Document:

Exhibit 10.9

 

LEASE

 

OF PREMISES AT 35 GATEHOUSE DRIVE,

 

WALTHAM, MASSACHUSETTS

 

FROM

 

ASTRAZENECA PHARMACEUTICALS LIMITED PARTNERSHIP

 

TO

 

MORPHIC ROCK THERAPEUTIC, INC.

 

 

TABLE OF CONTENTS

 

	
ARTICLE I. CERTAIN   DEFINITIONS
    	
5
    
	
ARTICLE II. LEASE OF   PREMISES
    	
12
    
	
Section 2.1
    	
Lease of the Premises
    	
12
    
	
Section 2.2
    	
Common Rights
    	
12
    
	
Section 2.3
    	
Parking
    	
12
    
	
Section 2.4
    	
Lease Term
    	
13
    
	
Section 2.5
    	
Lease Amendment
    	
13
    
	
ARTICLE III. CONDITION OF   PREMISES; CONSTRUCTION OF INITIAL IMPROVEMENTS; ALLOWANCE
    	
16
    
	
Section 3.1
    	
Condition of Premises
    	
16
    
	
Section 3.2
    	
Tenant’s Work;   Landlord’s Contribution. NOT APPLICABLE
    	
16
    
	
Section 3.3
    	
Plans and   Specifications
    	
16
    
	
Section 3.4
    	
Signs
    	
17
    
	
ARTICLE IV. BASE RENT;   ADDITIONAL RENT
    	
17
    
	
Section 4.1
    	
Base Rent
    	
17
    
	
Section 4.2
    	
Certain Additional Rent
    	
18
    
	
Section 4.3
    	
Taxes
    	
18
    
	
Section 4.4
    	
Operating Costs
    	
19
    
	
Section 4.5
    	
Payment for Electricity
    	
19
    
	
Section 4.6
    	
Tenant’s Audit Rights
    	
20
    
	
ARTICLE V. USE OF PREMISES
    	
21
    
	
Section 5.1
    	
Permitted Use
    	
21
    
	
Section 5.2
    	
Restrictions on Use
    	
22
    
	
Section 5.3
    	
Hazardous Materials
    	
22
    
	
Section 5.4
    	
Biohazard Removal and   Animal Care
    	
24
    
	
ARTICLE VI. LANDLORD’S   SERVICES
    	
25
    
	
Section 6.1
    	
Landlord’s Services
    	
25
    
	
Section 6.2
    	
Extraordinary Use
    	
27
    
	
Section 6.3
    	
Interruption; Delay
    	
27
    
	
Section 6.4
    	
Additional Services
    	
28
    
	
Section 6.5
    	
Landlord Indemnity
    	
28
    
	
Section 6.6
    	
Compliance with Laws
    	
28
    
	
ARTICLE VII. CERTAIN   OBLIGATIONS OF TENANT
    	
28
    
	
Section 7.1
    	
Rent
    	
28
    
	
Section 7.2
    	
Utilities
    	
28
    
	
Section 7.3
    	
No Waste
    	
29
    
	
Section 7.4
    	
Maintenance; Repairs;   and Yield Up
    	
29
    
	
Section 7.5
    	
Alterations by Tenant
    	
30
    
	
Section 7.6
    	
Trade Fixtures and   Equipment
    	
31
    
	
Section 7.7
    	
Compliance with Laws
    	
31
    
	
Section 7.8
    	
Contents at Tenant’s Risk
    	
31
    
	
Section 7.9
    	
Exoneration;   Indemnification and Insurance
    	
32
    
	
Section 7.10
    	
Landlord’s Access
    	
34
    
	
Section 7.11
    	
No Liens
    	
34
    
	
Section 7.12
    	
Compliance with   Rules and Regulations
    	
35
    

 

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ARTICLE VIII. SUBLETTING   AND ASSIGNMENT
    	
35
    
	
Section 8.1
    	
Subletting and   Assignment
    	
35
    
	
ARTICLE IX. RIGHTS OF   MORTGAGEES AND GROUND LESSORS; ESTOPPEL CERTIFICATES
    	
37
    
	
Section 9.1
    	
Subordination to   Mortgages and Ground Leases
    	
37
    
	
Section 9.2
    	
Lease Superior at Mortgagee’s   or Ground Lessor’s Election
    	
38
    
	
Section 9.3
    	
Notice to Mortgagee and   Ground Lessor
    	
38
    
	
Section 9.4
    	
Limitations on   Obligations of Mortgagees, Ground Lessors and Successors
    	
38
    
	
Section 9.5
    	
Estoppel Certificates
    	
39
    
	
ARTICLE X. CASUALTY
    	
39
    
	
Section 10.1
    	
Damage From Casualty
    	
39
    
	
Section 10.2
    	
Abatement of Rent
    	
40
    
	
Section 10.3
    	
Landlord’s Right to   Terminate
    	
40
    
	
ARTICLE XI. EMINENT DOMAIN
    	
40
    
	
Section 11.1
    	
Eminent Domain; Right   to Terminate and Abatement in Rent
    	
40
    
	
Section 11.2
    	
Restoration
    	
41
    
	
Section 11.3
    	
Landlord to Control   Eminent Domain Action
    	
41
    
	
ARTICLE XII. DEFAULT AND   REMEDIES
    	
41
    
	
Section 12.1
    	
Event of Default
    	
41
    
	
Section 12.2
    	
Landlord’s Remedies
    	
42
    
	
Section 12.3
    	
Reimbursement of   Landlord
    	
43
    
	
Section 12.4
    	
Landlord’s Right to   Perform Tenant’s Covenants
    	
43
    
	
Section 12.5
    	
Cumulative Remedies
    	
44
    
	
Section 12.6
    	
Expenses of Enforcement
    	
44
    
	
Section 12.7
    	
Landlord’s Default
    	
45
    
	
Section 12.8
    	
Limitation of   Landlord’s Liability
    	
45
    
	
Section 12.9
    	
Late Payment and   Administrative Expense
    	
45
    
	
ARTICLE XIII.   MISCELLANEOUS PROVISIONS
    	
46
    
	
Section 13.1
    	
Brokers
    	
46
    
	
Section 13.2
    	
Quiet Enjoyment
    	
46
    
	
Section 13.3
    	
Security Deposit
    	
46
    
	
Section 13.4
    	
Notices
    	
48
    
	
Section 13.5
    	
Waiver of Subrogation
    	
48
    
	
Section 13.6
    	
Entire Agreement;   Execution; Time of the Essence and Headings and Table of Contents
    	
49
    
	
Section 13.7
    	
Partial Invalidity
    	
49
    
	
Section 13.8
    	
No Waiver
    	
49
    
	
Section 13.9
    	
Holdover
    	
49
    
	
Section 13.10
    	
When Lease Becomes   Binding
    	
50
    
	
Section 13.11
    	
No Recordation
    	
50
    
	
Section 13.12
    	
As Is
    	
50
    
	
Section 13.13
    	
Financial Statements;   Certain Representations and Warranties of Tenant
    	
50
    
	
Section 13.14
    	
(a)  Real Estate   Confidentiality
    	
51
    
	
Section 13.15
    	
Summary of Basic Terms
    	
53
    

 

ii

 

SUMMARY OF BASIC TERMS

 

OFFICE LEASE

 

OF PREMISES AT 35 GATEHOUSE DRIVE,

 

WALTHAM, MASSACHUSETTS

 

TO

 

MORPHIC ROCK THERAPEUTIC, INC.

 

DATED AS OF AUGUST 5, 2015

 

The following is a summary of certain basic terms of this Lease which is intended for the convenience and reference of the parties.  Capitalized terms used, but not defined, in this Summary of Basic Terms, have their defined meanings in this Lease.  In addition, some of the following items or terms are incorporated into this Lease by reference to the item or term or to this “Summary of Basic Terms”.

 

1.                                      Landlord:  ASTRAZENECA PHARMACEUTICALS LIMITED PARTNERSHIP

 

2.                                      Tenant:  MORPHIC ROCK THERAPEUTIC, INC.

 

3A.                             Premises: Approximately 11,166 square feet of rentable space located in Building A on Level 2 of the Building (“A2”), depicted as the “Office” and “Lab” area within the “Limit of House A” on the floor plan attached hereto as Exhibit C.

 

3B.                             Landlord’s Property:  The real property with the Building and any other improvements now or hereafter thereon, commonly known as 35 Gatehouse Drive, Waltham, Massachusetts, as described on Exhibit A and depicted on Exhibit B.

 

3C.                             Leasable Square Footage of the Premises:  (which includes a proportionate share of the Common Areas of the Building):  11,166 rentable square feet.

 

3D.                             Leasable Square Footage of the Building:  An agreed upon 297,576 rentable square feet, subject to adjustment in the event that the Common Areas of the Building are expanded or reconfigured.

 

3E.                              Landlord’s Equipment:  The equipment owned by Landlord and located in the Premises on the date of Landlord’s delivery of the Premises to Tenant.  A complete itemization of Landlord’s Equipment will be agreed upon and listed on an exhibit to this Lease within thirty (30) days after the Term Commencement Date.  Tenant shall also have the right to use during the term hereof the Landlord’s work stations and furniture presently located in the Premises (“Landlord’s Furniture”) without warranty or representation as to their usage, fitness or condition.  The Landlord shall have no obligation to maintain, replace or repair said furniture.  The aforesaid furniture shall remain the property of the Landlord

 

1

 

and returned at the end of the Lease term in the same condition as on the Term Commencement Date, reasonable wear and tear and damage by fire or other casualty excepted.

 

4.                                      Tenant Improvement Allowance:  None.  Tenant shall be responsible for and pay for its own Tenant improvements including, without limitation, for all telephone, data wiring and equipment installation throughout the Premises and for connection to the main demarcation room from local exchange carriers, domestic water distribution within the Premises, hot water requirements, safety equipment, laboratory waste removal and office cleaning.

 

5A.                             Lease Term:  an approximately sixty-four calendar month period commencing on the Term Commencement Date and ending on the last day of the fifth (5th) Lease Year following the Rent Commencement Date, and, if exercised, the three (3) year period under the Right of Extension.

 

5B.                             Right of Extension:  Tenant shall have the right to extend the Lease Term for one (1) three (3) year term in accordance with Section 2.4(b).

 

6.                                      Permitted Use:  General business offices, scientific research and development laboratory, and uses customarily accessory thereto.  The foregoing notwithstanding, under no circumstances shall the Premises be used in any manner related to the Generic Drug business of any nature or description including, without limitation, the manufacture, development, sales, distribution or marketing of such products.

 

7.                                      Tenant’s Parking Allocation:  twenty-eight (28) unassigned parking spaces (2.5 spaces per 1,000 leasable square feet of the Premises), subject to the provisions of Section 2.3.

 

8.                                      Base Rent:  The Base Rent for the Initial Term shall be as set forth in the chart below:

 

	
Period
    	
 
    	
Base Rent per rsf
    	
 
    	
Annual Base Rent
    	
 
    	
Monthly Base Rent
    	
 
    
	
Lease Year 1
    	
 
    	
$
    	
37.00
    	
 
    	
$
    	
413,142.00
    	
 
    	
$
    	
34,428.50
    	
*
    
	
Lease Year 2
    	
 
    	
$
    	
38.00
    	
 
    	
$
    	
424,308.00
    	
 
    	
$
    	
35,359.00
    	
 
    
	
Lease Year 3
    	
 
    	
$
    	
39.00
    	
 
    	
$
    	
435,474.00
    	
 
    	
$
    	
36,289.50
    	
 
    
	
Lease Year 4
    	
 
    	
$
    	
40.00
    	
 
    	
$
    	
446,640.00
    	
 
    	
$
    	
37,220.00
    	
 
    
	
Lease Year 5
    	
 
    	
$
    	
41.00
    	
 
    	
$
    	
457,806.00
    	
 
    	
$
    	
38,150.50
    	
 
    

 

* Base Rent shall abate for the period beginning on the Rent Commencement Date in the amount of $9,761.83 per month for the three (3) months of the Lease Term following the Rent Commencement Date for a total Base Rent abatement of $29,285.50.

 

As used above, a “Lease Year” shall mean a period of twelve (12) full calendar months, where each successive Lease Year following Lease Year 1 shall commence on each anniversary of the Rent Commencement Date (or the first day of the first full calendar month following the Rent Commencement Date if the Rent Commencement Date is on a day other than the 1st of a calendar month).

 

2

 

The Base Rent for the Extension Term, if any, will be Fair Market Rent (as defined in Section 4.7 below), but in no event less than the Base Rent for the Lease Year immediately prior to such Extension Term.

 

9A.                             Additional Rent:  Tenant’s Tax Escalation, Tenant’s Operating Cost Escalation, Water Service Charge and/or Tenant’s Electricity Costs and all other sums (other than Base Rent) payable by Tenant to Landlord under this Lease.

 

9B.                             Tenant’s Tax Escalation:  Tenant’s Share of Taxes for any Tax Fiscal Year occurring in whole or in part during the Lease Term; payable monthly in equal installments. Tenant’s Tax Escalation for fiscal year 2015 is estimated to be approximately $8.09 per rentable square foot

 

9C.                             Tenant’s Operating Cost Escalation:  Tenant’s Share of the Operating Costs for any calendar year occurring whole or in part during the Lease Term; payable monthly in equal installments.  Tenant’s Operating Cost Escalation for fiscal year 2015 is estimated to be approximately $9.63 per rentable square foot.

 

9D.                             Tenant’s Electricity Costs:  Tenant shall pay the costs for electricity for lights and plugs and HVAC service provided to the Premises in accordance with Sections 4.5 and 7.2 (“Tenant’s Electricity Costs”).  If not separately metered or sub-metered, Tenant will pay its pro-rata costs monthly as allocated by the Landlord.

 

10.                               Heat and Utilities:  Other than utilities furnished by Landlord pursuant to this Lease, Tenant shall be responsible for contracting directly with the utility providers for all utility service to the Premises, including, without limitation, all utilities necessary to provide supplemental HVAC service to the Premises. If not separately metered, Tenant will pay its pro-rata costs monthly as allocated by the Landlord.

 

11.                               Brokers:  Transwestern RBJ.

 

12A.                      Tenant’s Address For Notices, Telephone Number, Fax Number and Taxpayer Identification No.:

 

Until the Term Commencement Date:

Morphic Rock Therapeutic, Inc.

c/o Polaris Venture Partners

1000 Winter Street, Suite 3350

Waltham, MA 02451

Attn:  Praveen Tipirneni, CEO

 

And thereafter at the Premises to the attention of the same officer

 

With a copy to:

 

Foley Hoag LLP

155 Seaport Boulevard

Boston, MA 02210

 

3

 

Attn: Mark A. Haddad, Esq.

 

Tenant F.I.D. #47-3882977

 

12B.                      Landlord’s Address for Notices:

 

AstraZeneca Pharmaceuticals LP

c/o MedImmune, LLC

One MedImmune Way

Gaithersburg, MD 20878

Attn: Cory Matthews / Global Real Estate

 

With a copy to:

 

AstraZeneca Pharmaceuticals LP

1800 Concord Pike

Wilmington, DE  19803

Attn:  General Counsel

 

with a copy to:

 

Burton Winnick, Esquire

McCarter & English, LLP

265 Franklin Street

Boston, MA  02110

 

12C.                      Landlord’s Address for Payment of Rent:

 

AstraZeneca LP

c/o Transwestern

PO Box 343030

Bethesda, MD  20827-3030

 

13.                               Security Deposit:  $137,714.00 in the form of a standby letter of credit.  See Section 13.3.

 

4

 

LEASE

 

THIS LEASE (this “Lease”), made as of the 5th day of August, 2015, by ASTRAZENECA PHARMACEUTICALS LIMITED PARTNERSHIP, a Delaware limited partnership, and MORPHIC ROCK THERAPEUTIC, INC., a Delaware corporation, is as follows.

 

W I T N E S S E T H:

 

ARTICLE I.
  CERTAIN DEFINITIONS

 

In addition to the words and terms defined elsewhere in this Lease, the following words and terms shall have in this Lease the meanings set forth in this Article (whether or not underscored):

 

“Additional Rent” has the meaning set forth in Item 9A of the Summary of Basic Terms.

 

“Bankruptcy Law” means any existing or future bankruptcy, insolvency, reorganization, dissolution, liquidation or arrangement or readjustment of debt law or any similar existing or future law of any applicable jurisdiction, or any laws amendatory thereof or supplemental thereto, including, without limitation, the United States Bankruptcy Code of 1978, as amended (11 U.S.C. Section 101 et seq.), as any or all of the foregoing may be amended or supplemented from time to time.

 

“Base Rent” has the meaning set forth in Item 8 of the Summary of Basic Terms.

 

“Broker” has the meaning set forth in Item 11 of the Summary of Basic Terms.

 

“Building” means the interconnected office and laboratory buildings located on Landlord’s Property and shown on the Site Plan.

 

“Business Hours” means Monday through Friday, 8:00 a.m. to 6:00 p.m. and Saturdays 8:00 a.m. to 1:00 a.m., except holidays.  The term “holiday” means the federal day of celebration of the following holidays:  New Year’s Day, Martin Luther King Day, President’s Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving, Christmas and any other weekday on which banks in the City of Boston, Massachusetts, are closed or required to be closed.

 

“Common Areas” means all areas of Landlord’s Property, as designated by Landlord from time to time, located inside or outside of the Building, which are not intended for the use of a single tenant and which are intended for (i) the non-exclusive common use of Landlord, Tenant and other tenants of portions of Landlord’s Property and their respective employees, agents, licensees and invitees and/or (ii) to serve the Building and/or Landlord’s Property.  Common Areas include, without limitation, the lobby of the Building, common restroom facilities and stairwells of the Building, sidewalks, unreserved Parking Areas, access drives, landscaped areas, utility rooms, storage rooms, and utility lines and systems and the Common Facilities.

 

5

 

“Common Facilities” means those facilities located on Landlord’s Property which Landlord designates from time to time as “common facilities”, including, but not limited to, building systems, passenger elevators, materials dumb-waiters, pipes, ducts, wires, conduits, meters, HVAC equipment and systems, electrical systems and equipment and plumbing lines and facilities, cafeteria, showers, conference rooms, auditorium and video/telephone conferencing meeting facilities.

 

“Environmental Law” means the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §1802 et seq., the Toxic Substances Control Act, 15 U.S.C. §2601 et seq., the Federal Water Pollution Control Act, 33 U.S.C. §1251 et seq., the Clean Water Act, 33 U.S.C. §1321 et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Massachusetts Oil and Hazardous Material Release Prevention and Response Act, Chapter 21E of the Massachusetts General Laws,  all regulations promulgated thereunder, and any other federal, state, county, municipal, local or other statute, law, ordinance or regulation (including any state or local board of health rules, regulation, or code), or any common law (including common law that may impose strict liability or liability based on negligence), which may relate to or deal with human health, the environment, natural resources, or Hazardous Materials, all as may be from time to time amended or modified.

 

“Event of Default” has the meaning given in Section 12.1.

 

“Extension Term” has the meaning given in Section 2.4(b).

 

“Generic Drug”  means (i) a drug product that is comparable to brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use, (ii) any drug manufactured, marketed or sold under its chemical name without advertising and/or (iii) any drug manufactured, marketed or sold under an Adopted Name assigned by the  United States Adopted Names Council.

 

“Hazardous Materials” or “Hazardous Substances” means, at any time, (a) any “hazardous substance” as defined in §101(14) of CERCLA (42 U.S.C. §9601(14)) or regulations promulgated thereunder; (b) any “solid waste,” “hazardous waste,” or “infectious waste,” as such terms are defined in any Environmental Law at such time; (c) asbestos, urea-formaldehyde, polychlorinated biphenyls (“PCBs”), bio-medical materials or waste, nuclear fuel or material, chemical waste, radioactive material, explosives, known carcinogens, petroleum products and by-products and other dangerous, toxic or hazardous pollutants, contaminants, chemicals, materials or substances which may be hazardous to human or animal health or the environment or which are listed or identified in, or regulated by, any Environmental Law; and (d) any additional substances or materials which at such time are classified or considered to be hazardous or toxic under any Environmental Law.

 

“Initial Term” means the period beginning at 12:01 a.m. on the Term Commencement Date and ending at 11:59 p.m. on the last day of the fifth (5th) Lease Year following the Rent Commencement Date.

 

6

 

“Insurance Costs” includes the cost of insuring the entire Landlord’s Property, including without limitation the buildings and improvements now or hereafter situated thereon, and all operations conducted in connection therewith, with such policies, coverages and companies and in such limits as may be reasonably selected by Landlord in light of the practices of similarly situated commercial landlords of comparable properties in the City of Waltham, Massachusetts (and/or which may be required by Landlord’s lenders), including, but not limited to, fire insurance with extended or with all-risk coverage, comprehensive general liability (including products liability) insurance covering personal injury, deaths and property damage with a personal injury endorsement covering false arrest, detention or imprisonment, malicious prosecution, libel and slander, and wrongful entry or eviction, rent loss or business interruption insurance earthquake insurance, Ordinance and Law insurance, terrorism insurance, worker’s compensation insurance, plate glass insurance, contractual liability insurance, boiler insurance, and fidelity bonds.  Insurance Costs shall not include any property insurance carried by Landlord with respect to equipment used exclusively by Landlord at the Building for Landlord’s pharmaceutical business operations or commercial general liability insurance for Landlord’s pharmaceutical business operations at the Landlord’s Property.

 

“Invitees” means employees, workers, visitors, guests, customers, suppliers, agents, contractors, representatives, licensees and other invitees.

 

“Land” means the land located at 35 Gatehouse Drive, Waltham, Massachusetts more particularly described in Exhibit A and which is depicted on the Site Plan.

 

“Landlord” means AstraZeneca Pharmaceuticals Limited Partnership, its successors and assigns.

 

“Landlord’s Property” means the Land, the Building and all present or future appurtenances and/or improvements to the Land and/or the Building.

 

“Leasable Square Footage of the Building” has the meaning set forth in Item 3D of the Summary of Basic Terms.

 

“Leasable Square Footage of the Premises” has the meaning set forth in Item 3C of the Summary of Basic Terms.

 

“Lease Term” means the Initial Term and, if Tenant timely and properly exercises its right to extend pursuant to Section 2.4(b), the Extension Term(s).

 

“Legal Requirements” means all applicable laws, statutes, rules, regulations and requirements of governmental authorities, including, but not limited to, zoning laws, building codes and the Americans with Disabilities Act of 1990 and any amendments thereto, regulations and ordinances in connection therewith (“ADA”).

 

“Operating Costs” means all costs, expenses and disbursements of every kind and nature (except Taxes) which Landlord shall pay or become obligated to pay in connection with owning, operating, managing, insuring, maintaining, repairing or replacing Landlord’s Property, all as reasonably and in good faith determined by Landlord.  For purposes of determining the Operating Costs, for any calendar year for which the Building is less than 95% occupied, the

 

7

 

Operating Costs for such calendar year which vary with occupancy shall be equitably adjusted to reflect the amount they would have been if the Building had been 95% occupied for such calendar year.  In no event shall the provisions of this section entitle Landlord to collect from Tenant more than Tenant’s Share of 100% of Operating Costs actually incurred.  Operating Costs shall include, by way of illustration, but not be limited to: all Insurance Costs; all charges payable by Landlord in connection with the performance of Landlord’s maintenance and repair obligations with respect to Landlord’s Property; all charges payable by Landlord to provide janitorial service to Landlord’s Property; all charges payable by Landlord to provide heating, ventilating and air conditioning services to the Building; all charges payable by Landlord to provide utility services to Landlord’s Property (except Tenant’s Electricity Costs or other similar electricity charges payable by other tenants); all costs related to trash, debris and refuse removal; all costs related to removal of snow and ice; all costs of pest and vermin control for the Common Areas; all costs of providing, maintaining, repairing and replacing of paving, curbs, walkways, landscaping, planters, roofs, walls, drainage, utility lines, security systems and other equipment; all costs of painting the exterior and Common Areas of the Building; all costs of repaving, resurfacing and restriping Parking Areas and drives; all costs of lighting, cleaning, waterproofing, repairing and maintaining Common Areas, Common Facilities and other portions of Landlord’s Property; the net cost to Landlord of providing food service as provided in Section 6.1(h); all costs of licenses, permits and inspection fees; all legal, accounting, inspection and consulting fees related to Landlord’s Property that are not specifically excluded herein; all costs of capital repairs and replacements to the Building or Common Areas, amortized over their expected useful life based upon and including a market rate of interest not to exceed eight percent (8%) per annum (subject to the limitation described below); all costs of wages, salaries and benefits of operating personnel, including welfare, retirement, vacations and other compensation and fringe benefits and payroll taxes for employees at or below the level of Building manager (provided that if any employee performs services in connection with the Building and other buildings, costs associated with such employee shall be proportionately included in Operating Costs based on the percentage of time such employee spends in connection with the operation, maintenance and management of the Building); management fees equal to 3% of gross rental revenues derived from Landlord’s Property (which management fees may be payable to an affiliate of Landlord); and all materials and supplies, including charges for telephone, overnight courier, postage, stationery, supplies and other materials and expenses required for the routine operation of the management office.  However, notwithstanding the above, the following specific items shall not be included: (a) the cost of alterations to space in the Building leased to others (as well as space occupied by Landlord for purposes other than Building management); (b) debt service and ground rent payments; (c) any cost or expenditure for which Landlord is entitled to reimbursement by insurance proceeds or eminent domain proceeds, whether or not Landlord is actually reimbursed; (d) costs for which Landlord is entitled to reimbursement under warranties provided to Landlord by contractors who have warranty obligations, whether or not Landlord is actually reimbursed; (e) costs in connection with leasing space in Landlord’s Property, including brokerage commissions, lease concessions, rental abatements and construction allowances granted to specific tenants, attorneys’ fees and collection costs related to negotiation and enforcement of tenant leases; (f) the cost of providing electrical service (lights and plugs) to space leased to tenants; (g) expenses which are billed directly, or reasonably allocable exclusively, to any tenant of the Building; (h) salaries and bonuses other than as expressly included in Operating Costs as set forth above; (i) the cost of any

 

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work or service performed on an extra-cost basis for any tenant of the Building; (j) capital expenditures, except for the amortization of capital expenditures (over their expected useful life based upon and including a market rate of interest not to exceed eight percent (8%) per annum) which (1) are required by laws which first become effective or applicable to Landlord’s Property after the Term Commencement Date, (2) are reasonably projected to achieve a savings in total Operating Costs over the Lease Term; or (3) are for repair or replacement of existing elements of Landlord’s Property; (k) the cost of any additions or improvements to the Building or Landlord’s Property; (l) depreciation, other than the amortization of capital improvements hereafter made as provided above; (m) costs incurred in connection with the sale, financing or refinancing of Landlord’s Property; (n) fines, costs, interest and/or penalties incurred due to the late payment of Taxes or Operating Costs, or any failure of Landlord to timely pay any obligation; (o) organizational expenses associated with the creation and operation of the entity that constitutes Landlord (as distinguished from the costs of Building operations) including, but not limited to, Landlord’s or Landlord’s property manager’s general corporate overhead or general administrative expenses; (p) advertising and promotional costs including tenant relation programs and events; (q) Landlord’s gross receipts taxes, personal and corporate income taxes, inheritance and estate taxes, other business taxes and assessments, franchise, gift and transfer taxes; (r) any costs, fees, dues, contributions or similar expenses for political, charitable, industry association or similar organizations; (s) costs incurred in connection with the original design and construction of the Building or Landlord’s Property, and the repair of damage to the Building or Landlord’s Property in connection with any type of casualty, event of damage or destruction or condemnation (other than the amount of any deductible payable by Landlord under any property insurance policy on Landlord’s Property, which amount shall be included in Operating Costs); (t) costs incurred in connection with upgrading the Building or Landlord’s Property to comply with insurance requirements, or life safety codes, ordinances, statutes, or other laws in effect and applicable to Landlord’s Property prior to the Term Commencement Date, including without limitation the ADA, including penalties or damages incurred as a result of non-compliance; (u) reserves of any kind; (v) any penalties or damages that Landlord pays to Tenant under this Lease or to other tenants of Landlord’s Property under their respective leases; (w) any costs, fines, interest or penalties incurred due to late payments or violations by Landlord of any governmental rule or authority; (x) legal fees, accountant fees and other expenses incurred in disputes with other former, current or future tenants or occupants of Landlord’s Property, or associated with the enforcement of any other leases of space in the Landlord’s Property, or the defense of Landlord’s title to or interest in the Building, Landlord’s Property or any part thereof; (y) services or installations available to any tenant in Landlord’s Property that are not also furnished to Tenant; (z) the cost of any service provided to Tenant or other occupants of Landlord’s Property for which Landlord is entitled to reimbursement (other than by a general reimbursement of operating expenses), whether or not Landlord is actually reimbursed; (aa) any cost or expense that is expressly excluded from Operating Costs, or expressly provided to be incurred by Landlord at its sole cost and expense, pursuant to any provision of this Lease; (bb) any Operating Cost charged to another tenant of Landlord’s Property that such tenant fails to pay; (cc) insurance premiums, or increases in insurance premiums, for any insurance required by any other tenant or occupant of Landlord’s Property that is not the same as or substantially equivalent to the insurance required of Landlord under this Lease; (dd) legal, mediation, arbitration, accounting and other fees and expenses incurred in disputes with the holder of any mortgage, deed of trust or other security instrument now or hereafter encumbering all or any part of

 

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Landlord’s Property; (ee) any cost or expense payable to any of Landlord’s affiliates or divisions, to the extent that such cost or expense is in excess of that which would be charged by an unaffiliated person or firm for the same service in Waltham, Massachusetts; (ff) costs incurred by Landlord in connection with correction of defects in design and construction of the Building or Landlord’s Property; (gg) any cost or expense related to removal, cleaning, abatement or remediation of Hazardous Material in or about the Landlord’s Property, including without limitation, Hazardous Substances in the ground water or soil that are not the responsibility of Tenant under this Lease; (hh) any cost or expense occasioned by or resulting from any violation of law by any other tenant or occupant of Landlord’s Property or their respective Invitees, or by any person or entity other than Tenant or Tenant’s Invitees; (ii) any bad debt loss, rent loss, or reserves (including, without limitation, any reserves for bad debts or rent loss); (jj) contributions to reserves for Operating Costs, including reserves for capital improvements (whether or not otherwise allocable under this Lease); and (kk) contributions to political or charitable organizations.  For purposes of determining exclusions from Operating Costs, Landlord shall be deemed to be a tenant or occupant of the Building, and all portions of the Leasable Square Footage of the Building where Landlord conducts its pharmaceuticals business operations to the exclusion of other tenants and occupants of the Property shall be deemed to be tenant space.

 

“Parking Areas” means those portions of Landlord’s Property which may be used for parking as depicted on the Site Plan, as such areas may be changed by Landlord from time to time.  The Parking Areas presently consist of the Parking Garage and the surface parking areas as depicted on the Site Plan.  The Parking Areas will not be changed to materially and adversely impact Tenant’s ingress and egress or to materially increase the distance from the Parking Areas to the Premises.

 

“Permitted Transferee” means (a) an entity controlling, controlled by or under common control with Tenant (a “Tenant Affiliate”), (b) an entity which succeeds to Tenant’s business by merger, consolidation or other form of corporate reorganization or (c) an entity which acquires all or substantially all of Tenant’s assets or stock; provided that an entity may not become a Permitted Transferee through or as a part of a bankruptcy or other similar insolvency proceeding.  The foregoing notwithstanding, under no circumstances shall any Permitted Transferee use the Premises for uses related to the Generic Drug business of any nature or description including, without limitation, the manufacture, development, sales, distribution or marketing of such products.

 

“Permitted Use” has the meaning set forth in Item 6 of the Summary of Basic Terms.

 

“Person” means any individual, partnership, joint venture, trust, limited liability company, business trust, joint stock company, unincorporated association, corporation, institution or entity, including any governmental authority.

 

“Premises” has the meaning set forth in Item 3A of the Summary of Basic Terms.

 

“Rent Commencement Date” means the date that is one hundred twenty (120) days following the Term Commencement Date.

 

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“Rules and Regulations” means the rules and regulations promulgated by Landlord with respect to Landlord’s Property, a copy of which is attached hereto as Exhibit D, as the same may be reasonably and in good faith modified by Landlord in a non-discriminatory manner from time to time upon notice to Tenant.

 

“Site Plan” means the site plan of Landlord’s Property attached hereto as Exhibit B which depicts the approximate size and layout of the Land, the Building and the Parking Areas.

 

“Specified Number” means twenty-eight (28), subject to the provisions of Section 2.3, based on a parking ratio of 2.5 spaces per 1,000 leasable square feet of the Premises.

 

“Summary of Basic Terms” means the Summary of Basic Terms which is affixed to this Lease immediately after the table of contents of this Lease.

 

“Tax Fiscal Year” means July 1 through June 30 next following, or such other tax period as may be established by law for the payment of Taxes.

 

“Taxes” means (a) all taxes, assessments, betterments, water or sewer entrance fees and charges including general, special, ordinary and extraordinary, environmental, or any other charges (including charges for the use of municipal services if billed separately from other taxes), levied, assessed or imposed at any time by any governmental authority upon or against the Land, the Building, or the fixtures, signs and other improvements thereon then included in Landlord’s Property and (b) all attorneys’ fees, appraisal fees and other fees, charges, costs and/or expenses incurred in connection with any proceedings related to an attempt to reduce the amount of the Taxes, change the tax classification and/or reduce the assessed value of Landlord’s Property, provided that such proceedings are reasonably projected to achieve a savings in total Taxes (taking into account the costs of the proceedings) over the Lease Term.  This definition of Taxes is based upon the present system of real estate taxation in the Commonwealth of Massachusetts; if taxes upon rentals or any other basis shall be substituted, in whole or in part, for the present ad valorem real estate taxes, the term “Taxes” shall be deemed changed to the extent to which there is such a substitution for the present ad valorem real estate taxes.  Taxes shall not include (i) any net income, capital, stock, succession, transfer, franchise, gift, estate or inheritance tax, except to the extent that such tax shall be imposed in lieu of any portion of Taxes; (ii) any item to the extent otherwise included in Operating Costs; (iii) interest and/or penalties incurred as a result of Landlord’s late payment of any Taxes; and (iv) any Taxes payable on fixtures and equipment of Landlord that are not available for the common use of all tenants.

 

“Tenant” means Morphic Rock Therapeutic, Inc., a Delaware corporation, its permitted successors and permitted assigns.

 

“Tenant Improvement Allowance” has the meaning set forth in Item 4 of the Summary of Basic Terms.

 

“Tenant’s Electricity Costs” has the meaning set forth in Item 9D of the Summary of Basic Terms.

 

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“Tenant’s Share” means 3.75%, being the amount (expressed as a percentage) equal to (a) the Leasable Square Footage of the Premises divided by (b) the Leasable Square Footage of the Building (rounded to the nearest one-hundredth of one percent (0.01%).

 

“Term Commencement Date” means the earlier of August 15, 2015 or the date Tenant commences its initial occupancy of the Premises for the active conduct of its business.

 

ARTICLE II.
 LEASE OF PREMISES

 

Section 2.1            Lease of the Premises.

 

Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord, upon and subject to the terms and provisions of this Lease and all zoning ordinances, and easements, restrictions and conditions of record.  Subject to all applicable Legal Requirements and Rules and Regulations, Tenant shall have access to the Premises on a seven days per week, 24 hours per day basis during the Lease Term, subject to closure where necessary or appropriate for maintenance, cleaning and repairs and those matters which are beyond Landlord’s reasonable control, including but not limited to, acts of God, accidents, breakdowns, war, civil commotion, fire or other casualty, labor difficulties, governmental regulations or orders and weather conditions.  In the event that it is necessary for Landlord to close the Premises for maintenance, cleaning or repairs, Landlord shall limit the closure to the minimum duration necessary to accomplish the applicable maintenance, cleaning and repairs.  Except in the event of emergency Landlord shall give Tenant not less than 72 hours advance written notice of any such closure.

 

Section 2.2            Common Rights.  The Premises are leased subject to, and with the benefit of, the non-exclusive right to use in common with others at any time entitled thereto the Common Areas and Common Facilities for all such purposes as such areas may be reasonably designated, but only in connection with the use of the Premises for the Permitted Use in accordance with the Rules and Regulations.  Landlord shall have the right from time to time to designate or change the locations, size or configuration of the Common Areas, and to modify or replace the Common Facilities, and to permit expansion of construction and new construction therein; provided, however, such changes shall not have a material adverse impact on Tenant’s access to, or use and enjoyment of, the Premises.  Tenant shall not have the right to use those portions of the Common Areas designated from time to time by Landlord as for the exclusive use of one or more other tenants.  Included herein is the right to use the Common Area conference center and conference rooms when not otherwise booked by the Landlord or others also entitled to use same, which use by Tenant shall be subject to Landlord’s allocation of such availability among such parties in Landlord’s reasonable discretion.

 

Section 2.3            Parking.  Subject to the Rules and Regulations, Tenant’s Invitees are authorized to park not more than the Specified Number of passenger automobiles, at any time, in the unreserved Parking Areas in common with Landlord and other tenants of Landlord’s Property from time to time, on

 

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a first come, first served basis.  Tenant acknowledges that not all of the Specified Number of spaces are located on Landlord’s Property and agrees that, in order to use the full amount of the Specified Number, Tenant will be required to utilize spaces in the Parking Garage.  In the event of a change in the Leasable Square Footage of the Premises, the Specified Number shall be adjusted pursuant to the formula used to calculate the Specified Number as of the date of the Lease.  Tenant shall not (a) permit any Invitees of Tenant (other than visitors and guests) to park in spaces designated as “visitor” spaces, (b) permit any Invitees of Tenant to park in spaces designated as “reserved” spaces (unless reserved for Tenant), (c) permit the total number of passenger automobiles parked in the Parking Areas by Invitees of Tenant, at any time, to exceed the Specified Number, and (d) except for delivery trucks using designated loading and unloading facilities, permit any Invitee of Tenant to park any vehicle in the Parking Areas other than passenger automobiles.  Landlord may, from time to time, designate one or more spaces as reserved for the exclusive use of one or more of the tenants and/or for Landlord’s Invitees, provided the same shall not materially and adversely affect Tenant’s parking rights hereunder.   Subject to the Rules and Regulations, Tenant shall have non-exclusive access to two (2) loading docks located in Building E, Level 0, and to the loading dock of the main building (A00).

 

Section 2.4            Lease Term.

 

(a)           The Lease Term shall commence at 12:01 a.m. on the Term Commencement Date and, unless Tenant timely and properly exercises its right to extend pursuant to Section 2.4(b) or this Lease terminates early, shall end at 11:59 p.m. on the last day of the fifth (5th) Lease Year following the Rent Commencement Date.  Provided Tenant has delivered to Landlord evidence of the insurance required under this Lease, Tenant shall have full access to the Premises upon the full execution of this Lease for the installation of telecommunications and computer systems, equipment, furnishings and other personal property.  Notwithstanding such access, the Initial Term shall not commence until the Term Commencement Date.

 

(b)           Provided that an Event of Default does not then exist, Tenant shall have the right to extend the Lease Term for one (1) period of three (3) years (the “Extension Term”) by giving Landlord written notice specifying such extension, which notice must be received by Landlord not less than twelve (12) months prior to the expiration date of the Initial Term.  If such extension becomes effective, the Lease Term shall be automatically extended upon the same terms and conditions as are applicable to the Initial Term, except that (x) Base Rent for the applicable Extension Term shall be as set forth in Item 8 of the Summary of Basic Terms and (y) there shall be no further right to extend or renew beyond the first Extension Term.

 

Section 2.5            Lease Amendment.  If, pursuant to any provision of this Lease, there is a change in any of the terms or amounts in the Summary of Basic Terms (including, without limitation, the Leasable Square Footage of the Building, the Leasable Square Footage of the Premises, Base Rent, or Tenant’s Share) then in effect, Landlord and Tenant will promptly execute a written amendment to, and restatement of, the Summary of Basic Terms, substituting the changed (or confirmed) terms and

 

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recomputed amounts in lieu of each of the applicable terms and amounts then in effect which have been changed.  As of the effective date of the amendment to the Summary of Basic Terms, the changed terms (and recomputed amounts) will be effective for all purposes of this Lease, and the amended and restated Summary of Basic Terms will be a part of, and incorporated into, this Lease.

 

Section 2.6            Landlord’s Equipment

 

During the Lease Term, Tenant shall have a license to use, at no additional cost to Tenant, Landlord’s Equipment.   Landlord shall provide Tenant with nine (9) additional vent hoods (which vent hoods shall be part of Landlord’s Equipment) for Tenant to install in the Premises at Tenant’s sole expense.  Tenant takes the Landlord’s Equipment in “AS IS” condition, and Landlord does not warrant or make any representation, express or implied, concerning the condition, adequacy or sufficiency for Tenant’s present or future purposes of the Landlord’s Equipment.  Landlord shall perform any maintenance, repairs or restoration that may be required to the Landlord’s Equipment during the Lease Term, and Tenant shall reimburse Landlord for all costs in connection therewith within thirty (30) days following receipt of Landlord invoice.  Tenant shall return the Landlord’s Equipment upon the expiration or earlier termination of this Lease in the same condition as of the Term Commencement Date, ordinary wear and tear and damage by fire or other casualty excepted.  Under no circumstances shall Tenant remove any of Landlord’s Equipment from the Premises.

 

Section 2.7            Back-up Generator.

 

Tenant shall be permitted to connect its equipment located in the Premises to the back-up generator equipment serving the Building (the “Back-up Generator”), at no additional cost to Tenant, by plugging such equipment into the red electrical outlets currently located in the Premises (the “Back-up Generator Outlets”).  Tenant’s use of such Back-Up Generator Outlets shall be at the sole risk and hazard of Tenant and Landlord does not warrant or make any representation, express or implied, concerning the condition, adequacy or sufficiency for Tenant’s present or future purposes of the Back-up Generator Outlets and/or Back-up Generator.

 

Section 2.8            Right of First Offer.

 

Subject to the provisions of this Section 2.8, Tenant shall have a one-time right of first offer (the “Right of First Offer”) on the then-available portions of Floor 1 of Building A (each, a “ROFO Space”) upon the following terms and conditions.  This Right of First Offer is subject and subordinate to (i) the rights of third parties existing as of the date of this Lease, (ii) the rights, if any, of each tenant in such ROFO Space granted in the Initial Lease-Up (as defined below) with respect to a ROFO Space, and (iii) the right of Landlord or any affiliate of Landlord to use or occupy such ROFO Space.

 

Landlord will notify Tenant of its plans to market a ROFO Space (the “ROFO Notice”) for lease to any party unrelated to Landlord (it being acknowledged and agreed that the Right of First Offer shall not be applicable to space Landlord intends to occupy and/or provide to affiliates of Landlord), which ROFO Notice shall specify the location and square footage for such ROFO Space, Landlord’s estimate of the fair market rent for such ROFO Space, the date of

 

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availability of such ROFO Space and all other material terms and conditions which will apply to such ROFO Space.  The term of any ROFO Space shall be coterminous with the Lease Term for the Premises; provided, however, that in the event less than thirty (30) full calendar months remain in the Lease Term as of the date of availability of such ROFO Space, then (i) if the Extension Term has not yet been exercised, Tenant’s exercise of such Right of First Offer shall be subject to Tenant’s simultaneous exercise of the Extension Term (which shall thereupon be applicable to such ROFO Space) and (ii) if no Extension Term remains or is exercisable by Tenant, then this Section 2.8 shall be of no force or effect and Tenant shall have no further Rights of First Offer.  Within ten (10) Business Days following its receipt of any ROFO Notice, Tenant shall have the right to accept the same by written notice to Landlord (the “ROFO Acceptance Notice”), provided that if Tenant disputes Landlord’s estimate of the fair market rent in the ROFO Acceptance Notice, the fair market rent for such space shall be determined as set forth in Section 4.7 below.   If Tenant timely delivers a ROFO Acceptance Notice, Landlord and Tenant shall execute an amendment to the Lease incorporating the ROFO Space into the Premises upon the terms contained in the ROFO Notice within ten (10) Business Days following Landlord’s delivery to Tenant of a form therefor (and if the Landlord’s determination of fair market rent was disputed in the ROFO Notice and not agreed to as of the commencement of the term for such ROFO Space, then rent shall be Landlord’s determination of fair market rent until the finalization of the fair market rent appraisal, and any change in such rent amount shall be adjusted — with applicable credits or reimbursement for any underpayment or overpayment - thereafter).

 

If Tenant fails to timely deliver a ROFO Acceptance Notice within said ten (10) Business Day period or fails to execute Landlord’s form of amendment for such ROFO Space within ten (10) Business Days of receipt from Landlord, Tenant shall be deemed to have waived its rights with respect to a ROFO Space and Landlord shall be entitled, but not required, to lease all or any portion of such ROFO Space to any party or parties on such terms and conditions, including, without limitation, options to extend the term of such lease and/or expand the premises under such lease, and for such rent as Landlord determines, all in its sole discretion, and the Right of First Offer with respect to such ROFO Space in such ROFO Notice shall be of no further force or effect.

 

Notwithstanding any contrary provision of this Lease, any Right of First Offer, and any exercise by Tenant of any Right of First Offer shall be void and of no effect unless on the date Tenant timely delivers a ROFO Acceptance Notice to Landlord and on the commencement date of the amendment for a ROFO Space (as applicable): (i) this Lease is in full force and effect, (ii) no Event of Default has occurred under this Lease which remains continuing and uncured after any applicable notice and opportunity to cure and (iii) except with respect to a Permitted Transfer, Tenant shall not have assigned this Lease and there shall not be any sublease or subleases then in effect.

 

Tenant acknowledges and agrees that Tenant’s Right of First Offer with respect to any space that is not subject to a third-party lease on the date hereof (the “Vacant Space”) shall not be of any force or effect until such time as such Vacant Space has been initially leased to a third-party tenant after the date hereof (the “Initial Lease-Up”) and such lease (and any rights held by such tenant in any part of the Building consisting of a ROFO Space) has subsequently expired.

 

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ARTICLE III.
 CONDITION OF PREMISES; CONSTRUCTION OF INITIAL IMPROVEMENTS; ALLOWANCE

 

Section 3.1            Condition of Premises.  Notwithstanding anything to the contrary herein contained, Tenant shall take the Premises “as-is”, in the condition in which the Premises are in as of the Term Commencement Date, without any obligation on the part of Landlord to prepare or construct the Premises for Tenant’s occupancy, and without any representation or warranty by Landlord to Tenant as to the condition of the Premises or the Building except as set forth in the next sentence.  Notwithstanding the foregoing Landlord represents that the roof and all structural elements of the Building and all utility and building service systems located in the Building on the Term Commencement Date shall be in good working order and condition for use of the Premises as office, research and development and laboratory space on the Term Commencement Date.

 

Section 3.2            Tenant’s Work; Landlord’s Contribution.   NOT APPLICABLE

 

Section 3.3            Plans and Specifications.  Tenant shall be solely responsible for the preparation of the final architectural, electrical and mechanical construction drawings, plans and specifications (called “plans”) necessary for Tenant to construct the Premises for Tenant’s occupancy, which plans shall be subject to approval by Landlord’s architect and engineers and shall comply with their reasonable requirements to avoid aesthetic or other conflicts with the design and function of the balance of the Building.  Landlord’s approval is solely given for the benefit of Landlord, and neither Tenant nor any third party shall have the right to rely upon Landlord’s approval of Tenant’s plans for any purpose whatsoever other than that Landlord does not object thereto under this Lease.  Landlord’s architects and engineers shall respond (with approval or disapproval) to any plan submission by Tenant within 8 business days after Landlord’s receipt thereof.  If Landlord fails to respond to any such submission within such 8 business day period, which failure continues for more than 2 business days after Tenant gives Landlord a written notice (the “Deemed Approved Notice”) advising Landlord that such plan submission shall be deemed approved within 2 business days of Landlord’s receipt of the Deemed Approved Notice, then such plan submission shall be deemed approved hereunder.  The Deemed Approved Notice shall, in order to be effective, contain on the first page thereof, in a font at least twice as large as the font of any other text contained in such notice, a legend substantially as follows:  “FAILURE TO RESPOND TO THIS NOTICE WITHIN TWO (2) BUSINESS DAYS AFTER RECEIPT HEREOF SHALL CONSTITUTE LANDLORD’S APPROVAL OF SUBMITTED PLANS.”  In the event Landlord’s architect’s or engineers’ approval of Tenant’s plans is withheld or conditioned, Landlord shall send prompt written notification thereof to Tenant and include a reasonably detailed statement identifying the reasons for such refusal or condition, and Tenant shall promptly have the plans revised by its architect to incorporate all reasonable objections and conditions presented by Landlord and shall resubmit such plans to Landlord.  Landlord’s architects and engineers shall respond (with approval or disapproval) to any plan re-submission by Tenant within 8 business days after Landlord’s receipt thereof.  Such process shall be followed until the plans shall have been approved by Landlord’s architect and engineers without

 

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unreasonable objection or condition.  Without limiting the foregoing, Tenant shall be responsible for all elements of the design of Tenant’s plans (including, without limitation, compliance with law, functionality of design, the structural integrity of the design, the configuration of the Premises and the placement of Tenant’s furniture, appliances and equipment), and Landlord’s approval of Tenant’s plans shall in no event relieve Tenant of the responsibility for such design.  Tenant agrees it shall be solely responsible for the timely preparation and submission of all such plans and for all elements of the design of such plans and for all costs related thereto.  (The word “architect” as used in this Section 3.2 shall include an interior designer or space planner.)  Tenant shall reimburse Landlord Landlord’s reasonable out-of-pocket expense incurred in connection with the review of Tenant’s plans.

 

Section 3.4            Signs.  Tenant may not erect or keep any sign which is visible from the exterior of the Building, but Tenant may install a sign at its sole cost and expense at the entrance to the Premises subject to Landlord’s reasonable approval.  All signs located in the interior and/or exterior of the Building (i) shall comply with all applicable Legal Requirements and the sign criteria included in the Rules and Regulations, and (ii) and shall have been reasonably approved in writing and in advance by Landlord following submission of detailed plans and specifications by Tenant to Landlord.  Tenant shall maintain its signs in good condition and repair and in accordance with Legal Requirements.  At the end of the Lease Term or earlier termination of this Lease, Tenant shall promptly remove Tenant’s signs, repair any damage caused by such removal, and return the affected portions of the Building to their condition existing prior to installation of the signs.  Tenant shall be identified in the Building directory in the Building’s common lobby and with directional signage at the entry of the Building at Landlord’s cost and, at Tenant’s cost, on the sign board at the entrance to the complex which includes the Building and Premises.

 

ARTICLE IV.
 BASE RENT; ADDITIONAL RENT

 

Section 4.1            Base Rent.

 

(a)           Tenant shall pay Base Rent commencing on the Rent Commencement Date at the rate set forth in Item 8 of the Summary of Basic Terms.

 

(b)           Base Rent shall be payable in equal monthly installments of 1/12th of the annual Base Rent then in effect and shall be paid without offset for any reason except as otherwise expressly provided herein, in advance, on the first day of each calendar month from and after the Rent Commencement Date.  Base Rent and Additional Rent shall be paid either (i) by an “electronic funds transfer” system arranged by and among Tenant, Tenant’s bank and Landlord, or (ii) by check sent to Landlord’s address set forth in Item 12C of the Summary of Basic Terms, or at such other place as Landlord shall from time to time designate in writing.  If Tenant is using checks, rent checks shall be made payable to AstraZeneca LP or to such other entity as Landlord may designate from time to time in writing.  The obligations of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are

 

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independent covenants and obligations. The parties acknowledge and agree that the obligations owing by Tenant under this Section 4.1 are rent reserved under this Lease, for all purposes hereunder, and are rent reserved within the meaning of Section 502(b)(6) of the Bankruptcy Code or any successor provision thereto.

 

Section 4.2            Certain Additional Rent.  From and after the Term Commencement Date Tenant shall pay to Landlord, without offset for any reason, all Additional Rent when due.  If Tenant fails to pay any Additional Rent, Landlord shall have all the rights and remedies for failure to pay Base Rent.  The parties acknowledge and agree that the obligations owing by Tenant under this Section 4.2 are rent reserved under this Lease, for all purposes hereunder, and are rent reserved within the meaning of Section 502(b)(6) of the Bankruptcy Code or any successor provision thereto.

 

Section 4.3            Taxes.

 

(a)           Tenant shall pay to Landlord, as Additional Rent, an amount equal to Tenant’s Tax Escalation.  Tenant’s Tax Escalation shall be estimated in good faith by Landlord at the beginning of each Tax Fiscal Year, and thereafter be payable to Landlord in equal estimated monthly installments together with the payment of Base Rent, subject to readjustment when the actual amount of Taxes is determined.  After readjustment, any shortage shall be due and payable by Tenant within 30 days of demand by Landlord and any excess shall be credited against future Base Rent and Additional Rent obligations, or refunded if the Lease Term has ended or terminated early and Tenant has no further rent or surrender obligations to Landlord.  If the taxing authority provides an estimated tax bill, then monthly installments of Taxes shall be based thereon until the final tax bill is ascertained.  Landlord shall furnish to Tenant, upon Tenant’s request, but not more than once in any year, a copy of the tax bill or any estimated tax bill.

 

(b)           If, after Tenant shall have made any payment under this Section 4.3, Landlord shall receive a refund of any portion of the Taxes paid on account of any Tax Fiscal Year in which such payments shall have been made as a result of an abatement of such Taxes, by final determination of legal proceedings, settlement or otherwise, Landlord shall, within 30 days after receiving the refund, pay to Tenant (unless an Event of Default has occurred) an amount equal to (i) the lesser of (A) Tenant’s Tax Escalation payments for such Tax Fiscal Year or (B) Tenant’s Share of the refund, which payment to Tenant shall be appropriately adjusted if Tenant’s Tax Escalation covered a shorter period than covered by the refund, less (ii) Tenant’s Share of all reasonable expenses incurred by Landlord in connection with such proceedings (including, but not limited to, reasonable attorneys’ fees, costs and appraisers’ fees), with Tenant’s Share being pro-rated for any partial Tax Fiscal Year at the beginning or end of the Term.  Landlord shall have sole control of all tax abatement proceedings.

 

(c)           Tenant’s obligation in respect of Taxes shall be prorated at the beginning and end of the Lease Term.  If the final tax bill for the Tax Fiscal Year in which such expiration or termination of this Lease occurs shall not have been received by Landlord, then within 30 days after the receipt of the tax bill for such Tax Fiscal Year, Landlord and Tenant shall make appropriate adjustments of estimated payments.

 

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(d)           Without limiting the generality of the foregoing, Tenant shall pay all rent and personal property taxes attributable to its signs or any other personal property including but not limited to its trade fixtures, the existing or any future floor coverings, wall treatments and light fixtures in the Premises.

 

(e)           Landlord may bring proceedings to contest the validity of the amount of any Taxes or to recover payment therefor.  Tenant shall reasonably cooperate with Landlord in connection with such proceedings and shall pay to Landlord Tenant’s Share of all reasonable costs, fees and expenses of such proceedings promptly upon being billed therefor, with Tenant’s Share being pro-rated for any partial Tax Fiscal Year at the beginning or end of the Term.  Any refund, rebate, credit or abatement of Taxes shall be equitably apportioned between the parties with due regard to the duties and rights of each under this Lease, after first reimbursing the parties participating in such contest or proceedings for their aforesaid respective costs and expenses in such contest or proceeding.

 

Section 4.4            Operating Costs.  Tenant shall pay to Landlord, as Additional Rent, an amount equal to Tenant’s Operating Cost Escalation.  Tenant’s Operating Cost Escalation shall be estimated in good faith by Landlord at the beginning of each calendar year, and thereafter be payable in equal estimated monthly installments, together with the Base Rent, subject to readjustment from time to time, but not more frequently than once in any calendar year, as reasonably determined by Landlord and also when actual Operating Costs are determined.  After a readjustment, any shortage shall be due and payable by Tenant within 30 days of demand by Landlord and any excess shall be credited against future Base Rent and Additional Rent obligations, or refunded if the Lease Term has ended and Tenant has no further rent or surrender obligations to Landlord.  Upon Tenant’s reasonable written request, Landlord shall provide Tenant with reasonable supporting documentation for the Operating Costs for the prior calendar year; provided that such request is received by Landlord within six months after the end of the calendar year to which such Operating Costs relate.

 

Section 4.5            Payment for Electricity.  Landlord has installed a meter to measure the consumption of electricity by all of the tenants (including Tenant) on the floors of the Building in which the Premises are located.  Tenant shall from and after the Term Commencement Date pay to Landlord, as Additional Rent, within 30 days of demand from time to time, but not more frequently than monthly, for its consumption of electricity, a sum equal to its pro rata share of such electrical costs (which shall be at Landlord’s cost and without mark-up), which pro rata share shall be based on a ratio, the numerator of which is the area of the portion of the Premises subject to each such common meter and the denominator of which is the aggregate area occupied by tenants (including space occupied by Landlord as a tenant of the Building) on the floor of the Building in which such portion of the Premises is located sharing such common meter.  The rate to be paid by Tenant for electricity shall exclude the costs incurred by Landlord in maintaining or replacing electrical meters, sub-meters or check-meters, but shall include any taxes or other charges imposed on the Landlord in connection with such electrical service.  In the event Landlord installs a check-meter to measure the consumption of electricity by Tenant in any portion of the Premises, Tenant shall

 

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pay to Landlord, as Additional Rent, on demand from time to time, but not more frequently than monthly, for its consumption of electricity as measured by such check-meter.

 

Section 4.6            Tenant’s Audit Rights.  Annually, within 120 days after the end of each calendar year or Tax Fiscal Year, as applicable, Landlord shall furnish to Tenant a report setting forth in reasonable detail the Operating Costs and Taxes for the immediately preceding calendar year (in the case of Operating Costs) or Tax Fiscal Year (in the case of Taxes).  Tenant shall have the right to audit Landlord’s books and records relating to Operating Costs and/or Taxes with respect to the period covered by each such report within six months after receipt of such report (such six month period being called the “Audit Period”) by delivering a notice of its intention to perform such audit to Landlord.  If, as a result of such audit, Tenant believes that it is entitled to receive a refund of any Additional Rent paid by Tenant in respect of Operating Costs and/or Taxes, Tenant shall deliver to Landlord, no later than 30 days after expiration of the Audit Period, a notice demanding such a refund, together with a statement of the grounds for each such demand and the amount of each proposed refund.  The cost of any such audit shall be paid by Tenant, except that, if it is established that the Additional Rent in respect of Operating Costs or Taxes, as applicable, charged to Tenant for the period in question was overstated by more than 3%, the reasonable out-of-pocket cost of such audit paid to a third party other than an employee of Tenant shall be paid or reimbursed to Tenant by Landlord.  Provided that Landlord has complied with Section 4.3(b) or Section 4.3(e), as the case may be, an overstatement for the purposes of allocation of audit costs shall not be deemed to exist due to a refund of Taxes.  Any audit shall be performed by either (a) Tenant’s or Tenant’s Affiliates regular employees or (b) a reputable certified public accountant reasonably acceptable to Landlord whose compensation is not contingent on the results of the audit.  As a condition of Tenant’s right to audit under this Section 4.6, Tenant agrees, and shall cause any outside auditor retained by Tenant to agree, to maintain the confidentiality of the results of the audit, subject to the right to disclose such results in any legal proceedings regarding the accuracy of the charges for Additional Rent in respect of Operating Costs or Taxes.  If Landlord determines that a report previously furnished by Landlord was in error, Landlord may furnish a corrective or supplemental report to Tenant within six (6) months after the original report was furnished, and if such corrective or supplemental report results in increased Additional Rent, the Audit Period for the year covered by such report shall be extended for six months after Landlord furnishes the corrective or supplemental report.

 

Section 4.7            Determination of Fair Market Rent.

 

“Fair Market Rent” shall mean (a) with respect to the Extension Term, the anticipated rent for the Premises for the Extension Term as of the commencement of the Extension Term under market conditions then existing and (b) with respect to a ROFO Space, the anticipated rent for the ROFO Space as of the commencement of the term for such ROFO Space under market conditions then existing.

 

With respect to the Extension Term, provided that Tenant timely delivers written notice that it is exercising its option to extend the term of the Lease, Landlord shall notify Tenant of Landlord’s estimate of the Fair Market Rent no later than the date that is eleven (11) calendar months prior to the expiration of the initial term of the Lease.  No later than fifteen (15) days

 

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after such notification, Tenant may dispute Landlord’s estimate of Fair Market Rent upon written notice thereof to Landlord which written notice shall contain Tenant’s estimate of the Fair Market Rent (the “Extension Term FMV Dispute Notice”).

 

If Tenant disputes Landlord’s estimate of Fair Market Rent, then the Fair Market Rent shall be determined by agreement between Landlord and Tenant during the next thirty (30) day period (the “Discussion Period”) following Tenant’s delivery of an Extension Term FMV Dispute Notice or a ROFO Acceptance Notice which disputes Landlord’s estimate of the fair market rent for a ROFO Space, as applicable.

 

If Landlord and Tenant are unable to agree upon the Fair Market Rent during the Discussion Period, then the Fair Market Rent shall thereafter be determined by the determination of a board of three (3) M.A.I. appraisers as hereafter provided, each of whom shall have at least five (5) years’ experience in the Waltham biotech rental market and each of whom is hereinafter referred to as “appraiser”, Tenant and Landlord shall each appoint one such appraiser and the two appraisers so appointed shall appoint the third appraiser (the “Neutral Appraiser”).  The cost and expenses of each appraiser appointed separately by Tenant and Landlord shall be borne by the party who appointed the appraiser.  The cost and expenses of the third appraiser shall be shared equally by Tenant and Landlord.  Landlord and Tenant shall appoint their respective appraisers no later than fifteen (15) days after the expiration of the Discussion Period and shall designate the appraisers so appointed by notice to the other party.  The two appraisers so appointed and designated shall appoint the Neutral Appraiser no later than thirty (30) days after the end of the Discussion Period and shall designate such appraiser by notice to Landlord and Tenant.  The Neutral Appraiser shall then choose either the Landlord’s estimate of Fair Market Rent or the Tenant’s estimate of Fair Market Rent as the Fair Market Rent of the space in question as of the commencement of the Extension Term and shall notify Landlord and Tenant of its determination no later than forty-five (45) days after the end of the Discussion Period. The Fair Market Rent determined in accordance with the provisions of this Section shall be deemed binding and conclusive on Tenant and Landlord.  Notwithstanding the foregoing, if either party shall fail to appoint its appraiser within the period specified above (such party referred to hereinafter as the “failing party”) the other party may serve notice on the failing party requiring the failing party to appoint its appraiser within ten (10) days of the giving of such notice and if the failing party shall not respond by appointment of its appraiser within said (10) day period, then the appraiser appointed by the other party shall be the sole appraiser whose choice of either the Landlord’s or the Tenant’s estimate of Fair Market Rent shall be binding and conclusive upon Tenant and Landlord.  All times set forth herein are of the essence.

 

ARTICLE V.
 USE OF PREMISES

 

Section 5.1            Permitted Use.  Tenant shall not use or occupy the Premises for any purpose other than the Permitted Use.

 

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Section 5.2            Restrictions on Use.  Tenant shall use the Premises and Landlord’s Equipment in a careful, safe and proper manner, shall not commit or suffer any waste on or about Landlord’s Property or with respect to Landlord’s Equipment, and shall not make any use of Landlord’s Property and/or Landlord’s Equipment which is prohibited by or contrary to any laws, rules, regulations, orders or requirements of public authorities, or which would cause a public or private nuisance.  Tenant shall comply with and obey all laws, rules, regulations, orders and requirements of public authorities which in any way affect the use or operation of Landlord’s Equipment and the use, operation or occupancy of Landlord’s Property.  Tenant, at its own expense, shall obtain any and all permits, approvals and licenses necessary for use of the Landlord’s Equipment and the Premises (copies of which shall be provided to the Landlord), provided that Landlord shall be responsible for obtaining a certificate of occupancy for the Building generally (i.e., as opposed to a certificate of occupancy for the Premises after the performance of any work by Tenant, which shall be Tenant’s responsibility) and any other permits, approvals and licenses necessary generally for the use of Landlord’s Equipment and Landlord’s Property.  Tenant shall not overload the floors or other structural parts of the Building; and shall not commit or suffer any act or thing on Landlord’s Property which is illegal, unreasonably offensive, unreasonably dangerous, or which unreasonably disturbs other tenants.  Tenant shall not knowingly do or permit to be done any act or thing on Landlord’s Property or with Landlord’s Equipment which will invalidate or be in conflict with any insurance policies, or which will increase the rate of any insurance, covering the Building.  If, because of Tenant’s failure to comply with the provisions of this Section or due to any use of the Premises or activity of Tenant in or about Landlord’s Property, the Insurance Costs are increased, Tenant shall pay Landlord the amount of such increase caused by the failure of Tenant to comply with the provisions of this Section or by the nature of Tenant’s use of the Premises.  Tenant shall cause any fire lanes in the front, sides and rear of the Building to be kept free of all parking associated with its business or occupancy and in compliance with all applicable regulations.  Tenant shall conduct its business at all times so as not to annoy or be offensive to other tenants and occupants in Landlord’s Property. Tenant shall not permit the emission of any objectionable noise or odor from the Premises and shall at its own cost install such extra sound proofing or noise control systems and odor control systems, as may be needed to eliminate unreasonable noise, vibrations and odors, if any, emanating from the Premises being heard, felt or smelled outside the Premises.  Tenant shall not place any file cabinets bookcases, partitions, shelves or other furnishings or equipment in a location which abuts or blocks any windows.

 

Section 5.3            Hazardous Materials.

 

(a)           Tenant shall be permitted to bring or keep in or on the Premises any Hazardous Material (hereinafter defined), so long as such Hazardous Material is specifically identified and enumerated in Tenant’s Hazardous Waste Management Program (as hereafter defined and as the same may be updated by Tenant from time to time upon reasonable prior notice to and with the approval of Landlord), which are hereby expressly permitted by Landlord (“Tenant’s Hazardous Materials”).  Tenant’s Hazardous Materials shall at all times be brought upon, kept or used in accordance with (A) all applicable Environmental Laws (hereinafter defined) and regulations or requirements of insurance rating or insurance service organizations, (B) Tenant’s “Hazardous Waste Management Program,” which shall be provided by Tenant to

 

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Landlord in advance of Hazardous Materials being brought by Tenant upon the Premises for Landlord’s review and approval, not to be unreasonably withheld, conditioned or delayed, and Tenant hereby acknowledges that Tenant shall be prohibited from bringing or keeping any Tenant’s Hazardous Materials in or on the Premises until Landlord has approved Tenant’s “Hazardous Waste Management Program” in writing, and (C) with respect to medical waste and so-called “biohazard” materials, all applicable laws and regulations and insurance regulations or requirements.  Tenant shall be responsible for assuring that all laboratory uses are adequately and properly vented.  Tenant’s Hazardous Waste Management Program shall be updated as reasonably required by Landlord or desired by Tenant (including the list of Tenant’s Hazardous Materials enumerated therein), but no less frequently than annually.  Tenant’s Hazardous Waste Management Program shall also specify (i) a description of handling, storage, use and disposal procedures; and (ii) all plans or disclosures and/or emergency response plans which Tenant has prepared, including without limitation Tenant’s Hazardous Waste Management Plan, and all plans which Tenant is required to supply to any governmental agency or authority pursuant to any Environmental Law.

 

(b)           Tenant, at its sole cost and expense, shall comply with (i) all applicable Environmental Laws, including but not limited to those relating to any discharge into the air, surface, water, sewers, soil or groundwater of any Tenant’s Hazardous Material, whether within or outside the Premises, Building or Landlord’s Property, and (ii) any applicable rules, requirements and safety procedures of the Massachusetts Department of Environmental Protection (“DEP”), the City of Waltham Fire Marshal, any other federal, state or local agencies or authorities having jurisdiction, and any insurer of the Landlord’s Equipment, Landlord’s Property, Building or the Premises with respect to the use, storage and disposal of any Hazardous Materials at or from the Premises.  Tenant shall provide Landlord with a written inventory of all of Tenant’s Hazardous Materials used or to be used in the Tenant’s normal operations at the Premises, and Tenant shall update said inventory on an annual basis and upon any changes or modifications thereto.

 

(c)           Any increase in the premium for insurance at the Landlord’s Property arising from Tenant’s use and/or storage of Tenant’s Hazardous Materials shall be at Tenant’s expense.  Tenant shall procure and maintain at its sole expense such additional insurance as may be necessary to comply with any requirement of any federal, state or local government agency with jurisdiction.

 

(d)           Tenant shall reimburse Landlord upon demand, as Additional Rent, for the reasonable costs of investigating Tenant’s compliance with the provisions of this Section 5.3, within thirty (30) days after demand therefor, but only if such investigation reveals that Tenant is not in material compliance.  Tenant shall execute affidavits, certifications and the like, as may be reasonably requested by Landlord from time to time concerning Tenant’s actual knowledge and belief concerning the presence of Hazardous Materials in or on the Premises or the Building.

 

(e)           Tenant hereby covenants and agrees to indemnify, defend and hold Landlord harmless from and against any and all claims against Landlord arising out of (A) the presence of Hazardous Material (which term shall include, for all purposes of this Lease, any biohazardous materials) in, under or about the Building or in Landlord’s Property or transported from the Building or Landlord’s Premises to the extent resulting from Tenant’s use or operations,

 

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or (B) the breach by Tenant of any of its obligations under this Section 5.3.  This indemnification of the Landlord by Tenant includes, without limitation, reasonable costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of Hazardous Material present in the land, soil, air or ground water on, under or about the Building or landlord’s Premises resulting from Tenant’s use or operations.  The indemnification and hold harmless obligations of Tenant under this Section 5.3(e) shall survive the expiration or any earlier termination of this Lease.  Without limiting the foregoing, if the presence of any Hazardous Material in the Building or otherwise in the Landlord’s Property is caused by any of the Tenant, its agents, contractors, or employees and results in any contamination of any part of the Landlord’s Property or any adjacent property, Tenant shall take all actions at Tenant’s sole cost and expense as are necessary pursuant to Environmental Laws to remediate the Landlord’s Property or any adjacent property to their condition as of the date of this Lease, provided that Tenant shall first obtain Landlord’s approval of such actions, which approval shall not be unreasonably withheld, conditioned or delayed so long as such actions, in Landlord’s reasonable discretion, would not potentially have any adverse effect on the Landlord’s Property, and, in any event, Landlord shall not withhold its approval of any proposed actions which are required by applicable Environmental Laws.

 

(f)            Landlord represents that it has no knowledge of (i) any contamination of any portion of the Landlord’s Property other than as disclosed in the environmental reports previously delivered to the Landlord; or (ii) any asserted claims by third parties relating to the presence of Hazardous Materials in the Landlord’s Property.

 

(g)           Landlord hereby covenants and agrees with Tenant to indemnify, defend and hold Tenant harmless from and against any and all claims against Tenant which may arise out of (i) the release or discharge of any Hazardous Material on or about the Landlord’s Property, Premises or Building by virtue of the acts of Landlord or any of its contractors, agents or invitees,  and (ii) the presence of the Hazardous Materials located at or migrating from the Landlord’s Premises or Building as of the Term Commencement Date.  The indemnification and hold harmless obligations of Landlord under this Section 5.3(g) shall survive the expiration or any earlier termination of this Lease with respect to occurrences during the Term.

 

Section 5.4            Biohazard Removal and Animal Care.

 

(a)           Tenant shall be responsible, at its sole cost and expense, for janitorial and trash removal services and other biohazard disposal services for the Premises, including the laboratory areas thereof.  Such services shall be performed by Tenant’s employees or by licensed (where required by law), insured and qualified contractors and on a sufficient basis to ensure that the Building and the Landlord’s Premises are at all times kept neat, clean and free of Hazardous Materials and biohazards as provided in Section 5.3.  In addition, Tenant shall be responsible, at Tenant’s sole cost and expense, for the care and safe storage of any animals housed within the Premises, including without limitation all animal husbandry and custodial services with respect thereto, in accordance with the highest standards and best practices applicable to Tenant’s industry.

 

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(b)           No animals, animal waste, food or supplies relating to the animals maintained from time to time in the animal storage areas of the Premises shall be transported within the Building except as provided in this Section 5.4.   All deliveries of animals or animal food or supplies to Tenant at the Building shall be made prior to 11:00 a.m.  No transportation of animals, animal waste, food or supplies within the Building shall occur between the hours of 11:00 a.m. and 2:00 p.m.  At all times that animals are transported within the Common Areas, they shall be transported in an appropriate cage or other container.  At no time shall any animals, animal waste, food or supplies relating to the animals be brought into, transported through, or delivered to the lobby of the Building or be transported within the Building in elevators.

 

ARTICLE VI.
 LANDLORD’S SERVICES

 

Section 6.1            Landlord’s Services.  Landlord shall furnish to the Building the services set forth below in this Section 6.1, subject to the conditions stated in this Lease.  The cost of certain of these services are to be (i) paid by Tenant, as expressly provided in this Lease, or (ii) included in Operating Costs or Taxes, as applicable.  The cost and expense of any services that are expressly provided in this Lease not (x) to be paid for by Tenant as expressly provided for in this Lease or (y) included in Operating Costs or Taxes, as applicable, shall be borne by Landlord.  Except as otherwise expressly provided in this Lease, the cost of all work and services to be provided or performed by Landlord hereunder shall be included in Operating Costs.

 

(a)           Exterior of Building and Structure.  Landlord shall keep in good condition and repair the exterior and structural elements of the Building, including the roof, roof membrane and the utility lines and systems outside the Building (except to the extent those utility lines or systems are the property or responsibility of the applicable utility company).

 

(b)           Systems.  Except with respect to the performance of Tenant’s obligations under Section 7.4, Landlord shall operate, maintain and repair the heating, ventilating and air conditioning system, the plumbing, sewer, drainage, electrical, fire protection, elevator, life safety and security systems and equipment and other mechanical, electrical and communications systems and equipment of the Building (“Building Systems”).  Notwithstanding the foregoing, the Building Systems shall only include such commonly available systems and equipment as are present in the Building as of the Term Commencement Date and replacements thereof, and shall expressly exclude any utility or building service systems or equipment installed by or on behalf of Tenant or otherwise in connection with Tenant’s operations in the Premises, all of which shall be operated, maintained, repaired, and replaced as necessary by Tenant at its sole expense.  Subject to the performance of Tenant’s obligations under Section 7.4, Landlord shall provide heating, ventilating, and air-conditioning services to the Premises to maintain reasonably comfortable temperatures, the cost of which shall be reimbursed by Tenant to Landlord as metered by Landlord based upon Tenant’s actual usage thereof.

 

(c)           Water and Sewer.  Hot and cold water will be available for Tenant’s use.  Tenant shall from and after the Term Commencement Date pay to Landlord, as Additional Rent, on demand from time to time, but not more frequently than monthly, for its consumption of water

 

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and sewer services in the Premises, a Water Service Charge.  As of the date hereof the “Water Service Charge” is a sum equal to $1.48/rsf per annum (i.e. $1,377.14 per month).  Landlord may from time to time have a survey made by a reputable, independent engineer or consulting firm selected by Landlord in its sole discretion to determine the cost of the water and sewer service being furnished to the Premises by Landlord.  If it is determined that such cost is different from the Water Service Charge, then the Water Service Charge shall be adjusted by such difference, effective on the date recommended by such engineer or consulting firm.  Any adjustment in the Water Service Charge shall be retroactive to the extent necessary.  Notwithstanding the foregoing, if the rates for water and/or sewer usage charged by the applicable utility company increase during the term of this Lease, Landlord may increase the Water Service Charge accordingly effective as of the date of such increase without the necessity of a survey.

 

(d)           Common Areas.  Landlord shall provide heating and air conditioning for the Common Areas inside the Building during Business Hours.  Landlord shall clean, provide lighting, repair, maintain and provide janitorial services for the Common Areas including, to the extent reasonable, the Parking Areas, in order to maintain the Common Areas.  Landlord shall make any alterations or improvements as are necessary to cause the Common Areas to be in substantial compliance with all Legal Requirements.  Notwithstanding the above, any damage to the Common Areas or Common Facilities caused by any Invitee of Tenant shall be the sole responsibility of Tenant.

 

(e)           Waste Removal.  Landlord shall provide or arrange for ordinary and reasonable waste removal services for the Building.  In the event that Landlord reasonably determines that Tenant’s quantity of waste is excessive in comparison to other tenants of the Building, or, in the event that Landlord determines that Tenant’s waste is other than waste generated by typical office use, Landlord may bill Tenant directly as Additional Rent for any such additional cost therefor or require that Tenant be responsible for disposing of its own waste.  Tenant shall be responsible for and pay for its own laboratory waste removal and office cleaning.

 

(f)            Taxes.  Landlord shall pay all Taxes levied upon or with respect to Landlord’s Property.

 

(g)           Insurance.  Landlord shall procure and maintain in full force and effect fire, casualty and extended coverage insurance with respect to the Building, with vandalism and malicious mischief endorsements, liability insurance with respect to the Common Areas, business automotive, rent loss insurance and such other insurance upon or with respect to Landlord’s Property as Landlord reasonably determines to be necessary, appropriate and/or desirable or is required by Landlord’s lender, all with such limits of coverage and deductibles as Landlord or Landlord’s lender may deem reasonably necessary, appropriate and/or desirable, which insurance coverage and amounts shall be commercially reasonable in light of the practices of similarly situated commercial landlords of comparable properties in the City of Waltham, Massachusetts.

 

(h)           Food Service.  Landlord shall cause food service to be provided (directly or through outside vendors) during Business Hours for tenants of the Building within a portion of the Common Areas of the Building for use by tenants of the Building and others permitted to use

 

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such facilities by Landlord.  Landlord shall have the right to terminate the food service if it no longer is economically viable in the Landlord’s sole and exclusive judgment.

 

Section 6.2            Extraordinary Use.  Tenant acknowledges that, for the purposes of computer use in the Premises, the electrical and HVAC services to be supplied by Landlord to the Premises will be sufficient only for computer use for general office purposes (and not for data centers, server farms or any similar computing equipment requiring high-demand power and cooling).  Any additional capacity or structural support, as reasonably determined by Landlord, needed for computers, data processing or heat-generating machines or other equipment required for computer use beyond ordinary office uses, shall be subject to Landlord’s prior written approval, which approval shall be in Landlord’s reasonable discretion, and all such equipment shall be installed and maintained at Tenant’s sole expense.

 

Section 6.3            Interruption; Delay.  Landlord shall have no responsibility or liability for failure or interruption of any such repairs or services referred to in this Article VI, or for any interruption in utility services, caused by breakage, accident, strikes, repairs, inability after exercise of reasonable diligence to obtain supplies or otherwise furnish services, or for any cause or causes beyond the reasonable control of Landlord (any or all of the foregoing being a “Service Interruption”) (but Landlord, in respect of those matters for which Landlord is responsible, will use reasonable efforts to restore such services or make such repairs as soon as possible), nor in any event for any indirect or consequential damages; and failure or omission on the part of Landlord to furnish such service or make such repair shall not be construed as an eviction of Tenant, nor render Landlord liable in damages, nor entitle Tenant to an abatement of Base Rent or Additional Rent, nor release Tenant from the obligation to fulfill any of its covenants under this Lease, except as provided in Articles X and XI with respect to eminent domain and damage by fire or other casualty.  Notwithstanding the foregoing, if the Premises, or a material portion thereof, is made untenantable or inaccessible, and Tenant actually ceases to use the Premises or such portion, for more than five consecutive business days after written notice from Tenant to Landlord as a result of any Service Interruption not caused by Tenant, then Tenant shall be entitled to receive an abatement of Base Rent and Additional Rent payable hereunder for the period beginning on the fifth consecutive business day of such Service Interruption and ending on the day the service is restored; provided that if such a Service Interruption renders less than the entire Premises untenantable or inaccessible, the amount of Base Rent and Additional Rent abated shall be prorated in proportion to the percentage of the rentable square footage of the Premises that is rendered untenantable or inaccessible.  The foregoing right shall not apply if the Service Interruption is due to casualty.  In any event, Landlord shall take all commercially reasonable steps to provide alternative power, utility services, HVAC, electrical, plumbing and other services to the Premises, including, but not limited to, providing generators and other temporary services at the Landlord’s sole cost and expense if such Service Interruption was caused by Landlord or Landlord’s employees, agents, contractors or invitees.

 

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Section 6.4            Additional Services.  Should Tenant request any additional services, or services beyond the noted hours for such services, Tenant agrees to pay to Landlord as Additional Rent therefor Landlord’s actual costs for providing such service, plus an additional 5% as an administrative fee, within 30 days of Landlord’s billing Tenant therefor.

 

Section 6.5            Landlord Indemnity.  Landlord will exonerate, indemnify, defend, save and hold harmless Tenant from and against all claims, proceedings, defenses thereof, liabilities, costs, and expenses of any kind and nature, including reasonable legal fees, expenses and costs, arising from (i) any injury to person or damage to property to the extent caused by the negligence or misconduct of Landlord or Landlord’s agents, employees or contractors, or (ii) any breach by Landlord of any representation, covenant or other term contained in this Lease, whether occurring before, during, or after the expiration of the Lease Term.  The provisions of this Section shall survive the expiration or earlier termination of the Lease Term.

 

Section 6.6            Compliance with Laws.  Landlord shall cause the Building (other than portions for which such compliance is the responsibility of the party leasing such space) and the Common Areas to comply with all Legal Requirements.  Such obligation of Landlord shall include, but not be limited to, the correction of any violations with respect to the Common Areas that arise out of or in connection with any claims brought under any provision of the Americans with Disabilities Act as amended from time to time.  As of the date hereof, Landlord has not received notice from any governmental agencies that the Landlord’s Property, Common Areas or Premises are in violation of Legal Requirements, and Landlord shall be responsible for correcting any such violations existing as of the Term Commencement Date.

 

ARTICLE VII.
 CERTAIN OBLIGATIONS OF TENANT

 

Section 7.1            Rent.  Tenant will promptly pay the Base Rent and Additional Rent, including without limitation any and all fees, charges, expenses, fines, assessments or other sums payable by Tenant to Landlord (or to the applicable provider of utilities) at the time and in the manner provided for in this Lease, all of which shall be deemed to be obligations to pay Base Rent or Additional Rent.

 

Section 7.2            Utilities.  Tenant shall pay Tenant’s Electricity Costs in accordance with Section 4.5.  With respect to utilities other than electric for which the Premises are separately metered or submetered, Tenant shall pay bills directly to the utility provider prior to their due dates if Tenant is billed directly by the utility provider, or Tenant shall pay the charges therefor to Landlord as Additional Rent within 30 days of Landlord’s billing therefor.  With respect to utilities other than electric for which the Premises are not separately metered or submetered, Tenant shall pay for usage as a part of the Operating Costs.  Tenant agrees that its use of electric current shall never

 

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exceed the capacity of existing feeders, risers and wiring installations in the Building.  Tenant shall not make or perform any alterations to wiring, installations, lighting fixtures or other electrical facilities in any manner without the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed, or conditioned.  Any risers or wiring to meet Tenant’s excess electrical requirements, if requested by Tenant and approved by Landlord, will be installed by Landlord at Tenant’s expense.

 

Section 7.3            No Waste.  Tenant shall not overload, damage or deface the Premises nor shall it suffer or permit the same to be done, nor shall it commit any waste.

 

Section 7.4            Maintenance; Repairs; and Yield Up.  Subject to Landlord’s maintenance and repair obligations and the limitations set forth below, Tenant shall keep the Premises neat and clean and maintain the same in good repair and condition; Tenant’s obligation to so maintain and repair the Premises shall apply to all of the Premises, including, without limitation, all doors, glass, fixtures, interior walls, floors, ceilings, HVAC equipment, telephone and data equipment, lighting, plumbing and lab equipment and any other systems (other than common Building Systems) exclusively serving the Premises.  There is excepted from Tenant’s obligations under this Section 7.4 only (a) damage to such portions of the Premises not the responsibility of Tenant under this Lease and originally constructed by Landlord as is caused by those hazards which are covered by the policies of insurance carried by Landlord with respect to Landlord’s Property, (b) repair of damage caused by Landlord except to the extent covered by Tenant’s property insurance, and (c) repairs and work which are otherwise the specific responsibility of Landlord hereunder.  Upon the expiration or other termination of the term hereof, Tenant shall (i) peaceably quit and surrender to Landlord the Premises in the condition required by the other provisions of this Lease; (ii) remove any and all Hazardous Materials from the Premises (other than any Hazardous Materials in the Premises on the Term Commencement Date or, except for such introduction requested by Tenant or required under this Lease, introduced by Landlord or those claiming under Landlord) and all of Tenant’s Property; (iii) deliver to Landlord a certification from a licensed, insured, and qualified industrial hygienist certifying that the Premises do not contain any Hazardous Materials other than any Hazardous Materials in the Premises on the Term Commencement Date or, except for such introduction requested by Tenant or required under this Lease, introduced by Landlord or those claiming under Landlord; (iv) repair any damages to the Premises or the Building caused by the installation or removal of alterations or Tenant’s property; and (v) decommission all laboratory lines, systems, and equipment in accordance with applicable industry standards.  Tenant’s obligations under the preceding sentence shall survive the expiration or earlier termination of this Lease for a period of eighteen (18) months.  Failure to perform such removal and restoration on or before the expiration or earlier termination of the Term hereof shall constitute a holding over by Tenant subject to the terms of Section 13.9 hereof.  Tenant shall cause all maintenance and repair work to conform to applicable governmental laws, rules, regulations, orders and requirements of public authorities.  Tenant shall keep the Premises clear of all filth, trash and refuse.  If Tenant fails to perform Tenant’s obligations under the above provisions of this Section, then Landlord will have the right (but not the obligation), without waiving any default by Tenant, to cause such obligations to be performed upon not less than three days prior written

 

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notice to Tenant (or a shorter period of prior written notice, or a contemporaneous written notice, if appropriate in Landlord’s judgment in light of the nature of Tenant’s obligations to be performed), and if Landlord causes any of such obligations to be performed, the costs and expenses reasonably incurred by Landlord in connection therewith shall be due and payable by Tenant to Landlord as Additional Rent upon demand.

 

Section 7.5            Alterations by Tenant.  Tenant will not make any change in, or addition to, the Premises without first obtaining, on each occasion, Landlord’s consent in writing, not to be unreasonably withheld, and then only at Tenant’s expense (other than with respect to the Tenant Improvement Allowance, if applicable), and in a lawful manner and upon such terms and conditions as Landlord, by such writing, shall approve, which shall include, without limitation, (a) maintenance of insurance reasonably satisfactory to Landlord and (b) compliance with Sections 7.9 and 7.11.  Notwithstanding the foregoing, the prior written consent of Landlord will not be required for non-structural interior alterations that do not affect any of the utility or building service systems or equipment in the Building (other than such utilities and systems that are located within and exclusively serve the Premises) and that cost less than $10,000.00 for any single project; provided, however, that Tenant shall notify Landlord of the performance of any such work and provide Landlord copies of any plans and specifications therefor that have been produced by or for the benefit of Tenant.  Any such alteration or addition shall be consistent in appearance with the rest of the Building and Landlord’s Property and shall be made only after duly obtaining (and providing to Landlord copies of) all required permits and licenses from all governmental authorities.  Tenant will deliver to Landlord in writing a schedule setting forth the details and location of all such proposed alterations or additions and detailed plans and specifications.  The contractor(s) performing the work shall be subject to Landlord’s reasonable approval.  All approved repairs, installations, alterations, additions or other improvements made by Tenant shall be made in a good and workmanlike manner, between such hours as approved in writing by Landlord, which approval shall not be unreasonably withheld, delayed, or conditioned, and in such a way that utilities will not be unnecessarily interrupted and other tenants and occupants of the Building will not suffer unreasonable inconvenience or interference as reasonably determined by Landlord.  Tenant’s Invitees shall be given such reasonable access to other portions of the Building and the mechanical systems as may be necessary or appropriate to perform such work.  Both during and after the performance of any such work, Landlord shall have free access to any and all mechanical installations in the Premises that constitute part of the Building service systems and equipment (i.e., as opposed to Tenant’s laboratory equipment), including, but not limited to, air conditioning, fans, ventilating systems, machine rooms and electrical closets; and Tenant agrees not to construct or permit the installation of partitions and/or other obstructions in the Premises which might interfere with Landlord’s free access to the Premises or Building, or impede the free flow of air to and from air vents and other portions of the heating, ventilating and air conditioning systems in the Building.  All installations, alterations, additions or improvements in or to the Premises shall be the property of Landlord and shall remain upon, and be surrendered with, the Premises at the end of the Lease Term or sooner termination of this Lease, except to the extent that Landlord, by written notice to Tenant given simultaneously with the approval of the plans and specifications for any such work, requires Tenant to remove any of the same at the expiration or earlier termination of this Lease, all of which items so designated

 

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shall be removed by Tenant at its expense and Tenant shall repair any damage to the Landlord’s Property and Landlord’s Equipment caused by the installation or removal of any such item.

 

Section 7.6            Trade Fixtures and Equipment.  Any trade fixtures installed in, or attached to, the Premises by, and at the expense of, Tenant, shall remain the property of Tenant, if the same may be removed without material damage to, or destruction of, the Premises.  Tenant shall have the right, at any time and from time to time during the Lease Term, to remove any and all of its trade fixtures, which it may have installed in, or attached to, the Premises.  In addition, at the end of the Lease Term or sooner termination of this Lease, Tenant shall remove all of Tenant’s trade fixtures unless Landlord gives Tenant a written waiver for same.  At any time that Tenant removes any of its trade fixtures, Tenant shall promptly repair Landlord’s Property and Landlord’s Equipment as a result of any damage to, or destruction of, Landlord’s Property and/or Landlord’s Equipment caused by the installation or removal of any of its trade fixtures.

 

Section 7.7            Compliance with Laws.  Subject to Section 6.6 and/or Landlord’s obligation to obtain a certificate of occupancy for the Building as provided in Section 5.2 above and any other permits, approvals and licenses necessary generally for the use of Landlord’s Property and Landlord’s Equipment, Tenant, in its use of the Premises and at its sole expense, shall comply with all applicable laws, orders and regulations of Federal, State, County and Town authorities, and with any direction of any public officer or officers, pursuant to law, including, without limitation, all Legal Requirements related to the use, storage, discharge, release, removal or existence of Hazardous Materials and for all applicable Export Control and sanctions regulations.  Tenant shall maintain the Premises and Landlord’s Equipment in a sanitary and safe condition in accordance with all applicable Federal and State laws and the by laws, rules, regulations and ordinances of the City of Waltham, and in accordance with all directions, rules and regulations of the Health Officer, Fire Marshall, Building Inspector and other proper officers of the governmental agencies having jurisdiction thereover.

 

Section 7.8            Contents at Tenant’s Risk.  All inventory, equipment, goods, merchandise, furniture, fixtures and property of every kind which may be on or about the Premises (other than Landlord’s Equipment and Landlord’s Furniture) shall be at the sole risk and hazard of Tenant, and if the whole or any part thereof shall be destroyed or damaged by windstorm, vandalism, and malicious mischief and such other hazards as are included in so-called extended all-risk coverage, including but not limited to fire, water or otherwise, or by the use or abuse of water or by the leaking or bursting of water pipes, or by rising water, or by roof or other structural leak, or by loss of electrical service, or in any other way or manner, no part of such loss or damage shall be charged to or borne by Landlord in any case whatsoever, except that to the extent required by applicable Massachusetts law, the foregoing shall not exculpate Landlord from its own negligent acts or omissions or willful misconduct.  Tenant agrees to maintain property insurance written on an All Risk or Special Perils Form, with coverage for broad form water damage, including earthquake sprinkler leakage, at the full replacement cost value of the insured property and with a replacement cost

 

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endorsement covering all of Tenant’s business and trade fixtures, equipment, furniture, merchandise and other personal property within the Premises; and from and after the commencement date of this Lease and throughout the remainder of the term hereof rent or business interruption insurance against loss resulting from fire, or other risks covered by broad form extended coverage endorsement, in an amount equal to the then current base annual rent and additional rents for the Premises for at least a one year period, with loss payable under such policy to Landlord, and Tenant shall indemnify and save harmless Landlord from any loss, cost, expense, damage or liability resulting from Tenant’s failure to have such insurance as required in this Lease.  Such insurance on Tenant’s property shall contain a waiver of subrogation clause in favor of Landlord.

 

Such policies are to be written for terms of not less than one year by a company having a general policy holder’s rating of not less than A and a rating in financial size of not less than XI, as rated in the most current “Best’s” insurance reports, and authorized and licensed to issue such policies in the Commonwealth of Massachusetts. Any such insurance required of Tenant hereunder may be furnished by Tenant under any blanket policy carried by it, providing the policy strictly complies with all other terms and conditions contained in this Lease, and provided further that such policy: (x) identifies with specificity the particular address of the premises being covered under the blanket policy; (y) provides a minimum guaranteed coverage amount for the Premises as required pursuant to the terms of this Article; and (z) expressly waives any pro rata distribution requirement contained in Tenant’s blanket policy covering the Premises. Each policy evidencing insurance as required to be carried by Tenant pursuant to this Article shall contain the following provisions and/or clauses: (i) a cross-liability clause; (ii) a provision that such policy and the coverage carried by Landlord shall be excess insurance; (iii) a provision including Landlord, Landlord’s managing agent, and other parties (including mortgagees) designated by Landlord as additional insureds (except with respect to workers’ compensation insurance); (iv) a waiver by the insurer of any right of subrogation against Landlord, its agents, employees and representatives which arises or might arise by reason of any payment under such policy or by reasons of any act or omission of Landlord, its agents, employees, or representatives; (v) a severability clause; and (vi) a provision that the insurer will endeavor to provide 30 days’ notice of cancelation. An Evidence of Insurance (in form ACORD 27, or such other form acceptable to Landlord) for each of the insurance policies Tenant is required to carry in compliance with its obligations under this Lease, and containing provisions specified herein, shall be delivered to Landlord prior to the Term Commencement Date, and, upon renewals, prior to the expiration of such coverage. Upon Tenant’s default in obtaining or delivering any such policy or policies or failure to pay the premiums therefor, Landlord (in addition to and not in limitation of its other rights, remedies and privileges by reason thereof) may, but shall not be obligated to, secure or pay the premium for any such policy or policies and charge Tenant as Additional Rent therefor an amount equal to 110% of the costs incurred by Landlord thereby.  Insurance notifications may arrive by regular mail.

 

Section 7.9            Exoneration; Indemnification and Insurance.  Tenant will exonerate, indemnify, defend, save and hold harmless Landlord (and any and all Persons claiming by, through or under Landlord) from and against all claims, proceedings, defenses thereof, liabilities, costs, and expenses of any kind and nature, including reasonable legal fees, arising from:  (i) any breach of this Lease by Tenant or any Invitee of

 

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Tenant or other Person claiming by, through or under Tenant; (ii) any occurrence within the Premises, except to the extent the same results from the negligence or willful misconduct of Landlord, its agents, contractors, or employees; and/or (iii) any act, omission or negligence of any Invitee of Tenant, or arising from any accident, injury or damage occurring in, on or about Landlord’s Property, which such accident, damage or injury results from the negligence or misconduct on the part of any Invitee of Tenant.  This exoneration, indemnification and hold harmless agreement shall survive the termination of this Lease.

 

From and after the Term Commencement Date and thereafter during the Lease Term and any period of holding over, Tenant shall maintain in full force and effect the following insurance coverages:

 

(i)            commercial general public liability insurance all on an occurrence basis with respect to the business carried on in or from the Premises and the Tenant’s use and occupancy of the Premises and of any other part of the Building, with coverage for any one occurrence or claim of not less than Ten Million Dollars ($10,000,000), which insurance shall include the Landlord as an additional insured (by written endorsement delivered to the Landlord),  shall contain a cross liability clause protecting the Landlord in respect of claims by the Tenant as if the Landlord were separately insured, and may be met by use of excess and/or umbrella liability insurance;

 

(ii)           all risks property insurance in respect of fire and such other perils are from time to time in the usual extended coverage endorsement covering the Tenant’s leasehold improvements or alterations (to the extent the same have not become the property of Landlord), trade fixtures, property and the furniture and equipment in the Premises for the full replacement cost thereof;

 

(iii)          workers’ compensation insurance and all such other insurance as may be required by applicable law and Employers Liability coverage with a limit of not less than One Million Dollars ($1,000,000); and

 

(iv)          insurance against such other perils and in such amounts as the Landlord may from time to time reasonably require upon not less than ninety (90) days’ written notice, such requirement to be made on the basis that the required insurance is customary at the time for prudent tenants of properties similar to the Building and for tenants in a similar business.

 

Each policy shall contain:  (A) a waiver by the insurer of any rights of subrogation or indemnity or any other claim over to which the insurer might otherwise be entitled against the Landlord or the agents or employees of the Landlord, and (B) a cross liability clause.

 

In the event Tenant fails to provide evidence of insurance required to be provided by Tenant hereunder, Landlord shall be authorized (but not required) to procure such coverage in the amounts stated with all costs thereof to be chargeable to Tenant as Additional Rent, and payable by Tenant upon receipt of written invoice therefor.

 

Tenant shall not permit any contractor to do any work at or furnish any materials to be incorporated into the Premises without first delivering to Landlord satisfactory evidence of the

 

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Contractor’s commercial general liability insurance, worker’s compensation insurance, automobile insurance and statutory lien bonds each reasonably acceptable to Landlord and complying with any insurance specifications provided by Landlord.  Tenant shall also provide and pay for window and plate glass insurance with respect to the Premises (if not otherwise covered by Tenant’s property insurance), and Tenant shall provide Landlord with a certificate evidencing such insurance and containing a provision that the same may not be canceled until the insurer endeavors to provide 30 days’ prior written notice to Landlord and Tenant shall provide Landlord with such a certificate prior to the Term Commencement Date and thereafter prior to the expiration of any such coverage.  All insurance requirements imposed upon Tenant or its contractors under this Lease shall be subject to the further requirement that the forms of coverage and the insurers providing the insurance be authorized to conduct business in the Commonwealth of Massachusetts, be in sound financial condition and carry an A-/VIII or better Best’s rating.  Tenant agrees that Landlord shall not be responsible or liable to Tenant, or to those Persons claiming by, through or under Tenant, for any loss or damage that may be occasioned by or through the acts or omissions of Persons occupying or using adjoining premises or any part of Landlord’s Property, or otherwise, or for any loss or damage resulting to Tenant or those Persons claiming by, through or under Tenant, or its or their property, except that to the extent required by applicable Massachusetts law, the foregoing shall not exculpate Landlord from its own negligent acts or omissions or willful misconduct.

 

Section 7.10          Landlord’s Access.  Landlord and its representatives shall have the right without charge to it and without reduction in Base Rent or Additional Rent, at reasonable times, with reasonable notice, and in such manner as shall not unreasonably interfere with Tenant’s business, to enter the Premises for any reasonable purpose (including, without limitation, showing the Premises to prospective purchasers, lenders and, during the last 12 months of the Lease Term, tenants) and, if Landlord so elects, to make entry for the purpose of investigating repair or maintenance problems and to make such repairs or changes as Landlord deems advisable, and to maintain, use, repair, replace, relocate or introduce pipes, ducts, wires, meters and any other Landlord’s fixtures serving or to serve the Premises or other parts of Landlord’s Property, or to maintain or repair any portion of Landlord’s Property or Landlord’s Equipment, and, in case of an emergency, whether resulting from circumstances in the Premises or elsewhere in Landlord’s Property, Landlord or its representatives may enter the Premises (forcibly, if necessary) at any time to take such measures as may be needed to cope with such emergency.  Such access shall include, but not be limited to, the right to open floors, walls, ceilings, and building systems for the foregoing purposes.

 

Section 7.11          No Liens.  Tenant shall not permit any mechanics’, laborers’ or materialmen’s liens to stand against Landlord’s Property, Landlord’s Equipment or Tenant’s interests in the Premises, this Lease, or the estate created hereby for any labor or materials furnished to Tenant or claimed to have been furnished to Tenant in connection with work of any character performed or claimed to have been performed in or on the Premises by or at the direction or sufferance of Tenant.

 

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Section 7.12          Compliance with Rules and Regulations.  Tenant covenants that all Invitees of Tenant will comply with the Rules and Regulations.  Landlord, however, shall have the reasonable right to change the Rules and Regulations and to waive any one or more of them in the case of any one or more tenants; provided that any changes or modifications to the Rules and Regulations shall be reasonable and of uniform applicability to all tenants of the Building, and provided that the Rules and Regulations will generally be enforced in a non-discriminatory manner with respect to similarly situated tenants.

 

ARTICLE VIII.
 SUBLETTING AND ASSIGNMENT

 

Section 8.1            Subletting and Assignment.

 

(a)           Except as hereinafter set forth, Tenant shall not assign, mortgage, pledge or encumber this Lease nor sublet all or any part of the Premises, nor permit or allow the use of all or any part of the Premises by any person other than Tenant and its employees, without, on each occasion, obtaining Landlord’s written consent thereto.  As used herein and except as expressly provided below, the term “assign” or “assignment” shall be deemed to include, without limitation:  (i) any transfer of Tenant’s interest in this Lease by operation of law or the merger or consolidation of Tenant with or into any other firm or corporation; or (ii) the transfer or sale of a controlling interest in Tenant.

 

(b)          (i)            Landlord will not unreasonably withhold, condition or delay its consent to any sublease of all or any part of the Premises, so long as (A) the subtenant and its proposed use is of a character consistent with the operation of a building of the same class as the Building; (B) the subtenant’s proposed use is permitted under the terms of this Lease; (C) the subtenant is qualified to do business in the Commonwealth of Massachusetts and has all applicable permits and licenses to do business from the Premises; (D) Tenant pays to Landlord all of Landlord’s reasonable expenses actually arising out of such sublease, including, without limitation, reasonable attorneys’ fees; (E) there does not then exist an Event of Default and no Event of Default will be created as a result of the proposed sublease or the proposed use by the subtenant; (F) each of Landlord’s mortgagees of Landlord’s Property has consented in writing to such sublease if such mortgagee’s consent is required pursuant to the terms of the applicable financing documents (and Landlord will use commercially reasonable efforts to obtain such consent); (G) the proposed sublease prohibits any assignment of the sublease or any sub-sublease of any portion of the Premises without the prior written consent of Landlord, which consent may be granted or denied in Landlord’s reasonable discretion; (H) the proposed sublease will not cause Landlord to be in default under any then-existing lease, license or other occupancy agreement regarding the Landlord’s Property (including without limitation pursuant to any anti-competition or prohibited use provisions therein).

 

(ii)           Landlord will not unreasonably withhold, condition or delay its consent to an assignment of this Lease, so long as (A) the assignee and its proposed use is of a character consistent with the operation of a first class office and/or laboratory building; (B) the assignee’s proposed use is permitted under the terms of this Lease; (C) the assignee is qualified

 

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to do business in the Commonwealth of Massachusetts and has all applicable permits and licenses to do business from the Premises; (D) Tenant pays to Landlord all of Landlord’s reasonable expenses actually arising out of such assignee, including, without limitation, attorneys’ fees; (E) there does not then exist an Event of Default and no Event of Default will be created as a result of the proposed assignment or the proposed use by the assignee; and (F) each of Landlord’s mortgagees of Landlord’s Property has consented in writing to such assignment if such mortgagee’s consent is required pursuant to the terms of the applicable financing documents; (G) the proposed assignment will not cause Landlord to be in default under any then-existing lease, license or other occupancy agreement regarding the Landlord’s Property (including without limitation pursuant to any anti-competition or prohibited use provisions therein).

 

(iii)          No assignment, sublease or transfer shall be made to an individual, entity or company that will engage in Generic Drug business uses in the Premises.

 

(iv)          Subsections (i) and (ii) above notwithstanding, no prior written consent of the Landlord shall be required for an assignment or sublease to a Permitted Transferee on the conditions that (I) the Permitted Transferee shall not engage in Generic Drug business uses in the Premises, (II) such Permitted Transferee meets the criteria set forth in (i) above for a sublease and (ii) above with respect to an assignment, (III) Tenant delivers prior written notice of such sublease or assignment to Landlord at least ten (10) days prior to the effective date thereof together with a copy of the fully executed document effecting such sublease or assignment and (IV) with respect to an assignment occurring in connection with a merger, consolidation or other form of corporate reorganization or an acquisition of all or substantially all of Tenant’s assets or stock, the net worth of such successor as of the effective date of the assignment is at least equal to the net worth of the Tenant as of the date of the Lease. Furthermore, so long as the same does not cause Tenant to violate (iii) above, neither any public offering of shares or other ownership interest in Tenant nor any private equity financing by one or more investors who regularly invest in private companies, shall be deemed an assignment for purposes of this Lease.

 

(c)           In the event of an assignment of this Lease, Tenant shall be jointly and severally liable with the new tenant for the payment of any and all Base Rent and Additional Rent which may become due by the terms of this Lease and for the performance of all covenants, agreements and conditions on the part of Tenant to be performed hereunder.  If the sublease or assignment is to a party other than a Permitted Transferee, Tenant shall also pay to Landlord 50% of the amount, if any, by which the rent received as a result of the assignment or sublease exceeds the rent payable hereunder on a per square foot basis after deducting the actual direct out-of-pocket costs which are (x) incurred by Tenant for leasing commissions, architectural and/or engineering fees, legal fees, additional tenant improvements paid in connection with such assignment or sublease, tenant improvement allowances, reimbursement obligations or costs incurred in constructing tenant improvements in connection with such sublease or assignment, free rent and/or any other consideration paid or provided by Tenant to the proposed transferee, which shall be depreciated on a straight line basis over the term of the proposed Transfer, and (y) documented to Landlord’s reasonable satisfaction by invoices, contracts, canceled checks and the like, such costs to be amortized on a straight-line basis over the then remaining term of this Lease.  No such assignment or sublease shall be valid or effective unless and until (i) the new

 

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tenant and Tenant execute and deliver to Landlord an agreement, in such form as Landlord may reasonably prescribe, pursuant to which, inter alia, such new tenant (A) assumes all of the obligations of Tenant under this Lease accruing from and after the effective date of the assignment if such transaction is an assignment of this Lease, (B) agrees to execute and deliver such estoppel certificates and subordination agreements as may be reasonably required by Landlord, (C) if a sublease, acknowledges that Landlord has no obligations to the subtenant under this Lease, the sublease or otherwise, and (D) agrees to maintain the same insurance coverages as the insurance coverages which Tenant is required to maintain under this Lease and to provide evidence thereof satisfactory to Landlord when requested; and (ii) the new tenant delivers to Landlord evidence, in form and substance satisfactory to Landlord, of the insurance coverages required to be maintained by such new tenant under the agreement referenced in clause (i) above.  No modification of the terms of this Lease or any course of dealing between Landlord and any assignee or sublessee of Tenant’s interest herein shall operate to release or impair Tenant’s obligations hereunder.

 

(d)           In the event that Tenant seeks Landlord’s consent to an assignment of this Lease other than to a Permitted Transferee or a sublease of 50% or more of the Premises other than to a Permitted Transferee, Landlord, at its option, may terminate this Lease (or if the request is for a sublease of less than all of the Premises, but for all of the remaining term, at Landlord’s option, Landlord may terminate this Lease as to the portion requested to be sublet and Landlord and Tenant shall execute an amendment to this Lease to modify the Premises and to adjust Base Rent and Tenant’s Share based upon the approximate remaining leasable square footage to the Leasable Square Footage of the Building); provided that if Landlord exercises such option, Tenant may, by written notice given to Landlord within five days after Landlord gives Tenant written notice of exercise of such option, defeat such exercise by withdrawing the request for Landlord’s consent to the proposed assignment or sublease and terminating the proposed assignment or sublease.  In the event of any such termination, Landlord may enter into a new lease with the proposed assignee or sublessee or any other party on any terms and provisions acceptable to Landlord in Landlord’s sole discretion for the Premises or the portion of the Premises released from this Lease

 

(e)           Tenant shall not enter into any arrangements with any subtenant or assignee to circumvent, or which have the effect of circumventing any provisions of this Article VIII.

 

ARTICLE IX.
 RIGHTS OF MORTGAGEES AND GROUND LESSORS; ESTOPPEL CERTIFICATES

 

Section 9.1            Subordination to Mortgages and Ground Leases.  Landlord represents that, as of the date of this Lease, no mortgage encumbers all or any part of Landlord’s Property.  Tenant agrees that this Lease shall be subordinate to the lien of any future mortgage or mortgages, or ground lease, upon Landlord’s Property, irrespective of the time of execution or time of recording of any such mortgage or mortgages, or ground lease, and to all renewals, extensions, and modifications therefor or amendments thereto provided that holder of the mortgage or landlord under the ground lease agrees not to disturb Tenant’s possession of the Premises and to recognize Tenant’s rights under this Lease so as Tenant is not

 

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in default beyond applicable notice and cure periods of Tenant’s obligations under this Lease.  Tenant agrees that it will, upon five (5) business days’ advance written request from Landlord or any holder of a mortgage on all or a portion of Landlord’s Property or the ground lessor thereof, execute, acknowledge, and deliver any and all commercially reasonable instruments reasonably deemed necessary or desirable by Landlord, or such holder to give effect to, or notice of, such subordination.

 

Section 9.2            Lease Superior at Mortgagee’s or Ground Lessor’s Election.  At the request in writing of any mortgagee, or ground lessor, of Landlord’s Property, this Lease shall be deemed superior to such mortgage, or ground lease, whether this Lease was executed before or after such mortgage, or ground lease, and Tenant shall execute such documents to effect the foregoing in recordable form as such mortgagee, or ground lessor, shall reasonably request.

 

Section 9.3            Notice to Mortgagee and Ground Lessor.  Upon receipt of a written request from Landlord or any holder of a mortgage, on all or any part of Landlord’s Property, or the ground lessor thereof, Tenant will thereafter send any such holder copies of all notices of default or termination given by Tenant to Landlord in accordance with any provision of this Lease.  In the event of any failure by Landlord to perform, fulfill or observe any agreement by Landlord herein or any breach by Landlord of any representation or warranty of Landlord herein, any such holder may at its election cure such failure or breach for and on behalf of Landlord within the time provided herein for Landlord to cure the same.

 

Section 9.4            Limitations on Obligations of Mortgagees, Ground Lessors and Successors.  Tenant agrees that the holder of a mortgage or ground lease or any successor-in-interest to any of them or to Landlord shall not be: (a) bound by any payment of an installment of Base Rent or Additional Rent which may have been made more than 30 days before the due date of such installment; (b) bound by any amendment or modification to this Lease made without the consent of the holder of a mortgage or ground lease or such successor in interest (to the extent such consent is required by such mortgage, ground lease or documents executed by Landlord and/or Tenant in connection with the same); (c) liable for any previous act or omission of Landlord (or its predecessors in interest); (d) responsible for any monies owing by Landlord to the credit of Tenant or subject to any credits, offsets, claims, counterclaims, demands or defenses which Tenant may have against Landlord (or any of its predecessors in interest); (e) bound by any covenant to undertake or complete any construction of the Premises or any portion thereof; or (f) obligated to make any payment to Tenant other than any security deposit actually delivered to holder of a mortgage or ground lease or such successor in interest.  Further, Tenant agrees that it will not seek to terminate this Lease by reason of any act or omission of Landlord until Tenant shall have given written notice of such act or omission to the holder of such mortgage or ground lease (at such holder’s last address furnished to Tenant) and following the giving of such notice such holder shall have the right, but shall not be obligated, to remedy such act or omission within 20 business days after the time period provided for in this Lease for Landlord to cure the same

 

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or, if such cure cannot reasonably be completed with such period,  such longer period as may be reasonably necessary to cure the same provided that such party commences such cure within said 20 business day period and diligently prosecutes such cure to completion; provided, however, the total period provided for such cure shall in no event exceed sixty days.  Tenant shall enter into a written agreement confirming the foregoing from time to time upon written request from Landlord and/or the holder of a mortgage or ground lease on Landlord’s Property.

 

Section 9.5            Estoppel Certificates.  Each party (“Responding Party”) agrees, at any time and from time to time, within ten business days after written request by the other party (“Requesting Party”) or any holder of a mortgage on all or a portion of Landlord’s Property or the ground lessor thereof, to execute, acknowledge and deliver to the Requesting Party a statement in writing certifying that (except as may be otherwise specified by the Responding Party):  (i) this Lease is presently in full force and effect and unmodified; (ii) Tenant has accepted possession of the Premises; (iii) any improvements required by the terms of this Lease to be made by Landlord have been completed to the satisfaction of Tenant; (iv) no rent under this Lease has been paid more than 30 days in advance of its due date; (v) the addresses for notices to be sent to the Responding Party is as set forth in this Lease or as specified in such certificate; (vi) to the best of the knowledge of the Responding Party, Tenant as of the date of executing the certificate has no charge, lien or claim of offset under this Lease, or otherwise, against rents or other charges due or to become due hereunder; (vii) to the best of the knowledge of the Responding Party, the Responding Party is not in default under this Lease; and (viii) such other factual information as the Requesting Party may reasonably request about this Lease or Tenant’s occupancy to the extent that the same is in the possession of the Responding Party and may be responded to without incurring any out-of-pocket costs.

 

ARTICLE X.
 CASUALTY

 

Section 10.1          Damage From Casualty.  If any material portion of the Premises or the Building affecting Tenant’s use of the Premises is damaged by fire or other casualty, Tenant shall give Landlord written notice of such casualty promptly after Tenant becomes aware of such casualty.  Within 30 days after Tenant gives Landlord written notice of such casualty, Landlord shall reasonably estimate, and give Tenant written notice of, the period commencing with the date of such notice (the “Restoration Period”) that Landlord anticipates will be reasonably required to perform the restoration work which is the responsibility of Landlord as provided below.  If Landlord reasonably estimates that the Restoration Period will be longer than 90 days, or if such casualty occurs during the final six (6) months of the Lease Term and Tenant does not elect to exercise a right to extend the Lease Term, if any, then either Landlord or Tenant may terminate this Lease by giving to the other written notice of termination within ten days after Landlord gives Tenant written notice of such estimate.  Such notice of termination shall be effective on the date thereof, and if Tenant is then occupying the Premises, Tenant shall thereafter have a reasonable period of time in which to vacate the Premises.  If (i) Landlord reasonably estimates that the Restoration Period will be 90 days or shorter, or (ii) Landlord reasonably estimates that the Restoration Period will be longer

 

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than 90 days but neither Landlord nor Tenant exercises its right to terminate this Lease as set forth above, then this Lease shall not terminate; and in such event, Landlord shall, unless Landlord exercises its termination right pursuant to Section 10.3, with reasonable dispatch, repair or rebuild the Premises to the condition thereof as of the Term Commencement Date (subject, however, to Legal Requirements then in existence), and Tenant shall, forthwith after the completion of Landlord’s Restoration Work, repair or rebuild the Premises to substantially its condition immediately before the occurrence of the casualty.

 

Section 10.2          Abatement of Rent.  In the event that the provisions of Section 10.1 shall become applicable, the Base Rent and Additional Rent shall be abated or reduced proportionately during any period in which, by reason of any such damage or destruction, there is substantial interference with the operation of the business of Tenant in the Premises, having regard to the extent to which Tenant may be required to discontinue its business in the Premises, and such abatement or reduction shall continue (but may be adjusted from time to time based on the extent of the interference with Tenant’s operations) for the period commencing with such destruction or damage and ending on the earlier to occur of (i) the date on which Tenant commences business operations in the Premises or the portion thereof affected by the casualty and (ii) the date that is 60 days after substantial completion by Landlord of the restoration work to be performed by Landlord under Section 10.1 above.

 

Section 10.3          Landlord’s Right to Terminate.  Notwithstanding the foregoing, Landlord may terminate this Lease following:  (a) damage or destruction to the Building or Premises to the extent of 50% or more of the cost of replacement thereof; or (b) the refusal of the applicable insurance carrier to pay funds sufficient for the cost to repair or replace, less any applicable deductible.  Landlord may exercise the right to so terminate this Lease by written notice to Tenant given within 60 days after the date of the damage or 60 days after the date Landlord receives written notice of such damage, whichever is later.  Such notice of termination shall be effective on the date thereof, and if Tenant is then occupying the Premises, Tenant shall thereafter have a reasonable period of time in which to vacate the Premises.

 

ARTICLE XI.
 EMINENT DOMAIN

 

Section 11.1          Eminent Domain; Right to Terminate and Abatement in Rent.  If the Premises or any part thereof, or the whole or any substantial part of Landlord’s Property, shall be taken, or if a conveyance shall be made in anticipation thereof, for any street or other public use, by action of the municipal, state, federal or other authorities, or shall receive any substantial direct or consequential damage for which Landlord or Tenant shall be entitled to compensation by reason of anything lawfully done in pursuance of any public authority, after the execution hereof and before the expiration of the Lease Term, then this Lease and the Lease Term shall terminate at the election of Landlord or Tenant (given by written notice to the other within 90 days of the taking or within 90 days of notice of the taking to Landlord), and such

 

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election may be made in case of any such taking notwithstanding the entire interest of Landlord may have been divested by such taking; and if neither Landlord nor Tenant so elects, then in case of any such taking or destruction of, or damage to, the Premises, rendering the same or any part thereof unfit for use and occupation, a just proportion of the Base Rent hereinbefore reserved according to the nature and extent of the injury sustained by the Premises as reasonably determined by Landlord, shall be suspended or abated until the Premises or, in case of such taking, what may remain thereof, shall have been put in proper condition for use and occupation.  To the extent that the Premises, upon having been put in proper condition for use and occupation are smaller than before such taking, the Base Rent hereinbefore reserved shall be reduced for the balance of the Lease Term in the same proportion which the reduction in space bears to the original Leasable Square Footage of the Premises.  In the event of a taking of any portion of the Building, Tenant’s Share shall be recomputed.

 

Section 11.2          Restoration.  If this Lease is not terminated as provided in Section 11.1, Landlord shall apply so much of the available proceeds of the eminent domain award as are required to restore Landlord’s Property and the Premises to a condition, to the extent practical, substantially the same as that immediately preceding the taking, but subject to zoning laws and building codes then in existence.  If the available proceeds of the eminent domain award are insufficient, in Landlord’s judgment, for that purpose, Landlord shall have no obligation to expend funds in excess of said proceeds and Landlord shall have the right to select which portions of Landlord’s Property, if any, shall be restored.  The term “available proceeds” means the amount of the award paid to Landlord, less cost of obtaining the same (including attorneys’ fees and appraisal fees) and less the amount thereof required to be paid to a mortgagee or ground lessor.

 

Section 11.3          Landlord to Control Eminent Domain Action.  Landlord reserves all rights to compensation for damage to the Premises or any part thereof, or the leasehold hereby created, heretofore accrued or hereafter to accrue, by reason of any taking for public use of said Premises or any portion thereof, or right appurtenant thereto, or privilege or easement in, through, under or over the same, and by way of confirmation of the foregoing Tenant hereby assigns all rights to such damages heretofore accrued or hereafter accruing during the Lease Term to Landlord.  Provided, however, nothing herein contained shall limit Tenant’s right to any separate award for the taking of personal property, the cost of leasehold improvements installed in the Premises by Tenant, moving expenses, or other items the payment of which shall not reduce the award payable to Landlord.

 

ARTICLE XII.
 DEFAULT AND REMEDIES

 

Section 12.1          Event of Default.  As used herein, “Event of Default” means the occurrence and/or existence of any one or more of the following:  (a) (i) Tenant shall fail to pay any installment of Base Rent, Additional Rent or any other monetary amount due under this Lease on or before the date on which the same becomes due and payable, and such failure continues for five business days after written notice

 

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from Landlord thereof or (ii) Landlord having given the written notice specified in the foregoing clause (i) to Tenant twice in any 12 month period, Tenant shall fail, on a third occasion within the 12 months following the giving of the first such notice by Landlord, to pay any installment of Base Rent, Additional Rent or any other monetary amount due under this Lease on or before the date on which the same becomes due and payable; or (b) Tenant shall neglect or fail to perform or observe any of the other covenants or undertakings herein on its part to be performed or observed and such neglect or failure shall continue for 30 days after written notice to Tenant; provided that if the default is other than a default under clause (a) above, or clauses (c) through (h) below, and is such that it cannot be cured within 30 days, but is capable of being cured, such 30 day period shall be extended by up to 60 additional days provided that Tenant commences to cure such default within said 30 day period, continues to do so diligently, and thereafter completes such cure within not more than 90 days following the notice of default; or (c) there is filed by Tenant any case, petition, proceeding or other action under any Bankruptcy Law; or (d) any other proceedings shall be instituted against Tenant under any Bankruptcy Law and not be dismissed within 60 days; or (e) Tenant shall execute an assignment of its property for the benefit of its creditors; or (f) a receiver, custodian or other similar officer for Tenant shall be appointed and not be discharged within 60 days; or (g) the estate hereby created shall be taken by execution or by other process of law and is not redeemed by Tenant within 60 days thereafter; or (h) an assignment or sublease in violation of the terms of this Lease.

 

Section 12.2          Landlord’s Remedies.

 

(a)           Upon the occurrence of an Event of Default, Landlord may, immediately or at any time thereafter (notwithstanding any license or waiver of any former breach or waiver of the benefit hereof, or consent in a former instance), and enter the Premises or any part thereof and repossess the same as of its former estate in accordance with law, or terminate this Lease by written notice to Tenant, and in either event expel Tenant and those claiming through or under it and remove their effects (forcibly, if necessary) in compliance with law without being deemed guilty of any manner of trespass and without prejudice to any remedy which might otherwise be used for arrears of Base Rent or Additional Rent or breach of covenant, and upon entry or written notice of termination, or automatic termination, both as aforesaid, this Lease shall terminate and Landlord, in addition to all other remedies which it may have at law or equity, and not in limitation thereof, shall have the remedies provided in this Article XII.  No termination of this Lease and/or repossession of the Premises pursuant to this Section 12.2(a) shall relieve Tenant of its obligations under this Lease, which shall survive such termination or repossession.

 

(b)           From the termination of this Lease pursuant to Section 12.2(a) through the remainder of the Lease Term, until such time, if any, that Landlord exercises its right pursuant to Section 12.2(c), Tenant shall pay to Landlord the Base Rent and Additional Rent in installments as and when the same become due and payable, subject to reduction by any rent and additional rent actually received by Landlord as a result of a re-letting of the Premises (net of the reasonable costs of re-letting, including remodeling costs, brokerage commissions and reasonable attorneys’ fees).  Landlord shall exercise commercially reasonable efforts to re-let the Premises to mitigate damages, and Landlord may re let the Premises or any part or parts thereof for a term or terms which may, at Landlord’s option, be less than or exceed the period which

 

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would otherwise have constituted the balance of the Lease Term and may grant concessions or free rent.  The good faith failure of Landlord to re let the Premises or any part or parts thereof, or, if the Premises are re let, the good faith failure to collect the rents due under such re letting, shall not release or affect Tenant’s liability for damage so long as Landlord does not act arbitrarily or capriciously.  Any suit brought to collect the amount of deficiency for any month or other period shall not prejudice in any way the right of Landlord to collect the deficiency for any subsequent month or period by a similar proceeding.  Landlord, at Landlord’s option, may make such alterations, repairs, replacements and decorations to the Premises as Landlord in Landlord’s sole but reasonable judgment considers advisable and necessary for the purpose of re letting the Premises, and the making of such alterations or decorations shall not operate or be construed to release Tenant from liability hereunder.

 

(c)           At Landlord’s option exercisable by written notice given to Tenant upon or after the termination of this Lease pursuant to Section 12.2(a), Tenant shall forthwith pay to Landlord as damages, in addition to all sums which were due prior to the exercise of such option by Landlord, a sum equal to the amount by which the Base Rent and Additional Rent for the remainder of the Lease Term exceeds the fair rental value of the Premises determined as of the termination date for the remainder of the Lease Term, discounted to present value at the then-applicable federal discount rate.  For the purposes of computing damages payable pursuant to this Section 12.2(c), the annual Additional Rent with respect to Taxes, Insurance Costs and Operating Costs for the remainder of the Lease Term will be assumed to be such Additional Rent for the most recently ended fiscal, calendar or lease year, as the case may be.

 

Section 12.3          Reimbursement of Landlord.  In the event of any default by Tenant in the payment of any Base Rent or Additional Rent, Tenant will, in addition to paying Landlord all amounts due under the terms and provisions of this Lease, including, without limitation, Section 12.9, reimburse Landlord for all reasonable expenses incurred by Landlord in collecting such rent or in obtaining possession of, or in re letting the Premises, or in defending any action, including expenses for reasonable counsel fees and commissions.  Tenant further agrees that, if on termination of this Lease by expiration or otherwise, Tenant shall fail to remove any of its property from the Premises as provided for herein, Landlord shall be authorized, in its sole option, and in Tenant’s name and on its behalf, either (a) to cause such property to be removed and placed in storage for the account and at the expense of Tenant; or (b) to sell such property at public or private sale, with or without notice, and to apply the proceeds thereof, after the payment of all expenses of removal, storage and sale, to the indebtedness, if any, of Tenant to Landlord, the surplus, if any, to be paid to Tenant; prior to the removal of such property Landlord may charge Tenant a fair rental amount for the storage of such property.  All sums payable by Tenant under this Article XII shall be deemed Additional Rent.

 

Section 12.4          Landlord’s Right to Perform Tenant’s Covenants.  Tenant covenants and agrees that, if it shall at any time fail to make any payment or perform any other act on its part to be made or performed as in this Lease provided, then Landlord, in its sole discretion may after due notice to, or demand upon, Tenant and subject to the limitations set forth below, make any payment or perform any other act on the part of Tenant

 

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to be made and performed as in this Lease provided, in such manner and to such extent as Landlord may reasonably deem desirable, and in exercising any such rights, Landlord may pay necessary and incidental costs and expenses, employ counsel, and incur and pay reasonable attorneys’ fees.  The making of any such payment or the performing of any other act by Landlord pursuant to this Article shall not waive, or release Tenant from, any obligations of Tenant in this Lease contained.  All sums so paid by Landlord and all reasonably necessary and incidental costs and expenses in connection with the performance of any such act by Landlord shall, except as otherwise in this Lease expressly provided, be payable to Landlord on demand, and Tenant covenants to pay any such sum or sums promptly, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of the non-payment thereof by Tenant as in the case of default by Tenant in the payment of the Base Rent.  Whenever practicable, Landlord, before proceeding as provided in this Section 12.4, shall give Tenant notice in writing of the failure of Tenant which Landlord proposes to remedy, and shall allow Tenant such length of time as may be reasonable in the circumstances, consistent with any grace periods contained herein, but not exceeding 30 days from the giving of notice, to remedy the failure itself and, if Tenant shall not remedy the failure in the time so allowed, Landlord shall be deemed to have given “due notice” and may proceed as provided in this Section 12.4; provided that nothing in this Section shall prevent Landlord from acting without notice to Tenant in case of any emergency wherein there is danger to property or person or where there may exist any violation of legal requirements including but not limited to the presence of Hazardous Materials, in which event no notice shall be required.

 

Section 12.5          Cumulative Remedies.  The specified remedies to which Landlord may resort under the terms of this Lease, or under the provisions of applicable law, are cumulative and not intended to be exclusive of any other remedies or means of redress to which Landlord may be lawfully entitled in case of any breach or threatened breach by Tenant of any provisions of this Lease.  The failure of Landlord to insist in any one or more cases upon the strict performance of any of the covenants of this Lease or to exercise any option contained herein shall not be construed as a waiver or a relinquishment for the future of such covenant or option.  Receipt by Landlord of any Base Rent or Additional Rent payment with knowledge of the breach of any covenants hereof shall not be deemed a waiver of such breach.  No waiver by Landlord or Tenant of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by the waiving party.  In addition to the other remedies provided in this Lease, Landlord shall be entitled to restraint by injunction of any violation or attempted or threatened violation of any of the covenants, conditions or provisions of this Lease.

 

Section 12.6          Expenses of Enforcement.  Tenant agrees to pay all reasonable expenses and reasonable attorneys’ fees incurred by Landlord in enforcing any obligation or any remedies hereunder including, without limitation, in connection with collection of Base Rent or Additional Rent, recovery by Landlord of the Premises, or in any litigation in which Landlord shall become involved by reason of any act or negligence of Tenant’s Invitees or any breach of this Lease by Tenant.

 

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Section 12.7          Landlord’s Default.  Landlord shall not be deemed to be in default hereunder unless such default shall remain uncured for more than 30 days following written notice from Tenant to Landlord specifying the nature of such default, or, if such cure cannot reasonably be completed within such period, such longer period as may be reasonably required to correct such default provided that Landlord commences such cure within said 30 day period and diligently prosecutes such cure to completion.  In no event whatsoever shall Landlord be liable for consequential or any indirect damages. The provisions of this Section 12.7 are further subject to the provisions of Articles X and XI dealing with eminent domain and fire and other casualty.

 

Section 12.8          Limitation of Landlord’s Liability.  The obligations of Landlord hereunder shall be binding upon Landlord and each succeeding owner of Landlord’s interest hereunder only during the period of such ownership, and Landlord and each succeeding owner shall have no liability whatsoever except for its obligations during each such respective period.  Tenant hereby agrees for itself and each succeeding holder of Tenant’s interest, or any portion thereof, hereunder, that any judgment, decree or award obtained against Landlord or any succeeding owner of Landlord’s interest, which is in any manner related to this Lease, the Premises or Tenant’s use and occupancy of the Premises or the Common Areas, or the remainder of Landlord’s Property, whether at law or in equity, shall be satisfied out of Landlord’s equity in the land and buildings then comprising Landlord’s Property owned by Landlord to the extent then owned by Landlord and the proceeds from Landlord’s Property and such succeeding owner, and further agrees to look only to such assets and to no other assets of Landlord, or such succeeding owner, for satisfaction.  Except in the event such Person is a guarantor of Tenant’s obligations under this Lease, no Person executing this Lease on behalf of Landlord or Tenant, nor any limited partner, or any officer, director, employee, member, trustee, beneficiary, or other owner of Landlord or Tenant, nor of any subsequent Landlord or Tenant shall have any personal liability hereunder.  The remedies provided to Tenant in this Lease are exclusive, and Landlord will not be liable under any theory of recovery, whether based on contract, tort or otherwise.

 

Section 12.9          Late Payment and Administrative Expense.  If Tenant shall fail to pay Base Rent, Additional Rent or other charges when due and payable under this Lease, such unpaid amounts shall bear interest from the due date thereof to the date of payment at the lesser of (a) a rate per annum equal to 3% plus the prime rate of Bank of America, N.A. (or any successor), in effect on the day the payment became due and subject to change thereafter or (b) the maximum rate permitted by applicable law.  In addition, if Landlord is required to redeposit any check which is returned for insufficient funds or if Tenant shall fail to pay Base Rent, Additional Rent or other charges on or before the date on which the same become due and payable, then Tenant shall also pay to Landlord an administrative expense charge of 5% of the amount thereof.  The provisions of this Section 12.9 shall not be construed to relieve Tenant of the obligation to pay Base Rent, Additional Rent and all other charges when due under this Lease and shall be in addition to and not in limitation of Landlord’s other remedies as provided for in this Lease.

 

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Section 12.10       Limitation of Tenant’s Liability.  Notwithstanding anything in this Lease to the contrary, except as provided in Sections 5.3, 5.4 and 13.9, in no event whatsoever shall Tenant be liable to Landlord for consequential or indirect damages arising under this Lease.

 

ARTICLE XIII.
 MISCELLANEOUS PROVISIONS

 

Section 13.1          Brokers.  Tenant represents that it has not dealt with any Person in connection with the Premises or the negotiation or execution of this Lease other than officers, employees and attorneys of Landlord and Brokers.  Tenant shall indemnify and save harmless Landlord from and against all claims, liabilities, costs and expenses incurred as a result of any breach of the foregoing representation by Tenant.  Landlord represents that it has not dealt with any Person in connection with the Premises or the negotiation or execution of this Lease other than officers, employees and attorneys of Tenant and Brokers.  Landlord shall indemnify and save harmless Tenant from and against all claims, liabilities, costs and expenses incurred as a result of any breach of the foregoing representation by Landlord.  The broker’s fees payable to Brokers for this Lease shall be payable by Landlord subject to and in accordance with the terms of a separate agreement between Landlord and Broker, and Landlord shall indemnify, defend and hold Tenant harmless from and against any liability in connection therewith.

 

Section 13.2          Quiet Enjoyment.  Tenant shall, so long as no Event of Default exists, peaceably and quietly have and hold the Premises without hindrance or molestation by any Person or Persons lawfully claiming by, through or under, Landlord, subject, however, to the terms of this Lease.

 

Section 13.3          Security Deposit

 

(a)           It shall be a condition precedent to the effectiveness of this Lease that Tenant shall deliver to Landlord, together with Tenant’s execution and delivery of this Lease, the Security Deposit in the form of an irrevocable standby letter of credit (the “Letter of Credit”) pursuant to the provisions of paragraphs (b) and (c) below. The Security Deposit shall be held as security for the performance of Tenant’s obligations.  The Security Deposit is not an advance payment of Rent or a measure of damages.  Landlord may use all or a portion of the Security Deposit to satisfy past-due Rent or to cure any Event of Default by Tenant.  If Landlord uses any portion of the Security Deposit, Tenant shall, within five (5) days after demand, restore the Security Deposit to its original amount. Landlord may assign the Security Deposit to a successor or transferee that purchases the Property and, following the assignment, Landlord shall have no further liability for the return of the Security Deposit. In the event Landlord or its successor or transferee pays, on behalf of Tenant, any transfer fee required by the issuer of a Letter of Credit in connection with a transfer of the Letter of Credit, Tenant shall reimburse such transfer fee to Landlord, as additional Rent, within fifteen (15) days of Landlord’s invoice therefor.

 

(b)           The Letter of Credit (and any renewals or replacements thereof) shall:

 

(i)            be in the amount of $137,714.00;

 

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(ii)           be issued on a form reasonably acceptable to Landlord;

 

(iii)          name Landlord as its beneficiary;

 

(iv)          be transferable by Landlord to Landlord’s transferee, without Tenant’s approval, should Landlord transfer or convey its interest in the Property, with any transfer fees being for the account of Tenant;

 

(v)           be drawn on an FDIC insured financial institution reasonably satisfactory to the Landlord and having a minimum corporate credit rating from Standard and Poor’s Professional Rating Service of “BBB” or a comparable minimum credit rating from Moody’s Professional Rating Service (Landlord hereby acknowledging that Silicon Valley Bank is acceptable to Landlord on the date hereof);

 

(vi)          be for a term of not less than one (1) year;

 

(vii)         allow draws on the Letter of Credit at the bank counter of the issuing bank, and/or by overnight courier; and

 

(viii)        expressly provide that the  amount thereof may not be reduced by amendment unless and until Landlord shall have provided its written consent to such amendment ((i) - (viii) being referred to herein as the “LOC Criteria”).

 

(c)           Tenant agrees that it shall from time to time, as necessary, whether as a result of a draw on the Letter of Credit by Landlord pursuant to the terms hereof or as a result of the expiration of the Letter of Credit then in effect, renew or replace the original and any subsequent Letter of Credit so that a Letter of Credit, in the amount required hereunder, is continuously in effect until a date which is at least thirty (30) days after the Termination Date.  If (x) Tenant fails to furnish such renewal or replacement at least thirty (30) days prior to the stated expiration date of the Letter of Credit then held by Landlord, (y) the corporate credit rating of the issuing institution drops below the minimum set forth above and/or (z) if Landlord determines, in its reasonable discretion, that it is reasonably likely that the Letter of Credit shall expire prior to the date Tenant shall surrender possession of the Premises to Landlord in accordance with this Lease, Landlord may draw upon such Letter of Credit and hold the proceeds thereof (and such proceeds need not be segregated) as a cash Security Deposit pursuant to the terms of this Section 13.3. To the extent the Security Deposit is held as cash, the Security Deposit may be commingled with Landlord’s general accounts and shall be held by Landlord without liability for interest (unless required by applicable law). Any renewal, replacement or amendment of the original or any subsequent Letter of Credit shall meet the LOC Criteria.  If Landlord draws on the Letter of Credit then, within five (5) days following written demand of Landlord, Tenant shall restore the amount available under the Letter of Credit to its original amount by providing Landlord with an amendment to the Letter of Credit evidencing that the amount available under the Letter of Credit has been restored to its original amount.  Should Landlord elect to draw upon the Letter of Credit, Tenant expressly waives any rights it might otherwise have to prevent Landlord from drawing on the Letter of Credit and agrees that an action for damages and not injunctive or other equitable relief shall be Tenant’s sole remedy in the event Tenant disputes Landlord’s claims to any such amounts.

 

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(d)           Upon the expiration or earlier termination of this Lease, Landlord shall return any unapplied portion of the Security Deposit to Tenant or return the Letter of Credit within thirty (30) days after the later to occur of: (x) the date Tenant surrenders possession of the Premises to Landlord in accordance with this Lease; or (y) the date of expiration or earlier termination of this Lease.

 

Landlord shall have the right to pledge or assign its interest in the Security Deposit (including the Letter of Credit and proceeds thereof) to any lender holding a security interest in the Premises. No mortgagee or purchaser of any or all of the Building at any foreclosure proceeding brought under the provisions of any mortgage shall (regardless of whether the Lease is at the time in question subordinated to the lien of any mortgage) be liable to Tenant or any other person for any or all of such sums or the return of any Letter of Credit (or any other or additional Security Deposit or other payments made by Tenant under the provisions of this Lease), unless Landlord has actually delivered the Security Deposit (including the Letter of Credit and proceeds thereof), to such mortgagee or purchaser. If requested by any such mortgagee or purchaser, Tenant shall obtain an amendment to the Letter of Credit that names such mortgagee or purchaser as the beneficiary thereof in lieu of Landlord.

 

Section 13.4          Notices.  Any notice, demand, request or statement required or intended to be given or delivered under the terms of this Lease shall be in writing, shall be addressed to the party to be notified at the address or addresses set forth in the Summary of Basic Terms or at such other address in the continental United States as each party may designate for itself from time to time by notice hereunder, and shall be deemed to have been given, delivered or served upon the earliest of (a) three days following deposit in the U.S. Mail, with proper postage prepaid, certified or registered, return receipt requested, (b) the next business day after delivery to a regularly scheduled overnight delivery carrier with delivery fees either prepaid or an arrangement, satisfactory with such carrier, made for the payment of such fees, or (c) receipt of notice given by personal delivery.

 

Section 13.5          Waiver of Subrogation.  Landlord and Tenant hereby release each other, to the extent of their respective insurance coverages, from any and all liability for any loss or damage caused by fire, any of the extended coverage casualties, or other casualties insured against, even if such fire or other casualty shall be brought about by the fault or negligence of the party benefited by the release or its agents, provided, however, this release shall be in force and effect only with respect to loss or damage occurring during such time as the policies of fire, extended coverage and other insurance, maintained by the releasing party shall contain a clause, or be subject to a statutory provision, to the effect that such release shall not affect said policies or the right of the releasing party to recover thereunder. Tenant agrees that its fire, extended coverage, and other property insurance policies will include such a clause.

 

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Section 13.6          Entire Agreement; Execution; Time of the Essence and Headings and Table of Contents.  This Lease together with all Exhibits referred to herein and the Summary of Basic Terms, sets forth the entire agreement between the parties hereto and cannot be modified or amended, except in a writing duly executed by the respective parties.  This Lease, together with all Exhibits referred to herein and the Summary of Basic Terms, supersedes all previous written and oral negotiations, understandings and agreements regarding the subject matter of this Lease.  Neither Landlord nor any Person acting on behalf of Landlord has made any representations to Tenant on which Tenant has relied in entering into this Lease except any representations expressly stated in this Lease.  This Lease is executed as a sealed instrument and in multiple counterparts, all copies of which are identical, and any one of which is to be deemed to be complete in itself and may be introduced in evidence or used for any purpose without the production of any other copy.  Time is of the essence of the obligations of the parties to be performed within a specific time frame in this Lease.  The headings throughout this Lease and the Table of Contents are for convenience of reference only, and shall in no way be held or deemed to define, limit, explain, describe, modify or add to the interpretation, construction or meaning of any provision of this Lease.

 

Section 13.7          Partial Invalidity.  If any term or condition of this Lease or its application to any Person or circumstance shall to any extent be in violation of or unenforceable under any law, rule, regulation or order (including any court order) now existing or hereafter enacted or entered by any court or other governmental entity having competent jurisdiction (including after all appeals therefrom), the remainder of this Lease, or the application of such term or condition to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby and shall be enforceable to the fullest extent not prohibited by law.

 

Section 13.8          No Waiver.  No assent, express or implied, by a party to any breach of any agreement or condition herein contained on the part of the other party to be performed or observed, and no waiver, express or implied, of any such agreement or condition shall be deemed to be a waiver of or an assent to any succeeding breach of the same or any other agreement or condition; the acceptance by Landlord of Base Rent or Additional Rent due hereunder (whether such payment is made by Tenant or another Person), or silence by Landlord or Tenant as to any breach by Tenant or Landlord, respectively, shall not be construed as waiving any of Landlord’s or Tenant’s rights hereunder unless such waiver shall be in writing.  No payment by Tenant or acceptance by Landlord of a lesser amount than shall be due Landlord from Tenant shall be deemed to be anything but payment on account, and the acceptance by Landlord of a check for a lesser amount with an endorsement or statement thereon, or upon a letter accompanying said check, that said lesser amount is payment in full shall not be deemed an accord and satisfaction, and Landlord may accept said check without prejudice to recover the balance due or pursue any other remedy.

 

Section 13.9          Holdover.  If Tenant remains in the Premises beyond the expiration of this Lease at the end of the Lease Term, or sooner following an early termination as provided for herein, such holding over shall not create any tenancy, but Tenant shall be a daily tenant at sufferance only subject to all of

 

49

 

Tenant’s obligations set forth herein, but at a daily rate equal to 150% of the Base Rent, then in effect, and Additional Rent and other charges provided for under this Lease.  The acceptance of a purported rent check following termination shall not constitute the creation of a tenancy at will, it being agreed that Tenant’s status shall remain that of a daily Tenant at sufferance, at the aforesaid daily rate.  Tenant shall also pay to Landlord all damages, if any, sustained by reason of any such holding over; provided, however, that in no event shall Tenant be liable to Landlord for any consequential, punitive, special or exemplary damages arising in connection with such holdover except in the event such holdover extends for more than sixty (60) days following Landlord’s delivery to Tenant of a written notice to vacate.  Otherwise, such holding over shall be on the terms and conditions set forth in this Lease as far as applicable.

 

Section 13.10       When Lease Becomes Binding.  The submission of this document for examination and negotiation does not constitute an offer to lease or a reservation or an option for the Premises, and this document shall become effective and binding only upon the execution and delivery hereof by both Landlord and Tenant.  All negotiations, considerations, representations and understandings between Landlord and Tenant are incorporated herein and may be modified or altered only by agreement in writing between Landlord and Tenant, and no act or omission of any employee or agent of Landlord shall alter, change or modify any of the provisions hereof.

 

Section 13.11       No Recordation.  Tenant shall not record this Lease with any registry of deeds or land court, and any recordation of this Lease will be void and constitute an Event of Default under this Lease.

 

Section 13.12       As Is.  Tenant represents to Landlord that Tenant has leased the Premises after a full and complete examination of the same, and by its execution and delivery of this Lease, Tenant hereby acknowledges that neither Landlord, nor Landlord’s agents, has made any representation or promises with respect to the Premises, the Building, or the land upon which it stands, and no rights, easements or licenses are acquired by Tenant, by implication or otherwise, except as may be set forth expressly in this Lease. The execution and delivery of this Lease by Tenant shall be conclusive evidence, as against Tenant, that Tenant accepts the Premises “AS IS”, with all faults.

 

Section 13.13       Financial Statements; Certain Representations and Warranties of Tenant.  From time to time as requested by Landlord, but not more than once in any year, and only if Tenant is not then a publicly traded company, Tenant shall provide to Landlord, any actual or potential mortgagee and any actual or potential ground lessor or any representative of any of the foregoing, copies of Tenant’s annual financial statements (audited or reviewed, if available) and quarterly financial statements, all certified as true and correct by Tenant, and, if Tenant is not then a publicly traded company, such other information regarding Tenant’s financial condition as Landlord may reasonably request; provided, however, that Landlord shall only request such financial statements if requested by a prospective lender or purchaser or if Tenant requests Landlord’s consent to an assignment or sublease.  Tenant represents and warrants to Landlord, its successors and assigns that:  (a) Tenant is a corporation duly organized

 

50

 

and validly existing under the laws of the State of Delaware, and is authorized to transact business in the Commonwealth of Massachusetts; (b) the execution, delivery and performance of this Lease by Tenant has been duly authorized by Tenant; and (c) this Lease is valid and binding upon Tenant and is enforceable against Tenant in accordance with the terms hereof.

 

Section 13.14       (a)  Real Estate Confidentiality.  Tenant acknowledges that the terms under which Landlord has leased the Premises to Tenant, including, without limitation, the rental rate(s), term and other financial and business terms, constitute confidential information of Landlord (“Landlord Confidential Information”).  Tenant covenants and agrees to keep the Landlord Confidential Information completely confidential; provided that (a) such Landlord Confidential Information may be disclosed by Tenant to those of its and its Tenant Affiliate’s officers, employees, attorneys, accountants, lenders, real estate brokers, contractors, consultants and financial advisors (collectively, “representatives”) who need to know such information in connection with Tenant’s use and occupancy of the Premises and for financial reporting and credit related activities (it being understood that Tenant shall inform its representatives of the confidential nature of such Landlord Confidential Information and that such representatives shall be directed by Tenant, and shall each expressly agree, to treat such Landlord Confidential Information confidentially in accordance with the terms of this Section), (b) such Landlord Confidential Information may be disclosed by Tenant to the extent otherwise in the public domain or to the extent required to be disclosed in connection with litigation involving this Lease or the Premises, and (c) unless required by applicable law, any other disclosure of such information may only be made if Landlord consents in writing prior to any such disclosure.  In furtherance of and not in limitation of the foregoing, Tenant understands and agrees that during the period of any negotiation of the terms of this Lease, the disclosure of Tenant’s possible interest in leasing the Premises and the terms thereof could have a material adverse effect on Landlord’s business.

 

Landlord acknowledges that the financial statements of Tenant and other financial and business information related to Tenant and its business constitute confidential information of Tenant (“Tenant Confidential Information”).  Landlord covenants and agrees to keep the Tenant Confidential Information completely confidential; provided that (a) such Tenant Confidential Information may be disclosed by Landlord to those of its officers, employees, attorneys, accountants, lenders and financial advisors (collectively, “representatives”) who need to know such information (it being understood that Landlord shall inform its representatives of the confidential nature of such Tenant Confidential Information and that such representatives shall be directed by Landlord, and shall each expressly agree, to treat such Tenant Confidential Information confidentially in accordance with the terms of this Section), (b) such Tenant Confidential Information may be disclosed by Landlord to Landlord’s lenders and prospective lenders and to prospective purchasers of Landlord’s Property (it being understood that Landlord shall inform its lenders and prospective lenders and purchasers of the confidential nature of such Tenant Confidential Information and that such lenders and prospective lenders and purchasers shall be directed by Landlord, and shall each expressly agree, to treat such Tenant Confidential Information confidentially in accordance with the terms of this Section), and (c) unless required by applicable law, any other disclosure of such information may only be made if Tenant consents in writing prior to any such disclosure.

 

51

 

(b) Non Real Estate Confidentiality.

 

(i)            Each of Tenant and Landlord agrees and acknowledges that it is not granted any rights to use or access any Confidential Information of the other party (“Counterparty Confidential Information”) by virtue of this Lease.

 

(ii)           Each party, as the receiving party (“Receiving Party”) shall keep all Counterparty Confidential Information confidential and, except with the express prior written consent of the other party (“Counterparty”) shall not:

 

(A)                               disclose or make available or publish the Counterparty Confidential Information in whole or in part to any third party, except as expressly permitted by this Lease;

 

(B)                               copy, reduce to writing or otherwise record the Counterparty Confidential Information;

 

(C)                               use, reproduce, transform or store the Counterparty Confidential Information in any retrieval or storage system whatsoever.

 

(iii)          The Receiving Party may disclose Counterparty Confidential Information only to the extent required by law, any governmental order or other legal requirement provided that, to the extent it is legally permitted to do so, it gives the Counterparty as much notice of such disclosure as possible and, where notice of disclosure is not prohibited and is given in accordance with this Section 13.14(b) Receiving Party takes into account the reasonable requests of the Counterparty in relation to the content of such disclosure. The Receiving Party shall cooperate with the Counterparty to obtain confidential treatment, to the extent possible, with respect to the Counterparty Confidential Information so disclosed.

 

(iv)          The Receiving Party’s obligations in relation to Counterparty Confidential Information shall, notwithstanding any earlier termination of the Lease continue in perpetuity.

 

(v)           The Receiving Party shall be liable for any breach by any of its employees, representatives, officers, directors and persons within its control of the restrictions contained in this clause (b) and agrees, at its sole expense, to take reasonable measures to prevent the prohibited or unauthorized disclosure or use of the Counterparty Confidential Information by those persons.

 

(vi)          Without limitation, the Receiving Party shall use at least the same effort and degree of care that it uses to protect its own confidential information of a similar nature from unauthorized use or disclosure, but shall not use less than a commercially reasonable degree of care.

 

“Counterparty Confidential Information” as herein used shall mean all confidential information or material (however recorded or preserved) disclosed or made available by the Counterparty to the Receiving Party, directly or indirectly, or which in any way as a result of this Lease or the Receiving Party’s dealings with the Counterparty or the Property, including the Tenant’s access to the Common Areas, is received by, comes into the possession of, or to the attention of the Receiving Party and any employees, directors, officers, representatives,

 

52

 

contractors or advisers of the Receiving Party or persons under the Receiving Party’s control including but not limited to:

 

(AA)       any information, (including but not limited to in the form of documents, notes, analyses, studies, samples, drawings, diagrams, designs, flowcharts, databases and models) that would be regarded as confidential by a reasonable business person relating to:

 

(i)            the business, affairs, customers, clients, suppliers, plans, intentions, market opportunities, compounds, candidate drugs or products of the Counterparty and/or persons within its control; and

 

(ii)           the operations, processes, product information, know-how, designs, trade secrets, or software of the Counterparty and/or persons within its control; and

 

(BB)       any information or analysis derived from the Counterparty Confidential Information;

 

but not including any information that:

 

(CC)       is or becomes generally available to the public (other than as a result of its disclosure by the Receiving Party or its representatives in breach of this Lease), (except that any compilation of otherwise public information in a form not publicly known shall nevertheless be treated as Counterparty Confidential Information);

 

(DD)       was lawfully in the possession of the Receiving Party on a non-confidential basis before the information was disclosed to it by the Counterparty as evidenced by Receiving Party’s written records; or

 

(EE)        is developed by the Receiving Party independently of the information disclosed by the Counterparty.

 

Receiving Party acknowledges that Counterparty may require individual Receiving Party employees to sign an individual confidentiality and non-disclosure agreement to manage intellectual property risks of working in a shared space with Counterparty employees, and such confidentiality and non-disclosure agreement may, without limitation, prohibit Receiving Party employees from disclosing Counterparty Confidential Information to employees of Counterparty.

 

Section 13.15       Summary of Basic Terms.  The Summary of Basic Terms which is affixed to this Lease sets forth certain basic terms and information which is thereafter referred to in the main text of this Lease.  Every reference to the Summary of Basic Terms, or to a particular item thereon, shall have the effect of incorporating the Summary, or the particular item thereof, into the main text of this Lease.

 

Section 13.16       Jurisdiction and Venue.  As the Premises are located in the Commonwealth of Massachusetts, Tenant agrees that its address for service of process is the address of the Premises or alternatively, with the

 

53

 

Secretary of State of the Commonwealth of Massachusetts.  In any cause of action arising out of or in connection with the Premises and the terms of this Lease, Tenant hereby submits itself to the jurisdiction of any state or federal court in the Commonwealth of Massachusetts and agrees that any such cause of action shall be governed by the laws of the Commonwealth of Massachusetts and further agrees that any such cause of action prosecuted by Tenant shall only be brought in state or federal courts in the Commonwealth of Massachusetts.  This Lease and the rights and obligations of the parties hereto shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts.

 

54

 

Tenant and Landlord, each by its duly authorized officer, has signed this Lease as of the date first set forth above.

 

	
 
    	
TENANT:
    
	
 
    	
 
    
	
 
    	
MORPHIC   ROCK THERAPEUTIC, INC., a Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Robert E. Farrell, Jr.
    
	
 
    	
Name:
    	
Robert E. Farrell, Jr.
    
	
 
    	
Title:
    	
VP Finance & Operations
    
	
 
    	
Duly Authorized
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LANDLORD:
    
	
 
    	
 
    
	
 
    	
ASTRAZENECA   PHARMACEUTICALS LIMITED PARTNERSHIP, a Delaware limited partnership
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Matthew D. Arnold
    
	
 
    	
Name:
    	
Matthew D. Arnold
    
	
 
    	
Title:
    	
VP IMED Operations
    
	
 
    	
Duly Authorized
    

 

55

 

EXHIBIT A

 

PROPERTY DESCRIPTION

 

The property is a state-of-the-art multi-tenant office, research and development, and laboratory facility located at 35 Gatehouse Drive in Waltham, Massachusetts. It provides spectacular views of the Cambridge Reservoir and is adjacent to over 22 acres of beautiful wooded protected park land in Weston, MA. It is situated directly off of Interstate 95 / Route 128 at Exit 17, neighboring Reservoir Woods, Waltham Woods, and Bay Colony Corporate Center. This location offers excellent proximity to Greater Boston’s most desirable residential communities and to the  R&D epicenter of Cambridge, world-renowned for the region’s best intellectual talent.

 

The location  is a series of interconnecting modern buildings, clad in glass and curtain wall skin that creates a world class destination. It offers tenants leading technology infrastructure. The tenant specific areas for lease are extremely flexible to accommodate a variety of specific research and development tailored to a tenant’s needs. Large ribbon windows and incredible natural light also enhance the “universal lab” flexibility and quality of environment. Common areas are spacious, modern, and can provide informal collaboration areas.

 

A-1

 

EXHIBIT B

 

SITE PLAN

 

 

B-1

 

EXHIBIT C

 

BUILDING FLOOR PLANS

 

(showing Premises)

 

[see attached]

 

C-1

 

 

C-2

 

EXHIBIT D

 

RULES AND REGULATIONS

 

ASTRAZENECA PHARMACEUTICALS LIMITED PARTNERSHIP (“Landlord”), hereby promulgates the rules and regulations (the “Rules and Regulations”) set forth below with respect to the use of the office building (the “Building”) and related amenities located at and known as 35 Gatehouse Drive, Waltham, Massachusetts (the “Property”) by tenants (collectively, the “Tenants,” and individually, a “Tenant”) of the Building.  Office space within the Building leased by a Tenant is called “Premises.”  The Rules and Regulations are as follows:

 

1.             Sidewalks, doorways, vestibules, stairways, corridors, halls and other similar areas within the common areas of the Property (the “Common Areas”) shall not be obstructed by any Tenant or used for any purpose other than ingress and egress to and from the portion of the Property leased by the applicable Tenant and for going from one part of the Property to another part of the Property.

 

2.             No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by a Tenant on or to any window, door, corridor or other part of the Building which is visible from outside of the Premises without the prior written consent of Landlord.

 

3.             Landlord will provide and maintain a directory board in a Common Area identifying Tenants.  Without the prior written consent of Lender, no Tenant shall be entitled to maintain any other directory or identifying sign in any Common Area.

 

4.             Movement of furniture, office equipment or any bulky material which requires movement through the Common Areas of the Building shall be restricted to such hours as Landlord may designate, and such movement shall be subject to such restrictions as Landlord may reasonably impose.

 

5.             Landlord shall have the authority to limit the weight of, and to prescribe and restrict the positioning and manner of installation of, safes, file cabinets and other heavy equipment.

 

6.             No Tenant shall use, or permit any person making or receiving any delivery to its Premises to use, any hand trucks except those equipped with rubber tires and side guards.

 

7.             All locks for doors in each Tenant’s Premises shall be building standard and no Tenant shall place any additional lock or locks on any door in its Premises without Landlord’s prior written consent.  All requests for duplicate keys shall be made through Landlord and charged to the Tenant.  Upon termination of a Tenant’s tenancy, the Tenant shall deliver to Landlord all keys to the Tenant’s Premises, to interior doors within the Tenant’s Premises, to doors within the Common Areas and to exterior Building doors which have been furnished to or obtained by the Tenant.

 

8.             Corridor doors, when not in use, shall be kept closed.

 

D-1

 

9.             Each Tenant shall lock all doors of its Premises leading to Common Areas at the close of its working day.

 

10.          No curtains, blinds, draperies or other window treatments shall be attached to or hung in any window of the Premises of a Tenant on an exterior wall of the Building or on an interior wall of the Building dividing the Premises from Common Areas without the prior written consent of Landlord, which consent shall not be unreasonably withheld.

 

11.          Plumbing fixtures and appliances shall be used only for the purposes for which they were designed and constructed, and no sweepings rubbish, rags or other material shall be thrown or placed therein.  The cost of repairing any damage resulting from misuse of the plumbing fixtures or appliances by a Tenant or its employees, agents or invitees shall be borne by the responsible Tenant.

 

12.          No Tenant shall use or permit the use of its Premises, or any part thereof, for lodging, for manufacturing, for any immoral or illegal purpose, or for any other purpose which is not permitted by the terms of its lease.

 

13.          No vending machines shall be allowed in any Premises without the prior written consent of Landlord, except for vending machines for the sole use of Tenant, its employees and invitees.

 

14.          Each Tenant shall, at its expense, provide artificial light and electric current for the employees of Landlord and/or Landlord’s contractors while performing janitorial or other cleaning, maintenance or repair services in the Tenant’s Premises.

 

15.          No Tenant will make or permit any of its employees, agents or invitees to make any improper noises in the Building or to otherwise interfere in any way with other Tenants or persons having business with them.

 

16.          No Tenant shall cause any unnecessary janitorial labor or services by reason of the Tenant’s willful misconduct or carelessness or indifference in the preservation of good order and cleanliness.

 

17.          Without the prior written consent of Landlord, no Tenant shall use the name of the Building or any picture of the Building in any materials promoting or advertising the business of the Tenant, except that each Tenant may use the address of the Building as the address of its business.

 

18.          Each Tenant shall cooperate with Landlord to assure the effective operation of the heating and air conditioning systems serving the Tenant’s Premises and the Building.

 

19.          Neither Landlord nor the Property manager will be responsible for lost or stolen money, jewelry or other personal property from any areas of the Property, regardless of whether the loss or theft occurs when the area in question is locked.

 

20.          Landlord may, in its discretion, institute security measures in the operation of the Property, and Tenants will comply with all such security measures.  Such security measures may

 

D-2

 

include, but are not limited to, requiring persons entering the Building or the Property to identify themselves to a watchman or other person designated by Landlord and to sign in and sign out of the Property, denying access to persons who are not properly identified or appear suspicious, requiring each employee, guest or visitor to wear and display a security badge at all times, and conducting fire or other emergency drills.  The exercise of such security measures by Landlord and any resulting interruption of a Tenant’s business shall not constitute an eviction or disturbance of a Tenant’s use and possession of its Premises, render Landlord liable to the Tenant for damages, or relieve a Tenant from its obligations under its lease.

 

21.          No bicycles or vehicles shall be brought into or kept in the Building.  All bicycles and vehicles brought onto the Property shall be driven and parked only in designated, paved areas.

 

22.          Parking on the Property shall be subject to the restrictions set forth in this paragraph and, with respect to any particular Tenant, to any additional restrictions on parking set forth in such Tenant’s lease.  Each Tenant and such Tenant’s employees, agents and invitees shall have the right, in common with others and in connection with the conduct of Tenant’s business at the Property, to park passenger automobiles on portions of the Property which have been striped for parking; provided, however that (a) no Tenant or its employees or agents may park in any space marked “visitor,” and (b) no Tenant or its employees, agents or invitees may park in any space marked “reserved,” unless reserved for such Tenant, and (c) persons parking their vehicles will do so exclusively within the marked parking space lines.  No Tenant or its employees, agents or invitees shall have a right to park vehicles on the Property overnight or for purposes other than in connection with the Tenant’s business at the Property.  Landlord shall have no responsibility to any Tenant or any Tenant’s employees, agents or invitees for any theft, loss of or damage to any vehicle or its contents on the Property.  Each Tenant’s parking rights, except as otherwise expressly provided in its lease, are in common with other Tenants and on a first come, first served basis, and, except as otherwise expressly provided in its lease or other written agreements with Landlord, no Tenant has the right to any designated parking spaces or to any particular number of parking spaces.

 

23.          All vehicles brought onto the Property by Tenant, its employees, agents, customers and invitees shall be in good condition and appearance and shall be drivable.  No such vehicles shall be leaking oil or other fluids.

 

24.          Each Tenant will deposit its garbage, trash and refuse only in approved trash containers within the Tenant’s Premises or in designated trash receptacles placed by Landlord within the Common Areas.  No Tenant shall deposit any hazardous, flammable or explosive substances in any trash receptacle on the Property.

 

25.          Landlord reserves the right to rescind, alter or waive any of the Rules and Regulations, and to adopt such additional rules and regulations as part of the Rules and Regulations, from time to time as Landlord deems it appropriate for the safety, protection, care and cleanliness of the Property, the operation thereof, the preservation of good order therein or the protection and comfort of the Tenants and their employees, agents and invitees.  An alteration or waiver of any of the Rules and Regulations in favor of one Tenant shall not, other than with the consent of Landlord, operate as an alteration or waiver in favor of any other

 

D-3

 

Tenant.  Landlord shall not be responsible to any Tenant for the non-observance or violation by any other Tenant of any of the Rules and Regulations, nor for the enforcement of any of the Rules and Regulations against any other Tenant.  No Tenant shall have the right to enforce any of the Rules and Regulations against any other Tenant.

 

D-4

 

EXHIBIT E

 

LANDLORD’S WORK

 

NOT APPLICABLE

 

Schedule 3E-1

 

FIRST AMENDMENT OF LEASE

 

THIS FIRST AMENDMENT OF LEASE (the “Amendment”) is made and entered into as of November 8, 2016 (the “Amendment Effective Date”) by and between ASTRAZENECA PHARMACEUTICALS LP (“Landlord”) and MORPHIC THERAPEUTIC, INC. (f/k/a Morphic Rock Therapeutic, Inc., “Tenant”).

 

RECITALS

 

A.                                    Landlord and Tenant are parties to that certain Lease dated as of August 5, 2015 (the “Existing Lease”) whereby Tenant leases certain space in the buildings and facilities commonly known as 35 Gatehouse Drive, Waltham, Massachusetts (“Landlord’s Property”), which leased space currently consists of approximately 11,166 square feet of rentable space located on Level 2 of Building A (the “Original Premises”), all as more particularly set forth in the Existing Lease.

 

B.                                    Tenant desires to expand the Original Premises to include 1,610 leasable square feet of un-demised space in Building B, Level 2 (the “B2 Premises”, as more particularly shown in the highlighted areas set forth in Exhibit A-1 attached hereto and incorporated herein) and a 114 leasable square feet in Building B, Level 3 (the “B3 Premises”, as more particularly shown in the highlighted area set forth in Exhibit A-2 attached hereto and incorporated herein, and together with the B2 Premises, the “Expansion Premises”).

 

C.                                    The Existing Lease, as amended by this First Amendment of Lease, shall be referred to herein as the “Lease”; and capitalized terms not otherwise defined herein shall have their respective definitions set forth in the Existing Lease.

 

NOW, THEREFORE, in consideration of the above recitals which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

 

1.                                      Expansion Premises; Landlord’s Equipment; Relocation.

 

a.                                      Effective as of the Amendment Effective Date (the “Expansion Commencement Date”): (i) the Existing Premises and the Expansion Premises shall together constitute the “Premises” for all purposes under the Lease and (ii) the “Leasable Square Footage of the Premises” set forth in Section 3C of the Summary of Basic Terms in Existing Lease shall be deemed to be 12,890 square feet.  The term of the Expansion Premises shall be coterminous with the Original Premises (the “Expiration Date”).  The parties acknowledge and agree that the Right of Extension shall be applicable to the Expansion Premises (including any Relocation Space, as defined below, if applicable) upon the same terms as applicable to the Original Premises.

 

b.                                      The Expansion Premises shall be subject to all of the terms and conditions of the Existing Lease currently in effect, except as expressly modified in this Amendment.  The Expansion Premises is accepted by Tenant in its “as is” condition and configuration without any representations or warranties by Landlord, express or implied.  The B2 Premises may be used for general business offices, scientific research and development laboratory and uses customarily accessory thereto and for no other purposes, and the B3 Premises may be used for conference room purposes, general business

 

 

office and no other purposes.  Tenant shall make no alterations to the Expansion Premises except in compliance with the terms of the Lease.

 

c.                                       Effective as of the Expansion Commencement Date, the term “Landlord’s Equipment” shall include the equipment owned by Landlord and located in the Expansion Premises on the Expansion Commencement Date.  A complete itemization of such portion of Landlord’s Equipment, prepared by Landlord and approved by Tenant, will be agreed upon and listed as an exhibit to this Amendment within thirty (30) days after the Expansion Commencement Date.  Additionally, Tenant shall have the right to use the Landlord’s work stations and furniture (e.g. desks, chairs and bookcases) located in the Expansion Premises on the Expansion Commencement Date, without warranty or representation as to their usage, fitness or condition and pursuant to the terms of the Lease.

 

d.                                      Landlord may, from time to time after the date that is twelve (12) calendar months following the Amendment Effective Date and at Landlord’s sole cost and expense, relocate Tenant from the B2 Premises and/or B3 Premises to space of reasonably comparable size and utility within Landlord’s Property (“Relocation Space”).  From and after the date of the relocation, the Base Rent for the Expansion Space, Tenant’s Share and the Water Service Charge shall be adjusted based on the rentable square footage of the Relocation Space, provided that if such Relocation Space is larger than the original B2 and/or B3 Premises, as applicable, Base Rent for such larger space shall not increase unless Tenant has requested such larger space.  Landlord shall exercise its right to relocate the B2 Premises and/or B3 Premises by providing Tenant written notice of the location of the applicable Relocation Space at least thirty (30) days prior to the relocation.

 

2.                                      Base Rent; Tenant’s Share Taxes and Operating Costs.

 

a.                                      Effective as of the Expansion Commencement Date, the Base Rent for the Expansion Premises shall be as set forth in the following chart (pro-rated for partial months):

 

	
Period
    	
 
    	
Rent per rsf
    	
 
    	
Annual Base Rent
    	
 
    	
Monthly base Rent
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Expansion Commencement   Date — October 31, 2017
    	
 
    	
$
    	
38.00
    	
 
    	
$
    	
65,512.00
    	
 
    	
$
    	
5,459.33
    	
 
    
	
November 1, 2017 —   October 31, 2018
    	
 
    	
$
    	
39.00
    	
 
    	
$
    	
67,236.00
    	
 
    	
$
    	
5,603.00
    	
 
    
	
November 1, 2018 —   October 31, 2019
    	
 
    	
$
    	
40.00
    	
 
    	
$
    	
68,960.00
    	
 
    	
$
    	
5,746.67
    	
 
    
	
November 1, 2019 —   Expiration Date
    	
 
    	
$
    	
41.00
    	
 
    	
$
    	
70,684.00
    	
 
    	
$
    	
5,890.33
    	
 
    

 

b.                                      Effective as of the Expansion Commencement Date, “Tenant’s Share” shall be modified to mean 4.33% being the amount (expressed as a percentage) equal to (a) the aggregate Leasable Square Footage of the Premises (i.e. the Original Premises and the Expansion Premises) divided by (b) the Leasable Square Footage of the Building (rounded to the nearest one-hundredth of one percent (0.01%)).

 

c.                                       Effective as of the Expansion Commencement Date, the “Water Service Charge” set forth in Section 6.l(c) of the Original Lease shall be deemed to be $1,589.77 per month ($1.48/rsf per annum).

 

2

 

3.                                      Parking. Effective as of the Expansion Commencement Date, the provisions of the Existing Lease regarding Tenant’s parking rights shall be modified as follows:

 

a.                                      Section 7 of the Summary of Basic Terms in the Original Lease shall be replaced with the following:

 

7.              Tenant’s Parking Allocation:   Thirty-three (33) unassigned parking spaces (2.5 spaces per 1,000 leasable square feet of the Premises), subject to the provisions of Section 2.3.

 

b.                                      The definition of “Specified Number” in Article I of the Original Lease shall be replaced with the following:

 

“Specified Number” means thirty-three (33), subject to the provisions of Section 2.3, based on a parking ratio of 2.5 spaces per 1,000 leasable square feet of the Premises.

 

4.                                      Miscellaneous.

 

a.                                      This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein.  There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any Rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Existing Lease, unless specifically set forth in this Amendment.

 

b.                                      Except as is expressly modified or amended here in, the provisions, conditions and terms of the Existing Lease shall remain unchanged and in full force and effect.

 

c.                                       In the case of any inconsistency between the provisions of the Existing Lease and this Amendment, the provisions of this Amendment shall govern and control.

 

d.                                      Landlord has delivered a copy of this Amendment to Tenant for Tenant’s review only and the delivery of it does not constitute an offer to Tenant or an option.  Landlord and Tenant shall not be bound by this Amendment until Landlord and Tenant have executed and delivered the same to the other party.

 

e.                                       The capitalized terms used in this Amendment shall have the same definitions as set forth in the Existing Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.

 

f.                                        Tenant and Landlord hereby represent to each other that Landlord and Tenant have dealt with no broker in connection with this Amendment other than Transwestem/RBJ.  Tenant and Landlord agree to indemnify and hold each other, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from all claims of any other brokers claiming to have represented Tenant and Landlord in connection with this Amendment.

 

g.                                       Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.

 

[SIGNATURES ARE ON FOLLOWING PAGE]

 

3

 

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this First Amendment of Lease as of the Amendment Effective Date as a document under seal.

 

 

	
 
    	
LANDLORD:
    
	
 
    	
 
    
	
 
    	
ASTRAZENECA PHARMACEUTICALS LP, a Delaware
    
	
 
    	
limited   partnership
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kumar Srinivasan
    
	
 
    	
 
    
	
 
    	
Name:   Kumar Srinivasan
    
	
 
    	
 
    
	
 
    	
Title:   Vice President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TENANT:
    
	
 
    	
 
    
	
 
    	
MORPHIC THERAPEUTIC, INC., a Delaware corporation
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Robert Farrell
    
	
 
    	
 
    
	
 
    	
Name:   Robert E. Farrell Jr.
    
	
 
    	
 
    
	
 
    	
Title:   Vice President Finance & Operations
    

 

4

 

EXHIBIT A-1

 

Location of B2 Premises

 

 

5

 

EXHIBIT A-2

 

Location of B3 Premises

 

 

6

 

SECOND AMENDMENT OF LEASE

 

THIS SECOND AMENDMENT OF LEASE (the “Amendment”) is made and entered into as of June 1, 2017 (the “Amendment Effective Date”) by and between ASTRAZENECA PHARMACEUTICALS LP (“Landlord”) and MORPHIC THERAPEUTIC, INC. (f/k/a Morphic Rock Therapeutic, Inc., “Tenant”).

 

RECITALS

 

A.                                    Landlord and Tenant are parties to that certain Lease dated as of August 5, 2015 (the “Original Lease”), as amended by that certain First Amendment of Lease dated as of November 8, 2016 (the “First Amendment” and together with the Original Lease, the  “Existing Lease”) whereby Tenant leases certain space in the buildings and facilities commonly known as 35 Gatehouse Drive, Waltham, Massachusetts (“Landlord’s Property”), which leased space currently consists of approximately 11,166 square feet of rentable space located on Level 2 of Building A (the “A2 Premises”), 1,610 square feet of  un-demised rentable space located on Level 2 of Building B (the “B2 Premises) and 114 square feet of rentable space located on Level 3 of Building B (the “B3 Premises”, and together with the A2 Premises and the B2 Premises, the “Existing Premises”), all as more particularly set forth in the Existing Lease.

 

B.                                    Tenant desires to (i) expand the Existing Premises to include 12,147 square feet of rentable office space located on Level 2 of Building D (the “D2 Premises”, as more particularly shown in the highlighted areas labeled “D2 Office Area” set forth in Exhibit A attached hereto and incorporated herein) and 9,092 square feet of rentable laboratory space located on Level 3 of Building C (the “C3 Premises”, as more particularly shown in the highlighted areas labeled “C3 Lab” set forth in Exhibit A attached hereto and incorporated herein, and together with the D2 Premises, the “Second Expansion Premises”), (ii) release the B3 Premises from the Existing Lease on June 30, 2017 and (iii) release the B2 Premises from the Existing Lease on August 31, 2017.

 

C.                                    The Existing Lease, as amended by this Second Amendment of Lease, shall be referred to herein as the “Lease”; and capitalized terms not otherwise defined herein shall have their respective definitions set forth in the Existing Lease.

 

NOW, THEREFORE, in consideration of the above recitals which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

 

1.                                      Second Expansion Premises; Release of B3 Premises and B2 Premises; Landlord’s Equipment.

 

a.                                      Effective as of the later of (i) June 1, 2017 and (ii) the date that Landlord delivers full possession of the Second Expansion Premises to Tenant free of all tenants and occupants and broom clean (except for Landlord’s Equipment)  (the “Second Expansion Commencement Date”): the Existing Premises and the Second Expansion Premises shall together constitute the “Premises” for all 

 

 

purposes under the Lease (including Section 3A of the Summary of Basic Terms in the Original Lease) and the “Leasable Square Footage of the Premises” set forth in Section 3C of the Summary of Basic Terms in the Original Lease shall be deemed to be 34,129 square feet.  Effective as of the Amendment Effective Date, the Lease Term (as defined in Section 3A of the Summary of Basic Terms in the Original Lease) and the Initial Term (as defined in Article I of the Original Lease) with respect to the A2 Premises and the Second Expansion Premises shall be extended to and expire on May 31, 2022.

 

b.                                      The Second Expansion Premises shall be subject to all of the terms and conditions of the Existing Lease currently in effect, except as expressly modified in this Amendment.  The Second Expansion Premises is accepted by Tenant in its “as is” condition and configuration without any representations or warranties by Landlord, express or implied.  The D2 Premises may be used for general business offices and uses customarily accessory thereto and for no other purposes, and the C3 Premises may be used as a scientific research and development laboratory and uses customarily accessory thereto, and no other purposes.  Tenant shall make no alterations to the Second Expansion Premises except in compliance with the terms of the Lease.

 

c.                                       Effective as of July 1, 2017: the A2 Premises, the B2 Premises and the Second Expansion Premises shall together constitute the “Premises” for all purposes under the Lease (including Section 3A of the Summary of Basic Terms in the Original Lease) and the “Leasable Square Footage of the Premises” set forth in Section 3C of the Summary of Basic Terms in the Original Lease shall be deemed to be 34,015 square feet. Effective as of September 1, 2017: the A2 Premises and the Second Expansion Premises shall together constitute the “Premises” for all purposes under the Lease (including Section 3A of the Summary of Basic Terms in the Original Lease) and the “Leasable Square Footage of the Premises” set forth in Section 3C of the Summary of Basic Terms in the Original Lease shall be deemed to be 32,405 square feet. The parties acknowledge and agree that the Right of Extension shall be applicable to the Premises, as defined in the prior sentence, upon the same terms and conditions set forth in the Existing Lease.

 

d.                                      Effective as of the Second Expansion Commencement Date, the term “Landlord’s Equipment” shall include the equipment owned by Landlord and located in the Existing Premises and Second Expansion Premises on the Second Expansion Commencement Date.  A complete itemization of the Landlord’s Equipment in the Second Expansion Premises, prepared by Landlord and approved by Tenant, will be agreed upon and listed as an exhibit to this Amendment within thirty (30) days after the Second Expansion Commencement Date. Additionally, Tenant shall have the right to use the Landlord’s work stations and furniture (e.g. desks, chairs and bookcases) located in the Second Expansion Premises on the Second Expansion Commencement Date, without warranty or representation as to their usage, fitness or condition and pursuant to the terms of the Lease.  Effective as of July 1, 2017 the term “Landlord’s Equipment” shall include only the equipment owned by Landlord and located in the A2 Premises, B2 Premises and Second Expansion Premises on such date. Effective as of September 1, 2017 the term “Landlord’s Equipment” shall include only the equipment owned by Landlord and located in the A2 Premises and Second Expansion Premises on such date.

 

e.                                       On or prior to July 1, 2017, Tenant shall surrender the B3 Premises, and Landlord’s Equipment therein, to Landlord in the condition required under the Lease, including without limitation Sections 2.6 and 7.4 of the Existing Lease.  On or prior to September 1, 2017, Tenant shall surrender the B2 Premises, and Landlord’s Equipment therein, to Landlord in the condition required under the Lease, including without limitation Sections 2.6 and 7.4 of the Existing Lease.

 

f.                                        Section 1.d. of the First Amendment shall be of no further force or effect.

 

2

 

2.                                      Base Rent; Tenant’s Share Taxes and Operating Costs; Security Deposit.

 

a.                                      Effective as of the Second Expansion Commencement Date, the Base Rent for the Second Expansion Premises shall be as set forth in the following chart (pro-rated for partial months):

 

	
Period
    	
 
    	
Rent per rsf
    	
 
    	
Annual Base Rent
    	
 
    	
Monthly Base Rent
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Second Expansion   Commencement Date through the ninety-second (92nd) day after the Second   Expansion Commencement Date
    	
 
    	
$0.00
    	
 
    	
$
    	
0.00
    	
 
    	
$
    	
0.00
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Ninety-third   (93rd) day after the Second Expansion Commencement Date— May 30, 2018
    	
 
    	
$41.00 (for C3) and $25.00 (for D2)
    	
 
    	
$
    	
676,447.00
    	
 
    	
$
    	
56,370.58
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 1, 2018   — May 30, 2019
    	
 
    	
$42.00 (for C3) and $26.00 (for D2)
    	
 
    	
$
    	
697,686.00
    	
 
    	
$
    	
58,140.50
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 1,   2019 — May 30, 2020
    	
 
    	
$43.00 (for C3) and $27.00 (for D2)
    	
 
    	
$
    	
718,925.00
    	
 
    	
$
    	
59,910.42
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 1,   2020 — May 30, 2021
    	
 
    	
$44.00 (for C3) and $28.00 (for D2)
    	
 
    	
$
    	
740,164.00
    	
 
    	
$
    	
61,680.33
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 1,   2021 — May 30, 2022
    	
 
    	
$45.00 (for C3) and $29.00 (for D2)
    	
 
    	
$
    	
761,403.00
    	
 
    	
$
    	
63,450.25
    	
 
    

 

b.                                      Effective as of the Second Expansion Commencement Date, the Base Rent for the Expansion Premises (as defined in the First Amendment, i.e. the B3 Premises and B2 Premises) shall be as set forth in the following chart:

 

	
Period
    	
 
    	
Rent per rsf
    	
 
    	
Annual Base Rent
    	
 
    	
Monthly Base Rent
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Second Expansion   Commencement Date — June 30, 2017
    	
 
    	
$38.00 (based upon 1,724 rsf)
    	
 
    	
$
    	
65,512.00
    	
 
    	
$
    	
5,459.33
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
July 1,   2017 — August 31, 2017
    	
 
    	
$38.00 (based upon 1,610 rsf)
    	
 
    	
$
    	
61,180.00
    	
 
    	
$
    	
5,098.33
    	
 
    

 

c.                                       Effective as of the Second Expansion Commencement Date, the Base Rent for the A2 Premises for the period from November 1, 2020 — May 30, 2022 shall be as set forth in the following chart:

 

	
Period
    	
 
    	
Rent per rsf
    	
 
    	
Annual Base Rent
    	
 
    	
Monthly Base Rent
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
November 1,   2020 — May 30, 2021
    	
 
    	
$
    	
44.00
    	
 
    	
$
    	
491,304.00
    	
 
    	
$
    	
40,942.00
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 1,   2021 — May 30, 2022
    	
 
    	
$
    	
45.00
    	
 
    	
$
    	
502,470.00
    	
 
    	
$
    	
41,872.50
    	
 
    

 

3

 

d.                                      Effective as of the Second Expansion Commencement Date, “Tenant’s Share” shall be modified to mean 11.47%.  Effective as of July 1, 2017, “Tenant’s Share” shall be modified to mean 11.43%.   Effective as of September 1, 2017, “Tenant’s Share” shall be modified to mean 10.89%.  In each case, the “Tenant’s Share” is the amount (expressed as a percentage) equal to (a) the aggregate Leasable Square Footage of the Premises divided by (b) the Leasable Square Footage of the Building (rounded to the nearest one-hundredth of one percent (0.01%)).

 

e.                                       Effective as of the Second Expansion Commencement Date, the “Water Service Charge” set forth in Section 6.1(c) of the Original Lease shall be deemed to be $4,209.24 per month ($1.48/rsf per annum). Effective as of July 1, 2017, the “Water Service Charge” set forth in Section 6.1(c) of the Original Lease shall be deemed to be $4,195.18 per month ($1.48/rsf per annum). Effective as of September 1, 2017, the “Water Service Charge” set forth in Section 6.1(c) of the Original Lease shall be deemed to be $3,996.62 per month ($1.48/rsf per annum).

 

f.                                        Effective as of the Second Expansion Commencement Date, Section 13 of the Summary of Basic Terms in the Original Lease and Section 13.3 of the Original Lease shall be amended to provide that the Security Deposit amount shall be $275.188.74.  Tenant shall deliver to Landlord either (i) an amendment to its existing Letter of Credit increasing the same to $275,188.74, or (ii) an additional Letter of Credit complying with the terms and conditions of Section 13.3 of the Original Lease in the amount of $137,474.74.

 

3.                                      Parking.

 

a.                                      Effective as of the Second Expansion Commencement Date, the provisions of the Existing Lease regarding Tenant’s parking rights shall be modified as follows:

 

(i)                                     Section 7 of the Summary of Basic Terms in the Original Lease shall be replaced with the following:

 

7.  Tenant’s Parking Allocation:  Eighty-six (86) unassigned parking spaces (2.5 spaces per 1,000 leasable square feet of the Premises), subject to the provisions of Section 2.3.

 

(ii)                                  The definition of “Specified Number” in Article I of the Original Lease shall be replaced with the following:

 

“Specified Number” means Eighty-six (86), subject to the provisions of Section 2.3, based on a parking ratio of 2.5 spaces per 1,000 leasable square feet of the Premises.

 

b.                                      Effective as of September 1, 2017, the provisions of the Existing Lease regarding Tenant’s parking rights shall be modified as follows:

 

(i)                                     Section 7 of the Summary of Basic Terms in the Original Lease shall be replaced with the following:

 

4

 

7.  Tenant’s Parking Allocation: Eighty-one (81) unassigned parking spaces (2.5 spaces per 1,000 leasable square feet of the Premises), subject to the provisions of Section 2.3.

 

(ii)                                  The definition of “Specified Number” in Article I of the Original Lease shall be replaced with the following:

 

“Specified Number” means Eighty-one (81), subject to the provisions of Section 2.3, based on a parking ratio of 2.5 spaces per 1,000 leasable square feet of the Premises.

 

4.                                      Contingency.  Landlord and Tenant acknowledge and agree that the effectiveness of this Amendment shall be subject to the conditions precedent that (i) Landlord and the current occupant of the Second Expansion Premises shall terminate the current occupant’s existing lease of the Second Expansion Premises in a manner satisfactory to Landlord and (ii) the Landlord shall deliver the Second Expansion Premises to Tenant free of all tenants and occupants.  Upon delivery of the Second Expansion Premises to Tenant free of all tenants and occupants, this contingency shall be deemed to have satisfied.

 

5.                                      Miscellaneous.

 

a.                                      This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein.  There have been no additional oral or written representations or agreements.  Under no circumstances shall Tenant be entitled to any Rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Existing Lease, unless specifically set forth in this Amendment.

 

b.                                      Except as is expressly modified or amended herein, the provisions, conditions and terms of the Existing Lease shall remain unchanged and in full force and effect.

 

c.                                       In the case of any inconsistency between the provisions of the Existing Lease and this Amendment, the provisions of this Amendment shall govern and control.

 

d.                                      Landlord has delivered a copy of this Amendment to Tenant for Tenant’s review only and the delivery of it does not constitute an offer to Tenant or an option.  Landlord and Tenant shall not be bound by this Amendment until Landlord and Tenant have executed and delivered the same to the other party.

 

e.                                       The capitalized terms used in this Amendment shall have the same definitions as set forth in the Existing Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.

 

f.                                        Tenant and Landlord hereby represent to each other that Landlord and Tenant have dealt with no broker in connection with this Amendment other than Transwestern/RBJ.  Tenant and Landlord agree to indemnify and hold each other, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from all claims of any other brokers claiming to have represented Tenant and Landlord in connection with this Amendment.

 

5

 

g.                                       Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.

 

[SIGNATURES ARE ON FOLLOWING PAGE]

 

6

 

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Second Amendment of Lease as of the Amendment Effective Date as a document under seal.

 

 

	
 
    	
LANDLORD:
    
	
 
    	
 
    
	
 
    	
ASTRAZENECA PHARMACEUTICALS LP,   a Delaware limited partnership 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kumar Srinivasan
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Kumar Srinivasan
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Vice President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TENANT:
    
	
 
    	
 
    
	
 
    	
MORPHIC THERAPEUTIC, INC.,   a Delaware corporation 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Robert Farrell
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Robert Farrell
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
VP Finance & Operations
    

 

7

 

EXHIBIT A

 

Location of the D2 Premises and C3 Premises

 

8

 

THIRD AMENDMENT OF LEASE

 

THIS THIRD AMENDMENT OF LEASE (the “Amendment”) is made and entered into as of April 20, 2018 (the “Amendment Effective Date”) by and between ASTRAZENECA PHARMACEUTICALS LP (“Landlord”) and MORPHIC THERAPEUTIC, INC. (f/k/a Morphic Rock Therapeutic, Inc., “Tenant”).

 

RECITALS

 

A.                                    Landlord and Tenant are parties to that certain Lease dated as of August 5, 2015 (the “Original Lease”), as amended by that certain First Amendment of Lease dated as of November 8, 2016 (the “First Amendment”) and as further amended by that certain Second Amendment of Lease dated as of June 1, 2017 (the “Second Amendment”  and together with the Original Lease and the First Amendment, the  “Existing Lease”) whereby Tenant leases certain space in the buildings and facilities commonly known as 35 Gatehouse Drive, Waltham, Massachusetts (“Landlord’s Property”), which leased space currently consists of approximately 11,166 square feet of rentable space located on Level 2 of Building A (the “A2 Premises”), 12,147 square feet of rentable office space located on Level 2 of Building D (the “D2 Premises”) and 9,092 square feet of rentable laboratory space located on Level 3 of Building C (the “C3 Premises”, and together with the A2 Premises and the D2 Premises, the “Existing Premises”), all as more particularly set forth in the Existing Lease.

 

B.                                    Tenant desires to release a portion of the D2 Premises (the “Released D2 Premises” as more particularly shown in the highlighted areas labeled “Astrazeneca” and “Floor Common” set forth in Exhibit A attached hereto and incorporated herein) and agreed to contain 2,620 square feet from the Existing Lease on May 1, 2018 and retain the remaining 9,527 square foot portion of the D2 Premises (the “Remaining D2 Premises” as more particularly shown in the highlighted areas labeled “Morphic Rock” set forth in Exhibit A).

 

C.                                    The Existing Lease, as amended by this Third Amendment of Lease, shall be referred to herein as the “Lease”; and capitalized terms not otherwise defined herein shall have their respective definitions set forth in the Existing Lease.

 

NOW, THEREFORE, in consideration of the above recitals which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

 

1.                                      Release of Released D2 Premises; Landlord’s Equipment; D2 Common Area.

 

a.             Effective as of May 1, 2018, the A2 Premises, the C3 Premises and the Remaining D2 Premises shall together constitute the “Premises” for all purposes under the Lease (including Section 3A of the Summary of Basic Terms in the Original Lease) and the “Leasable Square Footage of the Premises” set forth in Section 3C of the Summary of Basic Terms in the Original Lease shall be deemed to be 29,785 square feet. The parties acknowledge and agree that the Right of Extension shall be applicable to the Premises, as defined in the prior sentence, upon the same terms and conditions set forth in the Existing Lease.

 

 

b.             Effective as of May 1, 2018 the term “Landlord’s Equipment” shall include only the equipment owned by Landlord and located in the A2 Premises, the C3 Premises and the Remaining D2 Premises on such date.

 

c.             On or prior to May 1, 2018, Tenant shall surrender the Released D2 Premises, and Landlord’s Equipment therein, to Landlord in the condition required under the Lease, including without limitation Sections 2.6 and 7.4 of the Existing Lease.

 

d.             Effective as of May 1, 2018, Tenant shall have the right, in common with Landlord and others entitled thereto, to use as Common Areas the highlighted areas labeled “Floor Common” set forth in Exhibit A (the “D2 Common Area”), which area shall be deemed a portion of the Common Areas.

 

2.             Base Rent; Tenant’s Share Taxes and Operating Costs.

 

a.             Effective as of May 1, 2018, the Base Rent for the C3 Premises and D2 Remaining Premises shall be as set forth in the following chart (pro-rated for partial months):

 

	
Period
    	
 
    	
Rent per rsf
    	
 
    	
Annual Base Rent
    	
 
    	
Monthly Base Rent
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
May 1, 2018   — May 30, 2018
    	
 
    	
$41.00 (for C3) and $25.00 (for D2)
    	
 
    	
$
    	
610,947.00
    	
 
    	
$
    	
50,912.25
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 1,   2018 — May 30, 2019
    	
 
    	
$42.00 (for C3) and $26.00 (for D2)
    	
 
    	
$
    	
629,566.00
    	
 
    	
$
    	
52,463.83
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 1,   2019 — May 30, 2020
    	
 
    	
$43.00 (for C3) and $27.00 (for D2)
    	
 
    	
$
    	
648,185.00
    	
 
    	
$
    	
54,015.42
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 1,   2020 — May 30, 2021
    	
 
    	
$44.00 (for C3) and $28.00 (for D2)
    	
 
    	
$
    	
666,804.00
    	
 
    	
$
    	
55,567.00
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 1,   2021 — May 30, 2022
    	
 
    	
$45.00 (for C3) and $29.00 (for D2)
    	
 
    	
$
    	
685,423.00
    	
 
    	
$
    	
57,118.58
    	
 
    

 

Base Rent for the A2 Premises shall remain as set forth in the Second Amendment.

 

b.             Effective as of the May 1, 2018, “Tenant’s Share” shall be modified to mean 10.01%.  The “Tenant’s Share” is the amount (expressed as a percentage) equal to (a) the aggregate Leasable Square Footage of the Premises divided by (b) the Leasable Square Footage of the Building (rounded to the nearest one-hundredth of one percent (0.01%)).

 

c.             Effective as of May 1, 2018, the “Water Service Charge” set forth in Section 6.1(c) of the Original Lease shall be deemed to be $3,673.48 per month ($1.48/rsf per annum).

 

3.             Parking.  Effective as of May 1, 2018, the provisions of the Existing Lease regarding Tenant’s parking rights shall be modified as follows:

 

a.             Section 7 of the Summary of Basic Terms in the Original Lease shall be replaced with the following:

 

2

 

7.  Tenant’s Parking Allocation: seventy-five (75) unassigned parking spaces (2.5 spaces per 1,000 leasable square feet of the Premises), subject to the provisions of Section 2.3.

 

b.             The definition of “Specified Number” in Article I of the Original Lease shall be replaced with the following:

 

“Specified Number” means seventy-five (75), subject to the provisions of Section 2.3, based on a parking ratio of 2.5 spaces per 1,000 leasable square feet of the Premises.

 

4.             Expansion Right.

 

a.             Subject to the provisions of this Section 4, Tenant shall have a one-time right to expand (the “Expansion Right”) into the entire Released D2 Premises upon the following terms and conditions.

 

b.             Tenant shall have the right to expand into the Released D2 Premises effective November 1, 2020 (the “Expansion Date”) by giving Landlord written notice of Tenant’s exercise of such right (the “Expansion Notice”) no later than June 1, 2020.   If Tenant timely delivers the Expansion Notice, Landlord and Tenant shall execute an amendment to the Lease incorporating the Released D2 Premises into the Premises upon the terms contained in the Lease (including without limitation providing for a Base Rent equal to the Base Rent per rsf of the D2 Remaining Premises and a term that is coterminous with the Lease) within ten (10) business days following Landlord’s delivery to Tenant of a form therefor. If Tenant timely delivers an Expansion Notice and executes a mutually agreeable amendment for the Released D2 Premises, Landlord shall deliver full possession of the Released D2 Premises, free of all tenants and occupants, together with Landlord’s Equipment therein at such time, to Tenant on the Expansion Date, which Released D2 Premises shall be in substantially the same condition as they were in on the date of this Amendment, reasonable wear and tear excepted.

 

c.             If Tenant fails to timely deliver the Expansion Notice or fails to execute a mutually agreeable amendment for the Released D2 Premises within ten (10) business days of receipt from Landlord, Tenant shall be deemed to have waived its rights with respect to Released D2 Premises and Landlord shall be entitled, but not required, to lease all or any portion of the Released D2 Premises to any party or parties on such terms and conditions, including, without limitation, options to extend the term of such lease and/or expand the premises under such lease, and for such rent as Landlord determines, all in its sole discretion, and the Expansion Right shall be of no further force or effect.

 

d.             Notwithstanding any contrary provision of this Lease, the Expansion Right, and any exercise by Tenant of the Expansion Right shall be void and of no effect unless on the date Tenant timely delivers an Expansion Notice to Landlord and on the commencement date of the amendment for the Released D2 Premises (as applicable): (i) this Lease is in full force and effect, (ii) no Event of Default has occurred under this Lease which remains continuing and uncured after any applicable notice and opportunity to cure and (iii) except with respect to a Permitted Transferee, Tenant shall not have assigned this Lease and Tenant shall not have a sublease or subleases then in effect for more than fifteen percent (15%) of the square footage of the Premises existing immediately prior to the Expansion Date.

 

5.                                      Miscellaneous.

 

a.             This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein.  There have been no additional oral or written representations or agreements.  Under no circumstances shall Tenant be entitled to any Rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have 

 

3

 

been provided Tenant in connection with entering into the Existing Lease, unless specifically set forth in this Amendment.

 

b.             Except as is expressly modified or amended herein, the provisions, conditions and terms of the Existing Lease shall remain unchanged and in full force and effect.

 

c.             In the case of any inconsistency between the provisions of the Existing Lease and this Amendment, the provisions of this Amendment shall govern and control.

 

d.             Landlord has delivered a copy of this Amendment to Tenant for Tenant’s review only and the delivery of it does not constitute an offer to Tenant or an option.  Landlord and Tenant shall not be bound by this Amendment until Landlord and Tenant have executed and delivered the same to the other party.

 

e.             The capitalized terms used in this Amendment shall have the same definitions as set forth in the Existing Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.

 

f.             Tenant and Landlord hereby represent to each other that Landlord and Tenant have dealt with no broker in connection with this Amendment other than CBRE | New England.  Tenant and Landlord agree to indemnify and hold each other, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from all claims of any other brokers claiming to have represented Tenant and Landlord in connection with this Amendment.

 

g.             Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.

 

[SIGNATURES ARE ON FOLLOWING PAGE]

 

4

 

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Third Amendment of Lease as of the Amendment Effective Date as a document under seal.

 

	
 
    	
LANDLORD:
    
	
 
    	
 
    
	
 
    	
ASTRAZENECA PHARMACEUTICALS LP,   a Delaware limited partnership 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kumar Srinivasan
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Kumar Srinivasan
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Vice President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TENANT:
    
	
 
    	
 
    
	
 
    	
MORPHIC THERAPEUTIC, INC., a Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Robert Farrell
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Robert Farrell
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
VP Finance &   Operations
    

 

5

 

EXHIBIT A

 

Location of the Released D2 Premises and Remaining D2 Premises

 

 

6Exhibit 10.10

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

 

Confidential

Execution Version

 

RESEARCH COLLABORATION AND OPTION AGREEMENT

 

between

 

JANSSEN PHARMACEUTICALS, INC.

 

and

 

MORPHIC THERAPEUTIC, INC.

 

DATED: FEBRUARY 15, 2019

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
1.
    	
DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
RESEARCH PROGRAM;   OPTION EXERCISE AND EXCLUSIVITY
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.1.
    	
Research Programs
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.2.
    	
Research Plans and   Research Budgets
    	
24
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.3.
    	
Research Program Costs
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.4.
    	
Commencement of   Research Activities; Research Term
    	
26
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.5.
    	
Late Lead Optimization   Activities
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.6.
    	
Replacement Targets
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.7.
    	
Expiration of   Pre-Existing Restrictions
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.8.
    	
Janssen Compounds
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.9.
    	
Research Reports
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.10.
    	
Research Program Records
    	
32
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.11.
    	
Performance of Morphic   Research Activities
    	
32
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.12.
    	
Copies and Inspection   of Records
    	
33
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.13.
    	
Exclusivity
    	
33
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.14.
    	
Acquisitions by Third   Parties
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
OPTION
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.1.
    	
Option Grant
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.2.
    	
Option Exercise
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.3.
    	
IND-Enabling Study   Report
    	
35
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.4.
    	
Due Diligence
    	
35
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.5.
    	
Extension of Option   Period
    	
35
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.6.
    	
Termination of Option
    	
35
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.7.
    	
Right of First   Negotiation
    	
36
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
GOVERNANCE
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.1.
    	
Joint Research   Committee
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.2.
    	
Committee Chair
    	
40
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.3.
    	
JRC Meetings
    	
40
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.4.
    	
JRC Responsibilities
    	
40
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.5.
    	
Joint Finance Committee
    	
41
    

 

i

 

	
 
    	
4.6.
    	
JRC Decision-Making
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.7.
    	
Resolution of JRC   Disputes
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.8.
    	
Limitations on Decision   Making
    	
43
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.9.
    	
JRC Term
    	
43
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
DEVELOPMENT, REGULATORY   MATTERS AND COMMERCIALIZATION
    	
44
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.1.
    	
Technology Transfer
    	
44
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.2.
    	
Development and Commercialization   After Option Exercise
    	
44
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.3.
    	
Development Reports
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.4.
    	
Regulatory Activities
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.5.
    	
Development Diligence   Obligations
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.6.
    	
Commercialization   Diligence Obligations
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
MANUFACTURING
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.1.
    	
General   Responsibilities
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.2.
    	
Observation by Janssen
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.3.
    	
Manufacturing   Technology Transfer
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
LICENSE GRANTS
    	
47
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.1.
    	
Research Term Licenses
    	
47
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.2.
    	
Development and   Commercialization Licenses
    	
48
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.3.
    	
No Other Licenses or   Rights
    	
50
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
PAYMENTS
    	
50
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.1.
    	
Upfront Payment;   Research Program Fee
    	
50
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.2.
    	
Research Program Fee
    	
51
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.3.
    	
Late Lead Optimization   Fee
    	
51
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.4.
    	
Option Exercise Fee
    	
51
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.5.
    	
Development Milestones
    	
51
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.6.
    	
Sales Milestones
    	
53
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.7.
    	
Royalties
    	
53
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.8.
    	
Royalty Adjustments
    	
54
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.9.
    	
Third Party   Intellectual Property
    	
55
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.10.
    	
Compulsory Licenses
    	
57
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.11.
    	
Invoicing and Payment
    	
57
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.12.
    	
Reports
    	
58
    

 

ii

 

	
 
    	
8.13.
    	
Records and Audits
    	
58
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.14.
    	
Conduct of Audits
    	
59
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.15.
    	
Currency Exchange
    	
60
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.16.
    	
Taxes
    	
60
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.17.
    	
Late Payments
    	
61
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
INTELLECTUAL PROPERTY
    	
62
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.1.
    	
Ownership
    	
62
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.2.
    	
Assignment of   Intellectual Property
    	
63
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.3.
    	
Exploitation of Joint   Technology
    	
65
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.4.
    	
Disclosure
    	
65
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.5.
    	
Joint Research   Agreement
    	
65
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.6.
    	
Trademarks
    	
65
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
PATENT PROSECUTION AND   MAINTENANCE
    	
65
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.1.
    	
Morphic Prosecution and   Maintenance of Patents
    	
65
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.2.
    	
Janssen Input
    	
66
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.3.
    	
Information Sharing
    	
66
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.4.
    	
Review and Consult
    	
66
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.5.
    	
Janssen Prosecution and   Maintenance of Patents
    	
67
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.6.
    	
Cooperation
    	
67
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.7.
    	
No Attorney-Client   Privilege
    	
68
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
ENFORCEMENT OF   INTELLECTUAL PROPERTY
    	
68
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.1.
    	
Notification
    	
68
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.2.
    	
Enforcement Actions
    	
68
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.3.
    	
Patent Listing
    	
69
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.4.
    	
Enforcement of Listed   Patents
    	
70
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.5.
    	
Recoveries
    	
70
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.6.
    	
Patent Term Restoration
    	
70
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.7.
    	
Third Party Claims
    	
70
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
CONFIDENTIALITY
    	
71
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.1.
    	
Confidential   Information
    	
71
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.2.
    	
Return of Confidential   Information
    	
73
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.3.
    	
Publications
    	
73
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.4.
    	
Terms of this   Agreement; Publicity
    	
74
    

 

iii

 

	
13.
    	
REPRESENTATIONS AND   WARRANTIES; INDEMNIFICATION; DISCLAIMERS
    	
74
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.1.
    	
Representations,   Warranties and Covenants
    	
74
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.2.
    	
Disclaimers
    	
79
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.3.
    	
Indemnification
    	
80
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.4.
    	
Insurance
    	
82
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.5.
    	
Healthcare Compliance
    	
82
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
TERM AND TERMINATION
    	
83
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
14.1.
    	
Term
    	
83
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
14.2.
    	
Termination by Janssen   for Convenience
    	
84
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
14.3.
    	
Termination for Material   Breach
    	
84
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
14.4.
    	
Termination for Failure   to Determine to Commence Late Lead Optimization Activities
    	
85
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
14.5.
    	
Rights in Bankruptcy
    	
85
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
14.6.
    	
Effects of Termination
    	
86
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
14.7.
    	
Alternative Remedy in   Lieu of Termination
    	
89
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
14.8.
    	
Accrued Rights
    	
89
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
14.9.
    	
Survival
    	
90
    
	
 
    	
 
    	
 
    	
 
    
	
15.
    	
DISPUTE RESOLUTION
    	
90
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
15.1.
    	
Discussion by Executive   Officers; Arbitration
    	
90
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
GENERAL PROVISIONS
    	
90
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.1.
    	
Relationship of Parties
    	
90
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.2.
    	
Performance by   Affiliates
    	
91
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.3.
    	
No Third-Party   Beneficiaries
    	
91
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.4.
    	
Compliance with Laws
    	
91
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.5.
    	
Governing Law
    	
91
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.6.
    	
Counterparts;   Facsimiles
    	
91
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.7.
    	
Headings
    	
91
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.8.
    	
Assignment
    	
91
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.9.
    	
Non-Solicitation
    	
92
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.10.
    	
Notices
    	
92
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.11.
    	
Amendment
    	
93
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.12.
    	
Waiver
    	
93
    

 

iv

 

	
 
    	
16.13.
    	
Severability
    	
93
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.14.
    	
Construction
    	
93
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.15.
    	
Entire Agreement
    	
94
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.16.
    	
Acknowledgement
    	
94
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.17.
    	
Force Majeure
    	
94
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.18.
    	
Further Actions
    	
94
    

 

v

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

 

	
Schedules:
    	
 
    	
 
    
	
Schedule 1.18
    	
 
    	
J&J Universal Calendar
    
	
Schedule 1.91
    	
 
    	
Late Lead Optimization Activities
    
	
Schedule 1.108
    	
 
    	
Morphic Patents as of the Effective Date
    
	
Schedule 1.182
    	
 
    	
Threshold Activity and Selectivity
    
	
Schedule 2.2.1(a)
    	
 
    	
Research Plan for [***]
    
	
Schedule 2.2.1(b)
    	
 
    	
Research Plan for [***]
    
	
Schedule 2.2.1(c)
    	
 
    	
Research Plan for [***]
    
	
Schedule 2.2.3
    	
 
    	
2019 Research Plan and Research Budget
    
	
Schedule 2.10
    	
 
    	
Data Integrity Requirements
    
	
Schedule 10.1
    	
 
    	
Jurisdictions
    
	
Schedule 12.4.1
    	
 
    	
Press Release
    
	
Schedule 15.1
    	
 
    	
Dispute Resolution
    

 

vi

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

 

RESEARCH COLLABORATION AND OPTION AGREEMENT

 

This Research Collaboration and Option Agreement (this “Agreement”), dated as of February  , 2019 (the “Effective Date”), is made by and between Morphic Therapeutic, Inc. having an office at 35 Gatehouse Drive A2, Waltham, MA 02451 92121 (“Morphic”), and Janssen Pharmaceuticals, Inc. having an office at 1125 Trenton-Harbourton Road, Titusville, NJ 08560 (“Janssen”).  Each of Morphic and Janssen may be referred to herein as a “Party” or together as the “Parties.”

 

RECITALS

 

Morphic has proprietary integrin technology, including screening assays to identify small molecule compounds that modulate certain targets.

 

Janssen is developing therapeutic products for the treatment of certain cardiovascular and metabolic diseases and related conditions, including kidney disease.

 

The Parties wish to collaborate using Janssen’s and Morphic’s expertise to perform research and other activities, including to discover small molecule compounds that modulate such targets for the treatment of kidney disease.

 

Morphic desires to grant to Janssen, and Janssen desires to receive from Morphic, certain licenses and rights under the Morphic Technology to discover and exploit such small molecule compounds discovered in the course of such collaboration.

 

The Parties hereby agree as follows:

 

1.                                      DEFINITIONS.

 

The following terms and their correlatives have the following meanings:

 

1.1                               “Affiliate” of a Person means any other Person that (directly or indirectly) is controlled by, controls or is under common control with such Person.  For the purposes of this Section 1.1 (Affiliate), the term “control” (including the terms “controlled by” and “under common control with”) as used with respect to a Person means (a) in the case of a corporate entity, direct or indirect ownership of voting securities entitled to cast more than fifty percent (50%) of the votes in the election of directors or (b) in the case of a non-corporate entity, direct or indirect ownership of more than fifty percent (50%) of the equity interests with the power to direct the management and policies of such entity, provided that if local law restricts foreign ownership, control is established by direct or indirect ownership of the maximum ownership percentage that may, under such local law, be owned by foreign interests.

 

1.2                               “Agreement” has the meaning set forth in the preamble.

 

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

 

1.3                               “Allowable Overruns” means, for all Research Programs in the aggregate, any FTE Costs or Out-of-Pocket Costs incurred by or on behalf of a Party in any Calendar Year in the performance of Research Activities under each applicable Research Plan for each Research Program that (a) is not attributable to any breach of this Agreement by Morphic and (b) is in excess of the aggregate amount budgeted for such Research Activities across all Research Budgets for such Calendar Year by an amount not to exceed the greater of [***] of the amount budgeted for such activities across all Research Budgets and [***].

 

1.4                               “Anti-Corruption Laws” has the meaning set forth in Section 13.5.4 (Anti-Corruption Laws).

 

1.5                               “API” means an active pharmaceutical ingredient.

 

1.6                               “Applicable Law” means all applicable laws, rules and regulations (including any rules, regulations, guidelines or other requirements of any Regulatory Authority within the applicable jurisdiction) that may be in effect from time to time.

 

1.7                               “Applicable Rate” means (a) the average one-month London Inter-Bank Offering Rate (LIBOR) as reported on the day a payment was due in The Wall Street Journal (U.S. Internet version at www.wsj.com under the “Market Data” tab), plus [***] annually, or (b) if LIBOR ceases to exist, Janssen’s benchmark interest rate that has replaced LIBOR at the applicable time of the late payment.

 

1.8                               “Approved Labeling” means, with respect to a Product in a country: (a) the Regulatory Authority-approved full prescribing information for such Product in such country; and (b) the Regulatory Authority-approved labels and other written, printed or graphic materials on any container, wrapper or any package insert that is used with or for such Product in such country.

 

1.9                               “Assigned Product-Specific Know-How” has the meaning set forth in Section 9.2.2 (Morphic Assignment of Product-Specific Technology).

 

1.10                        “Assigned Product-Specific Patents” has the meaning set forth in Section 9.2.2 (Morphic Assignment of Product-Specific Technology).

 

1.11                        “Assigned Product-Specific Technology” has the meaning set forth in Section 9.2.2 (Morphic Assignment of Product-Specific Technology).

 

1.12                        “Assigned Technology” has the meaning set forth in Section 9.2.3 (Cooperation and Assistance).

 

1.13                        “Assigning Party” has the meaning set forth in Section 9.2.3 (Cooperation and Assistance).

 

1.14                        “Average Net Selling Price” means on a product-by-product basis, for a given product, Calendar Year and country, the aggregate Net Sales (expressed in the

 

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applicable local currency) of such product in such Calendar Year in such country, divided by the number of Units of such product for which revenue has been recognized by Janssen in accordance with GAAP in such Calendar Year in such country.

 

1.15                        “Bankrupt Party” has the meaning set forth in Section 14.5.2 (Rights in Bankruptcy).

 

1.16                        “Business Day” means a day other than Saturday, Sunday or any other bank or other public holiday in New York, New York or Boston, Massachusetts.

 

1.17                        “Calendar Quarter” means a financial quarter based on the J&J Universal Calendar for that year and is used by Janssen or its Affiliates for internal and external reporting purposes; provided, however, that the first Calendar Quarter for the first Calendar Year extends from the Effective Date to the end of the then-current Calendar Quarter and the last Calendar Quarter extends from the first day of such Calendar Quarter until the effective date of the termination or expiration of the Agreement.

 

1.18                        “Calendar Year” means a year based on the J&J Universal Calendar for that year (a copy of which for 2019 is attached hereto as Schedule 1.18). The last Calendar Year of the Term begins on the first day of the J&J Universal Calendar Year for the year during which termination or expiration of the Agreement will occur, and the last day of such Calendar Year will be the effective date of such termination or expiration.  The first Calendar Year will begin on the Effective Date and end on the last day of the first full Calendar Year thereafter.

 

1.19                        “Change of Control” means, with respect to a Party, that: (a) any Third Party acquires directly or indirectly the beneficial ownership of any voting security of such Party, or if the percentage ownership of such Third Party in the voting securities of such Party is increased through stock redemption, cancellation or other recapitalization, and immediately after such acquisition or increase such Third Party is, directly or indirectly, the beneficial owner of voting securities representing at least fifty percent (50%) of the total voting power of all of the then outstanding voting securities of such Party; (b) a merger, consolidation, recapitalization or reorganization of such Party is consummated that would result in shareholders or equity holders of such Party immediately prior to such transaction, owning less than fifty percent (50%) of the outstanding voting securities of the surviving entity (or its parent entity) immediately following such transaction; or (c) there is a sale or transfer to a Third Party of all or substantially all of such Party’s consolidated assets taken as a whole, through one or more related transactions.

 

1.20                        “Chemically Similar Compound” means, with respect to any compound, all other compounds that are contained within the scope of a composition-of-matter claim or use claim of a Patent that is Controlled by either Party, as the case may be, in the United States or a European Patent Organization (“EPO”) country (including

 

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such a claim of a Patent Cooperation Treaty application designating the United States or EPO) that also claims such compound or use of such compound.

 

1.21                        “Clinical Trial” means any clinical trial in humans that is designed to generate data in support or maintenance of an IND or MAA, including any Phase I Clinical Trial, Phase II Clinical Trial, Phase III Clinical Trial, or any post-approval clinical trial in humans.

 

1.22                        “CMCC License Agreement” means that certain Exclusive License Agreement dated as of October 7, 2015 by and between Children’s Medical Center Corporation and Morphic Rock Holding, LLC, as may be amended from time to time.

 

1.23                        “Combination Product” means any Product (a) containing (i) as a single formulation, two or more APIs as components, one of which is a Compound or (ii) in a single package or container and intended for coordinated use, two or more products as components including a Compound and one or more other products (where such other product may include a device or another API) for therapeutic administration or diagnostic use or (b) defined as a “combination product” by the FDA pursuant to 21 C.F.R. §3.2(e) or its foreign equivalent.

 

1.24                        “Commercialization” means any and all activities related to the marketing, promotion, distribution, pricing, reimbursement, offering for sale and sale of a pharmaceutical or biologic product and interacting with Regulatory Authorities following receipt of Regulatory Approval in the applicable country or region for such pharmaceutical or biologic product regarding the foregoing, but excluding activities relating to Manufacturing, Development or Medical Affairs. “Commercialize,” “Commercializing,” and “Commercialized” will be construed accordingly.

 

1.25                        “Commercially Reasonable Efforts” or “CRE” means [***].

 

1.26                        “Competing Activities” has the meaning set forth in Section 2.13 (Exclusivity).

 

1.27                        “Competitive Infringement” has the meaning set forth in Section 11.1 (Notification).

 

1.28                        “Competitive Product” has the meaning set forth in Section 2.13 (Exclusivity).

 

1.29                        “Compound” means (a) with respect to a Target, any small molecule compound that is discovered, screened or optimized by either Party in the performance of Research Activities for such Target under this Agreement, (b) a Chemically Similar Compound with respect to any such Compound described in the foregoing clause (a) and (c) any base form, metabolite, ester, salt form, racemate, stereoisomer, crystalline polymorph, hydrate or solvate of any Compound described in the foregoing clause (a) or clause (b).

 

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1.30                        “Compulsory Sublicensee” has the meaning set forth in Section 8.10 (Compulsory Licenses).

 

1.31                        “Confidential Information” has the meaning set forth in Section 12.1.1 (Confidential Information).

 

1.32                        “Control” means, with respect to any Know-How, Patent, Regulatory Submission, or other Intellectual Property, the possession (whether by ownership or license) by a Party or its Affiliates of the ability to grant to the other Party access, ownership, a license or a sublicense as required herein to such Know-How, Patent, Regulatory Submission, or other Intellectual Property without violating the terms of any agreement or other arrangement with any Third Party. Notwithstanding the foregoing, except as otherwise provided in Section 8.9 (Third Party Intellectual Property) and subject to Sections 7.3 (No Other Licenses or Rights), 8.8.3 (Third Party Payments by Janssen) and 8.8.4 (Maximum Payment Adjustments), with respect to any Know-How, Patent, Regulatory Submission or other Intellectual Property (a) that is first acquired or licensed to Morphic after the Effective Date, (b) that is not necessary for the performance of the Research Activities or the practice of the Morphic Platform and (c) that the use, practice or exploitation thereof by or on behalf of Janssen, its Affiliates or sublicensees would require Morphic to pay any additional amounts to the Third Party from whom Morphic acquired, licensed or otherwise obtained such Know-How, Patent, Regulatory Submission or other Intellectual Property (“Additional Amounts”), then, following Janssen’s exercise of the Option on a Research Program-by-Research Program basis, Morphic will only Control such Know-How, Patent, Regulatory Submission or other Intellectual Property for purposes of the license granted to Janssen for a Research Program under Section 7.2.1 (Exclusive License Grant) if Janssen agrees to pay (if necessary) and does in fact pay all Additional Amounts with respect to Janssen’s use, practice or exploitation of such Know-How, Patent, Regulatory Submission or other Intellectual Property.

 

1.33                        “Covenant Patents” has the meaning set forth in Section 13.1.3(g) (Morphic Covenants).

 

1.34                        “Covers” means, with reference to a particular subject matter at issue and a relevant Patent in a country, that the making, using, selling, offering for sale or importing of such subject matter would fall within the scope of one or more claims within such Patent in such country.

 

1.35                        “CPI” means the Consumer Price Index for the US City Average (all times).

 

1.36                        “CPR Rules” has the meaning set forth in Schedule 15.1 (Dispute Resolution).

 

1.37                        “Currency Hedge Rate” means the J&J currency hedge rate, which is the result of the effectively performed currency hedging at J&J for the then-current Calendar Year, as updated pursuant to Section 8.15 (Currency Exchange), and will be set

 

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up once a Calendar Year and will remain constant throughout such Calendar Year. The Currency Hedge Rate is calculated as a weighted average hedge rate of the outstanding external foreign currency forward hedge contracts of J&J with Third Party banks.

 

1.38                        “Deliverables” means any and all (a) deliverables to be generated or provided by Morphic in connection with the performance of Morphic Research Activities with respect to each Research Program, as specified in the applicable Research Plan and (b) summary descriptions of Intellectual Property that Covers any of the foregoing, which summaries need not include descriptions of Intellectual Property solely related to the Morphic Platform.

 

1.39                        “Development” means all internal and external research, development, and regulatory activities related to pharmaceutical or biologic products, including (a) research, non-clinical testing, toxicology, testing and studies, non-clinical and preclinical activities, and clinical trials and (b) preparation, submission, review, and development of data or information for the purpose of submission to a Regulatory Authority to obtain authorization to conduct Clinical Trials and to obtain, support or maintain Regulatory Approval of a pharmaceutical or biologic product, but excluding activities that are directed to Manufacturing, Medical Affairs, or Commercialization. Development will include development and regulatory activities for additional forms, formulations or indications for a pharmaceutical or biologic product after receipt of Regulatory Approval of such product (including label expansion), including Clinical Trials initiated following receipt of Regulatory Approval or any Clinical Trial to be conducted after receipt of Regulatory Approval that was mandated by the applicable Regulatory Authority as a condition of such Regulatory Approval with respect to an approved formulation or indication (such as post-marketing studies and observational studies, if required by any Regulatory Authority in any region in the Territory to support or maintain Regulatory Approval for a pharmaceutical or biologic product in such region). “Develop,” “Developing,” and “Developed” will be construed accordingly.

 

1.40                        “Disclosing Party” has the meaning set forth in Section 12.1.1 (Confidential Information).

 

1.41                        “Effective Date” has the meaning set forth in the preamble.

 

1.42                        “EFT” has the meaning set forth in Section 8.11.2 (Other Payments).

 

1.43                        “EMA” means the European Medicines Agency or any successor agency thereto.

 

1.44                        “EPO” has the meaning set forth in Section 1.20 (Chemically Similar Compound).

 

1.45                        “Existing In-License” has the meaning set forth in Section 13.1.2(n) (Morphic Representations and Warranties as of the Effective Date).

 

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1.46                        “Exploit” means to make, have made, use, offer to sell, sell, Develop, Manufacture, perform Medical Affairs activities, Commercialize or otherwise exploit. “Exploitation” will be construed accordingly.

 

1.47                        “FD&C Act” means the Federal Food, Drug and Cosmetic Act, as the same may be amended or supplemented from time to time.

 

1.48                        “FDA” means the United States Food and Drug Administration and any successor agency thereto.

 

1.49                        “Field” means the prevention, treatment and diagnosis of human and animal disease.

 

1.50                        “First Commercial Sale” means, with respect to a Product on a country-by-country basis, the first sale by Janssen or its Affiliates Sublicensees or, with respect to a Generic Product, the first sale by a Third Party, in each case, in an arms-length transaction to a Third Party (other than a Sublicensee) for use or consumption by the general public of that Product or Generic Product in a country after all required Regulatory Approvals for commercial sale of that Product or Generic Product have been obtained in such country. A sale of a Product for: (a) clinical study purposes; (b) compassionate use, named patient sales or patient assistance programs; (c) similar uses in a limited number to support Regulatory Approvals, such as test marketing programs or other similar programs or studies (provided that the Product is not otherwise generally available for purchase in such country); or (d) early access programs, in each case ((a) — (d)), will not constitute a First Commercial Sale of such Product. In addition, sales of a Product by and between Janssen and its Affiliates or Sublicensees will not constitute a First Commercial Sale.

 

1.51                        “FTE” means the equivalent of the work of one (1) full-time employee of Morphic or its Affiliates for one (1) year (consisting of [***] hours per Calendar Year) in performing Development activities hereunder.  Any employee of Morphic or any Affiliate who devotes fewer than [***] hours per Calendar Year on the applicable activities shall be treated as an FTE on a pro-rata basis, calculated by dividing the actual number of hours worked by such employee on such activities by [***].  Any employee of Morphic or any Affiliate who devotes more than [***] hours per Calendar Year on the applicable activities shall be treated as one (1) FTE.  Overtime and work on weekends, holidays and the like, in each case, will not be counted with any multiplier (e.g., time-and-a-half or double time) toward the number of hours that are used to calculate the FTE contribution. The portion of an FTE billable by Morphic for one individual during a given accounting period will be determined by dividing the number of hours worked directly by such individual on the work to be conducted under a Research Plan during such accounting period and the number of FTE hours applicable for such accounting period based on [***] working hours per Calendar Year.

 

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1.52                        “FTE Costs” means, for any period, the FTE Rate multiplied by the number of FTEs in such period.  FTEs will be pro-rated on a daily basis if necessary.

 

1.53                        “FTE Rate” means a rate of [***] per FTE per Calendar Year (pro-rated for the period beginning on the Effective Date and ending on the last day of the first Calendar Year of the Term). Overtime, and work on weekends, holidays, and the like will not be counted with any multiplier (e.g., time-and-a-half or double time) toward the number of hours that are used to calculate the FTE contribution. The FTE Rate is “fully burdened” and will include employee salaries and all overhead allocated to such employee’s work hereunder. Beginning on January 1, 2020 and on January 1 of each subsequent Calendar Year during the Term, the FTE Rate is subject to annual adjustment by the percentage increase or decrease in the CPI comparing the levels of the CPI as of December 31 of the most recently completed Calendar Year.

 

1.54                        “GAAP” U.S. generally accepted accounting principles, consistently applied.

 

1.55                        “Generic Product” means with respect to a given Product in a given country in the Territory, a product that (a) contains the same active pharmaceutical ingredient as such Product and is approved in reliance, in whole or in part, on a prior Regulatory Approval of such Product, (b) is sold or marketed for sale in such country by a Third Party that has not obtained the rights to market or sell such product as a Sublicensee, Subcontractor or Third Party Distributor of Janssen or any of its Affiliates, Sublicensees or Subcontractors with respect to such Product and (c) is considered by the applicable Regulatory Authority in such country to be therapeutically equivalent to, or interchangeable with, such Product, such that, in the U.S., the product may be substituted for the Product at the point of dispensing without any intervention by the prescribing physician in such country.

 

1.56                        “GLP” means all applicable good laboratory practice standards, including, as applicable, as set forth in the then-current good laboratory practice standards promulgated or endorsed by the FDA and the equivalent Applicable Law in the region in the Territory, each as may be amended and applicable from time to time.

 

1.57                        “Governmental Authority” means any court, tribunal, arbitrator, agency, commission, department, ministry, official, authority or other instrumentality of any national, state, county, city or other political subdivision.

 

1.58                        “Identified Research Activity Patents” has the meaning set forth in Section 8.9.1 (Morphic Research Activities).

 

1.59                        “IND” means an Investigational New Drug application required pursuant to 21 C.F.R. Part 312 or any comparable filings outside of the United States required to commence human clinical trials in such country or region, and all supplements or amendments that may be filed with respect to the foregoing.

 

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1.60                        “IND-Enabling Study” means a toxicology study (a) that is conducted using applicable GLP, (b) that is conducted in one or more species and that satisfies both applicable regulatory requirements and Janssen internal requirements and (c) the data and results from which are intended to meet the standard necessary for submission thereof as part of an IND with the applicable Regulatory Authority.

 

1.61                        “IND-Enabling Study Completion Date” has the meaning set forth in Section 3.3 (IND-Enabling Study Report).

 

1.62                        “IND-Enabling Study Report” means, with respect to one or more IND-Enabling Studies, an integrated report containing the pharmacology, toxicology, bioanalytical and pharmacokinetic data generated from such IND-Enabling Studies.

 

1.63                        “In-Licenses” has the meaning set forth in Section 13.1.3(d) (Morphic Covenants).

 

1.64                        “Indemnitee” has the meaning set forth in Section 13.3.3 (Procedure).

 

1.65                        “Indemnitor” has the meaning set forth in Section 13.3.3 (Procedure).

 

1.66                        “Initiation” means (a) with respect to a Phase I Clinical Trial, the fifth dosing of a human subject in such Phase I Clinical Trial; provided that if such Phase I Clinical Trial is halted for any reason other than for patient health and safety (as determined by the applicable data safety monitoring board or other applicable oversight committee, which such board or committee may be a Janssen-Operated Monitoring Board, in accordance with Applicable Law and such board or committee has notified the FDA that Janssen has halted such Phase I Clinical Trial), then “Initiation” shall mean the first dosing of a human subject in such Phase I Clinical Trial and (b) with respect to a Phase II Clinical Trial or Phase III Clinical Trial, the first dosing of a human subject in such Clinical Trial (as applicable).

 

1.67                        “Intellectual Property” means all Patents, rights to Inventions, copyrights, design rights, trademarks, trade secrets, Know-How and all other intellectual property rights (whether registered or unregistered) and all applications and rights to apply for any of the foregoing, anywhere in the world.

 

1.68                        “Invention” means any process, method, utility, formulation, composition of matter, article of manufacture, material, creation, discovery or finding, or any improvement thereof, that is made, conceived, discovered or otherwise generated, whether patentable or not.

 

1.69                        “Janssen” has the meaning set forth in the preamble.

 

1.70                        “Janssen Compound” means any Compound that (a) is not a Morphic Compound and (b) has been provided to Morphic under this Agreement pursuant to Section 2.8 (Janssen Compounds).

 

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1.71                        “Janssen Know-How” means any Know-How, other than Joint Know-How, Controlled by Janssen or any of its Affiliates that is (a) necessary or useful for Morphic to conduct any Morphic Research Activities under any Research Plan and (b) actually provided or disclosed by Janssen to Morphic for use in the performance of such Morphic Research Activities.

 

1.72                        “Janssen-Operated Monitoring Board” means, with respect to a Clinical Trial, an applicable data safety monitoring board or oversight committee that is operated by or includes personnel of Janssen or its Affiliates.

 

1.73                        “Janssen Patents” means any Patents Controlled by Janssen or any of its Affiliates that Cover any Janssen Know-How.

 

1.74                        “Janssen Product” means a Product that contains a Janssen Compound as an API.

 

1.75                        “Janssen Product Invention” has the meaning set forth in Section 9.1.2(a) (Other Inventions).

 

1.76                        “Janssen Prosecuted Patents” has the meaning set forth in Section 10.5 (Janssen Prosecution and Maintenance of Patents).

 

1.77                        “Janssen Research Activities” has the meaning set forth in Section 2.1.2 (Janssen Research Activities).

 

1.78                        “Janssen Technology” means the Janssen Know-How, the Janssen Patents and Janssen’s interest in the Joint Technology.

 

1.79                        “Janssen Terminated Product Agreement” has the meaning set forth in Section 3.7.2 (Effects of ROFN Exercise).

 

1.80                        “Joint Finance Committee” or “JFC” has the meaning set forth in Section 4.5 (Joint Finance Committee).

 

1.81                        “Joint Invention” has the meaning set forth in Section 9.1.2(a) (Other Inventions).

 

1.82                        “Joint Know-How” has the meaning set forth in Section 9.1.2(a) (Other Inventions).

 

1.83                        “Joint Patent” has the meaning set forth in Section 9.1.2(a) (Other Inventions).

 

1.84                        “Joint Research Committee” or “JRC” has the meaning set forth in Section 4.1 (Joint Research Committee).

 

1.85                        “Joint Technology” has the meaning set forth in Section 9.1.2 (Other Inventions).

 

1.86                        “JRC Chair” has the meaning set forth in Section 4.2 (Committee Chair).

 

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1.87                        “JRD” has the meaning set forth in Section 8.16.3 (Paying Agent).

 

1.88                        “Jurisdictions” has the meaning set forth in Section 10.1 (Morphic Prosecution and Maintenance of Patents).

 

1.89                        “J&J” means Johnson & Johnson.

 

1.90                        “Know-How” means all commercial, technical, scientific and other know-how and information, trade secrets, knowledge, technology, methods, processes, practices, formulae, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, specifications, data and results not generally known to the public (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, pre-clinical, clinical, safety, manufacturing and quality control data and know-how, including study designs and protocols), in all cases, whether or not patentable, in written, electronic or any other form now known or hereafter developed.

 

1.91                        “Late Lead Optimization Activities” means, with respect to a Research Program, the Research Activities designated in the applicable Research Plan as “Late Lead Optimization Activities” for such Research Program, which activities are intended to demonstrate that such Compounds are suitable for further optimization as potential lead candidates for such Research Program following the completion of Lead Optimization Activities for such Research Program. The activities set forth on Schedule 1.91 will in all cases be “Late Lead Optimization Activities” for purposes of this Agreement (including in each Research Plan).

 

1.92                        “Late Lead Optimization Fee” has the meaning set forth in Section 8.3 (Late Lead Optimization Fee).

 

1.93                        “Lead Candidate Guidelines” means, with respect to a given Research Program, the guidelines for Compounds that are the subject of such Research Program designated in the Research Plan as “Lead Candidate Guidelines”, which success criteria are intended to serve as suggested guidelines for determining whether such Compounds are suitable for further optimization as a potential development candidates for such Research Program.

 

1.94                        “Lead Optimization Activities” means, with respect to a Research Program, the Research Activities designated in the applicable Research Plan as “Lead Optimization Activities” for such Research Program, which such activities are intended to demonstrate that such Compounds are suitable for initial optimization as potential lead candidates for such Research Program.

 

1.95                        “Liabilities” has the meaning set forth in Section 13.3.1 (Indemnification by Morphic).

 

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1.96                        “Licensed Compound” means, on a Research Program-by-Research Program basis with respect to a Target via the applicable Mechanism of Action a Compound that is demonstrated by either Party or its respective Affiliates to have Threshold Activity and Selectivity against such Target via such Mechanism of Action.

 

1.97                        “MAA” means any new drug application or other marketing authorization application, in each case, filed with the applicable Regulatory Authority in a country or other regulatory jurisdiction (and all supplements and amendments thereto), which application is required to commercially market or sell a pharmaceutical or biologic product in such country or jurisdiction, including (a) all New Drug Applications and Biologics License Applications submitted to the FDA in the United States in accordance with the FD&C Act with respect to a biologic or pharmaceutical product, (b) all MAAs submitted to (i) the EMA under the centralized EMA filing procedure in the EU or (ii) a Regulatory Authority in any EU country if the centralized EMA filing procedure is not used to gain Regulatory Approval in such country, (c) Japanese New Drug Application submitted to the Ministry of Health, Labor and Welfare in Japan or (d) any analogous application or submission with any Regulatory Authority in any other country or regulatory jurisdiction.

 

1.98                        “Major European Country” means any of [***].

 

1.99                        “Major Market Country” means any of the [***] or a Major European Country.

 

1.100                 “Manufacture” means activities that are directed to manufacturing, processing, packaging, labeling, filling, finishing, assembly, quality assurance, quality control, testing, and release, shipping or storage of any pharmaceutical or biologic product (or any components or process steps involving any product or any companion diagnostic), placebo or comparator agent, as the case may be, including process development, qualification, validation, scale-up, pre-clinical, clinical and commercial manufacture and analytic development, product characterization and stability testing, but excluding activities that are directed to Development, Commercialization or Medical Affairs. “Manufacturing” and “Manufactured” will be construed accordingly.

 

1.101                 “Mechanism of Action” means, with respect to a target, modulation of such target by a compound via a given mechanism of action (whether inhibition or activation).

 

1.102                 “Medical Affairs” means activities conducted by a Party’s medical affairs departments (or, if a Party does not have a medical affairs department, the equivalent function thereof), including communications with key opinion leaders, medical education, symposia, advisory boards (to the extent related to medical affairs or clinical guidance), activities performed in connection with patient registries and other medical programs and communications, including educational grants, research grants (including conducting investigator-initiated studies) and charitable donations to the extent related to medical affairs and not to other

 

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activities that do not involve the promotion, marketing, sale or other Commercialization of products and are not conducted by a Party’s medical affairs (or equivalent) departments.

 

1.103                 “Morphic” has the meaning set forth in the preamble.

 

1.104                 “Morphic Compound” means a Compound that (a) is analoged around or optimized based on a hit compound identified through screening Morphic’s proprietary compound libraries under a Research Program (or Terminated Program), (b) modulates a Target through the applicable Mechanism of Action set forth in the Research Plan for such Research Program and (c) is delivered by Morphic to Janssen for the purpose of conducting the applicable Research Program.

 

1.105                 “Morphic Internal Program” means, with respect to a target and a given Mechanism of Action that Janssen proposes to select as a potential Replacement Target MoA in accordance with the terms and conditions of this Agreement, a bona fide Development or Commercialization program with respect to which (a) Morphic or its Affiliates have assigned FTEs to perform Development or Commercialization activities under a detailed written plan and allocated resources to the performance of such activities in accordance with an associated budget (and Morphic is at such time actively performing such Development or Commercialization activities with respect to such potential Replacement Target MoA) and (b) Morphic or its Affiliates have identified a compound that modulates the applicable target via the applicable Mechanism of Action, in each case, as in such potential Replacement Target MoA and shown that such candidate has activity in one or more in-vitro functional cell-based assays against such a target via a Mechanism of Action.

 

1.106                 “Morphic Know-How” means any and all Know-How, other than Joint Know-How, that (a) Morphic or any of its Affiliates owns or Controls and (b) is necessary or useful to (i) conduct any Research Activities or (ii) Exploit any Compound or Product, including all Morphic Platform Inventions, but expressly excluding all Know-How licensed to Morphic under the CMCC License Agreement.

 

1.107                 “Morphic Lead Optimization Activities” means, with respect to a Research Program, the Lead Optimization Activities for such Research Program that are assigned to Morphic in the applicable Research Plan for such Research Program.

 

1.108                 “Morphic Patent” means any and all Patents, other than Joint Patents, that (a) Morphic or any of its Affiliates owns or Controls and (b) are necessary or useful to (i) conduct any Research Activities or (ii) Exploit any Compound or Product, including all Morphic Platform Patents and Morphic Platform and Product Patents, but expressly excluding all Patents licensed to Morphic under the CMCC License Agreement.  The Morphic Patents existing as of the Effective Date are listed in Schedule 1.108 (Morphic Patents as of the Effective Date) and include all Morphic Platform Patents, Morphic Platform and Product Patents and Product-Specific

 

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Patents (until such time as such Product-Specific Patents become Assigned Product-Specific Patents).

 

1.109                 “Morphic Platform” means Morphic’s technology directed to (a) stable integrin conformations generally (and not integrin conformations that inhibit or activate any Target), (b) methods of producing or generating the same or (c) methods of inhibiting or activating integrins generally (and not related to inhibiting or activating any Target) through binding of specific integrin conformations with molecular fragments, in each case ((a) — (c)), in in vitro and in silico modeling. The Morphic Platform includes all Morphic Platform Inventions.

 

1.110                 “Morphic Platform Invention” has the meaning set forth in Section 9.1.1 (Improvements to Morphic Technology).

 

1.111                 “Morphic Platform Patents” means any Morphic Patents or Joint Patents that Cover the Morphic Platform and do not Cover any Compound or Product, excluding Morphic Platform and Product Patents. The Morphic Platform Patents existing as of the Effective Date are listed under a separate heading in Schedule 1.108 (Morphic Patents as of the Effective Date).

 

1.112                 “Morphic Platform and Product Patents” means any Patents that Cover both (a) the Morphic Platform and (b) (i) any Licensed Compound or Product incorporating any such Licensed Compound, (ii) any composition (e.g., a pharmaceutical composition) containing any such Licensed Compound or Product described in clause (i) above, (iii) any use or a method of using any such Licensed Compound, Product or composition described in clauses (i) or (ii) above or (iv) any method for Manufacturing any such Licensed Compound, Product or composition described in clauses (i) and (ii) above.

 

1.113                 “Morphic Prosecuted Patents” has the meaning set forth in Section 10.1 (Morphic Prosecution and Maintenance of Patents).

 

1.114                 “Morphic Research Activities” has the meaning set forth in Section 2.1.1 (Morphic Research Activities).

 

1.115                 “Morphic Research Activity Third Party Payments” has the meaning set forth in Section 8.9.2 (Morphic Research Activity Third Party Payments).

 

1.116                 “Morphic Technology” means the Morphic Patents, the Morphic Know-How and Morphic’s interest in the Joint Technology.

 

1.117                 “Morphic’s Knowledge” means the actual knowledge, after reasonable investigation, of the following: Morphic’s [***] and [***].

 

1.118                 “Net Sales” means [***].

 

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Net Sales will include [***] only if the applicable Product is sold at a price greater than the applicable cost of goods (as determined in accordance with GAAP). Net Sales will not include [***].  In addition, Net Sales will not include [***].

 

All aforementioned deductions will only be allowable to the extent they are commercially reasonable by Janssen and will be determined, on a country-by-country basis, as incurred in the ordinary course of business in type and amount verifiable based on Janssen’s and its Affiliates’ reporting system.  All such discounts, allowances, credits, rebates and other deductions will be fairly and equitably allocated between the Product and other products of Janssen and its Affiliates and Sublicensees such that the Product does not bear a disproportionate portion of such deductions.

 

If a Product is sold as part of a Combination Product in a given country in the Territory, then Net Sales for such Combination Product in such country will be determined as follows:

 

A.                                    In the event that any Product is sold in the form of Combination Products containing one or more other products, if the Licensed Compound is sold separately and all other products in such Combination Product are sold separately, then Net Sales for the determination of royalties of Combination Products will be calculated by [***].

 

B.                                    If the Licensed Compound is sold separately, but not all other products in a Combination Product are sold separately, then Net Sales for the determination of royalties of Combination Products will be calculated by [***].

 

C.                                    If the Licensed Compound is not sold separately, but all other products in a Combination Product are sold separately, then Net Sales for such Combination Product will be calculated by [***].

 

D.                                    If Net Sales of a Combination Product cannot be determined using the methods above (A — C), then the Parties will negotiate in good faith, at the latest six (6) months before the expected launch of such Combination Product, an allocation of Net Sales of such Combination Product to the respective API components or product components thereof, as the case may be, based on [***], and if the Parties are unable to agree on such a reasonable allocation no later than [***] prior to the estimated launch date of such Combination Product, then Net Sales of such Combination Product will be calculated based on [***].

 

1.119                 “New License Agreement” has the meaning set forth in Section 7.2.5 (Sublicense Continuation upon Termination).

 

1.120                 “Occupied MoA” has the meaning set forth in Section 2.6.3 (Occupied MoAs).

 

1.121                 “Option” has the meaning set forth in Section 3.1 (Option Grant).

 

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1.122                 “Option Exercise Fee” has the meaning set forth in Section 8.4 (Option Exercise Fee).

 

1.123                 “Option Period” means, on a Research Program-by-Research Program basis and subject to Section 3.6 (Termination of Option), the period of time commencing on the Effective Date and continuing until the end of the Research Term with respect to a Research Program, as determined in accordance with Section 2.4.2 (Research Term), unless, prior to the end of such Research Term, IND-Enabling Studies for such Research Program are commenced, in which case, the Option Period with respect to such Research Program will continue until the date that is [***] following the IND-Enabling Study Completion Date for such Research Program, in each case, subject to any extension of such period provided under Section 3.5 (Extension of Option Period), not to exceed [***] following the end of the Research Term with respect to such Research Program.

 

1.124                 “Orange Book” has the meaning set forth in Section 11.3 (Patent Listing).

 

1.125                 “Out-of-Pocket Costs” means, with respect to the Research Activities to be performed under a Research Plan and the corresponding Research Budget hereunder, direct expenses paid by either Party or its Affiliates to Third Parties and specifically identifiable in the applicable Research Budget and incurred to conduct such activities in the applicable Research Budget, including payments to Subcontractors, in each case, pursuant to any Research Plan.

 

1.126                 “Owning Party” has the meaning set forth in Section 9.2.3 (Cooperation and Assistance).

 

1.127                 “Paragraph IV Certification” has the meaning set forth in Section 11.4 (Enforcement of Listed Patents).

 

1.128                 “Paragraph IV Proceeding” has the meaning set forth in Section 11.4.2 (Enforcement of Listed Patents).

 

1.129                 “Partnering Notice” has the meaning set forth in Section 3.7.4 (Passed Terminated Janssen Product Partnering).

 

1.130                 “Party” has the meaning set forth in the preamble.

 

1.131                 “Passed Terminated Janssen Product” has the meaning set forth in Section 3.7.1 (ROFN Exercise Notice).

 

1.132                 “Patent” means any and all (a) patents, (b) pending patent applications, including, all provisional applications, substitutions, continuations, continuations-in-part, divisions and renewals and all patents granted thereon, (c) all patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including, supplementary protection certificates or the equivalent thereof, (d) inventor’s certificates, (e) any other form

 

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of government-issued right substantially similar to any of the foregoing and (f) all U.S. and foreign counterparts of any of the foregoing.

 

1.133                 “Per Product Annual Net Sales” has the meaning set forth in Section 8.7 (Royalties).

 

1.134                 “Person” means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture, Governmental Authority, association or other entity.

 

1.135                 “Phase I Clinical Trial” means a clinical trial generally consistent with 21 C.F.R.§ 312.21(a) (or the corresponding foreign regulations) that is required for Regulatory Approval of a product, that the FDA or other applicable Regulatory Authority permits to be conducted under an open IND and that is prospectively designed to gain evidence of the safety, tolerability and pharmacological activity or pharmacokinetics.

 

1.136                 “Phase II Clinical Trial” means a clinical trial generally consistent with 21 CFR §312.21(b) (or the corresponding foreign regulations) that is required for receipt of Regulatory Approval of a product, that the FDA or other applicable Regulatory Authority permits to be conducted under an open IND and that is prospectively designed to generate sufficient data (if successful) to commence a Phase III Clinical Trial for such product and that is conducted to evaluate the effectiveness and the appropriate dose range of a product for a particular indication or indications in patients with the disease or condition under study and to determine the common short-term side effects and risks.

 

1.137                 “Phase III Clinical Trial” means a clinical trial generally consistent with 21 CFR §312.21(c) (or the corresponding foreign regulations) that is required for receipt of Regulatory Approval of a product, that the FDA or other applicable Regulatory Authority permits to be conducted under an open IND and that is performed to gain evidence with statistical significance of the efficacy of such product in a target population and to gather additional information of safety for such product that is needed to evaluate the overall benefit-risk relationship of such product, to form the basis for approval of an MAA by a Regulatory Authority and to provide an adequate basis for physician labeling, in each case, without the need for additional Clinical Trials to generate additional data and information. Notwithstanding anything to the contrary set forth in this Agreement, treatment of patients as part of an expanded access program, compassionate sales or use program (including named patient program or single patient program), or an indigent program, in each case, will not be included in determining whether or not a clinical trial is a Phase III Clinical Trial or whether a patient has been dosed thereunder unless (and only if) such treatment is conducted as part of such Phase III Clinical Trial and the related clinical trial protocol.

 

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1.138                 “POC Clinical Trial” means a clinical trial generally consistent with 21 CFR § 312.21(b) (or the corresponding foreign regulations that is required for receipt of Regulatory Approval of a product and the FDA or other applicable Regulatory Authority permits to be conducted under an open IND), for which (a) the principal purpose of which is to make a preliminary determination about such product’s efficacy and that is intended to explore one or more doses, and is prospectively designed to generate sufficient data (if successful) of clinical activity and safety in such patient population; and (b) such clinical trial shall be a randomized and placebo controlled clinical trial unless the FDA or other applicable Regulatory Authority indicates (based upon meeting notes, special protocol assessment or other written acknowledgement) that the FDA or other applicable Regulatory Authority will accept a single arm clinical trial for Regulatory Approval.

 

1.139                 “Pre-Existing Restriction” has the meaning set forth in Section 2.6.3 (Occupied MoAs).

 

1.140                 “Product” means any formulation, presentation or dosage form of a pharmaceutical product containing a Licensed Compound as an active pharmaceutical ingredient, including Combination Products.  All Products containing the same Licensed Compound(s), or its or their bioequivalents, regardless of dosage form or mode of administration are considered a single Product for the purpose of milestone calculations hereunder.

 

1.141                 “Product-Specific Patents” means any Morphic Patents or Joint Patents that Cover (a) any Licensed Compound or Product incorporating any such Licensed Compound, (b) any composition (e.g., a pharmaceutical composition) containing any such Licensed Compound or Product, (c) any use or a method of using any such Licensed Compound, Product, or composition or (d) any method for Manufacturing any such Licensed Compound, Product or composition, but, in each case ((a) through (d)), do not Cover the Morphic Platform; and for clarity, all Morphic Platform Patents and Morphic Platform and Product Patents are excluded from Product-Specific Patents. The Product-Specific Patents existing as of the Effective Date are listed under a separate heading in Schedule 1.108 (Morphic Patents as of the Effective Date).

 

1.142                 “Prosecution and Maintenance” means, with regards to a particular Patent, the preparation, filing, prosecution and maintenance of such Patent, as well as re-examinations, reissues and the like with respect to such Patent, together with the conduct of interferences, the defense of oppositions and other similar proceedings with respect to that Patent.  When used as a verb, “Prosecute and Maintain” means to engage in Prosecution and Maintenance.

 

1.143                 “Prosecution Term” has the meaning set forth in Section 10.1 (Morphic Prosecution and Maintenance of Patents).

 

1.144                 “Protocol” has the meaning set forth in Schedule 15.1 (Dispute Resolution).

 

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1.145                 “Receiving Party” has the meaning set forth in Section 12.1.1 (Confidential Information).

 

1.146                 “Region” means each of the following: [***] and [***].

 

1.147                 “Regulatory Approval” means, with respect to a particular country or other regulatory jurisdiction, any approval of an MAA or other approval, product or establishment license, registration, or authorization of any Regulatory Authority necessary for the commercial marketing or sale of a pharmaceutical or biologic product in such country or other regulatory jurisdiction, including, in each case, Reimbursement Approval in those countries and jurisdictions where required under Applicable Law.

 

1.148                 “Regulatory Authority” means any applicable Governmental Authority with jurisdiction or authority over the Development, Manufacture, Commercialization, or other Exploitation (including Regulatory Approval or Reimbursement Approval) of pharmaceutical or biologic products in a particular country or other regulatory jurisdiction, and any corresponding national or regional regulatory authorities, including [***].

 

1.149                 “Regulatory Submissions” means any filing, application, or submission with any Regulatory Authority in support of the Development, Manufacture, Commercialization or other Exploitation of a pharmaceutical or biologic product (including to obtain, support or maintain Regulatory Approval from that Regulatory Authority), and all correspondence or communication with or from the relevant Regulatory Authority, as well as minutes of any material meetings, telephone conferences or discussions with the relevant Regulatory Authority.  Regulatory Submissions include all INDs, MAAs and other applications for Regulatory Approval.

 

1.150                 “Reimbursement Approval” means an approval, agreement, determination or other decision by the applicable Governmental Authority that establishes prices charged to end-users for pharmaceutical or biologic products at which a particular pharmaceutical or biologic product will be reimbursed by the Regulatory Authorities or other applicable Governmental Authorities in the Territory.

 

1.151                 “Replacement Decision” has the meaning set forth in Section 2.6.1 (Replacement Decision).

 

1.152                 “Replacement Target MoA” has the meaning set forth in Section 2.6.1 (Replacement Decision).

 

1.153                 “Research Activities” has the meaning set forth in Section 2.1.2 (Janssen Research Activities).

 

1.154                 “Research Budget” has the meaning set forth in Section 2.2.2 (Research Budgets).

 

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1.155                 “Research Plan” has the meaning set forth in Section 2.2.1 (Research Plans).

 

1.156                 “Research Program” means, on a Target-by-Target and Mechanism of Action-by-Mechanism of Action basis, the program of Research Activities undertaken for a given Target and Mechanism of Action (including any Replacement Target MoA) as set forth in Section 2.1 (Research Programs) and under the applicable Research Plan.

 

1.157                 “Research Program Fee” has the meaning set forth in Section 8.2 (Research Program Fee).

 

1.158                 “Research Term” has the meaning set forth in Section 2.4.2 (Research Term).

 

1.159                 “Research Term Outside Date” has the meaning set forth in Section 2.4.2 (Research Term).

 

1.160                 “Residual Information” has the meaning set forth in Section 7.2.3 (Residual Memory and Firewall).

 

1.161                 “Results” means any and all (a) raw data, processed data, notebook records, documents, reports, information, results, summaries, presentations, analyses, computer models, written, printed, graphic, video and audio recorded information contained in any computer database or computer readable form and other results supplied to or generated by or on behalf of a Party or its Affiliates or Sublicensees in the performance of activities under this Agreement or with respect to any Terminated Janssen Product after the Term and (b) Intellectual Property that claims or otherwise covers any of the foregoing.

 

1.162                 “Retained Janssen Patents” means, with respect to a Terminated Program, any Assigned Product-Specific Patents or Janssen Patents, in each case, existing as of the applicable effective date of termination of this Agreement with respect to such Terminated Program that (a) Cover both (i) one or more Licensed Compounds or Products that are the subject of such Terminated Program and (ii) one or more Licensed Compounds or Products that are the subject of one or more Research Programs that are not Terminated Programs and (b) are not assigned by Janssen to Morphic pursuant to Section 14.6.2(a).

 

1.163                 “ROFN” has the meaning set forth in Section 3.7.1 (ROFN Exercise Notice).

 

1.164                 “ROFN Availability Notice” has the meaning set forth in Section 3.7.1 (ROFN Exercise Notice).

 

1.165                 “ROFN Exercise Notice” has the meaning set forth in Section 3.7.1 (ROFN Exercise Notice).

 

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1.166                 “Royalty-Bearing Patents” means, with respect to a given Product in a country, the Valid Claims within the Morphic Patents or Product-Specific Patents Covering (a) [***]or (b) [***].

 

1.167                 “Royalty Sublicensee” means (a) [***] and (b) [***].

 

1.168                 “Royalty Term” means, on a Product-by-Product and country-by-county basis, the period commencing on the First Commercial Sale of a Product in a country and expiring upon the later of (a) the expiration of the last Valid Claim within the Royalty-Bearing Patents Covering such Product in such country and (b) ten (10) years after the First Commercial Sale of such Product in such country.

 

1.169                 “Subcontractor” means a Third Party contractor engaged by a Party to perform certain obligations or exercise certain rights of such Party under this Agreement on a fee-for-service basis (including contract research organizations, contract manufacturing organizations and Third Party Distributors), excluding all Sublicensees.

 

1.170                 “Sublicensee” means any Third Party to whom a Party or any of its Affiliates grants a sublicense of the rights granted to such Party hereunder to perform Research Activities or Exploit Products, including all Royalty Sublicensees and Compulsory Sublicensees, excluding all Subcontractors.

 

1.171                 “Synthesized Compounds” has the meaning set forth in Section 2.13.2 (Exclusivity).

 

1.172                 “Target” means [***].

 

1.173                 “Tax” or “Taxes” means any present or future taxes, levies, imposts, duties, charges, assessments or fees of any nature (including any interest thereon).

 

1.174                 “Term” has the meaning set forth in Section 14.1 (Term).

 

1.175                 “Terminated Janssen Product” means, with respect to a Terminated Program, any Janssen Compound or Janssen Product that is the subject of such Terminated Program.

 

1.176                 “Terminated Product Package” means, with respect to a Passed Terminated Janssen Product, the Results and other information or data generated by or on behalf of Morphic with respect to any Development, Manufacture, Commercialization or other Exploitation of such Passed Terminated Janssen Product (including from all pre-clinical studies and Clinical Trials), as applicable to the stage of Development or Commercialization of such Terminated Janssen Product, along with any Regulatory Submissions provided by or on behalf of Morphic or its Affiliates to any Regulatory Authority for such Terminated Janssen Product.

 

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1.177                 “Terminated Program” means: (a) any Research Program with respect to which Janssen did not exercise an Option in accordance with Section 3.2 (Option Exercise) prior to the expiration of the Option Period for such Research Program, (b) any Research Program that is the subject of termination of this Agreement or for which Janssen exercises its remedy in lieu of termination as set forth in Section 14.7 (Alternative Remedy in Lieu of Termination) or (c) any Research Program for which the Target that is the subject of such Research Program is replaced pursuant to a Replacement Decision.

 

1.178                 “Territory” means worldwide.

 

1.179                 “Third Party” means any Person other than Morphic, Janssen and their respective Affiliates.

 

1.180                 “Third Party Claim” has the meaning set forth in Section 13.3.1 (Indemnification by Morphic).

 

1.181                 “Third Party Distributor” means, with respect to a country, [***].

 

1.182                 “Threshold Activity and Selectivity” means, with respect to a Compound directed to a Target via a given Mechanism of Action, that such Compound has at least the activity and selectivity profile set forth on Schedule 1.182 (Threshold Activity and Selectivity) for the modulation of such Target via such Mechanism of Action.

 

1.183                 “Title 11” has the meaning set forth in Section 14.5.2 (Rights in Bankruptcy).

 

1.184                 “Trademark” means any word, name, symbol, color, designation or device or any combination thereof, whether registered or unregistered, including any trademark, trade dress, service mark, service name, brand mark, trade name, brand name, logo or business symbol.

 

1.185                 “United States” or “U.S.” means the United States of America, including its territories and possessions, the District of Columbia and Puerto Rico.

 

1.186                 “Units” means, with respect to a Product, the equivalent of one unit of formulation of such Product; for example, one unit is one pill.

 

1.187                 “Unresolved Issue” has the meaning set forth in Section 15.1 (Discussion by Executive Officers; Arbitration).

 

1.188                 “Upfront Payment” has the meaning set forth in Section 8.1 (Upfront Payment; Research Program Fee).

 

1.189                 “Valid Claim” means a claim of (a) any issued and unexpired patent whose validity, enforceability, or patentability has not been affected by any of the following: (i) irretrievable lapse, abandonment, revocation, dedication to the public,

 

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or disclaimer; or (ii) a holding, finding, or decision of invalidity, unenforceability, or non-patentability; or (b) a pending patent application that is filed and prosecuted in good faith and no more than [***] have elapsed from its earliest priority date. For clarity, if a claim in a patent application that has been pending for more than [***] from its earliest priority date subsequently issues, then such claim shall be considered a Valid Claim as of the date of such issuance (to the extent that such claim thereafter satisfies the foregoing clause (a)).

 

2.                                      RESEARCH PROGRAM; OPTION EXERCISE AND EXCLUSIVITY.

 

2.1.                            Research Programs.

 

2.1.1.                                Morphic Research Activities.  For each Research Program with respect to a Target and the applicable Mechanism of Action, during the Research Term for such Research Program, Morphic will (a) perform all activities assigned to it under the applicable Research Plan, including the Lead Optimization Activities for those Compounds identified under such Research Plan that modulates the applicable Target via the applicable Mechanism of Action and (b) use Commercially Reasonable Efforts to prepare and deliver all Deliverables and Results for each Research Program in accordance with this Agreement and the applicable Research Plan during the Option Period for such Research Program, including the preparation of all reports in accordance with Section 2.5 (Late Lead Optimization Activities) and Section 2.8 (Research Reports) (collectively ((a) and (b)), together with any other activity expressly set forth under this Agreement to be performed by or on behalf of Morphic during the Research Term, the “Morphic Research Activities”).  Morphic will perform, or have performed, all Morphic Research Activities in accordance with the applicable Research Plan and the applicable Research Budget for such Target and otherwise in accordance with this Agreement. Morphic will not perform any activities with respect to a Research Program or any Target (including the Exploitation of any Compound that modulates such Target via the applicable Mechanism of Action) that are not set forth in the applicable Research Plan for the applicable Research Program.

 

2.1.2.                                Janssen Research Activities.  For each Research Program with respect to a Target, during the Option Period for such Research Program, Janssen (a) will perform all activities assigned to it under the applicable Research Plan for such Research Program (including the IND-Enabling Studies for Compounds that are the subject of the applicable Research Program) and (b) may elect to lead other activities with respect to each Target that is the subject of such Research Program (together with any other activity expressly set forth under this Agreement to be performed by or on behalf of Janssen during the Research Term, the “Janssen

 

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Research Activities” and, together with the Morphic Research Activities, the “Research Activities”).

 

2.2.                            Research Plans and Research Budgets.

 

2.2.1.                                Research Plans.  For each Target that is the subject of a Research Program, Morphic will perform (or, in the case of the matters described in clauses (f) and (h) below, will use its Commercially Reasonable Efforts to perform) the Morphic Research Activities for such Research Program and Janssen will perform the Janssen Research Activities for such Research Program in accordance with a written research plan that sets forth: (a) the Morphic Research Activities to be performed by or on behalf of Morphic during the Research Term, (b) the Janssen Research Activities to be performed by or on behalf of Janssen during the Research Term, (c) the applicable Mechanism of Action for Compounds directed to such Target, (d) the Lead Optimization Activities and Late Lead Optimization Activities for Compounds that are the subject of the applicable Research Program, (e) the estimated timelines upon which Morphic will complete such activities, (f) the Deliverables and other Results required for the JRC to determine whether to commence Late Lead Optimization Activities for Compounds that are the subject of such Research Program, (g) the protocols and other plans for the IND-Enabling Studies to be performed by Janssen for one or more Compounds that are the subject of such Research Program and (h) all other Deliverables and Results to be provided by Morphic to Janssen for such Research Program (each such plan, a “Research Plan”). The initial Research Plan agreed to by the Parties for each of the Research Programs [***].

 

2.2.2.                                Research Budgets. For each Research Program, Morphic or its authorized Third Party designees will perform the Morphic Research Activities for such Research Program in accordance with a detailed written budget for such activities, which will include the number of FTEs to be dedicated by Morphic to performing the Morphic Research Activities under such Research Plan, as well as any direct out-of-pocket expenses expected to be incurred in connection with the performance of the Morphic Research Activities (each such budget for a Research Plan, as may be amended pursuant to Section 2.2.3 (Updates to Research Plans and Research Budgets), a “Research Budget”). All internal personnel and resources of Morphic under each Research Budget will be expressed in terms of FTEs and FTE Costs plus any direct Out-of-Pocket Costs to be incurred (e.g., from the use of contract research organizations or for the acquisition of materials that are specifically acquired for use in the applicable Research Program, including special reagents) in connection with the performance of the Morphic Research Activities as outlined in the applicable Research Plan. Morphic’s internal costs for Morphic personnel

 

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included in each Research Budget will be calculated and expressed using the relevant FTE Rates.

 

2.2.3.                                Updates to Research Plans and Research Budgets. The Research Plan and Research Budget for the 2019 Calendar Year are attached hereto as Schedule 2.2.3.  No later than October 1 of each Calendar Year, Morphic will provide the JRC with a non-binding estimate of its FTE Costs and Out-of-Pocket Costs anticipated to be incurred in the performance of the Morphic Research Activities for the subsequent two (2) Calendar Years, and the JRC will review and discuss such estimated costs at the next scheduled meeting of the JRC. The Parties may update each Research Plan and the corresponding Research Budget from time to time through the JRC, each of which updated plan and budget the JRC will have the right to determine whether to approve, subject to Section 4.6 (JRC Decision-Making). For clarity, if the JRC approves any update to a Research Plan to include additional Morphic Research Activities, then the JRC will also review, discuss and determine whether to approve an update to the applicable Research Budget to include the FTE Costs and Out-of-Pocket Costs anticipated to be incurred in connection with the performance of such additional Morphic Research Activities. Notwithstanding anything to the contrary set forth in this Agreement, Morphic will not have any obligation to perform any additional Morphic Research Activities under an update to a Research Plan unless and until the JRC approves an update to the corresponding Research Budget that contemplates the appropriate additional reimbursement for the performance of such activities.

 

2.3.                            Research Program Costs.

 

2.3.1.                                Allocation of Costs.  For all Morphic Research Activities with respect to a Research Program during the Option Period for such Research Program, Janssen will be responsible for all FTE Costs and Out-of-Pocket Costs incurred by Morphic in the performance of the Morphic Research Activities to the extent within the applicable Research Budget, plus Allowable Overruns. If Morphic incurs FTE Costs and Out-of-Pocket Costs in excess of the sum of the applicable Research Budget plus Allowable Overruns, then Janssen will not be obligated to bear such excess costs unless the JRC approves such excess costs (either before or after such costs have been incurred).

 

2.3.2.                                Reporting; Payment.  Morphic will provide Janssen with a report of the estimated amounts due under Section 2.3.1 (Allocation of Costs) in the current Calendar Quarter no later than [***] prior to the end of such Calendar Quarter. Within [***] after the end of each Calendar Quarter, unless such timing is adjusted by the Parties in writing, Morphic will provide Janssen with an invoice of actual FTE Costs and Out-of-Pocket

 

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Costs incurred in connection with the performance of the Morphic Research Activities during the prior Calendar Quarter for which Janssen is obligated to reimburse Morphic pursuant to Section 2.3.1 (Allocation of Costs), each of which invoices will contain a detailed and itemized calculation (consistent with Janssen’s then current internal reporting format previously provided to Morphic) of such costs incurred. Janssen will pay all amounts (other than those amounts that Janssen disputes in good faith in accordance with the terms and conditions of this Agreement) set forth in each such invoice in accordance with Section 8.11 (Invoicing and Payment).

 

2.4.                            Commencement of Research Activities; Research Term.

 

2.4.1.                                Commencement of Research Activities. On a Research Program-by-Research Program basis (but subject to the remainder of this Section 2.4 (Commencement of Research Activities; Research Term)), Janssen will have sole discretion and decision-making authority over whether to commence the Research Activities in accordance with the applicable Research Plan for each Research Program. Notwithstanding the foregoing, (a) the Parties will commence Research Activities for at least one Research Program in accordance with the applicable Research Plan for such Research Program promptly following the Effective Date and (b) the Parties will commence Research Activities for all Research Programs no later than [***] following the Effective Date. Upon Janssen’s determination that the Parties will commence Research Activities for an additional Research Program under this Agreement, in each case, in accordance with the applicable Research Plan for such Research Program, then on a Research-Program-by-Research Program basis, Janssen will pay the Research Program Fee with respect to such additional Research Program in accordance with Section 8.2 (Research Program Fee).

 

2.4.2.                                Research Term. On a Research Program-by-Research Program basis, the Research Activities for a Research Program will be performed by or on behalf of the Parties during the period commencing on the applicable date on which Janssen determines to commence the Research Activities for such Research Program in accordance with Section 2.4.1 (Commencement of Research Activities) and expiring on the earlier of the completion of such Research Activities and the date that is [***] thereafter (unless the Parties agree in writing to extend such date for such Research Program) (as such date may be extended, the “Research Term Outside Date” and such period, the “Research Term”); provided that the Research Term for a Research Program will terminate upon the exercise by Janssen of an Option with respect to such Research Program pursuant to Section 3.2 (Option Exercise).

 

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2.5.                            Late Lead Optimization Activities.  On a Research Program-by-Research Program basis, Morphic will use Commercially Reasonable Efforts to complete the Morphic Lead Optimization Activities for Compounds that are the subject of such Research Program as set forth in the applicable Research Plan in accordance with the timeframes for completing such activities set forth in such Research Plan. On a Research Program-by-Research Program basis, Morphic will provide written notice to Janssen once it has completed the Morphic Lead Optimization Activities for such Research Program, together with all Deliverables to be provided with respect to such activities (as set forth in the applicable Research Plan) and supporting Results. Following completion of all Lead Optimization Activities for such Research Program (including the Morphic Lead Optimization Activities), Janssen will have sole discretion and decision-making authority over whether and when to commence the Late Lead Optimization Activities for the applicable Compounds that are the subject of the applicable Research Program based on its review of all Deliverables and supporting Results from the Lead Optimization Activities for such Research Program and taking into account the Lead Candidate Guidelines for the Target that is the subject of such Research Program; provided that Janssen will make such determination and commence Late Lead Optimization Activities no later than sixty (60) days following completion of such Lead Optimization Activities for such Research Program. Upon Janssen’s determination (to be made within such sixty (60) day period) that the Parties will commence the Late Lead Optimization Activities for such Research Program, Janssen will pay the Late Lead Optimization Fee with respect to such Research Program in accordance with Section 8.3 (Late Lead Optimization Fee). Janssen will only be obligated to pay the Late Lead Optimization Fee one time with respect to each Research Program, and after Janssen pays the Late Lead Optimization Fee for a Research Program, without limiting Morphic’s obligations under this Agreement, Janssen will not be obligated to pay any additional Late Lead Optimization Fee for any additional Compounds that are the subject of such Research Program. If, within sixty (60) days following completion of Lead Optimization Activities for a given Research Program, Janssen does not (a) provide written notice to the JRC indicating that it will commence Late Lead Optimization Activities for such Research Program and (b) commence the applicable Late Lead Optimization Activities, then, unless otherwise agreed by the Parties in writing, (i) this Agreement will terminate with respect to such Research Program in accordance with Section 14.4 (Termination for Failure to Determine to Commence Late Lead Optimization Activities), (ii) such Research Program will thereafter be a Terminated Program and (iii) the terms and conditions of Section 3.6 (Termination of Option) shall apply with respect to such Terminated Program.

 

2.6.                            Replacement Targets.

 

2.6.1.                                Replacement Decision. On a Research Program-by-Research Program basis, at any time prior to commencement of those Research Activities designated in the applicable Research Plan for such Research Program to be commenced after completion of the first in vivo experiment set forth

 

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in such Research Plan for a Compound that is the subject of such Research Program, subject to Section 2.6.3 (Occupied MoAs), Janssen may elect to (a) change the Mechanism of Action for the Target that is the subject of such Research Program or (b) replace the Target that is the subject of such Research Program with a new target and Mechanism of Action (such new Mechanism of Action pursuant to the foregoing clause (a) or new target and Mechanism of Action pursuant to the foregoing clause (b), each, a “Replacement Target MoA,” and such decision, a “Replacement Decision”). If, as of the Replacement Decision, Morphic or its Affiliates have assigned FTEs to perform Development or Commercialization activities related to the potential Replacement Target MoA that is the subject of such Replacement Decision pursuant to a detailed written plan and allocated resources to the performance of such activities in accordance with an associated budget (and Morphic is at such time actively performing such Development or Commercialization activities with respect to such potential Replacement Target MoA), but at such time Morphic or its Affiliates have not identified a compound that modulates the applicable target via the applicable Mechanism of Action and shown that such candidate has activity in one or more in vitro functional cell-based assays against such a target via a Mechanism of Action, then Morphic shall provide written notice to Janssen describing:

 

(a)                   all of its out-of-pocket costs with respect to the acquisition and Development to-date of such potential Replacement Target MoA; and

 

(b)                   all existing agreements to which Morphic and its Affiliates have entered into with respect to such potential Replacement Target MoA that are in existence as of the effective date of such Replacement Decision.

 

Following receipt of such notice, the Parties will discuss in good faith any potential allocation of costs and any potential allocation of obligations under such existing agreements described in such notice with respect to such potential Replacement Target MoA, provided, however, that in no event will Janssen be responsible for any financial or other obligations of Morphic to any Third Party under or related to the CMCC License Agreement with respect to such potential Replacement Target MoA. If, following receipt of such notice, Janssen elects to proceed with the applicable Replacement Target MoA, then (i) to the extent agreed in writing by the Parties, such Replacement Target MoA will be subject to all existing agreements to which Morphic and its Affiliates have entered into with respect to such potential Replacement Target MoA that (A) are in existence as of the effective date of such Replacement Decision and (B) have been disclosed to Janssen, (ii) Janssen shall reimburse Morphic for the amount of such costs agreed in writing by the Parties and (iii) any

 

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Research Program for which Janssen rendered a Replacement Decision shall become a Terminated Program and the program of Research Activities undertaken for the Replacement Target MoA shall be a Research Program. If pursuant to a Replacement Decision, Janssen replaces the Target that is, at such time, the subject of a Research Program with a different target that is not the subject of any Research Program under this Agreement, then such replaced Target shall be removed from this Agreement as a “Target” and the terms and conditions of this Agreement (including Section 2.13 (Exclusivity)) shall no longer apply with respect to such replaced Target.  If, however, following receipt of such notice described above, the Parties cannot agree on the allocation of costs and obligations under such existing agreement described in such notice with respect to such potential Replacement Target MoA, then there will not be a Replacement Decision with respect to such potential Replacement Target MoA.

 

2.6.2.                                Limit on Replacements. Notwithstanding anything to the contrary set forth in this Agreement, Janssen may only complete two (2) Replacement Decisions under this Agreement.

 

2.6.3.                                Occupied MoAs. Notwithstanding anything to the contrary in Section 2.6.1 (Replacement Decisions), that if at the time of a Replacement Decision:

 

(a)                   Morphic is precluded from granting Janssen the licenses under this Agreement with respect to such proposed Replacement Target MoA due to a conflicting grant of rights (or an outstanding option to obtain such a grant of rights) or covenant to a Third Party pursuant to a bona fide written agreement that is executed in good faith in the ordinary course of business prior to the date of the Replacement Decision for such proposed target via the proposed Mechanism of Action that is still in effect on such date, or

 

(b)                   Morphic is conducting a Morphic Internal Program itself with respect to such proposed Replacement Target MoA (each of (a) and (b), a “Pre-Existing Restriction,” and such proposed target, in each case ((a) and (b)), an “Occupied MoA”),

 

then, in each case ((a) and (b)), Morphic will promptly notify Janssen that such proposed Replacement Target MoA is an Occupied MoA, and Janssen may select another proposed Replacement Target MoA (and another if such other proposed Replacement Target MoA is an Occupied MoA and so on) until such time that Janssen selects a Replacement Target MoA that is not an Occupied MoA, at which point such proposed Replacement Target MoA will be added as a Target and Research Program under this Agreement. If Janssen in good faith questions why a proposed Replacement Target MoA

 

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is an Occupied MoA, then, upon Janssen’s request, Morphic will promptly provide reasonable evidence as to why such proposed Replacement Target MoA is an Occupied MoA. In the event of a dispute with regard to any proposed Replacement Target MoA, such dispute will be resolved in accordance with Section 15.1 (Discussion by Executive Officers; Arbitration).

 

2.6.4.                                Effects of Notice. Effective immediately upon a Replacement Decision by Janssen, subject to Section 2.6.3 (Occupied MoAs), the proposed target included in the Replacement Target MoA will become a Target for purposes of this Agreement and all applicable terms and conditions of this Agreement will apply to such target as a Target and the corresponding Research Program hereunder. Following the Parties’ agreement on a Research Plan with respect to such Target via the applicable Mechanism of Action in accordance with Section 2.6.5 (Research Plans for Replacement Target MoAs), the Parties will promptly initiate Research Activities with respect to such Target via the applicable Mechanism of Action in accordance with Section 2.1 (Research Programs).

 

2.6.5.                                Research Plans for Replacement Target MoAs.  No later than [***] after a Replacement Decision by Janssen, subject to Section 2.6.3 (Occupied MoAs), the Parties will develop, through the JRC, a Research Plan (including applicable Threshold Activity and Selectivity) for such Replacement Target MoA and an associated Research Budget for the costs and expenses associated with the performance of the Research Activities set forth under such Research Plan, in each case, in accordance with this Section 2.6.5 (Research Plans for Replacement Target MoAs). The content of the Research Plan for such Replacement Target MoA will be consistent in scale and scope to that set forth in the Research Plans for all other Targets under this Agreement, including Research Activities that are consistent in scale and scope with the corresponding activities under the Research Plans for such other Targets. The Research Budget for each Replacement Target MoA will be substantially similar to the Research Budgets for all other Targets under this Agreement.

 

2.7.                            Expiration of Pre-Existing Restrictions.  If at any time during the period in which Janssen is eligible to make a Replacement Decision under Section 2.6.1 (Replacement Decision), any Pre-Existing Restriction that precluded Janssen from selecting a proposed Replacement Target MoA as a Target that Janssen previously proposed under Section 2.6.1 (Replacement Decision) later expires, terminates or is otherwise modified such that such proposed Replacement Target MoA would no longer be an Occupied MoA, then, so long as Janssen has not previously completed two (2) Replacement Decisions, Morphic will promptly notify Janssen of such expiration, termination or modification (as applicable).

 

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2.8.                            Janssen Compounds.  In order to facilitate a given Research Program, Janssen may provide Janssen Compounds to Morphic, the transfer of which compounds shall be documented in writing. Except as otherwise expressly set forth under this Agreement, (a) all Janssen Compounds will remain the sole property of Janssen, (b) Morphic will use the Janssen Compounds only in the performance of Morphic Research Activities conducted in accordance with the applicable Research Plan and Applicable Law and (c) Morphic will not use or deliver to or for the benefit of any Third Party any Janssen Compound without the prior written consent of Janssen. Morphic will use the Janssen Compounds supplied under this Agreement with prudence and appropriate caution as not all of their characteristics may be known. Janssen will provide Morphic the most current material safety data sheet for the Janssen Compounds upon their transfer to Morphic. Except as expressly set forth in this Agreement, THE JANSSEN COMPOUNDS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE JANSSEN COMPOUNDS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.

 

2.9.                            Research Reports.

 

2.9.1.                                Research Activities. During the Research Term for each Research Program, Morphic will keep Janssen reasonably informed, through the JRC, regarding the status and progress of Morphic’s activities under such Research Program, including the status of all Morphic Research Activities. During the Research Term for a Research Program, on a Calendar Quarterly basis, Morphic will prepare and provide to the JRC written reports on the status of all such Morphic Research Activities performed under such Research Program during the applicable Calendar Quarter. Such quarterly reports will include, with respect to such Research Program, the characteristics of any Compounds identified, the selection of Compounds for further study (including those for which Janssen may determine to commence Late Lead Optimization Activities following the completion of Lead Optimization Activities for such Research Program in accordance with Section 2.5 (Late Lead Optimization Activities)), completed Morphic Research Activities required for Janssen to commence IND-Enabling Studies for such Research Program and the Prosecution and Maintenance of any Morphic Patents or Joint Patents Covering any such Compounds. Such reports must be sufficient in content to allow Janssen to evaluate the progress of the Morphic Research Activities against the objectives and timelines included therefor in the applicable Research Plan.  In addition, Morphic will promptly report any other Results of a Research Program that are reasonably likely to be significant to the JRC. At any time during the Option Period for a Research Program, Morphic will promptly respond to any reasonable inquiries from Janssen regarding the progress of activities

 

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under such Research Program (including any Morphic Research Activities).

 

2.9.2.                                Research Costs. In addition, in each report to be provided pursuant to Section 2.9.1 (Research Activities), Morphic will provide (a) a summary of the FTE efforts and Out-of-Pocket Costs (along with reasonable supporting documentation), in each case, incurred by or on behalf of Morphic during the applicable Calendar Quarter in the performance of the Morphic Research Activities under each Research Program during such Calendar Quarter and (b) a reasonable estimate of the FTEs and Out-of-Pocket Costs, in each case, to be incurred on a Calendar Quarter-by-Calendar Quarter basis by or on behalf of Morphic in order to complete the Morphic Research Activities as set forth under the applicable Research Plan.

 

2.9.3.                                JRC Discussion. The JRC will review the quarterly update reports for each such Research Program and (a) confer regarding the progress towards developing Compounds that are the subject of each Research Program for which the Parties are ready to conduct Late Lead Optimization Activities, (b) review relevant Deliverables provided and Results generated in the performance of such Morphic Research Activities, (c) consider and advise on any technical issues that may arise and (d) discuss the Janssen Research Activities performed by or on behalf of Janssen under such Research Program during the same period. Notwithstanding anything to the contrary set forth in this Agreement, on a Research Program-by-Research Program basis, Janssen will not be obligated to discuss the Janssen Research Activities for such Research Program with the JRC or Morphic in the event of a Change of Control of Morphic involving a Third Party that is, at such time, performing any Competing Activities for any Competitive Product with respect to such Research Program.

 

2.10.                     Research Program Records.  Morphic will maintain, or cause to be maintained, records of its activities under each Research Program in accordance with the procedures and requirements set forth in Schedule 2.10 (Data Integrity Requirements) and the Results generated by Morphic and delivered to Janssen hereunder will comply with such procedures and requirements.

 

2.11.                     Performance of Morphic Research Activities.  Morphic will (a) provide all resources necessary for it to perform all Morphic Research Activities and (b) perform all Morphic Research Activities with reasonable care and skill in accordance with all Applicable Laws and the terms of this Agreement. On a Research Program-by-Research Program basis, as set forth under this Agreement, Morphic will use its Commercially Reasonable Efforts to complete all Morphic Research Activities set forth under each Research Plan in accordance with the performance timelines set forth in the applicable Research Plan and

 

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provide to Janssen all Deliverables and Results set forth in the applicable Research Plan within the timeframes included therefor. During the Research Term, Morphic will devote the efforts of suitably qualified and trained employees and research assistants capable of carrying out the Morphic Research Activities set forth under each Research Plan to a professional, workmanlike standard and will provide all necessary materials and facilities therefor.

 

2.12.                     Copies and Inspection of Records.  Once every [***], during normal business hours and upon reasonable notice not less than [***], Janssen will have the right to inspect all records of Morphic or its authorized Third Party designees that relate to the performance of Research Activities by or on behalf of Morphic. Notwithstanding anything to the contrary set forth in this Agreement, Janssen will have the right to inspect such records more than once every [***] for reasonable cause.  Janssen will have the right to arrange for its employees or independent consultants and (sub)contractors involved in the performance of activities under this Agreement to (a) visit the offices and laboratories of Morphic and its Third Party contractors once every [***] during normal business hours and upon reasonable notice not less than [***] and (b) discuss with Morphic’s technical personnel and consultants the performance and progress of the Research Activities and applicable Deliverables and associated Results in detail. After preparing or receiving the report for such visit or inspection, Janssen will provide Morphic with a written summary of Janssen’s findings of any deficiencies or other areas of remediation that Janssen identifies during any such visit or inspection. Morphic will use its Commercially Reasonable Efforts to remediate any such deficiencies within [***] after Morphic’s receipt of such report, at Morphic’s cost and expense.

 

2.13.                     Exclusivity.

 

2.13.1.                         Other than in the performance of activities under this Agreement and subject to Section 2.6.1 (Replacement Decision) and Section 3.6 (Termination of Option), Morphic will not (and will cause its Affiliates and Sublicensees not to), either alone or directly or indirectly with any Third Party, Exploit any biological molecule, chemical molecule or other molecule that is designed and intended by Morphic to modulate, bind to or target (a) any Target and (b) solely with respect to any Replacement Target MoA, any Target with a Mechanism of Action that is the same as the Mechanism of Action for the Replacement Target MoA (on a Target-by-Target or Replacement Target MoA-by-Replacement Target MoA basis, as applicable, any such molecule described in the foregoing, each a “Competitive Product” and such activities, the “Competing Activities”). For clarity, if target A is a Target, and target B is a separate target, then Morphic would have the right to screen Compounds for use in connection with target B in a counter-screen containing target A in order to attempt to determine whether such Compounds have off-target activity against target A, but Morphic would not have the right to perform any other

 

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activities with respect to target A outside of the performance of activities under this Agreement.

 

2.13.2.                         For any Compounds (a) synthesized by Morphic under this Agreement during the Research Term in the course of performing Morphic Research Activities and (b) produced in sufficient quantities to perform in-vitro cell-based assays of Compounds in accordance with the applicable Research Plan (the “Synthesized Compounds”), Morphic will not, either alone or directly or indirectly with any Third Party, perform any Clinical Trials (or activities associated therewith), Manufacture (other than for non-clinical research purposes) or Commercialize such Synthesized Compounds in patients with chronic kidney disease or acute kidney injury during the period commencing on Janssen’s exercise of the first Option and ending on the [***] of the exercise of such Option.

 

2.14.                     Acquisitions by Third Parties.

 

2.14.1.                         [***]

 

2.14.2.                         [***]

 

3.                                      OPTION.

 

3.1.                            Option Grant.  On a Research Program-by-Research Program basis, Morphic hereby grants to Janssen the exclusive option, exercisable at Janssen’s sole discretion, to obtain the licenses set forth in Section 7.2.1 (Exclusive License Grant) with respect to the Target that is the subject of each Research Program (including all Licensed Compounds that are the subject of the applicable Research Program) (each, an “Option”).

 

3.2.                            Option Exercise.  Janssen may exercise an Option for a Research Program by delivering written notice of such exercise to Morphic at any time during the Option Period for such Research Program (each such notice, an “Option Exercise Notice”). Upon Janssen’s delivery to Morphic of an Option Exercise Notice for a Research Program, (a) Janssen will be granted the licenses set forth in Section 7.2.1 (Exclusive License Grant) with respect to the Target that is the subject of such Research Program (including with respect to all Licensed Compounds that are the subject of the applicable Research Program), (b) Morphic will promptly provide Janssen with any existing supplies of Licensed Compounds that are the subject of the Research Program with respect to which Janssen exercised an Option, (c) Morphic will provide to Janssen copies of all Morphic Know-How that is necessary or useful to Exploit the Licensed Compounds and Products that are the subject of such Research Program in accordance with Section 5.1.2 (After Option Exercise) and (d) Morphic will assign to Janssen all Assigned Product-Specific Patents with respect to such Research Program in accordance with Section 9.2.2 (Morphic Assignment of Assigned Product-Specific Technology).

 

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3.3.                            IND-Enabling Study Report. On a Research Program-by-Research Program basis, within [***] following the date on which the complete IND-Enabling Study Reports from the IND-Enabling Studies for at least [***] animal species for such Research Program becomes available to Janssen, Janssen will deliver to the JRC such IND-Enabling Study Report for such Research Program (the date of such delivery, the “IND-Enabling Study Completion Date”).

 

3.4.                            Due Diligence. Following the IND-Enabling Study Completion Date for a Research Program and during the applicable Option Period for such Research Program, to assist Janssen in conducting thorough due diligence to decide whether to exercise an Option for such Research Program, (a) Morphic will afford to Janssen and its representatives reasonable access during normal business hours to Morphic’s personnel, records and data, offices and laboratories, in each case, that Janssen may reasonably request related to such Research Program and Licensed Compounds and (b) Morphic will promptly provide through an electronic data room downloadable and printable copies of (i) any documents reasonably requested by Janssen, (ii) any Patent or regulatory information and (iii) any Results relating to such Research Program, in each case ((i) — (iii)), then available to Morphic and to the extent that such information has not been previously provided by Morphic to Janssen and subject to customary and reasonable due diligence procedures to preserve the confidential nature of any such information.

 

3.5.                            Extension of Option Period.  If any information is provided to Janssen following the IND-Enabling Study Completion Date for a Research Program pursuant to a request made by Janssen under Section 3.4 (Due Diligence) within [***] after such IND-Enabling Study Completion Date, and such information is, in Janssen’s reasonable discretion, material information not previously provided to Janssen and required to be provided pursuant to Section 2.9 (Research Reports) for such Research Program, then the applicable Option Period for such Research Program will be automatically extended such that there are [***] between Janssen’s receipt of such material information and the expiration of the Option Period for such Research Program.

 

3.6.                            Termination of Option. On an Option-by-Option basis and Research Program-by-Research Program basis, if (a) within sixty (60) days following completion of Lead Optimization Activities for a given Research Program, Janssen does not both provide written notice to the JRC indicating that it will commence Late Lead Optimization Activities for such Research Program and commence Late Lead Optimization Activities for such Research Program during such sixty (60) day period, (b) Janssen does not deliver to Morphic an Option Exercise Notice for a Research Program during the applicable Option Period for such Research Program or (c) Janssen elects, in its sole discretion, to deliver written notice to Morphic to terminate an Option with respect to a Research Program prior to the expiration of the applicable Option Period for such Research Program, then, in either case ((a), (b) or (c)), (i) Janssen’s Option with respect to such Research Program will expire, (ii) the Research Term with respect to such Research Program

 

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will terminate, (iii) except as otherwise expressly set forth in this Agreement, each Party’s rights and obligations under this Agreement with respect to such Research Program will terminate (including the obligations set forth in Section 2.13 (Exclusivity) with respect to the applicable Target that is the subject of such Research Program), (iv) such Research Program will be a Terminated Program for purposes of this Agreement and (v) Morphic will thereafter be free to Exploit, alone or with one or more Third Parties, any Compounds or Products that are the subject of such Research Program, subject to the terms of Section 3.7 (Right of First Negotiation). Notwithstanding anything to the contrary set forth in this Agreement, the obligations of confidentiality and non-use set forth in ARTICLE 12 (Confidentiality) will apply to any Confidential Information of both Morphic and Janssen related to such Research Program.

 

3.7.                            Right of First Negotiation.

 

3.7.1.                                ROFN Exercise Notice. If Janssen does not exercise an Option with respect to a Research Program in accordance with Section 3.2 (Option Exercise) prior to the expiration of the Option Period for such Research Program, and after the expiration of such Option Period Morphic or any of its Affiliates has completed the final study report for a POC Clinical Trial for a Terminated Janssen Product that is the subject of such Terminated Program (a “Passed Terminated Janssen Product”), then (a) Morphic will notify Janssen in writing within [***] following the completion of such POC Clinical Trial and (b) within [***] following such notification to Janssen, Morphic will provide Janssen with the Terminated Product Package for such Passed Terminated Janssen Product, which will include all Results related to the applicable Passed Terminated Janssen Product through the completion of the POC Clinical Trial for such Passed Terminated Janssen Product (the information provided in the foregoing clauses (a) and (b), collectively, a “ROFN Availability Notice”). Subject to this Section 3.7 (Right of First Negotiation), Janssen will have an exclusive right of first negotiation to negotiate the terms of a definitive agreement pursuant to which Janssen would be granted exclusive rights to Develop, Manufacture and Commercialize such Passed Terminated Janssen Product (such exclusive right, a “ROFN”). Janssen may exercise the ROFN with respect to any applicable Passed Terminated Janssen Product that is the subject of a ROFN Availability Notice by notifying Morphic in writing (such notice, the “ROFN Exercise Notice”) no later than [***] after receipt of all information to be provided in such ROFN Availability Notice. During such [***] period following Morphic’s delivery of a ROFN Availability Notice, Morphic will (i) provide Janssen with other information and documentation in Morphic’s or its Affiliate’s Control relating to such Passed Terminated Janssen Product reasonably requested by Janssen within [***] after Janssen’s request therefor and (ii) afford Janssen and its representatives reasonable access during normal business hours to Morphic’s personnel to gather more information

 

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regarding such Passed Terminated Janssen Product. Until the expiration of such ROFN with respect to a Passed Terminated Janssen Product in accordance with this Section 3.7.1 (ROFN Exercise Notice), Morphic will not enter into negotiations or an agreement with any Third Party relating to any license, grant or other transfer of rights with respect to such Passed Terminated Janssen Product (including to further Develop and Commercialize any such product).

 

3.7.2.                                Effects of ROFN Exercise. If Janssen so provides a ROFN Exercise Notice to Morphic for such Passed Terminated Janssen Product within [***] following Morphic’s receipt of such ROFN Exercise Notice, then each of Janssen and Morphic will exclusively negotiate in good faith with one another for a period of [***] following Janssen’s receipt of all information to be provided in the applicable ROFN Availability Notice for such Passed Terminated Janssen Product the potential terms of a definitive agreement pursuant to which Janssen would be granted exclusive rights to Develop, Manufacture and Commercialize the applicable Passed Terminated Janssen Product (a “Janssen Terminated Product Agreement”), it being understood and agreed that neither Party shall be obligated to enter into any definitive agreement. The Janssen Terminated Product Agreement, at Janssen’s election, may include a grant of rights with respect to the entire Territory or only one or more substantial regions within the Territory or a grant of rights with respect to the entire Field or only one or more indications in the Field.

 

3.7.3.                                Expiration of ROFN.  If, with respect to a Passed Terminated Janssen Product for which Morphic delivers a ROFN Availability Notice to Janssen, (a) Janssen does not provide a ROFN Exercise Notice to Morphic within [***]  following Janssen’s receipt of all information to be provided in the applicable ROFN Availability Notice for such Passed Terminated Janssen Product or (b) Janssen and Morphic do not agree on the terms of a Janssen Terminated Product Agreement for such Passed Terminated Janssen Product within [***] following Janssen’s receipt of all information to be provided in the applicable ROFN Availability Notice for such Passed Terminated Janssen Product, then, in each case ((a) and (b)), following such [***] period or [***] period, as applicable, and subject to the terms of this Agreement, Morphic will be free to enter into negotiations or an agreement with any Third Party relating to any license, grant or other transfer of rights with respect to such Passed Terminated Janssen Product (including to further Develop and Commercialize any such product) without any further obligation to Janssen; provided that during the additional [***] period following the end of such [***] period or [***] period, as applicable, Morphic and its Affiliates will not enter into an agreement (or agree to terms of a non-binding term sheet for such an agreement) with any Third Party on terms that contain lower payments to Morphic in any of the following categories than those corresponding terms

 

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last offered by Morphic in writing to Janssen during such [***] or [***] period: (i) [***], (ii) [***], (iii) [***] or (iv) [***], without first granting Janssen the right to enter into an agreement with Morphic for the applicable Passed Terminated Janssen Product on such less favorable terms to Morphic.

 

3.7.4.                                Passed Terminated Janssen Product Partnering. If, prior to the completion of the first POC Clinical Trial for a Passed Terminated Janssen Product, Morphic or its Affiliates receives or makes a bona fide offer in the form of a non-binding term sheet or definitive agreement from or to any Third Party with respect to the transfer, assignment, grant of a license or other disposition of rights to Develop or Commercialize such Passed Terminated Janssen Product, then (a) Morphic will notify Janssen in writing within [***] following Morphic’s receipt of such offer and (b) within [***] following such notification to Janssen, Morphic will provide Janssen with the Terminated Product Package for such Passed Terminated Janssen Product, which will include all Results in Morphic’s or its Affiliate’s possession or Control related to the applicable Passed Terminated Janssen Product through such date (a “Partnering Notice”). Janssen will have a period of [***] after receipt of all information to be provided in such Partnering Notice to present to Morphic a non-binding term sheet that sets forth the terms of a definitive agreement pursuant to which Janssen would be granted exclusive rights to Develop, Manufacture and Commercialize such Passed Terminated Janssen Product. During such [***] period, (i) upon Janssen’s request, Morphic will (A) provide Janssen with other information and documentation in Morphic’s or its Affiliate’s Control relating to such Passed Terminated Janssen Product reasonably requested by Janssen within [***] after Janssen’s request therefor and (B) afford Janssen and its representatives reasonable access during normal business hours to Morphic’s personnel to gather more information regarding such Passed Terminated Janssen Product and (ii) Morphic will not enter into a definitive agreement or further discussions with any Third Party relating to any license, grant or other transfer of rights with respect to such Passed Terminated Janssen Product (including to further Develop and Commercialize any such product). If the terms of the non-binding term sheet presented by Janssen with respect to the applicable Passed Terminated Janssen Product are more favorable, in the aggregate, to Morphic than the terms presented in the non-binding term sheet received from or provided by Morphic to the applicable Third Party (as applicable), taking into account any differences regarding the scope of the rights to be licensed in each respective term sheet (including the territory, field, and other material rights and obligations of the parties thereto and, in the event of any dispute, as resolved in accordance with Section 15.1 (Discussion by Executive Officers; Arbitration)), then Janssen will have the exclusive right for [***] after Janssen’s receipt from Morphic of all information to be provided in

 

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the applicable Partnering Notice (or such later date on which the Parties may finally agree on the terms of such a term sheet, if the Parties wish to further negotiate the terms of such term sheet following Janssen’s delivery thereof to Morphic) to negotiate with Morphic the terms of a definitive agreement pursuant to which Janssen would be granted exclusive rights to Develop, Manufacture and Commercialize such Passed Terminated Janssen Product.

 

3.7.5.                                Expiration of a Partnering Right. If, with respect to a Passed Terminated Janssen Product for which Morphic delivers a Partnering Notice to Janssen, (a) Janssen does not provide a non-binding term sheet to Morphic for such Passed Terminated Janssen Product within [***] following Janssen’s receipt of all information to be provided in the applicable Partnering Notice, (b) the terms of the non-binding term sheet presented by Janssen with respect to the applicable Passed Terminated Janssen Product are not more favorable, in the aggregate, to Morphic than the terms presented in the non-binding term sheet received from or provided by Morphic to the applicable Third Party (as applicable), taking into account any differences regarding the scope of the rights to be licensed in each respective term sheet (including the territory, field, and other material rights and obligations of the parties thereto) or (c) Janssen and Morphic do not agree on the terms of a definitive agreement pursuant to which Janssen would be granted exclusive rights to Develop, Manufacture and Commercialize the applicable Passed Terminated Janssen Product within [***] after Janssen’s receipt from Morphic of all information to be provided in the applicable Partnering Notice (or such later date on which the Parties may finally agree on the terms of such a term sheet, if the Parties wish to further negotiate the terms of such term sheet following Janssen’s delivery thereof to Morphic), then, in each case ((a), (b) and (c)), following the expiration of such [***] or [***] period, as applicable, and subject to the terms of this Agreement, Morphic will be free to enter a definitive agreement or further discussions with the applicable Third Party relating to any license, grant or other transfer of rights with respect to such Passed Terminated Janssen Product (including to further Develop and Commercialize any such product); provided that if Morphic and such Third Party do not enter into a definitive agreement with respect to the Development and Commercialization of such Passed Terminated Janssen Product, then the terms of Section 3.7.1 (ROFN Exercise Notice) and Section 3.7.4 (Passed Terminated Janssen Product Partnering) will thereafter apply to such Passed Terminated Janssen Product.

 

4.                                      GOVERNANCE.

 

4.1.                            Joint Research Committee.  The Parties will establish a Joint Research Committee (the “JRC”) comprised of three (3) employee representatives of

 

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Morphic and three (3) employee representatives of Janssen, each of whom will have the appropriate experience and expertise to perform its responsibilities on the JRC.  As of the Effective Date, the JRC representatives will be [***] for Janssen and [***] for Morphic. Each Party may replace its representatives to the JRC at any time upon written notice to the other Party.  If agreed by the JRC on a case-by-case basis, the JRC may invite other non-members to participate in the discussions and meetings of the JRC, provided that such participants will have no voting authority at the JRC and that any such non-employee participants are bound by written obligations of non-use and confidentiality no less stringent than those set forth in ARTICLE 12 (Confidentiality).

 

4.2.                            Committee Chair.  The JRC will be chaired by a Janssen committee member (the “JRC Chair”).  As of the Effective Date the JRC Chair will be [***] of Janssen. The responsibilities of the JRC Chair will include:

 

4.2.1.                                Providing written notification to each Party at least [***] in advance of each JRC meeting;

 

4.2.2.                                Collecting and organizing agenda items for each JRC meeting and preparing the meeting agenda for such meeting; and

 

4.2.3.                                Preparing the written minutes of each JRC meeting and circulating such minutes for review and approval by the Parties, and identifying any action items to be carried out by the Parties.

 

4.3.                            JRC Meetings.  The JRC will hold its first meeting within [***] after the Effective Date.  During the Research Term and thereafter until disbanded as provided in Section 4.9 (JRC Term), the JRC will meet on a Calendar Quarter basis by audio or video teleconference and, at a minimum, twice each Calendar Year in person (which in-person meeting will be held on an alternating basis between Waltham, MA and a site of Janssen or any of its Affiliates, such to be agreed by the Parties). Either Party may also call a special meeting of the JRC (by videoconference or teleconference) upon at least [***] prior written notice to the other Party if such Party reasonably believes that a significant matter must be addressed before the next regularly scheduled JRC meeting, and such Party will provide the JRC materials reasonably adequate to enable an informed discussion by its members no later than [***] before the special meeting. Meetings of the JRC are effective only if at least two of the representatives of each Party are present at the meeting or participating by teleconference.  Each Party will be responsible for all its own costs and expenses of participating in the JRC meetings.  The Parties will endeavor to schedule meetings of the JRC at least [***] in advance.  The Parties will agree on the minutes of each meeting promptly, but in no event later than [***] following the date of such meeting.

 

4.4.                            JRC Responsibilities.  During any of the Research Terms, the JRC will:

 

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4.4.1.                                Review, discuss and provide advice as to the progress of research activities to identify and characterize Compounds;

 

4.4.2.                                Review, discuss and provide advice on the progress of Research Activities as against the applicable Research Plan and Research Budget for each Research Program;

 

4.4.3.                                Review and discuss Morphic’s estimates of the FTE Costs and Out-of-Pocket Costs anticipated to be incurred in the performance of the Morphic Research Activities for the subsequent two (2) Calendar Years, in accordance with Section 2.2.3 (Updates to Research Plans and Research Budgets);

 

4.4.4.                                Review, discuss and determine whether to approve (a) any updates to any Research Plan or Research Budget, in accordance with Section 2.2.3 (Updates to Research Plans and Research Budgets) and (b) any excess costs incurred by Morphic in the performance of the Morphic Research Activities, in accordance with Section 2.3.1 (Allocation of Costs);

 

4.4.5.                                Review, discuss and develop a Research Plan for each Replacement Target MoA, in accordance with Section 2.6.5 (Research Plans for Replacement Target MoAs);

 

4.4.6.                                Review, discuss and coordinate the delivery of the reports by Morphic regarding the Research Activities, in accordance with Section 2.8 (Research Reports);

 

4.4.7.                                Review and discuss the IND-Enabling Study Report for each Research Program delivered to the JRC by Janssen, in accordance with Section 3.3 (IND-Enabling Study Report);

 

4.4.8.                                Form such other committees as the JRC may deem appropriate, including (a) individual committees to oversee Research Activities under a particular Research Program and (b) the JFC, in accordance with Section 4.5 (Joint Finance Committee);

 

4.4.9.                                Attempt to resolve any disputes between the Parties related to the performance of the Research Activities on an informal basis (subject to Section 4.6 (JRC Decision-Making), Section 4.7 (Resolution of JRC Disputes) and Section 4.8 (Limitations on Decision Making)); and

 

4.4.10.                         Perform such other functions as expressly set forth in this Agreement or allocated to the JRC by the written agreement of the Parties.

 

4.5.                            Joint Finance Committee.  At the appropriate time (as determined by the JRC), the JRC will establish a joint finance committee (the “Joint Finance Committee” or “JFC”), which will report to the JRC. The JFC will (a) coordinate the budgeting,

 

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accounting, reporting, reconciliation and other financial activities set forth in this Agreement (including adjusting the due date for invoices prepared in accordance with Section 2.3.2 (Reporting; Payment)) and (b) perform any other functions that are expressly delegated to the JFC by the JRC. The JFC will include individuals from each Party with reasonable expertise in the areas of accounting, cost allocation, budgeting and financial reporting.  Without limiting the foregoing, the JFC will provide a forum for the Parties to discuss the Research Budget for each Research Program (but, for clarity, the JFC will not develop or determine whether to approve such budgets) and to track Morphic’s progress against such budgets. The JFC will meet at such times and with such frequency as the JRC deems appropriate. Each Party will be responsible for all its own costs and expenses of participating in the JFC meetings.

 

4.6.                            JRC Decision-Making.

 

4.6.1.                                General Process.  The JRC will only have the powers expressly assigned to it in this ARTICLE 4 (Governance) and elsewhere in this Agreement and will not have the authority to: (a) modify or amend the terms and conditions of this Agreement; or (b) waive either Party’s compliance with the terms and conditions of this Agreement. Regardless of the number of Janssen JRC committee members or Morphic JRC committee members, each Party will have one (1) vote, and the JRC will make decisions by consensus.  Except as otherwise expressly set forth in this Agreement, the phrase “determine,” “designate,” “confirm,” “approve,” or “determine whether to approve” by the JSC and similar phrases used in this Agreement will mean approval in accordance with this Section 4.6.1 (General Process), including the escalation and tie breaking provisions herein.

 

4.6.2.                                Decisions of the JRC.  The JRC will use good faith efforts, in compliance with this Section 4.6.2 (Decisions of the JRC), to promptly resolve any disagreement of the JFC and any such matter for which the JRC has authority under this Agreement. If, after the use of good faith efforts, the JRC is unable to resolve any such matter that is within the scope of the JRC’s authority or any other disagreement between the Parties that may be referred to the JRC, in each case, within a period of [***], then either Party may refer such matter for resolution in accordance with Section 4.7 (Resolution of JRC Disputes) to [***] of Morphic (or [***] who has the power and authority to resolve such matter) and [***] of Janssen Research & Development, LLC (or [***] who has the power and authority to resolve such matter) (collectively, the “Executive Officers”).

 

4.7.                            Resolution of JRC Disputes.  If a Party makes an election under Section 4.6.2 (Decisions of the JRC) to refer a matter on which the JRC cannot reach a consensus decision for resolution by the Executive Officers, then the JRC will submit in writing the respective positions of the Parties to their respective

 

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Executive Officers.  The Executive Officers will use good faith efforts to resolve any such matter so referred to them as soon as practicable, and any final decision that the Executive Officers agree to in writing will be conclusive and binding on the Parties. If the Executive Officers are unable to reach agreement on any such matter referred to them within [***] after such matter is so referred (or such longer period as the Executive Officers may agree upon), then Janssen will have the final decision-making authority with respect to such decision, including with respect to any update to a Research Plan or Research Budget, provided that Janssen may not exercise such final-decision making authority with respect to:

 

4.7.1.                                the initial Research Plan or associated Research Budget for each Target via the applicable Mechanism of Action (including any initial Research Plan and associated Research Budget for a Replacement Target MoA);

 

4.7.2.                                whether a proposed Replacement Target MoA is an Occupied MoA in accordance with Section 2.6.3 (Occupied MoAs);

 

4.7.3.                                any change in the scope of the Morphic Research Activities set forth in any Research Plan or any change in any Research Budget, in each case, in a manner that establishes or increases the anticipated FTE Costs or Out-of-Pocket Costs to be incurred by or on behalf of Morphic; or

 

4.7.4.                                the addition or substitution of a new target to any Research Plan (other than any Replacement Decision made pursuant to the terms and conditions of this Agreement).

 

4.8.                            Limitations on Decision Making.  Notwithstanding anything to the contrary set forth in this Agreement, no decision of Janssen in the exercise of its final decision-making authority will (a) cause a Party to take or decline to take any action that would be reasonably likely to result in a violation of any Applicable Law, the requirements of any Regulatory Authority or any agreement between Morphic and any Third Party or that would be reasonably likely to result in the infringement, misappropriation or other violation of any Intellectual Property of any Third Party, (b) impose any obligation on either Party that would be in violation of such Party’s written standard operating procedures, written business policies or written compliance policies or procedures, (c) conflict with the terms and conditions of this Agreement, (d) determine that Janssen has fulfilled any obligations under this Agreement or that Morphic or its Affiliates have breached any obligation under this Agreement, (e) make a decision that is expressly stated to require the agreement or consent of the Parties or (f) expand Janssen’s or its Affiliates’ rights or reduce its obligations under this Agreement.

 

4.9.                            JRC Term. The responsibilities of the JRC will terminate, on a Research Program-by-Research Program basis, upon the expiration of the Option Period for a Research Program. Upon the termination of the JRC with respect to the final Research Program, the JRC will have a final meeting thereafter to review the

 

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Results and Deliverables of the all Research Activities and will thereafter have no further authority with respect to activities under this Agreement.

 

5.                                      DEVELOPMENT, REGULATORY MATTERS AND COMMERCIALIZATION.

 

5.1.                            Technology Transfer.

 

5.1.1.                                Research Activities.  Morphic will transfer to Janssen copies of any and all Morphic Know-How that is necessary or useful for the performance of all Janssen Research Activities (a) no later than [***] after the Effective Date and (b) no later than [***] after the selection of any Replacement Target MoA by Janssen in accordance with Section 2.6.1 (Replacement Decisions). Each Calendar Quarter during the remainder of the Research Term for a Research Program, Morphic will transfer to Janssen copies of any Morphic Know-How that is related to the Janssen Research Activities under such Research Program and that is made, conceived, discovered or otherwise generated since the previous transfer of such Know-How to continue to enable Janssen to perform such Janssen Research Activities. Notwithstanding anything to the contrary set forth in this Agreement, Morphic will not, and will cause its Affiliates not to, disclose to Janssen or any of its Affiliates any Know-How licensed to Morphic under the CMCC License Agreement.

 

5.1.2.                                After Option Exercise.  On a Research Program-by-Research Program basis, following Janssen’s exercise of an Option with respect to a Research Program pursuant to Section 3.2 (Option Exercise), Morphic will transfer to Janssen copies of all Morphic Know-How that is necessary or useful to Exploit the Licensed Compounds and Products that are the subject of such Research Program.

 

5.1.3.                                Morphic Support.  In addition to transferring copies of Morphic Know-How in accordance with this Section 5.1 (Technology Transfer), Morphic will make its personnel reasonably available to Janssen so as to enable Janssen to practice under the Morphic Technology in connection with its performance of the Janssen Research Activities and the Exploitation of such Compounds and Products. Morphic may invoice Janssen for the FTE Costs and Out-of-Pocket Costs actually incurred by or on behalf of Morphic in connection with providing such assistance and cooperation, and Janssen will pay the undisputed amounts set forth in any such invoice in accordance with Section 8.11 (Invoicing and Payment).

 

5.2.                            Development and Commercialization After Option Exercise.  On a Research Program-by-Research Program basis, following Janssen’s exercise of an Option with respect to a Research Program pursuant to Section 3.2 (Option Exercise), Janssen will thereafter have sole control over and decision-making with respect to, at its cost and expense, the Exploitation of all Licensed Compounds and Products

 

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that are the subject of the applicable Research Program (including all Development, performance of Medical Affairs, Manufacture and Commercialization thereof).

 

5.3.                            Development Reports.  On a bi-annual basis Janssen will provide to Morphic a high-level summary of all material Development activities conducted by or on behalf of Janssen for Products that are the subject of each Research Program for which Janssen exercised an Option. Janssen’s obligations under this Section 5.3 (Development Reports) will terminate on a Research Program-by-Research Program basis following achievement and payment of all Development Milestone Events for a Research Program.

 

5.4.                            Regulatory Activities.  Without limiting the generality of Section 5.1 (Technology Transfer), on a Research Program-by-Research Program basis, following Janssen’s exercise of an Option with respect to a Research Program pursuant to Section 3.2 (Option Exercise), Janssen will thereafter have sole control over and decision-making with respect to, at its cost and expense, the preparation and submission of all Regulatory Submissions throughout the Territory for all Products that are the subject of the applicable Research Program. Janssen may file all MAAs for such Products in its own name (or in the name of its designee) and will own and control all such MAAs. Morphic will cooperate fully and in a timely manner to assist Janssen in its efforts to prepare and submit any Regulatory Submissions to obtain, support or maintain Regulatory Approvals for all such Products, including by providing to Janssen all data, written reports and other documentation related to any such Product Controlled by Morphic or its Affiliates (which assistance and data generation must be in accordance with Applicable Law and requirements and standards by applicable Regulatory Authorities) as well as any necessary samples and materials. Notwithstanding any provision of this Agreement to the contrary, if a Janssen-Operated Monitoring Board halts a Phase I Clinical Trial for a Product for patient health and safety reasons, then Janssen will provide Morphic reasonable detail of the findings of such Janssen-Operated Monitoring Board with respect to such determination.

 

5.5.                            Development Diligence Obligations.  On a Research Program-by-Research Program basis, following Janssen’s exercise of an Option with respect to a Research Program pursuant to Section 3.2 (Option Exercise), Janssen will use Commercially Reasonable Efforts to [***]. Janssen will have no other diligence obligations under this Agreement with respect to the Development or Regulatory Approval of any Compounds or Products.

 

5.6.                            Commercialization Diligence Obligations.  Following receipt by or on behalf of Janssen of Regulatory Approval for a Product in the United States or a Major European Country, Janssen will use CRE to [***]. Janssen will have no other diligence obligations under this Agreement with respect to the Commercialization of any Products.

 

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6.                                      MANUFACTURING.

 

6.1.                            General Responsibilities.  On a Research Program-by-Research Program basis, following (a) Janssen’s exercise of an Option with respect to a Research Program pursuant to Section 3.2 (Option Exercise) and (b) successful manufacturing technology transfer as set forth in Section 6.3 (Manufacturing Technology Transfer) for each Licensed Compound and Product that is the subject of such Research Program, Janssen will have sole responsibility for, and sole decision-making authority with respect to, all Manufacturing activities and associated costs and expenses for the Manufacture of such Licensed Compounds and Products.

 

6.2.                            Observation by Janssen.  On a Research Program-by-Research Program basis and to the extent Morphic performs Manufacturing activities with respect to Licensed Compounds and Products that are the subject of a Research Program with respect to which Janssen exercises an Option, following Janssen’s exercise of an Option with respect to such Research Program pursuant to Section 3.2 (Option Exercise), Morphic will provide Janssen with the opportunity, upon Janssen’s reasonable request during normal business hours, to observe the Manufacturing processes and procedures for each Licensed Compound that is the subject of a Research Program (e.g., review assays, batch records and release processes and procedures) for the purpose of enabling Janssen (or a Third Party contract manufacturer designated by Janssen) to Manufacture such Licensed Compound and Products that incorporate such Licensed Compound pursuant to Section 6.3 (Manufacturing Technology Transfer). If Morphic utilizes a contract manufacturer for the Manufacture of any such Licensed Compound, then Morphic will take all reasonable actions, including entering into a three party agreement with Janssen and such contract manufacturer, to enable Janssen to exercise its rights under Section 6.1 (General Responsibilities) and this Section 6.2 (Observation by Janssen).

 

6.3.                            Manufacturing Technology Transfer.  In addition to the initial technology transfer set forth in Section 5.1.1 (Research Activities), on a Research Program-by-Research Program basis and to the extent Morphic performs Manufacturing activities with respect to Licensed Compounds and Products that are the subject of a Research Program with respect to which Janssen exercises an Option, following Janssen’s exercise of an Option with respect to such Research Program pursuant to Section 3.2 (Option Exercise) and Janssen’s request with respect to Licensed Compounds that are the subject of such Research Program, the Parties will develop and agree upon a manufacturing technology transfer plan for such Licensed Compounds that will include all activities necessary to enable Janssen (or a contract manufacturer designated by Janssen) to Manufacture the applicable Licensed Compounds and all Products that incorporate such Licensed Compounds. The Parties understand and agree that following the technology transfer contemplated by this Section 6.3 (Manufacturing Technology Transfer) it may be necessary for Janssen from time to time to seek assistance and cooperation from Morphic in connection with the Manufacture of Licensed

 

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Compounds and Products, including with respect to scale-up activities. Morphic will provide such assistance and cooperation as a consultant upon the reasonable request of Janssen.

 

7.                                      LICENSE GRANTS.

 

7.1.                            Research Term Licenses.

 

7.1.1.                                Grant to Morphic.  On a Research Program-by-Research Program basis, during the Research Term for a Research Program, Janssen hereby grants to Morphic a royalty-free, non-exclusive, worldwide license, with the right to sublicense through multiple tiers (subject to the provisions of Section 7.1.3 (Right to Sublicense)), under the Janssen Technology solely to perform the Morphic Research Activities as set forth under and in accordance with the Research Plan for such Research Program.

 

7.1.2.                                Grant to Janssen.

 

(a)                   Janssen Research Activities. On a Research Program-by-Research Program basis, during the Research Term for a Research Program, Morphic hereby grants to Janssen a royalty-free, non-exclusive, worldwide license, with the right to sublicense through multiple tiers (subject to the provisions of Section 7.1.3 (Right to Sublicense)), under the Morphic Technology solely to perform the Janssen Research Activities as set forth under and in accordance with the Research Plan for such Research Program.

 

(b)                   Late Lead Optimization Activities. On a Research Program-by-Research Program basis, during the Research Term for a Research Program, subject to the remainder of this Section 7.1.2(b) (Late Lead Optimization Activities), Morphic hereby grants to Janssen a royalty-free, non-exclusive, worldwide license, with the right to sublicense through multiple tiers (subject to the provisions of Section 7.1.3 (Right to Sublicense)), under the Morphic Technology solely to perform any Late Lead Optimization Activities that are Morphic Research Activities (as set forth under and in accordance with the Research Plan for such Research Program).  Notwithstanding any provision in this Agreement to the contrary, Janssen may only perform those Late Lead Optimization Activities that are designated as Morphic Research Activities in the applicable Research Plan if (i) Morphic has not performed one or more of such Late Lead Optimization Activities as set forth in the applicable Research Plan and Janssen has provided written notice to Morphic that it has not performed one or more of such Late Lead Optimization Activities or otherwise failed to satisfy its obligations, in each case, as set forth under the applicable Research Plan and (ii) within [***] after

 

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Janssen’s delivery of such notice, Morphic has not cured such failure to perform or otherwise satisfied the obligations described in such written notice. If Janssen or its Affiliates so performs any such Late Lead Optimization Activities designated as Morphic Research Activities, then all such activities will be deemed to have been performed under the Agreement for such Research Program.

 

7.1.3.                                Right to Sublicense.  Each Party and its respective Affiliates may grant sublicenses of the rights granted to such Party under Section 7.1.1 (Grant to Morphic) or Section 7.1.2 (Grant to Janssen), as applicable, to any Affiliate or Third Party.  Any such sublicense will be consistent with the terms of this Agreement and will include confidentiality, non-disclosure and non-use provisions at least as restrictive or protective of the Parties as those set forth in this Agreement. Each Party will remain responsible and liable for the performance of all Sublicensees through all tiers under their sublicensed rights to the same extent as if such activities were conducted by the sublicensing Party and will ensure that any such Sublicensees comply with all relevant provisions of this Agreement. Any sublicense granted hereunder that is inconsistent with this Section 7.1.3 (Right to Sublicense) will be null and void.

 

7.2.                            Development and Commercialization Licenses.

 

7.2.1.                                Exclusive License Grant. On a Research Program-by-Research Program basis, subject to Janssen’s exercise of an Option with respect to a Research Program in accordance with Section 3.2 (Option Exercise), Morphic hereby grants and agrees to grant to Janssen a worldwide, exclusive, royalty-bearing license, with the right to grant sublicenses in accordance with Section 7.2.4 (Right to Sublicense), under the Morphic Technology to Develop, make, have made, use, have used, sell, have sold, offer for sale, import and otherwise Exploit Licensed Compounds and Products that are the subject of such Research Program.

 

7.2.2.                                Non-Exclusive License Grant to Morphic.  Janssen hereby grants and agrees to grant to Morphic a non-exclusive, royalty-free, irrevocable, perpetual, worldwide license, with the right to sublicense through multiple tiers, under all the Assigned Product-Specific Patents and all Assigned Product-Specific Know-How to Develop, make, have made, use, have used, sell, have sold, offer for sale, import and otherwise Exploit Morphic Compounds and Products incorporating or derived from Morphic Compounds, in each case, that are the subject of any Terminated Program.

 

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7.2.3.                                Residual Memory and Firewall.

 

(a)                   Notwithstanding anything to the contrary in this Agreement but subject to Section 7.2.3(b), each Party’s employees, contractors, advisors, agents and other personnel may use any learning, skills, ideas, concepts, techniques, Know-How and information Controlled by the other Party retained in intangible form in the unaided memory of such personnel who had access thereto through participation in the Research Activities (collectively, “Residual Information”) for any purpose.  A personnel’s memory will be considered unaided only if such person has not intentionally memorized the information for the purpose of retaining and/or subsequently recording, publishing, disclosing or using it.

 

(b)                   Notwithstanding anything to the contrary in this Agreement, on a Research Program-by-Research Program basis, if Morphic provides any Morphic Know-How to Janssen in order for Janssen to conduct Late Lead Optimization Activities that are designated as Morphic Research Activities in the applicable Research Plan for a Research Program in accordance with Section 7.1.2(b) (Late Lead Optimization Activities), then, for a period commencing on the Effective Date and ending on the [***] of the end of the Research Term for such Research Program, Janssen covenants and agrees that (i) no such Morphic Know-How will be used by or on behalf of Janssen or any of its Affiliates in more than a de minimis fashion in connection with any subsequent performance of any Development or Commercialization of any pharmaceutical product (other than a Product) and (ii) Janssen and its Affiliates will institute commercially reasonable technical and administrative safeguards to ensure the requirements set forth in the foregoing clause (i) are met, including by creating “firewalls” between the personnel working on any such pharmaceutical product (other than a Product) and the personnel that (A) are conducting such Late Lead Optimization Activities for such Research Program or (B) have accessed data relating to such Late Lead Optimization Activities (provided, that the foregoing clause (A) and (B) will not apply to any senior management of Janssen (or its Affiliates) who merely have knowledge of the relationship with Morphic or who are receiving general information regarding the progress of such Late Lead Optimization Activities but do not direct or are not otherwise directly involved in the performance of such Late Lead Optimization Activities).

 

7.2.4.                                Right to Sublicense. Janssen will have the right to grant sublicenses (or further rights of reference), through multiple tiers of sublicensees, under the licenses granted to Janssen in Section 7.2.1 (Exclusive License Grant) to Janssen’s Affiliates and other Third Parties; provided that any such sublicenses will be consistent with the terms and conditions of this Agreement and will include confidentiality, non-disclosure and non-use

 

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provisions at least as restrictive or protective of the Parties as those set forth in this Agreement. Janssen will remain responsible and liable for the performance of all sublicensees through all tiers under their sublicensed rights to the same extent as if such activities were conducted by Janssen and will ensure that any such sublicensees comply with all relevant provisions of this Agreement. Any sublicense granted hereunder that is inconsistent with this Section 7.2.4 (Right to Sublicense) will be null and void.

 

7.2.5.                                Sublicense Continuation upon Termination.  Upon termination of this Agreement for any reason, upon the request of any Sublicensee, Morphic will enter into a direct license from Morphic to such Sublicensee on the same terms as this Agreement, taking into account any difference in license scope, territory, and duration of sublicense grant (each a “New License Agreement”), provided that such Sublicensee is not at the time of such termination in breach of its sublicense agreement.  Under any such New License Agreement between Morphic and such former Sublicensee, such Sublicensee will be required to pay to Morphic the same amounts in consideration for such direct grant as Morphic would have received from Janssen pursuant to this Agreement on account of such Sublicensee’s Exploitation of Licensed Compounds or Products had this Agreement not been terminated. Under such New License Agreement, Morphic will not be bound by any grant of rights broader than, and will not be required to perform any obligation other than those rights and obligations contained in this Agreement and all applicable rights of Morphic set forth in this Agreement shall be included in such New License Agreement.  Notwithstanding the foregoing, Morphic will not be obligated to enter into a New License Agreement with a Sublicensee unless such Sublicensee notifies Morphic within [***] after the termination of this Agreement that it wishes to enter into a New License Agreement.  At the request of Janssen, Morphic will issue a comfort letter directly to any potential Sublicensee confirming the terms of this Section 7.2.5 (Sublicense Continuation upon Termination).

 

7.3.                            No Other Licenses or Rights.  No license or other right is or will be created or granted under this Agreement by implication, estoppel or otherwise.  All licenses and rights are or will be granted only as expressly provided in this Agreement.  Notwithstanding anything to the contrary contained herein, no license or other right is or will be created or granted under this Agreement with respect to any Know-How or Patent licensed to Morphic under the CMCC License Agreement.

 

8.                                      PAYMENTS.

 

8.1.                            Upfront Payment; Research Program Fee.  On or after the Effective Date, Morphic will submit an invoice to Janssen for $10,000,000 USD as a one-time, non-refundable, non-creditable upfront payment in consideration of the Parties’

 

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commencement of Research Activities for the first and second Research Program under this Agreement (the “Upfront Payment”).  Janssen will pay to Morphic the Upfront Payment within [***] after receipt of invoice therefor by Janssen.

 

8.2.                            Research Program Fee.  Janssen will pay to Morphic a one-time, non-refundable, non-creditable payment of $5,000,000 USD in consideration of the Parties’ commencement of Research Activities for the third Research Program under this Agreement, in each case, in accordance with the applicable Research Plan for such Research Program (such commencement to occur upon Janssen’s determination pursuant to Section 2.4 (Commencement of Research Activities; Research Term)) (the “Research Program Fee”). Janssen will pay the Research Program Fee once under this Agreement no later than [***] after Janssen’s receipt of an invoice therefor in accordance with Section 8.11 (Invoicing and Payment), which invoice Morphic may not provide to Janssen unless and until Janssen determines to commence Research Activities for such third Research Program. If the Parties commence Research Activities in accordance with the applicable Research Plan for the third Research Program under this Agreement, then the maximum amount payable by Janssen under this Section 8.2 (Research Program Fee) is $5,000,000 USD. Janssen will not owe to Morphic the [***].

 

8.3.                            Late Lead Optimization Fee.  On a Research Program-by-Research Program basis, Janssen will pay to Morphic a one-time, non-refundable, non-creditable payment of [***] in consideration of the Parties’ commencement of Late Lead Optimization Activities for Compounds that are the subject of such Research Program (such commencement to occur upon Janssen’s determination pursuant to Section 2.5 (Late Lead Optimization Activities)) (each, a “Late Lead Optimization Fee”). Janssen will pay the Late Lead Optimization Fee to Morphic once for each applicable Research Program no later than [***] after Janssen’s receipt of an invoice therefor in accordance with Section 8.11 (Invoicing and Payment), which invoice Morphic may not provide to Janssen with respect to a Research Program unless and until Janssen determines to commence any Late Lead Optimization Activities for such Research Program.

 

8.4.                            Option Exercise Fee.  On a Research Program-by-Research Program basis, Janssen will pay to Morphic a one-time, non-refundable, non-creditable payment of [***] USD (each, an “Option Exercise Fee”) within [***] in accordance with Section 8.11 (Invoicing and Payment) after Janssen’s receipt of an invoice from Morphic for the Option Exercise Fee for a Research Program, which invoice Morphic may not deliver until receipt by Morphic of an Option Exercise Notice for such Research Program.

 

8.5.                            Development Milestones.  On a Research Program-by-Research Program basis, Janssen will make one-time, non-refundable, non-creditable milestone payments (each, a “Development Milestone Payment”) to Morphic upon the first achievement by Janssen or its Affiliates or Sublicensees of each of the development milestone events (each, a “Development Milestone Event”) set

 

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forth in TABLE 8.5 (Development Milestones) below for the first Product that is the subject of each Research Program to achieve the applicable Development Milestone Event. For the avoidance of doubt, each Development Milestone Payment hereunder will be payable only once per Research Program upon the first achievement of the applicable Development Milestone Event by a Product that is the subject of such Research Program. No additional Development Milestone Payments will be made for any subsequent achievement of such Development Milestone Event by any other Product that is the subject of the same Research Program. If one or more Development Milestone Events are skipped for Products that are the subject of a particular Research Program, then such skipped Development Milestone Events will be payable upon the first achievement of the subsequent Development Milestone Event by a Product that is the subject of the same Research Program, except that a Development Milestone Event that is specific to one territory will not be deemed to be skipped solely because a subsequent Development Milestone Event was achieved in a different territory (e.g., receipt of Regulatory Approval of a Product in a Major European Country will not be deemed to trigger a Development Milestone Payment for receipt of Regulatory Approval of such Product in the United States if such Regulatory Approval of such Product has not yet occurred in the United States). Janssen will notify Morphic in writing of the achievement of a Development Milestone Event by Janssen or its Affiliates or Sublicensees no later than [***] after Janssen becomes aware of the achievement thereof. Thereafter, Morphic will provide Janssen with an invoice for the corresponding Development Milestone Payment, and Janssen will pay to Morphic such Development Milestone Payment within [***] after its receipt of an invoice for such Development Milestone Payment in accordance with Section 8.11 (Invoicing and Payment). If Janssen or its Affiliates or Sublicensees achieve all Development Milestone Events with respect to Products that are the subject of a particular Research Program (regardless of the number of times such events occur or the number of Products that trigger such event), then the maximum amount payable by Janssen with respect to a particular Research Program under this Section 8.5 (Development Milestones) is [***] .

 

Table 8.5 — Development Milestones

 

	
Development Milestone Event
    	
 
    	
Development
   Milestone
   Payment ($USD)
    
	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    

 

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[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    

 

8.6.                            Sales Milestones.  On a Research Program-by-Research Program basis, Janssen will make one-time, non-refundable, non-creditable sales milestone payments (each, a “Sales Milestone Payment” and together with the Development Milestone Payments, the “Milestone Payments”) to Morphic upon the achievement by Janssen or its Affiliates or Royalty Sublicensees of each of the sales-based milestones events (each, a “Sales Milestone Event”) set forth in TABLE 8.6 (Sales Milestones) below with respect to aggregate annual worldwide Net Sales of Products that are the subject of each Research Program. Each of the Sales Milestone Payments set forth below will be payable only one time, for the first Calendar Year in which the corresponding Sales Milestone Event is achieved. Janssen will notify Morphic in writing of the achievement of a Sales Milestone Event by Janssen or its Affiliates or Royalty Sublicensees no later than [***] after the end of the Calendar Year in which such Sales Milestone Payment is payable pursuant to the preceding sentence. Thereafter, Morphic will provide Janssen with an invoice for the corresponding Sales Milestone Payment, and Janssen will pay to Morphic such Sales Milestone Payment within [***] after its receipt of an invoice for such Sales Milestone Payment in accordance with Section 8.11 (Invoicing and Payment). If Janssen or its Affiliates or Royalty Sublicensees achieve all Sales Milestone Events with respect to Products that are the subject of a particular Research Program (regardless of the number of times such events occur or the number of Products that trigger such event), then the maximum amount payable by Janssen with respect to a particular Research Program under this Section 8.6 (Sales Milestones) is [***].

 

Table 8.6 — Sales Milestones

 

	
Sales Milestone Event
    	
 
    	
Sales Milestone
   Payment ($USD)
    
	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    

 

8.7.                            Royalties.  Subject to the provisions of Section 8.8 (Royalty Adjustments), on a Product-by-Product and country-by-country basis, Janssen will pay to Morphic

 

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royalties in the amount of the marginal royalty rates set forth in TABLE 8.7 (Royalty Payments) below of the aggregate Net Sales resulting from the sale of each Product in the Territory during each Calendar Year of the applicable Royalty Term for each Product in each country (each, the “Per Product Annual Net Sales”).  Only one royalty will be due with respect to the same Unit of Product.

 

Table 8.7 — Royalty Payments

 

	
Per Product Annual Net Sales
    	
 
    	
Royalty Rate (%)
    
	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    
	
[***]
    	
 
    	
[***]
    

 

8.8.                            Royalty Adjustments.

 

8.8.1.                                Reduction for Lack of Valid Claims.  Subject to Section 8.8.4 (Maximum Payment Adjustments), on a Product-by-Product and country-by-country basis, if, during the Royalty Term for a Product in a country in the Territory, such Product sold in such country is not Covered by one or more Valid Claims within a Royalty-Bearing Patent in such country, then the royalties payable by Janssen pursuant to Section 8.7 (Royalties) for such Product in such country (without giving effect to any reduction pursuant to this Agreement) will be reduced by [***] for the remainder of the Royalty Term for such Product in such country.

 

8.8.2.                                Generic Competition. If, on a Product-by-Product, Calendar Quarter-by-Calendar Quarter and country-by-country basis, there is a (a) sale of one or more Generic Products with respect to a Product in a country and (b) [***] decrease in gross amounts invoiced by Janssen or any of its Affiliates or Royalty Sublicensees (excluding any Third Party Distributor or Compulsory Sublicensee) on sales of a Product to a Third Party purchaser (including any Third Party Distributor), in each case of (a) and (b), in any given Calendar Quarter as compared to the average of such gross amounts invoiced on sales of such Product for the immediately preceding four Calendar Quarters, then the royalty rates payable by Janssen pursuant to Section 8.7 (Royalties) for such Product in such country (without giving effect to any reduction pursuant to this Agreement) shall be reduced by [***] for the remainder of the Royalty Term for such Product in such country.

 

8.8.3.                                Third Party Payments by Janssen. Subject to Section 8.8.4 (Maximum Payment Adjustments), if Janssen or any of its Affiliates makes any payment to a Third Party in consideration for a grant of rights under a Patent or other Intellectual Property Controlled by such Third Party (whether by acquisition or license) that is necessary or useful to Exploit

 

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one or more Products, then Janssen may credit against the royalties due to Morphic:

 

(a)                   in the case of any Morphic Research Activity Third Party Payments (except as provided in Section 8.9.3 (Third Party Agreements Prior to the Effective Date)), [***] of such amounts actually paid to such Third Party pursuant to such agreement; and

 

(b)                   in the case of all payments to one or more Third Parties other than Morphic Research Activity Third Party Payments, [***] of the amounts actually paid to such Third Party pursuant to such agreement (including any upfront payments, milestone payments, royalties and profit-sharing payments) in consideration for such rights.

 

8.8.4.                                Maximum Payment Adjustments.  In no event will the royalties payable to Morphic by Janssen pursuant to Section 8.7 (Royalties) for a Product (without giving effect to any reduction pursuant to this Agreement) in a given Calendar Quarter be reduced by more than [***] of the aggregate amount that would otherwise be payable to Morphic in respect such royalties for such Product in such Calendar Quarter as a result of the reductions permitted pursuant to Section 8.8.1 (Reduction for Lack of Valid Claims), Section 8.8.2 (Generic Competition) and Section 8.8.3 (Third Party Payments by Janssen). Janssen may carry forward any such reductions permitted under Section 8.8.1 (Reduction for Lack of Valid Claims), Section 8.8.2 (Generic Competition) or Section 8.8.3 (Third Party Payments by Janssen) that are incurred or accrued in a Calendar Quarter but are not applied against royalties due to Morphic in such Calendar Quarter as a result of the foregoing floor and apply such amounts against royalties due to Morphic in any subsequent Calendar Quarter until the amount of such reduction has been fully applied against royalties due to Morphic.

 

8.8.5.                                Royalty Sublicensees.  [***].

 

8.9.                            Third Party Intellectual Property.

 

8.9.1.                                Morphic’s Obligations.

 

(a)                   Morphic Research Activities. Each Party will promptly notify the other Party if it becomes aware of any Intellectual Property Controlled by a Third Party that such Party reasonably determines is necessary or useful to conduct the Morphic Research Activities under the applicable Research Plan. Except as expressly set forth in a Research Plan, Morphic will have the first right, but not the obligation, to negotiate with and seek to acquire rights (whether by acquisition or license) to any issued patents Controlled by a Third

 

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Party that a Party reasonably determines is necessary to conduct any Morphic Research Activities (such patent, an “Identified Research Activity Patent”) or initiate a legal action contesting any assertion that the conduct of the Morphic Research Activities infringes, misappropriates or otherwise violates such Identified Research Activity Patents in accordance with Section 11.7 (Third Party Claims), and if Morphic so elects to seek such rights, then (i) Morphic will use reasonable efforts to ensure that any such rights are freely sublicensable to Janssen to the extent of the licenses and rights granted to Janssen under this Agreement and (ii) Janssen will have the right to review and comment on the terms of any such acquisition or license, and Morphic will consider in good faith any comments made by Janssen.

 

(b)                   Identified Research Activity Patents. If, however, Janssen notifies Morphic of an Identified Research Activity Patent during the Option Period for a Research Program and Morphic fails to (i) acquire such rights to such Identified Research Activity Patents or (ii) initiate a legal action contesting the assertion that the conduct of the Morphic Research Activities infringes, misappropriates or otherwise violates such Identified Research Activity Patents in accordance with Section 11.7 (Third Party Claims), in each case ((i) and (ii)), by the [***] of becoming aware thereof, then Morphic will so notify Janssen, and if following discussion with Morphic with respect to the acquisition of such rights Janssen reasonably believes that it is necessary to acquire rights to such Identified Research Activity Patents, then Janssen may seek to acquire such rights following the exhaustion of all appeals with respect to any such legal action. If Janssen elects to and so acquires such rights to such Identified Research Activity Patents in accordance with this Section 8.9.1(b) (Identified Research Activity Patents), then Janssen may credit the amounts paid to one or more Third Parties with respect to such rights in accordance with Section 8.8.3(a). Without limiting this Section 8.9.1(a) (Morphic Research Activities) or Section 13.3.1(c), Morphic will be responsible for all financial and other obligations owed by Janssen to Third Parties with respect to any infringement, misappropriation or other violation incurred in connection with or otherwise related to the performance of the Morphic Research Activities under the applicable Research Plan in accordance with Section 8.9.2 (Morphic Research Activity Third Party Payments).

 

(c)                    CMCC License Agreement. Except as expressly set forth in a Research Plan, Morphic will be solely responsible for, and will satisfy, all financial and other obligations, including royalties, due from Morphic to any Third Parties pursuant to the CMCC License Agreement.

 

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8.9.2.                                Morphic Research Activity Third Party Payments. Except as expressly set forth in a Research Plan and subject in all cases to Janssen’s right to credit payments due to Third Parties against royalties due to Morphic in accordance with Section 8.8.3(a) and Section 8.8.4 (Maximum Payment Adjustments), Morphic will be solely responsible for all, and will satisfy, financial (including any upfront payments, milestone payments, royalties and profit-sharing payments) and other obligations owed by Janssen to Third Parties with respect to any infringement, misappropriation or other violation incurred in connection with or otherwise related to the performance of the Morphic Research Activities under the applicable Research Plan to the extent performed by or on behalf of Morphic or Janssen (the “Morphic Research Activity Third Party Payments”).

 

8.9.3.                                Third Party Agreements Prior to the Effective Date. Morphic will be solely responsible for all, and will satisfy, all financial and other obligations, including royalties, due from Morphic to any Third Parties pursuant to any agreement to which Morphic is a party as of the Effective Date and pursuant to which Morphic Controls any aspect of the Morphic Technology or the Morphic Platform or any Compound, including the CMCC License Agreement.

 

8.10.                     Compulsory Licenses.  If a Governmental Authority grants or compels Janssen to grant a compulsory license to a Third Party to Commercialize a Product (a “Compulsory Sublicensee”), then, (a) if Janssen is compensated on a royalty basis, in lieu of the royalties that would otherwise be due to Morphic pursuant to Section 8.7 (Royalties) Janssen will pay to Morphic [***] of the royalties paid to Janssen by the applicable Compulsory Sublicensee and (b) if Janssen is compensated on any basis other than on a royalty basis, then Janssen will pay to Morphic [***] of such other amounts paid to Janssen by the applicable Compulsory Sublicensee.

 

8.11.                     Invoicing and Payment.

 

8.11.1.                         FTE Costs and Out-of-Pocket Costs.  For any FTE Costs and Out-of-Pocket Costs incurred in connection with the performance of the Morphic Research Activities for which Janssen is obligated to reimburse Morphic pursuant to Section 2.3.1 (Allocation of Costs), payments to Morphic for such costs will be made upon invoice approval and no later than [***] after the invoice date.  All such invoices will include the purchase order number that will be sent to Morphic upon completion of the applicable Morphic Research Activities in the applicable Calendar Quarter. Janssen will not be under any obligation to process any invoice unless such invoice includes the following information: (a) the invoice number; (b) invoice date; (c) dollar amount of invoice; (d) purchase order number; (e) explanation of work completed; (f) remit to address; and (g) bill to name and address.  Invoices to be provided under this Section 8.11.1 (FTE

 

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Costs and Out-of-Pocket Costs) will be sent to: Accounts Payable, Johnson & Johnson Shared Services, P.O. Box 16571, New Brunswick, NJ, 08906-6500, or Morphic can elect to enroll in web invoicing service by contacting J&J’s Global Services help desk at 732-448-7414.

 

8.11.2.                         Other Payments.  All other payments made under this Agreement by a Party will be made by wire transfer or electronic funds transfer (“EFT”) in immediately available funds.  If either Party elects to make payments under this Agreement by EFT, then the other Party will provide a completed electronic funds transfer form to the paying Party in a timeframe that facilitates timely payment.  Each Party will promptly notify the other Party of the appropriate account information to facilitate any such payment.

 

8.12.                     Reports.  For as long as Janssen owes royalties on Net Sales of Product under this ARTICLE 8 (Payments), royalties payments are due and payable [***] after the end of each Calendar Quarter. In each such Calendar Quarter, Janssen will provide Morphic a written report showing, for such Calendar Quarter, (a) aggregate gross sales of Product in the Territory and on a Region-by-Region basis, (b) aggregate Net Sales of Product in the Territory and on a Region-by-Region basis and (c) royalty payments owed for that Calendar Quarter. Royalties are payable in U.S. dollars to the bank account designated in writing by Morphic.

 

8.13.                     Records and Audits.

 

8.13.1.                         Audit of Morphic.  Morphic will keep, and will instruct its Affiliates and Sublicensees to keep, such accounting records as are necessary to permit Janssen to verify FTE Costs invoiced by Morphic under this Agreement.  Morphic will, and will cause its Affiliates and Sublicensees to retain such records at the respective places of business of Morphic and its Affiliates for at least the [***] after the Calendar Year to which such records pertain.  Until expiration of such retention period, Janssen may, at Janssen’s expense, cause an independent certified accountant that is an internationally recognized expert in the field of audit selected by Janssen and reasonably acceptable to Morphic to audit such records, subject to the terms of Section 8.14 (Conduct of Audits).  If any such audit determines that Janssen overpaid Morphic, then Janssen may credit such amount against any other payments owed to Morphic under this Agreement, or, to the extent that there are not sufficient payments then due to Morphic hereunder against which Janssen may fully credit such overpayment, then Morphic will refund to Janssen the uncreditable amount of such overpayment no later than [***] after receipt of the applicable audit report.

 

8.13.2.                         Audit of Janssen.  Janssen will keep, and will instruct its Affiliates and Sublicensees to keep, such accounting records as are necessary to

 

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permit Morphic to confirm the accuracy of Janssen’s financial records related to the royalty calculations and other amounts paid or payable by Janssen under this Agreement.  Janssen will, and will cause its Affiliates and Sublicensees to, retain such records at the respective places of business of Janssen and its Affiliates for at least the [***] after the Calendar Year to which such records pertain.  Until expiration of such retention period, Morphic may, at Morphic’s expense, cause an independent certified accountant that is an internationally recognized expert in the field of audit selected by Morphic and reasonably acceptable to Janssen to audit such records, subject to the terms of Section 8.14 (Conduct of Audits).  If any such audit determines that Janssen underpaid Morphic, then Morphic may offset such amount against any other payments owed to Janssen under this Agreement, or, to the extent that there are not sufficient payments then due to Janssen hereunder against which Morphic may fully offset such underpayment, then Janssen will pay to Morphic the amount of such underpayment which is not offset as provided above no later than [***] after receipt of the applicable audit report.

 

8.13.3.                         Audit Dispute.  If the audited Party disagrees with the findings of the audit report, then the Parties will first seek to resolve the matter between themselves. If the Parties fail to reach agreement with respect to such matter, then either Party may refer such matter for resolution in accordance with the dispute resolution provisions set forth in Section 15.1 (Discussion by Executive Officers; Arbitration).

 

8.14.                     Conduct of Audits.  It is a condition to the conduct of any audit permitted by Section 8.13 (Records and Audits) that the accountant sign and deliver to the audited Party a confidentiality agreement as reasonably requested by the audited Party.  The Party engaging such accountant will require such accountant to share the findings of any such audit with both Parties.  The audit report will only contain the information relevant to support the statement as to whether FTE Costs, royalties or payments due (as applicable) were calculated and paid accurately and will not include any Confidential Information disclosed to the auditor during the course of the audit.  The auditing Party will pay for any such audit under Section 8.13 (Records and Audits), unless: (a) in the case of an audit under Section 8.13.1 (Audit of Morphic), such audit determines that Janssen overpaid Morphic by more than [***] of the amount owed, in which case Morphic will reimburse Janssen for the reasonable and documented fees and expenses of the auditor paid by Janssen for such audit; and (b) in the case of an audit under Section 8.13.2 (Audit of Janssen), such audit determines that Janssen underpaid Morphic by more than [***] of the amount owed, in which case Janssen will reimburse Morphic for the reasonable and documented fees and expenses of the auditor paid by Morphic for such audit.  Each Party may inspect all such records no more frequently than once every [***], during normal business hours with at least [***] prior written notice. An

 

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audit of the records relating to a particular Calendar Year may be conducted once and not more than once.

 

8.15.                     Currency Exchange.  All payments under this Agreement must be made in U.S. dollars.  If Products are sold in a currency other than U.S. dollars, for purposes of calculating royalties, then revenues from those sales must be expressed in U.S. dollars using the Currency Hedge Rates.  During any period where Janssen is paying royalties, not later than [***] after the Currency Hedge Rates for the next Calendar Year are available, Janssen will notify Morphic of the Currency Hedge Rates for the local currency of each country in the Territory and all relevant details.  The Currency Hedge Rates for a Calendar Year will remain unchanged during that Calendar Year.

 

8.16.                     Taxes.

 

8.16.1.                         Indirect Taxes.  Amounts payable under this Agreement do not include any sales, use, excise, value added or other applicable taxes, tariffs or duties.  If any taxing authority imposes a VAT, GST, sales, use, service, consumption, business or similar Tax with respect to the work undertaken under this Agreement, then Janssen agrees to pay that amount if specified in a valid invoice or supply exemption documentation. For avoidance of doubt, Morphic will not be entitled to pass on to Janssen, and Janssen will not be obligated to pay or bear, any Tax that is based on Morphic’s real, personal or intangible property (whether owned or leased), corporate structure, franchise, continuing business operations, income, gross receipts, capital stock, net worth or imposed with respect to Morphic’s engagement of employees or independent contractors or that Morphic incurs upon engaging any Subcontractor to perform its obligations under this Agreement, in whole or in part, to any affiliated or non-affiliated Third Party.  Morphic is solely responsible, to the extent required by Applicable Law, for identifying, billing and collecting the Taxes payable by Janssen in all relevant federal, state, county, municipal and other taxing jurisdictions and for filing all required tax returns in a timely manner. To the extent that Morphic does not provide Janssen a valid invoice (i.e., an invoice compliant with this Agreement and the rules and regulations of the jurisdiction of both Morphic and Janssen, including separate identification of the Tax where legally required), Morphic will be responsible for any penalty resulting directly from such noncompliance.  The Parties will cooperate in good faith to minimize taxes to the extent legally permissible.

 

8.16.2.                         Withholding Taxes.  Janssen will make all payments to Morphic under this Agreement without deduction or withholding for Taxes except to the extent that any such deduction or withholding is required by law in effect at the time of payment.

 

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(a)                   Any Tax required to be withheld on amounts payable under this Agreement will be deducted from amounts otherwise due to Morphic under this Agreement and paid by Janssen on behalf of Morphic to the appropriate Governmental Authority and Janssen will furnish Morphic with proof of payment of such Tax.  Any such Tax required to be withheld will be an expense of and borne by Morphic. If any such Tax is assessed against and paid by Janssen, then Morphic will indemnify and hold harmless Janssen from and against such Tax.

 

(b)                   Janssen and Morphic will cooperate with respect to all documentation required by any taxing authority or reasonably requested by Janssen to secure a reduction in the rate of applicable withholding Taxes.  On the Effective Date, Morphic will deliver to Janssen an accurate and complete Internal Revenue Service Form W-9 certifying that Morphic is a resident of the United States.

 

8.16.3.                         Paying Agent.  Janssen Research & Development, LLC, a New Jersey limited liability company having its principal place of business at 920 U.S. Route 202 (P.O. Box 300), Raritan, NJ 08869 (“JRD”), acting as paying agent for Janssen, may make certain payments due under this Agreement, and Janssen will reimburse JRD for all such payments

 

8.16.4.                         Transfer of Obligations or Rights.  Notwithstanding the foregoing, if Janssen takes any action, including an assignment or transfer of its rights and obligations to an Affiliate that is not a U.S. person (as defined in Section 7701(a)(30) of the Code), and if as a result of such action by Janssen, such Affiliate or Janssen is required by law to withhold Taxes that were not otherwise applicable, from or in respect of any amount payable under this Agreement, then any such amount payable under this Agreement shall be increased to take into account such withholding Taxes as may be necessary so that, after making all required withholdings (including withholdings on the withheld amounts) Morphic receives an amount equal to the sum it would have received if the transfer to an Affiliate, that is not a U.S. person, had not occurred.  In the event the Agreement is assigned or transferred to a Third Party that is not a U.S. person and Third Party is required by law to withhold Taxes that were not otherwise applicable, then any such amount payable under this Agreement shall be increased by the Third Party to take into account such withholding Taxes as may be necessary so that, after making all required withholdings (including withholdings on the withheld amounts), Morphic receives an amount equal to the sum it would have received if the transfer to a Third Party, that is not a U.S. person, had not occurred.

 

8.17.                     Late Payments. If either Party fails to make timely payment of any amount pursuant to this ARTICLE 8 (Payments), then any such payment that is not paid on or before the due date that is due under this ARTICLE 8 (Payments) will bear

 

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interest, to the extent permitted by Applicable Laws, at the Applicable Rate, effective for the first date on which payment was delinquent and calculated on the number of days such payment is overdue. In the event that LIBOR ceases to exist and either Party fails to make timely payment of any amount pursuant to this ARTICLE 8 (Payments), Janssen will promptly provide to Morphic written notice of the Janssen benchmark interest rate that replaces LIBOR as the Applicable Rate.

 

9.                                      INTELLECTUAL PROPERTY.

 

9.1.                            Ownership.  Subject to the provisions of ARTICLE 7 (License Grants) and this ARTICLE 9 (Intellectual Property), ownership of any Inventions that are conceived, created, invented, made or reduced to practice by or on behalf of the Parties (solely or jointly) in the course of performing the Research Activities will be allocated between the Parties as follows:

 

9.1.1.                                Improvements to Morphic Technology. Morphic will own any Invention that is an improvement to the Morphic Platform (such Inventions, “Morphic Platform Inventions”).

 

9.1.2.                                Other Inventions.

 

(a)                   Except as expressly set forth in Section 9.1.1 (Improvements to Morphic Technology) and subject to the licenses granted by Morphic to Janssen pursuant to Section 7.1 (Research Term Licenses) and Section 7.2 (Development and Commercialization Licenses to Janssen), as between the Parties, (i) Morphic will own all rights, title and interests in and to any Invention made, conceived, discovered or otherwise generated solely by or on behalf of Morphic in the performance of Morphic Research Activities under this Agreement, and any Patents that Cover such Invention, (ii) Janssen will own all rights, title and interests in and to any Invention made, conceived, discovered or otherwise generated solely by or on behalf of Janssen in the performance of activities under this Agreement (including all Janssen Research Activities) (each, a “Janssen Product Invention”) and any Patents that Cover any Janssen Product Invention and (iii) the Parties will jointly own all rights, title and interests in and to any Invention made, conceived, discovered or otherwise generated jointly by or on behalf of the Parties in the course of performing Research Activities under this Agreement (each, a “Joint Invention”), any Know-How made, conceived, discovered or otherwise generated jointly by or on behalf of the Parties in the course of performing Research Activities under this Agreement (“Joint Know-How”) and any Patents (excluding Morphic Platform Patents and Morphic Platform and Product Patents) that Cover any Joint Invention or Joint Know-How (“Joint

 

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Patents” and together with the Joint Inventions, the “Joint Technology”).

 

(b)                   Inventorship.  Inventorship of patentable inventions conceived or reduced to practice during the course of performance of activities pursuant to this Agreement will be determined in accordance with U.S. patent laws.

 

9.2.                            Assignment of Intellectual Property.

 

9.2.1.                                Janssen Assignment of Morphic Platform Inventions.  Janssen will and hereby does assign to Morphic all of its rights, title and interests in and to all Morphic Platform Inventions, and Morphic hereby accepts such assignment.

 

9.2.2.                                Morphic Assignment of Assigned Product-Specific Technology.  Upon exercise by Janssen of an Option with respect to a Research Program in accordance with Section 3.2 (Option Exercise), Morphic will, and hereby does, assign to Janssen (without any further action required on the part of Janssen) all Product-Specific Patents that Cover any Licensed Compound or Product that is the subject of the Research Program with respect to which Janssen exercised an Option (the “Assigned Product-Specific Patents”) and all Know-How that solely relates to any Licensed Compound or Product that is the subject of the Research Program with respect to which Janssen exercised an Option (the “Assigned Product-Specific Know-How” and together with the Assigned Product-Specific Patents, the “Assigned Product-Specific Technology”), and Janssen hereby accepts such assignment. Effective upon the assignment of any Assigned Product-Specific Patent and Assigned Product-Specific Know-How, such Patent will become a Janssen Patent (and will no longer be a Morphic Patent) and such Know-How will become Janssen Know-How (and will no longer be Morphic Know-How), but such Patent will remain a Product-Specific Patent for so long as such Patent satisfies the definition thereof with respect to the applicable Research Program and Product.

 

9.2.3.                                Cooperation and Assistance. The Party required to assign to the other Party rights in any Patents or Know-How pursuant to the foregoing Section 9.2.1 (Janssen Assignment of Morphic Platform Inventions) and Section 9.2.2 (Morphic Assignment of Assigned Product-Specific Technology) (the “Assigned Technology” and the “Assigning Party” and the “Owning Party,” respectively) will take (and cause its Affiliates, and their respective employees, agents and contractors to take) such further actions reasonably requested by the Owning Party to evidence such assignment and to assist the Owning Party in obtaining Patent and other Intellectual Property rights protection for such Assigned

 

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Technology, including executing further assignments, consents, releases and other commercially reasonable documentation and providing good faith testimony by affidavit, declaration, in-person or other proper means in support of any effort by the Owning Party to establish, perfect, defend or enforce its rights in any such Assigned Technology through prosecution of governmental filings, regulatory proceedings, litigation and other means, including through the filing, prosecution, maintenance and enforcement of such Assigned Technology. The Assigning Party will obligate its Affiliates and Subcontractors to assign all applicable Assigned Technology to the Assigning Party (or directly to Owning Party) so that Assigning Party can comply with its obligations under this Section 9.2.3 (Cooperation and Assistance), and the Owning Party will promptly obtain such assignment.  Without limitation, the Assigning Party will cooperate with the Owning Party if the Owning Party applies for U.S. or foreign patent protection for such Assigned Technology and will obtain the cooperation of the individual inventors of any such Assigned Technology. If the Assigning Party is unable to assign any Assigned Technology, then the Assigning Party hereby grants and agrees to grant to the Owning Party a royalty-free, fully paid-up, exclusive (even as to the Assigning Party, subject to the terms of this Agreement, including the licenses granted to the Owning Party pursuant to ARTICLE 7 (License Grants)), perpetual, irrevocable license (with the right to grant sublicenses through multiple tiers) under such Assigned Technology for any and all purposes.

 

9.2.4.                                Joint Technology.  Each Party will and hereby does assign to the other Party a joint interest in and to all Joint Technology, and the other Party hereby accepts such assignment.  Each Party will take (and cause its Affiliates and Sublicensees, and their respective employees, agents and contractors to take) such further actions reasonably requested by the other Party to evidence such assignment and to assist the Parties in obtaining jointly-owned Patent and other Intellectual Property rights protection for Inventions within the Joint Technology, including executing further assignments, consents, releases and other commercially reasonable documentation and providing good faith testimony by affidavit, declaration, in-person or other proper means in support of any effort by the Parties to establish, perfect, defend or enforce their rights in any Joint Technology through prosecution of governmental filings, regulatory proceedings, litigation and other means, including through the filing, prosecution, maintenance and enforcement of the Joint Technology.  Each Party will cause its Affiliates, Sublicensees and Third Party contractors (including all Subcontractors) to assign all Joint Technology to such Party so that each Party can comply with its obligations under this Section 9.2.4 (Joint Technology). Without limitation, each Party will cooperate with the other Party if the Parties agree to apply for U.S. or foreign patent protection for such Joint Technology and will obtain the cooperation of the individual inventors of any such Joint Technology.  If

 

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either Party is unable to assign a joint interest in any Joint Technology, then such Party hereby grants and agrees to grant to the other Party a royalty-free, fully paid-up non-exclusive (subject to the terms of this Agreement, including the licenses granted pursuant to ARTICLE 7 (License Grants)), perpetual, irrevocable license (with the right to grant sublicenses through multiple tiers) under such Joint Technology for any and all purposes.

 

9.3.                            Exploitation of Joint Technology. Subject to the licenses granted and exclusivity obligations set forth under this Agreement, each Party will exercise its ownership rights in and to any such Joint Technology, including the right to license and sublicense or otherwise to exploit, transfer or encumber its ownership interest, without an accounting or obligation to, or consent required from, the other Party. To the extent any further consent is required to enable a Party to so license or exploit its interest in the Joint Technology, the other Party will grant consent promptly upon request. Each Party will require its employees (or Third Party(ies) performing Research Activities on its behalf) to assign to such Party any Invention made, conceived, discovered or otherwise generated by such employees (or such Third Party(ies)) and to cooperate with such Party in connection with obtaining patent protection therefor.

 

9.4.                            Disclosure.  Each Party will promptly disclose to the other Party all Inventions within the Joint Technology, Janssen will promptly disclose to Morphic all Morphic Platform Inventions and Morphic will promptly disclose to Janssen all Inventions made in the course of activities conducted pursuant to this Agreement, in each case, that such Party develops or invents, whether solely or jointly with others (in any event, prior to the filing of any patent application with respect to such Inventions), including all invention disclosures or other similar documents submitted to such Party by its or its Affiliates’ employees, agents, or independent contractors relating thereto.  Each Party will also promptly respond to reasonable requests from the other Party for additional information relating thereto.

 

9.5.                            Joint Research Agreement.  This Agreement is a joint research agreement in accordance with 35 U.S.C. §103(c)(3) to develop and commercialize Compounds or Products.  Neither Party is required by this reference to have any Patent take advantage of or become subject to such §103(c)(3) except in accordance with the provisions of ARTICLE 10 (Patent Prosecution and Maintenance) regarding the Prosecution and Maintenance of such Patent.

 

9.6.                            Trademarks.  Janssen will, in its sole discretion, select and own all Trademarks used in connection with the Exploitation of Products.

 

10.                               PATENT PROSECUTION AND MAINTENANCE.

 

10.1.                     Morphic Prosecution and Maintenance of Patents. During the Research Term for each Research Program and until the date, if any, on which Janssen exercises

 

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an Option for a Research Program in accordance with Section 3.2 (Option Exercise)(the “Prosecution Term”), Morphic will be responsible for the Prosecution and Maintenance of those Morphic Patents and those Joint Patents that Cover Compounds or Products that are the subject of such Research Program or under which a Party practices in the performance of the Research Activities for such Research Program.  During the Prosecution Term, Morphic will file or cause to be filed, and prosecute or cause to be prosecuted to allowance or final rejection all Morphic Patents and Joint Patents in at least those countries listed on Schedule 10.1 (the “Jurisdictions”).  At all times during the Term, Morphic will be responsible for the Prosecution and Maintenance of the Morphic Platform Patents and Morphic Platform and Product Patents (together with all other Patents described in this Section 10.1 (Morphic Prosecution and Maintenance of Patents) during the Prosecution Term, the “Morphic Prosecuted Patents”).

 

10.2.                     Janssen Input.  Within [***] after the filing in the United States of an application within the Morphic Patents or a Joint Patent, Morphic will provide Janssen a written request inquiring in which countries or regions Janssen would desire Morphic to file a corresponding international application, in addition to the Jurisdictions.  Janssen will so notify Morphic within [***] after such notice of which countries or regions Janssen would desire Morphic to file a corresponding international application.  If Morphic does not desire to file such an international application in a country or region outside the Jurisdictions so requested by Janssen, then Morphic will so notify Janssen and then Janssen will have the option to request that Morphic file such international application in such countries or regions outside the Jurisdictions.  Morphic will file such international applications in such countries or regions outside the Jurisdictions, and Janssen will reimburse Morphic for its out-of-pocket expenses in Prosecuting and Maintaining such requested international patent applications.  Janssen, however, will have sole discretion and decision-making authority over whether to discontinue any Prosecution and Maintenance of such requested international patent applications in those countries or regions outside the Jurisdictions, upon [***] written notice to Morphic.

 

10.3.                     Information Sharing.  Upon Janssen’s reasonable request during the Term, Morphic will provide to Janssen: (a) copies of or access to all relevant patent applications included in the Morphic Prosecuted Patents; (b) copies of or access to any existing prior art searches for such applications; and (c) copies of or access to all correspondence to and from the U.S. Patent and Trademark Office and foreign patent offices for such applications.

 

10.4.                     Review and Consult.  Janssen will have the right to consult with Morphic regarding the content of the patent applications included in the Morphic Prosecuted Patents in advance of filing thereof with any patent authority, prior art searches and correspondence and to comment thereon to Morphic, or at Morphic’s request, to Morphic’s designated outside counsel, and Morphic will provide Janssen with all material correspondence received from any patent authority in connection therewith. In addition, Morphic will provide Janssen with drafts of proposed

 

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material filings and correspondence to any patent authority in connection with the Prosecution and Maintenance of any Morphic Prosecuted Patent for Janssen’s review and comment prior to the submission of such proposed filings and correspondence. Morphic will consider in good faith all such comments offered by Janssen and will incorporate such comments where appropriate.

 

10.5.                     Janssen Prosecution and Maintenance of Patents.  Janssen will be solely responsible for the Prosecution and Maintenance of all Janssen Patents. Following the exercise of an Option for a Research Program in accordance with Section 3.2 (Option Exercise), Janssen will be responsible for the Prosecution and Maintenance of all Joint Patents, Assigned Product-Specific Patents and Morphic Platform and Product Patents that Cover any Licensed Compound or Product that is the subject of such Research Program (together with any Janssen Patents, the “Janssen Prosecuted Patents” and the applicable Patents that were previously Morphic Prosecuted Patents will thereafter become Janssen Prosecuted Patents for purposes of this Agreement). Notwithstanding anything to the contrary set forth in this Agreement, Morphic may file applications claiming priority to such Morphic Platform and Product Patents, including divisionals, continuations or continuations in part, in each case, solely in the event such applications do not include any claims that Cover (a) any Licensed Compound or Product incorporating any such Licensed Compound that is the subject of such Research Program, (b) any composition (e.g., a pharmaceutical composition) containing any such Licensed Compound or Product, (c) any use or a method of using any such Licensed Compound, Product or composition or (d) any method for Manufacturing any such Licensed Compound, Product or composition.  Morphic will execute such documents and perform such acts as may be reasonably necessary to allow Janssen to initiate or continue such Prosecution and Maintenance of the Janssen Prosecuted Patents at Janssen’s sole expense.  Janssen may cease Prosecution and Maintenance of any Janssen Prosecuted Patent on a country-by-country basis in the Territory by providing written notice to Morphic.  If Janssen elects to cease Prosecution and Maintenance of any Janssen Prosecuted Patent in a country, then Morphic, at its sole discretion and cost, may continue Prosecution and Maintenance of such Janssen Prosecuted Patent in such country in Morphic’s name.  In addition, Janssen will provide Morphic with drafts of proposed material filings and correspondence to any patent authority in connection with the Prosecution and Maintenance of any Morphic Platform and Product Patent, Joint Patent or Assigned Product-Specific Patent for Morphic’s review and comment prior to the submission of such proposed filings and correspondence. In no event, however, will Janssen have any obligation to incorporate such comments offered by Morphic.

 

10.6.                     Cooperation.  Each Party will reasonably cooperate with the other Party in the filing, Prosecution and Maintenance of the Morphic Patents and Joint Patents pursuant to this Agreement.  Such cooperation includes promptly executing all documents, or requiring inventors, Subcontractors, employees, former employees (to the extent reasonably available) and consultants and agents to execute all

 

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documents, as reasonable and appropriate so as to enable the Prosecution and Maintenance of any such Patents in any country. Notwithstanding Janssen’s right to Prosecute and Maintain the Janssen Prosecuted Patents or Morphic’s right to Prosecute and Maintain the Morphic Prosecuted Patents, the Parties will, and will cause their Affiliates to, cooperate and implement reasonable patent filing and prosecution strategies (including filing divisionals, continuations or otherwise) so that, to the extent reasonable and feasible, Product-Specific Patents and Morphic Platform Patents are pursued in mutually exclusive patent applications to avoid the creation of Morphic Platform and Product Patents where reasonably practicable. In addition, Janssen will Prosecute and Maintain the Morphic Platform and Product Patents in accordance with Section 10.5 (Janssen Prosecution and Maintenance of Patents) using nationally recognized outside counsel that is mutually acceptable to each Party.

 

10.7.                     No Attorney-Client Privilege.  For the avoidance of doubt, nothing in this ARTICLE 10 (Patent Prosecution and Maintenance) is deemed to create an attorney-client relationship between Janssen’s in-house counsel and Morphic or between outside counsel representing Janssen and Morphic.

 

11.                               ENFORCEMENT OF INTELLECTUAL PROPERTY.

 

11.1.                     Notification.  If either Party becomes aware of any existing or threatened infringement or misappropriation of any Morphic Patent, Janssen Patent, Joint Patent, Morphic Know-How, Janssen Know-How or Joint Know-How in the Field in the Territory by a Third Party with respect to a Compound or Product or the Exploitation thereof (a “Competitive Infringement”), then such Party will promptly notify the other Party in writing to that effect and the Parties will consult with each other regarding any actions to be taken with respect to such Competitive Infringement.  For the avoidance of doubt, the term “Competitive Infringement” includes any counterclaims alleging that a Morphic Patent, Janssen Patent or Joint Patent is invalid or unenforceable or that a product or process does not infringe or misappropriate a Morphic Patent, Janssen Patent, Joint Patent, Morphic Know-How, Janssen Know-How or Joint Know-How.

 

11.2.                     Enforcement Actions.

 

11.2.1.                         Before Option Exercise. During the Option Period with respect to a Research Program, Morphic will have the sole right, but not the obligation, to bring and control any legal action to enforce any Morphic Patents or Joint Patents that Cover, and any Morphic Know-How or Joint Know-How that relate to, any Compound or Product that is the subject of such Research Program against any Competitive Infringement in the Territory as it reasonably determines appropriate, and Morphic will consider in good faith the interests of Janssen in such enforcement of such Patents. Janssen will provide reasonable cooperation to Morphic in connection with such legal action in the Territory, including by promptly supplying or

 

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executing all papers and instruments, or requiring its employees to supply or execute such papers and instruments, as may be necessary for purposes of initiating and pursuing such legal action in the Territory.

 

11.2.2.                         After Option Exercise.  Following Janssen’s exercise of an Option with respect to a Research Program pursuant to Section 3.2 (Option Exercise), Janssen will have (i) the sole right, but not the obligation, to bring and control any legal action to enforce any Assigned Product-Specific Patents and (ii) the first right, but not the obligation, to bring and control any legal action to enforce any Morphic Platform and Product Patents, Product-Specific Patents or Joint Patents, in each case ((i) and (ii)), that Cover any Licensed Compound or Product that is the subject of such Research Program against any Competitive Infringement in the Territory as it reasonably determines appropriate, and Janssen will consider in good faith the interests of Morphic in such enforcement of such Patents. If Janssen fails to commence enforcement of any Morphic Platform and Product Patents, Product-Specific Patents or Joint Patents, in each case, that are not Assigned Product-Specific Patents against a Competitive Infringement in the Territory within a period of [***] after a request from Morphic to do so, then Morphic may bring and control any legal action in the Territory to enforce any Morphic Platform and Product Patents, Product-Specific Patents or Joint Patents, in each case, that are not Assigned Product-Specific Patents and that Cover the applicable Product against such Competitive Infringement and Janssen will provide reasonable cooperation to Morphic in connection with such legal action in the Territory, including by promptly supplying or executing all papers and instruments, as may be necessary for the purposes of initiating and pursuing such legal action in the Territory.

 

11.2.3.                         Settlement.  With respect to any legal action identified above in this Section 11.2 (Enforcement Actions), the Party controlling such action will have the right to settle or otherwise dispose of such action on such terms as such Party reasonably determines appropriate. Notwithstanding the foregoing, no such settlement or other disposition will (a) impose any monetary restriction or obligation on or admit fault of the other Party or (b) adversely affect the other Party’s rights under this Agreement to any such Patent or Know-How then being enforced or defended, including any abandonment or intentional failure to maintain such Patent then being enforced or defended, in each case ((a) and (b)), without the prior written consent of the other Party.

 

11.3.                     Patent Listing.  Janssen will have the full and exclusive right, in its sole discretion, to determine and control the listing of any Patent (including any Morphic Patent or Joint Patent) in the then-current edition of the United States Food and Drug Administration publication “Approved Drug Products with Therapeutic Equivalence Evaluations” (the “Orange Book”) in connection with the Regulatory Approval of

 

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any Product, or in equivalent patent listings in any other country within the Territory.

 

11.4.                     Enforcement of Listed Patents.  The provisions of Section 11.2 (Enforcement Actions) notwithstanding, the following will apply with respect to any notification provided by a Third Party to Morphic or Janssen under 21 U.S.C. § 355(j)(2)(B) making a certification described in 21 U.S.C. §355(j)(2)(A)(vii)(IV) with respect to any Patent jointly or solely owned by Morphic that is listed in the Orange Book for a Product and with respect to equivalent actions in the United States or in any other country within the Territory (a “Paragraph IV Certification”):

 

11.4.1.                         The Party receiving a Paragraph IV Certification will, without any avoidable delay and in any case within five Business Days after receiving such a Paragraph IV Certification, notify the other Party in writing and will attach a copy of the Paragraph IV Certification to such notification. Janssen will have the sole right to determine a course of action with respect to any such proceedings, including negotiation of an offer of confidential access, and Morphic will cooperate fully with Janssen with respect to such course of action at Janssen’s expense.

 

11.4.2.                         Janssen will have the right, but not the obligation, in its sole discretion, to initiate any infringement proceeding as a result of the Paragraph IV Certification with respect to a Product, including the commencement of a patent infringement action under 35 U.S.C. § 271(e)(2)(A), or under an equivalent statute or regulation within any other country in the Territory (a “Paragraph IV Proceeding”). Any such Paragraph IV Proceeding commenced by Janssen under this Section 11.4 (Enforcement of Listed Patents) will be conducted in accordance with the provisions of Section 11.2 (Enforcement Actions). Morphic will reasonably assist Janssen in any such Paragraph IV Proceeding, at Janssen’s expense.

 

11.5.                     Recoveries.  Any recoveries resulting from an enforcement action pursuant to Section 11.2 (Enforcement Actions) or Section 11.4 (Enforcement of Listed Patents) will be first applied against payment of each Party’s costs and expenses in connection therewith. Any such recoveries in excess of such costs and expenses will be shared as follows: [***] of all such recoveries shall be paid to the Party initiating such suit, action or proceeding and [***] of all such recoveries shall be paid to the other Party.

 

11.6.                     Patent Term Restoration.  The Parties will cooperate with each other in obtaining patent term restoration or supplemental protection certificates or their equivalents in any country in the Territory where applicable to Morphic Patents and Joint Patents.

 

11.7.                     Third Party Claims.  Each Party will promptly inform the other Party in writing if such Party receives written, or otherwise becomes aware, of alleged infringement,

 

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misappropriation, or other violation of a Third Party’s Intellectual Property based upon Morphic’s performance of its obligations or exercise of its rights hereunder.  Except as otherwise set forth under this Agreement (including under Section 8.9.1(a) (Morphic Research Activities) and Section 13.3 (Indemnification)), Morphic will have the sole right to defend against any such claim brought against it.  Morphic will keep Janssen advised of all material developments in the conduct of any proceedings in defending any claim of alleged infringement, misappropriation, or other violation related to any Compounds, Products or Morphic Research Activities and will reasonably cooperate with Janssen in the conduct of such defense.  In no event may Morphic settle any such infringement, misappropriation, or other violation claim in a manner that would (a) impose any monetary restriction or obligation on or admit fault of Janssen or (b) adversely affect Janssen’s rights under this Agreement, including any abandonment or intentional failure to maintain any Patent, in each case ((a) and (b)), without the prior written consent of Janssen.

 

12.                               CONFIDENTIALITY.

 

12.1.                     Confidential Information.

 

12.1.1.                         Confidential Information.  The term “Confidential Information” means all Know-How or material in tangible form disclosed by a Party (the “Disclosing Party”) to the other Party (the “Receiving Party”) in connection with the course and conduct of activities under this Agreement, including Know-How related to the Disclosing Party’s current, future and proposed compounds, compositions, and biological materials.  Each Party will be considered a Disclosing Party and a Receiving Party with regard to Joint Know-How and the terms of this Agreement. All reports provided by Morphic to Janssen under Section 2.8 (Research Reports), all reports provided by Janssen to Morphic under Section 5.3 (Development Reports) and all information provided by Janssen to Morphic under Section 8.12 (Reports) will each be the Confidential Information of Janssen. Notwithstanding any other provisions herein, Confidential Information does not include information which, to the extent the Receiving Party can prove by competent evidence,

 

(a)                   was known to Receiving Party or any of its Affiliates prior to the time of disclosure;

 

(b)                   is at the time of disclosure hereunder or later becomes public knowledge through no fault or omission of Receiving Party or any of its Affiliates;

 

(c)                    is obtained by Receiving Party or any of its Affiliates from a Third Party under no obligation of confidentiality to Disclosing Party; or

 

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(d)                   has been independently developed by employees, subcontractors, consultants or agents of Receiving Party or any of its Affiliates without the aid, application or use of Disclosing Party’s Confidential Information, as evidenced by contemporaneous written records.

 

12.1.2.                         Restrictions.  During the Term and for [***] thereafter, Receiving Party will take reasonable steps to keep all Disclosing Party’s Confidential Information in confidence with at least the same degree of care with which Receiving Party holds its own confidential information and in any event no less than a reasonable degree of care.  Except as otherwise permitted under this Agreement, Receiving Party will not use Disclosing Party’s Confidential Information except in connection with the performance of its obligations and exercise of its rights under this Agreement.  Receiving Party has the right to disclose Disclosing Party’s Confidential Information without Disclosing Party’s prior written consent, to the extent and only to the extent reasonably necessary, to its Affiliates and its and their respective employees, subcontractors, consultants or agents who have a need-to-know such Confidential Information in order to perform its obligations and exercise its rights under this Agreement and who are required to comply with the restrictions on use and disclosure in this Section 12.1.2 (Restrictions).  Receiving Party will use reasonable efforts to cause those entities and persons to comply with the restrictions on use and disclosure in this Section 12.1.2 (Restrictions).  Receiving Party assumes responsibility for those entities and persons maintaining Disclosing Party’s Confidential Information in confidence and using same only for the purposes described herein.

 

12.1.3.                         Permitted Disclosures.  Receiving Party may disclose Disclosing Party’s Confidential Information to the extent (and only to the extent) such disclosure is reasonably necessary in the following instances:

 

(a)                   in order to comply with Applicable Law (including any securities law or regulation or the rules of a securities exchange) or with a legal or administrative proceeding;

 

(b)                   in connection with prosecuting or defending litigation, regulatory approval and other regulatory filings and communications, and filing, prosecuting and enforcing Patents in connection with Receiving Party’s rights and obligations pursuant to this Agreement; and

 

(c)                    in connection with exercising its rights hereunder, to (i) its Affiliates; (ii) potential and future collaborators (including Sublicensees and Third Party licensees and sublicensees); (iii) permitted actual or potential acquirers or assignees; and (iv) investment bankers, investors and lenders;

 

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provided that (A) with respect to sub-sections (c)(i) and (c)(ii) above, where reasonably possible, Receiving Party will notify Disclosing Party of Receiving Party’s intent to make any disclosure pursuant thereto sufficiently prior to making such disclosure so as to allow Disclosing Party adequate time to take whatever action it may deem appropriate to protect the confidentiality of the information to be disclosed, and (B) with respect to Section (c), each of those named people and entities agree in writing to comply with restrictions on use and disclosure of the Disclosing Party’s Confidential Information that are no less restrictive than the restrictions set forth in this ARTICLE 12 (Confidentiality).

 

12.2.                     Return of Confidential Information.  Upon the expiration or termination of this Agreement, the Receiving Party will return (or, as directed by the Disclosing Party, destroy) all Confidential Information of the Disclosing Party to the Disclosing Party that is in the Receiving Party’s possession or control (other than any Confidential Information required to continue to exercise a Party’s rights that survive termination of this Agreement), provided, however, copies may be retained and stored solely for the purpose of determining its obligations under this Agreement, subject to the non-disclosure and non-use obligation under this ARTICLE 12 (Confidentiality).  In addition, the Receiving Party will not be required to return or destroy Confidential Information contained in any computer system back-up records made in the ordinary course of business; provided that such Confidential Information may not be accessed without the Disclosing Party’s prior written consent or as required by Applicable Law.

 

12.3.                     Publications.  Morphic may not publish the results from any Research Activities for a Research Program (a) prior to the expiration of the Option Period for the applicable Research Program or (b) at any time during the Term with respect to any Research Program for which Janssen has exercised an Option in accordance with Section 3.2 (Option Exercise), in each case ((a) and (b)), without Janssen’s prior written consent, which consent Janssen may withhold for any reason. After the expiration of the Option Period for a Research Program with respect to which Janssen did not exercise an Option in accordance with Section 3.2 (Option Exercise), Morphic may publish results from the Morphic Research Activities conducted for such Research Program, provided that Morphic first gives Janssen a [***] period prior to the submission for publication of any abstract, manuscript, poster, slide presentation or other proposed publication material to review such material so that Janssen can ensure that no Janssen Confidential Information is included therein without its permission.  Janssen reserves the right to have any of its Confidential Information deleted from such proposed publication material prior to Morphic’s submission for publication.  Further, if requested by Janssen, Morphic will delay submission of any such proposed publication material for an additional [***] to allow Janssen to seek patent protection for any invention disclosed or referenced therein to which Janssen has any ownership interest.  Morphic will acknowledge Janssen’s contributions in any such publication unless otherwise instructed by Janssen.

 

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12.4.                     Terms of this Agreement; Publicity.

 

12.4.1.                         Restrictions. Notwithstanding anything to the contrary set forth in this Agreement, upon execution of this Agreement each Party may issue a press release announcing the existence of this Agreement in the form attached hereto as Schedule 12.4.1 (Press Release) applicable to each Party.  Upon exercise of an Option with respect to any Research Program, the Parties may issue a press release announcing such exercise in a form and substance to be agreed by the Parties in writing.  Except as required by Applicable Law, legal process or stock exchange rules, each Party will not issue any other press release or public statement disclosing information relating to this Agreement or the transactions contemplated hereby or the terms hereof without the prior written consent of the other Party.

 

12.4.2.                         Use of Names or Trademarks.  Neither Party will use the name, physical likeness, employee names or Trademarks of the other Party for any purpose without the prior written consent of the other Party, other than as necessary to prepare necessary filings with any Securities and Exchange Commission or comply with the regulations of any such commission, or other regulations applicable to the public sale of securities, including preparing proxy statements or prospectuses.  Nothing contained herein will be construed as granting either Party any rights or license to use any of the other Party’s Trademarks without separate, express written permission of the owner of such Trademark.

 

13.                               REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; DISCLAIMERS.

 

13.1.                     Representations, Warranties and Covenants.

 

13.1.1.                         Mutual Representations and Warranties as of the Effective Date.  Each Party represents and warrants to the other Party as of the Effective Date that:

 

(a)                   it is duly organized, validly existing and in good standing under the Applicable Law of the jurisdiction of its incorporation and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations, in each case, under this Agreement;

 

(b)                   it has the legal right and power to enter into this Agreement, to extend the rights and licenses granted or to be granted to the other in this Agreement, and to fully perform its obligations hereunder;

 

(c)                    the performance of this Agreement by such Party does not create a breach or default under any other agreement to which it is a Party;

 

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(d)                   the execution, delivery and performance of this Agreement by such Party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it is bound, nor violate any Applicable Law or regulation of any Governmental Authority; and

 

(e)                    it has obtained all necessary government authorizations, consents, approvals, licenses, exemptions of or filings or registrations with Governmental Authorities, under any Applicable Law currently in effect, that are or will be necessary for the transactions contemplated by this Agreement or any other agreement or instrument executed in connection herewith, or for the performance by it of its obligations under this Agreement.

 

13.1.2.                         Morphic Representations and Warranties as of the Effective Date.  In addition to the representations and warranties made by Morphic above and elsewhere in this Agreement, Morphic hereby represents and warrants to Janssen as of the Effective Date that:

 

(a)                   it has the full right, power and authority to grant all the right, title and interest in the licenses and Options granted or to be granted to Janssen under this Agreement;

 

(b)                   (i) Schedule 1.108 (Morphic Patents as of the Effective Date) sets forth a complete and accurate list of all Patents existing as of the Effective Date that are owned or Controlled by Morphic or any of its Affiliates and necessary or useful to (A) perform the Research Activities, or (B) Exploit any Compound or Product, (ii) Morphic owns or otherwise Controls all (A) Patents listed on Schedule 1.108 (Morphic Patents as of the Effective Date) and (B) Know-How related to the Morphic Platform and (iii) except as otherwise noted on Schedule 1.108 (Morphic Patents as of the Effective Date), Morphic exclusively owns all rights, title, and interests in and to such Patents, and where Morphic does not exclusively own any such Patent, Schedule 1.108 (Morphic Patents as of the Effective Date) identifies the Third Party owner of such Patent and the Existing In-License pursuant to which Morphic Controls such Patent;

 

(c)                    other than any Know-How licensed to Morphic under the CMCC License Agreement, the Morphic Know-How as of the Effective Date constitutes all of the Know-How owned, Controlled or held for use by Morphic or any of its Affiliates that is necessary or useful to (i) perform the Research Activities or (ii) Exploit any Compound or Products as contemplated by this Agreement (other than any Morphic Know-How made, conceived, discovered or otherwise

 

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generated by Morphic in the course of performing Morphic Research Activities under this Agreement);

 

(d)                   there is no pending litigation, or litigation that has been threatened in writing, that alleges, or any written communication alleging, that the practice by or on behalf of Morphic of the Morphic Technology or the Morphic Platform prior to the Effective Date has infringed, misappropriated or otherwise violated, or would infringe, misappropriate, or otherwise violate, any of the Intellectual Property of any Third Party;

 

(e)                    there are no claims, judgments or settlements against or pending, or amounts with respect thereto, owed by Morphic or any of its Affiliates, with respect to the Morphic Technology or the Morphic Platform, and Morphic has not received written notice threatening any such claims, judgments, or settlements;

 

(f)                     to Morphic’s Knowledge, practice by or on behalf of Morphic or Janssen under the Morphic Technology or Morphic Platform or the Exploitation by or on behalf of Morphic or Janssen (or their respective Affiliates or sublicensees) of any Compound or Product, in each case, as contemplated under this Agreement, does not and will not infringe any issued patent of any Third Party or, if and when issued, any claim within any published patent application of any Third Party;

 

(g)                    no Third Party has challenged the ownership, scope, duration, validity, enforceability, priority, or right to practice under any Morphic Patents or the Patents Covering the Morphic Platform (including, by way of example, through the institution of or written threat of institution of interference, inter partes review, reexamination, protest, opposition, nullity, or similar invalidity proceeding before the U.S. Patent and Trademark Office or any foreign patent authority or court);

 

(h)                   to Morphic’s Knowledge, no Third Party is infringing, misappropriating or otherwise violating, or threatening to infringe, misappropriate, or otherwise violate the Morphic Technology or the Morphic Platform;

 

(i)                       all fees required to be paid by Morphic in any jurisdiction in order to maintain the Morphic Patents and the Patents Covering the Morphic Platform have been timely paid and the Morphic Patents are valid, subsisting and, to Morphic’s Knowledge, enforceable;

 

(j)                      Morphic has not previously assigned, transferred, conveyed or granted any license or other rights under the Morphic Technology in

 

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any way that would conflict with or limit the scope of any of the rights or licenses granted to Janssen hereunder;

 

(k)                   Morphic’s rights, title and interests to all the Morphic Technology are free of any lien or security interest;

 

(l)                       Morphic has obtained, or caused its Affiliates, as applicable, to obtain, assignments from the inventors of all inventorship rights to the Morphic Patents and the Patents Covering the Morphic Platform, and all such assignments are valid and enforceable;

 

(m)               the inventorship of the Morphic Patents is properly identified on each issued patent or patent application in the Morphic Patents;

 

(n)                   there are no Third Party agreements pursuant to which Morphic Controls any of the Morphic Technology or Morphic Platform or any Compound;

 

(o)                   No Third Party has any rights, title or interests in or to, or any license under, any of the Morphic Technology or Morphic Platform;

 

(p)                   no written notice of default or termination has been received or given under any agreement pursuant to which Morphic Controls any Morphic Technology or Patents Covering or Know-How related to the Morphic Platform, including under any Existing In-License, and there is no act or omission by Morphic or its Affiliates that would provide a right to terminate any such agreement;

 

(q)                   Morphic and its Affiliates have taken commercially reasonable measures consistent with industry practices to protect the secrecy, confidentiality and value of all Morphic Know-How that constitutes trade secrets under Applicable Law (including requiring all employees, consultants, and independent contractors to execute binding and enforceable agreements requiring all such employees, consultants, and independent contractors to maintain the confidentiality of such Morphic Know-How) and such Morphic Know-How has not been used, disclosed to or discovered by any Third Party except pursuant to such confidentiality agreements and there has not been a breach by any party to such confidentiality agreements;

 

(r)                      the Morphic Technology has not been created pursuant to, and are not subject to, any funding agreement with any Governmental Authority or any Third Party, and are not subject to the requirements of the Bayh-Dole Act or any similar provision of any Applicable Law;

 

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(s)                     Morphic (i) is not excluded from, and has not been convicted of any crime or engaged in any conduct that could result in exclusion from, participation in any state or federal healthcare program, as defined in 42 U.S.C. §1320a-7b(f), for the provision of items or services for which payment may be made by a federal healthcare program, (ii) has not contracted with any employee, contractor, agent, or vendor to perform work under this Agreement who is excluded from participation in any state or federal healthcare program and (iii) is not subject to a final adverse action, as defined in 42 U.S.C.§ 1320a-7a(e) and 42 U.S.C. § 1320a-7a(g), and has no adverse action pending or threatened against it; and

 

(t)                      Morphic is in compliance with all Applicable Law, including the federal anti-kickback statute (42 U.S.C. § 1320a-7b), the related safe harbor regulations, and the Limitation on Certain Physician Referrals, also referred to as the “Stark Law” (42 U.S.C. § 1395nn).

 

13.1.3.                         Morphic Covenants.  Morphic covenants to Janssen that:

 

(a)                   Morphic will retain the full right, power and authority to grant all the right, title and interest in the licenses and Options granted or to be granted to Janssen under this Agreement;

 

(b)                   Morphic will not (i) assign, transfer, convey or grant any license or other rights to its rights, title and interests in or to the Morphic Technology or (ii) incur or permit to exist, with respect to any Morphic Technology, any lien, encumbrance, charge, security interest, mortgage, liability, grant of license to Third Parties or other restriction (including in connection with any indebtedness), in each case of clauses (i) and (ii), in any manner that would conflict with or limit the scope of any of the rights or licenses granted to Janssen hereunder (including any Option rights granted hereunder);

 

(c)                    Morphic will not license, sell, assign or otherwise transfer to any Third Party rights under any Morphic Technology (or agree to do any of the foregoing) to Exploit one or more compounds that are designed and intended to modulate, bind to or target (i) any Target or (ii) solely with respect to any Replacement Target MoA, any Target with a Mechanism of Action that is the same as the Mechanism of Action for such Replacement Target MoA;

 

(d)                   Morphic will, and will so cause its Affiliate to, (i) remain in compliance in all respects with and (ii)  not, without Janssen’s written consent, amend in a manner that adversely affects the rights granted to Janssen hereunder or Morphic’s ability to fully perform its obligations hereunder, in each case ((i) and (ii)), any Third Party agreements

 

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entered into by Morphic during the Term pursuant to which Morphic Controls any Morphic Technology or Compound or the Morphic Platform (the “In-Licenses”). Morphic will provide prompt notice to Janssen of any alleged breach or default of any In-License. If Janssen makes any payments to a Third Party in connection with the cure or other resolution of such alleged breach or default or Morphic, then, notwithstanding anything to the contrary set forth in this Agreement, Janssen may credit the full amount of such payments against any milestone payments, royalties or other amounts payable to Morphic under this Agreement;

 

(e)                    Morphic will, and will ensure that its Affiliates, Sublicensees and Subcontractors obtain written agreements from any and all Persons involved in or performing any Research Activities by or on behalf of Morphic that assign such Persons’ rights, title and interests in and to any Morphic Technology or Results to Morphic prior to any such person performing such activities;

 

(f)                     during the Research Term, Morphic will maintain sufficient resources to perform the Research Activities for which it is responsible under this Agreement in accordance herewith; and

 

(g)                    Morphic will not, and will so cause its Affiliates not to, directly or indirectly, sue, assert any claim or counterclaim against, or otherwise participate in any action or proceeding against Janssen or its Affiliates or their respective sublicensees in any case involving the Exploitation of any product (other than any Product) that claims or otherwise asserts that Janssen or its Affiliates or their respective sublicensees is or are liable for infringing any Morphic Platform and Product Patents made, conceived, discovered or otherwise generated by Janssen, its Affiliates or its agents (whether solely or jointly with Morphic, its Affiliates or its agents) in the performance of activities under this Agreement (the “Covenant Patents”). Janssen and each of its Affiliates and their respective sublicensees that is not party to this Agreement is a third party beneficiary of this Section 13.1.3(g).  If Morphic or any of its Affiliates sells, assigns, exclusively licenses, transfers or otherwise grants any right under any Covenant Patent to a Third Party, then Morphic or such Affiliate, as applicable, will require such purchaser, assignee, licensee or transferee to agree in writing to be bound by the same covenant to the same extent as made by Morphic and its Affiliates in this Section 13.1.3(g).

 

13.2.                     Disclaimers.

 

13.2.1.                         DISCLAIMER OF WARRANTIES.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY

 

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REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN PARTICULAR, JANSSEN DOES NOT MAKE ANY REPRESENTATION OR EXTEND ANY WARRANTY THAT THE COMPOUNDS OR PRODUCTS WILL BE SUCCESSFULLY DEVELOPED OR COMMERCIALIZED.

 

13.2.2.                         LIMITATION OF LIABILITY. EXCEPT FOR DAMAGES RESULTING FROM BREACHES OF SECTION 2.13 (EXCLUSIVITY), ARTICLE 12 (CONFIDENTIALITY), OR ANY REPRESENTATIONS OR WARRANTIES CONTAINED IN SECTION 13.1.2(b) (MORPHIC REPRESENTATION AND WARRANTIES AS OF THE EFFECTIVE DATE), OR INDEMNIFIABLE CLAIMS UNDER SECTION 13.3 (INDEMNIFICATION), IN NO EVENT WILL EITHER PARTY HAVE ANY CLAIMS AGAINST OR LIABILITY TO THE OTHER PARTY WITH RESPECT TO ANY INDIRECT, PUNITIVE, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING ANY CLAIMS FOR LOST PROFITS OR REVENUES) ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT UNDER ANY THEORY OF LIABILITY, EVEN IF SUCH PARTY HAS BEEN INFORMED OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES.

 

13.3.                     Indemnification.

 

13.3.1.                         Indemnification by Morphic.  Morphic will indemnify, defend and hold harmless Janssen and its Affiliates, and their respective directors, officers, employees and agents (each, a “Janssen Indemnitee”), against any and all liabilities, losses, damages and expenses (including reasonable attorneys’ fees and expenses) (collectively, “Liabilities”) made by a Third Party (a “Third Party Claim”) to the extent arising from or relating to, directly or indirectly:

 

(a)                   the gross negligence, recklessness or wrongful intentional acts or omissions of Morphic in the course of performing activities under this Agreement;

 

(b)                   the breach by Morphic of any warranty, representation or covenant of Morphic under this Agreement;

 

(c)                    any claim that the practice of the Morphic Platform or the performance of the Morphic Research Activities, in each case, as set forth in the applicable Research Plan infringes, misappropriates or otherwise violates any Intellectual Property owned or possessed by any Third Party; or

 

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(d)                   any claims of any nature arising out of (i) any Exploitation of any Compound or Product by or on behalf of Morphic prior to the Effective Date or after the effective date of termination of this Agreement, or (ii) any Morphic Research Activities performed by or on behalf of Morphic (excluding those Morphic Research Activities performed by or on behalf Janssen).

 

Morphic’s indemnification obligations pursuant to this Section 13.3.1 (Indemnification by Morphic) will not apply to the extent that the applicable Liabilities arise directly or indirectly from the negligence, recklessness or wrongful intentional acts or omissions of any Janssen Indemnitee or the breach by Janssen of any warranty, representation or covenant made by Janssen in this Agreement.

 

13.3.2.                         Indemnification by Janssen.  Janssen will indemnify, defend and hold harmless Morphic and its Affiliates, and their respective directors, officers, employees and agents (each, a “Morphic Indemnitee”), against any Third Party Claim to the extent arising from:

 

(a)                   the gross negligence, recklessness or wrongful intentional acts or omissions of Janssen in the course of performing activities under this Agreement;

 

(b)                   the breach by Janssen of any warranty, representation or covenant of Janssen under this Agreement;

 

(c)                    any claims of any nature arising out of the Exploitation of any Compound or Product by or on behalf of Janssen (other than by any Morphic Indemnitee), other than claims for which Morphic is required to indemnify Janssen pursuant to Section 13.3.1 (Indemnification by Morphic); or

 

(d)                   except for any claims with respect to which Morphic is required to indemnify any Janssen Indemnitee pursuant to Section 13.3.1(c), any claims of any nature arising out of (i) any Exploitation of any Product by or on behalf of Janssen after the effective date of termination of this Agreement, or (ii) any Research Activities performed by or on behalf of Janssen.

 

Janssen’s indemnification obligations pursuant to this Section 13.3.2 (Indemnification by Janssen) will not apply to the extent that the applicable Liabilities arise directly or indirectly from the negligence, recklessness or wrongful intentional acts or omissions of any Morphic Indemnitee or the breach by Morphic of any warranty, representation or covenant made by Morphic in this Agreement.

 

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13.3.3.                         Procedure. If a Party (the “Indemnitee”) intends to claim indemnification under this Section 13.3 (Indemnification), it will promptly notify the other Party (the “Indemnitor”) in writing of any Third Party Claim for which the Indemnitee intends to seek such indemnification.  The failure of the Indemnitee to deliver written notice to the Indemnitor within a reasonable time after the commencement of any such action will only relieve the Indemnitor of any obligation to the Indemnitee under this Section with respect to any such action to the extent such failure prejudices the Indemnitor’s ability to defend a Third Party Claim.  The Indemnitee will permit the Indemnitor to control the litigation or settlement of such Third Party Claim and cooperate fully with Indemnitor in all related matters, provided that unless agreed by Indemnitee (a) counsel appointed by Indemnitor to defend Indemnitee will not take any position that if sustained would cause Indemnitee not to be indemnified by Indemnitor and (b) no settlement will involve any terms binding on Indemnitee except payment of money to by paid by Indemnitor.

 

13.4.                     Insurance.  Morphic will procure and maintain general liability and product liability insurance during the Term of this Agreement and for at least [***] thereafter in an aggregate coverage amount of [***].  Janssen will be named or included as an additional insured under Morphic’s general liability and product liability insurance policy. Such insurance will not be construed to create a limit of Morphic’s liability with respect to its indemnification obligations under Section 13.3 (Indemnification).  Morphic will provide Janssen with written evidence of such insurance upon request and will provide Janssen with written notice at least [***] prior to the cancellation, non-renewal or material change in such insurance that materially adversely affects the rights of Janssen hereunder.

 

13.5.                     Healthcare Compliance.

 

13.5.1.                         Anti-Kickback and Stark Compliance.  Morphic will comply with Applicable Law, including the federal anti-kickback statute (42 U.S.C. § 1320a-7b), the related safe harbor regulations, and the Limitation on Certain Physician Referrals, also referred to as the “Stark Law” (42 U.S.C. § 1395nn) in connection with its activities under this Agreement.  Accordingly, no part of any consideration paid hereunder is a prohibited payment for the recommending or arranging for the referral of business or the ordering of items or services; nor are the payments intended to induce illegal referrals of business.

 

13.5.2.                         Exclusion from Federal Health Care Programs.  Morphic will conduct activities pursuant to this Agreement in accordance with Applicable Law and any applicable regulations regarding Medicare, Medicaid, and other third party-payer programs, if any.  Morphic will not (a) become excluded from, and will not be convicted of any crime or engaged in any conduct that could result in exclusion from, participation in any state or federal

 

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healthcare program, as defined in 42 U.S.C. §1320a-7b(f), for the provision of items or services for which payment may be made by a federal healthcare program and (b) contract with any employee, contractor, agent or vendor to perform work under this Agreement who is excluded from participation in any state or federal healthcare program.  Morphic will notify Janssen of any final adverse action, discovery of contract with an excluded entity or individual, or exclusion within thirty (30) days of such action and will terminate any such contract effective immediately.

 

13.5.3.                         No Debarred Individuals.  Morphic will not engage, in any capacity in connection with this Agreement, any person who has been debarred by FDA, is the subject of a conviction described in 21 U.S.C. 335a, or is subject to any similar sanction.  Morphic will promptly inform Janssen in writing if it or any person performing activities under this Agreement is debarred or is the subject of a conviction described in 21 U.S.C. 335a, or if any action, suit, claim, investigation, or legal or administrative proceeding is pending or threatened relating to the debarment of conviction of Morphic or any such person performing activities in connection with this Agreement.  Upon written request from Janssen, Morphic will, within ten (10) days, provide written confirmation that it has complied with the foregoing obligation.

 

13.5.4.                         Anti-Corruption Laws.  Neither Morphic nor any of its Affiliates will perform any actions in connection with this Agreement that are prohibited by local and other anti-corruption laws (collectively “Anti-Corruption Laws”) that may be applicable to Morphic.  Without limiting the foregoing, neither Morphic nor any of its Affiliates will make any payments, or offer or transfer anything of value, to any government official or government employee, to any political party official or candidate for political office or to any other Third Party related to the transactions contemplated by this Agreement in a manner that would violate Anti-Corruption Laws.

 

14.                               TERM AND TERMINATION.

 

14.1.                     Term.  This Agreement is effective as of the Effective Date and unless terminated earlier, will continue in effect on a Research Program-by-Research Program basis until either (a) the date of expiration of the Option Period for a Research Program (if Janssen does not exercise an Option for such Research Program) or (b) if Janssen does exercise an Option for a Research Program, the date on which the Royalty Term has expired in each country in the Territory for all Products that are the subject of such Research Program, and will finally expire upon the expiration of the Royalty Term for the final Product (the “Term”). Notwithstanding the foregoing, if Janssen has not exercised an Option for at least one Research Program before the expiration of the last to expire Option Period for the final Research Program, then the Term will expire upon the expiration of the last to

 

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expire Option Period. Upon expiration of the Royalty Term for a Product in a country that is the subject of any Research Program for which Janssen has exercised an Option in accordance with Section 3.2 (Option Exercise), the licenses granted from Morphic to Janssen under this Agreement with respect to such Product in such country will become fully-paid, irrevocable and perpetual.

 

14.2.                     Termination by Janssen for Convenience.  Janssen may terminate this Agreement in its entirety or on a Research Program-by-Research Program or country-by-country basis at any time and in its sole discretion upon sixty (60) days’ advance written notice to Morphic.

 

14.3.                     Termination for Material Breach.

 

14.3.1.                         Right to Terminate for Material Breach.

 

(a)                   Termination by Morphic. Subject to Section 14.3.2 (Disputed Breach), on a Research Program-by-Research Program basis Morphic may terminate this Agreement with respect to a Research Program upon delivery of written notice to Janssen in the event of any material breach of this Agreement by Janssen with respect to such Research Program, provided that such termination will not be effective if such breach has been cured within [***] after written notice thereof is given by Morphic to Janssen specifying the nature of the alleged breach (or, if such default cannot be cured within such first [***] period, such termination will not be effective if such breach has been cured within [***] after such notice if Janssen commences actions to cure such default within such [***] period and thereafter diligently continues such actions).

 

(b)                   Termination by Janssen.  Subject to Section 14.3.2 (Disputed Breach), on a Research Program-by-Research Program basis Janssen may terminate this Agreement with respect to a particular Research Program upon delivery of written notice to Morphic in the event of any material breach of this Agreement by Morphic with respect to such Research Program, provided that such termination will not be effective if such breach has been cured within [***] after written notice thereof is given by Janssen to Morphic specifying the nature of the alleged breach (or, if such default cannot be cured within such first [***] period, such termination will not be effective if such breach has been cured within [***] after such notice if Morphic commences actions to cure such default within such [***] period and thereafter diligently continues such actions).

 

14.3.2.                         Disputed Breach.  If the allegedly breaching Party disputes in good faith the existence, materiality, or cure of the applicable material breach and provides written notice of such dispute to the other Party within the

 

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applicable period set forth above in Section 14.3.1 (Right to Terminate for Material Breach), then the matter will be addressed under the dispute resolution provisions in Section 15.1 (Discussion by Executive Officers; Arbitration), and the termination will not become effective unless and until it has been determined under Section 15.1 (Discussion by Executive Officers; Arbitration) that the allegedly breaching Party is in material breach of any of its obligations under this Agreement and has failed to cure the same.  During the pendency of such a dispute, all of the terms and conditions of this Agreement will remain in effect and the Parties will continue to perform all of their respective obligations hereunder.

 

14.4.                     Termination for Failure to Determine to Commence Late Lead Optimization Activities. If, within [***] following completion of Lead Optimization Activities for a given Research Program, Janssen does not (a) provide written notice to the JRC indicating that it will commence Late Lead Optimization Activities and (b) commence Late Lead Optimization Activities for such Research Program, then, unless otherwise agreed by the Parties in writing, this Agreement will terminate with respect to such Research Program on the date that is [***] after the completion of Lead Optimization Activities for such Research Program.

 

14.5.                     Rights in Bankruptcy.

 

14.5.1.                         Termination Rights.  Either Party may, but is not required to, terminate this Agreement if, at any time, (a) the other Party files in any court or agency pursuant to any statute or regulation of any state, country or jurisdiction, a petition in bankruptcy or insolvency, for reorganization, for an arrangement, or for the appointment of a receiver or trustee of that Party or of its assets, (b) the other Party proposes a written Agreement of composition or extension of its debts, (c) the other Party is served with an involuntary petition against it, filed in any insolvency proceeding, and such petition will not be dismissed within sixty (60) days after the filing thereof, (d) the other Party proposes or is a Party to any dissolution or liquidation or (e) the other Party makes an assignment for the benefit of its creditors.

 

14.5.2.                         Rights in Bankruptcy.  All rights and licenses granted under or pursuant to this Agreement by one Party to the other are, and will otherwise be deemed to be, for all purposes of Section 365(n) of Title 11 of the U.S. Bankruptcy Code (“Title 11”), licenses of rights to “intellectual property” as defined in Section 101 of Title 11.  Each Party agrees that the other Party, as a licensee of intellectual property under this Agreement, will retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code.  In the event that a case under Title 11 is commenced by or against either Party (the “Bankrupt Party”), the other Party will have all of the rights set forth in Section 365(n) of Title 11 to the maximum extent permitted thereby.  Without limiting the Party’s rights under Section 365(n) of Title 11, if a case under Title 11 is commenced by or against the

 

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Bankrupt Party, the Parties further agree that, in the event of a rejection of this Agreement by either Party (for purposes of this Section 14.5.2 (Rights in Bankruptcy), the “licensor”) in any bankruptcy proceeding by or against the licensor under the U.S. Bankruptcy Code, (a) the other Party (for purposes of this Section 14.5.2 (Rights in Bankruptcy), the “licensee”) will be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which, if not already in the licensee’s possession, will be promptly delivered to it upon the licensee’s written request therefor and (b) Morphic will not interfere with Janssen’s rights to intellectual property and all embodiments of intellectual property, and will assist and not interfere with Janssen in obtaining intellectual property and all embodiments of intellectual property from another entity.  The term “embodiments” of intellectual property includes all tangible, intangible, electronic or other embodiments of rights and licenses hereunder, including all compounds and products embodying intellectual property, Compounds, Products, regulatory filings and related rights, and technology.  All rights of the Parties under this Section 14.5.2 (Rights in Bankruptcy) and under Section 365(n) of Title 11 are in addition to and not in substitution of any and all other rights, powers and remedies that each Party may have under this Agreement, Title 11 and any other Applicable Law.

 

14.6.                     Effects of Termination.

 

14.6.1.                         Generally.  Upon termination of this Agreement with respect to any Terminated Program or in its entirety:

 

(a)                   The Receiving Party will promptly return to the other Party or destroy all Confidential Information of the Disclosing Party that is solely related to any applicable Terminated Program; and

 

(b)                   Except as otherwise set forth in this Agreement (including the license granted in Section 7.2.2 (Non-Exclusive License Grant to Morphic)), all licenses granted by a Party to the other Party under this Agreement with respect to any applicable Terminated Program will immediately terminate.

 

14.6.2.                         Reversion; Financial Commitments.  Upon termination of this Agreement with respect to any Terminated Program or in its entirety (A) by Janssen pursuant to Section 14.2 (Termination by Janssen for Convenience) or (B) by Morphic pursuant to Section 14.3.1(a) (Termination by Morphic) in the event of an uncured material breach by Janssen or Section 14.4 (Rights in Bankruptcy) in the event of Janssen’s insolvency:

 

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(a)                   Janssen will, and hereby does, assign to Morphic all Assigned Product-Specific Patents and Janssen Patents, in each case, that (i) solely Cover any Licensed Compound or Product that is the subject of the applicable Terminated Program and do not Cover any Licensed Compound or Product that is the subject of any Research Program that is not a Terminated Program and (ii) Morphic previously assigned to Janssen pursuant to Section 9.2.2 (Morphic Assignment of Assigned Product-Specific Technology);

 

(b)                   Janssen will promptly transfer to Morphic copies of all Janssen Know-How that (i) is necessary or useful to Exploit the Licensed Compounds and Products that are the subject of the applicable Terminated Program in the form that such Licensed Compounds and Products exist as of the effective date of termination of this Agreement with respect to such Terminated Program and (ii) Morphic previously transferred to Janssen pursuant to Section 5.1.2 (After Option Exercise);

 

(c)                    Effective as of such termination, Janssen hereby grants and agrees to grant to Morphic a (i) non-exclusive, royalty-free (except as otherwise provided in Section 14.6.3 (Royalty for Terminated Janssen Products)), irrevocable, perpetual, worldwide license, with the right to sublicense through multiple tiers, under all such Janssen Know-How transferred to Morphic pursuant to Section 14.6.2(b), to Develop, make, have made, use, have used, sell, have sold, offer for sale, import and otherwise Exploit Licensed Compounds and Products that are the subject of the applicable Terminated Program, in the form that such Licensed Compounds and Products exist as of the effective date of termination of this Agreement with respect to such Terminated Program and (ii) a non-exclusive, royalty-free, irrevocable, perpetual, worldwide license, with the right to sublicense through multiple tiers, under the Retained Janssen Patents to Develop, make, have made, use, have used, sell, have sold, offer for sale, import and otherwise Exploit Licensed Compounds and Products that are the subject of the applicable Terminated Program, in the form that such Licensed Compounds and Products exist as of the applicable effective date of termination of this Agreement with respect to such Terminated Program; and

 

(d)                   Janssen will pay Morphic the amount of any financial commitments incurred by Morphic prior to termination in accordance with the Research Budget for the applicable Terminated Program that exceed amounts paid by Janssen to Morphic hereunder prior to such termination and cannot be canceled; provided that Janssen will only be responsible for paying FTE Costs (as pro-rated in accordance with the applicable Research Budget for such Terminated Program)

 

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and Out-of-Pocket Costs until [***] after the effective date of such termination.  Upon receipt of notice of termination of this Agreement with respect to a Terminated Program, Morphic will promptly terminate any outstanding commitments and avoid incurring any further costs under the applicable Research Plan for such Terminated Program.  No later than [***] after the effective date of termination or expiration of this Agreement or the applicable Terminated Program, unless another period is agreed to in writing by the Parties, Morphic may provide an invoice in respect of the final payment due and payable pursuant to the Research Budget for the applicable Terminated Program(s) in accordance with this Section 14.6.2(d).  Janssen will pay all such amounts in accordance with the invoicing and payment provisions of Section 8.11 (Invoicing and Payment).  Notwithstanding anything to the contrary set forth in this Agreement, it is understood that, in no event will the funds payable to Morphic exceed the Research Budget and then-applicable Allowable Overruns for the Terminated Program.  In addition, within [***] days after such effective date of termination, Morphic will provide Janssen with a final accounting for the applicable Research Budget(s).  If the final accounting indicates an amount is due to Morphic, then Janssen will make such final payment in accordance with the invoicing and payment provisions of Section 8.11 (Invoicing and Payment).  If the final accounting indicates an overpayment by Janssen, then Morphic will refund such overpayment to Janssen within [***] of the final accounting.

 

14.6.3.                         Royalty for Terminated Janssen Products.  Upon termination of this Agreement with respect to any Terminated Program or in its entirety by Janssen pursuant to Section 14.2 (Termination by Janssen for Convenience), if, as of the date of such termination with respect to such Terminated Program, Janssen has dosed all patients in a POC Clinical Trial for any Terminated Janssen Product that is the subject of the applicable Terminated Program, then on a Terminated Janssen Product-by-Terminated Janssen Product and country-by-country basis (with respect to such Terminated Program), for so long as Morphic or its Affiliates or licensees sell such Terminated Janssen Product, Morphic will pay Janssen royalties in the amount equal to [***] of the marginal royalty rates set forth in TABLE 8.7 (Royalty Payments) of the aggregate worldwide Net Sales resulting from the sale of each such Terminated Janssen Product during each Calendar Year for each Terminated Janssen Product in each country. For the purposes of this Section 14.6.3 (Royalty for Terminated Janssen Products), the definition of “Net Sales” and Section 8.7 (Royalties), Section 8.11.2 (Other Payments), Section 8.12 (Reports), Section 8.13.2 (Audit of Janssen), Section 8.14 (Conduct of Audits), Section 8.15 (Currency Exchange) and Section 8.16 (Taxes) will apply mutatis mutandis to the calculation, payment, recording and

 

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auditing of Morphic’s obligations to pay royalties under this Section 14.6.3 (Reverse Royalty for Terminated Janssen Products) as they apply to Janssen and, solely for such purpose, each reference in each such Section (and any related definitions) to (i) Janssen will be deemed to be a reference of Morphic and (ii) Morphic will be deemed to be a reference of Janssen.

 

14.7.                     Alternative Remedy in Lieu of Termination.  If Janssen has the right to terminate this Agreement pursuant to Section 14.3.1(b) (Termination by Janssen), then in addition to any other remedies available to Janssen at law or in equity, in lieu of terminating this Agreement Janssen may, in its sole discretion, exercise an alternative remedy as follows:

 

(a)                   Janssen may retain all of its licenses and other rights granted under this Agreement with respect to the applicable Terminated Program, subject to all of its payment and other obligations hereunder; except that (i) the then-unearned Milestone Payments and the royalty rates payable thereafter under this Agreement with respect to such Terminated Program and Products that are the subject of such Terminated Program, in each case, will be reduced by [***]  and (ii) Janssen’s obligations under Section 5.5 (Development Diligence Obligations) and Section 5.6 (Commercialization Diligence Obligations) will each terminate with respect to the Terminated Program; and

 

(b)                   any Janssen Confidential Information provided to Morphic pursuant to this Agreement related to such Terminated Program will be promptly returned to Janssen or destroyed and Janssen will be released from its ongoing disclosure and information exchange obligations with respect to activities related to such Terminated Program that are performed following the date of such election.

 

For the avoidance of doubt, except as set forth in this Section 14.7 (Alternate Remedy in Lieu of Termination), if Janssen exercises the alternative remedy set forth above in this Section 14.7 (Alternate Remedy in Lieu of Termination) with respect to a Terminated Program, then all rights and obligations of both Parties under this Agreement with respect to such Terminated Program will continue unaffected, unless and until this Agreement is subsequently terminated by either Party pursuant to this ARTICLE 14 (Term and Termination).

 

14.8.                     Accrued Rights.  Expiration or termination of this Agreement (or any provision hereof) for any reason will be without prejudice to any right that has accrued to the benefit of a Party prior to such expiration or termination, including damages arising from any breach under this Agreement. Subject to Section 14.6.2(d), expiration or

 

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termination of this Agreement will not relieve a Party from any obligation that is expressly indicated to survive such expiration or termination.

 

14.9.                     Survival.  The following provisions, as well as any other provisions which by their nature are intended to survive termination or expiration, will survive termination or expiration of this Agreement: Article 1 (Definitions), Section 2.10 (Research Program Records), Section 7.2.2 (Non-Exclusive License Grant to Morphic), Section 7.2.3 (Residual Memory and Firewall), Section 7.2.5 (Sublicense Continuation upon Termination), Section 8.7 (Royalties) (solely with respect to Terminated Janssen Products), Section 8.11.2 (Invoicing and Payment) (solely with respect to Terminated Janssen Products), Section 8.12 (Reports) (solely with respect to Terminated Janssen Products), Section 8.13 (Records and Audits), Section 8.14 (Conduct of Audits), Section 8.15 (Currency Exchange) (solely with respect to Terminated Janssen Products), Section 8.16 (solely with respect to Terminated Janssen Products), Section 9.1 (Ownership), Section 9.2 (Assignment of Intellectual Property), Section 9.3 (Exploitation of Joint Technology), Section 9.4 (Disclosure) (solely with respect to Joint Technology), Section 10.6 (Cooperation) (solely with respect to Joint Patents), Section 11.6 (Patent Term Restoration) (solely with respect to Joint Patents), Article 12 (Confidentiality), Section 13.2 (Disclaimers), Section 13.3 (Indemnification), Section 13.4 (Insurance), Section 14.1 (Term) (solely in case of expiration), Section 14.6 (Effects of Termination) (together with those Sections referenced therein), Section 14.8 (Accrued Rights), this Section 14.9 (Survival), Article 15 (Dispute Resolution) and Article 16 (General Provisions).

 

15.                               DISPUTE RESOLUTION.

 

15.1.                     Discussion by Executive Officers; Arbitration.  If there is an unresolved matter, dispute or issue arising out of or relating to the existence, negotiation, validity, formation, interpretation, breach, performance or application of this Agreement for which neither Party has the final decision making authority as expressly provided elsewhere in this Agreement, then either Party may refer such matter, dispute or issue to the Executive Officers of each Party, in writing for further discussion and resolution.  These individuals will meet as soon as practicable and attempt in good faith to resolve the matter, dispute or issue and reach an agreement.  These individuals may obtain the advice of other employees or consultants as they deem necessary or advisable in order to make the decision.  If these individuals cannot reach agreement as to the matter, dispute or issue within [***] of the matter, dispute or issue being referred to them, then any such matter, dispute or issue under this Agreement (an “Unresolved Issue”) will be resolved as provided in Schedule 15.1 (Dispute Resolution).

 

16.                               GENERAL PROVISIONS.

 

16.1.                     Relationship of Parties.  Both Parties are independent contractors under this Agreement.  Nothing herein contained is deemed to create an employment,

 

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agency, joint venture or partnership relationship between the Parties hereto or any of their agents or employees, or any other legal arrangement that would impose liability upon one Party for the act or failure to act on behalf of the other Party.  Neither Party will have any express or implied power or authority to enter into any contracts or commitments or to incur any liabilities in the name of, or on behalf of, the other Party, or to bind the other Party in any respect whatsoever.

 

16.2.                     Performance by Affiliates.  Notwithstanding anything to the contrary set forth in this Agreement, either Party may perform any or all of its obligations and exercise any or all of its rights under this Agreement through any Affiliate.  Each Party will cause its Affiliates to comply with the provisions of this Agreement in connection with such performance.

 

16.3.                     No Third-Party Beneficiaries.  No provision of this Agreement may be deemed or construed in any way to result in the creation of any rights in any person not a Party to this Agreement.

 

16.4.                     Compliance with Laws.  Each Party will perform or cause to be performed any and all of its obligations or the exercise of any and all of its rights hereunder in good scientific manner and in compliance with all Applicable Law, including the U.S. Foreign Corrupt Practices Act and all other Anti-Corruption Laws.

 

16.5.                     Governing Law.  This Agreement is governed by, and construed and enforced in accordance with, the laws of New York, without giving effect to any conflicts of laws principles that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.

 

16.6.                     Counterparts; Facsimiles.  This Agreement may be executed in two (2) counterparts, each of which is deemed an original, and both of which together are deemed to be one and the same instrument.  Counterparts may be delivered via electronic mail, including AdobeTM Portable Document Format (PDF) or any electronic signature complying with the U.S. Federal ESIGN Act of 2000, and any counterpart so delivered will be deemed to be original signatures, will be valid and binding upon the Parties, and, upon delivery, will constitute due execution of this Agreement.

 

16.7.                     Headings.  All headings in this Agreement are for convenience only and do not affect the meaning of any provision hereof.

 

16.8.                     Assignment.  Neither this Agreement nor any interest hereunder will be assignable by Morphic without the prior written consent of Janssen, except as follows:  (a) Morphic may, subject to the terms of this Agreement, assign its rights and obligations under this Agreement in whole to its successor-in-interest in connection with the sale of all or substantially all of its assets to which this Agreement relates, whether in a merger, acquisition, or similar transaction or series of related transactions, provided that such sale is not primarily for the benefit

 

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of its creditors and (b) Morphic may assign its rights and obligations under this Agreement to any of its Affiliates, provided that Morphic will remain liable for all of its rights and obligations under this Agreement.  Janssen may freely assign this Agreement or any interest hereunder in whole or in part, provided that Janssen will remain liable for all of its rights and obligations under this Agreement.  Morphic will promptly notify Janssen of any assignment or transfer under the provisions of this Section 16.8 (Assignment).  This Agreement will be binding upon the successors and permitted assigns of the Parties and the name of a Party appearing herein will be deemed to include the names of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this Agreement.  Any assignment not in accordance with this Section 16.8 (Assignment) will be null, void, and of no legal effect.

 

16.9.                     Non-Solicitation.  [***]

 

16.10.              Notices.  All notices that are required or permitted hereunder will be in writing and sufficient if delivered personally, sent by facsimile or electronic mail (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

	
If to Morphic:
    	
Morphic Therapeutic, Inc.
    
	
 
    	
35 Gatehouse Drive A2
    
	
 
    	
Waltham, MA 02451
    
	
 
    	
Attention: Chief Executive Officer
    
	
 
    	
 
    
	
With a copy to   (which will not constitute notice):
    
	
 
    	
 
    
	
 
    	
Dechert LLP
    
	
 
    	
1900 K Street, NW
    
	
 
    	
Washington, DC 20006
    
	
 
    	
Attention: David E. Schulman
    
	
 
    	
Facsimile: [***]
    
	
 
    	
 
    
	
If to Janssen:
    	
Janssen Pharmaceuticals, Inc.
    
	
 
    	
1125 Trenton-Harbourton Road
    
	
 
    	
Titusville, NJ 08560
    
	
 
    	
Attention: President
    
	
 
    	
 
    
	
With a copy to:
    	
Johnson & Johnson
    
	
 
    	
One Johnson & Johnson Plaza
    
	
 
    	
New Brunswick, NJ 08933
    
	
 
    	
Attention: Chief Patent Counsel
    
	
 
    	
Facsimile: [***]
    
	
 
    	
 
    
	
With a copy to (which will   not constitute notice):
    

 

92

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

 

	
 
    	
Ropes & Gray LLP
    
	
 
    	
800 Boylston Street, Prudential Tower
    
	
 
    	
Boston, MA 02199
    
	
 
    	
Attention: David M. McIntosh
    
	
 
    	
Facsimile: [***]
    

 

Either Party may change its designated address and facsimile number by notice to the other Party in the manner provided in this Section 16.10 (Notices).

 

16.11.              Amendment.  This Agreement may be amended, supplemented or otherwise modified only by means of a written instrument signed by a duly authorized officer of both Parties.

 

16.12.              Waiver.  No provision of this Agreement may be waived by any act, omission or knowledge of a Party or its agents or employees except by a written instrument expressly waiving such provision and signed by a duly authorized officer of the waiving Party.  The waiver by either of the Parties of any breach of any provision hereof by the other Party will not be construed to be a waiver of any succeeding breach of such provision or a waiver of the provision itself.

 

16.13.              Severability.  In the event that any provision of this Agreement is, for any reason, held to be invalid or unenforceable in any respect, such invalidity or unenforceability will not affect any other provision hereof, and the Parties will negotiate in good faith to modify the Agreement to preserve (to the extent possible) their original intent.

 

16.14.              Construction.  Except where the context expressly requires otherwise, (a) the use of any gender herein will be deemed to encompass references to either or both genders, and the use of the singular will be deemed to include the plural (and vice versa), (b) the words “include,” “includes,” and “including” will be deemed to be followed by the phrase “without limitation,” (c) the word “will” will be construed to have the same meaning and effect as the word “shall,” (d) any definition of or reference to any agreement, instrument, or other document herein will be construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented, or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (e) any reference herein to any person will be construed to include the person’s successors and assigns, (f) the words “herein,” “hereof,” and “hereunder” and words of similar import, will each be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (g) all references herein to Articles, Sections, or Schedules will be construed to refer to Articles, Sections, or Schedules of this Agreement, and references to this Agreement include all Schedules hereto, (h) the word “notice” means notice in writing (whether or not specifically stated) and will include notices, consents, approvals and other written communications contemplated under this Agreement, (i) provisions that require

 

93

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

 

that a Party, the Parties or any committee hereunder “agree,” “consent,” “approve,” or the like will require that such agreement, consent, or approval be specific and in writing, whether by written agreement, letter, approved minutes, or otherwise (but excluding e-mail and instant messaging), (j) references to any specific law, rule or regulation, or section or other division thereof, will be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof and (k) the term “or” will be interpreted in the inclusive sense commonly associated with the term “and/or.”

 

16.15.              Entire Agreement.  This Agreement, including the attached Schedules, is the sole agreement with respect to the subject matter and supersedes all other agreements, prior discussions, representations, and understandings between the Parties with respect to same.  For the avoidance of doubt, this Agreement supersedes that certain “Confidential Disclosure Agreement” between Morphic and an Affiliate of Janssen dated March 2, 2017, provided that all “Confidential Information” disclosed or received by Morphic and such Affiliate of Janssen thereunder is deemed “Confidential Information” hereunder and subject to the terms and conditions of this Agreement.

 

16.16.              Acknowledgement.  Morphic acknowledges and agrees that Janssen and its Affiliates may have been involved prior to the Effective Date and may be involved during the Term in Developing, Commercializing, Manufacturing or otherwise Exploiting products that may compete with the Products, and nothing in this Agreement will restrict or prohibit Janssen or any of its Affiliates from Developing, Commercializing, Manufacturing or otherwise Exploiting any such competitive products during the Term or thereafter.

 

16.17.              Force Majeure.  Neither Janssen nor Morphic will be liable for failure of or delay in performing obligations set forth in this Agreement (other than any obligation to pay monies when due), and neither will be deemed in breach of such obligations, if such failure or delay is due to natural disasters or any causes reasonably beyond the control of Janssen or Morphic; provided that the Party affected will promptly notify the other of the force majeure condition and will exert reasonable efforts to eliminate, cure or overcome any such causes and to resume performance of its obligations with reasonable dispatch when such causes are removed.

 

16.18.              Further Actions.  Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of the Agreement, including the filing of additional assignments, agreements, documents and instruments, as the other Party may at any time and from time to time reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes of, or to better assure and confirm unto such other Party its rights and remedies under, this Agreement.

 

[Signature Page Follows]

 

94

 

The Parties have caused this Research Collaboration and Option Agreement to be executed by their respective duly authorized officers as of the Effective Date.

 

	
MORPHIC   THERAPEUTIC, INC.
    	
 
    	
JANSSEN PHARMACEUTICALS, INC.
    
	
 
    	
 
    	
 
    
	
Signature: 
    	
/s/ Praveen P.   Tipirneni
    	
 
    	
Signature: 
    	
/s/ Peter Menziuso
    
	
Name: 
    	
Praveen P.   Tipirneni
    	
 
    	
Name: 
    	
Peter Menziuso
    
	
Title: 
    	
President and CEO
    	
 
    	
Title: 
    	
President
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

SCHEDULE 1.18

 

[***]

 

 

SCHEDULE 1.182

 

Threshold Activity and Selectivity

 

[***]

 

97

 

SCHEDULE 1.91

 

Late Lead Optimization Activities

 

Janssen Late Lead Optimization Activities will evaluate and optimize the following properties of the Compounds

 

	
 
    	
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SCHEDULE 1.108

 

Morphic Patents as of the Effective Date

 

A.  Product-Specific Patents

 

[***]

 

B.  Morphic Platform Patents

 

[***]

 

 

SCHEDULE 2.2.1(a)

 

[***]

 

 

SCHEDULE 2.2.1(b)

 

[***]

 

 

SCHEDULE 2.2.1(c)

 

[***]

 

 

SCHEDULE 2.2.3

 

2019 Research Plan and Research Budget

 

 

SCHEDULE 2.10

 

Data Integrity Requirements

 

1.                                      Morphic represents, warrants, covenants and certifies that the Data will be collected and generated following the specifications contained in this Agreement, all written instructions provided by Janssen, and all applicable good research practices.

 

2.                                      Data will be accurate, reliable and all results generated during the performance of services will be reconstructable, repeatable and traceable. Morphic must verify the Data during generation and prior to transfer of the Data to Janssen.

 

3.                                      Morphic must keep a separate written or electronic notebook record of all activity associated with the performance of services under this Agreement. Such records must document all data processing steps, including detailed notes of calculations applied, reasoning used for excluded data points and any decisions made in furtherance of the services, to allow for complete and transparent reporting of activities conducted in the performance of services under this Agreement.

 

4.                                      Morphic will collect and store hard copy as well as electronic Data securely in accordance with the terms of this Agreement, including in accordance with Janssen policies related to records management.

 

5.                                      Morphic must report all Data and its processing steps, decision-points, acceptance criteria, methods, calculations and results (successful and unsuccessful experiments) to Janssen at mutually agreed upon points in time.

 

6.                                      All Data generated must be made available either as an original or as an electronic copy by Morphic to Janssen at mutually agreed upon time points or at the latest at the completion of the Research Activities under this Agreement. Data which were generated or modified in electronic format must be transferred to Janssen in electronic format.

 

7.                                      No Data will be destroyed without the prior written approval of Janssen.

 

8.                                      During and up to [***] after the completion of the Research Activities under this Agreement, Morphic will ensure that representatives of Janssen have access to Morphic’s and its Affiliates’ premises, upon reasonable advance notice during regular business hours, for the purpose of reviewing such activities and the Data related thereto, and the systems and processes which were used to generate and process the Data. In the event that Morphic is found responsible for quality or data integrity issues with the Data generated under this Agreement, Morphic will seek to resolve any issues by a mutually agreed upon date.

 

Definition: For the purpose of this Schedule only, the terms listed below will have the meaning as defined below.

 

 

Data means all data, including raw data, processed data, notebook records, documents, reports, presentations, computer models, deliverables, written, printed, graphic, video and audio recorded information contained in any computer database or computer readable form and other results supplied to or generated by or on behalf of Morphic or its Affiliates or Sublicensees as the result of performing activities under this Agreement.

 

 

SCHEDULE 10.1

 

Jurisdictions

 

[***]

 

 

 

SCHEDULE 12.4.1

 

Press Release

 

 

Morphic Therapeutic Enters Into Integrin Research and Development Collaboration with Janssen

 

·                  Deal extends reach of Morphic discovery across all known human integrins

 

·                  Therapeutic potential of Morphic pipeline expanded by inclusion of both integrin inhibitor and activator research

 

·                  Collaboration facilitated by Johnson & Johnson Innovation, Boston

 

WALTHAM, Mass. — February XX, 2019 — Morphic Therapeutic (Morphic), a biotechnology company developing oral integrin therapies, announced today that it has entered into a research and development collaboration with Janssen Biotech, Inc. (Janssen) to discover and develop novel integrin therapeutics for patients with conditions not adequately addressed by current therapies. Johnson & Johnson Innovation LLC facilitated the transaction. The collaboration focuses on several undisclosed integrin targets and will explore both inhibitors and activators of integrin function.

 

To date, Morphic has built a leadership position in novel oral small molecule integrin inhibitors by leveraging the breakthrough structural research of its scientific founder, Dr. Tim Springer. Applying this platform to all 24 known human integrins, including αI integrin targets, potentially expands Morphic’s drug discovery capabilities, pipeline and the therapeutic applications of its drug candidates across a diverse set of diseases. This reflects integrins’ important role in many cellular processes.

 

“Our team is pleased to have a partner of Janssen’s caliber join our network of collaborators working together to drive the development of a new generation of oral integrin medicines using our in-house platform,” said Praveen Tipirneni, M.D., president, and chief executive officer, Morphic Therapeutic. “The dysregulation of the diverse integrin family is implicated in many conditions, creating an urgency which drives our team’s mission to rapidly and systematically interrogate this target class both from an inhibition and activation perspective. This partnership offers exciting opportunities to advance oral integrin development into new areas, research which creates value for all our internal programs and accelerates the refinement and validation of our platform.”

 

Under the terms of the agreement, the companies will collaborate through preclinical development to identify and advance candidates. Upon completing Investigational New Drug enabling studies, Janssen may exclusively option the licensed compounds, and then Janssen will be responsible for global clinical development and commercialization. Janssen will pay Morphic an undisclosed upfront payment and will fund research activities. In addition, Morphic will receive from Janssen multiple preclinical development, clinical and commercial milestone payments totaling over $725 million if such milestones are achieved. Morphic will also receive royalties on worldwide net sales for any products resulting from the collaboration.

 

About Integrins

 

Integrins are a ubiquitous family of receptors expressed on the surface of most human cells. Integrins are dimers comprising one α (alpha) subunit and one β (beta) subunit. Integrin signaling controls a wide range of cellular processes, including cell survival, cell cycle progression, immune system activation, cell differentiation, and cell migration. Aberrant integrin signaling contributes to a diverse array of human diseases, including each of Morphic’s focus areas of fibrosis, autoimmune diseases, and immuno-oncology.

 

αI (pronounced ‘alpha-eye’) domain integrins represent a distinct structural class of the 24-member integrin family. The presence of the αI domain in the α (alpha) subunit of the integrin dimer gives it a different mechanism of ligand binding. αI domain integrins are distinct from the α1 (alpha-one) subunit of the integrin dimer. Activators of integrin function may be useful in the treatment of diseases where cell function is weakened due to loss of integrin-mediated interactions with the microenvironment.

 

 

Research in the Springer laboratory has shown that, historically, compounds designed to inhibit integrin function inadvertently worked to activate it, leading to the failure of investigational oral integrin drugs. Morphic’s platform is designed to avoid these pitfalls and deliver effective oral therapeutic candidates including both inhibitors and activators of integrin function.

 

About Morphic Therapeutic

 

Morphic Therapeutic is a biotechnology company developing a new generation of oral integrin therapies. Drawing on integrin biology breakthroughs from the lab of noted entrepreneur and scientific founder Tim Springer, Morphic has developed an exclusive platform to build on these discoveries to model integrins and discover effective orally delivered integrin therapies. For more information, visit www.morphictx.com.

 

Contacts

 

Morphic Contact
 Robert E. Farrell, Jr., VP Finance and Ops and Treasurer
 bob.farrell@morphictx.com 
 781-996-0955

 

Morphic Media Contact
 Tom Donovan, Ten Bridge Communications
 tom@tenbridgecommunications.com
 857-559-3397

 

 

SCHEDULE 15.1

 

Dispute Resolution

 

Arbitration

 

If a Party desires to pursue resolution of the Unresolved Issue, then the Unresolved Issue will be submitted by either Party for resolution in arbitration pursuant to the then current CPR Non-Administered Arbitration Rules (“CPR Rules”) (http://www.cpradr.org), except where they conflict with these provisions, in which case these provisions control.  The arbitration will be held in New York, New York.  All aspects of the arbitration will be treated as confidential.

 

The arbitrators will be chosen from the CPR Panel of Distinguished Neutrals, unless a candidate not on such panel is approved by both parties.  Except as provided below with respect to Unresolved Issues related to Section 3.7.4 (Passed Terminated Janssen Product Partnering), each arbitrator will be a lawyer with at least 15 years experience with a law firm or corporate law department of over 25 lawyers or who was a judge of a court of general jurisdiction.  To the extent that the Unresolved Issue requires special expertise, the Parties will so inform CPR prior to the beginning of the selection process.

 

The arbitration tribunal will consist of three arbitrators, of whom each Party will designate one in accordance with the “screened” appointment procedure provided in CPR Rule 5.4.  The chair will be chosen in accordance with CPR Rule 6.4.

 

If, however, (a) the aggregate award sought by the Parties is less than [***]  and equitable relief is not sought, or (b) the Unresolved Issues involves Section 3.7.4 (Passed Terminated Janssen Product Partnering), a single arbitrator will be chosen in accordance with the CPR Rules (and, in the case of any dispute involving Section 3.7.4 (Passed Terminated Janssen Product Partnering), the arbitrator shall have at least ten (10) years of experience as a financial advisor or business development officer in the biopharmaceutical industry).

 

Candidates for the arbitrator position(s) may be interviewed by representatives of the Parties in advance of their selection, provided that all parties are represented.

 

The Parties agree to select the arbitrator(s) within [***] of initiation of the arbitration.  The hearing will be concluded within [***] after selection of the arbitrator(s) and the award will be rendered within [***] of the conclusion of the hearing, or of any post-hearing briefing, which briefing will be completed by both sides [***] after the conclusion of the hearing.  In the event the Parties cannot agree upon a schedule, then the arbitrator(s) will set the schedule following the time limits set forth above as closely as practical.

 

The hearing will be concluded in ten hearing days or less.  Multiple hearing days will be scheduled consecutively to the greatest extent possible.  A transcript of the testimony adduced at the hearing will be made and will be made available to each Party.

 

 

The arbitrator(s) will be guided, but not bound, by the CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration (www.cpradr.org) (“Protocol”).  The Parties will attempt to agree on modes of document disclosure, electronic discovery, witness presentation, etc. within the parameters of the Protocol.  If the Parties cannot agree on discovery and presentation issues, then the arbitrator(s) will decide on presentation modes and provide for discovery within the Protocol, understanding that the parties contemplate reasonable discovery.

 

The arbitrator(s) will decide the merits of any Unresolved Issue in accordance with the law governing this Agreement, without application of any principle of conflict of laws that would result in reference to a different law.  The arbitrator(s) may not apply principles such as “amiable compositeur” or “natural justice and equity.”

 

The arbitrator(s) are expressly empowered to decide dispositive motions in advance of any hearing and will endeavor to decide such motions as would a United States District Court Judge sitting in the jurisdiction whose substantive law governs.

 

The arbitrator(s) will render a written opinion stating the reasons upon which the award is based. The Parties consent to the jurisdiction of the United States District Court for the district in which the arbitration is held for the enforcement of these provisions and the entry of judgment on any award rendered hereunder.  Should such court for any reason lack jurisdiction, any court with jurisdiction may act in the same fashion.

 

Each Party has the right to seek from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc. to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the Unresolved Issue.  Rule 14 of the CPR Rules does not apply to this Agreement.

 

EACH PARTY HERETO WAIVES: (1) ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY, (2) WITH THE EXCEPTION OF RELIEF MANDATED BY STATUTE, ANY CLAIM TO PUNITIVE, EXEMPLARY, MULTIPLIED, INDIRECT, CONSEQUENTIAL OR LOST PROFITS OR REVENUES DAMAGES AND (3) ANY CLAIM FOR ATTORNEY FEES, COSTS AND PREJUDGMENT INTEREST.

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