Document:

Exhibit 10.7

	
 
    	
 
    

 

RESEARCH COLLABORATION AGREEMENT

 

BY AND BETWEEN

 

NAUREX INC.

 

AND

 

APTINYX INC.

 

DATED AS OF JULY 24, 2015

	
 
    	
 
    

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
PAGE
    
	
ARTICLE 1
    	
DEFINED   TERMS
    	
1
    
	
Section 1.1.
    	
Definitions
    	
1
    
	
Section 1.2.
    	
Descriptive Headings;   Certain Interpretations
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE 2
    	
RESEARCH   PROGRAM
    	
14
    
	
Section 2.1.
    	
General
    	
14
    
	
Section 2.2.
    	
Research Plan and   Research Activities
    	
14
    
	
Section 2.3.
    	
Conduct of the Research   Program; Diligence
    	
19
    
	
Section 2.4.
    	
Research Term
    	
20
    
	
Section 2.5.
    	
Research Program   Personnel; Subcontracting
    	
20
    
	
Section 2.6.
    	
Project Personnel
    	
21
    
	
Section 2.7.
    	
Facilities and Materials
    	
21
    
	
Section 2.8.
    	
Records and   Disclosure/Reports
    	
21
    
	
Section 2.9.
    	
Additional Activities
    	
22
    
	
 
    	
 
    	
 
    
	
ARTICLE 3
    	
EXCLUSIVE   OPTION OF THE COMPANY
    	
22
    
	
Section 3.1.
    	
Exclusive Option
    	
22
    
	
Section 3.2.
    	
Assignment of   Compound-Specific Technology
    	
23
    
	
Section 3.3.
    	
Transfer of Information
    	
25
    
	
Section 3.4.
    	
Non-Exercise of the   Option
    	
25
    
	
Section 3.5.
    	
Preservation of Option
    	
25
    
	
Section 3.6.
    	
Exclusivity
    	
26
    
	
Section 3.7.
    	
Change of Control
    	
26
    
	
Section 3.8.
    	
Restriction on the   Company
    	
27
    
	
 
    	
 
    	
 
    
	
ARTICLE 4
    	
PAYMENTS
    	
28
    
	
Section 4.1.
    	
Prepaid Research   Expenses
    	
28
    
	
Section 4.2.
    	
Funded SpinCo   Activities
    	
28
    
	
Section 4.3.
    	
FTE Records and Audit   Rights
    	
31
    
	
Section 4.4.
    	
Option Exercise Fee
    	
32
    
	
Section 4.5.
    	
Payment Method; Foreign   Exchange
    	
32
    
	
Section 4.6.
    	
Taxes
    	
32
    
	
Section 4.7.
    	
Interest on Overdue   Payments
    	
32
    
	
 
    	
 
    	
 
    
	
ARTICLE 5
    	
GOVERNANCE
    	
33
    
	
Section 5.1.
    	
Research Project   Coordinators
    	
33
    
	
Section 5.2.
    	
Joint Steering   Committee
    	
33
    
	
Section 5.3.
    	
Expenses
    	
36
    
	
 
    	
 
    	
 
    
	
ARTICLE 6
    	
INTELLECTUAL   PROPERTY
    	
36
    
	
Section 6.1.
    	
Collaboration   Inventions
    	
36
    
	
Section 6.2.
    	
Inventorship
    	
36
    
	
Section 6.3.
    	
Licenses to the Company
    	
36
    

 

ii

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

	
Section 6.4.
    	
Licenses to SpinCo
    	
39
    
	
Section 6.5.
    	
Prosecution and   Maintenance of Patent Rights
    	
40
    
	
Section 6.6.
    	
Enforcement and Defense   of Patent Rights
    	
42
    
	
Section 6.7.
    	
Potential Infringement   of Third Party Rights
    	
43
    
	
Section 6.8.
    	
Section 365(n) of   the Bankruptcy Code
    	
44
    
	
Section 6.9.
    	
Patent Term Extension   and Orange Book Listing
    	
44
    
	
Section 6.10.
    	
No Implied Licenses
    	
45
    
	
 
    	
 
    	
 
    
	
ARTICLE 7
    	
CONFIDENTIALITY
    	
45
    
	
Section 7.1.
    	
Confidentiality
    	
45
    
	
Section 7.2.
    	
Exceptions
    	
46
    
	
Section 7.3.
    	
Authorized Disclosure
    	
47
    
	
Section 7.4.
    	
Nondisclosure of Terms
    	
49
    
	
Section 7.5.
    	
Press Releases and   Announcements
    	
49
    
	
Section 7.6.
    	
Publications and   Presentations
    	
50
    
	
Section 7.7.
    	
Use of Name
    	
50
    
	
 
    	
 
    	
 
    
	
article 8
    	
REPRESENTATIONS,   WARRANTIES AND COVENANTS
    	
50
    
	
Section 8.1.
    	
Representations,   Warranties and Covenants
    	
50
    
	
Section 8.2.
    	
Additional   Representations, Warranties and Covenants of SpinCo
    	
51
    
	
Section 8.3.
    	
No Other Warranties
    	
53
    
	
 
    	
 
    	
 
    
	
ARTICLE 9
    	
INDEMNIFICATION
    	
53
    
	
Section 9.1.
    	
Indemnification by the   Company
    	
53
    
	
Section 9.2.
    	
Indemnification by   SpinCo
    	
53
    
	
Section 9.3.
    	
Indemnification   Procedures
    	
54
    
	
Section 9.4.
    	
Insurance
    	
55
    
	
 
    	
 
    	
 
    
	
ARTICLE 10
    	
TERMINATION
    	
56
    
	
Section 10.1.
    	
Termination
    	
56
    
	
Section 10.2.
    	
Termination Upon Notice
    	
56
    
	
Section 10.3.
    	
Termination for   Insolvency
    	
56
    
	
Section 10.4.
    	
Effect of Termination   or Expiration
    	
56
    
	
Section 10.5.
    	
Accrued Rights
    	
57
    
	
Section 10.6.
    	
Survival
    	
57
    
	
Section 10.7.
    	
Termination Not Sole   Remedy
    	
57
    
	
 
    	
 
    	
 
    
	
ARTICLE 11
    	
MISCELLANEOUS
    	
58
    
	
Section 11.1.
    	
Notices
    	
58
    
	
Section 11.2.
    	
Assignment
    	
59
    
	
Section 11.3.
    	
Relationship of the   Parties
    	
59
    
	
Section 11.4.
    	
Equitable Relief
    	
60
    
	
Section 11.5.
    	
Amendment and Waiver
    	
60
    
	
Section 11.6.
    	
Entire Agreement
    	
60
    
	
Section 11.7.
    	
No Third-Party   Beneficiaries
    	
60
    

 

iii

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

	
Section 11.8
    	
Export Control
    	
60
    
	
Section 11.9.
    	
Counterparts
    	
61
    
	
Section 11.10.
    	
Dispute Resolution
    	
61
    
	
Section 11.11.
    	
Performance Warranty
    	
61
    
	
Section 11.12.
    	
Governing Law; Venue
    	
61
    
	
Section 11.13.
    	
Severability
    	
61
    
	
Section 11.14.
    	
Force Majeure
    	
61
    
	
Section 11.15.
    	
Consequential Damages
    	
62
    

 

	
EXHIBITS:
    	
 
    
	
 
    	
 
    
	
Exhibit A
    	
Initial Research Plan
    
	
 
    	
 
    
	
SCHEDULES:
    	
 
    
	
 
    	
 
    
	
Schedule 1
    	
Preliminary Data   Package Information
    
	
 
    	
 
    
	
Schedule 2
    	
Exception Compounds
    
	
 
    	
 
    
	
Schedule 3
    	
Excluded Compounds
    
	
 
    	
 
    
	
Schedule 4
    	
Disorders and   Conditions in the Field
    
	
 
    	
 
    
	
Schedule 5
    	
Preliminary Initial   Screening Results
    
	
 
    	
 
    
	
Schedule 6
    	
Knowledge Persons
    
	
 
    	
 
    
	
Schedule 7
    	
Key Personnel
    
	
 
    	
 
    
	
Schedule 8
    	
SpinCo In-Licenses
    

 

iv

 

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RESEARCH COLLABORATION AGREEMENT

 

This Research Collaboration Agreement (this “Agreement”), dated as of July 24, 2015 (the “Execution Date”), is entered into by and between Naurex Inc., a Delaware corporation (the “Company”) and Aptinyx Inc., a Delaware corporation (“SpinCo”).  The Company and SpinCo are each referred to herein by name or as a “Party” or, collectively, as “Parties”.

 

RECITALS

 

WHEREAS, Actavis W.C. Holding Inc., a Delaware corporation (“Buyer”), the Company and SpinCo are parties to that certain Agreement and Plan of Merger of even date herewith among Allergan plc, a public limited company organized under the laws of Ireland, Buyer, Ursa Major Merger Sub Inc., a Delaware corporation, and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the Shareholders’ Representative (the “Merger Agreement”); and

 

WHEREAS, this Agreement shall become effective only as of the Closing Date (as defined in the Merger Agreement) (the “Effective Date”); and

 

WHEREAS, concurrently with the execution and delivery of the Merger Agreement and as a condition and inducement for Buyer to enter into the Merger Agreement, the Company and SpinCo have agreed to enter into this Agreement, pursuant to which, among other things, the Company and SpinCo will collaborate in the research and discovery of small molecules that modulate the NMDA receptors (as defined below).

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the Parties agree as follows:

 

ARTICLE 1
  DEFINED TERMS

 

Section 1.1.           Definitions.  As used herein, the following terms shall have the following meanings:

 

“Acquired Compound” means a Company Selected Compound for which the Company exercises an Option pursuant to Section 3.1, and any [***].

 

“Acquired Product” means any product that contains, or otherwise incorporates, an Acquired Compound.

 

“Affiliate” means, with respect to a Person, another Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person; provided that, for purposes of this definition, “control” means, with respect to a Person, direct or indirect ownership of fifty percent (50%) or more, including

 

1

 

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ownership by trusts with substantially the same beneficial interests, of the voting and equity rights of such Person, or the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract, by board of director membership or representation, or otherwise.

 

“Agreement” is defined in the preamble of this Agreement.

 

“Assignment Notice” is defined in Section 3.2(c).

 

“Assignment Notice Date” is defined in Section 3.2(c).

 

“Budgeted Amounts” is defined in Section 2.2(a).

 

“Business Day” means a day other than Saturday, Sunday or any other day on which commercial banks located in the State of New York are authorized or obligated by applicable Laws to close.

 

“Buyer” is defined in the preamble of this Agreement.

 

“Calendar Quarter” means each successive period of three (3) calendar months commencing on January 1, April 1, July 1 and October 1, except that the first Calendar Quarter of the Term shall commence on the Effective Date and end on the day immediately prior to the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date and the last Calendar Quarter shall end on the last day of the Term.

 

“Calendar Year” means each successive period of twelve (12) calendar months commencing on January 1 and ending on December 31, except that the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of the year in which the Effective Date occurs and the last Calendar Year of the Term shall commence on January 1 of the year in which the Term ends and end on the last day of the Term.

 

“Change of Control” means, with respect to a Party, the merger or sale of such Party or the sale or transfer of all or substantially all of the assets of such Party to a Third Party that is not an Affiliate of such Party.

 

“Collaboration Compound” means (a) any Existing Compounds and (b) any other small molecule compounds that are identified, generated, discovered, or developed by or on behalf of SpinCo or its Affiliates in the conduct of the Research Activities, excluding any Excluded Compound or any Company Compound (as defined in the License Agreement).

 

“Commercially Reasonable Efforts” means, with respect to the performance by SpinCo of SpinCo Activities hereunder, the carrying out of such activity in a sustained and diligent manner using efforts and resources comparable to the efforts and resources commonly used by a company in the research-based pharmaceutical industry in pursuing the discovery and research of compounds that are at a similar stage of discovery and research as the compounds included as part of the Research Program.  Without limitation to the foregoing, in the case of

 

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SpinCo, such efforts and resources shall be no less than the efforts and resources used by SpinCo in relation to its research and other activities with respect to compounds and products for use outside the Field and in other research programs of SpinCo.

 

“Company” is defined in the preamble of this Agreement.

 

“Company Collaboration Know-How” means Information, other than SpinCo Improvements, that is Invented by the Company or its Affiliates (or by Third Parties working on behalf of the Company or its Affiliates) after the Effective Date in connection with the conduct of the Research Activities. Company Collaboration Know-How shall exclude Joint Collaboration Know-How.

 

“Company Collaboration Patent Rights” means Patent Rights that cover or claim inventions or discoveries that are Invented by the Company or its Affiliates (or by Third Parties working on behalf of the Company or its Affiliates) after the Effective Date in connection with the conduct of the Research Activities.  Company Collaboration Patent Rights shall exclude Joint Collaboration Patent Rights.

 

“Company Compound” has the meaning ascribed to such term in the License Agreement.

 

“Company Indemnified Party” is defined in Section 9.2.

 

“Company In-License Agreement” is defined in Section 6.4(b).

 

“Company Selected Compounds” means the Eligible Compounds selected by the Company in accordance with Section 2.2(c)(iii).

 

“Competing Business” is defined in Section 3.6.

 

“Compound-Specific Know-How” means, with respect to an Acquired Compound, [***].

 

“Compound-Specific Patent Rights” means those Patent Rights that solely cover or claim (a) the composition of matter, manufacture or use of any Acquired Compounds or Acquired Products or the other Exploitation of any Acquired Compounds or Acquired Products, or (b) any Compound-Specific Know-How.

 

“Compound-Specific Technology” means, with respect to an Acquired Compound, the Compound-Specific Know-How and Compound-Specific Patent Rights.

 

“Confidential Acquired Compound Information” is defined in Section 7.1(b)(iii).

 

“Confidential Information” is defined in Section 7.1(a).

 

“Confidentiality Term” is defined in Section 7.1(a).

 

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“Contributed Intellectual Property” has the meaning ascribed to such term in the Reorganization Agreement.

 

“Control” means, with respect to any item of Information, Patent Rights or other intellectual property rights, the possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to assign, or grant a license, sublicense or other right to or under, such Information, Patent Rights or other intellectual property rights, as provided for herein without violating the terms of any agreement or other arrangement with any Third Party and without violating any applicable Laws.  For clarity, no Party (or Affiliate of a Party, as applicable) shall be deemed to Control any Information, Patent Rights or other intellectual property rights by virtue of the license grants to that Party by the other Party as set forth in this Agreement.

 

“Data Package” means, with respect to a Company Selected Compound, all Information that is [***].  The Data Package shall include, at a minimum, the types of Information set forth on Schedule 1.

 

“Data Package Delivery Date” is defined in Section 3.1(b).

 

“Declined Compound” means any Collaboration Compound that (a) as of the end of the Research Term, Company has not selected as a Company Selected Compound, as provided in Section 2.2(c)(iii), or (b) as of the end of the Option Period, is a Company Selected Compound for which Company has not exercised an Option, as provided in Section 3.4.

 

“Dedicated FTE Resource” is defined in Section 4.2(a)(i).

 

“Designated Officers” is defined in Section 5.2(d).

 

“Development Services Agreement” means the development services agreement by and between the Company and SpinCo of even date herewith.

 

“Disputed Matter” is defined in Section 5.2(d).

 

“Effective Date” is defined in the Recitals.

 

“Eligible Compound” is defined in Section 2.2(c)(ii).

 

“Eligible Compound Notice” is defined in Section 2.2(c)(ii).

 

“Eligible Compound Pool” means the collection of Collaboration Compounds consisting of one or more Eligible Compounds as designated from time to time by the JSC.

 

“Eligible Compound Pool Satisfaction” means, with respect to a Party’s Eligible Compound Selection Period, that the Eligible Compound Pool contains at least [***] Eligible Compounds that are not Terminated Compounds, and that at least [***] of such Eligible Compounds has been added to the Eligible Compound Pool after the last Pick of the other Party.

 

4

 

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“Eligible Compound Pool Satisfaction Notice” is defined in Section 2.2(c)(ii).

 

“Eligible Compound Selection Period” means, with respect to a Party, [***].

 

“Exception Compound” means [***].

 

“Excluded Compound” means [***].

 

“Exclusivity Period” means the period commencing on the Effective Date and ending on the [***] anniversary of the last day of the Term.

 

“Execution Date” is defined in the Preamble of this Agreement.

 

“Existing Compound” means any small molecule compound, other than the Excluded Compounds, that is owned or Controlled by SpinCo as of the Effective Date as a result of the Reorganization.

 

“Exploit” and “Exploitation” means to research, develop, import, export, make, have made, use, sell, offer for sale and otherwise exploit, including all registration, modification, enhancement, improvement, manufacture, storage, formulation, exportation, transportation, distribution, promotion and marketing activities related thereto.

 

“Exploitation License” is defined in Section 6.3(b).

 

“Extended IP Access Period” means the period commencing on the last day of the Term and ending on the [***] anniversary thereof.

 

“Extended IP Access Period Patent Rights” means any Patent Rights that first meet the definition of SpinCo Background Patent Rights or SpinCo Platform Patent Rights during the Extended IP Access Period and not during the Term.

 

“Field” means any therapeutic, prophylactic or diagnostic use for (a) the psychiatric disorders or conditions set forth on Schedule 4, or (b) the neurocognitive disorders or conditions set forth on Schedule 4.

 

“FFDCA” means the United States Federal Food, Drug, and Cosmetic Act.

 

“Force Majeure” means any event that is beyond a non-performing Party’s reasonable control, including an act of God, strike, lock-out or other industrial/labor disputes (whether involving the workforce of the Party so prevented or of any other Person), war, riot, civil commotion, terrorist act, malicious damage, epidemic, quarantine, fire, flood, storm, or natural disaster or compliance with any new, changed (including changed interpretations thereof), or reasonably unanticipated Law or governmental order, rule, regulation or direction (including changes in the requirements of a Governmental Entity), whether or not it is later held to be invalid, except to the extent any such Law or governmental order, rule, regulation or direction operates to delay or prevent the non-performing Party’s performance as a result of or in

 

5

 

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connection with any breach by such Party or any of its Affiliates of any term or condition (including any representation or warranty) of this Agreement.

 

“FTE” means a full-time, equivalent person year, based upon a total of [***] hours per year of scientific or technical work in connection with the Funded SpinCo Activities.

 

“FTE Cost” means, for any period during the Term, the applicable FTE Rate multiplied by the applicable number of FTEs to be expended over such period.

 

“FTE Rate” means [***]. The FTE Rate shall be adjusted annually for each Calendar Year after 2016 to be equal to the FTE Rate as of the Effective Date or the preceding Calendar Year, as the case may be, plus a percentage increase equal to the percentage increase in such Calendar Year in the Consumer Price Index for all Urban Consumers, as published by the U.S. Department of Labor, Bureau of Statistics.

 

“Funded SpinCo Activities” means the conduct by or on behalf of SpinCo of the following activities in accordance with the Research Plan and this Agreement: [***].

 

“GAAP” means United States generally accepted accounting principles, consistently applied.

 

“Governmental Entity” means any instrumentality, subdivision, court, administrative agency, commission, official or other authority of any country, state, province, prefect, municipality, locality or other government or political subdivision thereof, or any multinational organization or authority, or any quasi-governmental, private body or arbitral body exercising any executive, legislative, judicial, quasi-judicial, regulatory, taxing, importing, administrative or other governmental or quasi-governmental authority.

 

“Grantback In-License Notice” is defined in Section 6.4(b).

 

“Grantback License” is defined in Section 6.4(b).

 

“Grantback Patent Rights” means any Compound-Specific Patent Rights that are licensed by SpinCo to the Company pursuant to Section 6.3 or assigned by SpinCo to the Company pursuant to Section 3.2.

 

“Grantback Third Party Obligations” is defined in Section 6.4(b).

 

“Indemnification Claim Notice” is defined in Section 9.3(a).

 

“Indemnified Party” means the Company, in the case of a Company Indemnified Party, or SpinCo, in the case of a SpinCo Indemnified Party.

 

“Indemnifying Party” means the Company or SpinCo, as applicable, as the Party against whom a claim for indemnification is being asserted under Article 9.

 

6

 

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“Independent Accountant” means an internationally recognized independent registered public accounting firm selected by the Company and reasonably acceptable to SpinCo.

 

“Information” means information, data, discoveries, inventions, methods, and processes (in each case, whether patentable or not), including (a) techniques and data, including screens, models, methods, test data, including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, pre-clinical, clinical, safety, manufacturing and quality control data and information and (b) to the extent the term is used in a context which applies to tangible items (as opposed to intangible items), Materials.

 

“Infringement/Challenge” is defined in Section 6.6(a).

 

“Initial Eligible Compound Selection Period” is defined in Section 2.2(c)(iii)(A).

 

“Initial Screening Process” means those tests, assays, studies and other activities to be performed in order for a Collaboration Compound to be designated a Eligible Compound by the JSC, as such tests, assays, studies and other activities are more fully defined in the Research Plan.

 

“Initial Screening Results” means, with respect to a Collaboration Compound, all Information that is (a) generated by or on behalf of SpinCo or its Affiliates under the Research Plan or otherwise in the Control of SpinCo or its Affiliates and (b) reasonably necessary or useful for the JSC to make a fully informed decision about whether or not to designate such Collaboration Compound as an Eligible Compound. The Initial Screening Results shall include, at a minimum, the types of Information set forth on Schedule 5.  For clarity, as used in the definition of Initial Screening Results, Information Controlled by SpinCo includes Information in the public domain that is in the possession of SpinCo and not subject to any restriction preventing the disclosure of such Information to the Company.

 

“Initial Transfer” is defined in Section 3.3.

 

“Invented” means invented, developed, generated, discovered, conceived, reduced to practice, created, or otherwise made (with a correlative meaning for “Invention”).

 

“Joint Collaboration Know-How” means any Information, other than SpinCo Improvements, that is Invented in connection with the conduct of the Research Activities jointly by (a) the Company or its Affiliates or Third Parties working on behalf of the Company or its Affiliates and (b) SpinCo or its Affiliates or Third Parties working on behalf of SpinCo or its Affiliates. Joint Collaboration Know-How shall exclude, after exercise by the Company of an Option, any Information that constitutes Compound-Specific Know-How that is assigned to the Company pursuant to Section 3.2.

 

“Joint Collaboration Patent Rights” means any Patent Rights that cover or claim inventions or discoveries that are Invented in connection with the conduct of the Research Activities jointly by (a) the Company or its Affiliates or by Third Parties working on behalf of the Company or its Affiliates and (b) SpinCo or its Affiliates or by Third Parties working on behalf of SpinCo or its Affiliates. Joint Collaboration Patent Rights shall exclude any

 

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Compound-Specific Patent Rights that are assigned to the Company pursuant to Section 3.2 from and after the effective date of such assignment.

 

“Joint Collaboration Technology” means, collectively, the Joint Collaboration Know-How and the Joint Collaboration Patent Rights.

 

“Joint Steering Committee” or “JSC” is defined in Section 5.2.

 

“Key Personnel” is defined in Section 2.6.

 

“Knowledge” or variations thereof means the actual knowledge of those individuals listed on Schedule 6, including in each case, the knowledge such individuals would reasonably be expected to have after reasonable inquiry.

 

“Law” means any federal, state, territorial, foreign or local law, common law, statute, ordinance, judicial decision, rule, regulation or code of any Governmental Entity or any domestic or foreign institutional review board, privacy board or ethics committee.

 

“Lead Litigation Party” is defined in Section 6.6(a)(iii).

 

“Licensed Technology” is defined in Section 6.3(a).

 

“Lien” means any lien, security interest, mortgage, pledge, lease, adverse claim, levy, charge or other encumbrance or restriction of any kind, whether arising by contract or by operation of Law, or any conditional sale contract, title retention contract or other contract to grant any of the foregoing.

 

“Losses” means any claims, actions, causes of action, Judgments (as defined in the Merger Agreement), suits, fines, Liabilities (as defined in the Merger Agreement), losses, costs (including the costs of defense and enforcement of this Agreement), damages, expenses or amounts paid in settlement (in each case, including reasonable attorneys’ and experts’ fees and expenses).

 

“Materials” means compositions of matter, including (a) compounds and (b) tangible materials used in assays.

 

“Merger Agreement” is defined in the Recitals.

 

“NMDA” means N-methyl-D-aspartate.

 

“Non-Acquired Compounds” means any Collaboration Compounds other than Acquired  Compounds.

 

“Non-Acquired Products” means any products that incorporate a Collaboration Compound, other than any product that contains or otherwise incorporates an Acquired Compound or any Company Compound.

 

“Non-Pick Notice” is defined in Section 2.2(c)(iii)(A).

 

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“Option” is defined in Section 3.1.

 

“Option Exercise Date” means, with respect to any Company Selected Compound for which the Company exercises an Option, the date on which the Company provides the Option Exercise Notice to SpinCo in accordance with Section 3.1(c) and pays the Option Exercise Fee pursuant to Section 4.4.

 

“Option Exercise Fee” is defined in Section 4.4.

 

“Option Exercise Notice” is defined in Section 3.1(c).

 

“Option Period” means, the period of time beginning on the Effective Date and ending on the date that is one hundred eighty (180) days after the last day of the Research Term, as such period may be adjusted with respect to particular Company Selected Compounds pursuant to Section 3.1(b), or such longer period as the Parties may agree; provided that the Option Period shall be deemed to expire for all Company Selected Compounds on the date on which the Company has exercised Options for a total of three (3) Acquired Compounds.

 

“Orange Book” means the United States Food and Drug Administration’s publication, Approved Drug Products with Therapeutic Equivalence Evaluation, commonly known as the “Orange Book.”

 

“Out of Budget Amounts” is defined in Section 4.2(d).

 

“Out-of-Pocket Expenses” means, with respect to the Funded SpinCo Activities, SpinCo’s actual, reasonably incurred, documented, out-of-pocket expenses incurred in performing the Funded SpinCo Activities to the extent not included in the FTE Cost (or FTE-based funding) with respect to such Funded SpinCo Activities.

 

“Party” and “Parties” are defined in the preamble of this Agreement.

 

“Patent Cooperation Treaty” means the Patent Cooperation Treaty, opened for signature June 19, 1970, 28 U.S.T. 7645.

 

“Patent Rights” means any and all (a) issued patents; (b) patent applications, including all applications and filings made pursuant to the Patent Cooperation Treaty, provisional applications, substitutions, continuations, continuations-in-part, divisionals and renewals, and all letters of patent granted with respect to any of the foregoing; (c) patents of addition, restorations, extensions, supplementary protection certificates, registration or confirmation patents, patents resulting from post-grant proceedings, reissues and re-examinations; (d) inventor’s certificates; and (e) other forms of government issued rights substantially similar to any of the foregoing.

 

“Permitted Use” is defined in Section 7.1(a).

 

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“Person” means an individual, corporation, company, partnership, limited liability company, joint venture, association, trust, business trust, Governmental Entity, unincorporated organization, a division or operating group of any of the foregoing or any other entity or organization.

 

“Pick” is defined in Section 2.2(c)(iii)(A).

 

“Pick Notice” is defined in Section 2.2(c)(iii)(A).

 

“Post-Selection Enabling Activities” means those IND-enabling tests, assays, studies and other activities to be performed by or on behalf of SpinCo with respect to any Company Selected Compound or Acquired Compound, including as such tests, assays, studies and other activities are described in any Research Plan. For clarity, Post-Selection Enabling Activities exclude Preclinical Functional Efficacy Studies.

 

“Preclinical Functional Efficacy Studies” means those tests, assays, studies and other activities to be performed by or on behalf of SpinCo with respect to any Company Selected Compound or SpinCo Selected Compound to determine the suitability within the Field or outside the Field for use in connection with certain diseases, conditions and disorders, including as such tests, assays, studies and other activities are described in any Research Plan.

 

“Prepaid Research Expenses” is defined in Section 4.1.

 

“Project Coordinator” is defined in Section 5.1.

 

“Reimbursed FTE Number” is defined in Section 4.2(a)(i).

 

“Reorganization Agreement” means the asset contribution agreement by and between the Company and SpinCo of even date herewith.

 

“Representatives” means with respect to a Person, such Person’s legal, financial, internal and independent accounting and other professional advisors and representatives.

 

“Research Activities” means those tests, studies and other activities specified to be conducted or actually conducted under or in connection with the Research Plan, including the Initial Screening Process, the Preclinical Functional Efficacy Studies and the Post-Selection Enabling Activities.

 

“Research Plan” is defined in Section 2.2(a).

 

“Research Program” is defined in Section 2.1.

 

“Research Program Information” is defined in Section 7.1(b)(i).

 

“Research Program Resource Commitment” is defined in Section 2.5(a).

 

“Research Team” is defined in Section 4.2(a)(i).

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

“Research Term” is defined in Section 2.4.

 

“Resource Allocation Principle” is defined in Section 4.2(a)(i).

 

“Selected Compound” means any SpinCo Selected Compound or any Company Selected Compound, as applicable.

 

“Selected In-License Notice” is defined in Section 6.3(d).

 

“Selected SpinCo In-License Agreement” is defined in Section 6.3(d).

 

“SpinCo” is defined in the preamble of this Agreement.

 

“SpinCo Activities” means those Research Activities conducted or required to be conducted by or on behalf of SpinCo or its Affiliates.

 

“SpinCo Background Know-How” means, subject to Section 11.2(b), (a) Information included in the Contributed Intellectual Property and (b) other Information that is owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo any time during the Term or at any time during the Extended IP Access Period and is reasonably necessary or useful for performance of the Research Plan or the Exploitation of compounds that modulate the NMDA receptors, or any products containing or otherwise incorporating any such compounds (including Company Selected Compounds, Acquired Compounds and Acquired Products), including any SpinCo Platform Know-How.  SpinCo Background Know-How shall exclude (a) Joint Collaboration Know-How, (b) SpinCo Collaboration Know-How, and (c) after exercise by the Company of an Option, any Information that constitutes Compound-Specific Know-How that is assigned to the Company pursuant to Section 3.2.

 

“SpinCo Background Patent Rights” means, subject to Section 11.2(b), (a) Patent Rights included in the Contributed Intellectual Property and (b) any other Patent Rights owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo during the Term or at any time during the Extended IP Access Period that cover or claim SpinCo Background Know-How, including any SpinCo Platform Patent Rights.  SpinCo Background Patent Rights shall exclude (a) SpinCo Collaboration Patent Rights, (b) Joint Collaboration Patent Rights, and (c) after exercise by the Company of an Option, any Patent Rights that constitute Compound-Specific Patent Rights that are assigned to the Company pursuant to Section 3.2.

 

“SpinCo Collaboration Know-How” means any Information, other than SpinCo Improvements, that is Invented by SpinCo or its Affiliates (or by Third Parties working on behalf of SpinCo or its Affiliates) in connection with the conduct of the Research Activities. SpinCo Collaboration Know-How shall exclude (a) SpinCo Background Know-How, (b) Joint Collaboration Know-How, and (c) after exercise by the Company of an Option, any Information that constitutes Compound-Specific Know-How that is assigned to the Company pursuant to Section 3.2.

 

“SpinCo Collaboration Patent Rights” means Patent Rights that cover or claim inventions or discoveries that are Invented by SpinCo or its Affiliates (or by Third Parties working on behalf of SpinCo or its Affiliates) in connection with the conduct of the Research

 

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Activities.  SpinCo Collaboration Patent Rights shall exclude (a) SpinCo Background Patent Rights, (b) Joint Collaboration Patent Rights, and (c) after exercise by the Company of an Option, any Patent Rights that constitute Compound-Specific Technology that are assigned to Company pursuant to Section 3.2.

 

“SpinCo FTE Number” is defined in Section 4.2(a)(i).

 

“SpinCo Improvement” means, any Information that is Invented by either Party, or jointly by the Parties, in connection with the conduct of the Research Activities that is a modification of, or an improvement to, the SpinCo Platform; provided that in no event shall a SpinCo Improvement include any compositions of matter with respect to any Company Compounds, Collaboration Compounds (including any Selected Compounds or Acquired Compounds), or methods of use or manufacture or other Exploitation of any Company Compounds or Collaboration Compounds.

 

“SpinCo Indemnified Party” is defined in Section 9.1.

 

“SpinCo In-License” means any agreement between SpinCo or any of its Affiliates, on the one hand, and a Third Party, on the other hand, pursuant to which SpinCo or such Affiliate has obtained or, with respect to any agreement entered into after the Effective Date, obtains any rights or interest in or to any Patent Rights or Information included within the SpinCo Technology.

 

“SpinCo Platform” means SpinCo’s proprietary methods of screening and profiling molecules, [***], that enables the identification and characterization of pharmacological modulators of N-methyl-D-aspartate (NMDA) receptors. [***].

 

“SpinCo Platform Know-How” means any Information owned or Controlled by SpinCo as of the Effective Date or during the Term or at any time during the Extended IP Access Period that is not generally known, to the extent pertaining specifically to the SpinCo Platform.

 

“SpinCo Platform Patent Rights” means any Patent Rights owned or Controlled by SpinCo as of the Effective Date or during the Term or at any time during the Extended IP Access Period that solely cover or claim the SpinCo Platform Know-How or any SpinCo Improvements.

 

“SpinCo Selected Compounds” means the Eligible Compounds selected by SpinCo in accordance with Section 2.2(c)(iii).

 

“SpinCo Technology” means, collectively, the SpinCo Background Know-How, SpinCo Background Patent Rights, SpinCo Collaboration Know-How, and SpinCo Collaboration Patent Rights, including the SpinCo Platform, SpinCo Platform Know-How, SpinCo Platform Patent Rights and SpinCo Improvements.

 

“Target Compound Profile” means a target compound profile consisting of a set of targeted chemical and biological properties for small molecules to be evaluated and identified pursuant to the Research Plan for the purpose of identifying, generating, discovering and developing those small molecules that show the greatest promise for use in the Field, which profile has been approved by the JSC in accordance with Section 5.2(c)(ii).

 

“Term” is defined in Section 10.1.

 

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“Terminated Compound” is defined in Section 2.2(e).

 

“Territory” means all countries in the world.

 

“Third Party” means any Person other than the Company, SpinCo and their respective Affiliates.

 

“Third Party Claims” is defined in Section 9.1.

 

Section 1.2.                                 Descriptive Headings; Certain Interpretations.

 

(a)                     The table of contents and headings contained in this Agreement are for reference purposes only and shall not control or affect the meaning or construction of this Agreement.

 

(b)                     Except where expressly stated otherwise in this Agreement, the following rules of interpretation apply to this Agreement:

 

(i)                                     “or” has the inclusive meaning represented by the phrase “and/or”;

 

(ii)                                  “include”, “includes” and “including” are not limiting;

 

(iii)                               “hereof”, “hereto”, “hereby”, “herein” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(iv)                              “date hereof” refers to the date of this Agreement set forth in the preamble;

 

(v)                                 “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if”;

 

(vi)                              definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

 

(vii)                           references to “small molecule” are not intended and shall not be construed to include any peptide, small peptide, polypeptide or any modification of any of the foregoing that results in a compound containing two (2) or more amino acids and/or modified amino acids linked by a peptide bond;

 

(viii)                        references to an “Article”, “Section”, “Subsection”, “Exhibit” or “Schedule” refer to an Article of, a Section or Subsection of, or an Exhibit or Schedule to, this Agreement;

 

(ix)                              words importing the masculine gender include the feminine or neuter and, in each case, vice versa;

 

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(x)                                 “day” or “days” refers to calendar days;

 

(xi)                              references to a Law include any amendment or modification to such Law and any rules or regulations issued thereunder, whether such amendment or modification is made, or issuance of such rules or regulations occurs, before or, only with respect to events or developments occurring or actions taken or conditions existing after the date of such amendment, modification or issuance, after the date of this Agreement, but only to the extent such amendment or modification, to the extent it occurs after the date hereof, does not have a retroactive effect;

 

(xii)                           references to dollars are to U.S. dollars; and

 

(xiii)                        the language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against either Party hereto.

 

Each Party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof.  In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption will apply against the Party which drafted such terms and provision.

 

ARTICLE 2
 RESEARCH PROGRAM

 

Section 2.1.                                 General.  The Parties have entered into this Agreement with the principal objectives of (a) identifying, generating, discovering and developing small molecules that modulate the NMDA receptors, including the Existing Compounds and other Collaboration Compounds, in each case in accordance with the Research Plan and this Agreement, (b) identifying Collaboration Compounds for inclusion in the Eligible Compound Pool, (c) enabling the Company to select Collaboration Compounds that are included in the Eligible Compound Pool in accordance with Section 2.2(c), (d) enabling SpinCo to select Collaboration Compounds that are included in the Eligible Compound Pool in accordance with Section 2.2(c), (e) enabling the Company to identify Collaboration Compounds that show suitability and promise in the Field and (f) enabling SpinCo to identify Collaboration Compounds that show suitability and promise outside the Field (the “Research Program”).  The Parties shall conduct the Research Program in accordance with this Article 2 and the other terms and conditions of this Agreement.

 

Section 2.2.                                 Research Plan and Research Activities.

 

(a)                     Research Plan.  The activities to be undertaken in the course of the Research Program shall be set forth in a written research plan, which may be updated and amended in writing from time to time by the JSC (the “Research Plan”).  The initial Research Plan setting forth a high-level summary of the anticipated Research Activities is attached hereto as Exhibit A and shall serve as the Research Plan hereunder until such time as the Parties adopt a further updated plan in accordance with this Section 2.2(a). The JSC shall prepare and recommend for adoption by the Parties a further updated (and complete) Research Plan within fifteen (15) days

 

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after the Effective Date.  In addition, the JSC shall review and finalize Schedule 1 and Schedule 5 within fifteen (15) days after the Effective Date. Thereafter, for each subsequent Calendar Year, the JSC will prepare an updated Research Plan, which will be completed and approved by November 1 of the preceding Calendar Year.  Except as otherwise provided in this Section 2.2(a) with respect to the initial Research Plan, the Research Plan (and each annual update thereto) will specify the following components, as applicable: [***].  Without limitation to the foregoing, each of SpinCo and the Company acknowledges that it is the intention of the Parties that Research Plan direct the Research Activities to the identification, generation, discovery and development of Collaboration Compounds that modulate the NMDA receptor [***] so as to permit the Company to select three (3) Collaboration Compounds based on their suitability and promise for application in the Field.

 

(b)                     Research Activities; Target Compound Profiles.

 

(i)                                     Under the direction and supervision of the Joint Steering Committee, SpinCo shall use Commercially Reasonable Efforts to perform, or cause to be performed, the Research Activities in accordance with this Agreement and the Research Plan.  Subject to the reimbursement by the Company of certain FTE Costs (and FTE-based funding) and the Out-of-Pocket Expenses for Funded SpinCo Activities as provided in Section 4.2, each Party shall bear the costs and expenses incurred by such Party in connection with the conduct of the Research Program.

 

(ii)                                  By and through their respective representatives on the JSC, SpinCo shall, and the Company may, from time to time propose target compound profiles for use in identifying, generating, discovering and developing those Collaboration Compounds most suitable and promising for application in the Field.  Once approved by the JSC, (A) such proposed target compound profiles shall become Target Compound Profiles hereunder and (B) a Target Compound Profile may be modified or amended by the JSC from time to time.

 

(c)                      Identification and Selection of Collaboration Compounds.

 

(i)                                     Promptly after the Effective Date with respect to the Existing Compounds, and, with respect to Collaboration Compounds identified during the Research Term, promptly after synthesis of such Collaboration Compounds, SpinCo shall provide to the JSC any Information Controlled by SpinCo with respect thereto in accordance with criteria to be established by the JSC.  The JSC shall from time to time discuss such Information, and select and prioritize those Collaboration Compounds that will be further researched and evaluated under the Initial Screening Process as set forth in the Research Plan based on criteria to be established by the JSC from time to time.  SpinCo shall continue to update the JSC and the Company promptly with any Information Controlled by SpinCo pursuant to the Initial Screening Process with respect to such Collaboration Compounds and provide to the JSC and the Company Initial Screening Results as they become available.  For clarity, as used in this Section 2.2(c), Information Controlled by SpinCo includes Information in the public domain that is in the possession of SpinCo and not subject to any restriction preventing the disclosure of such Information to the Company.

 

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(ii)                                  Upon completion of all Initial Screening Process activities with respect to a Collaboration Compound, SpinCo shall present promptly to the JSC and the Company all Initial Screening Results for such Collaboration Compound, together with SpinCo’s good-faith opinion to the Company and the JSC with respect to whether SpinCo reasonably believes that such Collaboration Compound satisfies the applicable Target Compound Profile.  As promptly as practicable after receipt of the Initial Screening Results for each Collaboration Compound (or earlier on its own initiative), the JSC shall meet and evaluate such Initial Screening Results (or any interim results) in accordance with the criteria set forth in the Research Plan or otherwise established by the JSC to determine whether or not to designate such Collaboration Compound for inclusion in the Eligible Compound Pool (any Collaboration Compound so designated by the JSC, an “Eligible Compound”).  Eligible Compounds shall be added to the Eligible Compound Pool throughout the Research Term as such determinations are made by the JSC and in the order such determinations are made by the JSC, in each case as of the date of the applicable determination.  The JSC shall provide prompt written notice to each of SpinCo and the Company (A) upon the determination by the JSC that a Collaboration Compound is a Eligible Compound and shall be included in the Eligible Compound Pool (each, an “Eligible Compound Notice”) and (B) when Eligible Compound Pool Satisfaction is achieved (the “Eligible Compound Pool Satisfaction Notice”).

 

(iii)                               Upon the receipt by the Parties of any Eligible Compound Notice, the Parties shall have the right to designate Collaboration Compounds as Company Selected Compounds or SpinCo Selected Compounds, as applicable, according to the following procedures.

 

(A)                               The Company shall have the right at any time during the period commencing on the date of receipt by the Parties from the JSC of the initial Eligible Compound Notice and ending [***] days after the date of receipt by the Parties from the JSC of the initial Eligible Compound Pool Satisfaction Notice (the “Initial Eligible Compound Selection Period”), to select one (1) Eligible Compound (the right of either Party to select one (1) Eligible Compound in accordance with this Section 2.2(c), a “Pick”) as a Company Selected Compound by delivering written notice thereof to the JSC and SpinCo identifying the selected Eligible Compound (the “Pick Notice”), in which case each such Eligible Compound shall be deemed to be a Company Selected Compound as of the date of such written notice. If the Company declines to exercise a Pick during the Eligible Compound Selection Period, the JSC shall deliver a written notice of such failure to the Company and SpinCo (a “Non-Pick Notice”).

 

(B)                               (i) Following the Company’s Pick pursuant to subsection (A), SpinCo shall have the right at any time during the applicable Eligible Compound Selection Period ending [***] days after the date of receipt by the Parties from the JSC of an Eligible Compound Pool Satisfaction Notice or (ii) following the Company’s failure to Pick pursuant to subsection (A) at any time during the applicable Eligible Compound Selection Period ending [***] days after the date of receipt by the Parties from the JSC of a Non-Pick Notice, in either case ((i) or (ii))  to  exercise a Pick with respect to one (1) Eligible Compound as a SpinCo Selected Compound by delivering a Pick Notice to the JSC and the Company identifying the selected Eligible Compound, in which case each such Eligible Compound shall be deemed to be

 

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a SpinCo Selected Compound as of the date of such Pick Notice.

 

(C)                               Subject to subsections (A) and (B), the right to exercise a Pick shall alternate thereafter between the Company and SpinCo according to the foregoing procedures, on a mutatis mutandis basis, with the Company having the next opportunity, during its next applicable Eligible Compound Selection Period, to exercise a Pick (or to decline a Pick) following the Pick (or declination to Pick) by SpinCo pursuant to Section 2.2(c)(iii)(B), and then SpinCo having the next opportunity, during its next applicable Eligible Compound Selection Period, to Pick (or decline to Pick) after the Company’s last Pick (or declination to Pick), and so on.

 

(D)                               Each Party may exercise its right to select an Eligible Compound from the Eligible Compound Pool during the applicable Eligible Compound Selection Period, even if Eligible Compound Pool Satisfaction has not been achieved. If during the Eligible Compound Selection Period of a Party, additional Eligible Compounds are added to the Eligible Compound Pool, such Eligible Compound Selection Period shall be extended at the election of such Party by the number of days necessary for such Party to have at least [***] Business Days to consider such additional Eligible Compounds prior to exercising its Pick by delivering written notice thereof to the JSC and the other Party.

 

(E)                                Unless otherwise agreed by the Parties, each Party’s exercise of a Pick shall be effective only if such Party delivers a Pick Notice as required herein no later than the last day of the applicable Eligible Compound Selection Period (taking account of any extensions thereof pursuant to Section 2.2(c)(iii)(D)).  If a Party fails to deliver such notice within the applicable period, such Party shall be deemed to have declined the right to exercise a Pick with respect to the applicable Eligible Compound Selection Period.

 

(F)                                 The JSC shall provide prompt notice to a Party upon the earliest of the other Party’s exercise of a Pick, or declination to exercise a Pick,  and the expiration of an Eligible Compound Selection Period of the other Party.

 

(iv)                              At any time during the Research Term, SpinCo and the Company may trade, vary or modify selection rights or the Picking procedures by written agreement.

 

(v)                                 Each of SpinCo and the Company acknowledges that it is the intention of the Parties that the Research Program will be conducted in a manner that facilitates the sharing of Information as contemplated under this Agreement and consensus-based decision making with respect to the order and timing of the Research Activities carried out under the Research Plan, with a shared goal of progressing expeditiously the consideration and selection by the JSC of Eligible Compounds for the Eligible Compound Pool and the selection by each Party of Selected Compounds.  Each Party shall in good faith perform its obligations hereunder in furtherance of these objectives, without regard to the effect that the order or timing of the Research Activities or the sharing of such Information would have in relation to one Party or the other’s Picking rights with regard to Eligible Compounds as set forth in Section 2.2(c).

 

(d)                     Selected Compounds.  With respect to any Company Selected Compounds,

 

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the Company shall have the right, but not the obligation, at any time during the Research Term, (i) to (A) have conducted by SpinCo such Preclinical Functional Efficacy Studies as may be set forth in the then current Research Plan (B) have conducted by SpinCo such additional Preclinical Functional Efficacy Studies as the Company may reasonably request in writing from time to time consistent with the Resource Allocation Principle; and (ii) to (A) have conducted by SpinCo such Post-Selection Enabling Activities as may be set forth in the Research Plan, and (B) have conducted by SpinCo such other tests, assays, studies and activities (including Post-Selection Enabling Activities) as the Company may reasonably request in writing from time to time for the purpose of generating Information necessary or reasonably useful for the Company to determine whether it desires to exercise an Option with respect to such Company Selected Compound, and in the case of this clause (B), to which SpinCo agrees, such agreement not to be unreasonably conditioned, withheld or delayed.  In the case of tests, assays, studies and activities requested under clause (ii)(B), it is understood that SpinCo shall not be required to agree to perform such other tests, assays, studies and activities to the extent it would require a resource commitment in excess of the Research Program Resource Commitment.  With respect to any such tests, assays, studies and other activities that are not covered by the then current Research Plan to which SpinCo agrees, the Parties shall cooperate, by and through their respective members on the JSC, to adopt an amendment to the Research Plan to reflect such tests, assays, studies and other activities, including to include Budgeted Amounts for (x) the Out-of-Pocket Expenses to be reimbursed by the Company with respect to such activities pursuant to Section 4.2(a) or 4.2(b), as applicable, and (y) in the case of any such tests, assays, studies and activities under clause (ii)(B) (including Post-Selection Enabling Activities), the number of FTEs and the associated FTE Costs for the conduct and completion of such activities, in each case for the applicable period, to be reimbursed by the Company pursuant to Section 4.2(b).  Except as expressly set forth in the Research Plan or as requested by Company hereunder, SpinCo shall not conduct research or development on any Company Selected Compound during the Research Term.  For clarity, (x) subject to Section 3.6, SpinCo shall have the right (but not the obligation) to perform any tests, assays, studies and other activities with respect to SpinCo Selected Compounds as it may determine in its sole discretion, (y) the Company shall have the right (but not the obligation) to perform, or to engage Affiliates or Third Parties to perform, any tests, assays, studies and other activities with respect to any and all Company Selected Compounds during the Option Period, including additional Preclinical Functional Efficacy Studies and Post-Selection Enabling Activities; and (z) neither Party shall have any obligation during the Research Term to conduct or have conducted research or development activities with respect to such Party’s Selected Compounds.  If the Company conducts or  engages any Affiliate or Third Party to conduct any Preclinical Functional Efficacy Studies or substantially equivalent tests, assays, studies and other activities pursuant to clause (y) of the preceding sentence during the Research Term, the Company shall provide the results thereof that the Company Controls to SpinCo; provided that such right shall not extend to results of tests, assays, studies or other activities with respect to any Company Selected Compound conducted after the exercise by the Company of an Option with respect to such Company Selected Compound.

 

(e)                      Terminated Compounds.  At any time during the Research Term, the Company shall have the right to elect to permanently discontinue Research Activities with respect to any Company Selected Compound by providing not less than thirty (30) days’ written

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

notice to SpinCo and SpinCo shall have the right to elect to permanently discontinue Research Activities with respect to any SpinCo Selected Compound by providing written notice to the Company. In the event that the Company or SpinCo provides such written notice that it has made such election to terminate Research Activities with respect to a Selected Compound, the applicable Selected Compound shall become a “Terminated Compound” and shall be deemed to be returned to the Eligible Compound Pool as of the date of expiration of the thirty (30) day notice period (with respect to the Company) and as of the date of such notice (with respect to SpinCo) for potential selection by the other Party in accordance with the procedures set forth in Section 2.2(c).

 

(f)                       Exception Compounds.  Notwithstanding anything to the contrary in this Agreement, the Parties hereby agree that Section 2.2(c) shall not apply to Exception Compounds, which shall be governed instead by this Section 2.2(f).  SpinCo shall conduct such additional tests, assays, studies and other activities, including Preclinical Functional Efficacy Studies, with respect to the Exception Compounds as the Company may request in writing during the Research Term, consistent with the Resource Allocation Principle, to enable the Company to determine whether it wishes to select the Exception Compounds as Company Selected Compounds or exercise an Option with respect to the Exception Compounds. [***]. The Company’s selection of the Exception Compounds as Company Selected Compounds pursuant to this Section 2.2(f) shall not constitute a Pick for purposes of this Agreement.  [***].

 

(g)                      Limitation on Compounds Outside Research Activities.  It is the intention of the Parties that, except for the Excluded Compounds, or as provided in Section 2.2(f) in relation to Exception Compounds, SpinCo will make available for screening through the Research Activities during the Research Term, and the exercise by the Parties of related selection rights (though the Picking procedures), any and all small molecule compounds owned or Controlled as of the Effective Date or Controlled at any time during the Term or otherwise being subjected to synthesis, screening or testing by SpinCo during the Research Term that are reasonably believed by SpinCo to have the potential to modulate the NMDA receptors.  Accordingly, except as provided in this Agreement with respect to the conduct of the Research Program, SpinCo shall not, directly or indirectly, whether alone or together with a Third Party, engage during the Research Term in any activities to identify, generate, discover, or develop small molecule compounds that modulate the NMDA receptors, including any Collaboration Compounds, except as provided in this Agreement with respect to the Exploitation by SpinCo of the Excluded Compounds, any SpinCo Selected Compound or any Declined Compound.

 

Section 2.3.                                 Conduct of the Research Program; Diligence.  SpinCo shall use Commercially Reasonable Efforts during the Research Term to conduct the Research Activities set forth in the Research Plan in order to identify, generate, discover and develop in connection with the Research Program small molecules that modulate the NMDA receptor and that may be useful in the Field, including small molecules that meet one or more Target Compound Profiles.   SpinCo shall conduct the Research Activities in good scientific manner, including good laboratory practices, and in compliance with applicable Laws.

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Section 2.4.                                 Research Term.  The term for the conduct of the Research Program will begin on the Effective Date and, subject to the earlier termination of this Agreement in accordance with Article 10 hereof, will end upon the earlier of (a) the fifth (5th) anniversary of the Effective Date and (b) the date on which the Company has exercised its third (3rd) Option (the “Research Term”).  For clarity, the expiration of the Research Term does not affect the Company’s right to exercise an Option at any time during the applicable Option Period.

 

Section 2.5.                                 Research Program Personnel; Subcontracting

 

(a)                     Research Program Resources and Personnel. The Research Program will be conducted by the Research Team. Unless otherwise agreed in writing by the Parties, SpinCo shall make available a minimum of fifty percent (50%) of the services of the Research Team, and in no event shall SpinCo make available research and technical resources  representing less than [***] of the total research and technical resources of SpinCo measured as of the Effective Date, to perform the Funded SpinCo Activities during the Research Term for the benefit of the Company (the “Research Program Resource Commitment”).  For clarity, for such purpose, the research and technical resources of SpinCo dedicated to clinical research programs and activities shall not be factored into the foregoing allocation.  For purposes of determining research and technical resources of SpinCo made available for the benefit of the Company in a given period, such resources shall take account of (i) the research and technical resources dedicated by SpinCo to the Initial Screening Process and the Preclinical Functional Efficacy Studies for such period, as required in accordance with Section 4.2(a)(i) and 4.2(a)(ii), with the benefit to the Company in relation to such activities determined based on (x) [***] of the portion of the effort of the Research Team that SpinCo applies to the Initial Screening Process and (y) that portion of the overall Dedicated FTE Resource that SpinCo applies to the performance of Preclinical Functional Efficacy Studies with respect to Company Selected Compounds consistent with the Reimbursed FTE Number, and (ii) any Post-Selection Enabling Activities and such other tests, assays, studies and activities (in addition to the Initial Screening Process and Preclinical Functional Efficacy Studies) that the Parties agree that SpinCo will perform with respect to any Company Selected Compound (as contemplated in Section 2.2(d)), with the Company deemed to receive one hundred percent (100%) of the benefit of the activities described in this clause (ii).  During the Research Term, SpinCo shall use Commercially Reasonable Efforts to maintain and use hereunder a Research Team with appropriately qualified research and technical personnel with qualifications reasonably comparable to the research and technical personnel employed by the Company during the [***] month period prior to the completion of the Reorganization (as such term is defined in the Merger Agreement). Without limiting the generality of the foregoing or Section 2.6, in the event that any such research or technical personnel of SpinCo that are engaged in the Research Program are no longer employed by SpinCo or otherwise become unavailable during the Research Term, SpinCo shall select replacement personnel at least as appropriately qualified as such unavailable personnel and shall not engage any personnel to conduct Research Activities over the Company’s reasonable objection.

 

(b)                     Subcontracting. SpinCo may engage one or more subcontractors to perform its obligations under the Research Plan, to the extent permitted under the Research Plan or otherwise with the prior written consent of the Company, such consent not to be unreasonably

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

conditioned, withheld or delayed.  Notwithstanding the foregoing sentence, SpinCo shall remain at all times fully responsible and liable for its responsibilities under the Research Program and this Agreement.

 

Section 2.6.                                 Project Personnel.  The scientific and technical personnel of SpinCo considered by the Company to be critical for the conduct of the Research Program (the “Key Personnel”) are set forth on Schedule 7. To the extent consistent with applicable Law, SpinCo shall use Commercially Reasonable Efforts to keep available the services of the Key Personnel during the Research Term consistent with SpinCo’s obligations under Section 2.5(a).  Without limiting the generality of the foregoing, SpinCo shall not materially reduce the time commitment of any Key Personnel to the Research Program without the prior written approval of the Company such approval not to be unreasonably conditioned, withheld or delayed.  In the event that any Key Personnel are no longer employed by SpinCo or are otherwise incapable of performing their obligations under this Agreement due to a disability for a period of not less than [***] consecutive days, the Parties shall meet and discuss in good faith how best to proceed.  Notwithstanding the foregoing, SpinCo shall continue to be responsible for performing the SpinCo Activities, and any consent or agreement by the Company pursuant to this Section 2.6 shall not be deemed to be a waiver of any failure of SpinCo to conduct the SpinCo Activities under this Agreement.

 

Section 2.7.                                 Facilities and Materials.

 

(a)                     Unless otherwise specified in the Research Plan, SpinCo shall be responsible for providing all facilities and equipment that are reasonably necessary or useful to carry out the SpinCo Activities undertaken by SpinCo under the Research Plan.

 

(b)                     SpinCo shall procure or cause to be procured any and all materials required in connection with the conduct of the Research Activities, including the supply of compounds required for the performance of the Research Plan.  The Company may from time to time request, and SpinCo shall use Commercially Reasonable Efforts to provide to the Company, such quantities of materials as may be necessary or useful for the Company’s use in tests, assays, studies and other activities with respect to Company Selected Compounds, for which the Company shall reimburse SpinCo for Out-of-Pocket Expenses pursuant to Section 4.2(b).

 

Section 2.8.                                 Records and Disclosure/Reports.

 

(a)                     Records.  SpinCo shall, and shall cause its Affiliates and Third Party subcontractors to, maintain books and records in sufficient detail and in a good scientific manner appropriate for patent and regulatory purposes, and in compliance with applicable Law, which shall be complete and accurate and shall properly reflect all work done and results achieved in the conduct of the Research Program.  Such books and records shall be retained by SpinCo or its Affiliates or Third Party subcontractors, as applicable, for at least [***] years after the expiration or termination of this Agreement or for such longer period as may be required by applicable Law.  The Company shall have the right, during normal business hours and upon not less than [***] Business Days’ prior written notice, to inspect, audit and copy all records of SpinCo or its Affiliates or Third Party subcontractors maintained pursuant to this Section 2.8(a), including

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

records with respect to all Collaboration Compounds, the Initial Screening Process for all Collaboration Compounds, the Preclinical Functional Efficacy Studies with respect to both Parties’ Selected Compounds and all other SpinCo Funded Activities; provided that such right shall not extend to records of activities with respect to SpinCo Selected Compounds and Declined Compounds other than the Initial Screening Results and Preclinical Functional Efficacy Studies.  Such audit rights may not be exercised more than once in any Calendar Year and the Company shall maintain such records and the information disclosed therein in confidence to the extent required pursuant to Article 7.

 

(b)                     Disclosure/Reports.  No later than thirty (30) days after the Effective Date, SpinCo shall disclose and make available to the Company, in a form to be reasonably agreed by the Parties, any Information Controlled by SpinCo consisting of the results of tests, assays, studies and other activities performed prior to the Effective Date with respect to any Existing Compounds, other than the Excluded Compounds.  Without limitation to the foregoing, or to Section 2.2(b)(ii), SpinCo, throughout the Research Term, shall promptly provide the Company with written reports of all Information generated and any Inventions Invented in the conduct of the SpinCo Activities, including Information with respect to any and all Collaboration Compounds, provided that such right shall not extend to Information generated and any Inventions Invented with respect to SpinCo Selected Compounds and Declined Compounds other than Information and Inventions with respect to the Initial Screening Results and Preclinical Functional Efficacy Studies; provided, further that SpinCo shall have no obligation to disclose to the Company any Extended IP Access Period Patent Rights that first meet the definition thereof after the expiration of the Option Period.  Without limitation to the foregoing, SpinCo shall promptly provide to the Company with each report required pursuant to the Research Plan.

 

Section 2.9.                                 Additional Activities. If the Company requests SpinCo to perform any research or development activities in addition to the types of activities contemplated by the Research Plan (i.e., in addition to the Initial Screening Process, Preclinical Functional Efficacy Studies and Post-Selection Enabling Activities), the Parties shall negotiate in good faith to determine and mutually agree on the scope, duration, and the responsibility of the respective Parties for the costs, of such additional activities, if any, and upon such mutual agreement, the Parties shall supplement in writing this Agreement or the Research Plan to include such additional activities.

 

ARTICLE 3
 EXCLUSIVE OPTION OF THE COMPANY

 

Section 3.1.                                 Exclusive Option. SpinCo hereby grants to the Company, and the Company hereby accepts, an exclusive option exercisable with respect to a total of three (3) Company Selected Compounds (each, an “Option”), the exercise of which with respect to any Company Selected Compound shall result in (a) the Company Selected Compound becoming an Acquired Compound for purposes of this Agreement and (b) SpinCo (i) assigning to the Company all Compound-Specific Know-How owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo at any time during the Term, (ii) upon the request of the Company,

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

assigning to the Company the Compound-Specific Patent Rights owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo at any time during the Term, and (iii) the Company having the license rights afforded to it under the Exploitation License, in each case with respect to the applicable Acquired Compound, as set forth below.

 

(a)                     Data Package. For each Company Selected Compound, as promptly as possible (and in no event later than any date for the for the delivery thereof specified in the Research Plan or as otherwise agreed by the Parties in writing), SpinCo will assemble and deliver to the Company a Data Package for such Company Selected Compound.

 

(b)                     Evaluation.  Following receipt of a Data Package with respect to each Company Selected Compound (the “Data Package Delivery Date”), the Company shall have the right to continue to evaluate such Company Selected Compound throughout the Option Period. If the Data Package Delivery Date for a particular Company Selected Compound occurs after the end of the Research Term, then the Option Period for such compound shall automatically be deemed to be extended until (and include) the date that is [***] after the Data Package Delivery Date.  If, during the Option Period the Company reasonably determines that additional Information (including Materials (e.g., quantities of compound for testing)) in the Control of SpinCo or reasonably obtainable by SpinCo is required to make an election with respect to any Company Selected Compound, SpinCo shall use Commercially Reasonable Efforts to provide to the Company such additional Information, and in the case of Materials, to procure and provide to the Company the requested quantities (for which the Company shall reimburse SpinCo for Out-of-Pocket Expenses pursuant to Section 4.2(b)), it being understood that the level of effort that SpinCo is required to dedicate during the Research Term in order to provide such Information shall be consistent with the Resource Allocation Principle and, if necessary, the Parties will confer and prioritize the Research Activities in a manner that enables SpinCo to provide such Information consistent with those principles.  If Information is provided after, or within [***] days prior to the end of the Option Period, the Option Period for such Company Selected Compound shall be continued until [***] days after such Information is provided to the Company.  For clarity, as used in this Section 3.1(b), Information Controlled by SpinCo includes Information in the public domain that is in the possession of SpinCo and not subject to any restriction preventing the disclosure of such Information to the Company.

 

(c)                      Option Exercise. Any time during the period commencing on the Effective Date and ending on the last day of the Option Period, the Company shall have the right to exercise an Option with respect to any Company Selected Compound by providing written notice to SpinCo (“Option Exercise Notice”), in which case such Company Selected Compound shall become an Acquired Compound and the Company shall be required to pay the Option Exercise Fee pursuant to Section 4.4.

 

Section 3.2.                                 Assignment and License of Compound-Specific Technology.

 

(a)                     As soon as practicable following the Option Exercise Date with respect to an Acquired Compound, SpinCo shall identify existing Compound-Specific Technology owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo at any time during the

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Term applicable to such Acquired Compound, including any such Compound-Specific Technology that is subject to a SpinCo In-License.

 

(b)                     Effective on the Option Exercise Date with respect to the applicable Acquired Compound, SpinCo shall, and hereby does, irrevocably assign and transfer solely and exclusively to the Company all Compound-Specific Know-How with respect to such Acquired Compound that it Controls as of the Option Exercise Date and all of SpinCo’s and its Affiliates’ worldwide rights, title, and interests (including intellectual property rights) in and to such owned or Controlled Compound-Specific Know-How, free and clear of any Liens and without reservations of any kind or the payment to SpinCo of additional consideration (other than the applicable Option Exercise Fee).

 

(c)                      At any time during the Term or at any time thereafter, the Company shall have the right, upon written notice to SpinCo (an “Assignment Notice”), to require SpinCo to assign to the Company or any of its Affiliates (or designees) all Compound-Specific Patent Rights owned or Controlled by SpinCo or any of its Affiliates (or its or their successors).  Effective on the receipt by SpinCo of an Assignment Notice with respect to an Acquired Compound (the “Assignment Notice Date”), SpinCo shall, and hereby does, irrevocably assign and transfer solely and exclusively to the Company all Compound-Specific Patent Rights with respect to such Acquired Compound that it Controls (whether prior to, on or after the Option Exercise Date) and all of SpinCo’s and its Affiliates’ worldwide rights, title, and interests (including intellectual property rights) in and to such owned or Controlled Compound-Specific Patent Rights, free and clear of any Liens and without reservations of any kind or the payment to SpinCo of additional consideration (other than the applicable Option Exercise Fee).  For clarity, until such time as the Company provides an Assignment Notice with respect to an Acquired Compound, any Compound-Specific Patent Rights that are included in the SpinCo Background Patent Rights or SpinCo Collaboration Patent Rights or with respect to which SpinCo has a joint interest as part of any Joint Collaboration Patent Rights, shall continue to remain a part of such category of Patent Rights, shall continue to be licensed to the Company pursuant to the license grants in Section 6.3 and shall be subject to the terms and conditions of Article 6, including in relation to the prosecution and enforcement of such Compound-Specific Patent Rights.

 

(d)                     Following the Option Exercise Date with respect to any Acquired Compound and upon the written request of Company, SpinCo shall promptly take such actions as are necessary or as the Company may reasonably request with respect to any SpinCo Collaboration Patent Rights, SpinCo Background Patent Rights and Joint Collaboration Patent Rights that include claims that cover such Acquired Compound, including by filing divisionals, continuations, continuations-in-part or otherwise, so as, to the extent feasible, to separate into discrete patent application(s) claims that solely and exclusively cover the composition or formulation of such Acquired Compound and the Exploitation thereof (including any method of use thereof), including, to the extent possible, to separate claims into Patent Rights that will constitute Compound-Specific Patent Rights.

 

(e)                      In the case of any Compound-Specific Technology Controlled by SpinCo or its Affiliates pursuant to a SpinCo In-License, SpinCo shall promptly identify such SpinCo In-

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

License and provide a copy thereof to Company.  To the extent that any SpinCo In-License relates solely to the SpinCo Technology being assigned to the Company, at the request of the Company, SpinCo shall use reasonable efforts to assign to the Company such SpinCo In-License, and if the consent of the applicable Third Party is required for such assignment, use reasonable efforts to obtain such consent and thereafter use reasonable efforts to promptly assign to the Company, such SpinCo In-License.  With respect to any such SpinCo In-License that is not assigned to the Company, the Patent Rights and other intellectual property rights licensed to SpinCo or any of its Affiliates and Controlled by SpinCo pursuant to the terms of the SpinCo In-License shall constitute SpinCo Technology hereunder and the license granted to the Company in Section 6.3(b) shall include a sublicense under such SpinCo In-License and shall be subject to Section 6.3(d).

 

(f)                       Each Party hereby agrees to do all such acts and execute all documents reasonably necessary to effectuate the provisions of this Section 3.2, including any steps to memorialize the Company’s ownership (such as, e.g., by recording assignments or affirmations of assignment, as applicable), in all relevant jurisdictions.

 

Section 3.3.                                 Transfer of Information.  As soon as reasonably practicable after the Option Exercise Date with respect to an Acquired Compound, SpinCo shall disclose to the Company in English (and deliver in writing or in an electronic format) all Information in SpinCo’s or its Affiliates’ Control and not previously disclosed in writing to the Company related to such Acquired Compound, including all Compound-Specific Know-How related to such Acquired Compound and copies of files and other records pertaining to any Compound-Specific Patent Rights, including file histories (the “Initial Transfer”).  Thereafter, SpinCo shall cooperate with the Company and promptly disclose to the Company in English (and deliver in writing or in an electronic format) any and all other Information Controlled by SpinCo (or its Affiliates) and not previously disclosed in writing to the Company with respect to the Acquired Compound, including all such additional Information that constitutes Compound-Specific Technology.  Upon the request of the Company, SpinCo also shall transfer to the Company such quantities of all relevant Materials (including all existing quantities of the Acquired Compound), if any, in SpinCo’s or its Affiliates’ Control that are necessary or reasonably useful for the Exploitation of the Acquired Compounds and Acquired Products.

 

Section 3.4.                                 Non-Exercise of the Option Exercise. If the Company declines or otherwise fails to exercise an Option for a Company Selected Compound during the Option Period then such Company Selected Compound shall become a Declined Compound and, subject to Sections 3.6 and 6.3, SpinCo shall have the right in its sole discretion without any further obligation to the Company under this Agreement to develop, commercialize and otherwise Exploit such Declined Compound.

 

Section 3.5.                                 Preservation of Option and License Rights.   SpinCo shall not, and shall ensure that its Affiliates shall not, (a) encumber the rights in the SpinCo Platform or the other SpinCo Technology or any of SpinCo’s right, title or interest in or to any Joint Collaboration Technology, or transfer or assign to a Third Party any of the SpinCo Technology or any Joint Collaboration Technology, unless such encumbrance, transfer or assignment is

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

subject to the rights of and obligations to the Company under this Agreement, including the rights of the Company under the Exploitation License and to receive an assignment of any Compound-Specific Technology with respect to Acquired Compounds, or (b) grant any rights or licenses under the SpinCo Technology or any Joint Collaboration Technology that are inconsistent with the rights granted to the Company under this Agreement, including the Options.

 

Section 3.6.                                 Exclusivity.   During the Exclusivity Period, SpinCo shall not, and shall cause its Affiliates not to, either alone or in conjunction with others, directly or indirectly engage in (a) the research or preclinical development of any compound or any product for the purpose of the treatment, prevention or diagnosis of any disorders or conditions in the Field, (b) the clinical development of anys compound or any product for the treatment, prevention or diagnosis of any disorders and conditions in the Field, or the manufacture of such compound or product for such purpose, or (c) the commercialization of any compound or any product labelled, or approved or licensed by any Regulatory Authority (as defined in the Merger Agreement), for the treatment, prevention or diagnosis of any disorders or conditions in the Field, or the manufacture of such compound or product for purposes of such commercialization (a “Competing Business”), or grant to any Third Party the right to do the same, except with respect to any activities conducted with regard to the Research Program in this Agreement.  SpinCo acknowledges and agrees that the restrictions imposed in this Section 3.6 are reasonable and necessary for the protection of the business of the Company and the investments made by the Company under this Agreement and that the Company would not have entered into this Agreement without the protection afforded under this Section 3.6.  For clarity, without limitation to any other term or condition of this Agreement or any other Transaction Document, nothing under this Section 3.6 shall restrict SpinCo’s right, either alone or in collaboration with others, to directly or indirectly engage in the research, development, manufacture or commercialization of any compounds or products for use outside the Field, or grant to any Third Party the right to do the same.

 

Section 3.7.                                 Change of Control.  The restrictions in Section 3.6 shall be subject to the following: (x) the restrictive covenants in Section 3.6 shall in no way prevent SpinCo or any of its Affiliates from being subject to a Change of Control or acquiring not more than five percent (5%) of the outstanding equity securities of any Person engaged in a Competing Business so long as neither SpinCo nor any of its Affiliates manage, operate or control such Person or conduct such Competing Business and (y) in the event of a Change of Control of SpinCo, (i) nothing in this Agreement shall restrict the acquiring party or its Affiliates other than SpinCo from pursuing or engaging in any research, development or commercialization activities with respect to any therapeutic or prophylactic product or products for the treatment or prevention of any of the disorders and conditions set forth on Schedule 4, and (ii) any references to “SpinCo or its Affiliates” or “SpinCo and its Affiliates” shall not include the acquiring party or its Affiliates other than SpinCo; provided that:

 

(a)                     the acquiring party or its Affiliates other than SpinCo do not utilize any Acquired Compound or Acquired Product or any Company Compound or Collaboration

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Compound in any manner in connection with such research, development or commercialization activities;

 

(b)                     SpinCo shall provide the Company with written notice of any such Change of Control two (2) Business Days following the earlier of the first public announcement of the execution of any agreement with respect to such Change of Control and the closing date of such Change of Control;

 

(c)                      all such acquiring party’s or its Affiliates’ research, development, manufacture and commercialization activities related to the Competing Business shall be kept separate from the activities of SpinCo related to any Acquired Compound or Acquired Product  and any Collaboration Compound;

 

(d)                     such acquiring party and its affiliates shall not have the right to use or Exploit, and shall not use or Exploit, the SpinCo Technology (including the SpinCo Platform) or any Company Compound or Collaboration Compound in any manner that would constitute a violation of Section 3.6 had such use or Exploitation been engaged in by SpinCo (assuming that no Change of Control had occurred);

 

(e)                      during the Research Term, no employee or agent of SpinCo that participates or has participated in any Research Activities shall participate in any Competing Business of the acquiring party or any of its Affiliates; and

 

(f)                       such acquiring party or its Affiliates shall implement procedures customary in the industry to ensure that employees of SpinCo or any of its Affiliates who had, or continue to have, access to the Information related to any Acquired Compound or Acquired Product and any Collaboration Compound, including any Confidential Information of the Company, are not utilized by such acquiring party or its Affiliates in the research, development, manufacture or commercialization activities with respect to any diagnostic, therapeutic or prophylactic product or products for the diagnosis, treatment or prevention of any of the disorders and conditions set forth on Schedule 4.

 

Section 3.8.                                 Restriction on the Company.  During the Exclusivity Period, the Company shall not, and shall cause its Affiliates not to, either alone or in conjunction with others, directly or indirectly engage in (a) the research or preclinical development of the Acquired Compounds or the Acquired Products for the purpose of the treatment, prevention or diagnosis of any disorders or conditions outside the Field, (b) the clinical development of the Acquired Compounds or the Acquired Products for the treatment, prevention or diagnosis of any disorders or conditions outside the Field, or the manufacture of the Acquired Compounds or Acquired Products for such purpose, or (c) the commercialization of the Acquired Compounds or the Acquired Products labelled, or approved or licensed by any Regulatory Authority (as defined in the Merger Agreement), for the treatment, prevention or diagnosis of any disorders or conditions outside the Field, or the manufacture of the Acquired Compounds or Acquired Products for purposes of such commercialization, or grant to any Third Party the right to do the same.  The Company acknowledges and agrees that the restrictions imposed in this Section 3.8 are reasonable and necessary for the protection of the business of SpinCo and the investments

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

made by SpinCo and that SpinCo would not have entered into this Agreement without the protection afforded under this Section 3.8.

 

ARTICLE 4
 PAYMENTS

 

Section 4.1.                                 Prepaid Research Expenses.   The Company shall pay to SpinCo an amount equal to [***] as a prepayment in connection with the Funded SpinCo Activities (“Prepaid Research Expenses”), which Prepaid Research Expenses shall be credited against amounts invoiced pursuant to Section 4.2 for Funded SpinCo Activities until exhausted.  The Prepaid Research Expenses shall be payable within fifteen (15) days of the Effective Date.

 

Section 4.2.                                 Funded SpinCo Activities.  The Company shall reimburse SpinCo for Funded SpinCo Activities based on the type of Research Activities being performed as provided in this Section 4.2.

 

(a)                     Initial Screening Process; Preclinical Functional Efficacy Studies.

 

(i)                                                 Research Team.  The Parties hereby acknowledge and agree that the Research Program shall be conducted by a number of research employees of SpinCo (the “Research Team”) who will be engaged in the conduct of the Funded SpinCo Activities, including the Initial Screening Process and the Preclinical Functional Efficacy Studies with respect to Company Selected Compounds and SpinCo Selected Compounds.  For clarity, in addition to the Research Team, SpinCo may have other research employees engaged in other activities on behalf of SpinCo, and any individual employee may be both part of the Research Team and also engaged in such other activities; provided that the Dedicated FTE Resource is utilized in the Research program. With respect to the period from the Closing Date through December 31, 2015 and each Calendar Year thereafter, the Parties shall agree in advance on the FTE-based funding contributions of each Party with respect to the Initial Screening Process, which contributions shall be allocated between the Parties on a [***] basis, and the Preclinical Functional Efficacy Studies,  to be performed by the Research Team during the applicable period by establishing the total required number of Research Team members (measured in FTEs) for the performance of such Research Activities (the “Dedicated FTE Resource”), the number of Research Team members (measured in FTEs) to be funded by the Company for the applicable period for the conduct of Preclinical Functional Efficacy Studies with respect to Company Selected Compounds (together with [***] of the FTE-based funding for the Initial Screening Process the “Reimbursed FTE Number”) and the minimum number of Research Team members to be funded by SpinCo for the conduct of Preclinical Functional Efficacy Studies with respect to Company Selected Compounds (together with [***] of the FTE-based funding for the Initial Screening Process, the “SpinCo FTE Number”).  The number of planned Preclinical Functional Efficacy Studies with respect to Company Selected Compounds and SpinCo Selected Compounds may or may not be equal, and the number of FTEs and Out-of-Pocket Expenses required for any particular Preclinical Functional Efficacy Study may vary for a given period.  It is the intention of the Parties that the Reimbursed FTE Number and the SpinCo FTE Number shall represent that portion of the Dedicated FTE Resource that the Company and SpinCo,

 

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respectively, shall receive and have access to during the applicable period with respect to the Initial Screening Process and the Preclinical Functional Efficacy Studies (such principle, the “Resource Allocation Principle”). By way of example and without limitation, if the Dedicated FTE Resource for a given twelve (12)-month period is [***] Research Team members (measured in FTEs) and the Reimbursed FTE Number is [***], the Company shall receive the benefit of, and have access to, at least [***] of the overall Dedicated FTE Resource for such period, and if the Dedicated FTE Resource for a given [***]-month period is [***] Research Team members (measured in FTEs) and the Reimbursed FTE Number is [***] as a result of additional FTEs for Preclinical Functional Efficacy Studies anticipated to be conducted with respect to Company Selected Compounds compared to the Preclinical Functional Efficacy Studies anticipated to be conducted with respect to SpinCo Selected Compounds, the Company shall receive the benefit of, and have access to, at least [***] of the overall Dedicated FTE Resource for such period.

 

(ii)                                              SpinCo has represented to the Company that it expects to have a Research Team through December 31, 2016 of at least [***] research employees (measured in FTEs) available to perform the Initial Screening Process.  The Parties agree that, for such period, SpinCo shall use diligent efforts to cause the Dedicated FTE Resource to be [***] Research Team members (measured in FTEs), in which event the Reimbursed FTE Number applicable to the Company for such period shall be [***] and the SpinCo FTE Number shall be [***].  In subsequent periods, at least [***] days prior to commencement of the next Calendar Year, the Parties shall confer in good faith and agree in writing upon the Dedicated FTE Resource, the Reimbursed FTE Number and the SpinCo FTE Number for such period.  SpinCo shall not act to reduce, and shall use commercially reasonable efforts to cause not to be reduced, the Dedicated FTE Resource for any period below the level agreed for such period without the Company’s consent.  For clarity, with respect to a given period of the Research Term, the Company shall have no obligation to reimburse SpinCo for amounts pursuant to this Section 4.2(a) and SpinCo shall have no obligation to conduct the Research Program unless and until the Dedicated FTE Resource and the Reimbursed FTE Number have been agreed for such period.  Without limitation to the foregoing, in the event that Research Team (measured in FTEs) decreases in size during the applicable calendar month, the amount reimbursable by the Company pursuant to this Section 4.2(a) for such month shall be reduced pro rata with respect to that portion of the applicable month during which the number of Research Team member (measured in FTEs) is fewer than the applicable Dedicated FTE Resource for such period.  For clarity, SpinCo may elect to increase the number of Research Team members (measured in FTEs) engaged in such Research Activities in excess of the Dedicated FTE Resource agreed by the Parties for such period, but unless otherwise agreed by the Company in writing, the Company shall have no obligation to fund any Research Team members in excess of the Reimbursed FTE Number.

 

(iii)                                           Consistent with the foregoing, and subject to Section 4.2(c), for the period from the Closing date to December 31, 2015 and each Calendar Year thereafter during the Research Term, with respect to the conduct of the Initial Screening Process for Collaboration Compounds and Preclinical Functional Efficacy Studies for both Party’s Selected Compounds, the Company shall reimburse SpinCo for (A) [***] and (B) [***] of the Out-of-Pocket Expenses related and reasonably allocable to the Initial Screening Process for Collaboration Compounds and [***] of the Out-of-Pocket Expenses related and reasonably allocable to Preclinical

 

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Functional Efficacy Studies with respect to Company Selected Compounds.  SpinCo shall be responsible for funding the remaining Research Team member FTEs and other Out-of-Pocket Expenses with respect to the Initial Screening Process and Preclinical Functional Efficacy Studies for such period.

 

(b)                     Post-Selection Enabling Activities and Other SpinCo Funded Activities.  Subject to Sections 4.2(a) and 4.2(c), with respect to the conduct of all other Funded SpinCo Activities, including the conduct of any Post-Selection Enabling Activities conducted on behalf of Company, the Company shall reimburse SpinCo for (i) [***] of the Budgeted Amounts for FTE Costs for such Research Activities and (ii) Out-of-Pocket Expenses related and reasonably allocable to such Research Activities.

 

(c)                      Invoicing; Payment.

 

(i)                                                 Within [***] days following the last day of each calendar month during the Research Term, SpinCo shall provide to the Company (x) an invoice for (1) the applicable Reimbursed FTE Number times [***] of the then current annual FTE Rate for the conduct of the Initial Screening Process and the Preclinical Functional Efficacy Studies with respect to Company Selected Compounds and SpinCo Selected Compounds (adjusted as provided in this Section 4.2(c) for any calendar month during which the total number of Research Team members dedicated to such Research Activities (measured in FTEs) is fewer than the applicable Reimbursed FTE Number), (2) [***] of Out-of-Pocket Expenses incurred by SpinCo during such calendar month that are reasonably allocable to the conduct of the Initial Screening Process with respect to Company Selected Compounds and SpinCo Selected Compounds and one hundred percent (100%) of the Out-of-Pocket Expenses reasonably allocable to the Preclinical Functional Efficacy Studies with respect to Company Selected Compounds, together with reasonable supporting documentation with respect thereto, (3) the Budgeted Amounts for FTE Costs for the conduct of all other Funded SpinCo Activities for the applicable calendar month, including the conduct of any Post-Selection Enabling Activities, (4) one hundred percent (100%) of the Out-of-Pocket Expenses incurred by SpinCo during such calendar month that are reasonably allocable to such Post-Selection Enabling Activities and any other Funded SpinCo Activities conducted on behalf of Company, together with reasonable supporting documentation with respect thereto, and (y) the balance of the Prepaid Research Expenses that remains after the application of same to the invoice for such calendar month; provided, however, that in the case of Out-of-Pocket Expenses, SpinCo shall limit the invoiced amounts to the Budgeted Amount therefor and any Out of Budget Amounts that are subject to the reimbursement by the Company pursuant to Section 4.2(d).  For clarity, the reconciliation and invoicing process set forth in this Section 4.2(c) shall apply, without limitation, with respect to each calendar month with respect to which Prepaid Research Expenses will be creditable against invoiced amounts.

 

(ii)                                              Within [***] days following receipt by the Company of such invoice from SpinCo, the Company shall pay to SpinCo the amount due (after taking account of the Prepaid Research Expenses) as reimbursement for the Funded SpinCo Activities in accordance with Section 4.5.  If the Company disputes in good faith any charge contained in an

 

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invoice, it will pay any undisputed amounts in accordance with the preceding sentence and provide written notice of the nature of the dispute to SpinCo, and the disputed amount will be addressed under the dispute resolution provisions of Section 11.10.

 

(d)                     Overspend.  SpinCo shall promptly inform the Company in writing upon SpinCo determining that it is reasonably likely to overspend by more than [***] of the Budgeted Amounts for Out-of-Pocket Expenses for a calendar month with respect to the Funded SpinCo Activities, including Out-of-Pocket Expenses with respect to the conduct of any Post-Selection Enabling Activities (“Out of Budget Amounts”). Any Out of Budget Amounts shall be reimbursed by the Company pursuant to Section 4.2(c) to the extent such Out of Budget Amounts (i) are less than or equal to [***] of the Budgeted Amounts, and (ii) were not attributable to a failure by SpinCo to use Commercially Reasonable Efforts or the failure of SpinCo to adequately supervise a Third Party performing such activities or the negligence on the part of SpinCo with respect to such activity.

 

(e)                      No Additional Reimbursement.  Without limitation to the foregoing, SpinCo acknowledges and agrees that SpinCo shall not be entitled to reimbursement hereunder for, and shall not invoice the Company for, any amounts attributable to activities other than as set forth in Section 4.2(a) or Section 4.2(b) above.

 

Section 4.3.                                 FTE Records and Audit Rights.

 

(a)                     SpinCo shall keep for at least [***] years from the end of the Calendar Year to which they pertain complete and accurate records of the Out-of-Pocket Expenses for Funded SpinCo Activities in sufficient detail to allow the accuracy of the amounts charged to the Company to be confirmed.

 

(b)                     At the request and, subject to this Section 4.3(b), expense, of the Company, SpinCo shall, and shall cause its Affiliates to, permit an Independent Accountant, at reasonable times and upon not less than thirty (30) days’ notice, to audit the books and records maintained by SpinCo pursuant to Section 4.3(a) to ensure the accuracy of all reports and payments made under this Agreement.  Each such examination shall be limited to pertinent records for any Calendar Year ending not more than [***] years prior to the date of the audit.  This audit right shall not be exercised by the Company more than once in any Calendar Year and a twelve (12) month period may not be audited more than once.  Before permitting such Independent Accountant to have access to such records, SpinCo may require such Independent Accountant and its personnel involved in such audit to sign a customary confidentiality agreement in form and substance reasonably acceptable to SpinCo as to any Confidential Information which is to be provided to such accountant or to which such accounting firm will have access while conducting the examination under this Section 4.3.  The Independent Accountant will prepare and provide to the Company and SpinCo a written report stating whether the reports submitted and amounts paid hereunder were correct or incorrect, and the amounts of any discrepancies. The Parties shall use reasonable efforts, through the participation of finance representatives of both Parties, to resolve any dispute arising in relation to the audit by good faith discussion.  The results of any such audit, reflecting the Independent Accountant’s determination of any disputed

 

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matters, shall be binding on both Parties absent manifest error.  In the event that there was an underpayment or overpayment by the Company hereunder with respect to FTE Costs (or, in the case of FTE-based reimbursement pursuant to Section 4.2(a)(iii), with respect to amounts due based on the Reimbursed FTE Number, as adjusted) or Out-of-Pocket Expenses, the Company or SpinCo, as the case may be, shall promptly (but in no event later than thirty (30) days after its receipt of the Independent Accountant’s report so concluding) make payment to the other of the amount of such underpayment or overpayment plus, in the case of any overpayment by the Company, interest at the rate set forth in Section 4.7 from the date such overpayment was originally made.  If such examination establishes an overpayment to SpinCo for any Calendar Year covered by such examination in excess of [***], SpinCo shall reimburse the Company for the expense of such Independent Accountant.

 

Section 4.4.                                 Option Exercise Fee.   The Company shall pay to SpinCo an option exercise fee of One Million Dollars ($1,000,000) (“Option Exercise Fee”) for each Option exercised by the Company hereunder.  Each Option Exercise Fee shall be payable within [***] days of the date on which the Company delivers to SpinCo an Option Exercise Notice for the applicable Option pursuant to Section 3.1(c).

 

Section 4.5.                                 Payment Method; Foreign Exchange. All payments due under this Agreement shall be made by bank wire transfer in immediately available funds to a bank account designated by the Party owed such payment.  Payments hereunder shall be made in U.S. dollars.  For the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement, a Party shall convert any amount expressed in a foreign currency into U.S. dollar equivalents using its standard conversion methodology consistent with GAAP.

 

Section 4.6.                                 Taxes.  Payments shall be free and clear of any taxes (other than withholding and other taxes imposed on the receiving Party), fees or charges, to the extent applicable.  If applicable Law requires withholding of income or other taxes imposed upon any payments made by a Party under this Agreement, the paying Party shall make such withholding payments as may be required and shall subtract such withholding payments from such payments.   Any amounts so withheld and paid over to the appropriate taxing authority shall be deemed to have been paid hereunder. At the receiving Party’s request, the paying Party shall provide the receiving Party a certificate evidencing payment of any withholding taxes hereunder and shall reasonably assist the receiving Party, at the receiving Party’s expense, to obtain the benefit of any applicable tax treaty.

 

Section 4.7.                                 Interest on Overdue Payments.  If any payment due to either Party under this Agreement is not paid when due, then such paying Party shall pay interest thereon (before and after any judgment) at a rate per annum equal to the one-month LIBOR rate (as reported in the Wall Street Journal) as in effect from time to time, plus [***], provided that interest shall not accrue at a rate that exceeds the maximum rate permitted by applicable Law, such interest to run from the date on which payment of such sum became due until payment thereof in full together with such interest (or, in the case of an overpayment governed by Section 4.3, from the date specified in Section 4.3).

 

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ARTICLE 5
 GOVERNANCE

 

Section 5.1.                                 Research Project Coordinators.  Promptly after the Effective Date, each Party shall appoint a senior representative having a general understanding of pharmaceutical discovery and research matters with respect to the Research Program to act as its project coordinator under this Agreement (each, a “Project Coordinator”).  The Project Coordinators shall serve as the contact point between the Parties with respect to this Agreement, and shall be primarily responsible for: (a) facilitating the flow of information and otherwise promoting communication, coordination and collaboration between the Parties, (b) providing a single point of communication for seeking consensus both internally within the respective Party’s organization and together, including facilitating review of external corporate communications, (c) raising cross-Party or cross-functional disputes in a timely manner, and (d) undertaking such other responsibilities as the Parties may mutually agree in writing.  Each Party may replace its Project Coordinator at any time by written notice to the other Party.

 

Section 5.2.                                 Joint Steering Committee.  As soon as practicable (but not later than thirty (30) days) following the Effective Date, the Parties shall establish a joint steering committee (the “Joint Steering Committee” or “JSC”), which shall serve as a forum for coordination and communication between the Parties with respect to the Research Program.

 

(a)                     Composition of the JSC.  The JSC shall be comprised of two (2) representatives of the Company and two (2) representatives of SpinCo, each with the requisite expertise and seniority to enable such person to make decisions on behalf of the Parties with respect to the issues falling within the jurisdiction of the JSC.  Each Party may change any one or both of its JSC representatives at any time upon written notice to the other Party.

 

(b)                     Chair of Committee; Meetings of the JSC; Procedures.

 

(i)                                     Regular Meetings.  The chair of the JSC shall alternate between a representative of the Company on the JSC and a representative of SpinCo on the JSC, as designated by the Company or SpinCo, as applicable, for each twelve (12) month period during the Option Period, with SpinCo having the right to designate the chair for the first such period.  The JSC shall meet [***] times per Calendar Year, at least one of such meetings to be face-to-face,  or on such other schedule agreed upon by the Parties.  Either Party may request additional ad hoc meetings at a mutually agreeable times.  As agreed upon by the Parties, JSC meetings may be face-to-face or may be conducted through teleconferences or videoconferences, provided that at least one (1) JSC meeting during any Calendar Year shall be conducted face-to-face, unless otherwise agreed to by the Parties.  In addition to its JSC representatives, each Party shall be entitled to have other employees attend such meetings to present and participate, though not in a decision-making capacity; provided that any such other employees agree in writing to be bound by obligations of confidentiality at least as stringent as provided for under this Agreement.  Each Party shall bear its own costs and expenses, including travel and lodging expense, that may be incurred by JSC representatives or other attendees at JSC meetings, as a result of such meetings hereunder.  The chair of the JSC (or his or her designee) shall have the responsibility for

 

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preparing and circulating to the members of the JSC an agenda for each JSC meeting not later than [***] Business Days prior to such meeting and for transcribing and issuing to the members of the JSC minutes of each JSC meeting within [***] days after each meeting, and such minutes shall be reviewed and modified as mutually required to obtain approval of such minutes promptly thereafter.

 

(ii)                                  Ad Hoc Research Review Meetings.  In addition to the meetings set forth in Section 5.2(b)(i), the JSC shall meet upon the request of either Party on three (3) days’ notice to ensure that the Parties can avoid delay in the conduct and progression of the Research Activities, including to consider any Initial Screening Results, to facilitate the selection of Collaboration Compounds as Eligible Compounds and to facilitate discussion of Eligible Compounds for selection as Selected Compounds by each Party.  The chair of the JSC (or his or her designee) shall provide to the members of the JSC an agenda and any relevant information for each such meeting not later than [***] prior to such meeting.

 

(iii)                               Procedures.  The JSC shall have the right to adopt such standing rules as shall be necessary or useful in carrying out its work in accordance with the terms of this Agreement, and allocate to each Party’s representatives responsibility for performing ministerial tasks required in connection with such work, provided that such rules are not inconsistent with this Agreement or unduly burdensome on either Party.  Without limitation to the foregoing, the JSC shall adopt rules to ensure a timely and orderly process for the JSC to provide notices to the Parties as required hereunder, including the issuance of notices with respect to the selection of Eligible Compounds for the Eligible Compound Pool, the exercise of Picks by each Party and the achievement of Eligible Compound Pool Satisfaction from time to time hereunder.

 

(c)          Function and Powers of the JSC. The Joint Steering Committee shall be responsible for overseeing and managing the Research Program and the conduct of activities under the Research Plan.  SpinCo shall, through the JSC, update the Company on its progress under the Research Plan on at least a monthly basis during the Research Term.  Without limiting the generality of the foregoing, the JSC shall be responsible for the following:

 

(i)                                     reviewing and serving as a forum for discussing the Research Plan and the Budgeted Amounts, reviewing, revising (as applicable), and recommending for adoption by the Parties the complete Research Plan, and preparing, reviewing and recommending for adoption by the Parties updates and amendments to the Research Plan and the Budgeted Amounts;

 

(ii)                                  reviewing, revising (as applicable), and recommending for adoption by the Parties the final version of Schedule 1 and Schedule 5;

 

(iii)                               reviewing, revising (as applicable), and approving [***];

 

(iv)                              monitoring compliance with the Research Plan, including the accomplishment of key objectives and reviewing actual monthly spending versus the Budgeted Amounts;

 

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(v)                                 providing a forum for SpinCo to present to and discuss with the Company the Collaboration Compounds, including Collaboration Compounds that show promise for the Field, and for the Parties to coordinate the Company’s access to Collaboration Compounds and related Information;

 

(vi)                              selecting and prioritizing Collaboration Compounds for further research and evaluation under the Research Plan, including adopting and amending from time to time the criteria to be used by the JSC for selecting and prioritizing Collaboration Compounds that will be evaluated under the Initial Screening Process;

 

(vii)                           discussing and determining which Collaboration Compounds constitute Eligible Compounds in accordance with Section 2.2(c), including adopting and amending from time to time the criteria to be used by the JSC in determining whether to select particular Collaboration Compounds as Eligible Compounds;

 

(viii)                        reviewing and discussing (but not selecting) each Company Selected Compound under consideration by the Company for selection as an Acquired Compound in accordance with Section 3.1;

 

(ix)                              reviewing and coordinating with respect to members of the Research Team, including reviewing such members’ qualifications;

 

(x)                                 issuing promptly such notices as the JSC is required to provide to one or both Parties pursuant to this Agreement, including notices with respect to the selection of Eligible Compounds for the Eligible Compound Pool, the other Party’s exercise of Picks  by each Party and the achievement of Eligible Compound Pool Satisfaction from time to time hereunder; and

 

(xi)                              taking such other actions or making such other decisions as may be delegated to the JSC pursuant to this Agreement or by mutual written agreement of the Parties after the Effective Date.

 

For clarity, with respect to the adoption of the complete Research Plan, or updates or amendments to the Research Plan, or final Schedule 1 or Schedule 5, such Research Plan (or update or amendment) and schedules shall not be effective unless and until executed by an authorized representative of each Party.

 

(d)         Decision-Making. The Company’s members of the JSC shall collectively have one (1) vote, and SpinCo’s members of the JSC shall collectively have one (1) vote.  No decision shall be made without a quorum of at least one (1) representative member from each Party present.  [***].

 

(e)          Limitations on Authority.  The JSC shall have only those powers expressly delegated to it in this Agreement or agreed by the Parties in writing, and will not have the power to amend or waive compliance with this Agreement, or to make any decision that is not consistent with this Agreement.  For clarity, the decision-making rights reserved for the JSC are

 

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not intended to apply to SpinCo’s management of its day-to-day operations in performing the Research Activities, provided that SpinCo is conducting such operations in a manner consistent with the JSC’s direction on strategic and other matters within the JSC’s jurisdiction (as provided in Section 5.2(c)) and that such day-to-day operations do not contradict, supersede or conflict with this Agreement.

 

Section 5.3.                                 Expenses.  Each Party shall bear its own costs and expenses, including travel costs and expenses, for personnel serving as Project Coordinators or participating in the JSC.

 

ARTICLE 6
 INTELLECTUAL PROPERTY

 

Section 6.1.                                 Collaboration Inventions. Subject to the licenses and other rights granted herein, including SpinCo’s assignment obligation in Section 3.2 with respect to Compound-Specific Technology:

 

(a)         As between the Parties, the Company shall own all rights, title, and interests in and to the (i) Company Collaboration Know-How, (ii) the Company Collaboration Patent Rights, and (iii) the Compound-Specific Know-How and the Compound-Specific Patent Rights that are assigned to the Company or any of its Affiliates (or designees) pursuant to Section 3.2;

 

(b)         As between the Parties, SpinCo shall own all rights, title, and interests in and to the SpinCo Collaboration Know-How, the SpinCo Collaboration Patent Rights, the SpinCo Platform Know-How, the SpinCo Platform Patent Rights and the SpinCo Improvements; and

 

(c)          The Parties shall each own an equal, undivided interest in and to any and all Joint Collaboration Know-How and Joint Collaboration Patent Rights.  Subject in the case of SpinCo to its exclusivity obligations under Section 3.6, each Party shall have the right to Exploit and license Third Parties to Exploit the Joint Collaboration Technology without a duty of seeking consent or accounting to the other Party.

 

Section 6.2.                                 Inventorship. The determination of whether Information and inventions are Invented by a Party for the purpose of allocating proprietary rights therein shall, for purposes of this Agreement, be made in accordance with applicable Law in the United States as such law exists as of the Effective Date irrespective of where Inventorship actually occurs.

 

Section 6.3.                                 Licenses to the Company.

 

(a)         R&D License.  SpinCo, on behalf of itself and its Affiliates, hereby grants to the Company and its Affiliates a fully paid-up, royalty-free, irrevocable, co-exclusive (together with SpinCo) right and license, with the right to grant or authorize sublicenses to Third Party (sub)contractors (in the case of SpinCo, in accordance with Section 2.5(b)), under all SpinCo Technology and SpinCo’s and its Affiliates’ interest in the Joint Collaboration Technology (collectively, the “Licensed Technology”) during the Research Term and the Option Period for

 

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the sole purpose of conducting research and development with respect to Collaboration Compounds (other than Declined Compounds and SpinCo Selected Compounds after the date on which the applicable Collaboration Compound becomes a Declined Compound or SpinCo Selected Compound, as applicable) and evaluating whether or not to exercise its Options hereunder, including for purposes of evaluating the Information disclosed in any Initial Screening Results and the Data Packages or otherwise provided by SpinCo hereunder; provided that, upon the Company’s selection of a Company Selected Compound, the license granted in this Section 6.3(a) shall automatically be deemed to be exclusive (including with regard to SpinCo and its Affiliates), with the right to grant and authorize sublicenses through multiple tiers with respect to such Company Selected Compound, subject to the retained rights of SpinCo and its Affiliates under the Licensed Technology as necessary to conduct SpinCo Activities.

 

(b)         Exploitation License.  Without limitation to Section 6.3(a), SpinCo, on behalf of itself and its Affiliates, hereby grants to the Company and its Affiliates a royalty-free, fully paid-up (subject to Section 6.3(d)), perpetual, irrevocable exclusive (including with regard to SpinCo and its Affiliates) right and license, with the right to grant and authorize sublicenses through multiple tiers, under the Licensed Technology to Exploit (i) any Acquired Compound or Acquired Product for all purposes, including to Exploit Acquired Compounds and Acquired Products for all purposes in and outside the Field and (ii) without limitation to the foregoing clause (i), any and all compounds and products in the Field (the “Exploitation License”).  The Company covenants to SpinCo that the Company and its Affiliates shall not exercise rights, or grant any other Person the right to exercise rights, under the license granted in this Section 6.3(b) with respect to (x) (i) the research or preclinical development of the Acquired Compounds or the Acquired Products for the purpose of the treatment, prevention or diagnosis of any disorders or conditions outside the Field, (ii) the clinical development of the Acquired Compounds or the Acquired Products for the treatment, prevention or diagnosis of any disorders or conditions outside the Field, or the manufacture of the Acquired Compounds or Acquired Products for such purpose, or (c) the commercialization of the Acquired Compounds or the Acquired Products labelled, or approved or licensed by any Regulatory Authority (as defined in the Merger Agreement), for the treatment, prevention or diagnosis of any disorders or conditions outside the Field, or the manufacture of the Acquired Compounds or Acquired Products for purposes of such commercialization, or (y) any compound or product other than an Acquired Compound or Acquired Product in the Field, unless and until the Company has proposed to SpinCo in writing a development plan with respect to such use outside the Field (in the case of clause (x)) or such compound and product in the Field (in the case of clause (y)) and (in each case) such plan has been approved by SpinCo in writing, in its sole discretion.  For clarity, no rights are granted to the Company or its Affiliates outside the Field with respect to compounds and products other than Acquired Compounds and Acquired Products.

 

(c)          Retained Right.  The right and license granted to the Company and its Affiliates in Section 6.3(b) shall not include the right under the SpinCo Platform Know-How, SpinCo Platform Patent Rights and SpinCo Improvements to identify, discover or conduct preclinical development with respect to any compound or product for the purpose of use outside the Field or to conduct clinical development of any compound or product outside the Field, other than any Acquired Compound or any Acquired Product (subject in the case of Acquired

 

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Compounds and Acquired Products to the restrictions set forth in Sections 6.3(a) and 6.3(b)), and shall be subject to the retained rights of SpinCo and its Affiliates under the Licensed Technology as necessary to perform the Research Plan and to otherwise conduct any and all research and development with respect to any compound or product, other than Acquired Compounds and Acquired Products, that is not directed to the Field and to Exploit any compounds and products, other than Acquired Compounds and Acquired Products, outside the Field.

 

(d)         SpinCo In-Licenses.  The right and license granted to the Company and its Affiliates in Section 6.3(b) shall be royalty-free and fully paid-up, except to the extent that it includes any sublicense or other rights under any Licensed Technology which are subject to a license agreement by and between SpinCo and any Third Party entered into after the Closing (as defined in the Merger Agreement) (each, a “Selected SpinCo In-License Agreement”) with respect to which the exercise by the Company or any of its Affiliates or sublicensees of a sublicense thereunder would give rise to any payment obligations to such Third Party, including in respect of milestones, royalties or other amounts, in which case (i) SpinCo shall provide the Company with written notice with regard to such obligations and a copy of such Selected SpinCo In-License Agreement and shall include a description of the amounts payable and the reporting requirements under such Selected SpinCo In-License Agreement (the “SpinCo Third Party Obligations” and any such notice, a “Selected In-License Notice”) and (ii) the Company shall be responsible for the payment of any and all such amounts (and for complying with related reporting requirements) to the extent identified by SpinCo as SpinCo Third Party Obligations pursuant to subsection (i) and shall pay and report such amounts to SpinCo in sufficient time for SpinCo to comply with the applicable terms and conditions of the applicable Third Party agreement to the extent identified by SpinCo as SpinCo Third Party Obligations pursuant to subsection (i); provided that the Company shall not have such obligations in respect of any Selected SpinCo In-License Agreement in the event that Company notifies SpinCo within sixty (60) days of the receipt of the applicable Selected In-License Notice that the Company desires not to receive the benefit of a sublicense under such Selected SpinCo In-License Agreement, in which event the license granted to the Company in Section 6.3(b) shall be deemed to exclude ab initio any sublicense under such Selected SpinCo In-License Agreement and the Company shall not be responsible pursuant to this Section 6.3(d) for any payments due to such Third Party pursuant to such agreement.  Any sublicense granted to the Company with respect to such Licensed Technology under a Selected SpinCo In-License Agreement (other than any such Agreement with respect to which the Company declines the sublicense rights as provided in the preceding sentence), shall be subject to the terms and conditions of the applicable Selected SpinCo In-License Agreement.

 

(e)          Limitation on In-License Agreements.  SpinCo covenants to the Company that SpinCo and its Affiliates shall not, without the Company’s prior written consent, enter into any option, license, assignment or similar agreement with a Third Party with respect to any Collaboration Compound (other than any Excluded Compound or SpinCo Selected Compound) or the Exploitation thereof, including any SpinCo In-License, that would require SpinCo or any of its Affiliates or sublicensees to pay to the Third Party any milestones, royalties or other amounts in connection with the Exploitation of any such Collaboration Compound; provided that after the conclusion of the Option Period this covenant shall apply to any Acquired Compound

 

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but no other Collaboration Compound.

 

Section 6.4.                                 Licenses to SpinCo.

 

(a)         The Company, on behalf of itself and its Affiliates, hereby grants to SpinCo, during the Research Term, a fully paid-up, royalty-free, non-exclusive license, with the right to grant sublicenses to Third Party subcontractors in accordance with Section 2.5(b), under the Company Collaboration Know-How and Company Collaboration Patent Rights solely for the purpose of performing SpinCo Activities.

 

(b)         The Company on behalf of itself and its Affiliates, hereby grants to SpinCo and its Affiliates a perpetual, irrevocable, non-exclusive right and license, with the right to grant and authorize sublicenses through multiple tiers, under the Grantback Patent Rights to the extent reasonably necessary to make or have made, or import for the purpose of making or having made, subject to Section 3.6, (i) any intermediate of any SpinCo Selected Compounds and Declined Compounds and (ii) any intermediate of any other compounds and products that, after expiration of the Option Period, constitute Non-Acquired Compounds and Non-Acquired Products, in each case solely for use outside the Field in any product (other than an Acquired Product or Company Product) that contains or incorporates such SpinCo Selected Compound or Declined Compound (the “Grantback License”); provided that SpinCo shall only have the right to sublicense to a Person to the extent SpinCo grants to such Person a license to any other Patent Rights of SpinCo that also claim the applicable compound or product.  The Grantback License shall be royalty-free and fully paid up, except to the extent that it includes any sublicense or other rights under any Grantback Patent Rights which are subject to a license agreement by and between the Company or any of its Affiliates and any Third Party (each, a “Company In-License Agreement”) with respect to which the exercise by SpinCo or any of its Affiliates or sublicensees of a sublicense thereunder would give rise to any payment obligations to such Third Party, including in respect of milestones, royalties or other amounts, in which case (i) the Company shall provide SpinCo with a written notice with regard to such obligations and copy of such Company In-License Agreement and shall include a description of the amounts payable and the reporting requirements under such Company In-License Agreement (the “Grantback Third Party Obligations” and any such notice, a “Grantback In-License Notice”) and (ii) SpinCo shall be responsible for the payment of any and all such amounts (and for complying with related reporting requirements) to the extent identified by the Company as Grantback Third Party Obligations pursuant to subsection (i) and shall pay and report such amounts to the Company in sufficient time for the Company to comply with the applicable terms and conditions of the applicable Third Party agreement to the extent identified by the Company as Grantback Third Party Obligations pursuant to subsection (i); provided that SpinCo shall not have such obligations in respect of any Company In-License Agreement in the event that SpinCo notifies the Company within sixty (60) days of the receipt of the applicable Selected In-License Notice that SpinCo desires not to receive the benefit of a sublicense under such Company In-License Agreement, in which event the license granted to SpinCo in Section 6.4(a) shall be deemed to exclude ab initio any sublicense under such Company In-License Agreement and SpinCo shall not be responsible pursuant to this Section 6.4(b) for any payments due to such Third Party pursuant to such agreement).  Any sublicense granted to SpinCo with respect to such Grantback

 

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Patent Rights under a Company In-License Agreement (other than any such Agreement with respect to which SpinCo declines the sublicense rights as provided in the preceding sentence), shall be subject to the terms and conditions of the applicable Company In-License Agreement.

 

Section 6.5.                                 Prosecution and Maintenance of Patent Rights.

 

(a)         SpinCo Patent Rights.  Subject to Section 6.5(d), except as set forth below, SpinCo shall have the sole right, but not the obligation, to prepare, file, prosecute and maintain any and all SpinCo Background Patent Rights, SpinCo Collaboration Patent Rights and SpinCo Platform Patent Rights (excluding any Compound-Specific Patent Rights).  Any such filing shall be at SpinCo’s sole cost and expense.  Subject to applicable Law, SpinCo shall keep the Company reasonably informed in respect of any material change, effect, event, occurrence, state of facts or development relating to the preparation, filing, prosecution or maintenance of any such Patent Rights being prosecuted by SpinCo that may reasonably be expected to impact the any Company Selected Compound or the Company’s Exploitation License, including by providing the Company with (i) copies of any material communications to or from SpinCo or its Representatives, on the one hand, and any patent authority, on the other hand, with respect thereto and (ii) drafts of any material filings or responses to be made by SpinCo to any such patent authority with respect thereto sufficiently in advance of submitting such filings or responses so as to allow for a reasonable opportunity for the Company to review and comment thereon.  SpinCo shall [***] the requests and suggestions of the Company with respect to such drafts and with respect to strategies for preparing, filing, prosecuting and maintaining such Patent Rights; [***].  If SpinCo elects not to file, or desires to discontinue prosecution or maintenance of any such Patent Rights, SpinCo shall provide reasonable prior written notice thereof to the Company and, in any event, so as to provide the Company a reasonable amount of time to meet any applicable deadline to establish or preserve such Patent Rights in such country or region, and the Company shall have the right, in its sole discretion (subject to Section 6.9) and upon notice to SpinCo, to file, prosecute and maintain such Patent Rights that cover or claim any Company Selected Compound, Acquired Compound or Acquired Product or the Exploitation thereof (including any method of use or making of any Company Selected Compound, Acquired Compound or Acquired Product), which filing, prosecution and maintenance shall be at the Company’s sole cost and expense.  Each Party shall provide the other Party with all assistance reasonably necessary to facilitate prosecution and maintenance of such Patent Rights under this Section 6.5(a).  Notwithstanding the foregoing, SpinCo’s foregoing obligations under this Section 6.5(a) shall not apply to any SpinCo Platform Patent Rights or Extended IP Access Period Patent Rights, and SpinCo shall have the sole right, but not the obligation, at its sole cost and expense, to obtain, prosecute and maintain the SpinCo Platform Patent Rights and any Extended IP Access Period Patent Rights throughout the world, without any obligation to coordinate with the Company.

 

(b)         Company Patent Rights.

 

(i)                                     The Company shall have the sole right, but not the obligation, at its sole cost and expense, to obtain, prosecute and maintain the Company Collaboration Patent Rights.

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

(ii)                                  The Company shall have the sole right, but not the obligation, to obtain, prosecute and maintain throughout the world any and all Compound-Specific Patent Rights, the cost and expense of which shall be borne by the Company.  Subject to applicable Law, in the case of any Compound-Specific Patent Rights, the Company shall keep SpinCo reasonably informed in respect of any material change, effect, event, occurrence, state of facts or development relating to the preparation, filing, prosecution or maintenance of such Compound-Specific Patent Rights.  The Company shall use reasonable efforts to confer with SpinCo with respect to the Company’s choice of any outside counsel to be retained by or on behalf of the Company to carry out the filing, prosecution and maintenance of any Compound-Specific Patent Rights.  SpinCo shall provide the Company with all assistance reasonably necessary to facilitate prosecution and maintenance of such Compound-Specific Patent Rights.

 

(c)          Joint Collaboration Patent Rights. As between the Parties, [***] shall have the first right (but not the obligation), using counsel reasonably acceptable to the Company, to obtain, prosecute and maintain throughout the world any Joint Collaboration Patent Rights (excluding any Compound-Specific Patent Rights), in each case, with SpinCo’s reasonable out-of-pocket expenses of preparation, filing, prosecution and maintenance to be [***] by the Parties. Subject to applicable Law, [***] shall keep [***] reasonably informed in respect of any material change, effect, event, occurrence, state of facts or development relating to the preparation, filing, prosecution or maintenance of any such Joint Collaboration Patent Rights, including by providing [***] with (i) copies of any material communications to or from [***] or its Representatives, on the one hand, and any patent authority, on the other hand, with respect thereto and (ii) drafts of any material filings or responses to be made by [***] to any such patent authority sufficiently in advance of submitting such filings or responses so as to allow for a reasonable opportunity for [***] to review and comment thereon.  [***] shall consider in good faith the requests and suggestions of [***] with respect to such drafts and with respect to strategies for preparing, filing, prosecuting and maintaining such Joint Collaboration Patent Rights.  If [***] elects not to file, or desires to discontinue prosecution or maintenance of any such Joint Collaboration Patent Rights, SpinCo shall provide reasonable prior written notice thereof to [***] shall thereupon have the option, in its sole discretion to assume the control and direction of the preparation, filing, prosecution and maintenance of such Joint Collaboration Patent Rights, with [***] reasonable out-of-pocket expenses to be [***] by the Parties.  In the event that the non-prosecuting Party under this Section 6.5(c) at any time desires to cease co-funding the preparation, filing or maintenance of any such Joint Collaboration Patent Rights with respect to any country or region, it may do so upon written notice to the prosecuting Party (and shall have no further funding obligations commencing with respect to the period commencing thirty (30) days after the date of such notice), provided that upon providing such notice the non-Prosecuting Party shall automatically be deemed to assign (and hereby assigns effective as of the date of such notice) to the prosecuting Party all right, title and interest in and to such Joint Collaboration Patent Rights with respect to such country or region and such Joint Collaboration Patent Rights shall thereafter be deemed to be Company Collaboration Patent Rights or SpinCo Collaboration Patent Rights, as applicable).

 

(d)         CREATE Act.  Notwithstanding anything to the contrary in this Article 6, neither Party shall have the right to pursue a filing under 35 U.S.C. 102(c) when exercising its

 

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rights under this Article 6, without the prior written consent of the other Party. With respect to any such permitted election, the Parties shall coordinate their activities with respect to any submissions, filings or other activities in support thereof. The Parties acknowledge and agree that this Agreement is a “joint research agreement” as defined in 35 U.S.C. 100(h).

 

Section 6.6.                                 Enforcement and Defense of Patent Rights.

 

(a)         Rights and Procedures.  If either Party believes that any SpinCo Background Patent Rights, SpinCo Collaboration Patent Rights, Company Collaboration Patent Rights or Joint Collaboration Patent Rights (including any Compound-Specific Patent Rights) (i) is being infringed by a Third Party’s activities or (ii) is being challenged as invalid or unenforceable (“Infringement/Challenge”), it shall notify the other Party in writing and provide it with any evidence of such Infringement/Challenge that is reasonably available to such Party.

 

(i)                                     The Company shall have the sole right, but not the obligation, at its sole cost and expense, to remove or defend against any Infringement/Challenge with respect to any Compound-Specific Patent Rights.

 

(ii)                                  SpinCo shall have the sole right, but not the obligation, at its sole cost and expense, to remove or defend against any Infringement/Challenge with respect to any SpinCo Platform Patent Rights and any Extended IP Access Period Patent Rights.

 

(iii)                               With respect to any Infringement/Challenge in relation to any SpinCo Background Patent Rights, SpinCo Collaboration Patent Rights, and Joint Collaboration Patent Rights (excluding (x) any Compound-Specific Patent Rights, which are governed by Section 6.6(a)(i) and (y) any SpinCo Platform Patent Rights and any Extended IP Access Period Patent Rights, which are governed by Section 6.6(a)(ii)), (A) the Company shall have the sole right, but not the obligation, to remove or defend against any Infringement/Challenge with respect to any such Patent Rights that [***], including any Acquired Compound or Acquired Product (or the Exploitation thereof) in the Field, (B) SpinCo shall have the sole right, but not the obligation, to remove or defend against any Infringement/Challenge with respect to any such Patent Rights that [***] and (C) the Company shall have the first right, but not the obligation, at its sole cost and expense, to remove or defend against any Infringement/Challenge that is not described by clause (A) or (B) that may reasonably impact any Acquired Compound or Acquired Product in the Field; provided that if the Company determines not to remove or defend against any such Infringement/Challenge within ninety (90) days of receiving notice of any such Infringement/Challenge (or such other period as may be required to preserve SpinCo’s right to remove or defend against such Infringement/Challenge), SpinCo shall, at its sole cost and expense, have the right, but not the obligation, to defend against such remove or defend against any such Infringement/Challenge, subject to the Company’s prior written consent, not to be unreasonably withheld, conditioned or delayed (the Party with the right to remove or defend such Infringement/Challenge being referred to as the “Lead Litigation Party”).  The Parties shall cooperate to ensure that there is proper communication and coordination of activities between the Parties with respect to the activities carried on pursuant to the terms of this Section 6.6(a)(iii).  For the avoidance of doubt, [***].

 

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(b)         Cooperation.  The Party not enforcing or defending the applicable Patent Rights under Section 6.6(a) shall, at the requesting Party’s expense, provide reasonable assistance to the other Party, including providing access to relevant documents and other evidence, making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the enforcing Party to maintain the action.

 

(c)          Costs and Expenses.  Any amounts recovered by either Party pursuant to Section 6.6(a), whether by settlement or judgment, shall be used to reimburse the Parties for their reasonable out-of-pocket costs and expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses), with any remainder being retained by or paid to the Party removing or defending against the Infringement/Challenge.

 

Section 6.7.                                 Potential Infringement of Third Party Rights.

 

(a)         Third Party Licenses.  If (i) in the reasonable opinion of the Company, one or more Patent Rights have issued to a Third Party in any country such that the Company or any of its Affiliates or (sub)licensees cannot exercise the Exploitation License or otherwise Exploit any Acquired Compound in such country without infringing such Patent Rights or (ii) as a result of any claim made against the Company or any of its Affiliates or (sub)licensees alleging that the exercise of the Exploitation License or other Exploitation of any Acquired Compound by the Company, its Affiliates or any of its (sub)licensees infringes or misappropriates any Patent Rights or any other intellectual property right of a Third Party in any country, a judgment is entered by a court of competent jurisdiction from which no appeal is taken within the time permitted for appeal, such that the Company or any of its Affiliates or (sub)licensees cannot exercise the Exploitation License or otherwise Exploit any Acquired Compound  in such country without infringing the Patent Rights or other proprietary rights of such Third Party, then, in any case, the Company shall have the first right, but not the obligation, at its sole cost and expense, to negotiate and obtain a license from such Third Party as necessary for the Company and its Affiliates and (sub)licensees to exercise the Exploitation License or otherwise Exploit any Acquired Compound in such country.

 

(b)         Third Party Litigation.  In the event that a Third Party institutes a Patent Rights, trade secret or other infringement suit against either Party or its Affiliates or (sub)licensees alleging that the exercise of the Exploitation License or other Exploitation of any Acquired Compound  infringes one or more Patent Rights, trademark, trade secret or other intellectual property rights held by such Third Party, then subject to Article 9, the Company shall have the first right, but not the obligation, at its sole cost and expense, to assume direction and control of the defense of claims arising therefrom (including the right to settle such claims at its sole discretion).  If the Company determines not to assume such direction and control, subject to Article 9, SpinCo shall, at its sole cost and expense, have the right, but not the obligation, to defend against such claims asserted against SpinCo or any of its Affiliates; provided, however, that SpinCo shall obtain the written consent of the Company prior to settling or otherwise disposing of such claims to the extent such event would limit or restrict the ability of the Company to exercise the Exploitation License or Exploit any Acquired Compound.

 

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(c)                      Cooperation.  In the event that a Third Party institutes a Patent Rights, trade secret or other infringement suit against either Party or its Affiliates or (sub)licensees, the Party that is not controlling the defense shall, and shall cause its Affiliates, to use all reasonable efforts to assist and cooperate with the defending Party (at the defending Party’s expense) in connection with the defense of such suit.

 

Section 6.8.                                 Section 365(n) of the Bankruptcy Code. All rights and licenses granted under or pursuant to this Agreement by the Company or SpinCo are and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction, licenses of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code.  The Parties agree that the Parties, as licensees of such rights under this Agreement, shall retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction.  The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against either Party under the U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction, the Party hereto that is not a Party to such proceeding shall 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 non-subject Party’s possession, shall be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon the non-subject Party’s written request therefor, unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject Party.

 

Section 6.9.                                 Patent Term Extension and Orange Book Listing. For the avoidance of doubt, as between the Parties:

 

(a)                     [***] shall have the sole right to make decisions regarding and shall have the sole right to apply for, patent term extensions, worldwide, including in the United States with respect to extensions pursuant to 35 U.S.C. §156 et. seq. and in other jurisdictions pursuant to supplementary protection certificates, and in all jurisdictions with respect to any other extensions that are now or become available in the future, wherever applicable, with respect to the Compound-Specific Patent Rights covering or claiming the Acquired Compounds and the Acquired Products, and the Exploitation of each of the foregoing, including patent term extensions decisions with respect to Compound-Specific Patent Rights and [***] Collaboration Patent Rights, in each case including whether or not to do so. [***] shall ensure that any and all Compound-Specific Patent Rights Controlled by [***] remain available for such patent term extensions with respect to the Acquired Compounds and the Acquired Products, and the Exploitation of each of the foregoing unless the Parties otherwise agree in writing.  The Parties shall cooperate with respect to any decisions regarding patent term extensions, worldwide, with respect to any Compound-Specific Patent Rights and shall cooperate in good faith to consider each Party’s respective interests in patent term extensions as relates to its respective products.  For the avoidance of doubt, [***] shall not have the right to seek any patent term extension, supplemental protection certificate or other extension of any Grantback Patent Rights at any

 

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time.

 

(b)         [***] shall have the sole right to make all filings with regulatory authorities, worldwide, with respect to any Acquired Compounds or Acquired Products, including as required or allowed (i) in the United States, in the Orange Book, and (ii) outside of the United States, under the national implementations of Article 10.1(a)(iii) of Directive 2001/EC/83 in the European Union or other international equivalents of any of the foregoing.

 

Section 6.10.                          No Implied Licenses.  Except as expressly provided herein, neither Party grants any license or similar right to or under any intellectual property not otherwise expressly granted herein.

 

ARTICLE 7
 CONFIDENTIALITY

 

Section 7.1.                                 Confidentiality.

 

(a)                     Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, each Party shall, and shall cause its officers, directors, employees and agents to, (i) all times during the Term and for a period of [***] years following termination or expiration hereof (the “Confidentiality Term”), keep confidential and shall not publish or otherwise disclose to any Third Party any Confidential Information of the other Party and (ii) not use for any purpose other than a Permitted Use any Confidential Information of the other Party.  Subject to Section 7.1(b), as used in this Agreement (i) “Confidential Information” means all information and know-how and any tangible embodiments thereof provided or disclosed by one Party to the other Party in the course of performing this Agreement, including data; knowledge; practices; processes; ideas; research plans; engineering designs and drawings; research data; manufacturing processes and techniques; scientific, manufacturing, and business plans; and financial and personnel matters relating to the disclosing Party or to its present or future products, sales, suppliers, customers, employees, investors or business and (ii) a “Permitted Use” means (x) the exercise of any (sub)license or other rights hereunder or the conduct of activities related to the subject matter of this Agreement or (y) the performance by a Party of any of its obligations under this Agreement.  Without limiting the generality of the foregoing, all SpinCo Platform Know-How and tangible embodiments thereof shall be Confidential Information of SpinCo.

 

(b)                     Research Program Information.

 

(i)                                     In light of the Parties’ shared interests in the Research Activities, both Parties recognize each other’s interest in Information generated under or in connection with this Agreement or the Research Program consisting of the Research Plan and any amendments thereto, Target Compound Profiles, Initial Screening Results and other results of tests, assays, studies and other activities (including Preclinical Functional Efficacy Studies) conducted in the Research Program and other Information with respect to any Collaboration Compound that is the subject of any Research Activities hereunder (collectively, the “Research Program Information”).  Notwithstanding the Party that disclosed any Research Program Information,

 

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such Information shall be the Confidential Information of each Party (and both Parties shall be deemed to be the receiving Party and the disclosing Party with respect thereto); provided that with respect to Research Program Information, a Permitted Use means (in addition to the uses set forth in Section 7.1(a)), the right to use Research Program Information, in the case of each Party,  for its internal research purposes and, in the case of SpinCo, except in the case of the Research Plan and any amendments thereto, the Target Compound Profiles and Confidential Acquired Compound Information, for the conduct of any and all activities that are not targeted to the Field.  Any disclosures of such Research Program Information to Third Parties shall be subject to the other terms of this Article 7.

 

(ii)                                  Notwithstanding Section 7.1(a) and 7.1(b), (A) upon the Company’s exercise of a Pick with respect to an Eligible Compound, any and all Research Program Information pertaining primarily to such Eligible Compound shall be deemed to be the Confidential Information of the Company (and not of SpinCo) and (B) upon SpinCo’s exercise of a Pick with respect to an Eligible Compound or any Collaboration Compound becoming a Declined Compound, any and all Research Program Information pertaining primarily to such Eligible Compound shall be deemed to be the Confidential Information of SpinCo (and not of the Company); provided that with respect to any Selected Compound that becomes a Terminated Compound pursuant to Section 2.2(e), any and all Research Program Information pertaining primarily to such Eligible Compound shall be deemed to be the Confidential Information of each Party (and both Parties shall be deemed to be the receiving Party and the disclosing Party with respect thereto) unless and until such Terminated Compound again becomes a Selected Compound of a Party.

 

(iii)                               Notwithstanding Sections 7.1(a) and 7.1(b)(ii), (A) upon the Company’s exercise of an Option with respect to any Acquired Compound, any and all Research Program Information pertaining primarily to the Acquired Compounds and Acquired Products and all Compound-Specific Technology (collectively, as of the applicable Option Exercise Date, the “Confidential Acquired Compound Information”) shall be deemed to be the Confidential Information of the Company (and not of SpinCo), (B) after the conclusion of the Option Period with respect to all Company Selected Compounds, any and all Research Program Information pertaining primarily to any Declined Compound or SpinCo Selected Compound shall be deemed the Confidential Information of SpinCo (and not of the Company) and (C) after the conclusion of the Option Period with respect to all Company Selected Compounds, any and all other Research Program Information that is not covered by clause (A) or clause (B) above shall be the Confidential Information of the disclosing Party with respect thereto.

 

Section 7.2.                                 Exceptions. Notwithstanding the foregoing, the confidentiality and non-use obligation under Section 7.1 with respect to any Confidential Information shall not apply to information that:

 

(a)                     can be demonstrated by documentation or other competent evidence to have been in the knowledge or possession of the receiving Party prior to the time it was disclosed to, or learned by, the receiving Party;

 

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(b)                     was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;

 

(c)                      became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

 

(d)                     was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others; or

 

(e)                      can be demonstrated by documentation or other competent evidence to have been independently developed by or for the receiving Party without use of the disclosing Party’s Confidential Information;

 

provided, however, (i) that the exceptions set forth in clauses (a), (d) and (e) shall not operate to relieve SpinCo of any obligations with respect to any Confidential Acquired Compound Information, and (ii) that the exceptions set forth in clauses (a), (d) and (e) shall not operate to relieve the Company of any obligations with respect to any Research Program Information pertaining primarily to SpinCo Selected Compounds or Declined Compounds.

 

For clarity, in the case of clauses (a), (b) and (c) above, specific disclosures made under this Agreement shall not be deemed to be within the above exceptions merely because they are embraced by general disclosures in the public knowledge or literature or in the possession of the receiving Party, and any combination of features disclosed hereunder shall not be deemed within the above exceptions merely because individual features are in the public knowledge or literature or in the possession of the receiving Party.

 

Section 7.3.                                 Authorized Disclosure.  Notwithstanding anything in Section 7.1 to the contrary, the receiving Party may disclose the Confidential Information of the disclosing Party to the extent that such disclosure is:

 

(a)                     made in response to a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state, provincial and local Governmental Entity of competent jurisdiction or, if in the reasonable opinion of the receiving Party’s legal counsel, such disclosure is otherwise required by applicable Law, including by reason of filing with securities regulators; provided, however, that the receiving Party shall first have given notice to the disclosing Party and given the disclosing Party a reasonable opportunity to quash such order or to obtain a protective order or confidential treatment requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued; and provided, further, that the Confidential Information disclosed in response to such court or governmental order shall be limited to that information which is legally required to be disclosed in response to such court or governmental order;

 

(b)                     made by or on behalf of the receiving Party to a Governmental Entity as

 

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required in connection with any filing, application or request for regulatory approval; provided, however, that reasonable measures shall be taken to assure confidential treatment of such information to the extent practicable and consistent with applicable Law;

 

(c)                      subject to the disclosing Party’s prior written consent, not to be unreasonably withheld, conditioned or delayed, made by or on behalf of the receiving Party to a patent authority as may be reasonably necessary or useful for purposes of obtaining or enforcing any Patent Right provided, however, that reasonable measures shall be taken to assure confidential treatment of such information, to the extent such protection is available;

 

(d)                     made by or on behalf of the receiving Party to its Representatives and contractors in connection with the performance of its obligations or exercise of its rights as contemplated by this Agreement, or to existing or prospective investors,  lenders or acquirers as may be necessary or useful in connection with their evaluation of such existing or prospective investment, loan or acquisition; provided, however, that such persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this Article 7 (which confidentiality and non-use obligations shall apply for a period of no less than [***] years after the effective date of the agreement pursuant to which any such disclosure is made);

 

(e)                      made by or on behalf of the Company or its Affiliates or (sub)licensees to  Representatives, contractors, existing or prospective collaboration partners, (sub)licensees, or acquirers or other Third Parties as may be necessary or useful in connection with the Exploitation of any Acquired Compound or Acquired Product;  provided, however, that such persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this Article 7 (which confidentiality and non-use obligations shall apply for a period of no less than [***] years after the effective date of the agreement pursuant to which any such disclosure is made);

 

(f)                       in the case of Research Program Information, made by or on behalf of SpinCo or its Affiliates to  Representatives, contractors, existing or prospective collaboration partners, (sub)licensees, or acquirers or  other Third Parties as may be necessary or useful in connection with the Exploitation of a SpinCo Selected Compound or Declined Compound or the other conduct of its business outside the Field; provided, however, that such rights of disclosure shall not apply to any Research Program Information with respect to the structure of any Collaboration Compound other than a SpinCo Selected Compound or a Declined Compound or to any Confidential Acquired Compound Information; provided, further, that such persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this Article 7 (which confidentiality and non-use obligations shall apply for a period of no less than [***] years after the effective date of the agreement pursuant to which any such disclosure is made); or

 

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(g)                      mutually agreed to by the Parties or as otherwise expressly set forth in this Agreement.

 

Section 7.4.                                 Nondisclosure of Terms.  Each of the Parties hereto acknowledges that the terms of this Agreement constitute the Confidential Information of each Party and agrees not to disclose the terms of this Agreement to any Third Party without the prior written consent of the other Party hereto; provided that a Party may disclose the terms of this Agreement without such consent to such Party’s Representatives on a need-to-know basis, and also as follows: (a) either Party may disclose such terms to existing and prospective Third Party investors, lenders and acquirers and other Third Parties in connection with due diligence or similar investigations by such Third Parties, (b) the Company may disclose such terms to existing and potential (sub)licensees, collaborators and other Third Parties as may be necessary or useful in connection with the Exploitation of any Acquired Compound or Acquired Product, and (c) SpinCo may disclose such terms to existing and potential licensees and sublicensees, and to collaborators of SpinCo as may be necessary or useful in connection with (i) the Exploitation of any SpinCo Selected Compound or Declined Compound as may be necessary or useful in connection with the grant of such sublicense and (ii) after expiration of the Option, the Exploitation of any compound or product that modulates the NMDA receptors other than any Acquired Compound or Acquired Product as may be necessary in connection with such (sub)licensee’s or collaborator’s reasonable and customary diligence activities, provided that any disclosure pursuant to clause (ii) shall be limited to only those terms necessary to demonstrate that the compounds or products with respect to which such disclosure is being made are not within the scope of this Agreement, and provided, further, that  SpinCo shall have obtained the Company’s prior written consent with respect to the terms to be disclosed prior to disclosing any such terms; provided, further, that in each case ((a)-(c)) the permitted disclosures shall be made under confidentiality obligations substantially equivalent to those of this Agreement.  Notwithstanding the foregoing, to the extent a Party determines in good faith that it is required by applicable Law to publicly file or otherwise disclose the terms of this Agreement with a Governmental Entity, including public filings pursuant to securities laws or the rules of a stock exchange on which the securities of the disclosing Party are listed (or to which an application for listing has been submitted), such disclosing Party shall provide the proposed redacted form of this Agreement to the other Party with a reasonable amount of time prior to filing or disclosure for the other Party to review and approve such redacted form (which approval shall not be unreasonably conditioned, withheld or delayed).  The Party making such filing, registration, notification or disclosure shall submit this Agreement in a manner consistent with the agreed redaction and shall use commercially reasonable efforts to seek confidential treatment for the redacted terms, to the extent such confidential treatment is applicable and reasonably available consistent with applicable Law.  Each Party shall be responsible for its own legal and other external costs in connection with any such filing, registration or notification.

 

Section 7.5.                                 Press Releases and Announcements.  Except as provided in Section 7.4, no public statement or disclosure concerning the existence or terms of this Agreement shall be made, either directly or indirectly, by either Party, without first obtaining the written approval of the other Party.  Once any public statement or disclosure has been approved in accordance with this Section 7.5, then either Party may make subsequent and repeated public disclosure of

 

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the contents thereof without further approval of the other Party.

 

Section 7.6.                                 Publications and Presentations.  The Parties acknowledge that scientific lead-time is a key element of the value of the Research Activities under the Research Program and further agree that scientific publications must be strictly monitored to prevent any adverse effect from premature publication of results of the Research Activities hereunder.  Accordingly, neither Party shall publish, present or otherwise disclose any material related to the results of the Research Program without the prior review by the other Party.  The publishing Party shall provide the other Party the opportunity to review each of the publishing Party’s proposed abstracts, manuscripts or presentations (including information to be presented verbally) that contain the non-publishing Party’s Confidential Information or disclose any unpatented Information related to the results of the Research Program at least [***] days prior to its intended presentation or submission for publication, and the publishing Party agrees, upon written request from the non-publishing Party given within such thirty (30)-day period, not to submit such abstract or manuscript for publication or to make such presentation until the non-publishing Party is given up to [***] days (or such other period as the Parties may mutually agree) from the date of such written request to seek appropriate patent protection for any unpatented Information disclosed in such publication or presentation that it reasonably believes may be patentable.  Notwithstanding the foregoing, in no event shall a Party have the right, in reliance on this Section 7.6, to publish, present or otherwise disclose any Confidential Information of the other Party without such other Party’s prior written consent; provided that the Company shall have the right to publish, present or otherwise disclose the Research Program Information with respect to any Acquired Compound or Acquired Product without the prior written consent of SpinCo, and SpinCo shall have the right to publish, present or otherwise disclose the Research Program Information with respect to any SpinCo Selected Compound or any Declined Compound without the prior written consent of the Company.

 

Section 7.7.                                 Use of Name.  Neither Party shall mention or otherwise use the name, insignia, symbol, trademark, trade name or logotype of the other Party (or any abbreviation or adaptation thereof) in any publication, press release, promotional material or other form of publicity without the prior written approval of such other Party in each instance.  The restrictions imposed by this Section 7.7 shall not prohibit either Party from making any disclosure identifying the other Party that is required by applicable Law.

 

ARTICLE 8
 REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Section 8.1.                                 Representations, Warranties and Covenants.  Each Party hereby represents and warrants, as of the Execution Date and as of the Effective Date, and covenants to the other Party, as applicable, as follows:  Such Party has the power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.  This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal and valid obligation binding upon such Party and enforceable in accordance with its terms.  The execution, delivery and performance of

 

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the Agreement by such Party does not and will not conflict with any agreement, instrument or understanding, oral or written, to which it is a Party or by which it is bound, or violate any applicable Law, any order of any court, governmental body or administrative or other agency having jurisdiction over it, or its articles of incorporation or bylaws.

 

Section 8.2.                                 Additional Representations, Warranties and Covenants of SpinCo.  SpinCo hereby represents and warrants, as of the Execution Date and as of the Effective Date, and covenants, as applicable, as follows:

 

(a)                     With respect to each Collaboration Compound and each Company Selected Compound, all Information contained in the Initial Screening Results and in the Data Package, as applicable, including any reports delivered in connection therewith, with respect to such compound will be complete and will accurately set forth the results of the relevant activities in all respects, and taken together, such Information will constitute all material information related to such compound Known to SpinCo at the time of delivery of such Initial Screening Results, Data Packages and related reports.

 

(b)                     Neither SpinCo nor its Affiliates has, directly or indirectly, by action or omission, (i) assigned, transferred, granted, conveyed or otherwise encumbered any right, title or interest in or to any Patent Rights or Information owned by, licensed to or otherwise Controlled by SpinCo or its Affiliates with respect to the Exploitation of compounds or products in the Field or with respect to any Collaboration Compound, or (ii) agreed to or is otherwise bound by any covenant not to sue for any infringement, misuse or otherwise with respect to the foregoing Patent Rights or Information.

 

(c)                      To SpinCo’s Knowledge, as of the date hereof the conduct of the Research Program as described in the initial Research Plan does not and will not infringe or misappropriate any Patent Rights or other intellectual property or proprietary right of any Person.

 

(d)                     Except as otherwise disclosed to the Company as part of the Data Package, the Exploitation by the Company of the applicable Company Selected Compound, and if optioned by the Company, the associated Acquired Compound will not, to SpinCo’s Knowledge at the time of delivery of the Data Package, infringe or violate the issued Patent Rights or misappropriate any other intellectual property or proprietary rights of any Person.

 

(e)                      To SpinCo’s Knowledge, all material Information Controlled by SpinCo with respect to any Company Selected Compound at the time of delivery of the Data Package will be disclosed to the Company in writing prior to, or as part of, the delivery of any applicable Data Package, or if later obtained by SpinCo, promptly after obtaining same.

 

(f)                       Schedule 8 sets forth a true and complete list of all SpinCo In-Licenses and shall be updated by SpinCo from time to time to list any SpinCo In-License entered into after the Effective Date.  SpinCo has, prior to the Effective Date, provided the Company with access to true and complete (except for any redactions required by the terms thereof) copies of any SpinCo In-License in effect as of the Effective Date.  To SpinCo’s Knowledge (i) the licenses to SpinCo in the SpinCo In-Licenses are in full force and effect and by their terms and are sublicenseable to

 

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the Company as contemplated by this Agreement, (ii) there are no challenges to or violation of the rights granted to SpinCo thereunder by any Third Party, (iii) SpinCo is not in material breach under any of the SpinCo In-Licenses, nor, to SpinCo’s Knowledge, is any counterparty thereto, and (iv) SpinCo has not received any written notice of breach under any of the SpinCo In-Licenses from the counterparty thereto.

 

(g)                      Except with respect to any SpinCo In-Licenses to which the Company has consented pursuant to Section 6.3(e), as of the date of the assignment of any Compound-Specific Technology to the Company pursuant to Section 3.2, such Compound-Specific Technology will be Controlled by SpinCo or an Affiliate free and clear of all Liens.

 

(h)                     Neither SpinCo nor any of its Affiliates has been debarred or is subject to debarment and neither it nor any of its Affiliates will use in any capacity, in connection with the SpinCo Activities, any Person who has been debarred pursuant to Section 306 of the FFDCA or who is the subject of a conviction described in such section.  SpinCo agrees to inform the Company in writing promptly if it or any such Person who is performing services hereunder is debarred or is the subject of a conviction described in Section 306 or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to the best of its or its Affiliates’ Knowledge, is threatened, relating to the debarment or conviction of it or any such Person performing services hereunder.

 

(i)                         In furtherance of the rights granted to the Company hereunder, SpinCo shall enter into agreements to obligate all Persons who perform SpinCo Activities or who conceive, discover, develop or otherwise make any Compound-Specific Technology or Licensed Technology to assign their rights in and to any such Information and Patent Rights to SpinCo such that SpinCo may assign or license such rights to the Company, as applicable, in accordance with this Agreement.

 

(j)                        As of the Effective Date, SpinCo has the infrastructure and appropriately qualified research and technical personnel required to conduct the Initial Screening Process and, during the Research Term, shall at all times have and maintain the infrastructure and shall use Commercially Reasonable Efforts to have and maintain at all times appropriately qualified research and technical personnel required to conduct the Research Activities in accordance with the Research Plan.

 

(k)                     Neither SpinCo nor any of its Affiliates has encumbered, and neither SpinCo nor any of its Affiliates will at any time during Term encumber, any (i) Licensed Technology or (ii) any Know-How or Patent Rights that are owned by SpinCo or any of its Affiliates that would, in the absence of a “control” requirement, constitute Licensed Technology hereunder, in each case that is necessary or useful to the Company under or in connection with the Research Program or the Exploitation of any Company Selected Compounds or Acquired Compounds, in a manner that would have the effect of excluding such Licensed Technology from the licenses, assignments or other rights provided to the Company hereunder.

 

(l)                         SpinCo and its Affiliates and their respective permitted contractors and consultants will conduct all SpinCo Activities in accordance with applicable Law, including

 

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good laboratory practices.

 

Section 8.3.                                 No Other Warranties. OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR GRANTS ANY WARRANTY IN THIS AGREEMENT AND EACH PARTY HEREBY  DISCLAIMS ALL OTHER WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY WITH RESPECT TO MATERIALS OR INFORMATION DELIVERED TO THE OTHER PARTY UNDER THIS AGREEMENT, OR WITH RESPECT TO ANY INFORMATION OR PATENT RIGHTS, INCLUDING ALL OTHER WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, AND VALIDITY OF ANY PATENTS, ISSUED OR PENDING.

 

ARTICLE 9
  INDEMNIFICATION

 

Section 9.1.                                 Indemnification by the Company.  The Company shall defend, indemnify and hold harmless SpinCo, its Affiliates, and their respective directors, officers, agents and employees (each a “SpinCo Indemnified Party”) from any Loss incurred in connection with any and all Third Party suits, investigations, claims or demands (collectively, “Third Party Claims”) to the extent arising out of or resulting from (a) the Company’s breach of this Agreement, (b) the research, development or Exploitation of any Company Selected Compound or Acquired Compound or Acquired Product by the Company or any of its Affiliates, (sub)licensees or agents or (c) any negligence or willful misconduct on the part of the Company or its Affiliates or their respective directors, officers, employees, and agents in performing their obligations under this Agreement; provided, however, that the foregoing indemnity obligation shall not apply to the extent such Loss is subject to indemnification by SpinCo pursuant to Section 9.2, as to which Losses each of the Company and SpinCo shall indemnify the other to the extent of their respective liability.

 

Section 9.2.                                 Indemnification by SpinCo.  SpinCo shall defend, indemnify and hold harmless the Company, its Affiliates and (sub)licensees, and their respective directors, officers, agents and employees (each a “Company Indemnified Party”) from any Loss incurred in connection with any and all Third Party Claims to the extent arising out of or resulting from (a) SpinCo’s breach of this Agreement, (b) the research, development or Exploitation of any Excluded Compound or SpinCo Selected Compound, product that contains a Excluded Compound or a SpinCo Selected Compound, Non-Acquired Compound or Non-Acquired Product by SpinCo or any of its Affiliates, (sub)licensees or agents or (c) any negligence or willful misconduct on the part of SpinCo or its Affiliates or their respective directors, officers, employees, and agents in performing their obligations under this Agreement; provided, however, that the foregoing indemnity obligation shall not apply to the extent such Loss is subject to indemnification by the Company pursuant to Section 9.1, as to which Losses each of the Company and SpinCo shall indemnify the other to the extent of their respective liability.

 

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Section 9.3.                                 Indemnification Procedures.

 

(a)         Notice of Claim. All indemnification claims in respect of a Company Indemnified Party shall be made solely by the Company and all indemnification claims in respect of a SpinCo Indemnified Party shall be made solely by SpinCo.  The Company or SpinCo shall give the Indemnifying Party prompt written notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such the Indemnified Party intends to base a request for indemnification under this Section 9.3, but in no event shall the Indemnifying Party be liable for any Losses that result from any delay in providing such notice.  Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent that the nature and amount of such Loss is known at such time).  The Indemnified Party shall furnish promptly to the Indemnifying Party copies of all papers and official documents received in respect of any Loss and Third Party Claims.

 

(b)         Control of Defense. At its option, the Indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after the Indemnifying Party’s receipt of an Indemnification Claim Notice.  The assumption of the defense of a Third Party Claim by the Indemnifying Party shall not be construed as an acknowledgment that the Indemnifying Party is liable to indemnify the Indemnified Party in respect of the Third Party Claim, nor shall it constitute a waiver by the Indemnifying Party of any defenses it may assert against the Indemnified Party’s claim for indemnification.  Upon assuming the defense of a Third Party Claim, the Indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the Indemnifying Party.  In the event the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall immediately deliver to the Indemnifying Party all original notices and documents (including court papers) received by the Indemnified Party in connection with the Third Party Claim.  Should the Indemnifying Party assume the defense of a Third Party Claim, except as provided in Section 9.3(c), the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the analysis, defense or settlement of the Third Party Claim unless specifically requested in writing by the Indemnifying Party.  In the event that it is ultimately determined that the Indemnifying Party is not obligated to indemnify, defend or hold harmless the Indemnified Party from and against the Third Party Claim, the Indemnified Party shall reimburse the Indemnifying Party for any and all costs and expenses (including attorneys’ fees and costs of suit) and any Losses incurred by the Indemnifying Party in its defense of the Third Party Claim.

 

(c)          Right to Participate in Defense.  Without limitation of Section 9.3(b) above, any Indemnified Party shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Indemnified Party’s own expense unless (i) the employment thereof has been specifically authorized by the Indemnifying Party in writing, (ii) the Indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 9.3(b) (in which case the Indemnified Party shall control the defense), or (iii) the interests of the indemnitee and the Indemnifying Party with respect to such Third Party Claim

 

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are sufficiently adverse to prohibit the representation by the same counsel of both parties under applicable Law, ethical rules or equitable principles.

 

(d)         Settlement.  With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that shall not result in the Indemnified Party’s becoming subject to injunctive or other relief or otherwise adversely affecting the business of the Indemnified Party in any manner, and as to which the Indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the Indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the Indemnifying Party, in its sole discretion, shall deem appropriate.  With respect to all other Losses in connection with Third Party Claims, where the Indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 9.3(b), the Indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss; provided it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed).  If the Indemnifying Party does not assume and conduct the defense of a Third Party Claim as provided above, the Indemnified Party may defend against such Third Party Claim; provided that the Indemnified Party shall not settle any Third Party Claim without the prior written consent of the Indemnifying Party, not to be unreasonably withheld or delayed.

 

(e)          Cooperation.  Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each indemnitee to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith.  Such cooperation shall include access during normal business hours afforded to Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making indemnified Parties and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the Indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.

 

(f)           Expenses.  Except as provided above, the costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be reimbursed on a Calendar Quarter basis by the Indemnifying Party, without prejudice to the Indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.

 

Section 9.4.                                 Insurance. Each Party shall have and maintain such type and amounts of insurance covering its activities hereunder as is reasonable under the circumstances, including insurance as is: (a) normal and customary in the research-based pharmaceutical industry generally for parties similarly situated; and (b) otherwise required by applicable Law.  Each of the foregoing policies of SpinCo shall be primary to any liability insurance carried by

 

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the Company, which Company insurance shall be excess and non-contributory for claims and losses arising out of the performance of the Agreement.  In the case of the Company (but not SpinCo), all of such insurance coverage may be maintained through a self-insurance plan. Certificates evidencing at least the above-required insurance coverage shall be submitted by each Party within thirty (30) days after the Effective Date and prior to each renewal or replacement period and shall bear a certification that the coverage specified therein will not be canceled or terminated without at least thirty (30) days’ prior written notice to the other Party.  Such policies shall remain in effect throughout the Term and shall not be canceled without the prior authorization of the other Party.  Maintenance of such insurance coverage shall not relieve a Party of any responsibility under this Agreement for damages in excess of insurance limits or otherwise.

 

ARTICLE 10
  TERMINATION

 

Section 10.1.                          Term.  This Agreement shall come into force on the Effective Date and shall continue in effect until the expiration of the Option Period with respect to all Collaboration Compounds and the conclusion of any associated assignment and Initial Transfer activities as set forth in Sections 3.2 (other than Section 3.2(c)) and 3.3 (the “Term”), unless earlier terminated in accordance with the terms hereof.

 

Section 10.2.                          Termination Upon Notice. The Company may terminate this Agreement for any or no reason at any time upon sixty (60) days’ written notice to SpinCo.

 

Section 10.3.                          Termination for Insolvency.  In the event that either Party files for protection under bankruptcy or insolvency laws, makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over substantially all of its property that is not discharged within sixty (60) days after such filing, proposes a written agreement of composition or extension of its debts, proposes or is a party to any dissolution or liquidation, files a petition under any bankruptcy or insolvency act or has any such petition filed against it that is not discharged within sixty (60) days of the filing thereof, then the other Party may terminate this Agreement in its entirety effective immediately upon written notice to the first Party.

 

Section 10.4.                          Effect of Termination or Expiration.

 

(a)                     Upon any termination of this Agreement:

 

(i)                                     the Research Program shall terminate;

 

(ii)                                  if the Company has exercised any Option as of the effective date of expiration or termination, SpinCo shall complete as promptly as practicable all assignment and transfer activities set forth in Section 3.2 and 3.3 with respect to any Acquired Compound to the extent not completed as of the date of expiration or termination;

 

(iii)                               if the Company has exercised any Option as of the effective date of

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

expiration or termination, the license granted to the Company under Section 6.3(b) and the license granted to SpinCo in Section 6.4(b) shall survive and remain in effect on a fully-paid, perpetual and irrevocable basis (and, for clarity, termination of either such license is not an available remedy for breach by a Party of this Agreement or any of its obligations hereunder); and

 

(iv)                              in the event Company terminates this Agreement pursuant to (A) Section 10.2 and SpinCo is in material breach of one or more of its material obligations under this Agreement as of the effective date of such termination, or (B) Section 10.3, then in each case ((A) and (B)), the Exclusivity Period shall remain in effect until the [***] anniversary of the date that would have been the last day of the Research Term had the Research Term run its full course without extension (i.e., a Research Term of [***] years).

 

(b)                     Upon any termination or expiration of this Agreement, each Party shall promptly return or destroy all Confidential Information of the other Party, provided that each Party may retain, subject to Article 7, (i) any such Confidential Information with respect to which a Party has a continuing right or license under this Agreement, (ii) one (1) copy of such Confidential Information in its archives solely for the purpose of establishing the contents thereof and ensuring compliance with its obligations hereunder, (iii) any computer records or files containing such Confidential Information that have been created solely by its automatic archiving and back-up procedures, to the extent created and retained in a manner consistent with its standard archiving and back-up procedures, but not for any other uses or purposes and (iv) any Confidential Information of the other Party contained in its laboratory notebooks or databases.

 

Section 10.5.                          Accrued Rights.  The expiration or earlier termination of this Agreement, for any reason, shall not affect any rights or obligations that have already accrued as of the date of such expiration or termination, nor preclude either Party from pursuing any rights and remedies it may have under this Agreement or at law or in equity which accrued or are based upon any event occurring before expiration or termination.

 

Section 10.6.                          Survival.  If the Company has not exercised any Option as of the expiration or any termination of this Agreement, Articles 1 (to the extent necessary to give effect to the other articles and sections set forth in this Section 10.6), 9 (other than Section 9.4) and 11 and Sections, 2.8, 3.4 (with respect to SpinCo’s exclusivity obligations with respect to Declined Compounds), 3.6 (for the Exclusivity Period), 3.7, 3.8 (for the Exclusivity Period), 4.2(a)(iii) (to the extent applicable to any final accounting hereunder), 4.2(b)-(e) (to the extent applicable to any final accounting hereunder), 4.3 (for the relevant period), 4.5-4.7, 6.1-6.2, 6.5(b)(i), 6.5(c)-(d), 6.6 (only with respect to Joint Collaboration Patent Rights), 6.8, 6.10, 7.1-7.3 (for the period contemplated therein), 7.4-7.7, 10.4(a)(i), 10.4(a)(iv), 10.4(b), 10.5, 10.7 and this Section 10.6 shall survive the expiration and any termination of this Agreement.  If the Company has exercised any Option as of the expiration or any termination of this Agreement, then in addition to the Articles and Sections set forth in the preceding sentence, Sections 2.7(b) (second sentence, for a period of one (1) year after expiration or termination), 2.9, 3.2, 3.3, 3.5 (with respect to Acquired Compounds or Acquired Products), 4.4 (solely with respect to any Option exercised during the Term), 6.3(b)-(d), 6.3(e) (subject to the proviso in the last sentence), 6.4(b), 6.5(a), 6.5(b)(ii), 6.6 (in its entirety), 6.7, 6.9, 8.2(f) (first sentence), 10.4(a)(ii), 10.4(a)(iii), shall survive the expiration and any termination of this Agreement.

 

Section 10.7.                          Termination Not Sole Remedy.  Termination is not the sole

 

57

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

remedy under this Agreement and, whether or not termination is effected, all other remedies will remain available except as agreed to otherwise herein.

 

ARTICLE 11.  
 MISCELLANEOUS

 

Section 11.1.                          Notices.  All notices, requests, claims, demands, waivers and other communications under this Agreement shall be in writing and shall be sent by facsimile, courier or express delivery service or personal delivery to the following addresses or facsimile numbers, or to such other addresses or facsimile numbers as shall be designated from time to time by a Party in accordance with this Section 11.1:

 

(a) if to the Company:

 

Naurex Inc.

c/o Actavis W.C. Holding Inc.

Morris Corporate Center III

400 Interpace Parkway

Parsippany, NJ 07054

Attention:  General Counsel

Facsimile:  (862) 261-7923

 

with a copy (which shall not constitute notice) to:

 

Actavis W.C. Holding Inc.

Morris Corporate Center III

400 Interpace Parkway

Parsippany, NJ 07054

Attention:  General Counsel

Facsimile:  (862) 261-7923

 

and

 

Covington & Burling LLP

The New York Times Building

620 Eighth Avenue

New York, NY  10018-1405

Attention:  Andrew Ment

Facsimile: (212) 841-1010

 

(b) if to SpinCo:

 

[***]

 

with a copy to:

 

58

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

[***]

 

All notices, requests, claims, demands, waivers and other communications under this Agreement shall be deemed to have been duly given (i) when delivered by hand, if personally delivered, (ii) upon receipt when delivered by a courier or express delivery service (such date of receipt being evidenced by the courier’s or express delivery service’s records) or (iii) when sent, if sent by facsimile.

 

Section 11.2.                          Assignment.

 

(a)                                 Without the prior written consent of the other Party hereto, neither Party shall sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided, however, that either Party may, without such consent, assign this Agreement and its rights and obligations hereunder to an Affiliate, to the purchaser of all or substantially all of its assets or the business of the Party to which this Agreement relates, or to its successor entity or acquirer in the event of a merger, consolidation or change in control of the Party.  Any attempted assignment or delegation in violation of the preceding sentence shall be void and of no effect.  All validly assigned and delegated rights and obligations of the Parties hereunder shall be binding upon and inure to the benefit of and be enforceable by and against the successors and permitted assigns of the Company or SpinCo, as the case may be.  In the event either Party seeks and obtains the other Party’s consent to assign or delegate its rights or obligations to a Third Party, the assignee shall assume all obligations of its assignor or transferor under this Agreement.

 

(b)                                 The rights to Information, materials and intellectual property (i) controlled by a Third Party permitted assignee of a Party, which Information, materials and intellectual property were controlled by such assignee immediately prior to such assignment; or (ii) controlled by an Affiliate of a Party who becomes an Affiliate through any Change of Control of such Party after the Effective Date, which Information, materials and intellectual property were controlled by such Affiliate immediately prior to such Change in Control, in each case ((i) and (ii)), shall be automatically excluded from the rights licensed or granted to the other Party under this Agreement; provided, that in each case ((i) and (ii)), SpinCo shall not reference, use or otherwise incorporate any such information, materials or intellectual property in connection with the Research Activities without the prior written consent of the Company.  Without limiting the generality of the foregoing, such Information, materials and intellectual property will not be subject to the licenses granted in Sections 6.3(a) and 6.3(b).

 

Section 11.3.                          Relationship of the Parties.  It is expressly agreed that SpinCo, on the one hand, and the Company, on the other hand, shall be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture or agency.  Neither SpinCo, on the one hand, nor the Company, on the other hand, shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other, without the prior written consent of the other Party to do so.  All persons employed by a Party shall be employees of such Party and not of the other Party and all

 

59

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.

 

Section 11.4.                          Equitable Relief.  The Parties acknowledge and agrees that in the event of a violation or threatened violation of any provision of Articles 3 or 7, the non-breaching Party shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving irreparable injury or actual damages and without the necessity of having to post a bond, as well as to an equitable accounting of all earnings, profits and other benefits arising from any such violation.  The rights provided in the immediately preceding sentence shall be cumulative and in addition to any other rights or remedies that may be available to the non-breaching Party.  Nothing in this Section 11.4 is intended, or should be construed, to limit the non-breaching Party’s right to preliminary and permanent injunctive relief or any other remedy for a breach of any other provision of this Agreement.

 

Section 11.5.                          Amendment and Waiver.

 

(a)                                 No failure or delay on the part of any Party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any Party at Law, in equity or otherwise.

 

(b)                                 Except as otherwise specifically set forth in this Agreement, any amendment, supplement or modification of or to any provision of this Agreement and any waiver of any provision of this Agreement shall be effective (i) only if it is made or given in writing and signed by SpinCo and the Company or, in the case of a waiver, by the Party granting the waiver and (ii) only in the specific instance and for the specific purpose for which made or given.

 

Section 11.6.                          Entire Agreement.  This Agreement, together with their schedules and exhibits and all ancillary agreements, documents or instruments to be delivered in connection herewith and therewith, contain the entire agreement and understanding between the Parties with respect to the subject matter hereof and thereof and supersede all prior discussions, negotiations, commitments, agreements and understandings, both written and oral, relating to such subject matter.

 

Section 11.7.                          No Third-Party Beneficiaries.  None of the provisions of this Agreement shall be for the benefit of or enforceable by any Third Party other than the SpinCo Indemnified Parties or the Company Indemnified Parties under Article 9. No such Third Party shall obtain any right under any provision of this Agreement or shall by reason of any such provision make any claim in respect of any debt, liability or obligation (or otherwise) against either Party.

 

Section 11.8.                          Export Control.  This Agreement is made subject to any restrictions concerning the export of products or technical information from the United States or other countries that may be imposed on the Parties from time to time.  Each Party agrees that it will not export, directly or indirectly, any technical information acquired from the other Party

 

60

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

under this Agreement or any products using such technical information to a location or in a manner that at the time of export requires an export license or other governmental approval, without first obtaining the written consent to do so from the appropriate agency or other Governmental Entity in accordance with applicable Law.

 

Section 11.9.                          Counterparts.  This Agreement may be executed in any number of counterparts and by the Parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  This Agreement may be executed by facsimile, .pdf or other electronically transmitted signatures and such signatures shall be deemed to bind each Party hereto as if they were the original signatures.

 

Section 11.10.                   Dispute Resolution.  Except as provided in Section 5.2(d), if a dispute arises between the Parties in connection with or relating to this Agreement or any document or instrument delivered in connection herewith, then either Party shall have the right to refer such dispute to the Designated Officers who shall confer on the resolution of the issue.  Any final decision mutually agreed to by the Designated Officers shall be in writing and shall be conclusive and binding on the Parties.  Except as set forth in the provisos in Section 5.2(d), if such officers are not able to agree on the resolution of an issue within twenty (20) days after such issue was first referred to them, the Parties shall have the right to litigate such dispute in accordance with Section 11.12 or to pursue such other dispute resolution mechanism as the Parties may agree. Notwithstanding anything herein to the contrary, nothing in this Section 11.10 shall preclude either Party from seeking interim or provisional relief, including a temporary restraining order, preliminary injunction or other interim equitable relief concerning a dispute, if necessary to protect the interests of such Party.

 

Section 11.11.                   Performance Warranty.  Each Party hereby warrants and guarantees the performance of any and all rights and obligations by its Affiliates. Each Party will prohibit all of its Affiliates from taking, any action that such Party is prohibited from taking under this Agreement as if such Affiliates were parties to this Agreement.

 

Section 11.12.                   Governing Law; Venue. This Agreement shall be governed by, and construed in accordance with, the substantive Law of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof.  Any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby shall be brought exclusively in a court of competent jurisdiction, federal or state, located in New York, New York, and in no other jurisdiction.  Each Party hereby consents to personal jurisdiction and venue in, and agrees to service of process issued or authorized by, such court.

 

Section 11.13.                   Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

 

Section 11.14.                   Force Majeure.    Neither Party shall be liable to the other Party for failure or delay in performing any obligation set forth in this Agreement, and neither shall be

 

61

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

deemed in breach of its obligations, if such failure or delay is due to a Force Majeure.  In the event of such Force Majeure, the suspension of performance shall be of no greater scope and no longer duration than is necessary and the Party affected shall use commercially reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.  Notice of a Party’s failure or delay in performance due to force majeure must be given to the other Party within ten (10) days after its occurrence.  All delivery dates under this Agreement that have been affected by Force Majeure shall be tolled for the duration of such Force Majeure; provided that, in the case that SpinCo is the affected Party, if the suspension of performance continues for ninety (90) days after the date of the occurrence, the Company shall be permitted to terminate this Agreement on account of such Force Majeure.

 

Section 11.15.                   Consequential Damages. EXCEPT  IN THE EVENT OF (A) THE INTENTIONAL OR WILLFUL BREACH OR MISCONDUCT OR FRAUD OF A PARTY, (B) A PARTY’S BREACH OF ITS OBLIGATIONS UNDER SECTION 3.6, SECTION 3.7 OR SECTION 3.8 (AS APPLICABLE) OR ARTICLE 7, (C) AS PROVIDED UNDER SECTION 11.4, AND (D) TO THE EXTENT ANY SUCH DAMAGES ARE REQUIRED TO BE PAID TO A THIRD PARTY AS PART OF A CLAIM FOR WHICH A PARTY PROVIDES INDEMNIFICATION UNDER ARTICLE 9, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES UNDER THIS AGREEMENT FOR ANY SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS OR LOST REVENUES, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.

 

[Signature page follows]

 

62

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their duly authorized representatives as of the date first written above.

 

	
 
    	
NAUREX INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
   /s/ Norbert G. Riedel
    
	
 
    	
 
    	
Name: Norbert G. Riedel, Ph.D.
    
	
 
    	
 
    	
Title: President and Chief Executive   Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
APTINYX INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
   /s/ Norbert G. Riedel
    
	
 
    	
 
    	
Name: Norbert G. Riedel, Ph.D.
    
	
 
    	
 
    	
Title: President and Chief Executive   Officer
    

 

[SIGNATURE PAGE TO RESEARCH COLLABORATION AGREEMENT]

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 1

 

PRELIMINARY DATA PACKAGE INFORMATION

 

(TO BE REVIEWED AND FINALIZED BY THE JSC)

 

In addition to the initial screening results for Eligible Compound:

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 2

 

EXCEPTION COMPOUNDS

 

	
[***]
    

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 3

 

EXCLUDED COMPOUNDS

 

	
[***]
    

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 4

 

PSYCHIATRY AND NEUROLOGY INDICATIONS

 

Psychiatry

 

·                  [***]

·                  [***]

·                  [***]

·                  [***];

·                  [***];

·                  [***];

·                  [***];

·                  [***];

·                  [***];

·                  [***];

·                  [***]; and

·                  [***].

 

Neurology

 

·                  Delirium; and

·                  Major or mild neurocognitive disorder  due to Alzheimer’s disease including prodromal stages.

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 5

 

INITIAL SCREENING RESULTS

 

(TO BE REVIEWED AND FINALIZED BY THE JSC)

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 6

 

KNOWLEDGE PERSONS

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 7

 

KEY PERSONNEL

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 8

 

SPINCO IN-LICENSES

 

None, as of the Execution Date or the Effective Date.

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Exhibit A

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

AMENDMENT NO. 1

 

TO

RESEARCH COLLABORATION AGREEMENT

 

AMENDMENT NO. 1, dated as of July 15, 2016 (this “Amendment”), to the Research Collaboration Agreement, dated as of July 25, 2015 (the “Agreement”), by and between Naurex, Inc., a Delaware corporation (the “Company”) and Aptinyx Inc., a Delaware corporation (“SpinCo”).

 

WHEREAS, the Parties desire to amend the Agreement pursuant to Section 2.2(c)(iv) and Section 11.5(b) of the Agreement to modify certain matters relating to the Picking procedures under the Agreement as set forth below.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Amendment and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

 

1.                                   Definitions. Capitalized terms not otherwise defined herein have the respective meanings set forth in the Agreement.

 

2.                                    Amendment. The definition of “Eligible Compound Pool Satisfaction” is hereby deleted it its entirety and replaced with the following:

 

“Eligible Compound Pool Satisfaction” means, with respect to a Party’s Eligible Compound Selection Period, that the Eligible Compound Pool contains at least [***] Eligible Compounds that are not Terminated Compounds, and that at least [***] of such Eligible Compounds has been added to the Eligible Compound Pool after the last Pick of the other Party.

 

3.                                    Miscellaneous.

 

(a)                              From and after the date hereof, all references in the Agreement to “this Agreement” and similar phrases shall be deemed to mean the Agreement  as amended by this Amendment. All of the terms and provisions of the Agreement, as amended hereby, shall continue in full force and effect in accordance with their respective terms.

 

(b)                               This Amendment shall be governed by, and construed in accordance with, the substantive Law of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof. Any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby shall be brought exclusively in a court of competent jurisdiction, federal or state, located in New York, New York, and in no other jurisdiction. Each Party hereby consents to personal jurisdiction and venue in, and agrees to service of process issued or authorized by, such court.

 

(c)                                This Amendment may be executed in any number of counterparts and by the Parties in separate counterparts, each of which when so executed shall be deemed to be an original  and all of which taken together  shall constitute one and the same agreement.   This Amendment may be executed by facsimile, .pdf or other electronically transmitted signatures and such signatures shall be deemed to bind each Party hereto as if they were the original signatures.

 

[Signature Page Follows]

 

 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

IN WITNESS WHEREOF,  the Parties have caused this Amendment to be signed by their duly authorized representative as of the date first above written.

 

	
 
    	
NAUREX   INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   David C. Nicholson
    
	
 
    	
Name:   David C. Nicholson
    
	
 
    	
Title:   Vice President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
APTINYX INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Ashish Khanna
    
	
 
    	
Name: Ashish Khanna
    
	
 
    	
Title: Chief Business   Officer
    
				

 

[Signature Page to Amendment No. 1 to Research Collaboration Agreement]Exhibit 10.9

 

OFFICE LEASE AGREEMENT

 

Between

 

FSP 909 DAVIS STREET LLC,

a Delaware limited liability company

as

Landlord

 

and

 

APTINYX INC.,

a Delaware corporation

as

Tenant

 

Premises:

 

Suite 600

909 Davis Street

Evanston, Illinois 60201

 

 

BASIC LEASE INFORMATION

 

	
Effective Date:
    	
 
    	
October 13, 2016
    
	
 
    	
 
    	
 
    
	
Tenant:
    	
 
    	
APTINYX INC., a Delaware corporation
    
	
 
    	
 
    	
 
    
	
Tenant’s Address:
    	
 
    	
909 Davis Street
   Evanston, Illinois 60201
   Attn: Patricia Adams, Vice President of Human Resources and Administration
    
	
 
    	
 
    	
 
    
	
Guarantor:
    	
 
    	
None.
    
	
 
    	
 
    	
 
    
	
Landlord:
    	
 
    	
FSP 909 DAVIS STREET LLC, a Delaware limited   liability company
    
	
 
    	
 
    	
 
    
	
Landlord’s Address:
    	
 
    	
Franklin Street Properties
   401 Edgewater Place
   Suite 200
   Wakefield, Massachusetts 01880-6210
    
   With a copy to:
    
   NAI Hiffman Asset Management, LLC
   909 Davis Street
   Evanston, Illinois 60201
   Attn: Building Manager
    
	
 
    	
 
    	
 
    
	
Premises:
    	
 
    	
Suite 600, composed of 16,519 square feet of   Rentable Area on the sixth (6th) floor of the office   building (the “Building”) located at 909 Davis Street, City of   Evanston, Cook County, Illinois (“Land”). The Premises are   outlined on the plan attached to the Lease as Exhibit “B”.
    
	
 
    	
 
    	
 
    
	
Term:
    	
 
    	
Sixty-five (65) months, commencing on April 1,   2017 (the “Commencement Date”), and ending at 5:00 p.m. on   August 31, 2022, subject to adjustment, extension and earlier   termination as provided in the Lease.
    
	
 
    	
 
    	
 
    
	
Renewal Option(s):
    	
 
    	
One five (5) year renewal in accordance with Exhibit “G” attached hereto.
    
	
 
    	
 
    	
 
    
	
Base Rental:
    	
 
    	
 
    

 

	
Period of Term
    	
 
    	
Annual Base
   Rental Rate
   Per RSF
    	
 
    	
Annual
   Base Rental
    	
 
    	
Monthly
   Installment
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4/1/17 – 3/31/18
    	
 
    	
$
    	
18.00
    	
 
    	
$
    	
297,342.00
    	
*
    	
$
    	
24,778.50
    	
*
    
	
4/1/18 – 3/31/19
    	
 
    	
$
    	
18.50
    	
 
    	
$
    	
305,601.48
    	
 
    	
$
    	
25,466.79
    	
 
    
	
4/1/19 – 3/31/20
    	
 
    	
$
    	
19.00
    	
 
    	
$
    	
313,860.96
    	
 
    	
$
    	
26,155.08
    	
 
    
	
4/1/20 – 3/31/21
    	
 
    	
$
    	
19.50
    	
 
    	
$
    	
322,120.56
    	
 
    	
$
    	
26,843.38
    	
 
    
	
4/1/21 – 3/31/22
    	
 
    	
$
    	
20.00
    	
 
    	
$
    	
330,380.04
    	
 
    	
$
    	
27,531.67
    	
 
    
	
4/1/22 – 8/31/22
    	
 
    	
$
    	
20.50
    	
 
    	
$
    	
141,099.80
    	
 
    	
$
    	
28,219.96
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
(5 months)
    	
 
    	
 
    	
 
    

 

* See Section 5(b) below regarding rent abatement.

 

 

	
Security Deposit:
    	
 
    	
$350,000.00 in the form   of a Letter of Credit in accordance with the terms of Exhibit “M”,   and subject to reduction as provided in Section 9 of Exhibit “M”.
    
	
 
    	
 
    	
 
    
	
Rent:
    	
 
    	
Base Rental, Tenant’s   Share of Operating Costs and all other sums that Tenant may owe to Landlord   under the Lease.
    
	
 
    	
 
    	
 
    
	
Improvement Allowance:
    	
 
    	
$25.00 per square foot   of Rentable Area.
    
	
 
    	
 
    	
 
    
	
Permitted Use:
    	
 
    	
General office purposes   consistent with comparable first class office buildings in   Evanston, Illinois, provided Tenant may also use the Premises for a   laboratory for research and development of medicine and drugs, and all   ancillary uses related thereto, subject to and in accordance with the terms   and conditions described in Section 4 below and Exhibit “N” to this   Lease.
    
	
 
    	
 
    	
 
    
	
Tenant’s Share of   Operating Costs:
    	
 
    	
8.464%
    
	
 
    	
 
    	
 
    
	
Initial Liability   Insurance Amount:
    	
 
    	
$3,000,000.00
    
	
 
    	
 
    	
 
    
	
Brokers:
    	
 
    	
CBRE, Inc., for Tenant
   and Jones Lang LaSalle, for Landlord
    
	
 
    	
 
    	
 
    
	
Right of First Refusal
    	
 
    	
On all contiguous space   on the fifth (5th)   floor of the Building, in accordance with Exhibit “H”   attached hereto.
    

 

The foregoing Basic Lease Information is incorporated into and made a part of the Lease identified above.  If any conflict exists between any Basic Lease Information and the Lease, then the Lease shall control.

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page No.
    
	
 
    	
 
    	
 
    
	
1.
    	
Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Lease Grant
    	
5
    
	
 
    	
 
    	
 
    
	
3.
    	
Lease Term; Acceptance   of Premises
    	
5
    
	
 
    	
 
    	
 
    
	
4.
    	
Use
    	
5
    
	
 
    	
 
    	
 
    
	
5.
    	
Payment of Rent
    	
5
    
	
 
    	
 
    	
 
    
	
6.
    	
Operating Costs
    	
6
    
	
 
    	
 
    	
 
    
	
7.
    	
Late Payments;   Dishonored Checks
    	
10
    
	
 
    	
 
    	
 
    
	
8.
    	
Security Deposit
    	
11
    
	
 
    	
 
    	
 
    
	
9.
    	
Services to be   Furnished by Landlord
    	
11
    
	
 
    	
 
    	
 
    
	
10.
    	
Graphics; Signage
    	
12
    
	
 
    	
 
    	
 
    
	
11.
    	
Telecommunications
    	
13
    
	
 
    	
 
    	
 
    
	
12.
    	
Repair and Maintenance   by Landlord
    	
14
    
	
 
    	
 
    	
 
    
	
13.
    	
Maintenance by Tenant
    	
14
    
	
 
    	
 
    	
 
    
	
14.
    	
Repairs by Tenant
    	
15
    
	
 
    	
 
    	
 
    
	
15.
    	
Alterations,   Additions, Improvements
    	
15
    
	
 
    	
 
    	
 
    
	
16.
    	
Laws and Regulations;   Green/LEED Programs; Disability Laws; Building Rules and Regulations
    	
16
    
	
 
    	
 
    	
 
    
	
17.
    	
Entry by Landlord
    	
18
    
	
 
    	
 
    	
 
    
	
18.
    	
Assignment and   Subletting
    	
19
    
	
 
    	
 
    	
 
    
	
19.
    	
Mechanic’s Liens
    	
20
    
	
 
    	
 
    	
 
    
	
20.
    	
Property Insurance
    	
21
    
	
 
    	
 
    	
 
    
	
21.
    	
Liability Insurance
    	
21
    
	
 
    	
 
    	
 
    
	
22.
    	
INDEMNITY
    	
22
    
	
 
    	
 
    	
 
    
	
23.
    	
WAIVER OF SUBROGATION   RIGHTS
    	
22
    
	
 
    	
 
    	
 
    
	
24.
    	
Casualty Damage
    	
23
    
	
 
    	
 
    	
 
    
	
25.
    	
Condemnation
    	
23
    
	
 
    	
 
    	
 
    
	
26.
    	
DAMAGES FROM CERTAIN   CAUSES
    	
24
    

 

 

	
 
    	
 
    	
 
    
	
27.
    	
Default by Tenant
    	
24
    
	
 
    	
 
    	
 
    
	
28.
    	
Default by Landlord
    	
26
    
	
 
    	
 
    	
 
    
	
29.
    	
Quiet Enjoyment
    	
27
    
	
 
    	
 
    	
 
    
	
30.
    	
Right to Relocate
    	
27
    
	
 
    	
 
    	
 
    
	
31.
    	
Holding Over
    	
27
    
	
 
    	
 
    	
 
    
	
32.
    	
Rights Reserved to   Landlord
    	
27
    
	
 
    	
 
    	
 
    
	
33.
    	
Subordination to   Mortgage; Estoppel Agreement
    	
28
    
	
 
    	
 
    	
 
    
	
34.
    	
Intentionally Omitted
    	
28
    
	
 
    	
 
    	
 
    
	
35.
    	
Attorney’s Fees
    	
28
    
	
 
    	
 
    	
 
    
	
36.
    	
No Implied Waiver
    	
29
    
	
 
    	
 
    	
 
    
	
37.
    	
Independent Obligations
    	
29
    
	
 
    	
 
    	
 
    
	
38.
    	
Recourse Limitation
    	
29
    
	
 
    	
 
    	
 
    
	
39.
    	
Notices
    	
29
    
	
 
    	
 
    	
 
    
	
40.
    	
Severability
    	
29
    
	
 
    	
 
    	
 
    
	
41.
    	
Recordation
    	
29
    
	
 
    	
 
    	
 
    
	
42.
    	
Governing Law
    	
29
    
	
 
    	
 
    	
 
    
	
43.
    	
Force Majeure
    	
30
    
	
 
    	
 
    	
 
    
	
44.
    	
Time of Performance
    	
30
    
	
 
    	
 
    	
 
    
	
45.
    	
Transfers by Landlord
    	
30
    
	
 
    	
 
    	
 
    
	
46.
    	
Commissions
    	
30
    
	
 
    	
 
    	
 
    
	
47.
    	
Financial Statements
    	
30
    
	
 
    	
 
    	
 
    
	
48.
    	
Tenant’s Standing and   Authority
    	
30
    
	
 
    	
 
    	
 
    
	
49.
    	
Effect of Delivery of   This Lease
    	
30
    
	
 
    	
 
    	
 
    
	
50.
    	
WAIVER OF WARRANTIES   AND ACCEPTANCE OF CONDITION
    	
30
    
	
 
    	
 
    	
 
    
	
51.
    	
Merger of Estates
    	
31
    
	
 
    	
 
    	
 
    
	
52.
    	
Survival of Indemnities   and Covenants
    	
31
    
	
 
    	
 
    	
 
    
	
53.
    	
Headings
    	
31
    
	
 
    	
 
    	
 
    
	
54.
    	
Entire Agreement;   Amendments
    	
31
    

 

 

	
55.
    	
Exhibits
    	
31
    
	
 
    	
 
    	
 
    
	
56.
    	
Joint and Several   Liability
    	
32
    
	
 
    	
 
    	
 
    
	
57.
    	
Multiple Counterparts
    	
32
    
	
 
    	
 
    	
 
    
	
58.
    	
Mail
    	
32
    
	
 
    	
 
    	
 
    
	
59.
    	
Roof Rights
    	
32
    
	
 
    	
 
    	
 
    
	
60.
    	
OFAC and Anti-Money   Laundering Compliance Certifications
    	
32
    
	
 
    	
 
    	
 
    
	
61.
    	
Landlord Cancellation   Option
    	
32
    
	
 
    	
 
    	
 
    
	
62.
    	
Landlord’s   Representations
    	
32
    

 

	
ADDENDUM
    	
 
    	
DEFINITIONS
    
	
 
    	
 
    	
 
    
	
EXHIBIT “A-1”
    	
 
    	
LEGAL DESCRIPTION OF THE PROPERTY
    
	
EXHIBIT “A-2”
    	
 
    	
LEGAL DESCRIPTION OF THE RETAIL PARCEL
    
	
EXHIBIT “A-3”
    	
 
    	
EXCLUDED RETAIL PROPERTY
    
	
EXHIBIT “B”
    	
 
    	
FLOOR PLAN
    
	
EXHIBIT “C”
    	
 
    	
RULES AND REGULATIONS
    
	
EXHIBIT “D”
    	
 
    	
TENANT IMPROVEMENTS AGREEMENT
    
	
EXHIBIT “E”
    	
 
    	
PARKING
    
	
EXHIBIT “F”
    	
 
    	
CONFIDENTIALITY AGREEMENT
    
	
EXHIBIT “G”
    	
 
    	
RENEWAL OPTION
    
	
EXHIBIT “H”
    	
 
    	
RIGHT OF FIRST OFFER
    
	
EXHIBIT “I”
    	
 
    	
INTENTIONALLY OMITTED
    
	
EXHIBIT “J”
    	
 
    	
INTENTIONALLY OMITTED
    
	
EXHIBIT “K”
    	
 
    	
EXISTING EXPANSION RIGHTS AND ROFRS ENCUMBERING THE   PREMISES
    
	
EXHIBIT “L”
    	
 
    	
INTENTIONALLY OMITTED
    
	
EXHIBIT “M”
    	
 
    	
LETTER OF CREDIT TERMS AND CONDITIONS
    
	
EXHIBIT “N”
    	
 
    	
LABORATORY USE RIDER
    

 

 

OFFICE LEASE AGREEMENT

 

THIS OFFICE LEASE AGREEMENT (“Lease”) is executed effective as of September    , 2016 (the “Effective Date”), between FSP 909 DAVIS STREET LLC, a Delaware limited liability company (“Landlord”), and APTINYX INC., a Delaware corporation (“Tenant”).

 

W I T N E S S E T H:

 

1.             Definitions.  Capitalized terms used in this Lease and not defined elsewhere have the meanings given them below:

 

“After Hours HVAC Rate” means $125.00 per hour per floor for cooling and $75.00 per hour per floor for heating, subject to adjustment from time to time as provided in Section 9(a)(8) below.

 

“Alterations” shall have the meaning given such term in Section 15(a) hereto

 

“Base Rental” means the “Base Rental” set forth in the Basic Lease Terms.

 

“Broker” shall mean the broker(s) identified in the Basic Lease Terms.

 

“Building” means that certain office building known as 909 Davis Street, Evanston, Illinois 60201.

 

“Building Standard”  means the level of service or type of equipment standard in the Building or the type, brand and/or quality of materials Landlord reasonably designates from time to time to be the minimum type, brand or quality to be used in the Building or the exclusive type, grade or quality of material to be used in the Building, consistent with similar first class buildings in the Market Area.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of the State, or are in fact closed in, the State.

 

“Claims” means any and all liabilities, obligations, damages, claims, suits, losses, causes of action, lien, judgments and expenses (including court costs, reasonable attorneys fees and costs of investigation) of any kind, nature or description.

 

“Commencement Date”  means April 1, 2017.

 

“Common Areas”  means all areas, spaces, facilities and equipment (whether or not located within the Building) made available by Landlord for the common and joint use of Landlord, Tenant and others designated by Landlord using or occupying space in the Building, including, but not limited to, tunnels, loading docks, walkways, sidewalks and driveways necessary for access to the Building, Parking Areas, Building lobbies (including those on floors with one tenant), atriums, landscaped areas, public corridors, public rest rooms, Building stairs, elevators open to the public, service elevators (provided that such service elevators shall be available only for tenants of the Building and others designated by Landlord), drinking fountains, equipment rooms, risers and any such other areas and facilities, if any, as are designated by Landlord from time to time as Common Areas, including, but not limited to, any such areas so designated by Landlord on a single-tenant floor of the Building.

 

“Complex”  means the Property, the Building and the Parking Areas.

 

“Default Rate”  means the lesser of (1) the rate of twelve percent (12%) per annum, and (2) the maximum rate of interest then permissible for a commercial loan to Tenant in the State.

 

“Disability Laws” shall have the meaning given such term in Section 15(a) hereto.

 

“Dispute” shall have the meaning given such term in Section 6(e) hereto.

 

1

 

“Event of Default” shall have the meaning given such term in Section 27(a) hereto.

 

“Force Majeure” means acts of God; strikes; lockouts; labor troubles; inability to procure materials; acts of war; terrorist actions; inclement weather; governmental laws or regulations; casualty; orders or directives of any legislative, administrative, or judicial body or any governmental department; inability to obtain any licenses, permissions or authorities (despite commercially reasonable pursuit of such licenses, permissions or authorities); and other similar or dissimilar causes beyond Landlord’s reasonable control.

 

“Hazardous Materials” means any of the following, in any amount: (a) any petroleum or petroleum product, asbestos in any form, urea formaldehyde and polychlorinated biphenyls; (b) any radioactive substance; (c) any toxic, infectious, reactive, corrosive, ignitable or flammable chemical or chemical compound; and (d) any chemicals, materials or substances, whether solid, liquid or gas, defined as or included in the definitions of hazardous substances, hazardous wastes, hazardous materials, extremely hazardous wastes, restricted hazardous wastes, toxic substances, toxic pollutants, solid waste, or words of similar import in any federal, state or local Law now existing or existing on or after the Effective Date as the same may be interpreted by government offices and agencies.

 

“Hazardous Materials Laws” means any federal, state or local statutes, laws, ordinances or regulations now existing or existing after the Effective Date that control, classify, regulate, list or define Hazardous Materials.

 

“Landlord Related Party”  means any officer, director, partner, employee, member, agent or contractor of Landlord.

 

“Landlord’s Mortgagee” shall have the meaning given such term in Section 33(a) hereto.

 

“Landlord’s Notice Address” shall mean the address of Landlord set forth on the signature page of this Lease.

 

“Landlord’s Relocation Notice” shall have the meaning given such term in Section 30 hereto.

 

“Laws” means any law, regulation, rule, order, statute or ordinance of any governmental or private entity in effect on or after the Effective Date and applicable to the Complex or the use or occupancy of the Complex, including, without limitation, Hazardous Materials Laws, Rules and Regulations and Permitted Encumbrances.

 

“Lease Term”  means the period commencing on the Commencement Date and terminating on August 31, 2022.

 

“Lease Year”  means a period of twelve (12) consecutive calendar months with respect to each subsequent Lease Year.  The first Lease Year shall begin on the 1st day of the month following the Commencement Date unless the Commencement Date occurs on the 1st day of a month, in which event the first Lease Year shall begin on the Commencement Date.

 

“Market Area”  means the Evanston, Illinois submarket area.

 

“Miscellaneous Power” shall have the meaning given such term in Section 9(a)(6) hereto.

 

“Mortgage” shall have the meaning given such term in Section 33(a) hereto.

 

“New Premises” shall have the meaning given such term in Section 30 hereto.

 

“Non-Structural Alterations” shall have the meaning given such term in Section 15(a) hereto.

 

“Normal Business Holidays”  means New Year’s Day, Memorial Day, July 4th (Independence Day), Labor Day, Thanksgiving and Christmas Day and any other day which shall be recognized by office tenants generally (excluding federal or state banking institutions) as a national holiday on which employees are not required to work.

 

2

 

“Normal Business Hours”  for the Building means 8:00 a.m. to 6:00 p.m. on Monday through Friday, and 8:00 a.m. to 1:00 p.m. on Saturday, exclusive of Normal Business Holidays.

 

“OFAC” shall have the meaning given such term in Section 60 hereto.

 

“Offsite Parking Garage” means the off-site multi-level parking garage known as the Sherman Parking Garage located at 821 Davis Street, Evanston, Illinois.

 

“Operating Costs” shall have the meaning given to such term in Section 6(c) hereto.

 

“Parking Areas”  means those areas located upon the Property designated by Landlord, from time to time, to be parking areas.

 

“Permitted Encumbrances” means all easements, declarations, encumbrances, covenants, conditions, reservations, restrictions and other matters now or after the Effective Date affecting title to the Complex, provided Landlord shall not enter into any new easements, declarations, encumbrances, covenants, conditions, reservations, restrictions or other matters after the Effective Date which materially adversely affect Tenant’s rights or materially increase Tenant’s obligations hereunder.

 

“Permitted Transfer” shall have the meaning given such term in Section 18(a) of this Lease.

 

“Premises”  means the suite of offices, known as Suite No. 600, located upon the sixth (6th) floor of the Building and outlined on the floor plan attached to this Lease as Exhibit “B” and incorporated herein by reference, and consists of 16,519 square feet of Rentable Area.

 

“Primary Lease” shall have the meaning given such term in Section 33(a) of this Lease.

 

“Property” shall mean, collectively, the real property described on Exhibit “A-1”, the Building, and any other building or improvements now or hereafter constructed upon the real property described on Exhibit “A-1”, but excluding the parcel of real estate and air space having an address of 900-950 Church Street and more particularly described on Exhibit “A-2” attached hereto (the “Retail Parcel”) and excluding any business and trade fixtures, machinery and equipment owned, or leased from a third party, by the owner of the Retail Parcel, which are generally described on Exhibit “A-3” attached hereto, or a tenant of the Retail Parcel.

 

“Provider” shall have the meaning given to such term in Section 11(a) of this Lease.

 

“Relocation Effective Date” shall have the meaning given such term in Section 30 of this Lease.

 

“Rent”  means, collectively, the Base Rental, the Tenant’s Share of Operating Costs (as provided in Section 6), the amounts to be paid by Tenant pursuant to the Tenant Improvements Agreement (if any), and all other sums of money becoming due and payable to Landlord under this Lease.

 

“Rentable Area”  means (i) the “Usable Area” within any Premises (i.e., the gross area enclosed by the surface of the exterior glass walls, the mid-point of any walls separating portions of the Premises from those of adjacent tenants, the slab penetration line of all walls separating such Premises from Service Areas and the corridor side of walls separating such Premises from Common Areas), plus (ii) a pro-rata part of the Common Areas and Service Areas within the Building.  The areas in clauses (i) and (ii) above include the area encompassed by any columns or other structural elements which provide support to the Premises or the Building, but exclude permanent vertical penetrations, such as fire stairs, elevator shafts, flues, pipe shafts and vertical ducts.  All references to “RSF” mean the square feet of Rentable Area.

 

“Rentable Area of the Building”  means (and is hereby deemed to be) 195,175 square feet of Rentable Area.

 

3

 

“Rentable Area of the Premises”  means (and is hereby deemed to be) 16,519 square feet of Rentable Area, irrespective of whether the same should be more or less as a result of variations resulting from later re-measurement or actual construction and completion of the Premises for occupancy.

 

“Review Fee” shall have the meaning given such term in Section 18(a) of this Lease.

 

“Rules and Regulations”  means the rules and regulations for the Complex set forth on Exhibit “C” attached of this Lease and incorporated herein by reference, and the rules and regulations for the Parking Areas, and any rules and regulations that may be adopted or altered by Landlord in accordance with Section 26 of Exhibit “C”.

 

“Security Deposit” means a Letter of Credit in the amount of Three Hundred Fifty Thousand and 00/100 Dollars ($350,000.00) in accordance with the terms of Exhibit “M” and subject to reduction as provided in Section 9 of Exhibit “M”, to be delivered by Tenant to Landlord contemporaneously with the Tenant’s delivery to Landlord of an executed copy of this Lease, such funds to be used by Landlord as described in Section 8 below.

 

“Service Areas”  means those areas, spaces, facilities and equipment serving the Building (whether or not located within the Building), but to which Tenant and other occupants of the Building will not have access, including, but not limited to, service elevators, mechanical, telephone, electrical, janitorial and similar rooms and air and water refrigeration equipment.

 

“State” means the State of Illinois.

 

“Substitute Tenant” shall have the meaning given such term in Section 27(f) of this Lease.

 

“Taxes”  means any general real property tax, improvement tax, gross receipt tax, margin tax, assessment, special assessment, reassessment, commercial rental tax, in lieu tax, levy, charge, penalty or similar imposition imposed by any Taxing Authority.  The term “Taxes” includes all charges or burdens of every kind and nature Landlord incurs in connection with using, occupying, owning, operating, leasing or possessing the Complex, without particularizing by any known name and whether any of the foregoing are general, special, ordinary, extraordinary, foreseen or unforeseen; any tax or charge for fire protection, street lighting, streets, sidewalks, road maintenance, refuse, sewer, water or other services provided to the Complex.  The term “Taxes” does not include Landlord’s state or federal income, franchise, estate or inheritance taxes, or other taxes measured or determined based upon Landlord’s income other than rents at the Complex.  If Landlord is entitled to pay, and elects to pay, any of the above listed assessments or charges in installments over a period of two or more calendar years, then only such installments of the assessments or charges (including interest thereon) as are actually paid in a calendar year will be included within the term “Taxes” for such calendar year. The “Taxes” for any given calendar year shall be those which accrue for such calendar year regardless of the year due and payable or paid (i.e. accounted on an accrual basis, not cash basis).

 

“Taxing Authority” means any authority having the direct or indirect power to tax, including but not limited to, (a) any city, county, state or federal entity, (b) any school, agricultural, lighting, drainage or other improvement or special assessment district, (c) any governmental agency, or (d) any private entity having the authority to assess the Property under any of the Permitted Encumbrances.

 

“Tenant Improvements”  means those improvements to the Premises which Tenant elects to construct or have constructed in the Premises in accordance with the Tenant Improvements Agreement, if any.

 

“Tenant Improvements Agreement”  means an agreement between Tenant and Landlord for construction of improvements within the Premises attached as Exhibit “D” of the Lease.

 

“Tenant’s Notice Address” shall mean the address of Tenant set forth on the signature page of this Lease.

 

“Tenant Related Party”  means any officer, director, partner, employee, agent or contractor of Tenant.

 

4

 

“Tenant’s Share”  means the proportion which the Rentable Area of the Premises bears to the Rentable Area of the Building.  The initial Tenant’s Share shall be 8.464%.

 

“Transfer” shall have the meaning given such term in Section 18(a) hereto.

 

2.             Lease Grant.  Upon the terms of this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the Premises and the non-exclusive right to use the Common Areas, subject to all of the terms and conditions of this Lease (including the Rules and Regulations).

 

3.             Lease Term; Acceptance of Premises.

 

(a)           This Lease shall continue in force during a period beginning on the Effective Date of this Lease (though the Lease Term shall not commence and no Rent shall accrue until the Commencement Date) and ending on the expiration of the Lease Term, unless this Lease is terminated early (pursuant to a right to so terminate specifically set forth in this Lease) or extended to a later date pursuant to any other term or provision hereof.  Tenant currently occupies the Premises under a sublease from the current tenant of the Premises that expires on March 31, 2017 (the “Existing Sublease”) and Tenant has agreed to retain possession of the Premises on the Commencement Date in their “AS IS” condition (as described in Section 50 below).  If the current tenant (i.e., Tenant’s sublessor) or any other occupant of the Premises holds over and Landlord cannot acquire possession of the Premises prior to the Commencement Date, this Lease shall not be void or voidable and Landlord shall not be deemed to be in default under this Lease or otherwise liable to Tenant for any claims, damages or liabilities in connection therewith; and in such event Tenant agrees to accept possession of the Premises at such time as Landlord is able to tender the same.

 

(b)           Tenant acknowledges that it has had the opportunity to measure and confirm the square footage of Rentable Area contained in the Premises and the Building and by its execution of this Lease, waives any right to contest the amount of Rentable Square Feet contained in either of the foregoing.

 

4.             Use.  The Premises shall be used solely for general office purposes and for no other purpose.  Notwithstanding the foregoing sentence to the contrary, provided Tenant complies with the additional terms and conditions set forth in Exhibit “N” attached hereto, Tenant may also use the Premises for a laboratory for research and development of medicine and drugs, and all ancillary uses related thereto, consistent in all cases with the standards of comparable first class office buildings in Evanston, Illinois, and for no other use.  Tenant shall (i) lock the doors to the Premises and take other reasonable steps to secure the Premises and the personal property of all Tenant Related Parties and any of Tenant’s transferees, contractors or licensees in the Common Areas and the Complex, from unlawful intrusion, theft, fire and other hazards; (ii) keep and maintain in good working order all security and safety devices installed in the Premises by or for the benefit of Tenant (such as locks, smoke detectors and burglar alarms), but the fire alarm panel, sprinkler system and strobes serving the Premises shall be maintained by Landlord (subject to reimbursement pursuant to Section 6 below); and (iii) cooperate with Landlord and other tenants in the Building on Building safety matters.  Tenant acknowledges that Landlord is not a guarantor of the security or safety of Tenant, its employees and invitees or their property; and that such security and safety matters are the responsibility of Tenant and the local law enforcement authorities.

 

5.             Payment of Rent.

 

(a)           Except as otherwise expressly provided in this Lease, the Rent shall be due and payable to Landlord in advance in monthly installments on the first (1st) day of each calendar month during the Lease Term, at Landlord’s address as provided on the signature page of this Lease or to such other person or at such other address as Landlord may from time to time designate in writing.  Landlord may, at its option, bill Tenant for Rent, but no delay or failure by Landlord in providing such a bill shall relieve Tenant from the obligation to pay the Base Rental on the first (1st) day of each month as provided herein.  All payments shall be in the form of a check unless otherwise agreed by Landlord, provided that payment by check shall not be deemed made if the check is not duly honored with good funds.  The Rent shall be paid without notice, demand, abatement, deduction or offset, except as otherwise expressly provided in this Lease.  If the Lease Term commences on other than the first (1st) day of a calendar month, then the Base Rental for such partial month shall be prorated and paid at the rental rate applicable during the first full month of the Lease Term for which a payment of rent is due.  The Base Rental for the first full month of the Lease Term for which a payment of rent is due (i.e., the sixth [6th] full month of the Lease Term) plus

 

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an estimated monthly amount of Tenant’s Share of Operating Costs described in Section 6(a) herein, is being deposited with Landlord by Tenant contemporaneously with the delivery by Tenant to Landlord of an executed copy of this Lease and shall be applied to the payment of Base Rental and Tenant’s Share of Operating Costs, as the case may be, by Landlord for the appropriate periods without any further notice by Tenant.  If the Lease Term commences or ends at any time other than the first day of a calendar year, the Tenant’s Share of Operating Costs shall be prorated for such year according to the number of days of the Lease Term in such year.

 

(b)           Notwithstanding anything herein to the contrary, no Base Rental or Tenant’s Share of Operating Costs shall be due for the first five (5) months of the Lease Term.

 

6.             Operating Costs.

 

(a)           Tenant shall pay to Landlord Tenant’s Share of Operating Costs.  Prior to the commencement of each calendar year during the Lease Term, Landlord may, at its option, provide Tenant with a then current estimate of Operating Costs for the upcoming calendar year, and thereafter Tenant shall pay, as additional rental, in monthly installments, the estimated Tenant’s Share of Operating Costs for the calendar year in question.  In addition, if Landlord determines that any component of Operating Costs of the Complex has changed or is going to change prior to the end of a calendar year, Landlord shall have the right to revise its estimate of Operating Costs of the Complex to take into account such change and Tenant shall pay such adjusted amount thereafter; provided, however, Landlord agrees it will not revise the original estimate of Operating Costs of the Complex more than one time in any calendar year.  The failure of Landlord to estimate Operating Costs and bill Tenant on an annual basis shall in no event relieve Tenant of its obligation to pay Tenant’s Share of Operating Costs.  In the event the Building is not at least ninety-five percent (95%) occupied during any year of the Lease Term (including the calendar year in which the Lease Term commences), the Operating Costs shall be “grossed up” by increasing the variable components of Operating Costs (i.e., those that vary based on occupancy) to the amount which Landlord projects would have been incurred had the Building been ninety-five percent (95%) occupied during such year, such amount to be annualized for any partial year.  Landlord agrees that property taxes shall be based on annual assessments and shall not be “grossed up.”

 

(b)           On or before April 1 of each calendar year during Tenant’s occupancy (including the calendar year following the year in which the Lease Term is terminated), or as soon thereafter as possible, Landlord shall furnish to Tenant a statement of Tenant’s Share of Operating Costs (the “Statement”) for the prior year.   In the event of an underpayment by Tenant because of any difference between the amount, if any, collected by Landlord from Tenant for the estimated Tenant’s Share of Operating Costs and the actual amount of Tenant’s Share of Operating Costs, such underpayment shall be paid to Landlord within thirty (30) days after receipt by Tenant of an invoice therefore.  In the event of an overpayment by Tenant because of any difference between the amount, if any, collected by Landlord from Tenant for the estimated Tenant’s Share of Operating Costs and the actual amount of Tenant’s Share of actual Operating Costs, and provided no Event of Default has occurred and is continuing and there are no amounts owing and unpaid by Tenant to Landlord, Landlord shall credit such overpayment against the next due installment of the estimated Tenant’s Share of Operating Costs for the upcoming calendar year. Any overpayment by Tenant during the last year of the then existing term shall be refunded by Landlord to Tenant within thirty (30) days following the expiration of such term.  The obligation to refund underpayments and overpayments shall survive the expiration of this Lease.

 

(c)           “Operating Costs” means all direct and, to the extent provided in Section 6(d)(1), indirect costs and expenses incurred in each calendar year of operating, maintaining, repairing, managing and, to the extent specifically provided below, owning the Complex, including, without limitation, the following:

 

(1)           Wages, salaries, benefits and other compensation of all employees engaged in the direct operation and maintenance of the Complex at or below the level of general manager or functional equivalent manager, employer’s social security taxes, unemployment taxes or insurance and any other taxes which may be levied on such wages, salaries and other compensation, and the cost of medical, disability and life insurance and pension or retirement benefits for such employees; provided, however, with respect to employees engaged in the operation and maintenance of other buildings owned by Landlord (or an affiliate of Landlord), other than the Complex, such items shall be fairly apportioned among all such buildings;

 

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(2)           Cost of leasing or purchasing all supplies, tools, equipment and materials used in the operation, maintenance, repair and management of the Complex;

 

(3)           Except for electricity to tenants’ premises (which shall be excluded from Operating Costs, as Tenant shall pay for electricity to the Premises directly to the service provider, as provided below), the cost of all utilities for the Complex (both interior and exterior), including, without limitation, the cost of water and power, electrical utilities for the Common Areas, sewage, heating, lighting, air conditioning and ventilation for the Complex;

 

(4)           Cost of all maintenance and service agreements for the Complex and surrounding grounds, including, but not limited to, janitorial service, pest control, security service and access control equipment, equipment leasing, energy management system leasing, snow and ice removal, landscape maintenance, alarm service, window cleaning, metal finishing, trash collection and removal and elevator maintenance, re-painting, re-striping, seal-coating, cleaning, sweeping, patching and repairing parking areas and other paved surfaces serving the Building;

 

(5)           Cost of all insurance relating to the Complex, including, but not limited to, fire and extended coverage insurance, earthquake and flood insurance, environmental insurance, rental interruption insurance and liability insurance applicable to the Complex and Landlord’s personal property used in connection therewith, plus the cost of all deductible payments made by Landlord in connection therewith (but only to the extent not already deducted as an Operating Cost);

 

(6)           All Taxes (if the amount of Taxes payable for any calendar year is changed by final determination of legal proceedings, settlement, or otherwise, such changed amount shall be the Taxes for such year);

 

(7)           Cost of repairs and general maintenance for the Complex (excluding such repairs and general maintenance paid by insurance proceeds or by Tenant or other third parties), including any costs to repair, replace or maintain the fire alarm panel, sprinkler system and strobes serving the Premises, other tenants’ premises, and the common areas of the Complex;

 

(8)           Costs of performing responsibilities allocable to the Complex and costs of contributions allocable to the common elements and operation of the Complex, including costs, expenses and charges incurred by Landlord in connection with public sidewalks, walkways, rights of way or other public facilities, or any easements or other appurtenances to the Property;

 

(9)           Legal expenses incurred with respect to the Complex which relate directly to the operation of the Complex and which benefit all of the tenants of the Complex generally, such as legal proceedings to abate offensive activities or uses or reduce property taxes (as set forth in Section 16(e) hereof), but excluding legal expenses related to the collection of Rent or to the sale, leasing or financing of the Complex;

 

(10)         Fees for management services, whether provided by an independent management company, by Landlord or by any affiliate of Landlord, but only to the extent that the costs of such services do not exceed three percent (3%) of the gross revenues of the Complex;

 

(11)         Expenses incurred in order to comply with any federal, state or municipal law, code or ordinance, or regulation which was not promulgated, or which was promulgated but not in effect or  applicable to the Complex, as of the Effective Date of this Lease;

 

(12)         Amortization of the cost of installation of capital investment items which (A) Landlord reasonably believes will either (i) reduce (or avoid increases in) Operating Costs, or (ii) promote safety, (B) may be required in order to comply with any federal, state or municipal law, code or ordinance, or regulation which was not promulgated, or which was promulgated but was not in effect or applicable to the Complex, as of the Effective Date of this Lease, or (C) may be required to cause the Building or the Complex to comply with or be certified under any so-called green/LEED program(s) undertaken or maintained by Landlord.  All

 

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costs of such capital investment items shall be amortized, together with an amount equal to interest at twelve percent (12%) per annum, with the amortization schedule being determined in accordance with generally accepted accounting principles and in no event shall the amortization period be less than three years or extend beyond the remaining useful life of the Building;

 

(13)         Costs of ad valorem tax consultants;

 

(14)         such other costs, expenses and charges as may ordinarily be incurred in connection with managing, maintaining, repairing and operating an office building project similar to the Complex; and

 

(15)         all costs of maintaining the certification of the Building or Complex under any so-called green/LEED program(s) undertaken or maintained by Landlord, including, without limitation all costs related to the management and reporting in connection thereto.

 

(d)           Notwithstanding anything to the contrary in this Lease, Operating Costs shall not include any expenses or costs for the following items:

 

(1)           Except as provided in Section 6(c)(12), costs that under generally accepted accounting principles are required to be classified as capital expenditures, and related amortization thereof;

 

(2)           Except as provided in Section 6(c)(12), depreciation or amortization of the Building or its contents or components;

 

(3)           Expenses for the preparation of space (including tenant finish out costs) or other similar type work which Landlord performs for any tenant or prospective tenant of the Building;

 

(4)           Expenses incurred in leasing or obtaining new tenants or retaining existing tenants, including, but not limited to, marketing costs and leasing commissions;

 

(5)           Except as provided in Section 6(c)(9), legal expenses;

 

(6)           Interest, amortization or other costs associated with any mortgage, loan or refinancing of the Complex;

 

(7)           Any ground rent incurred for the Complex;

 

(8)           Any costs of services performed for any tenant of the Complex, to the extent that such services are not made available to Tenant under this Lease;

 

(9)           The costs of repairs or replacements incurred by reason of fire or other casualty or caused by the exercise of the right of eminent domain, to the extent of insurance proceeds or a condemnation award received for such purposes;

 

(10)         The costs in excess of $10,000 per year of correcting defects in the design or construction of any latent defect in the original construction of all or any portion of the Building or Complex infrastructure or the Building’s mechanical, electrical, plumbing or HVAC systems;

 

(11)         Costs (including, without limitation, attorney’s fees and disbursements) incurred in connection with any judgment, settlement or arbitration award resulting from any tort liability;

 

(12)         Any cost included in Operating Costs representing an amount paid to Landlord or to a person, firm, corporation, or other entity affiliated with or related to Landlord to the extent in excess of the amount which would have been paid to a third party on an arms-length basis in the absence of such affiliation or relationship;

 

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(13)         Salaries of employees engaged in the direct operation and management of the Complex above the level of general manager or functional equivalent manager;

 

(14)         Costs of mortgaging any of Landlord’s interest in all or any part of the Building or Complex;

 

(15)         Any costs arising from any retail space in the Complex; and

 

(16)         Landlord’s general overhead to the extent that same is not fairly allocable to the Complex.

 

(e)           If there exists any dispute as to the calculation of Tenant’s Share of Operating Costs (a “Dispute”), the events, errors, acts or omissions giving rise to the Dispute shall not constitute a breach or default by Landlord nor shall Landlord be liable to Tenant, except as specifically provided below.  If there is a Dispute, Tenant shall so notify Landlord in writing within sixty (60) days after receipt of the Statement.  Such notice shall specify the items in Dispute.  Notwithstanding the existence of a Dispute, Tenant shall timely pay the amount in dispute as and when required under this Lease, provided such payment shall be without prejudice to Tenant’s position.  Upon receipt of such payment, Landlord shall thereafter provide Tenant with such supplementary information regarding the items in Dispute as may be reasonably requested by Tenant in an effort to resolve such Dispute; provided, however, that Landlord shall not be required to provide any supplementary information to Tenant unless all sums shown to be due by Tenant on the Statement are paid in full.  If Landlord and Tenant are unable to resolve such Dispute, such Dispute shall be referred to a mutually satisfactory third party certified public accountant for final resolution, subject to the audit rights of Tenant contained in Section 6(f).  The cost of such certified public accountant shall be paid by the party found to be least accurate (in terms of dollars in dispute).  If a Dispute is resolved in favor of Tenant, Landlord shall, within thirty (30) days thereafter, refund any overpayment to Tenant, together with interest from the time of such overpayment at ten percent (10%) per annum.  The determination of such certified public accountant shall be final and binding, subject to the audit rights of Tenant contained in Section 6(f), and final settlement shall be made within thirty (30) days after receipt of such accountant’s decision.  If Tenant fails to dispute the calculation of Tenant’s Share of Operating Costs in accordance with the procedures and within the time periods specified in this Section 6(e), or request an audit of the Operating Costs in accordance with the procedures and within the time periods specified in Section 6(f), the Statement shall be considered final and binding for the calendar year in question.

 

(f)            Tenant, at Tenant’s expense, shall have the right, no more frequently than once per calendar year, following thirty (30) days’ prior written notice (such written notice to be given within thirty [30] days following Tenant’s receipt of Landlord’s Statement delivered in accordance with Section 6(b)) to Landlord, to audit Landlord’s books and records relating to Operating Costs for the immediately preceding calendar year only; provided that such audit must be concluded within one hundred twenty (120) days after Tenant’s receipt of Landlord’s Statement for the year to which such audit relates; and provided further that the conduct of such audit must not unreasonably interfere with the conduct of Landlord’s business.  Without limitation upon the foregoing, Tenant’s right to audit Landlord’s books and records shall be subject to the following conditions:

 

(1)           Such audit shall be conducted during Normal Business Hours and at the location where Landlord maintains its books and records;

 

(2)           Tenant shall deliver to Landlord a copy of the results of such audit within five (5) Business Days after written request by Landlord;

 

(3)           No audit shall be permitted if an Event of Default by Tenant has occurred and is continuing under this Lease, including any failure by Tenant to pay an amount in Dispute;

 

(4)           Tenant shall reimburse Landlord within ten (10) days following written demand for the reasonable cost of all copies requested by Tenant’s auditor;

 

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(5)           Such audit must be conducted by an independent, nationally-recognized accounting firm or a local accounting firm reasonably acceptable to Landlord that is not being compensated by Tenant on a contingency fee basis and which has agreed with Landlord in writing to keep the results of such audit confidential by executing and delivering to Landlord a confidentiality agreement in the form of Exhibit “F” attached to this Lease, such confidentiality agreement to also be signed and delivered to Landlord by Tenant;

 

(6)           No subtenant shall have the right to audit;

 

(7)           If, for any calendar year, an assignee of Tenant (as permitted by this Lease) has audited or given notice of an audit, Tenant will be prohibited from auditing such calendar year, unless in the case of an audit having been noticed but not yet performed by such assignee, the assignee withdraws its audit notice, and, similarly, if Tenant has audited such calendar year or given such notice, the foregoing restrictions of this Section 6(f)(8) will apply to the assignee’s right to audit; and

 

(8)           Any assignee’s (other than an assignee pursuant to a Permitted Transfer, as hereinafter defined) audit right will be limited to the period after the effective date of the assignment.

 

(g)           Unless Landlord in good faith disputes the results of such audit, an appropriate adjustment shall be made between Landlord and Tenant to reflect any overpayment or underpayment of Tenant’s Share of Operating Costs within thirty (30) days after delivery of such audit to Landlord.  In the event of an overpayment by Tenant, within thirty (30) days following the delivery of such audit, Landlord shall, if no Event of Default exists hereunder, make a cash payment to Tenant in the amount of such overpayment, or, if an Event of Default exists hereunder, credit such overpayment against delinquent Rent and make a cash payment to Tenant for the balance.  In the event Landlord in good faith disputes the results of any such audit, the parties shall in good faith attempt to resolve any disputed items.  If Landlord and Tenant are able to resolve such dispute, final settlement shall be made within thirty (30) days after resolution of the dispute.  If the parties are unable to resolve any such dispute, any sum on which there is no longer dispute shall be paid and any remaining disputed items shall be referred to a mutually satisfactory third party certified public accountant for final resolution.  The cost of such certified public accountant shall be paid by the party found to be least accurate (in terms of dollars in dispute).  The determination of such certified public accountant shall be final and binding and final settlement shall be made within thirty (30) days after receipt of such accountant’s decision. Promptly upon the undisputed determination of the results of such audit or the resolution of a disputed audit, the parties shall execute a memorandum indicating acknowledgment of such determination or resolution, as the case may be.

 

7.             Late Payments; Dishonored Checks.

 

(a)           In the event any installment of Rent is not received within five (5) Business Days after the date due (without in any way implying Landlord’s consent to such late payment), Tenant, to the extent permitted by law, agrees to pay, in addition to said installment of Rent, a late payment charge equal to five percent (5%) of the installment of Rent due, it being understood that said late payment charge shall be for the purpose of reimbursing Landlord for the additional costs and expenses which Landlord presently expects to incur in connection with the handling and processing of late payments.  Notwithstanding the foregoing, with respect to the first (1st) two (2) delinquencies, the late payment charge shall be waived so long as the delinquent sum is paid within five (5) Business Days after written notice of such delinquency.  In the event of any such late payment(s) by Tenant, the additional costs and expenses so resulting to Landlord will be difficult to ascertain precisely and the foregoing charge constitutes a reasonable and good faith estimate by the parties of the extent of such additional costs and expenses.  Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant’s default with respect to such overdue amount, nor prevent Landlord from exercising any other rights or remedies granted hereunder unless such default is otherwise cured within the time period provided in this Lease.

 

(b)           In addition to the late payment charge contained in Section 7(a), all Rent, if not paid within thirty (30) days of the date due, shall, at the option of Landlord, and to the extent permitted by law, bear interest from the date due until paid at the Default Rate.

 

(c)           If any check is tendered by Tenant and not duly honored with good funds, Tenant shall, in addition to any other remedies available to Landlord under this Lease, pay Landlord a “NSF” fee of $25.00.

 

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8.             Security Deposit.  The Security Deposit shall be deposited with Landlord by Tenant contemporaneously with the delivery by Tenant to Landlord of this Lease.  The Security Deposit shall be held by Landlord, without liability for interest, as security for the performance by Tenant of Tenant’s covenants and obligations under this Lease, it being expressly understood that the Security Deposit shall not be considered an advance payment of Rent or a measure of Tenant’s liability for damages in case of default by Tenant.  Landlord may, from time to time, without prejudice to any other remedy, use the Security Deposit to the extent necessary to make good any arrearages of Rent or to satisfy any other covenant or obligation of Tenant hereunder following the expiration of any applicable cure periods.  Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to the amount required hereunder, from time to time.  If Landlord transfers its interest in the Complex during the term of this Lease, Landlord may assign the Security Deposit to the transferee and upon assumption by such transferee of liability for the Security Deposit, Landlord shall have no further liability for the return of such Security Deposit.  Upon application of all or any part of the Security Deposit, Tenant must upon demand restore the Security Deposit to the amount required hereunder, from time to time.  No application of the Security Deposit by Landlord will be deemed to have cured Tenant’s default.  Tenant waives all provisions of Laws, now or hereinafter in force, which restrict the amount or types of claim that a landlord may make upon a security deposit or imposes upon a landlord (or its successors) any obligation with respect to the handling or return of security deposits.  The Security Deposit will be released to Tenant within thirty (30) days of the surrender of the Premises to Landlord subject to any deductions made by Landlord pursuant to the terms of this Lease.  Notwithstanding anything to the contrary contained herein, Tenant shall provide the Security Deposit in the form of a Letter of Credit in accordance with Exhibit “M” attached hereto.

 

9.             Services to be Furnished by Landlord.

 

(a)           Landlord agrees to furnish Tenant the following services:

 

(1)           Facilities for hot and cold water at those points of supply provided for general use of other tenants in the Building and as necessary to service any kitchen facilities and restrooms within the Premises approved by Landlord and provided solely for the use of Tenant and its employees, and central heat and air conditioning in season (the cost of such service to be paid by Tenant and other tenants of the Complex in accordance with Section 6(c)(3) during Normal Business Hours, and the cost of such service during other than Normal Business Hours to be paid as set forth in Section 9(a)(8)).

 

(2)           Routine maintenance for all Common Areas and Service Areas of the Building in the manner and to the extent necessary to maintain the same in first class condition.

 

(3)           Janitorial service, five (5) days per week, exclusive of Normal Business Holidays, at a level comparable to that provided in similar first class office buildings within a three (3) mile radius of the Building.

 

(4)           All Building Standard fluorescent and incandescent bulb and ballast replacement in the Premises, the Common Areas and the Service Areas, provided Tenant shall be charged Landlord’s standard Building charge for all replacements of same in the Premises during the Term (provided the cost of same provided to other tenants’ premises shall be excluded from “Operating Costs”).

 

(5)           Limited access to the Building (or to the floor on which the Premises are located) during other than Normal Business Hours through the use of master entry cards and/or keys.  Landlord shall have no liability to Tenant, its employees, agents, contractors, invitees, or licensees for losses due to theft or burglary (other than theft or burglary committed by employees of Landlord), or for damages done by unauthorized persons in the Premises or on the Complex.  Tenant shall cooperate fully in Landlord’s efforts to control access in the Building and shall follow all regulations promulgated by Landlord with respect thereto which are adopted in accordance with Exhibit “C”.

 

(6)           Proper facilities to furnish (A) Building Standard lighting, and (B) sufficient electrical power for normal office machines (including electric typewriters, desk-top computer facilities and desk-top word processing facilities) and other machines of similar electrical consumption (“Miscellaneous Power”).

 

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In the event Landlord determines that Tenant will require, or is consuming, special lighting in excess of Building Standard or Miscellaneous Power in excess of the Building Standard, Tenant shall reimburse Landlord for the cost of any additional equipment, such as transformers, risers and supplemental air conditioning equipment, which Landlord’s engineer reasonably deems necessary to accommodate such above-standard consumption (without implying any obligation on the part of Landlord to accommodate such use). Tenant shall have all charges for the electricity separately metered to the Premises billed directly to Tenant and Landlord shall make a corresponding adjustment to Tenant’s Share of Operating Costs.  The Premises are separately metered for electricity.  Tenant shall obtain electricity directly from the utility company and pay the utility company directly for such electricity

 

(7)           Passenger elevator service in common with other tenants of the Building for ingress to and egress from the floor(s) upon which the Premises are situated, twenty-four (24) hours a day, seven (7) days a week, and non-exclusive freight elevator service to the Premises during Normal Business Hours and at other times upon reasonable prior notice to Landlord and reasonable approval of the Building manager.  Any passenger or freight elevator use shall be subject to the Rules and Regulations for the Building and shall be subject to temporary cessation for ordinary repair and maintenance and during times when life safety systems override normal Building operating systems.

 

(8)           Heating and air conditioning during other than Normal Business Hours shall be furnished only upon the prior request of Tenant made in accordance with such reasonable procedures as are, from time to time, prescribed by the Building manager, and Tenant shall bear the cost of such heating and air conditioning service at the After Hours HVAC Rate; provided, however, there shall be a two (2) hour minimum charge when such service is requested and the After-Hours HVAC Rate may be adjusted, from time to time, to reflect increases in the costs incurred by Landlord in providing such service.  In the event any other tenant within the same HVAC zone as the Premises also requests after-hours heating or air conditioning during the same period as Tenant, Landlord shall equitably allocate the cost thereof among all tenants within the same HVAC zone requesting such service.

 

(b)           In the event Landlord agrees to provide any additional services at the specific request of Tenant, without implying any obligation on the part of Landlord to do so, the provision of such services shall, unless otherwise specifically agreed in writing, be subject to the availability of Building personnel, and, if the provision of any such service requires Landlord to incur any out-of-pocket cost, Tenant shall reimburse Landlord for the cost of providing such service (plus an administrative charge equal to five percent [5%] of such cost, plus applicable sales tax) within ten (10) days following receipt of an invoice from Landlord.  Unless Landlord has agreed with Tenant to the contrary in writing, Landlord may discontinue the provision of such additional service at any time upon thirty (30) days advance written notice (or immediately upon the occurrence of an Event of Default).

 

The unintentional failure by Landlord, to any extent, to furnish services required to be furnished by Landlord hereunder, or any cessation thereof, shall not render Landlord liable in any respect for damages (including, without limitation, business interruption damages) to persons or property, nor be construed as an eviction of Tenant, nor work an abatement of Rent, nor relieve Tenant from fulfillment of any covenant or agreement set forth in this Lease.  Should any of such services be interrupted, Landlord shall use reasonable diligence to restore the same promptly, but Tenant shall have no claim for rebate of Rent, damages or eviction on account thereof.  Notwithstanding the foregoing, subject to Section 24 (Casualty Damage) and Section 25 (Condemnation), if there is an interruption in essential services to be provided by Landlord which is (a) specific to the Building (as opposed to an interruption or curtailment in such services which extends beyond the Building to include other properties), (b) causes the Premises to be untenantable, and (c) is not caused by an event of Force Majeure, then Tenant will be entitled to deliver Landlord a notice stating that if the untenantability caused by the interruption is not cured within five (5) Business Days, Tenant will be entitled to an abatement of Base Rental as provided in this section.  If Tenant properly delivers such an abatement notice to Landlord, and the untenantability caused by the interruption in such services is not remedied within seven Business Days after Landlord receives Tenant’s abatement notice, then Tenant shall thereafter be entitled to an abatement of Base Rental and Tenant’s Share of Operating Costs (in proportion to the portion of the Premises rendered untenantable by the interruption in such services) until such services are restored.

 

10.          Graphics; Signage.  Tenant shall have the right to maintain its building monument signage and signage at the entrance to the Premises that are existing and in place as of the date of this Lease (the “Existing Signage”).  Any other signage requested by Tenant in addition to the Existing Signage shall be subject to the prior

 

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approval of Landlord and shall be provided, constructed and installed by Landlord; provided, however, Tenant shall reimburse Landlord for Landlord’s cost of providing such service, plus an administrative charge equal to ten percent (10%) of Landlord’s cost.  All such additional signage shall be in the standard graphics for the Building and no others shall be used or permitted without Landlord’s prior written consent.  Tenant, at its sole cost and expense, shall remove all of Tenant’s signage upon the termination of this Lease and repair any damage caused by such removal.

 

11.          Telecommunications.

 

(a)           In the event that Tenant wishes to utilize the services of a telephone or telecommunications provider whose equipment is not servicing the Building as of the date of Tenant’s execution of this Lease (“Provider”), such Provider shall be required to obtain the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed, before installing its lines or equipment within the Complex.  In no event shall the Provider be permitted to provide service to any occupant of the Complex other than Tenant, without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed.

 

(b)           The installation of lines or equipment by the Provider shall be subject to the satisfaction of the following conditions:

 

(1)           Tenant shall be responsible for and shall pay all costs incurred in connection with the installation of telephone cables and related wiring in the Premises, including, without limitation, any hook-up, access and maintenance fees related to the installation of such wires and cables in the Premises and the commencement of service therein, and the maintenance thereafter of such wire and cables; and there shall be included in Tenant’s Share of Operating Costs  all installation, hook-up or maintenance costs incurred by Landlord in connection with telephone cables and related wiring in the Building which are not allocable to any individual users of such service but are allocable to the Building generally;

 

(2)           Prior to commencement of any work in or about the Building by Provider, Provider shall supply Landlord with such written indemnities, insurance verifications, financial statements, and such other items as Landlord reasonably deems to be necessary to protect its financial interests and the interests of the Building relating to the proposed activities of the Provider;

 

(3)           Prior to the commencement of any work in or about the Building by the Provider, (i) the Provider shall consult with Landlord’s Building manager regarding the Building requirements regarding the installation of telecommunications equipment and cabling and shall comply with same, and (ii) the Provider shall agree to abide by the Rules and Regulations applicable to the work and such other requirements as are reasonably determined by Landlord to be necessary to protect the interests of the Building, the tenants in the Building, and the Landlord, including, without limitation, providing security in such form and amount as determined by Landlord;

 

(4)           Landlord reasonably determines that there is sufficient space in the Building for the placement of all of the Provider’s equipment and materials;

 

(5)           The Provider is licensed and reputable; and

 

(6)           The Provider agrees to compensate Landlord for space used in the Building for the storage and maintenance of the Provider’s equipment and for all costs that may be incurred by Landlord in arranging for access by the Provider’s personnel, security for Provider’s equipment, and any other such costs as Landlord may reasonably expect to incur.

 

(c)           If Tenant fails to maintain all telephone cables and related wiring in the Premises and such failure affects or interferes with the operation or maintenance of any other telephone cables or related wiring in the Building, Landlord or any vendor hired by Landlord may enter into and upon the Premises forthwith and perform such repairs, restorations or alterations as Landlord deems necessary in order to eliminate any such interference (and Landlord may recover from Tenant all of Landlord’s reasonable costs in connection therewith).  Upon the expiration or earlier termination of this Lease, Tenant agrees to remove all telephone cables and related

 

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wiring installed by Tenant for and during Tenant’s occupancy, which Landlord shall request Tenant to remove.  Tenant agrees that neither Landlord nor any of its agents or employees shall be liable to Tenant, or any of Tenant’s employees, agents, customers or invitees or anyone claiming through, by or under Tenant, for any damages, injuries, losses, expenses, claims or causes of action because of any interruption, diminution, delay or discontinuance at any time for any reason in the furnishing of any telephone service to the Premises and the Building

 

(d)           Landlord’s consent under this section shall not be deemed any kind of warranty or representation by Landlord, including, without limitation, any warranty or representation as to the suitability, competence, or financial strength of Provider.

 

(e)           Tenant acknowledges and agrees that all telephone and telecommunications services desired by Tenant shall be ordered and utilized at the sole risk and  expense of Tenant.

 

(f)            Tenant agrees that, to the extent service by Provider is interrupted, curtailed, or discontinued, Landlord shall have no obligation or  liability with respect thereto and it shall be the sole obligation of Tenant at its expense to obtain substitute service.

 

(g)           The provisions of this Section 11 may be enforced solely by the Tenant and Landlord, and are not for the benefit of any other party.  No Provider shall be deemed a third party beneficiary of this Lease.

 

12.          Repair and Maintenance by Landlord.  Except as provided in Section 14, Landlord shall be responsible for the maintenance and repair of exterior and load-bearing walls, floors (but not floor coverings), mechanical, electrical, plumbing and HVAC systems and equipment which are Building Standard, the roof of the Building, the Common Areas, the Service Areas, the Parking Areas and the fire alarm panel, sprinkler system and strobes serving the Premises, in good condition and repair, reasonable wear and tear and damage due to casualty excepted, so as to maintain the condition of the Building consistent with similar first class buildings in the Market Area.  In no event shall Landlord be responsible for the maintenance or repair of improvements made by or at the request of Tenant which are not Building Standard.  Tenant will cooperate with Landlord to facilitate the performance of Landlord’s obligations under this Section 12, including any entry by Landlord into all or any portion of the Premises and the temporary relocation of items of Tenant’s personal property, all as Landlord may determine is reasonably necessary to properly perform such obligations.  All requests for repairs must be submitted to Landlord in writing, except in the case of an emergency.  If Tenant believes any maintenance or repair Landlord is obligated under this Section 12 to perform is needed at the Property, Tenant will promptly provide written notice to Landlord specifying in detail the nature and extent of any condition requiring maintenance or repair.  Landlord will not be deemed to have failed to perform its obligations under this Section 12 with respect to any maintenance or repair unless Tenant has provided such written notice and Landlord has had a commercially reasonable time within which to respond to such notice and effect the needed maintenance or repair.  Repairs and maintenance by Landlord pursuant to this Section 12 are included in Operating Costs, except to the extent excluded by Section 6(d).  Landlord shall not be liable to Tenant for any expense, injury, loss or damage resulting from work done in the Building or upon the Property, except to the extent resulting from the gross negligence or willful misconduct of Landlord, or the use of, any adjacent or nearby building, land, street, or alley.

 

13.          Maintenance by Tenant.  Except for Landlord’s obligations described in Section 12 above and any janitorial services provided by Landlord under Section 9 above, Tenant, at Tenant’s sole cost and expense, will keep and maintain the Premises in good, clean, sanitary, neat and fully operative condition and repair, reasonable wear and tear and damage due to casualty excepted, so as to maintain the condition of the Premises consistent with similar premises in first class buildings in the Market Area, which obligations of Tenant will include, without limitation, the maintenance, repair and replacement of all: (a) interior surfaces of exterior walls and demising walls; (b) interior walls, moldings, partitions and ceilings; (c) carpeting; (d) non-structural interior components; (e) interior windows, plate glass and doors; (f) kitchen or break-room fixtures, appliances and equipment; and (g) Tenant’s personal property situated in the Premises. Tenant will also pay or reimburse Landlord for (or, at Landlord’s option, perform) the repair or replacement of any waste or excessive or unreasonable wear and tear to the Premises or the Complex caused or permitted by Tenant.  Any repairs or replacements performed by Tenant pursuant to this Section must be at least equal in quality and workmanship to the original work, be in accordance with all Laws and comply with Landlord’s sustainability practices, including any third-party rating systems concerning environmental compliance of the Building or Complex, as the same may change from time to time.  At the expiration or early termination of

 

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this Lease, Tenant shall deliver up the Premises to Landlord in as good condition as at the Commencement Date, ordinary wear and tear and damage by fire or casualty loss (unless caused by Tenant) excepted.

 

14.          Repairs by Tenant.  Tenant shall, at Tenant’s cost, repair or replace any damage to the Premises (including doors and door frames, interior windows and any kitchen equipment, such as dishwashers, sinks, refrigerators, trash compactors and plumbing and other mechanical systems related thereto) that is not caused by Landlord or that is not within the responsibility of Landlord under the Tenant Improvements Agreement, if any, and any damage to the Complex, or any part thereof, caused by Tenant or any employee, officer, contractor, agent, subtenant, guest, licensee or invitee of Tenant (except that with respect to any such damage outside of the Premises or below floor coverings, above ceilings or behind walls or columns, such damage shall be repaired by Landlord, and Tenant shall reimburse Landlord for the cost of such repairs or replacements, plus an administrative charge equal to five percent (5%) of the cost of such repairs or replacements.  If Tenant fails to make such repairs or replacements within thirty (30) days after receipt of written notice from Landlord, Landlord may, at Landlord’s option, make such repairs or replacements, and Tenant shall reimburse Landlord for the cost of such repairs or replacements, plus an administrative charge equal to five percent (5%) of the cost of such repairs or replacements.  Reimbursement for all repairs performed by Landlord pursuant to this Section 14 shall be payable as additional Rent by Tenant to Landlord within ten (10) days following Tenant’s receipt of an invoice from Landlord.  Notwithstanding anything contained herein to the contrary, if any such damage is covered by Landlord’s insurance, in whole or in part, Tenant’s liability under this Section 14 shall be limited to the deductible payable by Landlord and any portion of the cost of repairing such damage not covered by Landlord’s insurance.  In connection with repairs or replacements made by Tenant, Tenant shall provide Landlord with a copy of the contractor agreement regarding such repairs, copies of certificates of insurance evidencing contractor coverage satisfactory to Landlord, copies of “as-built” plans and specifications and other information or documentation reasonably required by Landlord, including evidence of the lien-free completion of such repairs or replacements.

 

15.          Alterations, Additions, Improvements.

 

(a)           Tenant will make no alteration, change, improvement, replacement or addition to the Premises (collectively, “Alterations”), without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed with respect to interior Alterations which will not affect, in any way, the mechanical, electrical, plumbing, HVAC, structural and/or fire and life safety components of the Building (“Non-Structural Alterations”).  Landlord may, at its option, require Tenant to submit plans and specifications to Landlord for approval (such approval not to be unreasonably withheld or delayed) prior to commencing any Alterations.  All Alterations (including any Non-Structural Alterations) shall be performed by union contractors approved by Landlord, which approval shall be granted or denied within five (5) Business Days after Landlord’s receipt of (i) Tenant’s written request for approval, (ii) certificates of insurance for each such union contractor evidencing the insurance required by this Section 15(a), and (iii) a project directory.  All Alterations shall be done in a good and workmanlike manner, in compliance with all applicable laws, including, but not limited to, Title III of The Americans With Disabilities Act of 1990 or any applicable local or state Law regarding handicapped access (collectively, the “Disability Laws”) and in accordance with Landlord’s sustainability practices (of which Tenant has received prior written notice) under any so-called green/LEED program(s) undertaken or maintained by Landlord.  Landlord may, in the exercise of reasonable judgment, request that Tenant provide Landlord with appropriate evidence of Tenant’s ability to complete and pay for the completion of the Tenant Alterations such as a performance bond or letter of credit.  Upon completion of the Tenant Alterations, Tenant shall deliver to Landlord an as-built mylar and digitized (if available) set of plans and specifications for the Tenant Alterations. Tenant shall require that any contractors used by Tenant carry a comprehensive liability (including builder’s risk) insurance policy in such amounts as Landlord may reasonably require and provide proof of such insurance to Landlord prior to the commencement of any Alterations and Tenant shall require that any contractors used by Tenant comply with such rules and regulations imposed by Landlord from time to time, including such rules and regulations related to so-called green/LEED program(s) undertaken or maintained by Landlord.  TENANT SHALL INDEMNIFY AND HOLD LANDLORD AND LANDLORD RELATED PARTIES HARMLESS FROM, AND REIMBURSE LANDLORD FOR AND WITH RESPECT TO, ANY AND ALL COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES), DEMANDS, CLAIMS, CAUSES OF ACTION AND LIENS ARISING FROM AND IN CONNECTION WITH ANY ALTERATIONS PERFORMED BY TENANT, EXCEPT TO THE EXTENT RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD.  All persons performing work in the Building at the request of Tenant shall register with the Building manager prior

 

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to initiating any work.  Upon completion of any Alterations, Tenant shall provide Landlord with a copy of its building permit, final inspection tag and, if plans and specifications were required by Landlord, final “as built” plans and specifications, together with evidence of the lien-free completion of such Alterations.  Except for the Tenant Improvements (which shall be governed by the Tenant Improvements Agreement [if any]), all Alterations now or hereafter placed or constructed on the Premises at the request of Tenant shall be at Tenant’s cost.  If Tenant performs such Alterations, an amount equal to ten percent (10%) of the estimated cost of such Alterations shall be deposited with Landlord within ten (10) days following Tenant’s receipt of an invoice from Landlord and upon Tenant completing all “punch list” items with respect to such Alterations, such retained amount will be returned to Tenant when all such punch list items are completed lien-free and to Landlord’s satisfaction.  Tenant shall pay to Landlord a construction supervision fee equal to five percent [5%] of the hard costs of the Alterations with respect to any Alterations (other than Permitted Alterations).  Notwithstanding the foregoing, Tenant may make alterations (collectively, the “Permitted Alterations”) of a purely non-structural, decorative nature without Landlord’s prior written consent if Tenant provides Landlord with reasonable prior notice of such alterations and with plans and specifications for such alterations (if such plans and specifications were required to be submitted by Landlord for its approval as provided herein) and such alterations (a) do not require the issuance of a building permit, (b) do not exceed $25,000.00 in cost, and (c) do not affect the base building mechanical, electrical, plumbing, HVAC and/or fire and life safety systems or equipment in the Building.

 

(b)           Upon the expiration or early termination of this Lease, Tenant shall remove its personal property, trade fixtures, office supplies, laboratory equipment and installations (if any) and movable office furniture and equipment not attached to the Building and (1) such removal shall be made prior to the termination or expiration of the Lease Term; and (2) Tenant shall promptly repair all damage caused by such removal.  All other property at the Premises, any Alterations to the Premises, and any other articles attached or affixed to the floor, wall, or ceiling of the Premises shall, immediately upon installation, be deemed the property of Landlord and shall be surrendered with the Premises at the termination or expiration of this Lease, without payment or compensation therefor.  If, however, Landlord so requests in writing, Tenant will, at Tenant’s sole cost and expense, prior to the termination or expiration of the Lease Term, remove any and all trade fixtures, office supplies and office furniture and equipment placed or installed by Tenant in the Premises, and any Tenant Improvements and Alterations (including any non-Building Standard Alterations and any specialty improvements) installed by Tenant or installed by Landlord at Tenant’s request in the Premises and which Landlord designated as being subject to removal at the time of Landlord’s approval of plans (with respect to the Tenant Improvements) or upon Tenant’s written request at the time of Landlord’s consent (or if no consent was required, at the time Landlord was notified thereof) (with respect to any Alterations other than the Tenant Improvements), and will repair any damage caused by such removal. In addition, Tenant shall, at Tenant’s expense, remove all of Tenant’s telecommunications equipment and racks, including removal from the Premises or from risers or other Common Areas of all cabling installed by Tenant or for the exclusive use of Tenant, and Tenant shall  promptly repair, at Tenant’s expense, any damage caused by such removal.

 

16.          Laws and Regulations; Green/LEED Programs; Disability Laws; Building Rules and Regulations.

 

(a)           Tenant, at Tenant’s sole cost and expense, shall comply with all current and future federal, state, municipal Laws applicable to the use of the Premises, the employees, agents, visitors and invitees of Tenant, and the business conducted in the Premises by Tenant, including, without limitation, all Hazardous Materials Laws; will not engage in any activity which would cause Landlord’s fire and extended coverage insurance to be canceled or the rate increased (or, at Landlord’s option, Landlord may allow Tenant to engage in such activity provided Tenant pays for any such increase in the insurance rate); and will not commit any act which is a nuisance or annoyance to Landlord or to other tenants in the Building or which might, in the reasonable judgment of Landlord, appreciably damage Landlord’s goodwill or reputation, or tend to injure or depreciate the value of the Building.  Without limiting the foregoing, Tenant shall not place or permit to remain within the Premises any “hazardous materials” or “hazardous substances” as such terms are now or hereafter defined under applicable Hazardous Materials Laws, except cleaning supplies, copier toner or other similar type products commonly found in commercial office space, provided such items are properly labeled, stored and disposed of in accordance with all applicable governmental requirements. Notwithstanding the foregoing, nothing in this Section 16(a) shall be construed as requiring Tenant to be responsible for any legal requirements applicable to the structural portions of the Premises, any restrooms within the Building (other than restrooms constructed by or at the special request of

 

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Tenant) or the Building Standard mechanical, electrical, plumbing or HVAC systems, unless the failure to comply with any such legal requirements is caused by Tenant or anyone acting for Tenant.

 

(b)           Tenant, at its sole cost, shall be responsible for compliance with Disability Laws with respect to (1) the Premises, (2) the Tenant Improvements, (3) all Alterations made to the Premises or any other acts of Tenant after the Commencement Date, (4) all requirements of Disability Laws that relate to the employer-employee relationship or that are necessitated by the special needs of any employee, agent, visitor or invitee of Tenant and that are not required to be provided generally, including, without limitation, requirements related to auxiliary aids and graphics installed by or on behalf of Tenant (other than Base Building Signage), and (5) all requirements of Disability Laws that relate to private restrooms constructed by or at the special request of Tenant.  Notwithstanding any provision of this Section 16 to the contrary, Landlord, at its sole cost, shall be responsible for compliance with Disability Laws with respect to the Common Areas (including restrooms located upon floors leased by Tenant) and the Service Areas.  Neither party shall be in default under this Section 16(b) for its failure to comply with Disability Laws so long as the responsible party is either contesting in good faith, and by legal means, the enforcement of Disability Laws, or is undertaking diligent efforts to comply with Disability Laws.  Except as otherwise provided in Section 16(a) above, Tenant shall not be responsible for compliance with any Laws requiring (a) structural repairs or modifications, (b) repairs, replacements or modifications to the utility or building service equipment, or (c) installation of new or modification of existing building service equipment, such as fire detection or suppression equipment, unless such repairs, replacements, modifications or installations shall (i) be due to Tenant’s particular manner of use of the Premises (as opposed to office use generally), (ii) be due to the negligence or willful misconduct of Tenant or any agent, employee, or contractor of Tenant, and/or (iii) be due solely to Alterations made by or for Tenant.

 

(c)           Tenant shall cooperate fully with Landlord, at all times, in abiding by all regulations and requirements which Landlord may prescribe for the proper functioning and protection of all utilities and services necessary for the operation of the Premises or the Complex and such other rules and regulations Landlord may prescribe in connection with any so-called green/LEED program(s) undertaken or maintained by Landlord, including, without limitation, surveys adopted by Landlord from time to time for the Building and maintaining and reporting utility consumption data in a format prescribed by Landlord.  Landlord and its contractors shall have free access to any and all mechanical installations in the Premises at all reasonable times and upon prior written notice to Tenant (provided that no such notice or reasonable time requirement shall be required in the case of emergency or to perform repairs or other services otherwise required by Landlord under this Lease), and Tenant agrees that there shall be no construction of partitions or other obstructions which might interfere with the moving of the servicing equipment of Landlord to or from the enclosures containing said installations.  Tenant further agrees that neither Tenant nor its employees, agents, licensees, invitees or contractors shall at any time tamper with, adjust or otherwise in any manner adversely affect Landlord’s mechanical installations in the Premises or the Complex.  Further, Tenant shall not use or operate the Premises in any manner that will cause the Premises, Building or Complex or any part thereof not to conform with Landlord’s sustainability practices or the certification of the Premises, Building or Complex issued pursuant to any so-called green/LEED program(s) undertaken or maintained by Landlord, provided Tenant has prior written notice thereof.

 

(d)           Tenant shall comply with the Rules and Regulations and shall cause all of its agents, employees, contractors, invitees and visitors to do so.  All changes to such Rules and Regulations shall be sent by Landlord to Tenant in writing.  Landlord shall have no liability to Tenant or any other person for its failure to enforce the Rules and Regulations.

 

(e)           Tenant, at its sole cost and expense, will regularly monitor the Premises for the presence of mold or any conditions that reasonably can be expected to give rise to mold, such as by way of example but not limitation, water damage, mold growth, repeated complaints of respiratory ailments or eye irritation by persons occupying the Premises or any notice from a governmental authority of complaints of indoor air quality at the Premises.  If Tenant discovers the existence of any mold or conditions referred to above, Tenant will notify Landlord and Landlord shall retain an industrial hygienist or other professional mold consultant to conduct an inspection and prepare a report for Tenant and Landlord.  If the inspection report concludes that mold is present in the Premises and such presence is due to actions, omissions or negligence of Tenant, Tenant will be responsible for the cost of such inspection and the cost of remediation.  If the inspection report concludes that mold is present in the Premises and such presence is due to actions, omissions or negligence of Landlord, Landlord will be responsible for

 

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the cost of such inspection and the cost of remediation. If the inspection report concludes that mold is present in the Premises, Landlord will hire a contractor that specializes in mold remediation to prepare a remediation plan for the Premises and upon Landlord’s approval of the plan, the contractor will promptly carry out the work contemplated in the plan in accordance with applicable Laws.  To the extent required by applicable state or local health or safety requirements, occupants and visitors to the Premises will be notified of the conditions and the schedule for the remediation. The contractor performing the remediation will provide a written certification to Landlord and Tenant that the remediation has been completed in accordance with applicable Laws.

 

(f)            Landlord may, but is not obligated to, contest the amount or validity, in whole or in part, of any Taxes.  Tenant has no right to protest any Tax and/or the appraised value of the Building determined by any taxing authority.  Tenant hereby knowingly, voluntarily and intentionally waives and releases any right, whether created by law or otherwise, to (a) file or otherwise protest before any taxing authority any such rate or value determination even though Landlord may elect not to file any such protest; (b) receive, or otherwise require Landlord to deliver, a copy of any reappraisal notice received by Landlord from any taxing authority (except in connection with an audit of Operating Costs); and (c) appeal any order of a taxing authority which determines any such protest.  Tenant acknowledges and agrees that the foregoing waiver and release was bargained for by Landlord and Landlord would not have agreed to enter into this Lease in the absence of this waiver and release.  If, notwithstanding any such waiver and release, Tenant files or otherwise appeals any such protest, then Tenant will be in default under this Lease and, in addition to Landlord’s other rights and remedies, Tenant must pay or otherwise reimburse Landlord for costs incurred in contesting any Taxes.  If, as a result of Tenant’s tax protest or appeal, an increase in the value of the Complex occurs, then Tenant must pay Landlord, in addition to Tenant’s Share of the costs incurred by Landlord in contesting such Taxes, an amount equal to Tenant’s Share of the additional Taxes, such amount to be calculated based upon the increase in value multiplied by the tax rate estimated to be in effect for each year during the balance of the Lease Term (and to the extent applicable, any extension of the Lease Term).  Tenant’s Share of Landlord’s costs incurred in connection with contesting the Taxes must be paid by Tenant within five days following written demand by Landlord.

 

(g)           TENANT SHALL INDEMNIFY AND HOLD LANDLORD AND LANDLORD RELATED PARTIES HARMLESS FROM, AND REIMBURSE LANDLORD FOR AND WITH RESPECT TO, ANY AND ALL COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES), DEMANDS, CLAIMS, CAUSES OF ACTION AND LIENS ARISING FROM AND IN CONNECTION WITH THE FAILURE OF TENANT TO FULLY COMPLY WITH ITS OBLIGATIONS SET FORTH IN THIS SECTION 16 OR FROM THE PRESENCE, TREATMENT, STORAGE, TRANSPORTATION, DISPOSAL, RELEASE OR MANAGEMENT OF HAZARDOUS MATERIALS IN, ON, UNDER, UPON OR FROM THE PROPERTY RESULTING FROM OR RELATING TO TENANT’S USE OF THE PREMISES OR THE COMPLEX.  The obligations of Tenant under this Section shall survive the expiration or earlier termination of this Lease

 

17.          Entry by Landlord.

 

(a)           Tenant shall permit Landlord to erect, use and maintain pipes, ducts, wiring and conduits in and through the Premises, so long as Tenant’s use, layout or design of the Premises is not materially affected or altered.  Landlord or Landlord’s agents shall have the right to enter upon the Premises in the event of an emergency, or to inspect the Premises, to perform janitorial and other services, to conduct safety and other testing in the Premises and to make such repairs, alterations, improvements or additions to the Premises or the Building as Landlord may deem necessary or desirable.  Janitorial and cleaning services shall be performed after Normal Business Hours.  Any entry or work by Landlord may be during Normal Business Hours after reasonable notice to Tenant (except in the case of an emergency) and Landlord agrees to use reasonable efforts to minimize interference with Tenant’s occupancy of the Premises as a result of any such entry or work.

 

(b)           If Tenant shall not be personally present to permit an entry into the Premises when for any reason an entry therein shall be necessary or permissible, Landlord (or Landlord’s agents), after attempting to notify Tenant (unless Landlord believes an emergency situation exists), may enter the Premises without rendering Landlord or its agents liable therefor (if during such entry Landlord or Landlord’s agent shall accord reasonable care to Tenant’s property), and without relieving Tenant of any obligations under this Lease.

 

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(c)           Subject to the requirements set forth in Section 17(a) above, Landlord may enter the Premises for the purpose of conducting such inspections, tests and studies as Landlord may deem desirable or necessary to confirm Tenant’s compliance with all Laws (including Hazardous Materials Laws) or for other purposes necessary in Landlord’s reasonable judgment to ensure the sound condition of the Building and the systems serving the Building.  Landlord’s rights under this Section 17 are for Landlord’s own protection only, and Landlord has not, and shall not be deemed to have assumed any responsibility to Tenant or any other party for compliance with Laws as a result of the exercise or non-exercise of such rights.

 

(d)           Landlord may do any of the foregoing, or undertake any of the inspection or work described in the preceding paragraphs without such action constituting an actual or constructive eviction of Tenant, in whole or in part, or giving rise to an abatement of Rent by reason of loss or interruption of business of the Tenant, or otherwise.  Landlord agrees to use reasonable efforts to minimize interference with Tenant’s occupancy of the Premises as a result of any such entry or work and to give Tenant reasonable prior written notice of any such entry or work, except in the case of an emergency.

 

18.          Assignment and Subletting.

 

(a)           Except for a Permitted Transfer (as defined below), Tenant shall not assign this Lease or sublease the Premises or any part thereof or mortgage, pledge or hypothecate its leasehold interest or grant any concession or license within the Premises (any such assignment, sublease, mortgage, pledge, hypothecation, or grant of a concession or license being hereinafter referred to in this Section 18 as a “Transfer”) without the prior written consent of Landlord (which consent shall not be unreasonably withheld, conditioned or delayed) and any attempt to effect a Transfer without such consent of Landlord shall be void and of no effect.  In order for Tenant to make a Transfer, Tenant must request in writing Landlord’s consent at least thirty (30) days in advance of the date on which Tenant desires to make a Transfer and pay Landlord a $250.00 fee for reviewing such request (the “Review Fee”).  Such request shall include the name of the proposed assignee or sublessee, current financial information on the proposed assignee or sublessee and the terms of the proposed Transfer.  Landlord shall, within ten (10) Business Days following receipt of such request, notify Tenant in writing that Landlord elects (1) except in the case of a Permitted Transfer (as defined below), to terminate this Lease as to the space so affected as of the date so specified by Tenant, in which event Tenant will be relieved of all further obligations hereunder as to such space, (2) to permit Tenant to assign or sublet such space in accordance with the terms provided to Landlord, or (3) to refuse consent to Tenant’s requested Transfer and to continue this Lease in full force and effect as to the entire Premises.  If Landlord elects options (1) or (3) above, Landlord shall return the Review Fee to Tenant.  If Landlord elects option (1) above, then Tenant may within ten (10) Business Days following Tenant’s receipt of Landlord’s notice to Tenant of such election, rescind its request for consent to the Transfer and this Lease shall continue in full force and effect.  If Landlord elects to exercise option (2) above, Tenant agrees to provide, at its expense, direct access from any sublet space or concession area to a public corridor of the Building, and such other improvements, alterations or additions as may be required by applicable law.  The prohibition against a Transfer contained herein shall be construed to include a prohibition against any Transfer by merger, sale of assets, sale of a controlling interest in stock or by operation of law. Notwithstanding the foregoing or anything else to the contrary in this Lease, if no Event of Default has occurred and is continuing, Tenant shall have the right, subject to Section 18(b), to make a Transfer of this Lease without the prior written consent of Landlord (a “Permitted Transfer”) (i) to a parent or subsidiary of Tenant or any entity under common control with Tenant or (ii) in connection with (A) the merger, acquisition, consolidation or reorganization of Tenant or (B) the sale of all or substantially all of Tenant’s assets, so long as, with respect to any Transfer referred to in the preceding clauses (i) and (ii), such transferee has a tangible net worth equal to the tangible net worth of Tenant on the date of this Lease and the transferee intends to use the Premises in a comparable manner to Tenant’s use.  Any assignment or sublease must be in writing and Tenant shall have provided Landlord with copy of the executed copy of assignment or sublease within ten (10) Business Days after the date of such sublease or assignment.

 

(b)           Notwithstanding that the prior express written consent of Landlord to a Transfer may have been obtained under the provisions of Section 18(a) or that such permission is not required, the following shall apply to all Transfers:

 

(1)           Tenant shall, in the case of an assignment, cause the assignee to expressly assume in writing and to agree to perform all of the covenants, duties and obligations of Tenant hereunder, and such

 

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transferee shall be jointly and severally liable therefor along with Tenant (i.e, Landlord’s consent to any Transfer shall not release Tenant from performing its obligations under this Lease, but rather Tenant and its transferee shall be jointly and severally liable therefor);

 

(2)           In the event that the rent or other consideration due and payable by a sublessee or assignee under any such permitted sublease or assignment exceeds the Rent for the portion of the Premises so transferred, then Tenant shall pay to Landlord, as additional Rent, fifty percent (50%) of all such excess rental and other consideration, after deducting the amortized costs incurred by Tenant in connection with the sublease or assignment (which may include, without limitation, marketing costs, rent abatement, construction allowances, brokerage fees and attorneys’ fee), which costs shall be amortized over the term of the Transfer, immediately upon receipt thereof by Tenant from such transferee;

 

(3)           No usage of the Premises different from the usage herein permitted to be made by Tenant shall be permitted, and all of the terms and provisions of this Lease shall continue to apply after a Transfer; and

 

(4)           Any such transferee’s obligations shall include, without limitation, the obligation to pay Rent as to the portion of the Premises subject to the Transfer, and Landlord shall be permitted to enforce the provisions of this Lease against the undersigned Tenant or any transferee, or both, without demand upon or proceeding in any way against any other persons. Landlord may collect Rent directly from the transferee and apply the net amount collected to the Rent reserved in this Lease, without the requirement of any consent or approval from Tenant.

 

(c)           The consent by Landlord to a particular Transfer shall not be deemed a consent to any other subsequent Transfer.  If this Lease, the Premises or the Tenant’s leasehold interest therein, or if any portion of the foregoing is transferred, or if the Premises are occupied in whole or in part by anyone other than Tenant without the prior consent of Landlord as provided herein, Landlord may nevertheless collect rent from the transferee or other occupant and apply the net amount collected to the Rent payable hereunder, but no such transaction or collection of rent or application thereof by Landlord shall be deemed a waiver of the provisions hereof or a release of Tenant from the further performance by Tenant of its covenants, duties and obligations hereunder.

 

(d)           No assignee or subtenant of the Premises shall be a then-existing tenant or occupant of the Building or a person or entity with whom Landlord is then dealing with regard to leasing space in the Building or with whom Landlord has had any dealings with the past six months with regard to leasing space in the Building, unless Landlord does not have suitable space within the Complex to accommodate such party’s needs.

 

(e)           For purposes of this Section 18, and in addition to any other reasonable grounds for denial, Landlord’s consent to a Transfer will be deemed reasonably withheld if, in Landlord’s good faith judgment, any one or more of the following apply: (a) the proposed transferee does not have the financial strength to perform the Tenant’s obligations under this Lease; (b) the business and operations of the proposed transferee are not of comparable quality to the business and operations being conducted by other tenants in the Building; (c) either the proposed transferee, or any Affiliate of the proposed transferee, occupies or is negotiating with Landlord to lease space in the Building, subject, however, to the provisions of Section 18(d) above; (d) the proposed transferee does not have a good business reputation; (e) the proposed use of the Premises by the proposed transferee may or will cause the Building or Complex or any part thereof not to conform with any so-called green/LEED program(s) undertaken or maintained by Landlord; (f) the presence in the Premises of the proposed transferee would, in Landlord’s reasonable judgment, impact the Building or the Complex in a negative manner; (g) if the subject space is only a portion of the Premises and the physical subdivision of such portion is, or would render the Premises, not regular in shape with appropriate means of ingress and egress and facilities suitable for normal renting purposes, or is otherwise not readily divisible from the Premises; (h) the Transfer would require alterations to the Building or the Complex to comply with applicable Laws; (i) the transferee is a government (or agency or instrumentality thereof); or (j) an Event of Default exists under this Lease and has not been waived by Landlord at the time Tenant requests consent to the proposed Transfer.

 

19.          Mechanic’s Liens.  Tenant will not permit any mechanic’s liens, materialmen’s liens or other liens to be placed upon the Premises or the Complex for any work performed by or at the request of Tenant, or any

 

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assignee, sublessee or licensee of Tenant, and nothing in this Lease shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any person for the performance of any labor or the furnishing of any materials to the Premises, or any part thereof, nor as giving Tenant any right, power, or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to any mechanic’s or other liens against the Premises or the Complex.  In the event any such lien is attached to the Premises or the Complex and not discharged by payment, bonding or otherwise within fifteen (15) days after receipt of written notice from Landlord, then, in addition to any other right or remedy of Landlord, Landlord may, but shall not be obligated to, discharge the same.  Any amount paid by Landlord for the aforesaid purpose shall be paid by Tenant to Landlord within ten (10) days after written demand as additional Rent and shall bear interest at the Default Rate from the date such demand by Landlord is received by Tenant until reimbursed by Tenant.

 

20.          Property Insurance.

 

(a)           Landlord shall maintain a policy or policies of fire and extended coverage insurance, including flood and earthquake coverage, on the portion of the Complex that is the property of Landlord, including Alterations by Tenant that have become the property of Landlord, in such amounts as Landlord’s mortgagee may require, but in no event in an amount equal to less than eighty percent (80%) of the replacement cost.  Such insurance shall be maintained at the expense of Landlord (as a part of the Operating Costs), and payments for losses thereunder shall be made solely to Landlord or the mortgagees of Landlord as their interests shall appear.  Tenant shall maintain at its expense, in an amount equal to full replacement cost, fire and extended coverage insurance, including flood and earthquake coverage, on all of its personal property, including removable trade fixtures, located in the Premises and in such additional amounts as are required to meet Tenant’s obligations pursuant to Section 24 hereof.  Tenant shall, at Landlord’s request from time to time, provide Landlord with current certificates of insurance evidencing Tenant’s compliance with this Section 20 and Section 21.  Tenant shall obtain the agreement of Tenant’s insurers to notify Landlord that a policy is due to expire at least thirty (30) days prior to such expiration.

 

(b)           Tenant shall maintain throughout the Lease Term a policy or policies of “all risk” extended coverage insurance protecting Tenant against loss of or damage to Tenant’s alterations, additions, improvements, carpeting, floor coverings, paintings, decorations, fixtures, inventory and other business personal property located in or about the Premises to the full replacement value of the property so insured and endorsed to provide that Tenant’s insurance is primary in the event of any overlapping coverage with the insurance carried by Landlord.  Such insurance shall be maintained at the expense of Tenant and payment for losses thereunder shall be made solely to Tenant or the mortgagees of Tenant (if permitted hereunder) as their interests shall appear.  Tenant shall, prior to occupancy of the Premises and at Landlord’s request from time to time, provide Landlord with a current certificate of insurance evidencing Tenant’s compliance with this Section 20.  Tenant shall obtain the agreement of Tenant’s insurers to notify Landlord that a property insurance policy is due to be canceled or expire at least thirty (30) days prior to such cancellation or expiration.

 

21.          Liability Insurance.

 

(a)           In addition to the property insurance described above, Tenant shall keep in force throughout the Lease Term: (i) a Commercial General Liability insurance policy or policies to protect the Landlord against liability to the public or to any invitee of tenant or a Landlord Related Party incidental to the use of or resulting from any accident occurring in or upon the Premises with a limit of not less than $3,000,000.00 per occurrence, or such larger amount as Landlord may require from time to time that in Landlord’s reasonable judgment is then being customarily required by landlords of buildings comparable to the Building, covering bodily injury and property damage liability and $1,000,000 products/completed operations aggregate; (ii) Business Auto Liability covering owned and hired vehicles with a limit of not less than $1,000,000 per accident; (iii) insurance protecting against liability under Worker’s Compensation Laws with limits at least as required by statue; (iv) Employers Liability with limits of $1,000,000 each accident, $1,000,000 disease policy limit, $1,000,000 disease-each employee; and (v) Business Interruption Insurance with limit of liability representing loss of at least approximately one year of income.

 

(b)           Each of the aforesaid policies or certificates thereof shall be delivered to Landlord by Tenant upon the Commencement Date and at least thirty (30) days prior to each renewal of said insurance, and shall

 

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(i) be provided at Tenant’s expense; (ii) name the Landlord, FSP Property Management LLC, any mortgagee designated by Landlord and the building management company, if any, as additional insureds; (iii) be issued by an insurance company authorized to issue insurance in the State and rated in Best’s Insurance Guide or any successor thereto as having a “Best’s Rating” of at least “A” and a “Financial Size Category” of at least “VII” during the Term; (iv) contain an endorsement that said insurance shall not be cancelled unless thirty (30) days prior written notice (ten days for nonpayment of premium) shall have been given to Landlord; (v) contain an endorsement that Tenant’s insurance is primary for claims arising out of an incident or event occurring within the Premises; and (vii) include coverage for the contractual liability of Tenant to indemnify Landlord and Landlord Related Parties pursuant to Section 22(a).   Tenant shall obtain the agreement of Tenant’s insurers to notify Landlord that a liability insurance policy is due to be canceled or expire at least thirty (30) days prior to such cancellation or expiration.

 

(c)           Whenever Tenant shall undertake any Alterations, the aforesaid insurance protection must extend to and include injuries to persons and damage to property arising in connection with such Alterations, without limitation including liability under any applicable structural work, act, and such other insurance as Landlord shall require; and the policies of or certificates evidencing such insurance must be delivered to Landlord prior to the commencement of any such Alterations.

 

(d)           Landlord may maintain a policy or policies of comprehensive general liability insurance and environmental insurance with respect to the Complex, but excluding the Premises, in such amounts as are required by Landlord’s mortgagee or are determined to be necessary by Landlord, and the costs of such insurance shall be included in the Operating Costs.  Payments for losses thereunder shall be made solely to Landlord or the mortgagees of Landlord as their interests shall appear.

 

22.          INDEMNITY.

 

(a)           TENANT SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS LANDLORD AND EACH LANDLORD RELATED PARTY FROM AND AGAINST CLAIMS RESULTING FROM ANY INJURIES TO OR DEATH OF ANY PERSON OR ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE FROM:  (1) AN INCIDENT OR EVENT WHICH OCCURRED WITHIN OR ON THE PREMISES; OR (2) THE OPERATION OR CONDUCT OF TENANT’S BUSINESS WITHIN THE PREMISES.  IF ANY SUCH CLAIM IS MADE AGAINST LANDLORD OR ANY LANDLORD RELATED PARTY, TENANT SHALL, AT TENANT’S SOLE COST AND EXPENSE, DEFEND SUCH CLAIM BY OR THROUGH ATTORNEYS REASONABLY ACCEPTABLE TO LANDLORD.  The indemnity obligations of Tenant under this Section 22(a) shall not apply to a claim  arising out of the gross negligence or intentional misconduct of Landlord or any Landlord Related Party.

 

(b)           LANDLORD SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS TENANT AND EACH TENANT RELATED PARTY FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, DAMAGES, CLAIMS, SUITS, LOSSES, CAUSES OF ACTION, LIENS, JUDGMENTS AND EXPENSES (INCLUDING COURT COSTS, ATTORNEYS’ FEES AND COSTS OF INVESTIGATION) OF ANY KIND, NATURE OR DESCRIPTION RESULTING FROM ANY INJURIES TO OR DEATH OF ANY PERSON OR ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE FROM, (1) AN INCIDENT OR EVENT WHICH OCCURRED WITHIN OR ON THE COMMON AREAS; OR (2) THE OPERATION OR CONDUCT OF LANDLORD’S BUSINESS WITHIN THE COMMON AREAS (COLLECTIVELY, THE “CLAIMS”).  IF ANY SUCH CLAIM IS MADE AGAINST TENANT OR ANY TENANT RELATED PARTY, LANDLORD SHALL, AT LANDLORD’S SOLE COST AND EXPENSE, DEFEND SUCH CLAIM BY OR THROUGH ATTORNEYS REASONABLY ACCEPTABLE TO TENANT.  The indemnity obligations of Landlord under this Section 22(b) shall not apply to a claim arising out of the gross negligence or intentional misconduct of Tenant or any Tenant Related Party.

 

23.          WAIVER OF SUBROGATION RIGHTS.  NOTWITHSTANDING ANYTHING IN THIS LEASE TO THE CONTRARY, TO THE EXTENT THAT AND SO LONG AS THE SAME IS PERMITTED UNDER THE LAWS AND REGULATIONS GOVERNING THE WRITING OF INSURANCE WITHIN THE STATE, ALL INSURANCE CARRIED BY EITHER LANDLORD OR TENANT SHALL PROVIDE FOR A WAIVER OF RIGHTS OF SUBROGATION AGAINST LANDLORD AND TENANT ON THE PART OF THE INSURANCE CARRIER.  UNLESS THE WAIVERS CONTEMPLATED BY THIS SENTENCE ARE NOT

 

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OBTAINABLE FOR THE REASONS DESCRIBED IN THIS SECTION 23, LANDLORD AND TENANT EACH HEREBY WAIVE ANY AND ALL RIGHTS OF RECOVERY, CLAIMS, ACTIONS OR CAUSES OF ACTION AGAINST THE OTHER, ITS AGENTS, OFFICERS, OR EMPLOYEES, FOR ANY LOSS OR DAMAGE TO PROPERTY OR ANY INJURIES TO OR DEATH OF ANY PERSON WHICH IS COVERED OR WOULD HAVE BEEN COVERED UNDER THE INSURANCE POLICIES REQUIRED UNDER THIS LEASE.  THE FOREGOING RELEASE SHALL NOT APPLY TO LOSSES OR DAMAGES IN EXCESS OF ACTUAL OR REQUIRED POLICY LIMITS (WHICHEVER IS GREATER) NOR TO ANY DEDUCTIBLE (UP TO A MAXIMUM OF $50,000) APPLICABLE UNDER ANY POLICY OBTAINED BY THE WAIVING PARTY.  THE FAILURE OF EITHER PARTY (THE “DEFAULTING PARTY”) TO TAKE OUT OR MAINTAIN ANY INSURANCE POLICY REQUIRED UNDER THIS LEASE SHALL BE A DEFENSE TO ANY CLAIM ASSERTED BY THE DEFAULTING PARTY AGAINST THE OTHER PARTY HERETO BY REASON OF ANY LOSS SUSTAINED BY THE DEFAULTING PARTY THAT WOULD HAVE BEEN COVERED BY ANY SUCH REQUIRED POLICY.  THE WAIVERS SET FORTH IN THE IMMEDIATELY PRECEDING SENTENCE SHALL BE IN ADDITION TO, AND NOT IN SUBSTITUTION FOR, ANY OTHER WAIVERS, INDEMNITIES, OR EXCLUSIONS OF LIABILITIES SET FORTH IN THIS LEASE.

 

24.          Casualty Damage.  If the Premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give prompt written notice thereof to Landlord.  In case the Building shall be so damaged by fire or other casualty that (i) substantial alteration or reconstruction of the Building shall, in the judgment of an independent architect selected by Landlord, be required (whether or not the Premises shall have been damaged by such fire or other casualty), or (ii)  in the event any mortgagee under a first mortgage or first deed of trust covering the Building should require that the insurance proceeds payable as a result of said fire or other casualty be used to retire the mortgage debt, or (iii) in the event of the occurrence of a casualty which is not insured under the “all risk” extended coverage insurance required to be carried by Landlord pursuant to the terms of Section 20, Landlord may, at its option, terminate this Lease by notifying Tenant in writing of such termination within fifteen (15) days after the date of Landlord’s receipt of the estimated cost of reconstruction or determination by a mortgagee to take the proceeds in which event the Rent hereunder shall be abated as of the date of such damage.  If  Landlord does not elect to terminate this Lease,  Landlord shall, as soon as practicable, but no more than ninety (90) days after the date of such damage, commence to repair and restore the Building and shall proceed with reasonable diligence to restore the Building to substantially the same condition which it was in immediately prior to the occurrence of the fire or other casualty, except that Landlord shall not be required to rebuild, repair, or replace any part of Tenant’s furniture, fixtures and equipment removable by Tenant under the provisions of this Lease or any Alterations to the Premises made by Tenant following the Commencement Date which were not approved by Landlord in writing, and Landlord shall not in any event be required to spend for such work an amount in excess of the insurance proceeds actually received by Landlord as a result of the fire or other casualty, plus any deductible amounts thereunder.  If Landlord determines that insurance proceeds will be insufficient to restore the Building as required by this Section 24, Landlord may, at its option, elect to either (1) terminate this Lease by written notice to Tenant within fifteen (15) days after the date of Landlord’s receipt of written notice of the amount of insurance proceeds Landlord will receive, or (2) provide the extra funds necessary to complete the restoration.  In the event Landlord did not originally construct any Alterations to be repaired, the time for Landlord to commence and complete such repairs shall be extended by the amount of time necessary for Landlord to obtain detailed working drawings of the Alterations to be repaired.  In the event Landlord does not either commence the repairs to the Building within the time required herein, or complete the repairs to the Building within two hundred seventy (270) days after the date of such damage, Tenant may terminate the Lease by written notice thereof to Landlord given no later than thirty (30) days following the date on which Landlord was to commence or complete such repairs, as the case may be.  Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from such damage or the repair thereof, except that, subject to the provisions of the next sentence, Landlord shall allow Tenant an equitable abatement of Rent during the time and to the extent the Premises are unfit for occupancy and  are vacated by Tenant.  If the Premises or any other portion of the Complex is damaged by fire or other casualty resulting from the intentional acts of Tenant or any employee, officer, contractor, agent, subtenant, or licensee of Tenant, the Rent hereunder shall not be abated during the repair of such damage, and Tenant shall remain liable for the payment thereof.

 

25.          Condemnation.  If (i) the whole or substantially the whole of the Complex, or (ii) the whole or such portion of the Premises as shall render the remainder reasonably unfit for Tenant’s use, shall be taken for any public or quasi-public use, by right of eminent domain or otherwise, or sold in lieu of condemnation, then this Lease

 

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shall terminate as of the date when physical possession of the Building or the Premises are taken by the condemning authority.  If this Lease is not so terminated upon any such taking or sale, the Base Rental and Tenant’s Share of Operating Costs payable hereunder shall be diminished by an amount representing that portion of Base Rental and Tenant’s Share of Operating Costs applicable to the portion of the Premises subject to such taking or sale, and Landlord shall to the extent Landlord deems feasible, restore the Building and the Premises to substantially their former condition, except that Landlord shall not be required to rebuild, repair, or replace any Alterations to the Premises made by Tenant following the Commencement Date which were not approved by Landlord in writing, nor shall Landlord in any event be required to spend for such work an amount in excess of the amount received by Landlord as compensation for such taking.  All amounts awarded upon a taking of any part or all of the Property, Building or the Premises shall belong to Landlord, and Tenant shall not be entitled to and expressly waives all claims to any such compensation, except that Tenant may make a separate claim upon the condemning authority for expenses related to relocation and the unamortized cost of leasehold improvements paid for by Tenant.

 

26.          DAMAGES FROM CERTAIN CAUSES.  NOTWITHSTANDING ANYTHING CONTAINED IN THIS LEASE TO THE CONTRARY, AND SUBJECT TO THE TERMS OF SECTION 9 AND SECTION 23, NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY SHALL BE LIABLE FOR DAMAGES TO TENANT OR ANY PARTY CLAIMING THROUGH TENANT FOR ANY INJURY TO OR DEATH OF ANY PERSON OR DAMAGE TO PROPERTY OR FOR INTERRUPTION OR DAMAGE TO BUSINESS RESULTING FROM ANY OF THE FOLLOWING REASONS:  (a) ANY ACT, OMISSION OR NEGLIGENCE OF TENANT OR TENANT’S EMPLOYEES, AGENTS, CONTRACTORS, OFFICERS, SUBTENANTS, ASSIGNEES, LICENSEES, INVITEES OR CUSTOMERS; (b) ANY ACT, OMISSION OR NEGLIGENCE OF ANY OTHER TENANT WITHIN THE BUILDING, OR ANY OF THEIR RESPECTIVE EMPLOYEES, AGENTS, CONTRACTORS, TENANTS, ASSIGNEES, LICENSEES, INVITEES OR CUSTOMERS; (c) THE REPAIR, ALTERATION, MAINTENANCE, DAMAGE OR DESTRUCTION OF THE PREMISES OR ANY OTHER PORTION OF THE BUILDING (INCLUDING THE CONSTRUCTION OF LEASEHOLD IMPROVEMENTS FOR OTHER TENANTS OF THE BUILDING), EXCEPT TO THE EXTENT CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY LANDLORD RELATED PARTY; (d) VANDALISM, THEFT, BURGLARY AND OTHER CRIMINAL ACTS (OTHER THAN THOSE COMMITTED BY LANDLORD’S EMPLOYEES); (e) ANY DEFECT IN OR FAILURE OF EQUIPMENT, PIPES, WIRING, HEATING OR AIR CONDITIONING EQUIPMENT, STAIRS, ELEVATORS, OR SIDEWALKS, THE BURSTING OF ANY PIPES OR THE LEAKING, ESCAPING OR FLOWING OF GAS, WATER, STEAM, ELECTRICITY, OR OIL, BROKEN GLASS, OR THE BACKING UP OF ANY DRAINS, EXCEPT TO THE EXTENT CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY LANDLORD RELATED PARTY; (f) INJURY DONE OR OCCASIONED BY WIND, SNOW, RAIN OR ICE, FIRE, ACT OF GOD, PUBLIC ENEMY, INJUNCTION, RIOT, STRIKE, INSURRECTION, WAR, COURT ORDER, REQUISITION, ORDER OF ANY GOVERNMENTAL BODY OR AUTHORITY, OR (g) ANY OTHER CAUSE BEYOND THE REASONABLE CONTROL OF LANDLORD.  UNDER NO CIRCUMSTANCES SHALL LANDLORD BE LIABLE FOR DAMAGES RELATED TO BUSINESS INTERRUPTION OR LOSS OF PROFITS.  THE PROVISIONS OF THIS SECTION 26 SHALL NOT LIMIT THE OBLIGATIONS OF LANDLORD OR THE RIGHTS OF TENANT UNDER THIS LEASE NOT INVOLVING A CLAIM FOR DAMAGES.

 

27.          Default by Tenant.

 

(a)           The following events shall be deemed to be events of default by Tenant under this Lease (hereinafter called an “Event of Default”):

 

(1)           Tenant shall fail to timely pay any Rent and such failure shall continue for a period of ten (10) days after written notice of such default shall have been given to Tenant; provided, however, Landlord shall not be obligated to give Tenant written notice of its failure to pay Rent more than two times in any 12-month period and after the second notice, an Event of Default shall occur automatically upon Tenant’s failure to timely pay any Rent within such 12-month period without the requirement of any further notice from Landlord;

 

(2)           Tenant shall fail to comply with any terms, provisions or covenants of this Lease or any other agreement between Landlord and Tenant not requiring the payment of Rent, all of which terms, provisions and covenants shall be deemed material, and such failure shall continue for a period of thirty (30) days

 

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after written notice of such failure is delivered to Tenant or, if such failure cannot reasonably be cured within such thirty (30) day period, Tenant shall fail to commence to cure such failure within such thirty (30) day period and/or shall thereafter fail to prosecute such cure diligently and continuously to completion within sixty (60) days of the date of Landlord’s notice of default;

 

(3)           Tenant or any guarantor takes any action to, or notifies Landlord that Tenant or any guarantor intends to, file a petition under any section or chapter of the United States Bankruptcy Code, as amended from time to time, or under any similar Law of the United States or any state thereof; or a petition shall be filed against Tenant  or any guarantor under any such statute and shall not be dismissed within sixty (60) days thereafter;

 

(4)           a receiver or trustee shall be appointed for Tenant’s leasehold interest in the Premises or for all or a substantial part of the assets of Tenant or any guarantor; or

 

(5)           Tenant abandons all, or substantially all, of the Premises, without providing Landlord with (a) thirty (30) days prior written notice of its intent to vacate, (b) an affirmative statement that this Lease is in full force and effect and that there are no uncured events of default by Landlord or Tenant, (c) an affirmative statement that Tenant intends to comply with all of the terms and conditions of the Lease including, without limitation, the payment of Rent, (d) current financial statements and (e) a forwarding address and telephone number.

 

(b)           Upon the occurrence of any Event of Default, Landlord may, at its option and without further notice to Tenant and without judicial process, in addition to all other remedies given hereunder or by Law or equity, do any one or more of the following:  (1) terminate this Lease, in which event Tenant shall immediately surrender possession of the Premises to Landlord; (2) enter upon and take possession of the Premises and expel or remove Tenant therefrom, with or without having terminated this Lease; (3) apply all or any part of the Security Deposit to cure such Event of Default; (4) change or re-key all locks to entrances to the Premises, and Landlord shall have no obligation to give Tenant a new key to the Premises until such Event of Default is cured; and (5) remove from the Premises any furniture, fixtures, equipment or other personal property of Tenant, without liability for trespass or conversion, and store such items either in the Complex or elsewhere at the sole cost of Tenant and without liability to Tenant.  Any of such furniture, fixtures, equipment or personal property not claimed within thirty (30) days from the date of removal shall be deemed abandoned.

 

(c)           Exercise by Landlord of any one or more remedies hereunder shall not constitute forfeiture or an acceptance of surrender of the Premises by Tenant, it being understood that such surrender can be effected only by the written agreement of Landlord and Tenant.

 

(d)           If Landlord terminates this Lease by reason of an Event of Default, Tenant shall pay to Landlord the sum of (1) the cost of recovering the Premises, (2) the cost of repairing any damage to the Premises, (3) any amounts owed by Tenant under this Lease that have accrued but not been paid, (4) any other damages or relief which Landlord may be entitled to for any Event of Default other than the non-payment of rent at law or in equity, and (5) the Rent payable over what would have been the remainder of the Term absent such Lease termination less fair market value of the Premises over such remainder of the Term, as discounted by present value at one percent (1%) per annum.  In no event shall Landlord have any obligation to refund to Tenant any of the Base Rental prepaid on this Lease, irrespective of whether Landlord relets all or any portion of the Premises following an Event of Default.

 

(e)           If Tenant should fail to make any payment, perform any obligation, or cure any default hereunder within the notice and cure period set forth in Section 27(a), Landlord, without obligation to do so and without thereby waiving such failure or default, may make such payment, perform such obligation, and/or remedy such other default for the account of Tenant (and enter the Premises for such purpose), and Tenant shall, within ten (10) days following written demand, pay all costs, expenses and disbursements (including attorneys’ fees) incurred by Landlord in taking such remedial action, plus, at the option of Landlord, interest thereon at the Default Rate.

 

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(f)            If an Event of Default occurs, Landlord shall use reasonable efforts to mitigate its damages. Landlord’s duty to mitigate damages as a result of an Event of Default will be satisfied in full if Landlord undertakes to lease the Premises to another tenant (a “Substitute Tenant”) in accordance with the following criteria: (a) Landlord will have no obligation to solicit or entertain negotiations with any other prospective tenants for the Premises until Landlord obtains full and complete possession of the Premises including, without limitation, the final and unappealable legal right to relet the Premises free of any claim of Tenant; (b) Landlord will not be obligated to lease or show the Premises on a priority basis, or offer the Premises to a prospective tenant when other space in the Building suitable for the prospective tenant’s use is (or soon will be) available; (c) Landlord will not be obligated to lease the Premises to a Substitute Tenant for a Base Rental less than the current fair market Base Rental then prevailing for similar uses in comparable buildings in the same market area as the Building, nor will Landlord be obligated to enter into a new lease under other terms and conditions that are unacceptable to Landlord under Landlord’s then current leasing policies for comparable space in the Building; (d) Landlord will not be obligated to enter into a lease with a Substitute Tenant whose use would (i) violate any restriction, covenant, or requirement contained in the lease of another tenant of the Building; (ii) adversely affect the reputation of the Building; or (iii) be incompatible with other uses of the Building; (e) Landlord will not be obligated to enter into a lease with any proposed Substitute Tenant that does not have, in Landlord’s reasonable opinion, sufficient financial resources to operate the Premises in a first class manner; and (f) Landlord will not be required to expend any amount of money to alter, remodel, or otherwise make the Premises suitable for use by a proposed Substitute Tenant unless: (i) Tenant pays any such sum to Landlord in advance of Landlord’s execution of a lease with the proposed Substitute Tenant (which payment will not be in lieu of any damages or other sums to which Landlord may be entitled as a result of Tenant’s default under this Lease); or (ii) Landlord, in Landlord’s reasonable discretion, determines that any such expenditure is financially justified in connection with entering into a lease with the prospective Substitute Tenant.  Tenant hereby waives any right to assert, claim or allege that Landlord has not fulfilled its duty to mitigate damages as a result of an Event of Default if Landlord’s efforts to mitigate are in compliance with the provisions of this Section 27.

 

(g)           Tenant will reimburse and compensate Landlord on demand and as Additional Rent for any actual loss Landlord incurs in connection with, resulting from or related to any breach or default of Tenant under this Lease, regardless of whether the breach or default constitutes an Event of Default, and regardless of whether suit is commenced or judgment is entered.  Such loss includes all reasonable legal fees, costs and expenses (including paralegal fees, expert fees, and other professional fees and expenses) Landlord incurs investigating, negotiating, settling or enforcing any of Landlord’s rights or remedies or otherwise protecting Landlord’s interests under this Lease.  In addition to the foregoing, Landlord is entitled to reimbursement of all of Landlord’s reasonable fees, expenses and damages, including, but not limited to, reasonable attorneys’ fees and paralegal and other professional fees and expenses, Landlord incurs in connection with any bankruptcy or insolvency proceeding involving Tenant including, without limitation, any proceeding under any chapter of the Bankruptcy Code; by exercising and advocating rights under Section 365 of the Bankruptcy Code; by proposing a plan of reorganization and objecting to competing plans; and by filing motions for relief from stay.  Such fees and expenses are payable on demand, or, in any event, upon assumption or rejection of this Lease in bankruptcy.

 

(h)           Tenant waives and releases all Claims, Tenant may have resulting from Landlord’s re-entry and taking possession of the Premises pursuant to this Section 27 by any lawful means and removing, storing or disposing of Tenant’s property as permitted under this Lease, regardless of whether this Lease is terminated and, to the fullest extent allowable under the Laws, Tenant releases and will indemnify, protect, defend (with counsel reasonably acceptable to Landlord) and hold harmless Landlord and the Landlord Related Parties from and against any and all Claims arising therefrom.  No such re-entry is to be considered or construed as a forcible entry by Landlord.  THIS INDEMNITY PROVISION IS INTENDED TO INDEMNIFY LANDLORD, LANDLORD RELATED PARTIES AND THEIR RESPECTIVE AGENTS AGAINST THE CONSEQUENCES OF THEIR OWN NEGLIGENCE OR FAULT WHEN LANDLORD OR ITS AGENTS ARE JOINTLY, COMPARATIVELY, OR CONCURRENTLY NEGLIGENT WITH TENANT (BUT NOT WHEN THE NEGLIGENCE OR FAULT OF LANDLORD, LANDLORD RELATED PARTIES  OR THEIR AGENTS IS THE SOLE BASIS OF THE CLAIM).  No such re-entry is to be considered or construed as a forcible entry by Landlord.

 

28.          Default by Landlord.  Landlord shall be in default under this Lease if Landlord fails to perform any of its obligations hereunder and such failure continues for a period of thirty (30) days after Tenant delivers written notice of such failure to Landlord and to the holder(s) of any indebtedness or other obligations secured by

 

26

 

any mortgage or deed of trust affecting the Premises, the name and address of which have been provided to Tenant in writing, provided that if such failure cannot reasonably be cured within such thirty (30) day period, Landlord shall not be in default hereunder as long as Landlord or such holder(s) commences the remedying of such failure within such thirty-day period and diligently prosecutes the same to completion, during which time Landlord and such holder(s), or either of them, or their agents or employees, shall be entitled to enter upon the Premises and do whatever may be necessary to remedy such failure.  Notwithstanding any provision of this Lease to the contrary, in no event shall Landlord or Tenant be liable to the other for consequential, special or punitive damages under this Lease, except in the case of a hold over by Tenant under Section 31 below.

 

29.          Quiet Enjoyment.  Tenant, on paying all sums herein called for and performing and observing all of its covenants and agreements hereunder, shall and may peaceably and quietly occupy and use the Premises during the Lease Term, subject to the provisions of this Lease, all matters of record affecting the Complex and applicable Laws; and Landlord agrees to warrant and forever defend Tenant’s right to such occupancy against the claims of any and all persons whomsoever lawfully claiming the same or any part thereof, subject only to the provisions of this Lease, all matters of record affecting the Complex and all applicable Laws.

 

30.          Right to Relocate.  Notwithstanding anything contained herein to the contrary, Landlord reserves the right from time to time, at Landlord’s sole cost and expense, and after first giving Tenant at least sixty (60) days advance written notice (“Landlord’s Relocation Notice”), to remove Tenant from the Premises and relocate Tenant to some other “like kind” space in the Building (the “New Premises”) of approximately the same dimensions and size as the Premises, with substantially similar views, and not immediately facing the train.  Landlord shall incur all costs for Tenant’s relocation from the Premises to the New Premises, including, but not limited to, all design and engineering fees, “hard” construction costs (which shall mean and be limited to the costs of labor and materials), costs for moving any audio visual and security systems, cost for moving any telephone/data cabling, costs for moving any furniture, fixtures and equipment, and moving costs.  The New Premises shall be finished out and decorated by Landlord at Landlord’s sole cost and expense so that the New Premises shall be comparable in its interior design and decoration to the Premises.  If Landlord exercises such relocation option, the Effective Date of such relocation (the “Relocation Effective Date”) shall be the later of (i) sixty (60) days following the delivery of Landlord’s Relocation Notice, and (ii) the date on which Landlord substantially completes the tenant finish work required of Landlord under this Section 30.  Upon the Relocation Effective Date, Tenant shall surrender possession of the Premises and move into the New Premises.  In the event of any such relocation, this Lease shall continue in full force and effect with no change in the terms, covenants or conditions hereof other than the substitution of the New Premises for the Premises.

 

31.          Holding Over.  Should Tenant continue to occupy the Premises after the expiration of the Lease Term without the prior written consent of Landlord, such occupancy shall be a tenancy at sufferance under all of the terms, covenants and conditions of this Lease, but at a daily Base Rental equal to the sum determined by dividing one hundred and fifty percent (150%) of the Base Rental, plus any sums due pursuant to Section 6, for the final month of the Lease Term by thirty (30).  Tenant shall also pay any and all costs, expenses or damages (including consequential damages, if the holdover exceeds thirty (30) days, and direct damages) sustained by Landlord as a result of such holdover.  If Tenant consists of more than one person or entity, and if any of the persons or entities comprising Tenant continue to occupy the Premises after the expiration of the Lease Term, all other persons or entities comprising Tenant shall be deemed to have consented to such occupancy and shall continue to be jointly and severally liable for all of the terms, covenants and conditions contained in this Lease during the holdover term.

 

32.          Rights Reserved to Landlord.  Landlord reserves the right at any time:

 

(a)           To change the name of the Building upon thirty (30) days advance written notice.

 

(b)           To decorate and to make inspections, repairs, alterations, additions, changes, or improvements, whether structural or otherwise, in and about the Building, or any part thereof; for such purposes, to enter upon the Premises and, during the continuance of any such work, to temporarily close doors, entryways, public space, and corridors in the Building; to interrupt or temporarily suspend Building services and facilities; and to change the arrangement and location of entrances or passageways, doors, and doorways, corridors, elevators, stairs, restrooms, or other public parts of the Building; provided, however, Landlord shall use reasonable efforts to

 

27

 

minimize interference with Tenant’s operations in the Premises when performing such work in or about the Premises.

 

(c)           To take such reasonable measures as Landlord deems advisable for the security of the Building and its occupants; evacuating the Building for cause, suspected cause, or for drill purposes; temporarily denying access to the Building; and closing the Building after Normal Business Hours and on Saturdays, Sundays, and holidays, subject, however, to Tenant’s right to enter when the Building is closed after Normal Business Hours under such reasonable regulations as Landlord may prescribe from time to time which may include by way of example, but not of limitation, that persons entering or leaving the Building, whether or not during Normal Business Hours, identify themselves to a security officer by registration or otherwise and that such persons establish their right to enter or leave the Building.

 

(d)           Upon at least twenty-four (24) hours’ notice to Tenant, to enter the Premises to show the Premises to prospective purchasers, lenders, or tenants; provided, however, Landlord shall use reasonable efforts to minimize any disruption to the conduct of Tenant’s business by reason of such entry.

 

33.          Subordination to Mortgage; Estoppel Agreement.

 

(a)           Subject to subsection (d) below, this Lease shall be subordinate to any deed of trust, mortgage, or other security instrument (a “Mortgage”), or any ground lease, master lease, or primary lease (a “Primary Lease”), that hereafter covers all or any part of the Premises (the mortgagee under any Mortgage or the lessor under any Primary Lease is referred to herein as “Landlord’s Mortgagee”).

 

(b)           Tenant shall attorn to any party succeeding to Landlord’s interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, upon such party’s request, and shall execute such agreements confirming such attornment as such party may reasonably request within ten (10) Business Days after such request.

 

(c)           Tenant shall not seek to enforce any remedy it may have for any default on the part of the Landlord without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail, to any Landlord’s Mortgagee whose address has been given to Tenant, and affording such Landlord’s Mortgagee a reasonable opportunity to perform Landlord’s obligations hereunder.

 

(d)           Notwithstanding anything contained in this Section 33 to the contrary, the subordination of this Lease to any Mortgage or Primary Lease now existing or hereafter placed upon the Premises or the Building or any part thereof and Tenant’s agreement to attorn to Landlord Mortgagee as provided in this Section 33 is and shall be conditioned upon such holder’s entering into a commercially reasonable non-disturbance and attornment agreement providing that Tenant’s right to quiet possession of the Premises during the Lease Term shall not be disturbed if there is no Event of Default.

 

(e)           Tenant agrees that it will, from time to time, within ten (10) Business Days after written request by Landlord, execute and deliver to such persons as Landlord shall designate, an estoppel agreement in recordable form certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that this Lease is in full force and effect as so modified), stating the dates to which Rent and other charges payable under this Lease have been paid, stating that the Landlord is not in default hereunder (or if Tenant alleges a default, stating the nature of such alleged default) and further stating such other matters as Landlord shall reasonably require.

 

34.          Intentionally Omitted.

 

35.          Attorney’s Fees.  Tenant must pay to Landlord on demand all reasonable attorney’s fees, costs and expenses incurred by Landlord in recovery of any Rent or enforcement of Landlord’s rights under this Lease.  Furthermore, if Landlord or Tenant employs an attorney to assert or defend any action arising out of the breach of any term, covenant or provision of this Lease, or to bring legal action for the unlawful detainer of the Premises, the prevailing party shall be entitled to recover from the non-prevailing party reasonable attorney’s fees and costs of suit

 

28

 

incurred in connection therewith.  For purposes of this Section 35, a party shall be considered to be the “prevailing party” to the extent that (a) such party initiated the litigation and substantially obtained the relief which it sought (whether by judgment, voluntary agreement or action of the other party, trial, or alternative dispute resolution process), (b) such party did not initiate the litigation and either (1) received a judgment in its favor, or (2) did not receive judgment in its favor, but the party receiving the judgment did not substantially obtain the relief which it sought, or (c) the other party to the litigation withdrew its claim or action without having substantially received the relief which it was seeking.  In the interest of obtaining a speedier and less costly hearing of any dispute, the parties hereby each irrevocably waive the right to trial by jury in any action or proceeding under or arising out of or related to this Lease or the Premises.

 

36.          No Implied Waiver.  The failure of either party to insist at any time upon the strict performance of any covenant or agreement in this Lease or to exercise any right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future.  The acceptance by Landlord of late payments shall not be construed as a waiver by Landlord of the requirement for timely payment nor create a course of dealing permitting such late payments.  Any payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Rent due under this Lease shall be deemed to be on account of the earliest Rent due hereunder.  No endorsement or statement on any check or any letter accompanying any check or payment as Rent shall be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy provided in this Lease.

 

37.          Independent Obligations.  The obligation of Tenant to pay Rent hereunder and the obligation of Tenant to perform Tenant’s other covenants and duties hereunder constitute independent, unconditional obligations to be performed at all times provided for hereunder and are independent of the Landlord’s performance of Landlord’s duties and obligations hereunder.  Except as expressly provided in this Lease, Tenant waives and relinquishes all rights which Tenant might have to claim any nature of lien against or withhold, abate or deduct from, or offset against Rent.

 

38.          Recourse Limitation.  Tenant shall be entitled to look solely to Landlord’s equity in the Complex for the recovery of any judgment against Landlord, and Landlord shall not be personally liable for any deficiency with respect to the recovery of such judgment.  The provision contained in the foregoing sentence shall not limit any right that Tenant might otherwise have to obtain specific performance of Landlord’s obligations under this Lease.

 

39.          Notices.  Any notice under this Lease must be in writing, and shall be given or be served by (a) personal delivery to the person identified on the signature page of this Lease as the person to receive notices, so long as a copy of the personally delivered notice is deposited in the United States mail, return receipt requested, or recognized overnight courier within three (3) days thereafter, (b) delivery via a recognized overnight courier, or (c) depositing the same in the United States mail, postage prepaid, certified mail, return receipt requested,  and addressed to the person identified herein as the person to receive such notices at the Tenant’s Notice Address or the Landlord’s Notice Address, as the case may be, as stated in this Lease or such other address in the continental United States of which notice has been given to the other party in the manner provided herein.  Notice by personal delivery or overnight courier shall be effective upon receipt, and notice by mail shall be effective upon deposit in the United States mail in the manner above described.

 

40.          Severability.  If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by Law.

 

41.          Recordation.  Tenant agrees not to record this Lease or any memorandum hereof.

 

42.          Governing Law.  This Lease and the rights and obligations of the parties hereto shall be interpreted, construed, and enforced in accordance with the Laws of the State.  This Lease is performable in, and the exclusive venue for any action brought with respect hereto, shall be in Cook County, Illinois.

 

29

 

43.          Force Majeure.  Whenever a period of time is herein prescribed for the taking of any action by Landlord or Tenant, the party responsible for taking such action shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental Laws, regulations or restrictions, or any other cause whatsoever beyond the control of the party responsible for taking such action; provided, however, the provisions of this Section 43 shall never be construed as allowing an extension of time with respect to Tenant’s obligation to pay Rent when and as due under this Lease.

 

44.          Time of Performance.  Except as otherwise expressly provided herein, time is of the essence under this Lease, including all Exhibits.

 

45.          Transfers by Landlord.  Landlord shall have the right to transfer and assign, in whole or in part, all of its rights and obligations hereunder and in the Complex, and in such event and upon the assumption by the transferee of the obligations of Landlord hereunder, Landlord shall be released from any further obligations accruing after the date of transfer, and Tenant agrees to look solely to such successor-in-interest of Landlord for the performance of such obligations.

 

46.          Commissions.  Landlord and Tenant agree that the two parties identified as Broker in the Basic Lease Terms above, are the only brokers involved in the procurement, negotiation or execution of this Lease, and that their respective commissions shall be paid by Landlord pursuant to a separate commission agreement.  Landlord and Tenant hereby agree to defend, indemnify and hold each other harmless against any loss, claim, expense or liability with respect to any commissions or brokerage fees claimed on account of the execution and/or renewal of this Lease or the expansion of the Premises due to any action of the indemnifying party.

 

47.          Financial Statements.  Tenant represents and warrants that as of the date hereof any financial statements provided by it to Landlord were true, correct and complete when provided, and that no material adverse change has occurred since that date that would render them inaccurate or misleading.  Subject to restrictions on disclosure under applicable law, Tenant, within 15 days after request, shall provide Landlord with current audited or certified financial statements and such other information with respect to Tenant and any guarantor hereunder as Landlord may reasonably request  in order to create a “business profile” of Tenant and determine Tenant’s ability to fulfill its obligations under this Lease.  Landlord, however, shall not require Tenant to provide such information unless (i) Landlord is requested to produce such information in connection with a proposed financing or sale of the Building, and (ii) such lender or perspective purchaser has agreed to keep such information confidential except to the extent required by application law.  Landlord agrees to keep such information confidential except to the extent required by applicable Law.  In addition, Tenant agrees upon prior written request to meet with Landlord, any lender or prospective purchaser during Normal Business Hours at mutually convenient times, from time to time, to discuss such information about Tenant’s business and financial condition requested by Landlord.

 

48.          Tenant’s Standing and Authority.  Tenant is a corporation duly organized, validly existing and in good standing under the Laws of Delaware and has due authority to enter into this Lease, and all organizational action requisite for the execution and delivery of this Lease has been taken.  The signatory to this Lease on behalf of Tenant has been duly authorized to execute and deliver this Lease.  Tenant shall contemporaneously with its execution and delivery of this Lease deliver to Landlord evidence of Tenant’s good standing, authority and authorization for the execution and delivery of this Lease.

 

49.          Effect of Delivery of This Lease.  Landlord has delivered a copy of this Lease to Tenant for Tenant’s review only, and the delivery hereof does not constitute an offer to Tenant or an option to be exercised by Tenant.  This Lease shall not be effective until a copy of this Lease executed by both Landlord and Tenant is delivered by Landlord to Tenant.

 

50.          WAIVER OF WARRANTIES AND ACCEPTANCE OF CONDITION.  TENANT ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE, TENANT HAS AGREED TO ACCEPT THE PREMISES IN “AS IS” CONDITION, AND NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY HAS MADE ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE HABITABILITY, MERCHANTABILITY, SUITABILITY, QUALITY, CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE WITH REGARD

 

30

 

TO THE PREMISES OR THE COMPLEX AND THAT THIS LEASE CONSTITUTES THE FULL AND FINAL AGREEMENT OF LANDLORD AND TENANT WITH RESPECT TO THIS LEASE OF SPACE IN THE BUILDING BY TENANT.  TENANT HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY CLAIM OR CAUSE OF ACTION BASED UPON ANY WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO HABITABILITY, MERCHANTABILITY, SUITABILITY, QUALITY, CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE WITH REGARD TO THE PREMISES OR THE COMPLEX.  TENANT FURTHER REPRESENTS AND WARRANTS TO LANDLORD THAT TENANT HAS HAD AN OPPORTUNITY TO MEASURE THE ACTUAL DIMENSIONS OF THE PREMISES AND THE BUILDING AND AGREES TO THE SQUARE FOOTAGE CALCULATIONS SET FORTH IN DEFINITIONS OF THE “PREMISES”, “RENTABLE AREA OF THE BUILDING” AND “RENTABLE AREA OF THE PREMISES” FOR ALL PURPOSES. TENANT’S TAKING POSSESSION OF THE PREMISES SHALL BE CONCLUSIVE EVIDENCE THAT (a) TENANT HAS INSPECTED (OR HAS CAUSED TO BE INSPECTED) THE PREMISES AND THE COMPLEX, (b) TENANT ACCEPTS THE PREMISES AND THE COMPLEX AS BEING IN GOOD AND SATISFACTORY CONDITION AND SUITABLE FOR TENANT’S PURPOSES, AND (c) THE PREMISES AND THE COMPLEX FULLY COMPLY WITH LANDLORD’S COVENANTS AND OBLIGATIONS HEREUNDER.

 

51.          Merger of Estates.  The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not constitute a merger of the Landlord’s fee estate in the Property and the leasehold interest created hereby; and upon such surrender or cancellation of this Lease, Landlord shall have the option, in Landlord’s sole discretion, to (a) either terminate all or any existing subleases or subtenancies, or (b) assume Tenant’s interest in any or all subleases or subtenancies.

 

52.          Survival of Indemnities and Covenants.  Any and all indemnities of Landlord or Tenant and any and all covenants of Landlord or Tenant not fully performed on the date of the expiration or termination of this Lease shall survive such expiration or termination.

 

53.          Headings.  Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Lease.

 

54.          Entire Agreement; Amendments.  This Lease, including the exhibits and addenda, if any, listed in Section 55, embodies the entire agreement between the parties hereto with relation to the transaction contemplated hereby, and there have been and are no covenants, agreements, representations, warranties or restrictions between the parties hereto, other than those specifically set forth herein.  To be effective, any amendment or modification of this Lease must be in writing and signed by Landlord and Tenant.

 

55.          Exhibits.  The following exhibits are attached hereto and incorporated herein and made a part of this Lease for all purposes:

 

	
Exhibit “A-1”
    	
-
    	
Legal   Description of Property
    
	
Exhibit “A-2”
    	
-
    	
Legal   Description of Retail Parcel
    
	
Exhibit “A-3”
    	
-
    	
Excluded   Retail Parcel
    
	
Exhibit “B”
    	
-
    	
Floor   Plan
    
	
Exhibit “C”
    	
-
    	
Rules and   Regulations
    
	
Exhibit “D”
    	
-
    	
Tenant   Improvements Agreement [Tenant Performs TI]
    
	
Exhibit “E”
    	
-
    	
Parking
    
	
Exhibit “F”
    	
-
    	
Confidentiality   Agreement
    
	
Exhibit “G”
    	
-
    	
Renewal   Option
    
	
Exhibit “H”
    	
-
    	
Right   of First Refusal
    
	
Exhibit “I”
    	
-
    	
Intentionally   Omitted
    
	
Exhibit “J”
    	
 
    	
Intentionally   Omitted
    
	
Exhibit “K”
    	
-
    	
Existing   Expansion and ROFRs Encumbering the Premises
    
	
Exhibit “L”
    	
-
    	
Intentionally   Omitted
    
	
Exhibit “M”
    	
-
    	
Letter   of Credit Terms and Conditions
    
	
Exhibit “N”
    	
-
    	
Laboratory   Use Rider
    

 

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56.          Joint and Several Liability.  If Tenant consists of more than one person or entity, the obligations of such parties under this Lease shall be joint and several.

 

57.          Multiple Counterparts.  This Lease may be executed in multiple counterparts, each of which shall constitute an original instrument, but all of which shall constitute one and the same agreement.

 

58.          Mail.  Tenant understands and agrees that mail delivery in the Building shall be to the Premises by the mail carrier.

 

59.          Roof Rights. During the Lease Term, Tenant shall have the right to maintain its microwave antenna and related equipment on the roof of the Building that are existing and in place as of the date of this Lease (the “Existing Antenna”).  Any changes to, modifications to, or replacements of the Existing Antenna (the “Antenna Changes”) shall be subject to the prior written consent of Landlord, such consent to be given or withheld in Landlord’s sole discretion.  Tenant’s shall comply with the following terms and conditions with respect to the Existing Antenna and any Antenna Changes (collectively, the “Equipment”): (a) the Equipment shall be in conformity with all applicable zoning and other laws, (b) with respect to the Antenna Changes, Landlord must first approve the size of, location of, and specifications for the Antenna Changes, and (c) the location, installation and maintenance of the Equipment shall (i) be subject to and completed in accordance with the terms and conditions of Section 15 of this Lease and with any and all applicable governmental laws, codes, rules, regulations and ordinances in effect from time to time; (ii) be located on that part of the roof as Landlord may from time to time designate away from the perimeter of the roof so as not to be visible from the street level (except that Landlord may after the initial installation of any portion of such Equipment from time to time cause Tenant to relocate such Equipment to another portion of the roof, at Landlord’s sole cost and expense); and (iii) in no manner interfere with the use of any other communications equipment installed on the roof prior to the time Tenant installs the Equipment.  Tenant shall not be obligated to pay any additional rent for such use of the roof.  During the Lease Term, Tenant warrants that it will, at its sole cost and expense, maintain in force and effect, in addition to any other insurance requirements of this Lease, insurance (such insurance to provide coverage for both Landlord and Tenant, as named insureds) with coverage limits of not less than One Hundred Thousand and 00/100 Dollars ($100,000.00) for roof damage claims.  Tenant shall furnish Landlord with a copy of such insurance policy or a certificate thereof upon Tenant’s execution of this Lease.  Tenant shall indemnify, defend and hold Landlord harmless from and against any claims, damages, costs, expenses or liabilities arising in connection with Tenant’s installation, maintenance (or failure to maintain), removal or use of the Equipment or with Tenant’s activities on or having access to the roof of the Building, except to the extent caused by Landlord’s gross negligence or willful misconduct.  Landlord reserves the right to grant to other tenants and licensees similar rights on or around the Building roof which do not unreasonably interfere with Tenant’s rights hereunder.  Tenant, at its sole cost and expense, will keep the Equipment and surrounding area in good order and repair and free from any hazard to person or property.  Upon termination of this Lease, Tenant, at its sole cost and expense, shall remove the Equipment and shall restore the roof of the Building to its condition existing prior to the installation of the Equipment, ordinary wear and tear excepted.  Tenant shall further repair, at its sole cost and expense, any damage or destruction caused by the removal of the Equipment.  All work performed by or on behalf of Tenant on the rooftop shall be done under the supervision of a representative of Landlord at such time and in such a manner that is satisfactory to Landlord and in such a  manner so as to not void any roof warranty or guaranty.

 

60.          OFAC and Anti-Money Laundering Compliance Certifications.  Tenant hereby represents, certifies and warrants to Landlord as follows:  (i)  Tenant is not named and is not acting, directly or indirectly, for or on behalf of any person, group, entity or nation named by an Executive Order, including without limitation Executive Order 13224, or the United State Treasury Department as a terrorist, “Specially Designated National and Blocked Person,” or other banned or blocked person, entity, nation or transaction pursuant to any law, order, rule or regulation that is enacted, enforced or administered by the Office of Foreign Assets Control (“OFAC”); (ii) Tenant is not engaged in this transaction, directly or indirectly, for or on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group, entity or nation; and (iii) none of the proceeds used to pay rent have been or will be derived from a “specified unlawful activity” as defined in, and Tenant is not otherwise in violation of, the Money Laundering Control Act of 1986, as amended, or any other applicable Laws regarding money laundering activities.  Furthermore, Tenant agrees to immediately notify Landlord if Tenant was, is, or in the future becomes, a “senior foreign political figure,” and immediate family member or close associate of a senior foreign political figure,” within the meaning of Section 312 of the USA PATRIOT Act of 2001.

 

32

 

Notwithstanding anything in this Lease to the contrary, Tenant understands that this Lease is a continuing transaction and that the foregoing representations, certifications and warranties are ongoing and shall be and remain true and in force on the date hereof and throughout the term of the Lease and that any breach thereof shall be a default under the Lease (not subject to any notice or cure rights) giving rise to Landlord remedies including but not limited to eviction, and Tenant hereby agrees to defend, indemnify and hold harmless Landlord and Landlord Related Parties from and against any and all claims, damages, losses, risks, liabilities, fines, penalties, forfeitures and expenses (including without limitation costs and attorney’s fees) arising from or related to any breach of the foregoing representations, certifications and warranties.

 

61.          Landlord Cancellation Option.  If Tenant vacates or abandons the Premises for a period of sixty (60) days, such vacation or abandonment shall not ipso facto constitute a default by Tenant under this Lease, but in such event Landlord shall have the option to cancel this Lease and recapture the Premises, without payment of any cancellation fee or penalty by or to Landlord or Tenant, by written notice to Tenant at any time following such vacation or abandonment.  In such event, Tenant shall surrender possession of the Premises on the date set forth in Landlord’s notice as the effective date of cancellation and thereafter neither party shall have any rights or obligations under this Lease, except the terms and conditions which expressly survive the termination of this Lease.

 

62.          Representations.  Landlord represents to Tenant that as of the date of this Lease, Landlord has received no written notice from any governmental authority that the Building is in violation of any Laws that remain uncured and, to Landlord’s knowledge, the Building is not in violation of any Laws that remain uncured.  Each party represents to the other that it has the full power and authority to enter into this Lease and that it has obtained any necessary consents and taken all actions necessary in connection therewith.

 

LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR TENANT’S INTENDED COMMERCIAL PURPOSE, AND TENANT’S OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT ABATEMENT, SETOFF, DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.

 

[SIGNATURE PAGE TO FOLLOW]

 

33

 

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date first above written.

 

	
Landlord’s Notice   Address:
    	
LANDLORD:
    
	
 
    	
 
    
	
Franklin Street   Properties

401 Edgewater Place
    	
FSP 909 DAVIS STREET   LLC, a Delaware limited liability company
    
	
Suite 201
    	
 
    
	
Wakefield,   Massachusetts 01880-6210
    	
By: 
    	
FSP Property Management   LLC, its asset manager
    
	
Attn: Scott   Carter, Esq.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
and
    	
 
    	
By: 
    	
/s/ William S.   Friend, Jr.
    
	
 
    	
 
    	
Name: 
    	
William S.   Friend, Jr.
    
	
Franklin Street   Properties
    	
 
    	
Title: 
    	
Executive Vice   President — Regional Director
    
	
401 Edgewater Place
    	
 
    
	
Suite 201
    	
 
    
	
Wakefield,   Massachusetts 01880-6210
    	
 
    
	
Attn: Asset Management
    	
 
    
	
 
    	
 
    
	
With a copy to:
    	
 
    
	
 
    	
 
    
	
Dykema Gossett PLLC
    	
 
    
	
10 South Wacker Drive,   Suite 2300
    	
 
    
	
Chicago, Illinois   60606
    	
 
    
	
Attention: Robert C.   Linton, Esq.
    	
 
    

 

	
Tenant’s Notice Address::
    	
TENANT:
    
	
 
    	
 
    
	
 
    	
APTINYX INC., a   Delaware corporation
    
	
909 Davis Street
    	
 
    
	
Evanston, Illinois   60201
    	
By: 
    	
/s/ Norbert G. Riedel
    
	
Attn: Patricia Adams,   Vice President of Human Resources and Administration
    	
Name: 
    	
Norbert G. Riedel, PhD
    
	
Title: 
    	
President and CEO
    

 

OFFICE LEASE AGREEMENT/Aptinyx, Inc. — Signature Page

 

 

EXHIBIT “A-1”

 

LEGAL DESCRIPTION OF THE PROPERTY

 

LOT 2 IN DAVIS CHURCH SECOND RESUBDIVISION, BEING A RESUBDIVISION OF LOT 1 IN DAVIS CHURCH RESUBDIVISION RECORDED OCTOBER 2, 2000 AS DOCUMENT NO. 00766688, IN THE SOUTHWEST QUARTER OF SECTION 18, TOWNSHIP 41 NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT OF DAVIS CHURCH SECOND RESUBDIVISION RECORDED APRIL 12, 2000 AS DOCUMENT NO. 0020426116 IN COOK COUNTY, ILLINOIS.

 

Commonly known as 909 Davis Street, Evanston, Illinois

 

1

 

EXHIBIT “A-2”

 

LEGAL DESCRIPTION OF THE RETAIL PARCEL

 

LOT 1 IN DAVIS CHURCH SECOND RESUBDIVISION, BEING A RESUBDIVISION OF LOT 1 IN DAVIS CHURCH RESUBDIVISION RECORDED OCTOBER 2, 2000 AS DOCUMENT NO. 00766688, IN THE SOUTHWEST QUARTER OF SECTION 18, TOWNSHIP 41 NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT OF DAVIS CHURCH SECOND RESUBDIVISION RECORDED APRIL 12, 2002 AS DOCUMENT NO. 0020426116 IN COOK COUNTY, ILLINOIS.

 

Commonly known as 900-950 Church Street, Evanston, Illinois

 

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EXHIBIT “A-3”

 

EXCLUDED RETAIL PROPERTY

 

The cooling tower located at the Property which services the Retail Parcel (including, without limitation, fluid cooler (BAC-Model No. FL1843-L), Glycol Fill System and two (2) base mounted pumps) and any and all Facilities (as hereinafter defined), which (a) are located within, on, under, through or across any part of the Retail Parcel or the Property and (b) are used exclusively to provide services (including, without limitation, air conditioning, alarm, electric, internet, plumbing and drainage service) to any part of the Retail Parcel but not including any and all columns, beams or other structural supports penetrating or located in whole or in part the Retail Parcel.  As used in this Exhibit, “Facilities” shall mean any and all enunciators, antennae, boxes, brackets, cabinets, cables, coils, computers, conduits, controls, control centers, cooling towers, couplers, devices, ducts, equipment (including, without limitation, heating, ventilating, air conditioning and plumbing equipment), fans, fixtures, generators, hangers, heat traces, indicators, junctions, lines, machines, meters, motors, outlets, panels, pipes, pumps, radiators, risers, satellite dishes, microwave dishes, starters, switches, switchboards, systems, tanks, transformers, valves, wiring, black metal exhaust shafts and the like.

 

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EXHIBIT “B”

 

FLOOR PLAN

 

 

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EXHIBIT “C”

 

RULES AND REGULATIONS

 

Any capitalized terms not defined in this Exhibit “C” shall have the meaning set forth in the Lease to which this Exhibit “C” is attached.

 

(1)                                 Sidewalks, doorways, vestibules, halls, stairways, and similar areas shall not be obstructed, nor shall refuse, furniture, boxes or other items be placed therein by Tenant or Tenant’s officers, agents, servants, contractors and employees, or used for any purpose other than ingress and egress to and from the Premises, or for going from one part of the Building or Complex to another part of the Building or Complex.  Tenant shall be responsible, at its sole cost, for the removal of any large boxes or crates not used in the ordinary course of business.  Nothing shall be swept or thrown into the corridors, halls, elevator shafts or stairways.

 

(2)                                 Canvassing, soliciting, distributing handbills, advertising and peddling in the Building and Complex are prohibited.

 

(3)                                 Plumbing fixtures and appliances shall be used only for the purpose for which such were constructed or installed, and no unsuitable material shall be placed therein.  The cost of repair of any stoppage or damage to any such fixtures or appliances from misuse on the part of Tenant or Tenant’s officers, agents, servants, contractors, employees, guests and customers shall be paid by Tenant, and Landlord shall not in any case be responsible therefor.

 

(4)                                 No signs, directories, posters, advertisements, or notices visible to the public shall be painted or affixed on or to any of the windows or doors, or in corridors or other parts of the Building, except in such color, size, and style, and in such places, as shall be first approved in writing by Landlord.  Landlord shall have the right to remove, at the expense of Tenant, all unapproved signs, directories, posters, advertisements or notices following reasonable prior notice to Tenant.

 

(5)                                 Tenant shall not do, or permit anything to be done, in or about the Building or Complex, or bring or keep anything therein, that will in any way increase the rate of fire or other insurance on the Building, or on property kept therein, or otherwise increase the possibility of fire or other casualty.  No cooking (other than cooking through the use of a microwave oven), including grills or barbecues, shall be permitted within the Premises or on any patio adjoining the Premises.

 

(6)                                 Landlord shall have the power to prescribe the weight and position of heavy equipment or objects which may overstress any portion of the floor of the Premises.  All damage done to the Building by the improper placing of such heavy items shall be repaired at the sole expense of Tenant.  Tenant shall notify the Building manager when safes or other heavy equipment are to be taken in or out of the Building and the moving of such equipment shall be done only after written permission is obtained from Landlord and shall be performed under such conditions as Landlord may reasonably require.

 

(7)                                 Corridor doors, when not in use, shall be kept closed.

 

(8)                                 All movement of furniture and equipment into and out of the Building shall be scheduled through the Building manager and conducted outside of Normal Business Hours unless prior approval from the Building manager is obtained.  All deliveries must be made via the service entrance and service elevator, when provided, during Normal Business Hours.  Any delivery after Normal Business Hours must be coordinated with the Building manager.  When conditions are such that Tenant must dispose of crates, boxes, and other such items, Tenant shall dispose of such items prior to or after Normal Business Hours.

 

(9)                                 Tenant shall cooperate with Landlord’s employees in keeping the Premises neat and clean.

 

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(10)                          Tenant shall not cause or permit any improper noises in the Building, or allow any unpleasant odors to emanate from the Premises, or otherwise interfere, injure or annoy in any way other tenants, or persons having business with such tenants.

 

(11)                          No animals or birds shall be brought into or kept in or about the Building, except those assisting the disabled.

 

(12)                          No machinery of any kind, other than ordinary office machines such as copiers, fax machines, personal computers and related mainframe equipment, electric typewriters and word processing equipment, shall be operated on the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed.

 

(13)                          Tenant shall not use or keep in the Building any flammable or explosive fluid or substance (including Christmas trees and ornaments but excluding those fluids and substances in amounts commonly accepted as standard office products that are maintained in accordance with the manufacturers requirements)), or any illuminating materials, without the prior written approval of the Building manager.

 

(14)                          No bicycles, motorcycles or similar vehicles will be allowed in the Building, provided such bicycles, motorcycles or similar vehicles will be allowed in the Building’s underground parking garage, subject to (i) availability of space for such bicycles, motorcycles or similar vehicles, (ii) payment by Tenant to Landlord of any then applicable additional parking or bicycle fee, and (iii) compliance with Landlord’s rules and regulations with respect to such use.

 

(15)                          No nails, hooks, or screws (other than those necessary for hanging artwork, diplomas, posterboards and other such items on interior walls) shall be driven into or inserted in any part of the Building (including doors), except as approved by Landlord.

 

(16)                          Landlord has the right to evacuate the Building in the event of an emergency or catastrophe.  Tenant shall cause its officers, agents and employees to participate in any fire safety or emergency evacuation drills scheduled by Landlord.

 

(17)                          No food or beverages shall be prepared, cooked or distributed from the Premises without the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed; provided, however, Tenant shall be permitted to install refrigerators, microwave ovens, coffee machines and vending machines for the use of its own employees and guests.

 

(18)                          No additional or replacement locks shall be placed upon any doors without the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed.  All necessary keys shall be furnished by Landlord.  Upon termination of the Lease, Tenant shall return all such keys to Landlord and shall provide the Landlord the combination of all locks on doors or vaults.  No duplicates of  keys shall be made by Tenant.

 

(19)                          Tenant will not locate furnishings or cabinets adjacent to mechanical or electrical access panels or over air conditioning outlets so as to prevent Landlord’s personnel or contractors from servicing such units as routine or emergency service may require.  Tenant shall pay the cost of moving such furnishings for Landlord’s access.  Tenant shall instruct all of its employees to refrain from any attempts to adjust thermostats.  The lighting and air conditioning equipment of the Building shall be exclusively controlled by Landlord’s personnel.

 

(20)                          No portion of the Building shall be used for the purpose of lodging rooms.

 

(21)                          Tenant shall obtain Landlord’s prior written approval, which approval shall not be unreasonably withheld or delayed, for the installation of window shades, blinds, drapes or any other window treatment or object that may be visible from the exterior of the Building or affect the heating and cooling of the Building.  Landlord will control all internal lighting that may be visible from the exterior of the Building and shall have the right to change, at Tenant’s expense, any unapproved lighting following reasonable prior notice to Tenant.

 

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(22)                          No supplemental heating, air ventilation or air conditioning equipment, including space heaters and fans, shall be installed or used by Tenant without the prior written consent of Landlord.

 

(23)                          No smoking shall be permitted within the Premises or anywhere else within the Complex, other than those smoking areas designated by the Building manager.

 

(24)                          No unattended children shall be allowed within the Complex.

 

(25)                          Other than during Normal Business Hours, Building access shall be limited, with the result that access will require entry cards or keys and compliance with Landlord’s registration procedures.

 

(26)                          In no event shall Tenant bring onto the Complex or permit its invitees, employees, contractors or agents to bring onto the Complex firearms, weapons, explosives or any other article of intrinsically dangerous nature irrespective of whether the person has a permit to carry such firearm, weapon or be in possession of such explosive.

 

(27)                          Tenant shall comply with all rules, regulations and measures adopted by Landlord from time to time in connection with any green/LEED program(s) undertaken or maintained by Landlord from time to time including, without limitation, requirements to adopt proven energy and carbon reduction measures and participate in waste recycling and management programs.

 

(28)                          Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency and shall cooperate and participate in all reasonable security and safety programs affecting the Building.

 

(29)                          Access to the Building’s underground parking garage will be limited to those who have signed an indemnification form.  Violation of the rules and regulations on said form will be grounds for parking denial.

 

(30)                          All access to the Building’s roof, telecom closet, or other areas not normally accessible by tenant shall be coordinated with the management office with at least 24 hours’ notice (except in the case of an emergency as determined by Landlord).

 

(31)                          All vendors who will be performing work in the Building will be union vendors.

 

(32)                          All vendors working in the Building will have provided insurance to the Managing Agent’s office in such form and at such levels to meet the Building’s insurance requirements.

 

(33)                          After hours work must be scheduled through the Managing Agent at (847) 424-1987 with at least 24 hours’ notice.  Contractor’s name and location of work must be provided.  If necessary, the Building engineer will remain at the property to oversee the work, at tenant’s expense.

 

(34)                          Except with the prior approval of Landlord, all cleaning, repairing, janitorial, decoration, painting or other services and work in and about the Premises shall be done only by authorized Building personnel.  Landlord’s janitorial service shall remove all ordinary and customary trash and refuse from the receptacles in Tenant’s Premises on a nightly basis (other than on weekends or holidays).  At Tenant’s sole cost and expense Landlord or Landlord’s agents may remove excessive or non-customary trash or refuse from the Premises upon Tenant’s prior written request.

 

(35)                          No floor covering shall be affixed to any floor in the Premises by means of glue or other adhesive without Landlord’s prior written consent (which consent shall be deemed given as to any such matters included as part of the plans and specifications for Tenant’s Work or for subsequent alterations which are otherwise approved by Landlord).

 

(36)                          Landlord reserves the right to rescind any of these Rules and Regulations and make such other and further Rules and Regulations as in its judgment shall from time to time be necessary or advisable for the operation of the Building or the Complex or for the maintenance of any third party certification of the Building or Complex

 

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under any so-called green/LEED program(s) undertaken or maintained by Landlord, providing that such Rules and Regulations are in writing and uniformly enforced against all other tenants of the Building.  Such Rules and Regulations shall be binding upon Tenant upon delivery to Tenant of notice thereof in writing.

 

(37)                          In the event of any inconsistency between these Rules and Regulations and the terms of this Lease, the terms of the Lease shall control.

 

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EXHIBIT “D”

 

TENANT IMPROVEMENTS AGREEMENT

[Tenant Performs Tenant Improvements]

 

This Tenant Improvements Agreement (herein so called) describes and specifies the rights and obligations of Landlord and Tenant under the Lease to which this Exhibit “D” is attached, with respect to the design, construction and payment for the completion of the Tenant Improvements within the Premises.  Performance of the Work shall occur after the Effective Date [subject to Tenant’s compliance with the terms and conditions of the Existing Sublease (if then applicable), including, without limitation, Tenant’s receipt of approval from Tenant’s sublessor thereunder].

 

1.                                      Definitions.  Any capitalized terms not defined in this Tenant Improvements Agreement shall have the meaning set forth in the Lease.  Additionally, as used in this Tenant Improvements Agreement, the following terms (when delineated with initial capital letters) shall have the respective meaning indicated for each as follows:

 

“Approved Costs” means all costs reasonably incurred by Tenant in connection with the design, construction and installation of the Tenant Improvements, which shall include and be limited to “hard” construction costs (which shall mean and be limited to the costs of labor and materials), design and engineering fees, other consulting fees, audio visual and security systems costs, and telephone/data cabling costs.  Landlord may charge Tenant a construction management fee in an amount equal to one percent (1%) of the “hard” construction costs (which shall mean and be limited to the costs of labor and materials) of the Tenant Improvements, which amount may be included in the Approved Costs and may be deducted from the Improvement Allowance and retained by Landlord when Landlord disburses the Improvement Allowance.  Any moving costs and costs paid by Tenant to independent contractors and vendors for the purchase and installation of furniture, fixtures and equipment in the Premises shall not be included in Approved Costs.

 

“Contractor” means the union general contractor selected to perform the Work.

 

“Plans and Specifications” means the detailed construction documents for the Tenant Improvements referred to in paragraph 3 below.

 

“Space Plan” means the space plan to be prepared by Tenant in accordance with paragraph 2 below and approved by Landlord and Tenant, and showing the general configuration of the Tenant Improvements.

 

“Certificate of Occupancy” means a certificate of occupancy, governmental sign-off or other document, permit or approval (whether conditional, unconditional, temporary or permanent) which must be obtained by Landlord from the appropriate governmental authority as a condition to the lawful initial occupancy by Tenant of the Premises.

 

“Improvement Allowance” means $25.00 per rentable square foot of the Premises.

 

“Substantial Completion” means either (a) the date a Certificate of Occupancy (or all approvals required for the issuance thereof) is obtained for the Premises, or (b) if a Certificate of Occupancy is not required as a condition to Tenant’s lawful occupancy of the Premises, the date that the Tenant Improvements are substantially completed (subject to punch list items), as confirmed in writing by Landlord’s architect.

 

“Tenant Improvements” means the initial improvements to the Premises that are more particularly described in the Plans and Specifications.

 

“Tenant’s Architect” means a licensed architect selected and engaged by Tenant reasonably acceptable to Landlord.

 

“Work” means all materials and labor to be added to the existing improvements in the Premises, if any, in order to complete the installation of the Tenant Improvements within the Premises in accordance with the

 

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Plans and Specifications, including, without limitation, all air balancing and other mechanical adjustments to Building equipment serving the Premises.  Tenant acknowledges and agrees that only Building Standard materials may be utilized in the performance of the Work unless otherwise approved by Landlord in writing, such approval not to be unreasonably withheld.

 

2.                                      Space Plan.  Tenant will engage Tenant’s Architect to develop and design a space plan for the Tenant Improvements and will deliver such space plan to Landlord prior to commencing any Work (including without limitation any design, construction or installation of any Tenant Improvements).  The space plan must (a) be compatible with the base building (as reasonably determined by Landlord); (b) be adequate, in Landlord’s reasonable discretion, for the preparation of Plans and Specifications for the Tenant Improvements; (c) show, in reasonable detail, the design and appearance of the finishing materials to be used in connection with installing the Tenant Improvements; (d) contain such other detail or description as Landlord may reasonably deem necessary to adequately outline the scope of the Tenant Improvements; (e) conform to all applicable governing codes and ordinances; and (f) contain all information necessary for construction cost estimating.  All space plan drawings must be not less than 1/8” scale.  Without limiting those general requirements, the space plan must expressly specify and include (without limitation) all of the following: (1) wall types and heights and insulation, if needed; (2) door types and hardware groups; (3) door frame types; (4) ceiling heights; (5) ceiling materials; (6) floor covering materials and locations; (7) all wall finishes; (8) any appliances, special systems or equipment to be furnished as a part of the construction; (9) any mechanical requirements beyond that provided in the base building; (10) any fire protection requirements beyond that provided in the base building; (11) any plumbing requirements; (12) all power and data locations; (13) any power required other than building standard power distribution; (14) any power requirements for modular furniture; (15) any emergency power requirement; (16) any lighting requirements beyond that provided in the base building; (17) millwork elevations and details; (18) specific floor material selections and designations; and (19) specific wall material selections and designations.  The Space Plan must also include enlarged sketch layouts for any non-standard rooms, including reflected ceiling plans, and must state the approximate usable and rentable square footage of the Premises.  If Tenant fails to provide Landlord with a Space Plan meeting the foregoing requirements by the date set forth above in this Section there shall be no extension of the Commencement Date.  In addition to the Improvement Allowance, Landlord shall pay for a portion of the costs associated with the initial Space Plan and any revisions thereto in an amount not to exceed $0.12 per rentable square foot of the Premises (the “Space Plan Allowance”).  The Space Plan Allowance shall be subject to all the terms and conditions of this Lease applicable to the Improvement Allowance, including without limitation Section 5 below with respect to Landlord’s receipt of satisfactory documentation before funding any portion of the Space Plan Allowance and Tenant’s forfeiture of any Space Plan Allowance not utilized on or before October 1, 2017.

 

3.                                      Plans and Specifications.  After Landlord receives and approves Tenant’s Space Plan as provided above, Tenant will cause Tenant’s Architect to prepare the Plans and Specifications for the Tenant Improvements.  Landlord will approve or disapprove (specifically describing any reasons for disapproval) the Plans and Specifications in writing within ten (10) Business Days after receiving them.  If Landlord disapproves the Plans and Specifications, Tenant will provide appropriately revised Plans and Specifications to Landlord for approval (or disapproval) within five (5) Business Days on the same basis as set forth above.  After Landlord’s approval, Tenant will submit the Plans and Specifications for permits and construction bids.  No deviation from the Building Standard will be permitted in the Space Plan or the Plans and Specifications, provided reasonable deviations with respect to the ceiling, lighting, painting, flooring and wall covering may be permitted with Landlord’s approval.  Landlord will not approve any deviations which Landlord believes (a) do not conform to applicable codes, ordinances and other Laws or are disapproved by any governmental agency, (b) require services beyond the level normally provided to other tenants in the Building, or (c) are of a nature or quality that are inconsistent with Landlord’s overall plan or objectives for the Building.  No approval by Landlord of any deviation constitutes an acknowledgment by Landlord that such deviations are in conformance with applicable codes, ordinances and other Laws.  In the event that Landlord’s approval shall be required in this Tenant Improvements Agreement, then notwithstanding anything to the contrary set forth in the Lease, Landlord’s approval shall not be unreasonably withheld, conditioned, or delayed.

 

4.                                      Tenant Improvements.  Tenant will cause to be constructed, at Tenant’s sole cost and expense (subject to Landlord’s payment of the Improvement Allowance), the Tenant Improvements. The Tenant Improvements will be designed and constructed as described in this Exhibit “D”.  Tenant will select the Contractor to be the general contractor to perform the Work.  Landlord shall have the right to approve (such approval not to be unreasonably withheld, conditioned or delayed) the Contractor and all subcontractors that will be performing any

 

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portion of the Work.  All contractors that will be performing any portion of the Work shall be union contractors.  Tenant will pay all direct and indirect costs of the design and construction of the Tenant Improvements (subject to the Landlord’s payment of the Improvement Allowance as provided for herein).  Such costs may include, without limitation, all costs of preparing the Space Plan, construction document preparation, design, Plans and Specifications, general conditions, labor, materials, and other construction costs, the fees (on an hourly basis) of Contractor’s project manager and site superintendent for the Tenant Improvements, and all costs incurred in connection with obtaining permits for the Tenant Improvements.  For all purposes of ownership, including risk of loss thereto, the Tenant Improvements will immediately upon installation be and remain a part of the Building and the property of Landlord, provided that as provided in Section 15 of this Lease, Landlord may require Tenant to remove same upon the expiration or earlier termination of the Lease Term.

 

Tenant currently occupies the Premises under the Existing Sublease and Landlord permits Tenant to immediately commence construction of the Tenant Improvements from and after the Effective Date of this Lease [subject to Tenant’s compliance with the terms and conditions of the Existing Sublease (if then applicable), including, without limitation, Tenant’s receipt of approval from Tenant’s sublessor thereunder].  Tenant shall use its best efforts to complete the Tenant Improvements on or before July 31, 2017.  Notwithstanding the foregoing sentence to the contrary, as part of the Tenant Improvements, Tenant shall perform the work necessary to separately demise the Premises from the remaining portion of the sixth (6th) floor of the Building, including the installation of a demising wall (the “Demising Work”) on or before April 1, 2017.  Tenant acknowledges that the tenant in the premises adjacent to the Premises will also be performing demising work.  Tenant’s performance of the Demising Work shall be coordinated with Landlord and Tenant shall cooperate with Landlord and/or Landlord’s contractors in all ways to ensure the efficient and expeditious scheduling, staging and performance of the Demising Work.  The Demising Work shall not adversely affect any construction work being performed by or for Landlord or its tenants and shall be performed in harmony with Landlord’s contractors and subcontractors and with other contractors and subcontractors in the Complex.  Tenant shall impose on and enforce all applicable terms of this Tenant Improvements Agreement against Tenant’s contractors.  Landlord shall have the right to order Tenant or any of Tenant’s contractors who violate the requirements imposed on Tenant or Tenant’s contractors in performing the Demising Work to cease performance of the Demising Work and to remove its equipment and employees from the Building.  No such action by Landlord shall cause any extension of the Commencement Date nor relieve Tenant from any of its obligations under the Lease.  Further, notwithstanding anything herein to the contrary, any delay in the completion of the Demising Work, or any interference to Tenant’s business operations or inconvenience suffered by Tenant during the performance of any adjacent tenant’s demising work shall not subject Landlord to any liability for any loss or damages resulting there from nor entitle Tenant to any credit, abatement or adjustment of Rent or other sum payable under the Lease, as amended hereby.

 

During Tenant’s design, construction and installation of the Tenant Improvements, Tenant shall pay for all Building services and utilities, if and to the extent required, (i) in accordance with the Existing Sublease from the Effective Date through March 31, 2017, and (ii) in accordance with this Lease from and after April 1, 2017.

 

5.                                      Funding of the Improvement Allowance.  Tenant may from time to time deliver to Landlord a request for payment of all or a portion of the Improvement Allowance (provided that in no event shall Tenant make more than one [1] request in any calendar month), accompanied by all of the following in form and substance satisfactory to Landlord:  (a) a certificate duly executed by Tenant’s Architect certifying that the applicable portion of the Tenant Improvements for which reimbursement is being sought are Substantially Completed; (b) with respect to the final request for disbursement, a final Certificate of Occupancy for the Premises; (c) duly executed conditional lien waivers (or duly executed final and unconditional lien waivers, if in connection with the final request for disbursement) and such other affidavits, sworn statements, certificates, information, and data as may be requested by Landlord from all general contractors, subcontractors and materialmen performing work on the Premises for which reimbursement is being sought; (d) such documentation as Landlord deems reasonably necessary to obtain an endorsement to the policy of title insurance insuring Landlord’s lender, if any; (e) with respect to the final request for disbursement, copies of all warranties and guaranties relating to the Tenant Improvements together with duly executed assignments thereof to Landlord; (f) an itemized computation of the actual Approved Costs incurred by Tenant (“Actual Costs”) for the applicable portion of the Tenant Improvements; (g) with respect to the final request for disbursement, final as-built plans and specifications for the Tenant Improvements; and (h) with respect to the final request for disbursement, such other information and documentation as Landlord may reasonably request to evidence the proper, lien-free Substantial Completion of the Tenant Improvements.  Unless Landlord reasonably

 

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disputes Tenant’s assertion that Substantial Completion of the Tenant Improvements has occurred, upon Landlord’s receipt, review and reasonable approval of all of the foregoing, Landlord will pay to Tenant the amount of the Actual Costs, up to the maximum amount of the Improvement Allowance.  Landlord may retain from each such payment an amount equal to 10% of each such disbursement, which retained amount will be paid to Tenant when all punch list items for the Tenant Improvements are completed to Landlord’s satisfaction.   In no event will Landlord have any obligation to pay for any costs of the Tenant Improvements in excess of the Improvement Allowance or to perform any work in the Premises that is not expressly contemplated by this Lease, unless otherwise hereafter agreed to in writing by the parties hereto.  Tenant shall be solely responsible for any and all costs of constructing the Tenant Improvements in excess of the Improvement Allowance.  Tenant shall not be entitled to any credit or payment from Landlord for any portion of the Improvement Allowance not used by Tenant on or before March 1, 2018.

 

6.                                      Changes to Plans and Specifications.  Tenant will immediately notify Landlord if Tenant desires to make any changes to the Tenant Improvements after Tenant has approved the Plans and Specifications.  If Landlord approves (such approval not to be unreasonably withheld, conditioned or delayed) the revisions (which Landlord shall approve or deny within five [5] Business Days after Landlord’s receipt of any and all information requested by Landlord with respect to such revisions), Tenant may carry out the changes contemplated therein. If Landlord reasonably estimates that the change order will cause the cost of the Tenant Improvements to exceed the Improvement Allowance (or if the cost of the Tenant Improvements already exceeds the Improvement Allowance), Landlord may require Tenant to deposit such estimated additional cost with Landlord before the change order work is performed.

 

7.                                      Landlord’s Approval Rights.  Landlord may withhold its approval of any Space Plan, Plans and Specifications, change orders, or other work requested by Tenant which Landlord reasonably determines may require work which: (a) exceeds or adversely affects the structural integrity of the Building; (b) adversely affects, or exceeds Tenant’s pro rata capacity of, any part of the heating, ventilating, air conditioning, plumbing, mechanical, electrical, communication or other systems of the Building; (c) will increase the cost of operation or maintenance of any of the systems of the Property; (d) does not conform to applicable building codes or is not approved by any governmental authority with jurisdiction over the Premises; (e) is not a building standard item or an item of equal or higher quality; (f) may detrimentally affect the uniform appearance of the Property; or (g) is reasonably disapproved by Landlord for any other reason.

 

8.                                      Tenant’s Representative.  Tenant designates Patricia Adams, Tenant’s Vice President of Human Resources and Administration, as the representative of Tenant having authority to approve the Plans and Specifications, request or approve any change order, give and receive all notices, consents, approvals and directions regarding the Tenant Improvements, and to otherwise act for and bind Tenant in all matters relating to the Tenant Improvements.

 

9.                                      Tenant Finish Work.  All finish work and decoration and other work desired by Tenant and not included within the Tenant Improvements to be performed by Landlord as set forth in the approved Plans and Specifications (including specifically, without limitation, the design and installation of all computer systems, telephone systems, telecommunications systems, removable fixtures, furnishings, and equipment) will be designed, furnished and installed by Tenant and to the extent not included in the Improvement Allowance shall be at Tenant’s sole expense and will not be chargeable against the Improvement Allowance.  Tenant will perform all such work in the same manner and following the same procedures as are provided in this Lease for Alterations.  Landlord is under no obligation to inspect, or supervise any such work, and Landlord shall have no liability or responsibility whatsoever therefor.

 

10.                               Liens and Claims.  Tenant will keep the Property and the Complex free from any mechanics’, materialmen’s, designers’ or other liens arising out of any work performed, materials furnished or obligations incurred by or for Tenant or any person or entity claiming by, through or under Tenant.  Tenant will upon request record and post notices of non-responsibility or such similar protective notices as Landlord may reasonably request. If any such liens are filed and Tenant, within 15 days after such filing, does not release the same of record or provide Landlord with a bond or other surety satisfactory to Landlord protecting Landlord and the Property and the Complex against such liens, Landlord may, without waiving its rights and remedies based upon such breach by Tenant and without releasing Tenant from any obligation under the Lease, cause such liens to be released by any means

 

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Landlord deems proper, including, but not limited to, paying the claim giving rise to the lien or posting security to cause the discharge of the lien.  In such event, Tenant will reimburse Landlord, as Rent, for all amounts Landlord pays (including, without limitation, reasonable attorneys’ fees and costs).  To the fullest extent allowable under the Laws, Tenant releases and will indemnify, protect, defend (with counsel reasonably acceptable to Landlord) and hold harmless the Landlord Related Parties and the Property and the Complex from and against any Claims in any manner relating to or arising out of the Tenant Improvements, any of the Work or any other work performed, materials furnished or obligations incurred by or for Tenant or any person or entity claiming by, through or under Tenant.

 

11.                               Hoisting Charges.  Landlord shall not impose any charges for a personnel operator or hoisting charges for utilizing the Building’s freight elevator(s) or loading dock during the construction of Tenant Improvements or during Tenant’s physical move into the Premises.

 

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EXHIBIT “E”

 

PARKING

 

Parking Areas of Building.  Tenant shall have a non-exclusive right to use four (4) reserved parking spaces in the Parking Areas of the Building in locations designated by Landlord.  Use of the Parking Areas shall be subject to such terms, conditions, and regulations as are, from time to time, promulgated by the Landlord.  Tenant shall pay a monthly parking fee for each such parking space at the then prevailing rate therefor, which shall be due and payable on the first day of each month during the Lease Term (regardless of whether Tenant actually uses the foregoing 4 reserved parking spaces).  The anticipated parking fee rate for reserved parking spaces in the Parking Areas of the Building is $100.00 per space per month.

 

Offsite Parking Garage.  Tenant shall have a non-exclusive right to use twenty-one (21) unreserved parking spaces in the Offsite Parking Garage.  Use of the Offsite Parking Garage shall be subject to such reasonable terms, conditions, and regulations as are, from time to time, promulgated by the owner or operator of the Offsite Parking Garage.  For each such parking space, Tenant shall pay to Landlord, quarterly in advance, an amount equal to the parking fee rate which Landlord must pay the owner of the Offsite Parking Garage pursuant to the agreement between Landlord and the owner of the Offsite Parking Garage (regardless of whether Tenant actually uses the foregoing 21 unreserved parking spaces).  The anticipated parking fee rate for unreserved parking spaces in the Offsite Parking Garage is $85.00 per space per month (i.e., a minimum of $5,355.00 per quarter for the 21 spaces).  Tenant must complete the Offsite Parking Agreement Form available from the Building manager at the management office, and return same to the Offsite Parking Garage office along with $25 deposit per transponder.

 

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EXHIBIT “F”

 

CONFIDENTIALITY AGREEMENT

 

THIS CONFIDENTIALITY AGREEMENT (this “Agreement”), dated as of             , is entered into by APTINYX INC., a Delaware corporation (“Tenant”), and                                     (“Auditor”), for the benefit of FSP 909 DAVIS STREET LLC, a Delaware limited liability company (“Landlord”).

 

W I T N E S S E T H  T H A T:

 

WHEREAS, in connection with that certain Lease (the “Lease”) dated                  , between Landlord and Tenant, Tenant has the right to hire an independent accounting firm to audit Landlord’s books and records pertaining to Operating Costs (as defined in the Lease); and

 

WHEREAS, it is expected that in connection with such audit, Tenant and Auditor will receive or have access to Confidential Information (defined below); and

 

WHEREAS, as a condition of Tenant’s audit right, Landlord requires that Tenant and Auditor keep confidential the Confidential Information.

 

NOW, THEREFORE, in consideration of and as a condition of Tenant’s audit right and in consideration of payment by Tenant for Auditor’s services for performing the audit, and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Auditor and Tenant agree as follows, for the benefit of Landlord:

 

1.                                      Auditor and Tenant acknowledge that the information which Auditor and Tenant may receive in connection with such audit is non-public, confidential and/or proprietary information relating to Landlord, its business operations and the Complex, and that Landlord would be irreparably damaged if such information were disclosed to or utilized on behalf of any other person (including Auditor and Tenant), firm, corporation or any other tenant of the Complex for any reason other than Tenant’s audit of Landlord.  Auditor and Tenant agree that any information given to Auditor or Tenant by Landlord during the course of such audit is, and shall remain, property owned by Landlord, and neither Auditor nor Tenant shall have any right in or to such information, other than to use the information for the purposes set forth in the Lease.

 

2.                                      Auditor and Tenant agree to keep confidential, and agree to cause their employees, associates, agents and advisors to keep confidential, any information belonging to Landlord and any information not generally known to the public about the business and affairs of Landlord, including, without limitation, (a) all books, manuals, records, memoranda, projections, business plans, tenant lists, cost information, contractual relationships, and (b) other information, whether computerized, written or oral, relating specifically or generally to Operating Costs, the Complex and the business operations of Landlord (the “Confidential Information”).

 

3.                                      Auditor and Tenant each hereby represent and warrant that its internal policies, procedures and practices are adequate to safeguard against any breach of this Agreement by it or its employees, associates, agents and advisors, and Auditor and Tenant each agree to maintain such internal policies, procedures and practices as are necessary to adequately safeguard against a breach of this Agreement.

 

4.                                      The phrase “to keep confidential,” as used herein, means that the information or document, including the content, substance or effect of such information or document, (a) shall not be disclosed or distributed by Auditor or Tenant to any other person, firm, organization or entity, including to any associate, agent, advisor or affiliate of Auditor or Tenant not directly involved in the audit, or to any other tenant of the Complex, (b) shall not be utilized by either Auditor or Tenant for any purpose other than as described in the Lease.

 

5.                                      Notwithstanding anything to the contrary set forth herein, in the event that Auditor or Tenant is required to do so in legal, arbitration, governmental or regulatory proceedings, Auditor or Tenant may disclose only that portion of the Confidential Information which its counsel advises in writing that it is legally compelled to

 

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disclose and will exercise its best efforts to obtain assurances that confidential treatment will be accorded such Confidential Information even after such disclosure.

 

6.                                      Auditor and Tenant acknowledge that the subject matter of this Agreement is unique and that no adequate remedy at law would be available for breach of the obligations specified herein.  Accordingly, in the event of a breach or threatened breach by Auditor or Tenant of the provisions of this Agreement, Landlord shall, in addition to any other rights and remedies available to it, at law or in equity, be entitled to injunctive relief by a court or agency of competent jurisdiction enjoining and restraining the violating party from committing or continuing any violation of this Agreement.

 

7.                                      Any waiver by Landlord of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or of any other provision hereof.

 

8.                                      In case any one or more of the provisions or parts of a provision contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement; and this Agreement shall, to the fullest extent possible, be reformed and construed as if such invalid or illegal or unenforceable provision, or part of a provision, had never been contained herein, and such provision or part shall be reformed so that it would be valid, legal and enforceable to the maximum extent possible.

 

9.                                      This Agreement shall be binding upon Tenant, Auditor and their successors and assigns for the benefit of Landlord, and shall be fully enforceable by Landlord against Tenant, Auditor and their successors and assigns.

 

10.                               Agreement may be amended or modified in whole or in part, only by an instrument in writing signed by Landlord, Tenant and Auditor.

 

11.                               This Agreement shall be construed in accordance with and governed for all purposes by the Laws of the State of Illinois, without regard to conflicts of law principles.  Venue for any action arising herefrom shall be in Cook County, Illinois, and the parties hereto submit themselves to the jurisdiction of the state and federal courts of Cook County, Illinois.

 

IN WITNESS WHEREOF, Tenant and Auditor have duly executed this Agreement as of the date first above written.

 

	
TENANT:
    	
APTINYX INC., a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
AUDITOR:
    	
 
    
	
 
    	
a
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

2

 

EXHIBIT “G”

 

RENEWAL OPTION

 

So long as no Event of Default exists and Tenant is occupying the entire Premises at the time of such election, Tenant may renew this Lease for one (1) additional period of five (5) years on the same terms provided in this Lease (except as set forth below), by delivering written notice of the exercise thereof to Landlord not earlier than one year and not later than two hundred-seventy (270) days before the expiration of the Lease Term.  On or before the commencement date of the extended Lease Term in question, Landlord and Tenant shall execute an amendment to this Lease extending the Lease Term on the same terms provided in this Lease, except as follows:

 

(1)                                 The Base Rental payable for each month during each such extended Lease Term shall be the prevailing rental rate (the “Market Rate”), prevailing six (6) months prior to the commencement of such extended Lease Term, for space of equivalent quality, size, utility and location in the Market Area, with the length of the extended Lease Term and the credit standing of Tenant to be taken into account. The Market Rate shall include all standard lease components then being offered to tenants in such submarket, including, but not limited to, rental rate, expenses, escalations, tenant improvements, and rent abatement. Within ten (10) days after receipt of written notice of Tenant’s exercise of its renewal option, Landlord shall give to Tenant a written determination of Market Rate.  Tenant shall have fifteen (15) days in which to give written notice to Landlord that Tenant (a) disagrees with Landlord’s proposed Market Rate, or (b) accepts Landlord’s proposed Market Rate.  If Tenant disagrees with Landlord’s proposed Market Rate then Landlord and Tenant shall endeavor in good faith to agree upon the Market Rate within the next fifteen (15) days.  If Landlord and Tenant are unable to agree upon the Market Rate within such 15-day period, then Tenant, by written notice to Landlord prior to the expiration of such 15-day period, may, as its sole and exclusive remedy, either (i) terminate this Lease as of end of the initial Lease Term, or (ii) dispute Landlord’s determination of the Market Rate and proceed to arbitration as set forth below.  If Tenant fails to deliver such written notice prior to the expiration of such 15-day period, then Tenant shall be deemed to have rejected Landlord’s proposed Market Rate and rescinded Tenant’s notice electing to exercise the renewal option.

 

(2)                                 If Tenant disputes Landlord’s determination of the Market Rate for an extension of the Lease Term as set forth above, then the Market Rate shall be selected by three appraisers as provided in this section.  Upon delivery and receipt of such notice, each party will within seven days thereafter separately select an appraiser that must (i) have at least five years of full-time commercial appraisal experience with projects comparable to the Complex, (ii) be a member of the American Institute of Real Estate Appraisers or a similar appraisal association, and (iii) not have any material financial or business interest in common with either of the parties, which two appraisers will, within seven days of their selection, mutually appoint a third appraiser meeting the criteria set forth above (and who also does not have any material financial or business interest in common with either of the two selecting appraisers).  Within seven days of the appointment of the third appraiser, Landlord and Tenant will submit to the three appraisers their respective determinations of Market Rate and any related information.  Within twenty-one (21) days of such appointment of the third appraiser, the three appraisers will review each party’s submittal (and such other information as the three appraisers deems necessary) and will select, in total and without modification, the submittal presented by either Landlord or Tenant as the Market Rate.  Subject to the previous sentence, if the three appraisers timely receive one party’s submittal, but not both, the appraisers must designate the submitted proposal as the Market Rate for the applicable extension of the Lease Term.  Any determination of Market Rate made by the three appraisers in violation of the provisions of this section shall be beyond the scope of authority of the three appraisers and shall be null and void.  Landlord and Tenant will each separately pay all costs, fees, and expenses for its selected appraiser and each will pay directly to the third appraiser, one-half (1⁄2) of all fees, costs and expenses of the third appraiser.

 

(3)                                 Tenant shall have no further renewal options unless expressly granted by Landlord in writing.

 

Tenant’s rights under this Exhibit “G” shall terminate if (i) the Lease or Tenant’s right to possession of the Premises is terminated, (ii) Tenant assigns any of its interest in the Lease or sublets any portion of the Premises, or (iii) Tenant fails to timely exercise its option under this Exhibit “G”, time being of the essence with respect to Tenant’s exercise thereof.

 

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EXHIBIT “H”

 

RIGHT OF FIRST OFFER

 

So long as no Event of Default then exists under this Lease, Tenant will have the first right (“First Right”) to be offered by Landlord the opportunity to lease all contiguous space on the fifth (5th) floor of the Building shown on Exhibit “H-1” attached hereto (the “First Right Space”).  The First Right is subject to the terms and conditions set forth in this section, and is further subject to any prior rights to such space granted to any other tenants in the Building, which are as follows: Houghton Mifflin Harcourt Publishing Company and Medpoint Digital, Inc.  If at any time after the Commencement Date while this First Right is in effect Landlord receives a request for proposal that covers all or any part of the First Right Space (“RFP”) and intends to lease all or any part of the First Right Space, then Landlord will first notify Tenant that such First Right Space, and any other space described in the RFP (including space on other floors), is available for lease (collectively, the “Available Space”).  Tenant must notify Landlord in writing within ten (10) Business Days of receiving Landlord’s notice whether Tenant desires to lease all of the Available Space from Landlord.  If Tenant notifies Landlord that Tenant does not desire to lease all of the Available Space, or if Tenant does not respond in writing to Landlord’s notice within such ten-Business Day period, then Landlord may freely lease the Available Space without restriction.  If Tenant notifies Landlord in writing within such ten-Business Day period that Tenant desires to lease all of the Available Space, the parties will thereafter negotiate for Tenant’s lease of all of the Available Space from Landlord.  If Landlord and Tenant fail to mutually agree upon the terms of Tenant’s lease of all of the Available Space and to execute a written amendment to this Lease within ten (10) Business Days after Tenant delivers Tenant’s offer notice to Landlord, then Landlord’s obligations under this section shall automatically terminate and be of no further force or effect at the end of such ten-Business Day period.  Tenant’s First Right shall apply during the Term (including any extensions thereof) and shall automatically terminate on the last day of the Term.  The purpose of this section is to provide notice to Tenant so that Tenant may be in a position to offer to lease such space on a competitive basis with others, and, notwithstanding anything to the contrary contained in this section, nothing in this section shall be deemed to be an option or right of first refusal.  Furthermore, notwithstanding anything to the contrary contained in this Exhibit, nothing in this Exhibit shall be deemed to prevent, limit, or otherwise restrict Landlord from responding to or otherwise engaging any third party regarding the First Right Space or Available Space during the ten-Business Day period described herein.

 

1

 

EXHIBIT “H-1”

 

FIRST RIGHT SPACE

 

 

2

 

EXHIBIT “I”

 

INTENTIONALLY OMITTED

 

1

 

EXHIBIT “J”

 

INTENTIONALLY OMITTED

 

1

 

EXHIBIT “K”

 

EXISTING EXPANSION RIGHTS AND ROFRS ENCUMBERING THE PREMISES

 

None.

 

1

 

EXHIBIT “L”

 

INTENTIONALLY OMITTED

 

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EXHIBIT “M”

 

LETTER OF CREDIT TERMS AND CONDITIONS

 

1.                                      Letter of Credit.  Concurrently with the execution of this Lease, Tenant must deliver to Landlord an unconditional, irrevocable standby letter of credit (“Letter of Credit”) which conforms in form and substance to the attached Schedule “1” (or is otherwise reasonably acceptable to Landlord) and which:

 

(a)                                 is issued by a United States federal or state chartered bank (“Issuer”) that (i) is a commercial bank or trust company reasonably acceptable to Landlord, and (ii) has total assets of at least One Billion Dollars ($1,000,000,000.00), as determined in accordance with generally accepted accounting principles consistently applied (“Total Assets”);

 

(b)                                 names Landlord as beneficiary thereunder;

 

(c)                                  has a term ending not less than one year after the date of issuance;

 

(d)                                 automatically renews for one-year periods unless Issuer notifies beneficiary in writing, at least 60 days prior to the expiration date, that Issuer elects not to renew the Letter of Credit;

 

(e)                                  provides for payment to beneficiary of immediately available funds (denominated in United States dollars) in the amount of Three Hundred Fifty Thousand and 00/100 Dollars ($350,000.00), subject to reduction as may be provided in Section 9 below, within 24 hours after presentation of the Sight Draft substantially conforming to the form attached as Exhibit “A” to the Letter of Credit;

 

(f)                                   provides that draws may be presented, and are payable, at Issuer’s letterhead office, the office located at Chicago, Illinois or any other full service office of Issuer;

 

(g)                                  is payable in sight drafts which only require the beneficiary to state that the draw is payable to the order of beneficiary;

 

(h)                                 permits partial and multiple draws;

 

(i)                                     permits multiple transfers by beneficiary;

 

(j)                                    waives any rights Issuer may have, at law or otherwise, to subrogate to any claims beneficiary may have against applicant or applicant may have against beneficiary; and

 

(k)                                 is governed by the International Standby Practices 1998, published by the International Chamber of Commerce.

 

The Letter of Credit (as transferred, extended, renewed or replaced) must be maintained during the entire Lease Term, as extended or renewed, and for a period of 45 days thereafter.

 

2.                                      Transfer; Fees.  Landlord may freely transfer the Letter of Credit in connection with an assignment of this Lease without (i) Tenant’s consent, (ii) restriction on the number of transfers or (iii) condition, other than presentment to Issuer of the original Letter of Credit and a duly executed transfer document conforming to the form attached as Exhibit “B” to the Letter of Credit. Tenant is solely responsible for any bank fees or charges imposed by Issuer in connection with the issuance of the Letter of Credit or any transfer, renewal, extension or replacement thereof.  If Tenant fails to timely pay such transfer fee, Landlord may, at its option and without notice to Tenant, elect to pay any transfer fees to Issuer when due, and upon payment, such amount will become immediately due and payable from Tenant to Landlord as Additional Rent under this Lease.

 

1

 

3.                                      Draw and Use of Draw Proceeds.  Immediately upon the occurrence of an Event of Default (as defined in the Lease), and at any time thereafter, Landlord may draw on the Letter of Credit, in whole or in part (if partial draw is made, Landlord may make multiple draws), as Landlord may determine in Landlord’s sole and absolute discretion in accordance with the Lease.  The term “Draw Proceeds” means the cash proceeds of any draw or draws made by Landlord under the Letter of Credit.  Any delays by Landlord in drawing on the Letter of Credit or using the Draw Proceeds will not constitute a waiver by Landlord of any of its rights hereunder with respect to the Letter of Credit or the Draw Proceeds.  Landlord will hold the Draw Proceeds in its own name and may co-mingle the Draw Proceeds with other accounts of Landlord or invest them as Landlord may determine in its sole and absolute discretion.

 

In addition to any other rights and remedies Landlord may have, Landlord may in its sole and absolute discretion and at any time, use and apply all or any portion of the Draw Proceeds to pay Landlord for any one or more of the following:

 

(a)                                 Rent or any other sum which is past due, due or becomes due, or to which Landlord is otherwise entitled under the terms of this Lease, due to an Event of Default (including, without limitation, late payment fees or charges and any amounts which Landlord is or would be allowed to collect under this Lease, and without deducting therefrom any offset for proceeds of any potential reletting or other potential mitigation which has not in fact occurred at the time of the draw);

 

(b)                                 any and all amounts incurred or expended by Landlord in connection with the exercise and pursuit of any one or more of Landlord’s rights or remedies under this Lease after an Event of Default, including, without limitation, reasonable attorneys’ fees and costs;

 

(c)                                  any and all amounts incurred or expended by Landlord in obtaining the Draw Proceeds, including, without limitation, reasonable attorneys’ fees and costs; or

 

(d)                                 any and all other damage, injury, expense or liability caused to or incurred by Landlord as a result of any Event of Default.

 

To the extent that Draw Proceeds exceed the amounts so applied, such excess Draw Proceeds will be held by Landlord as a Security Deposit in accordance with the terms of Section 8 of the Lease.  Following any use or application of the Draw Proceeds, Tenant, if requested by Landlord in writing, must, within 10 days after receipt of Landlord’s request, cause a replacement Letter of Credit complying with Section 1 above to be issued and delivered to Landlord; provided, however, that the amount of the replacement Letter of Credit will be an amount equal to the amount of the Letter of Credit (as set forth in Section 1(e) above) required hereunder from time to time less any unapplied Draw Proceeds on the date the replacement Letter of Credit is issued.  Upon Landlord’s receipt of the replacement Letter of Credit, Landlord will deliver the prior original Letter of Credit to Issuer for cancellation (if not theretofore fully drawn) and any unapplied Draw Proceeds will be applied in accordance with Sections 3(a), (b), (c) and (d) above.

 

If it is determined or adjudicated by a court of competent jurisdiction that Landlord was not entitled to draw on the Letter of Credit, Tenant may, as its sole and exclusive remedy, cause Landlord to (i) deliver the prior original Letter of Credit to Issuer for cancellation (if not theretofore fully drawn), (ii) return to Issuer the amount of the Draw Proceeds which the court determines Landlord was not entitled to draw and (iii) reimburse Tenant for all out-of-pocket fees, costs and interest expenses actually incurred by Tenant as a direct result of Landlord’s draw on the Letter of Credit; provided, however, Tenant may exercise its exclusive remedy only after Tenant has (y) cured all defaults under this Lease and (z) caused a replacement Letter of Credit complying with Section 1 above to be issued and delivered to Landlord. Landlord will not be liable for any other actual damages or any indirect, consequential, special or punitive damages incurred by Tenant in connection with either a draw by Landlord on the Letter of Credit or the use or application by Landlord of the Draw Proceeds.  Nothing in this Lease or in the Letter of Credit will confer upon Tenant any property right or interest in any Draw Proceeds.

 

4.                                      Renewal and Replacement.  The Letter of Credit must provide that it will be automatically renewed unless Issuer provides written notice of nonrenewal to Landlord at least 60 days prior to the expiration date of the Letter of Credit.  If written notice of nonrenewal is received from Issuer, Tenant must renew the Letter of

 

2

 

Credit or replace it with a new Letter of Credit, at least 30 days prior to the stated expiration date of the then-current Letter of Credit.  Any renewal or replacement Letter of Credit must meet the criteria set forth in Section 1 above, and must have a term commencing at least one day prior to the stated the expiration date of the immediately prior Letter of Credit.  Failure to provide a renewal or replacement Letter of Credit as provided above will, at Landlord’s election, be an Event of Default under this Lease.

 

5.                                      Issuer Quality Event.  If an Issuer Quality Event occurs, Tenant, upon 30 days advance written notice from Landlord, must, at its own cost and expense, provide Landlord with a replacement Letter of Credit meeting all of the requirements of Section 1 above and upon receipt of such replacement Letter of Credit Landlord shall immediately return the existing letter of credit to Tenant.  The term “Issuer Quality Event” means the Issuer fails to meet the criteria set forth in Section 1(a) above.  If Tenant does not provide Landlord with a replacement Letter of Credit meeting the requirements of Section 1 above within thirty (30) days after Tenant receives written notice from Landlord that an Issuer Quality Event has occurred, such failure will, at Landlord’s election, be an Event of Default under this Lease.

 

6.                                      Additional Agreements of Tenant.  Tenant expressly acknowledges and agrees that:

 

(a)                                 the Letter of Credit constitutes a separate and independent contract between Landlord and Issuer, and Tenant has no right to submit a draw to Issuer under the Letter of Credit;

 

(b)                                 Tenant is not a third-party beneficiary of such contract, and Landlord’s ability to either draw under the Letter of Credit for the full or any partial amount thereof or to apply Draw Proceeds may not, in any way, be conditioned, restricted, limited, altered, impaired or discharged by virtue of any Laws to the contrary, including, but not limited to, any Laws that restrict, limit, alter, impair, discharge or otherwise affect any liability that Tenant may have under this Lease or any claim that Landlord has or may have against Tenant;

 

(c)                                  During the Term, neither the Letter of Credit nor any Draw Proceeds will be or become the property of Tenant, and Tenant does not and will not have any property right or interest therein;

 

(d)                                 Tenant is not entitled to any interest on any Draw Proceeds;

 

(e)                                  neither the Letter of Credit nor any Draw Proceeds constitute an advance payment of Rent, security deposit or rental deposit;

 

(f)                                   neither the Letter of Credit nor any Draw Proceeds constitute a measure of Landlord’s damages resulting from any Event of Default; and

 

(g)                                  Tenant will cooperate with Landlord, at Tenant’s own expense, in promptly executing and delivering to Landlord all modifications, amendments, renewals, extensions and replacements of the Letter of Credit, as Landlord may reasonably request to carry out the terms and conditions of this Exhibit “M”.

 

7.                                      Restrictions on Tenant Actions.  Tenant hereby irrevocably waives any and all rights and claims that it may otherwise have at law or in equity, to contest, enjoin, interfere with, restrict or limit, in any way whatsoever, any requests or demands by Landlord to Issuer for a draw or payment to Landlord under the Letter of Credit.  If Tenant, or any person or entity on Tenant’s behalf or at Tenant’s discretion, brings any proceeding or action to contest, enjoin, interfere with, restrict or limit, in any way whatsoever, any one or more draw requests or payments under the Letter of Credit, Tenant will be liable for any and all direct and indirect damages resulting therefrom or arising in connection therewith, including, without limitation, reasonable attorneys’ fees and costs.

 

8.                                      Cancellation After End of Term.  Provided that no Event of Default then exists, Landlord will deliver the Letter of Credit to the Issuer for cancellation within 45 days after Tenant surrenders the Premises to Landlord upon the expiration of the Term.

 

9.                                      Potential Reduction.  Notwithstanding the foregoing, if at the end of the first seventeen (17) months of the Lease Term (a) no Event of Default then exists, and (b) there has been no monetary Event of Default

 

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during such seventeen (17)-month period, then, upon the written request of Tenant, the face amount of the Letter of Credit may be reduced to $280,000.00, and immediately upon delivery to Landlord of a satisfactory replacement Letter of Credit in such reduced face amount but meeting all of the other requirements of this Exhibit “M,” the then existing Letter of Credit will be deemed canceled and shall be returned to Tenant.

 

Furthermore, if at the end of the first twenty-nine (29) months of the Lease Term (a) no Event of Default then exists, and (b) there has been no monetary Event of Default during such twenty-nine (29)-month period, then, upon the written request of Tenant, the face amount of the Letter of Credit may be reduced to $210,000.00, and immediately upon delivery to Landlord of a satisfactory replacement Letter of Credit in such reduced face amount but meeting all of the other requirements of this Exhibit “M,” the then existing Letter of Credit will be deemed canceled and shall be returned to Tenant.

 

Furthermore, if at the end of the first forty-one (41) months of the Lease Term (a) no Event of Default then exists, and (b) there has been no monetary Event of Default during such forty-one (41)-month period, then, upon the written request of Tenant, the face amount of the Letter of Credit may be reduced to $140,000.00, and immediately upon delivery to Landlord of a satisfactory replacement Letter of Credit in such reduced face amount but meeting all of the other requirements of this Exhibit “M,” the then existing Letter of Credit will be deemed canceled and shall be returned to Tenant.

 

Furthermore, if at the end of the first fifty-three (53) months of the Lease Term (a) no Event of Default then exists and (b) there has been no monetary Event of Default during such fifty-three (53)-month period, then, upon the written request of Tenant, the face amount of the Letter of Credit may be reduced to $70,000.00, and immediately upon delivery to Landlord of a satisfactory replacement Letter of Credit in such reduced face amount but meeting all of the other requirements of this Exhibit “M,” the then existing Letter of Credit will be deemed canceled and shall be returned to Tenant.

 

For purposes of this Section 9, “monetary Event of Default” shall mean late payment of Rent.

 

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SCHEDULE 1

TO

EXHIBIT “M” OF THE LEASE

 

FORM OF LETTER OF CREDIT

 

[LETTERHEAD OF ISSUING BANK]

 

	
IRREVOCABLE   STANDBY LETTER
    	
DATE   OF ISSUANCE:                                           
    
	
OF   CREDIT NO:
    	
                    
    	
EXPIRATION   DATE:
    	
                                
    
	
 
    	
 
    
	
BENEFICIARY:
    	
APPLICANT:
    
	
 
    	
 
    
	
(LANDLORD)
    	
 
    	
(TENANT)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
					

 

AS THE ISSUING BANK (“ISSUER”), WE HEREBY ESTABLISH THIS IRREVOCABLE STANDBY LETTER OF CREDIT NO.                  IN FAVOR OF THE ABOVE-NAMED BENEFICIARY (“BENEFICIARY”) FOR THE ACCOUNT OF THE ABOVE-NAMED APPLICANT (“APPLICANT”) IN THE AMOUNT OF USD $                 (                                               U.S. DOLLARS).

 

BENEFICIARY MAY DRAW ALL OR ANY PORTION OF THIS LETTER OF CREDIT AT ANY TIME AND FROM TIME TO TIME AND ISSUER WILL MAKE FUNDS IMMEDIATELY AVAILABLE TO BENEFICIARY UPON PRESENTATION OF BENEFICIARY’S DRAFT(S) AT SIGHT IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT “A”) (“SIGHT DRAFT”), DRAWN ON ISSUER AND ACCOMPANIED BY THIS LETTER OF CREDIT.  ALL SIGHT DRAFT(S) MUST BE SIGNED AND ENDORSED ON BEHALF OF BENEFICIARY AND SIGNATOR MUST INDICATE HIS OR HER TITLE OR OTHER OFFICIAL CAPACITY.  NO OTHER DOCUMENTS WILL BE REQUIRED TO BE PRESENTED.  THE ISSUER WILL EFFECT PAYMENT UNDER THIS LETTER OF CREDIT WITHIN 24 HOURS AFTER PRESENTMENT OF THE SIGHT DRAFT(S).

 

ISSUER WILL HONOR ANY SIGHT DRAFT(S) PRESENTED IN SUBSTANTIAL COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT AT THE ISSUER’S LETTERHEAD OFFICE, THE OFFICE LOCATED AT                                                     OR ANY OTHER FULL SERVICE OFFICE OF THE ISSUER ON OR BEFORE THE ABOVE STATED EXPIRATION DATE, AS SUCH EXPIRATION DATE MAY BE EXTENDED HEREUNDER.  PARTIAL AND MULTIPLE DRAWS AND PRESENTATIONS ARE PERMITTED ON ANY NUMBER OF OCCASIONS.  FOLLOWING ANY PARTIAL DRAW, ISSUER WILL ENDORSE THIS LETTER OF CREDIT AND RETURN THE ORIGINAL TO BENEFICIARY.

 

ISSUER ACKNOWLEDGES THAT THIS LETTER OF CREDIT IS ISSUED PURSUANT TO THE PROVISIONS OF THAT CERTAIN OFFICE LEASE AGREEMENT BETWEEN THE BENEFICIARY AND THE APPLICANT FOR SPACE LOCATED AT                                                                                                                                                                    (“LEASE”).  NOTWITHSTANDING ANY REFERENCE IN THIS LETTER OF CREDIT TO THIS LEASE OR ANY OTHER DOCUMENTS, INSTRUMENTS OR AGREEMENTS, OR REFERENCES IN THIS LEASE OR ANY OTHER DOCUMENTS, INSTRUMENTS OR AGREEMENTS TO THIS LETTER OF CREDIT, THIS LETTER OF CREDIT CONTAINS THE ENTIRE AGREEMENT BETWEEN BENEFICIARY AND ISSUER RELATING TO THE OBLIGATIONS OF ISSUER HEREUNDER.

 

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THIS LETTER OF CREDIT WILL BE AUTOMATICALLY EXTENDED EACH YEAR WITHOUT AMENDMENT FOR A PERIOD OF ONE YEAR FROM THE EXPIRATION DATE HEREOF, AS EXTENDED, UNLESS AT LEAST SIXTY (60) DAYS PRIOR TO THE EXPIRATION DATE, ISSUER NOTIFIES BENEFICIARY BY REGISTERED MAIL THAT IT ELECTS NOT TO EXTEND THIS LETTER OF CREDIT FOR SUCH ADDITIONAL PERIOD.  NOTICE OF NON-EXTENSION WILL BE GIVEN BY ISSUER TO BENEFICIARY AT BENEFICIARY’S ADDRESS SET FORTH HEREIN OR AT SUCH OTHER ADDRESS AS BENEFICIARY MAY DESIGNATE TO ISSUER IN WRITING AT ISSUER’S LETTERHEAD ADDRESS

 

THIS LETTER OF CREDIT IS FREELY TRANSFERABLE IN WHOLE OR IN PART, AND THE NUMBER OF TRANSFERS IS UNLIMITED.  ISSUER AGREES THAT IT WILL EFFECT ANY TRANSFERS IMMEDIATELY UPON PRESENTATION TO ISSUER THIS LETTER OF CREDIT AND A WRITTEN TRANSFER REQUEST SUBSTANTIALLY IN THE FORM OF THE COMPLETED TRANSFER FORM ATTACHED HERETO AS EXHIBIT “B.”  SUCH TRANSFER WILL BE EFFECTED AT NO COST TO BENEFICIARY.  ANY TRANSFER FEES ASSESSED BY ISSUER WILL BE PAYABLE SOLELY BY APPLICANT, AND THE PAYMENT OF ANY TRANSFER FEES WILL NOT BE A CONDITION TO THE VALIDITY OR EFFECTIVENESS OF THE TRANSFER OR THIS LETTER OF CREDIT.

 

ISSUER WAIVES ANY RIGHTS IT MAY HAVE, AT LAW OR OTHERWISE, TO SUBROGATE TO ANY CLAIMS BENEFICIARY MAY HAVE AGAINST APPLICANT OR APPLICANT MAY HAVE AGAINST BENEFICIARY.

 

EXCEPT AS OTHERWISE EXPRESSLY MODIFIED HEREIN, THIS STANDBY LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES 1998, PUBLISHED BY THE INTERNATIONAL CHAMBER OF COMMERCE.

 

	
 
    	
ISSUER:
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
AUTHORIZED SIGNATURE
    
	
 
    	
 
    
	
 
    	
Its:
    	
 
    

 

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EXHIBIT “A”

TO LETTER OF CREDIT

 

SIGHT DRAFT

 

Sight Draft

 

$                        

 

At sight, pay to the order of [Name of Beneficiary to be inserted], the amount of USD $                 (                              and 00/100ths U.S. Dollars).

 

Drawn under [Name of Issuer to be inserted] Standby Letter of Credit No.                       .

 

	
 
    	
Dated:                    ,   20              
    
	
 
    	
 
    
	
 
    	
[Name   of Beneficiary to be inserted]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Its   Authorized Representative and [Title
    
	
 
    	
 
    	
or   Other Official Capacity to be inserted]
    
	
 
    	
 
    
	
To:
    	
[Name   and Address of Issuer to be inserted]
    	
 
    
				

 

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EXHIBIT “B”

TO LETTER OF CREDIT

 

FORM OF TRANSFER REQUEST

 

	
IRREVOCABLE   STANDBY LETTER OF
    	
 
    
	
CREDIT   NO:
    	
                                                 
    	
 
    
	
 
    	
 
    
	
CURRENT   BENEFICIARY:
    	
APPLICANT:
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
TO:
    	
[NAME   OF ISSUING BANK]
    	
 
    
					

 

The undersigned, as the current “Beneficiary” of the above referenced Letter of Credit, hereby requests that you reissue the Letter of Credit in favor of the transferee named below [INSERT TRANSFEREE NAME AND ADDRESS BELOW]:

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

	
From   and after the date this transfer request is delivered to the Issuer, the   transferee shall be the “Beneficiary” under the Letter of Credit for all   purposes and shall be entitled to exercise and enjoy all of the rights,   privileges and benefits thereof.
    
	
 
    	
 
    
	
DATED:
    	
[NAME   OF BENEFICIARY]
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name
    	
 
    
	
 
    	
Title
    	
 
    
	
 
    	
 
    
	
 
    	
[NOTARY   ACKNOWLEDGMENT]
    
				

 

[TO BE SIGNED BY A PERSON PURPORTING TO BE AN AUTHORIZED REPRESENTATIVE OF THE BENEFICIARY AND INDICATING THEIR TITLE OR OTHER OFFICIAL CAPACITY, AND ACKNOWLEDGED BY A NOTARY PUBLIC.]

 

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EXHIBIT “N”

 

LABORATORY USE RIDER

 

In the event Tenant uses all or any portion of the Premises for a laboratory for research and development of medicine and drugs, and/or any ancillary uses related thereto as described in Section 4 of this Lease above, then Tenant shall at all times thereafter comply with the terms of this Laboratory Use Rider.

 

Compliance with Laws.  Tenant shall comply with all Laws applicable to Tenant’s use or occupancy of the Premises, including without limitation, the rules and regulations promulgated by the Illinois Department of Public Health, and any other governmental bodies and authorities which regulate laboratory facilities in the State of Illinois.

 

Special Prohibited Uses.  Without limitation, Tenant shall not use the Premises or allow the Premises to be used for: (1) the operation of any medical offices seeing patients; (2) the operation of any type of clinic; (3) the performance of studies, tests, or trials that allow participants to enter and/or exit the Premises; or (4) any use which in Landlord’s reasonable judgment would materially adversely affect the image, use or operation of the Property.

 

Medical Waste Policy.  Prior to operating a laboratory in the Premises, to the extent any hazardous medical waste will be generated, Tenant shall furnish to Landlord a written policy (the “Medical Waste Policy”) concerning the identification, collection, storage, decontamination and disposal of “hazardous medical waste” at the Premises, which Medical Waste Policy shall be subject to the written approval of Landlord (which approval shall not be unreasonably withheld, conditioned or delayed) and once approved by Landlord shall not be amended or modified without the further written approval of Landlord (which approval shall not be unreasonably withheld, conditioned or delayed).  Except for normal and ordinary hazardous materials used in an office environment in normal and ordinary types and amounts (such as lubricants, solvents, copier toner, white out, etc.), Tenant agrees that such Medical Waste Policy shall incorporate the following elements:  (i) Tenant and its employees and agents shall be expressly forbidden from disposing of any hazardous medical waste within the Premises or the Property in a manner which is contrary to the terms of the Medical Waste Policy; (ii) all such hazardous medical waste will be collected, stored, decontaminated and removed from the Premises and the Property by a qualified party in compliance with all applicable Laws (including, without limitation, those of the Illinois Department of Public Health and the Occupational Safety and Health Act) of the City of Evanston, County of Cook, State of Illinois, the Center for Disease Control and any other local, state or federal agency having jurisdiction over this matter; and (iii) Tenant shall at all times employ proper procedures, including, without limitation, the use of tags, signs or other appropriate written communication, to prevent accidental injury or illness to other tenants in the Building (including their employees, agents and invitees) resulting from Tenant’s collection, storage, decontamination and disposal of hazardous medical waste.  Tenant agrees that at all times during the Term, Tenant and its employees and agents shall adhere to the terms and conditions of the Medical Waste Policy.  For purposes of this paragraph, “hazardous medical waste” shall include, but not be limited to, the following: any potentially infectious materials; blood and other body fluids in any form (including, without limitation, lab specimens); any material contaminated by potentially infectious materials or by blood or other body fluids; scalpels, needles and syringes; gloves and other disposable protective clothing or devices; contaminated linen; uniforms or laundry; and cleaning equipment or materials used to clean any of the foregoing.

 

Laboratory Equipment.  No electrical or electronic or electromagnetic or similar equipment or machines or devices shall be installed or used in the Premises unless the same is properly electrically filtered and insulated so that there is no interference in the Property with telephonic, video, fiber optic, data processing, radio, television or other communication, transmission or reception.  All walls, ceilings, floors and doors of any room used for any such use shall be properly shielded to the extent required to comply with any applicable federal, state and local laws, ordinances, rules and regulations. Notwithstanding anything in this Lease to the contrary, any and all specialized equipment related to Tenant’s laboratory use at the Premises must be approved in writing by Landlord before being brought into, installed or used in the Premises, and Tenant shall remove any and all such equipment upon the expiration or sooner termination of the Term (and repair any damage caused by such removal).

 

Noise, Vibration, and Odors.  Tenant shall not allow or permit any excessive vibration, noise or odor to emanate from the Premises, or any machine or other installation therein, or otherwise allow or permit the same to

 

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constitute a disturbance or nuisance to occupants of the Property. Furthermore, the Premises shall not be used for any purpose which creates strong, unusual, or offensive odors, fumes, dust or vapors, including any such odors, fumes, dust or vapors caused by the heating, burning or other use of chemicals in the Premises.

 

Licensing.  Tenant represents that it is and will be licensed to operate the Permitted Use in the Premises at all times, and Tenant agrees to obtain and maintain at all times, at its expense, all requisite permits and/or licenses in connection therewith and shall furnish copies of same to Landlord upon request.  Landlord shall in no event be obligated to make any additions, alterations or improvements to the Property, or to increase or alter any existing management function or procedure for the Property, which may be required by any governmental authority as a condition precedent to the issuance or renewal of any such permit or license, any and all such required additions, alterations or improvements to be made, at Tenant’s sole expense, subject to the terms and provisions of this Lease.

 

Floor Loading.  Tenant agrees not to overload the floor(s) of the Building.  Subject to applicable Laws, Tenant, at its expense, may reinforce certain areas within the Premises.  The actual areas to be reinforced and the plans and specifications for such reinforcement shall be subject to Landlord’s prior written approval (which approval shall not be unreasonably withheld, conditioned or delayed).  Tenant shall also pay the fees of any structural engineer engaged by Landlord to review Tenant’s structural reinforcement plans and specifications, unless Tenant engages Landlord’s designated structural engineers for the Property to provide the structural engineering drawings and services for the Tenant Improvements.

 

Insurance.  Tenant shall not knowingly conduct or permit to be conducted in the Premises any activity, or place any equipment in or about the Premises or the Building, which will invalidate the insurance coverage in effect or increase the rate of fire insurance or other insurance on the Premises or the Building.  If any invalidation of coverage or increase in the rate of fire insurance or other insurance occurs or is threatened by any insurance company due to activity conducted from the Premises, or any act or omission by Tenant, or its agents, employees, representatives, or contractors, such statement or threat shall be conclusive evidence that the increase in such rate is due to such act of Tenant or the contents or equipment in or about the Premises, and, as a result thereof, Tenant shall be in default and liable therefor, including (without limitation) for the costs of any premium increase and such increase shall be considered additional Rent payable with the next monthly installment of Base Rental due under this Lease, and Landlord’s acceptance of such amount shall not waive any of Landlord’s other rights.

 

In addition to the insurance requirements described in Section 20 and Section 21 of this Lease, Tenant shall maintain Pollution or Environmental Impairment Insurance covering: (1) first-party costs for cleanup and remediation; (2) third party liability for bodily injury; and (3) property damage on-site and off-site, with limits of no less than one million ($1,000,000) per occurrence.  This policy shall name the Landlord, FSP Property Management LLC, any mortgagee designated by Landlord and the building management company, if any, as additional insureds.  Further, this policy shall provide for loss of rental income for up to 12 months (e.g. in the event of extensive remediation).

 

Hazardous Materials.  Without limiting the terms and conditions of Section 16 of this Lease, in no event shall Tenant introduce or permit to be kept on the Premises or brought into the Building any dangerous, noxious, radioactive or explosive substance, unless in accordance with the Medical Waste Policy or otherwise expressly approved in writing by Landlord.  Tenant hereby indemnifies Landlord, its agents and employees, from any judgment, loss or claim, including attorney’s fees incurred in defending against any such loss or claim entered against, incurred or sustained by any or either of them as the result of any injury to any individual or entity occasioned by contact with or exposure to any infectious, infected, dangerous, noxious, radioactive, explosive, hazardous or contaminated material, substance or thing utilized, applied, removed or received by Tenant, its agents, employees, concessionaires, or invitees.

 

Alterations Related to Laboratory Use.  Notwithstanding anything contained in Section 15 of this Lease to the contrary, (i) Tenant shall make no Alterations related to Tenant’s laboratory use at the Premises without the prior written consent of Landlord, and (ii) with respect any Alterations related to Tenant’s laboratory use at the Premises, Tenant shall remove all such Alterations upon the expiration or sooner termination of the Term in a good and workmanlike manner and upon such removal Tenant shall restore the Premises to its original condition prior to the installation of such Alterations (including, without limitation, restoring the Premises to Building standard office finishes and mechanical, electrical and plumbing systems).

 

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Janitorial.  Without limiting the terms and conditions of the Medical Waste Policy described above, at Tenant’s sole cost and expense, Tenant shall provide cleaning and janitorial services with respect to any laboratory space in the Premises, at a level comparable to that provided in similar first class office buildings in the Market Area.  Notwithstanding anything contained in the Lease to the contrary, Landlord shall not be required to provide cleaning and janitorial services with respect to any laboratory space in the Premises.  Landlord must approve in advance the scope and provider of such cleaning or janitorial services, including any contract therefor.  Any such service provider shall be licensed and reputable and shall maintain, at its own expense, insurance coverage against such risks with such companies as Landlord may reasonably require, in amounts no less than: (i) Commercial General Liability insurance on an occurrence basis in amounts not less than $2,000,000 ($1,000,000 of which may be in excess umbrella coverage) naming Landlord, FSP Property Management LLC, any mortgagee designated by Landlord and the building management company, if any, as additional insureds; (ii) workers’ compensation insurance in amounts required by statute; and (iii) Business Automobile Liability insurance on an occurrence basis in amounts not less than $1,000,000.  Tenant shall provide Landlord with insurance certificates evidencing the above coverage, identities, mailing addresses and telephone numbers for any such service provider prior to commencement of any services.  Each insurance certificate will contain a provision that no cancellation or material change in the policies will be effective except upon thirty (30) days prior written notice.  Any such service provider shall (i) comply with all Laws and Landlord’s waste practices, (ii) not interrupt or interfere with other tenants, (iii) use care and consideration for others on the Property when using any public areas, (iv) prohibit abusive language or actions on the part of its workers, and (v) require all workers to wear company identification.  Landlord and its building manager reserve the right to implement additional rules and regulations applicable to any service provider.

 

Excessive Use of Building Systems, Services or Common Areas.  Tenant’s use and occupancy of the Premises (including, without limitation, Tenant’s use of all or any portion of the Premises for a laboratory) shall not in any manner:  (i) cause the design loads for the Building or the systems providing exhaust, heating, cooling, ventilation, electrical (including, without limitation, as provided in Section 9(a)(6) of this Lease), life safety, water, sewer or other utility or safety services to the Building (collectively, the “Systems”) to be exceeded, (ii) adversely affect the Building or the operation of said Systems in the Premises or the Building or cause deterioration or damage to the Building or to such Systems, or (iii) result in excessive use of any Building services or Common Areas.  If Landlord determines, in Landlord’s reasonable judgment, that Tenant’s use or occupancy of the Premises (including, without limitation, Tenant’s use of all or any portion of the Premises for a laboratory) (i) will cause (or have caused) the design loads for the Building or the Systems or other utility or safety services to the Building to be exceeded, (ii) will adversely affect (or have adversely affected) the Building or the operation of said Systems in the Premises or the Building or will cause (or have caused) deterioration or damages to the Building or to such Systems, or (iii) will result (or have resulted) in excessive use of any Building services or Common Areas, then Landlord shall deliver written notice thereof to Tenant and Tenant shall (X) temper such excess loads and correct, repair and restore the portion of the Building or Systems so affected in a timely and expeditious manner by installing supplementary structural support, exhaust, heating, cooling, ventilation, electrical, life safety, water, sewer or other utility or safety systems in the Premises or elsewhere in the Building where necessary at the sole cost of Tenant, including, without limitation, the cost of preparing and submitting to Landlord for review and approval working drawings and specifications (plus fifteen percent (15%) of such cost as an overhead and supervision fee payable to Landlord) from time to time as the work progresses as additional Rent within ten (10) days after Landlord’s written demand therefor, from time to time, and/or (Y) reimburse Landlord within ten (10) days after Landlord’s written demand, from time to time, for any incremental cost resulting from such excess use of the Building services or Common Areas.  Any expense to Landlord resulting from the operation, repair, maintenance, replacement and removal of any such supplementary structural support, or Systems  or other utility or safety systems, including rent for space occupied by any such supplementary structural support or Systems or other utility or safety systems installed outside the Premises, shall be borne exclusively by Tenant and shall be paid by Tenant to Landlord as additional Rent at rates fixed by Landlord from time to time.  Without limiting the foregoing, Section 9(b) of this Lease will continue to apply in the event Landlord agrees to provide any additional services at the specific request of Tenant as a result of its laboratory use at the Premises, without implying any obligation on the part of Landlord to do so.

 

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