handling of the Research Material.

 

2(a).                   Is Research Material of human origin?

 

            Yes

            No

 

2(b).                  If yes in 2(a), was Research Material collected according to 45 CFR Part 46, “Protection of Human Subjects”?

 

            Yes (Please provide Assurance Number: _____________)

            No

            Not Applicable (brief explanation......)

 

3.            This Research Material will be used by Recipient’s Investigator solely in connection with the following research project (“Research Project”) described with specificity as follows (use an attachment page if necessary):

 

For example:  This Research Material will be used for preclinical studies investigating the effects of the Research Material in a cancer cell line.

 

3(a).                   Are any materials used in the Research Project of human origin?

 

            Yes

            No

 

3(b).      If yes in 3(a), were human-origin materials collected according to 45 CFR Part 46, “Protection of Human Subjects”?

 

            Yes (Please provide Assurance Number: _                           )

            No

 

 

	
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            Not Applicable (brief explanation......)

 

4.            In all oral presentations or written publications concerning the Research Project, Recipient will acknowledge Provider’s or Company’s contribution of this Research Material unless requested otherwise.  To the extent permitted by law, Recipient agrees to treat in confidence, for a period of [...***...] years from the date of its disclosure, any of Provider’s or Company’s written information about this Research Material that is stamped “CONFIDENTIAL,” except for information that was previously known to Recipient or that is or becomes publicly available or which is disclosed to Recipient without a confidentiality obligation.  Any oral disclosures to Recipient shall be identified as being CONFIDENTIAL by written notice delivered to Recipient within thirty (30) days after the date of the oral disclosure.  Recipient may publish or otherwise publicly disclose the results of the Research Project, but if CONFIDENTIAL information has been given to Recipient, such public disclosure may be made only after Provider and Company have had thirty (30) days to review the proposed disclosure to determine if it includes any CONFIDENTIAL information, except when a shortened time period under court order or the Freedom of Information Act pertains.  The publication or other disclosure shall be delayed for up to an additional thirty (30) days upon written request by either Provider or Company as necessary to preserve U.S. or foreign patent or other intellectual property rights. Abstracts must also be sent to Provider who will forward them to Company for courtesy notification after submission but prior to presentation or publication.

 

5.            This Research Material is proprietary to Company.  Company has agreed to allow NCI to make their proprietary compound available for this Research Project.  Recipient’s Investigator agrees to retain control over this Research Material and further agrees not to transfer the Research Material to other people not under her or his direct supervision without advance written approval of Provider.  When the Research Project is completed, the Research Material will be disposed of, if directed by Provider.

 

6.            This Research Material is provided as a service to the research community.  IT IS BEING SUPPLIED TO RECIPIENT WITH NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.  Provider makes no representations that the use of the Research Material will not infringe any patent or proprietary rights of third parties.

 

7.            Recipient shall retain title to any patent or other intellectual property rights in inventions made by its employees in the course of the Research Project.  Recipient agrees not to claim, infer, or imply endorsement by the Government of the United States of America (hereinafter referred to as “Government”) of the Research Project, the institution or personnel conducting the Research Project or any resulting product(s).  Unless prohibited by law from doing so, Recipient agrees to hold the Government harmless and to indemnify the Government for all liabilities, demands, damages, expenses and losses arising out of Recipient’s use for any purpose of the Research Material.

 

8.            The undersigned Provider and Recipient expressly certify and affirm that the contents of any statements made herein are truthful and accurate.

 

9.            This MTA shall be construed in accordance with Federal law as applied by the Federal courts in the District of Columbia.

 

10.    Results of the Research Project shall be provided to the Provider.  Publications shall be provided to Provider and Company as described in Article 4.

 

***Confidential Treatment Requested

 

 

	
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11.    Recipient (“Institution”) agrees to notify Provider and Company upon the filing of any patent applications related to research with this Research Material under this Agreement and abide by the following terms of the Intellectual Property Option to Collaborator:

 

Institution agrees to promptly notify the Provider (NCI) and Company in writing of any inventions, discoveries or innovations made by the Recipient’s Investigator or any other employees or agents of Institution, whether patentable or not, which are conceived or first actually reduced to practice in the performance of this Research Project using Company’s Research Material (hereinafter “Institution Inventions”).

 

Institution agrees to grant to Company: (i) a paid-up nonexclusive, nontransferable, royalty-free, world-wide license to all Institution Inventions for research purposes only; and (ii) a time-limited first option to negotiate an exclusive or co-exclusive, if applicable, world-wide royalty-bearing license for all commercial purposes, including the right to grant sub-licenses, to all Institution Inventions on terms to be negotiated in good faith by Company and Institution.  Company shall notify Institution, in writing, of its interest in obtaining an exclusive or co-exclusive license to any Institution Invention within [...***...] months of Company’s receipt of written notice of such Institution Invention(s).  In the event that Company fails to so notify Institution, or elects not to obtain an exclusive or co-exclusive license, then Company’s option shall expire with respect to that Institution Invention, and Institution will be free to dispose of its interests in such Institution Invention in accordance with Institution’s policies.  If Institution and Company fail to reach agreement within [...***...] days, (or such additional period as Company and Institution may agree) on the terms for an exclusive or co-exclusive license for a particular Institution Invention, then for a period of [...***...] months thereafter Institution shall not offer to license the Institution Invention to any third party on materially better terms than those last offered to Company without first offering such terms to Company, in which case Company shall have a period of [...***...] days in which to accept or reject the offer.

 

Institution agrees that notwithstanding anything herein to the contrary, any inventions, discoveries or innovations, whether patentable or not, which are not Subject Inventions as defined in 35 USC 201(e),* arising out of any unauthorized use of the Research Material and/or any modifications to the Research Material, shall be the property of Company (hereinafter “Company Inventions”).  Institution will promptly notify Company in writing of any such Company Inventions and, at Company’s request and expense, Institution will cause to be assigned to Company all right, title and interest in and to any such Company Inventions and provide Company with reasonable assistance to obtain patents (including causing the execution of any invention assignment or other documents)**: Institution may also be conducting other more basic research using the Research Material under the authority of a separate Material Transfer Agreement (MTA), or other such agreement with Company.  Inventions arising thereunder shall be subject to the terms of the separate MTA, and not to this clause.

 

* 35 USC 201 (e): The term “Subject Invention” means any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement, provided that in the case of a variety of plant, the date of determination (as defined in section 41(d) (FOOTNOTE 1) of the Plant Variety Protection Act (7 U.S.C. 2401(d))) must also occur during the period of contract performance.

 

**Assignment of such Company Inventions by Institution shall be in accordance with any approvals required by 35 USC 202 (c)(7).

 

***Confidential Treatment Requested

 

 

	
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12.    This Agreement shall terminate two (2) years from the date of the last signature below.

 

Signatures Begin on Next Page

 

 

	
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SIGNATURES

 

	
 
    	
RECIPIENT
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Date
    	
 
    	
 
    	
John Doe, Ph.D.
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Date
    	
 
    	
 
    	
Authorized Signature for Recipient and Title
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Recipient’s Official and Mailing Address:
    
	
 
    	
 
    
	
 
    	
John Doe, Ph.D.
    
	
 
    	
Associate Professor
    
	
 
    	
Department of Biochemistry
    
	
 
    	
University School of Medicine
    
	
 
    	
City, State, Zip
    
	
 
    	
Phone:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NATIONAL CANCER   INSTITUTE
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Date
    	
 
    	
 
    	
Sherry Ansher, Ph.D.
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Associate Chief, Agreement Coordination Group
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Date
    	
 
    	
 
    	
Laurie Whitney, Ph.D.
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Supervisory Technology Transfer Specialist Technology Transfer   Center, NCI
    	
 
    

 

Please address all correspondence related to this agreement to Sally Hausman at the following address by express mail:

 

Sally Hausman

Senior Specialist, Research and Development Agreements

Regulatory Affairs Branch

Cancer Therapy Evaluation Program

Executive Plaza North, Suite 7111

6130 Executive Blvd.

Rockville, MD 20852-7181

 

Any false or misleading statements made, presented, or submitted to the Government, including any relevant omissions, under this Agreement and during the course of negotiation of this Agreement are subject to all applicable civil and criminal statutes including Federal statutes 31 U.S.C. §§ 3801-3812 (civil liability) and 18 U.S.C. § 1001 (criminal liability including fine(s) and/or imprisonment).

 

 

	
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