Document:

Exhibit 10.11

 

***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.

 

 

 

LICENCE AGREEMENT

 

 

between

 

 

LONZA SALES AG

 

 

and

 

TRACON PHARMACEUTICALS INC

 

 

 

INDEX

 

 

 

	
ARTICLE
    	
TITLE
    	
 
    	
PAGE
    
	
 
    	
 
    	
 
    	
 
    
	
1.
    	
Definitions
    	
 
    	
 
    
	
2.
    	
Supply of System and   Know-How
    	
 
    	
 
    
	
3.
    	
Ownership of   Property and Intellectual Property
    	
 
    	
 
    
	
4.
    	
Licences
    	
 
    	
 
    
	
5.
    	
Payments
    	
 
    	
 
    
	
6.
    	
Royalty Procedures
    	
 
    	
 
    
	
7.
    	
Liability and   Warranties
    	
 
    	
 
    
	
8.
    	
Indemnification
    	
 
    	
 
    
	
9.
    	
Confidentiality
    	
 
    	
 
    
	
10.
    	
Intellectual   Property Enforcement
    	
 
    	
 
    
	
11.
    	
Term and Termination
    	
 
    	
 
    
	
12.
    	
Assignment
    	
 
    	
 
    
	
13.
    	
Governing Law and   Jurisdiction
    	
 
    	
 
    
	
14.
    	
Force Majeure
    	
 
    	
 
    
	
15.
    	
Illegality
    	
 
    	
 
    
	
16.
    	
Miscellaneous
    	
 
    	
 
    
	
17.
    	
Notice
    	
 
    	
 
    
	
18.
    	
Interpretation
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
SCHEDULE
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
1
    	
Patent Rights
    	
 
    	
 
    

 

 

THIS AGREEMENT is made the    29th     day of    June                         2009

 

BETWEEN

 

LONZA SALES AG incorporated and registered in Switzerland whose registered office is at Muenchensteinerstrasse 38, CH-4002, Basel, Switzerland (hereinafter referred to as “Lonza”), and

 

TRACON PHARMACEUTICALS INC, of 4510 Executive Drive, Suite 330, San Diego, CA 92121, USA, (hereinafter referred to as “Licensee”)

 

WHEREAS

 

A.                                  Lonza is the proprietor of the System and has the right to grant certain Intellectual Property rights in relation thereto (all as hereinafter defined), and

 

B.                                 The Licensee wishes to take a licence under Intellectual Property (as hereinafter defined) of which Lonza is the proprietor to commercially exploit the Product (as hereinafter defined) in the form hereunder.

 

NOW THEREFORE the parties hereby agree as follows:

 

1.                                    Definitions

 

1.1                            “Affiliate” means any company, corporation, limited liability company, partnership or other entity which directly or indirectly controls, is controlled by or is under common control, directly or indirectly, with the relevant party to this Agreement.  “Control” means the ownership of more than fifty percent (50%) of the issued share capital of the party in question or the legal power to direct or cause the direction of the general management and policies of the party in question.

 

1.2                            “Cell Lines” means those cell lines referred to in Clause 2.1.1(b).

 

1.3                            “Competing Contract Manufacturer” shall mean any party who undertakes or performs more than [...***...] percent ([...***...]%) of their business as a third party

 

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manufacturer of [...***...] or any product of a similar nature to which this Agreement relates.

 

1.4                            “Effective Date” means the date first above written.

 

1.5                            “First Commercial Sale” means the date of the first sale or other disposal of Product for consideration by the Licensee or its sublicensee.

 

1.6                            “Intellectual Property” means System Know-How and Patent Rights.

 

1.7                            “Know-How” means all proprietary and confidential unpatented technical and other information, including, but without prejudice to the generality of the foregoing, ideas, concepts, trade secrets, know-how, inventions, discoveries, data, formulae, specifications, processes, procedures for experiments and tests and other protocols, results of experimentation and testing, fermentation and purification techniques and assay protocols that are not in the public domain.

 

1.8                           “Net Selling Price” means all monies received by or on behalf of Licensee or its sublicensee hereunder in respect of the sale of Product in the Territory less the following items to the extent that they are paid or allowed and included in the invoice price, whether or not invoiced separately:

 

1.8.1                 normal discounts actually granted, including without limitation, quantity, trade, cash and other discounts, rebates and charge-backs;

 

1.8.2                 amounts refunded or credits allowed for Product or other goods returned or not accepted by customers;

 

1.8.3                 packaging, transportation and insurance charges on shipments or deliveries to customers; and

 

1.8.4                 taxes, tariffs, customs duties, surcharges and other governmental charges actually incurred and paid by Licensee or its sublicensee hereunder in connection with the sale, exportation, importation or delivery of Product or other goods to customers.

 

Upon any sale or other disposal of Product by or on behalf of Licensee or its sublicensee hereunder other than a bona fide arms length transaction

 

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exclusively for money or upon any use of the Product for purposes which do not result in a disposal of such Product in consideration of sales revenue customary in the country of use, such sale, other disposal or use shall be deemed to constitute a sale at the [...***...] price in the country in which such sale, other disposal or use occurs.

 

For the avoidance of doubt, the supply of Product free of charge as commercial samples, or for use in research, pre-clinical or clinical studies, or to third parties for evaluation purposes, shall not be included in this provision

 

1.9                           “Patent Rights” means the patents and applications, short particulars of which are set out in Schedule 1 hereto, and all patents and applications thereof of any kind throughout the world whether national or regional including but without prejudice to the generality of the foregoing, author certificates, inventor certificates, improvement patents, utility certificates and models and certificates of addition, and including any divisions, renewals, continuations, continuations in part, reissues, patent disclosures, improvements and extensions of reissue thereof.

 

1.10                   “Product” means TRC-105, a GS-CHO derived chimeric IgG1 antibody directed against CD105, of which Licensee is the proprietor and which is obtained by the expression of any one gene or of any combination of genes by use of the System, or any formulation containing the same.

 

1.11                   “Strategic Partner” means a party with whom Licensee has entered into a contractual relationship, to identify a therapeutic target, collaborate in the performance of research and development of a Product or a product of which the Strategic Partner is the Proprietor.  In no event may any entity that is primarily a Competing Contract Manufacturer be deemed a Strategic Partner for the purposes of this Agreement.

 

1.12                   “System” means Lonza’s glutamine synthetase gene expression system consisting of the Cell Lines, the Vectors, and the System Know-How, whether used individually or in combination with each other.  For the avoidance of doubt, any gene proprietary to Licensee inserted into the System for the purposes of producing Product does not form part of the System.

 

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1.13                    “System Know-How” means Know-How relating directly or indirectly to the System known to Lonza from time to time, of which Lonza is the proprietor.

 

1.14                    “Territory” means world-wide.

 

1.15                    “Valid Claim” means a claim within the Patent Rights (including any re-issued and unexpired patents) which has not been held unenforceable or invalid by the decision of a court or other governmental agency of competent jurisdiction unappealable or unappealed within the time allowed for appeal and which has not been admitted to be invalid or unenforceable through re-issue or disclaimer or otherwise.

 

1.16                    “Vectors” means those vectors referred to in Clause 2.1.1(a).

 

2.                                    Supply of the System and System Know-How

 

2.1                            Unless previously supplied by Lonza under a separate agreement, Lonza shall, if requested by Licensee in writing, arrange for supply [...***...] ex-works Lonza’s premises, Slough, Berkshire (Incoterms 2000) to Licensee the following:

 

2.1.1                 (a)                              Vectors

Approximately [...***...] of vector [...***...].

Approximately [...***...] of vector [...***...].

 

(b)                               Cell Lines

[...***...] ml vials of [...***...] cell line [...***...].

[...***...] ml vials of the [...***...] cell 
 line [...***...].

 

2.1.2                 System Know-How

 

System Know-How contained as at the date hereinabove in (a) manuals of operating procedures for the System, (b) regulatory information on CD-ROM, and (c) Vector nucleotide sequences.

 

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2.2                 Licensee shall use the System only in the expression of Product by insertion of gene(s) coding for Product(s) into the System, and shall not use, cause the use of or permit to be used the System for any purpose not directly authorised by this Agreement.

 

3.                                     Ownership of Property and Intellectual Property

 

3.1                             It is hereby acknowledged and agreed that as between the parties any and all property and Intellectual Property in the System is vested in Lonza.

 

3.2                             The provisions of this Clause 3 shall survive termination of this Agreement.

 

4.                                     Licences

 

4.1                             Lonza hereby grants to Licensee a world-wide non-exclusive licence (with the right to sublicense, subject to Clause 4.3 below) under the System Know-How and Patent Rights to use, develop, manufacture, market, sell, offer for sale, distribute, import and export Product in the Territory.

 

4.2                             Save as expressly provided by Clause 2.2 above, the Licensee hereby undertakes not to make any modifications or adaptations to the System during the subsistence of this Agreement.

 

4.3                             Subject to the provisions of this Clause 4.3, Licensee shall be entitled to grant a sublicence to the rights granted by Clause 4.1 to any one or more third parties for the purposes of any such third party producing Product for Licensee provided always:

 

4.3.1                 Licensee shall ensure such sublicensee’s use of the System, the Intellectual Property and the Product is undertaken solely for the purpose of establishing a manufacturing process for Product, or producing Product, for Licensee; and

 

4.3.2                 The sublicensee shall not, by virtue of this Agreement, be granted any right or licence, either express or implied, under any patent or proprietary right vested in Lonza or otherwise, to use the System, the Intellectual Property or the Product other than for the purposes of

 

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establishing a manufacturing Process for Product or producing Product for Licensee and Licensee agrees to ensure that such sublicensee shall not assign, transfer, further sublicense or otherwise make over the benefit or the burden of the rights granted to it pursuant to this Agreement; and

 

4.3.3                 Any sublicence granted shall be expressly subject and subordinate to the terms of this Agreement, and it shall be Licensee’s responsibility to ensure the strict adherence by any sublicensee hereunder to the terms and conditions of this Agreement; and

 

4.3.4                 Prior to the grant of any sublicence pursuant to this Clause 4 Licensee shall obtain the written consent of Lonza (such consent not to be unreasonably withheld), to the grant of such sublicence.

 

4.4                             If, on a country-by-country basis, any granted patents that form part of the Patent Rights (including any re-issued patents and unexpired patents), subsequently expire or no longer contain a Valid Claim such Patent Rights shall automatically fall outside the scope of this Agreement and the provisions of Clauses 4.1 to 4.3 shall only apply, with respect to granted patents, to those granted patents which contain a Valid Claim and form part of the Patents Rights for as long as those granted patents remain in force.

 

4.5                             On a country-by-country basis, where no Valid Claims within the Patent Rights remain in force, the provisions of Clauses 4.1 to 4.3 shall only apply for as long as the System Know-How remains secret and substantial.

 

5.                                     Payments

 

5.1                             In consideration of the licence granted to Licensee pursuant to Clause 4.1 above, and in consideration for the right to sublicense the rights granted by Clause 4.1 pursuant to Clause 4.3, Licensee shall pay Lonza as follows:

 

5.1.1               in respect of Product manufactured by Lonza, a royalty of [...***...]percent ([...***...]%) of the Net Selling Price;

 

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5.1.2               where Licensee or Licensee’s Strategic Partner manufactures Product:

 

5.1.2.1                    a payment of pounds sterling [...***...] due [...***...] during the course of this Agreement, and being first payable upon [...***...]; and

 

5.1.2.2                    a royalty of [...***...] percent ([...***...]%) of the Net Selling Price of such Product manufactured.

 

5.1.3               where any party other than Lonza, Licensee or Licensee’s Strategic Partner manufactures Product:

 

5.1.3.1                    a payment of pounds sterling [...***...] per sublicence due [...***...] during the course of such sublicence, and being first payable on the [...***...]; and

 

5.1.3.2                    a royalty of [...***...] percent ([...***...]%) of the Net Selling Price of such Product manufactured.

 

5.3                            If, on a country-by-country basis, the manufacture and/or sale of the Product are not protected by a Valid Claim within the Patent Rights then in respect of sales in such countries:

(a)                               the royalties referred to in 5.1.1, 5.1.2.2 and 5.1.3.2 shall be due only in respect of the System Know-How;

(b)                               the royalties referred to in 5.1.1 and 5.1.2.2 shall be at the rate of [...***...] per cent ([...***...]%) of the Net Selling Price;

(c)                               the royalties referred to in 5.1.3.2 shall be at the rate of [...***...] per cent ([...***...]%) of the Net Selling Price

(d)                            such royalty shall expire twelve (12) years following the first commercial sale of the Product.

 

5.4  In the event Lonza is the only manufacturer of Product but Licensee wishes to secure a second source manufacturer of Product (the ‘Second Source’), then provided Lonza continues to manufacture at least [...***...] percent ([...***...]%) of Licensee’s requirement for Product, the payment applicable to such Product as is manufactured

 

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by the Second Source shall be that referred to in clause 5.1.1 (and not 5.1.2 or 5.1.3), namely as if such Product was manufactured by Lonza.

 

5.5  In the event (a) Licensee requests that Lonza (or one of its Affiliates) manufacture clinical batches (i.e. phase I, II or III) with a lead time until start of the first GMP production run of:

 

(i)                                   [...***...] months in respect of a production run at less than [...***...]L ([...***...] litres); or

(ii)                                [...***...] months in respect of a production run at or above [...***...]L ([...***...] litres)

 

and Lonza does not have capacity available to initiate such production run following such time period, or (b) Licensee has entered into an agreement with Lonza (or one of its Affiliates) to manufacture Product, and Lonza (or such Affiliate) in breach of such agreement cannot manufacture due to capacity constraints or other reasons within Lonza’s (or such Affiliate’s) control, then the payment applicable to such Product shall be that referred to in clause 5.1.1 (and not 5.1.2 or 5.1.3), namely as if such Product was manufactured by Lonza.

 

6.                                     Royalty Procedures

 

6.1                             Licensee shall keep true and accurate records and books of account containing all data necessary for the calculation of royalties payable to Lonza.  Such records and books of account shall, upon reasonable notice having been given by Lonza (which in no event shall be less than thirty (30) days prior notice), be open at reasonable times during regular business hours for inspection by an independent certified public accounting firm of nationally recognized standing, selected by Lonza and reasonably acceptable to Licensee, as reasonably necessary to verify the accuracy of the royalty reports hereunder for the [...***...] calendar quarters immediately prior to the date of such notice.  Such independent auditors shall agree to maintain the confidentiality of the information and materials disclosed during the audit.  The independent auditor shall disclose to Lonza only whether the royalty reports are correct or not and the amount of any discrepancy.  No other information shall be shared.  Any such audit shall be conducted in a manner that does not interfere unreasonably with the operations of Licensee’s business.  Lonza may perform an audit once each calendar year.  Each audit shall begin upon the date specified by Lonza within the time frame specified above, and shall be completed as soon as reasonably practicable.  Lonza

 

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shall pay the costs of the independent auditors conducting such audit, unless the results of the audit reveal an underpayment of [...***...]% or more by Licensee, in which case, Licensee shall pay the reasonable out-of-pocket costs of the independent auditors.  If an audit concludes that an overpayment or underpayment has occurred during the audited period, such payment shall be remitted by the party responsible for such payment to the other party within thirty (30) days after the date such auditor’s written report identifying the overpayment or underpayment is delivered to the party responsible for such payment.

 

6.2                             Licensee shall prepare a statement in respect of each calendar quarter which shall show for the immediately preceding quarter details of the sales of Product and the royalty due and payable to Lonza thereon.

 

Such statement shall be submitted to Lonza within forty-five (45) days after the end of the calendar quarter to which it relates, together with a remittance for the royalties due to Lonza.

 

6.3                             All sums due under this Agreement:

 

6.3.1                 shall be made in pounds sterling to Lonza.  Payments due to Lonza in currencies other than pounds sterling shall first be calculated in the relevant local currency before being calculated at the rate of exchange in effect at the close of business on the day payment is due or made, whichever is earlier.  The rate of exchange shall be the mean value of the Pound Spot Rate in London first published in the Financial Times on the day following the day for determining such rates.

 

6.3.2                 are exclusive of any Value Added Tax or of any other applicable taxes, levies, imposts, duties and fees of whatever nature imposed by or under the authority of any government or public authority, and shall be paid by Licensee (other than taxes on Lonza’s income).  The parties agree to co-operate in all respects reasonably necessary to take advantage of such double taxation treaties as may be available.

 

6.4                             Where Lonza does not receive payment of any sum by the due date, interest shall accrue thereafter on the sum due and owing to Lonza at the rate of [...***...]

 

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percent ([...***...]%) over the base rate from time to time of National Westminster Bank plc, interest to accrue on a day-to-day basis without prejudice to Lonza’s right to receive payment on the due date.

 

7.                                     Liability and Warranties

 

7.1                            Lonza gives no representation or warranty that the Patent Rights will be valid nor that the exercise of the rights granted to Licensee hereunder will not infringe other patent rights or intellectual property rights vested in Lonza or any third party.

 

7.2                            Lonza warrants that (a) it has the power, authority and legal right to enter into this Agreement and to grant to Licensee the license rights purported to be granted hereby, (b) this Agreement and the license rights purported to be granted hereby do not conflict with, or constitute a default under, any contractual obligation of it, (c) the patents included in the Patent Rights are the only patents that must be licensed from Lonza and/or its Affiliates in order to operate the System, (d) the System Know-How is the only Know-How that must be licensed from Lonza and/or its Affiliates in order to operate the System, and (e) it has not received any suit or claim alleging that the Intellectual Property infringes the intellectual property rights of a third party.

 

7.3                            Licensee acknowledges that it may require licences under Lonza patent rights other than those herein licensed or under third party patent rights (including those vested in Affiliates of Lonza) in order to use enhancements to or optimization tools for the System.  It is hereby agreed that it shall be the Licensee’s responsibility to satisfy itself as to the need for such licences and if necessary to obtain such licences.  No licence is granted save as expressly provided herein and no licence in addition thereto shall be deemed to have arisen or be implied by way of estoppel or otherwise.

 

7.4                            Each Party (“Indemnifying Party”) shall indemnify and hold harmless the other Party (“Indemnified Party”) and its officers, employees and agents at all times in respect of any and all losses, damages, costs and expenses suffered or incurred as a result of any contractual, tortious or other claims or proceedings by third parties against Indemnified Party arising out of the Indemnifying Party’s breach of this Agreement, including breach of representations and warranties, violation of applicable law, negligence or wilful misconduct.

 

7.5                            With respect to product liability claims or proceedings, the following shall apply: (a) except to the extent provided in (b) below, Licensee shall indemnify and hold harmless Lonza and its officers, employees and agents at all times in

 

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respect of any and all losses, damages, costs and expenses suffered or incurred as a result of any tortious claims or proceedings by third parties against Lonza, its officers, employees and agents for death or bodily injury to the extent relating to the Product, and (b) Lonza shall indemnify and hold harmless Licensee and its officers, employees and agents at all times in respect of any and all losses, damages, costs and expenses suffered or incurred as a result of any tortious claims or proceedings by third parties against Licensee, its officers, employees and agents for death or bodily injury relating to the Product to the extent such claims or proceedings result from defects in the materials provided by Lonza, or from Lonza breach of this Agreement.

 

7.6                            Any condition or warranty other than those relating to title which might otherwise be implied or incorporated within this Agreement by reason of statute or common law or otherwise is hereby expressly excluded.

 

7.7                            IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOSS OF PROFITS, SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT.

 

7.8                            The terms of this Clause 7 shall survive expiration or termination of this Agreement for whatever reason.

 

8.                                     Confidentiality

 

8.1                             Licensee expressly acknowledges that the System Know-How and any other Know-How with which it is supplied by Lonza pursuant to this Agreement is supplied in circumstances imparting an obligation of confidence and Licensee agrees to keep such Know How or System Know-How secret and confidential and to respect Lonza’s proprietary rights therein and to use the same for the sole purpose of this Agreement and not during the period of this Agreement or at any time for any reason whatsoever to disclose or permit to be disclosed such Know How or System Know-How to any third party other than its sublicensee hereunder for use in accordance with the terms of this Agreement.  Licensee shall procure that only its employees and agents and employees and agents of its sublicensee hereunder shall have access to the

 

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Know How or System Know-How on a need to know basis and that all such employees and agents shall be informed of their secret and confidential nature and shall be subject to the same obligations as Licensee and its sublicensee hereunder pursuant to this Clause 8.1.

 

8.2                             Licensee hereby undertakes and agrees to keep the System secure and safe from loss, damage, theft, misuse and unauthorised access and shall procure that the System shall be made available only to employees and agents of Licensee and employees and agents of its sublicensee hereunder on a need to know basis and subject to the same obligations of confidence as provided in Clause 8.1 hereof, and to use the same for the sole purpose of this Agreement.

 

8.3                             Both parties undertake and agree not to at any time for any reason whatsoever disclose or permit to be disclosed to any third party or otherwise make use of or permit to be made use of any trade secrets or confidential information or materials relating to the business affairs or finances of the other or of any suppliers, agents, distributors, licensees or other customers of the other which comes into their possession pursuant to this Agreement.

 

8.4                             The obligations of confidence referred to in this Clause 8 shall not extend to any information which the receiving party demonstrates:

 

8.4.1                 is or shall become generally available to the public otherwise than by reason of a breach by the recipient party of such information of the provisions of this Clause 8;

 

8.4.2                 is known to the recipient party of such information and is at its free disposal prior to its receipt from the other;

 

8.4.3                 is subsequently disclosed to the recipient party without obligations of confidence by a third party owing no such obligation of confidentiality to the disclosing party; and

 

8.4.4                  Lonza or Licensee may be required to disclose to a government agency for the purpose of any statutory, regulatory or similar legislative requirement applicable to the production of Product or to

 

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meet the requirements of any Stock Exchange to which the parties may be subject, but only to the extent such disclosure is required, and subject to obligations of secrecy wherever possible; and

 

8.4.5               can be demonstrated by competent written evidence as having been independently developed by the recipient of the information in question without access to or use or knowledge of the information of the disclosing party.

 

8.5                             The obligations of both parties under this Clause 8 shall survive the expiration or termination of this Agreement for whatever reason.

 

9.                                     Intellectual Property Enforcement

 

9.1                             Lonza hereby undertakes and agrees that at its own cost and expense it will:

 

9.1.1                 prosecute or procure prosecution of such of the Patent Rights which are patent applications diligently so as to secure the best commercial advantage obtainable, as determined by Lonza in its commercially reasonable discretion, and will pursue, as determined by Lonza in its commercially reasonable discretion, all necessary actions against any third party that Lonza reasonably believes is infringing, misappropriating or violating any Intellectual Property; and

 

9.1.2                 pay or procure payment of all renewal fees in respect of the Patent Rights valid and subsisting for the full term thereof and in particular will procure such renewal of the registrations thereof as may be necessary from time to time so far as it is reasonable to do so with particular reference to commercial considerations.

 

9.2                                                                            Licensee shall promptly notify Lonza in writing of any infringement or improper or unlawful use of or of any challenge to the validity of the Patent Rights and/or Know-How of which Licensee becomes aware.  Lonza undertakes and agrees to take all such steps and proceedings and to do all other acts and things as may in Lonza’s sole discretion be necessary to restrain any such infringement or improper or unlawful use or to defend such challenge to validity and Licensee shall permit

 

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Lonza to have the sole conduct of any such steps and proceedings including the right to settle them whether or not Licensee is a party to them. Licensee shall have the right at its own cost and for its own benefit to initiate, prosecute and control the enforcement of the the Patent Rights against infringement by a Third Party in the Territory if all of the following conditions are fulfilled (a) the product manufactured through the infringing activity is a competing product to the Product, (b) Lonza has not granted rights to third parties which prevent Lonza from granting such a right to enforce to Licensee, and (c) Lonza does not initiate proceedings within sixty (60) days of being requested to do so by Licensee.

 

10.                             Term and Termination

 

10.1                     Unless terminated earlier in accordance with the provisions of this Clause 10 or Clause 14, this Agreement shall continue in force in each country of the world, until expiry of the last Valid Claim, or for so long as the System Know-How is identified and remains secret and substantial, whichever is later.

 

10.2                     Licensee may terminate this Agreement for any reason by giving sixty (60) days notice in writing to Lonza.

 

10.3                     Either Lonza or Licensee may terminate this Agreement forthwith by notice in writing to the other upon the occurrence of any of the following events:

 

10.3.1         if the other commits a breach of this Agreement which in the case of a breach capable of remedy shall not have been remedied within thirty (30) days of the receipt by the other of a notice identifying the breach and requiring its remedy.

 

10.3.2         if the other enters into compulsory or voluntary liquidation (other than for the purpose of effecting a reconstruction or amalgamation in such manner that the company resulting from such reconstruction or amalgamation if a different legal entity shall agree to be bound by and assume the obligations of the relevant party under this Agreement) or has a receiver appointed over all or any part of its assets or takes or

 

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suffers any similar action in consequence of a debt, or ceases for any reason to carry on business.

 

10.4                    If at any time during this Agreement Licensee knowingly and directly opposes or assists any third party to oppose the grant of letters patent or any patent application within any of the Patent Rights, or knowingly and directly disputes assists any third party to dispute the validity of any patent within any of the Patent Rights or any of the claims thereof, in each case except as required by legal process or court order, Lonza shall be entitled at any time thereafter to terminate all or any of the licences granted hereunder forthwith by notice to Licensee.

 

10.5 If this Agreement is terminated for any reason any and all licences granted hereunder shall terminate with effect from the date of termination and Licensee shall destroy all elements of the System and Product forthwith and shall certify such destruction immediately thereafter in writing to Lonza.

 

10.6                     Termination for whatever reason or expiration of this Agreement shall not affect the accrued rights of the parties arising in any way out of this Agreement as at the date of termination.  The right to recover damages against the other and all provisions which are expressed to survive this Agreement shall remain in full force and effect.

 

11.                             Assignment

 

11.1                     Save as expressly provided by Clause 4, neither party shall be entitled to assign, transfer, charge or in any way make over the benefit and/or the burden of this Agreement without the prior written consent of the other which consent shall not be unreasonably withheld or delayed, save that either party shall be entitled without the prior written consent of the other party to assign, transfer, charge, sub-contract, deal with or in any other manner make over the benefit and/or burden of this Agreement to an Affiliate or to any 50/50 joint venture company of which Lonza or Licensee, as the case may be, is the beneficial owner of not less than fifty percent (50%) of the issued share capital thereof or to any company with which that party may merge or consolidate, to any company to which that party may transfer substantially all of its assets and undertakings to which this agreement relates.  A change in control shall not be deemed to be an assignment, transfer, charge or make over.

 

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11.2                     This Agreement shall be binding upon the successors and assigns of the parties and the name of a party appearing herein shall be deemed to include the names of its successors and assigns provided always that nothing herein shall permit any assignment by either party except as expressly provided herein.

 

12.                             Governing Law and Jurisdiction

 

12.1                    The validity, construction and performance of this Agreement shall be governed by English law and the parties submit to the non-exclusive jurisdiction of the courts of England and Wales.

 

12.2                    Either party shall have the right to take proceedings in any other jurisdiction for the purposes of enforcing a judgement or order obtained from any court of competent jurisdiction.

 

13.                             Force Majeure

 

Neither party shall be in breach of this Agreement if there is any total or partial failure of performance by it of its duties and obligations under this Agreement occasioned by any act of God, including without limitation, fire, act of government or state, war, civil commotion, insurrection, embargo, epidemic, terrorism or earthquake, prevention from or hindrance in obtaining any raw materials, energy or other supplies, labour disputes of whatever nature and any other reason beyond the control of either party.  If either party is unable to perform its duties and obligations under this Agreement as a direct result of the effect of one of the reasons set out in this Clause 13 such party shall give written notice to the other of such inability stating the reason in question.  The operation of this Agreement shall be suspended during the period (and only during the period) in which the reason continues.  Forthwith upon the reason ceasing to exist the party relying upon it shall give written notice to the other of this fact. If the reason continues for a period of more than one hundred eighty (180) days and substantially affects the commercial basis of this Agreement the party not claiming under this Clause 13 shall have the right to terminate this Agreement by giving written notice of such termination to the other party.

 

14.                            Illegality

 

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14.1                    If any provision or term of this Agreement or any part thereof shall become or be declared illegal, invalid or unenforceable for any reason whatsoever including but without limitation by reason of the provisions of any legislation or other provisions having the force of law or by reason of any decision of any Court or other body or authority having jurisdiction over the parties hereto or this Agreement including the EC Commission or the European Court of Justice:

(i)                                  such provision shall, so far as it is illegal, invalid or unenforceable, be given no effect by the Parties and shall be deemed not to be included in this Agreement;

(ii)                               the other provisions of this Agreement shall be binding on the Parties as if such provision was not included therein; and

(iii)                            the Parties agree to negotiate in good faith to amend such provision to the extent possible for incorporation herein in such reasonable manner as most closely achieves the intention of the Parties without rending such provision invalid or unenforceable.

 

15.                             Miscellaneous

 

15.1                    This Agreement embodies and sets forth the entire agreement and understanding of the parties and supersedes all prior oral and written agreements, understanding or arrangements relating to the subject matter of this Agreement.  Neither party shall be entitled to rely on any agreement, understanding or arrangement which is not expressly set forth in this Agreement.

 

15.2                    This Agreement shall not be amended, modified, varied or supplemented except in writing signed by duly authorised representatives of the parties.

 

15.3                    No failure or delay on the part of either party hereto to exercise any right or remedy under this Agreement shall be construed or operated as a waiver thereof nor shall any single or partial exercise of any right or remedy under this Agreement preclude the exercise of any other right or remedy or preclude the further exercise of such right or remedy as the case may be.  The rights and remedies provided in this Agreement are cumulative and are not exclusive of any rights or remedies provided by law.

 

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15.4                    Except as required by law, the text of any press release or other communication to be published by or in the media whether of a scientific nature or otherwise and concerning this Agreement shall require the prior written approval of Lonza and Licensee.

 

15.5                    Each of the parties hereto shall be responsible for its respective legal and other costs incurred in relation to the preparation of this Agreement.

 

15.6                    The parties to this Agreement do not intend that any term hereof should be enforceable by virtue of the Contracts (Rights of Third Parties) Act 1999, or by any other statute or common-law principle, by any person who is not a party to this Agreement.

 

16.                             Notice

 

16.1                     Any notice or other document to be given under this Agreement shall be in writing and shall be deemed to have been duly given if left at or sent by registered post or by a reputable overnight courier to a party or delivered in person to a party at the address set out below for such party or such other address as the party may from time to time designate by written notice to the other(s):

 

Address of Lonza

Lonza Sales AG, 228 Bath Road, Slough, Berkshire SL1 4DX

Facsimile: 01753 777001

For the attention of the Head of Legal Services

 

Address of Licensee

TRACON PHARMACEUTICALS INC, of 4510 Executive Drive, Suite 330, San Diego, CA 92121, USA

Facsimile: 001-858-550-0780

For the attention of Vice President of Product Development

 

16.2                     All such notices and documents shall be in the English language.  Any such notice or other document shall be effective upon actual receipt.

 

17.                             Interpretation

 

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17.1                     The headings in this Agreement are inserted only for convenience and shall not affect the construction hereof.

 

17.2                     Where appropriate words denoting a singular number only shall include the plural and vice versa.

 

17.3                     Reference to any statute or statutory provision includes a reference to the statute or statutory provision as from time to time amended, extended or re-enacted.

 

AS WITNESS the hands of the duly authorised representatives of the parties hereto

 

 

 

 

 

	
Signed for and on behalf of
    	
...../s/ Gerry   Kenney.......................................
    
	
LONZA SALES AG
    	
GERRY KENNEDY
    
	
 
    	
 
    
	
 
    	
....Authorised   Signatory........................ TITLE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Signed for and on behalf of
    	
...../s/ K.B.   Fallen..............................................
    
	
LONZA SALES AG
    	
KAREN FALLEN
    
	
 
    	
 
    
	
 
    	
....Authorised Signatory........................   TITLE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Signed for and on behalf of
    	
...../s/ Sharon   Real..............................................
    
	
TRACON PHARMACEUTICALS INC
    	
 
    
	
 
    	
 
    
	
 
    	
...VP of Product   Dev............................. TITLE
    

 

21

 

SCHEDULE 1

 

PATENT RIGHTS

 

[...***...]

 

***Confidential Treatment Requested

 

 

[...***...]

 

***Confidential Treatment Requested

 

2

 

[...***...]

 

***Confidential Treatment Requested

 

3

 

[...***...]

 

***Confidential Treatment Requested

 

4Exhibit 10.12

 

THIS WARRANT AND THE SHARES 1SSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). OR THE SECURITIES LAWS OF ANY STATE. AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

 

WARRANT TO PURCHASE STOCK

 

Company: TRACON PHARMACEUTICALS, INC.

Number of Shares: 37,500

Type/Series of Stock: Series A Preferred

Warrant Price: $2.00 per share

Issue Date: November 14, 2013

Expiration Date: November 14, 2023          See also Section 5.1(b).

 

	
Credit   Facility:
    	
This Warrant to Purchase Stock (“Warrant”)   is issued in connection with that certain Loan and Security Agreement of even   date herewith between Silicon Valley Bank and the Company (the “Loan Agreement”).
    

 

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SILICON VALLEY BANK (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “Holder”) is entitled to purchase the number of fully paid and non-assessable shares (the “Shares”) of the above-stated Type/Series of Stock (the “Class”) of the above-named company the “Company”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. Reference is made to Section 5.4 of this Warrant whereby Silicon Valley Bank shall transfer this Warrant to its parent company, SVB Financial Group.

 

SECTION 1. EXERCISE.

 

1.1       Method of Exercise.  Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

 

1.2       Cashless Exercise.  On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised.  Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:

 

X = Y(A-B)/A

 

where:

 

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X =                       the number of Shares to be issued to the Holder;

 

Y =                       the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);

 

A =                       the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and

 

B =                        the Warrant Price.

 

1.3       Fair Market Value.  If the Company’s common stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”) and the Class is common stock, the fair market value of a Share shall be the closing price or last sale price of a share of common stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company.  If the Company’s common stock is then traded in a Trading Market and the Class is a series of the Company’s convertible preferred stock, the fair market value of a Share shall be the closing price or last sale price of a share of the Company’s common stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company multiplied by the number of shares of the Company’s common stock into which a Share is then convertible.  If the Company’s common stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.

 

1.4       Delivery of Certificate and New Warrant.  Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.

 

1.5       Replacement of Warrant.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.

 

1.6       Treatment of Warrant Upon Acquisition of Company.

 

(a)        Acquisition.  For the purpose of this Warrant, “Acquisition” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization; or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.

 

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(b)        Treatment of Warrant at Acquisition.  In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “Cash/Public Acquisition”), either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.

 

(c)        The Company shall provide Holder with written notice of its request relating to the Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.

 

(d)       Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.

 

(e)        As used in this Warrant, “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.

 

SECTION 2.           ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.

 

2.1       Stock Dividends, Splits, Etc.  If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in common stock or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or

 

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distribution occurred.  If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased.  If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

2.2       Reclassification, Exchange, Combinations or Substitution.  Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant.  The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.

 

2.3       Conversion of Preferred Stock.  If the Class is a class and series of the Company’s convertible preferred stock, in the event that all outstanding shares of the Class are converted, automatically or by action of the holders thereof, into common stock pursuant to the provisions of the Company’s Certificate of Incorporation, including, without limitation, in connection with the Company’s initial, underwritten public offering and sale of its common stock pursuant to an effective registration statement under the Act (the “IPO”), then from and after the date on which all outstanding shares of the Class have been so converted, this Warrant shall be exercisable for such number of shares of common stock into which the Shares would have been converted had the Shares been outstanding on the date of such conversion, and the Warrant Price shall equal the Warrant Price in effect as of immediately prior to such conversion divided by the number of shares of common stock into which one Share would have been converted, all subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant.

 

2.4       Adjustments for Diluting Issuances.  Without duplication of any adjustment otherwise provided for in this Section 2, the number of shares of common stock issuable upon conversion of the Shares shall be subject to anti-dilution adjustment from time to time in the manner set forth in the Company’s Articles or Certificate of Incorporation as if the Shares were issued and outstanding on and as of the date of any such required adjustment.

 

2.5       No Fractional Share.  No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share.  If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.

 

2.6       Notice/Certificate as to Adjustments.  Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based.  The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such

 

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adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.

 

SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

 

3.1       Representations and Warranties.  The Company represents and warrants to, and agrees with, the Holder as follows:

 

(a)        The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which shares of the Class were last sold and issued prior to the Issue Date hereof in an arms-length transaction in which at least $500,000 of such shares were sold.

 

(b)        All Shares which may be issued upon the exercise of this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.  The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of the Class, common stock and other securities as will be sufficient to permit the exercise in full of this Warrant and the conversion of the Shares into common stock or such other securities.

 

(c)        The Company’s capitalization table attached hereto as Schedule 1 is true and complete, in all material respects, as of the Issue Date.

 

3.2       Notice of Certain Events.  If the Company proposes at any time to:

 

(a) declare any dividend or distribution upon the outstanding shares of the Class or common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;

 

(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);

 

(c)        effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class;

 

(d) effect an Acquisition or to liquidate, dissolve or wind up; or

 

(e) effect an IPO;

 

then, in connection with each such event, the Company shall give Holder:

 

(1) at least seven (7) Business Days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above;

 

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(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event); and

 

(3) with respect to the IPO, at least seven (7) Business Days prior written notice of the date on which the Company proposes to file its registration statement in connection therewith.

 

Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2 hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the terms hereof.  Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

 

SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER.

 

The Holder represents and warrants to the Company as follows:

 

4.1       Purchase for Own Account.  This Warrant and the securities to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act.  Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4.2       Disclosure of Information.  Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities.  Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

 

4.3       Investment Experience.  Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

4.4       Accredited Investor Status.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

4.5       The Act.  Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom,

 

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which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.  Holder is aware of the provisions of Rule 144 promulgated under the Act.

 

4.6       Lock-Up Agreement.  The Holder agrees that the Shares shall be subject to the Lock-Up Agreement restrictions contained in Section 1.14 of the Investors’ Rights Agreement, dated March 28, 2011, between the Company and the investors listed on Exhibit A attached thereto, as amended to date and as the same may be amended, restated or modified from time to time.

 

4.7       Drag-Along Provision.  As a condition to the issuance of any Shares upon exercise of this Warrant, Holder shall execute a counterpart signature page to the Right of First Refusal, Co-Sale and Drag-Along Agreement, dated March 28, 2011, among the Company and the persons or entities listed on Exhibit A and Exhibit B thereto as a Stockholder thereunder for the sole purpose of being bound by the Drag-Along Rights provision contained in Section 5 thereof.

 

4.8       No Voting Rights.  Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.

 

SECTION 5. MISCELLANEOUS.

 

5.1       Term and Automatic Conversion Upon Expiration.

 

(a)        Term.  Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the Expiration Date and shall be void thereafter.

 

(b)        Automatic Cashless Exercise upon Expiration.  In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.

 

5.2       Legends.  The Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

 

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED NOVEMBER 14, 2013, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

 

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS AFTER THE EFFECTIVE DATE OF THE ISSUER’S INITIAL REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE ISSUER’S PRINCIPAL OFFICE.  SUCK LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES.

 

THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A DRAG-ALONG PROVISION CONTAINED IN A CERTAIN RIGHT OF FIRST REFUSAL, CO-SALE AND DRAG-ALONG AGREEMENT BY AND AMONG THE SHAREHOLDER, THE COMPANY AND CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

 

5.3       Compliance with Securities Laws on Transfer.  This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company).  The Company shall not require Holder to provide an opinion of counsel if the transfer is to SVB Financial Group (Silicon Valley Bank’s parent company) or any other affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act.  Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.

 

5.4       Transfer Procedure. After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group.  By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations and warranties set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof.  Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant.  Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, or any shares or other securities issued upon any conversion of any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.

 

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5.5       Notices.  All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5.  All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

 

SVB Financial Group

Attn:  Treasury Department

3003 Tasman Drive, HC 215

Santa Clara, CA 95054

Telephone:  (408) 654-7400

Facsimile:  (408) 988-8317

Email address:  derivatives@svb.com

 

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

 

Tracon Pharmaceuticals, Inc.

Attn: H. Casey Logan, Chief Business Officer

8910 University Center Lane, Suite 700

San Diego, CA 92122

Telephone: (858) 550-0780, Ext. 236

Facsimile:________________

Email: clogan@traconpharma.com

 

5.6       Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

5.7       Attorney’s Fees.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

5.8       Counterparts; Facsimile/Electronic Signatures.  This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.  Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.

 

5.9       Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.

 

5.10     Headings.  The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

 

9

 

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

 

[Remainder of page left blank intentionally]

 

[Signature page follows]

 

10

 

 

IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.

 

 

“COMPANY”

 

	
TRACON PHARMACEUTICALS, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/Charles Theuer
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
Charles Theuer
    	
 
    
	
 
    	
(Print)
    	
 
    
	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
“HOLDER”
    	
 
    
	
 
    	
 
    	
 
    
	
SILICON VALLEY BANK
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/Kevin Wallace
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
Kevin Wallace
    	
 
    
	
 
    	
(Print)
    	
 
    
	
Title:
    	
Vice President
    	
 
    

 

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.         The undersigned Holder hereby exercises its right purchase _____________ shares of the Common/Series _______ Preferred [circle one] Stock of TRACON PHARMACEUTICALS, INC. (the “Company”) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:

 

[   ]       check in the amount of $_______ payable to order of the Company enclosed herewith

 

[   ]       Wire transfer of immediately available funds to the Company’s account

 

[   ]       Cashless Exercise pursuant to Section 1.2 of the Warrant

 

[   ]       Other [Describe] ___________________________________________

 

2.         Please issue a certificate or certificates representing the Shares in the name specified below:

 

	
 
    	
 
    	
 
    
	
 
    	
Holder’s Name
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
(Address)
    	
 
    

 

3.         By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.

 

	
 
    	
HOLDER;
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
(Date):
    	
 
    

 

 

 

 

Appendix 1

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