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As filed with the Securities and Exchange Commission on November 5, 2018

Registration No. 333-227902

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

AMENDMENT NO. 1

TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CENTREXION THERAPEUTICS CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware   2834   32-0402377

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

200 State Street

Boston, Massachusetts 02109

(781) 301-7277

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Jeffrey B. Kindler

Chief Executive Officer

Centrexion Therapeutics Corporation

200 State Street

Boston, Massachusetts 02109

(617) 837-6911

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Peter N. Handrinos

Wesley C. Holmes

Latham & Watkins LLP

200 Clarendon Street

Boston, Massachusetts 02116

(617) 948-6000

  Ilir Mujalovic
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
(212) 848-4000

 

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐                 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐                 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐                

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of Securities To Be Registered   Proposed Maximum
Aggregate Offering
Price(1)(2)
 

Amount of Registration

Fee(3)(4)

Common Stock, $0.001 par value per share

  $92,000,000   $11,151

 

 

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Includes the aggregate offering price of additional shares that the underwriters have the option to purchase.

(3)

$10,454 of this registration fee was previously paid by the Registrant in connection with the filing of its Registration Statement on Form S-1 on October 19, 2018.

(4)

Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus dated November 5, 2018.

PROSPECTUS

5,000,000 Shares

 

LOGO

Common Stock

 

 

This is Centrexion Therapeutics Corporation’s initial public offering. We are selling 5,000,000 shares of our common stock.

We expect the public offering price to be between $14.00 and $16.00 per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will trade on The Nasdaq Global Select Market under the symbol “CNTX.”

We are an “emerging growth company” under the federal securities laws and are subject to reduced public company disclosure standards. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”

Investing in the common stock involves risks that are described in the “Risk Factors” section beginning on page 14 of this prospectus.

 

 

 

    

Per Share

      

Total

 

Public offering price

   $          $    

Underwriting discount(1)

   $          $    

Proceeds, before expenses, to us

   $          $    

 

  (1)

We refer you to “Underwriting” beginning on page 192 for additional information regarding underwriting compensation.

The underwriters may also exercise their option to purchase up to an additional 750,000 shares from us, at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus.

Certain of our existing stockholders, including entities affiliated with certain of our directors, have indicated an interest in purchasing an aggregate of approximately $30 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any or all of these stockholders, or any or all of these stockholders may determine to purchase more, fewer or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares will be ready for delivery on or about                     , 2018.

 

 

 

BofA Merrill Lynch           Leerink Partners   Evercore ISI

 

 

The date of this prospectus is                     , 2018.


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TABLE OF CONTENTS

 

    

Page

 

PROSPECTUS SUMMARY

     1  

RISK FACTORS

     14  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     71  

INDUSTRY AND OTHER DATA

     71  

USE OF PROCEEDS

     72  

DIVIDEND POLICY

     74  

CAPITALIZATION

     75  

DILUTION

     78  

SELECTED FINANCIAL DATA

     82  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     84  

BUSINESS

     106  

MANAGEMENT

     147  

EXECUTIVE AND DIRECTOR COMPENSATION

     155  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     169  

PRINCIPAL STOCKHOLDERS

     173  

DESCRIPTION OF CAPITAL STOCK

     177  

SHARES ELIGIBLE FOR FUTURE SALE

     184  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

     187  

UNDERWRITING

     192  

LEGAL MATTERS

     200  

EXPERTS

     200  

WHERE YOU CAN FIND MORE INFORMATION

     200  

INDEX TO FINANCIAL STATEMENTS

     F-1  

 

 

Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Through and including                 , 2018 (25 days after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

We have proprietary rights to trademarks, trade names and service marks appearing in this prospectus that are important to our business. Solely for convenience, the trademarks, trade names and service marks may appear in this prospectus without the ® and TM symbols, but any such references are not intended to indicate, in any way, that we forgo or will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, trade names and service marks. All trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.

 

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For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

 

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PROSPECTUS SUMMARY

This summary highlights, and is qualified in its entirety by, the more detailed information and financial statements included elsewhere in this prospectus. This summary does not contain all of the information that may be important to you in making your investment decision. You should read this entire prospectus carefully, especially the “Risk Factors” section beginning on page 14 and our financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock.

As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our” and “Centrexion” refer to Centrexion Therapeutics Corporation.

Overview

We are a late clinical-stage biopharmaceutical company focused on becoming the leader in identifying, developing and commercializing novel, non-opioid and non-addictive therapies to address the large unmet medical need for the treatment of chronic pain.

As of 2011, over 40 million adults in the United States and over 1 billion people worldwide suffer from chronic pain each year. This epidemic exacts a tremendous cost in terms of direct treatment and rehabilitation expenditures, lost worker productivity, prevalent addiction to opioid-based drugs, and emotional and financial burden for patients and their families. The World Health Organization, or WHO, and European Commission estimate the worldwide prevalence of osteoarthritis, or OA, alone will impact 130 million people by 2050, of whom 40 million will be severely disabled by the disease. According to an Institute of Medicine of the National Academies report, pain is a significant public health problem in the United States that costs society between $560 and $635 billion annually. Despite the magnitude of the pain problem, innovation in the development of therapeutic solutions has been largely absent. Since 2010, there have been 19 approvals by the U.S. Food and Drug Administration, or FDA, for the treatment of pain, of which 11 were opioid variants, one was an extended release generic corticosteroid, five were variants of aspirin, and two were variants of other existing drugs. We are developing a portfolio of novel product candidates designed to overcome the limitations of current treatment options for chronic pain and to present patients and physicians with better and safer treatment alternatives.

Our most advanced product candidate, CNTX-4975, is designed to selectively and locally target and disrupt the signaling of pain-sensing nerve fibers. CNTX-4975 is in pivotal Phase 3 development for the treatment of patients with moderate to severe pain due to knee OA. In a Phase 2 randomized, double-blinded, placebo-controlled clinical trial in 175 subjects with moderate to severe pain due to knee OA, we observed that, compared to placebo, subjects receiving a single intra-articular, or IA, injection of 1.0 mg of CNTX-4975 experienced:

 

   

statistically significant and clinically meaningful reduction in pain with walking on a flat surface, corresponding to question A1 of the Western Ontario and McMaster Universities Arthritis Index, or WOMAC index;

 

   

onset of pain relief observed by second day;

 

   

durable pain relief, lasting six months after a single treatment;

 

   

improvement in knee stiffness;

 

   

improvement in knee function; and

 

   

no detectable systemic exposure of CNTX-4975 by 24 hours after IA injection; and



 

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an observed adverse event, or AE, profile similar to the placebo group based on the overall incidence of AEs and distribution of specific AEs.

In the first quarter of 2018, we began enrolling subjects in VICTORY-1, the first of two planned pivotal Phase 3 registration trials for CNTX-4975, and we expect to report topline results in the first quarter of 2020. In the second half of 2018, we began enrolling subjects in OA-303, an open label safety trial with approximately 850 subjects, and in VICTORY-2, the second pivotal Phase 3 registration trial for CNTX-4975 that includes repeat dosing. We expect to report topline results from OA-303 in the second half of 2019 and VICTORY-2 in the second half of 2020. If the results of these trials are positive, we plan to submit a new drug application, or NDA, in the United States, and a marketing authorization application, or MAA, in Europe, in the second half of 2021. CNTX-4975 was granted Fast Track Designation by the FDA in January 2018 for the treatment of moderate to severe pain associated with knee OA.

We hold worldwide commercialization rights to CNTX-4975, and, if successfully developed and approved, we anticipate initial commercial sales in 2022. Issued and pending patent applications are expected to provide protection for CNTX-4975 through 2038.

In addition to CNTX-4975, we have three other product candidates in clinical development and one in pre-clinical development for the treatment of multiple types of pain. We believe that we have one of the industry’s largest pipelines of novel, non-opioid and non-addictive, clinical-stage product candidates for the treatment of chronic pain.

The pharmaceutical industry is highly competitive and we, along with our competitors, face a number of regulatory and technical challenges. Before obtaining marketing approval from regulatory authorities for the sale of any product candidates, we must complete pre-clinical and clinical development to demonstrate the safety and efficacy of our product candidates. However, we believe that several factors have positioned us to be a leader in the treatment of chronic pain, including our:

 

   

Unique Approach to the Treatment of Chronic Pain—Chronic pain is a highly complex and often misunderstood medical condition. We have a deep understanding of the pathophysiology of chronic pain. We believe we can leverage our knowledge of pain biology to develop targeted treatments that are specific to both the type and source of pain.

 

   

Extensive Clinical Data—We have generated Phase 2 clinical data for our most advanced product candidate, CNTX-4975, that showed onset of response by the second day after administration, a significant reduction from baseline knee OA pain and a clinically meaningful difference compared to the placebo group in subjects with moderate to severe pain associated with knee OA, and the potential for six months of significant pain reduction with a single IA injection. Additionally, in clinical trials to date the safety profile of CNTX-4975 has been similar to placebo with limited systemic exposure of CNTX-4975 after an IA injection.

 

   

Significant Management Team Expertise—We have assembled a senior management team with over 135 years of collective experience in leadership positions at companies such as Abbott, Celgene, Merck, Pfizer and Roche, with substantial product development experience and a successful track record of navigating complex drug development and regulatory pathways. Our clinical team has led or contributed to the development of 20 products, including Rituxan for rheumatoid arthritis, Otezla for psoriasis and psoriatic arthritis and Actemra for rheumatoid arthritis, all three of which have achieved multi-billion dollars in annual sales.



 

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Our product candidates are designed to treat pain conditions of multiple etiologies associated with a wide variety of common disease states. The following table summarizes our current product candidate pipeline:

 

LOGO

Our Strategy

Our mission is to develop and commercialize novel, non-opioid and non-addictive therapies to safely and effectively address the significant unmet medical need of chronic pain. The principal elements of our strategy to achieve this mission include the following:

 

   

Create novel, non-opioid and non-addictive therapies by leveraging our understanding of pain biology to address the large and growing problem of chronic pain. While innovation in medical sciences has led to exciting new treatment options in many disease areas, chronic pain has seen limited innovation in recent years. We have a deep understanding of the pathophysiology of chronic pain. We intend to leverage this understanding to bring innovation in the chronic pain treatment paradigm through targeted drug development. Our senior management team has over 135 years of collective experience in leadership positions at companies with substantial product development experience, and understands the complexity of designing and executing clinical trials for and developing pain therapies.

 

   

Advance the development of our lead product candidate, CNTX-4975, designed for the treatment of patients with moderate to severe chronic pain associated with knee OA. There are limited therapeutic options available for patients with moderate to severe knee OA and we believe that CNTX-4975 has the potential to transform the standard of care to a once-every-six months IA injection to substantially improve knee OA pain. In the first quarter of 2018, we began enrolling subjects in VICTORY-1, the first of two planned pivotal Phase 3 registration trials for CNTX-4975, and we expect to report topline results in the first quarter of 2020. In the second half of 2018, we began enrolling subjects in OA-303, an open label safety trial with approximately 850 subjects, and in VICTORY-2, the second pivotal Phase 3 registration trial for CNTX-4975 that includes repeat dosing. We expect to report topline results from OA-303 in the second half of 2019 and VICTORY-2 in the second half of 2020. In January 2018, the FDA granted Fast Track Designation for CNTX-4975 for the treatment of moderate to severe pain associated with knee OA. If successfully developed and approved, we anticipate initial commercial sales in 2022.



 

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Leverage clinical activity of CNTX-4975 to expand into new indications, including pain associated with the arthritis of other joints. We believe that CNTX-4975 may have analgesic utility in additional joints, including small sized joints such as the carpometacarpal joint, or base of the thumb, medium sized joints such as the ankle, and other large joints such as the shoulder. If we are successful in obtaining safety and efficacy data that support the use of CNTX-4975 in both a small and a medium sized joint, in addition to the large joint of the knee, we believe the indication for use of CNTX-4975, if approved, could potentially be broadened to the treatment of moderate to severe pain associated with OA, with no limitation as to which joint is involved. In addition, there are other types of joint disorders associated with chronic pain, such as rheumatoid and psoriatic arthritis, post-traumatic joint injury and temporomandibular joint disorders, where we believe CNTX-4975 may have potential for use as an analgesic.

 

   

Advance our other product candidates through clinical development and pursue development of additional product candidates. Our objective is to build a well-balanced, multi-asset portfolio targeting the large population of patients with chronic pain. To achieve this, in addition to CNTX-4975, we intend to pursue development of our other product candidates, CNTX-0290, CNTX-6970, CNTX-2022 and CNTX-6016, in indications where we believe they could have meaningful impact and address the large unmet medical need. In addition, we may choose to selectively in-license or acquire complementary product candidates by leveraging the insights, network and experience of our management team.

 

   

Maximize the commercial potential of all our product candidates. We currently intend to retain all commercial rights to CNTX-4975 in the United States and selectively partner outside of the United States. Because injectable IA therapies for chronic joint pain in the United States are administered by a relatively small number of specialists, particularly pain management physicians, sports medicine specialists, orthopedists and rheumatologists, we believe that we can effectively commercialize CNTX-4975 in the United States to each of these specialist groups with our own targeted sales and marketing organization and, thereby, retain greater commercial value versus a partnership. As we continue to build and develop our product portfolio, we may opportunistically pursue strategic partnerships that maximize the value of our pipeline while seeking to maintain commercialization rights in the United States for select specialists that treat chronic pain conditions.

 

   

Leverage our management team background and expertise. We have assembled a management team with extensive experience in product development. Our Chief Medical Officer is a rheumatologist with 28 years of drug development experience, our Chief Scientific Officer is a neurosurgeon who also led a pain research laboratory, and our Chief Development Operations Officer is a veterinary surgeon with 22 years of development experience including participation in the development of four approved pain therapies. Their experience with both patients and drug development provides them with deep insight into chronic pain as well as the changing treatment landscape. We believe this experience enables us to better understand unmet medical needs in chronic pain and design and execute efficient clinical trial programs and regulatory strategies.

Risk Factors

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary. These risks include the following:

 

   

we have a limited operating history, have incurred significant losses since our inception, expect to incur losses for the foreseeable future, may never achieve or maintain profitability, and our



 

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recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern;

 

   

even if this offering is successful, we will need additional funding in order to complete development of and obtain regulatory approval for our product candidates and commercialize our products, if approved;

 

   

our pre-clinical studies and clinical trials may fail to demonstrate adequately the safety and efficacy of any of our product candidates and the development of our product candidates may be delayed or unsuccessful, which could prevent or delay regulatory approval and commercialization;

 

   

our business is highly dependent on the success of our lead product candidate, CNTX-4975, which will require significant additional clinical testing before we can seek regulatory approval and potentially launch commercial sales, and if CNTX-4975 does not receive regulatory approval or is not successfully commercialized, our business may be harmed;

 

   

the clinical trial and regulatory approval processes are lengthy, time consuming and inherently unpredictable, and we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates;

 

   

if the FDA does not conclude that certain of our product candidates satisfy the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for such product candidates under Section 505(b)(2) are not as we expect, the approval pathway for those product candidates may take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful;

 

   

developments by competitors may render our products or technologies obsolete or non-competitive or may reduce the size of our markets;

 

   

failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue;

 

   

our product candidates may cause serious adverse events or undesirable side effects, including injury and death;

 

   

we rely on third parties, some of which are sole suppliers, for the manufacture and supply of materials for our research programs, pre-clinical studies and clinical trials and we do not have long-term contracts with any of these parties, which increases the risk that we will not have sufficient quantities of such materials, product candidates, or any therapies that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts;

 

   

our existing collaborations are important to our business and future licenses may also be important to us, and if we are unable to maintain any of these collaborations, or if these arrangements are not successful, our business could be adversely affected;

 

   

if we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents which are sufficient to protect our product candidates, others could compete against us more directly, which would negatively impact our business; and



 

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our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

Implications of Being an Emerging Growth Company

As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

 

   

being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;

 

   

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;

 

   

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

   

reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

 

   

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if any of the following events occur prior to the end of such five-year period, (i) our annual gross revenue exceeds $1.07 billion, (ii) we issue more than $1.0 billion of non-convertible debt in any three-year period or (iii) if we become a “large accelerated filer” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act), we will cease to be an emerging growth company prior to the end of such five-year period. We will be deemed to be a “large accelerated filer” at such time that we (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act, for a period of at least 12 months and (c) have filed at least one annual report pursuant to the Exchange Act.

We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.



 

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Corporate Information

We were incorporated under the laws of the State of Delaware in February 2013. Our principal executive offices are located at 200 State Street, Boston, Massachusetts 02109 and our telephone number is (617) 837-6911. Our website address is www.centrexion.com. The information contained in, or accessible through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.



 

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The Offering

 

Common stock offered by us

5,000,000 shares

 

Common stock to be outstanding after this offering

22,162,604 shares (or 22,912,604 shares if the underwriters exercise their option to purchase additional shares in full).

 

Option to purchase additional shares

The underwriters have a 30-day option to purchase up to 750,000 additional shares of our common stock at the public offering price less estimated underwriting discounts and commissions.

 

Use of proceeds

We estimate that the net proceeds from this offering will be approximately $66.7 million (or approximately $77.1 million if the underwriters exercise in full their option to purchase additional shares of common stock), at an assumed public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us. We anticipate that we will use the net proceeds of this offering, together with our cash and cash equivalents, to fund the Phase 3 program and pre-commercialization expenses for CNTX-4975 through topline results in the first pivotal Phase 3 registration trial, VICTORY-1; to fund the development of CNTX-0290 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; to fund the development of CNTX-6970 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; to fund the development of CNTX-6016 to complete Phase 1 development; and the remainder, if any, for other research and development expenses for our pipeline, including unallocated expenses and expenses for CNTX-2022, and for working capital and other general corporate purposes. See “Use of Proceeds” beginning on page 72 for additional information.

 

Risk factors

You should carefully read the “Risk Factors” beginning on page 14 and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common stock.

 

Dividend policy

The terms of our current certificate of incorporation provide that, upon conversion of our preferred stock into our common stock upon the closing of this offering, the holders of Series D preferred stock will receive a cumulative accrued dividend calculated at a rate per annum of $0.117 per share of Series D preferred stock (subject to certain adjustment provisions), payable in shares of common stock based on a value of $11.24 per share. Based on an assumed closing date of November 19, 2018, we expect to issue 392,504 shares of our common stock for cumulative accrued dividends to our Series D preferred stockholders. For each day prior to or following the assumed closing date that this offering actually closes, such dividends



 

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decrease or increase, respectively, by an aggregate of approximately 1,157 shares of common stock. The stock dividends will not be paid on any shares of our common stock purchased in this offering. We do not pay dividends on our common stock and do not anticipate paying any dividends on our common stock for the foreseeable future. Any future determinations relating to our dividend policy will be made at the discretion of our board of directors and will depend on various factors. See “Dividend Policy” on page 73.

 

Proposed Nasdaq Global Select Market symbol

“CNTX”

 

 

Certain of our existing stockholders, including entities affiliated with certain of our directors, have indicated an interest in purchasing an aggregate of approximately $30 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any or all of these stockholders, or any or all of these stockholders may determine to purchase more, fewer or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering.

The number of shares of our common stock to be outstanding after this offering is based on 1,244,493 shares of our common stock outstanding as of September 30, 2018 and excludes:

 

   

1,981,815 shares of our common stock issuable upon exercise of stock options outstanding as of September 30, 2018, at a weighted-average exercise price of $4.36 per share;

 

   

83,189 shares of our common stock issuable upon the exercise of certain warrants to purchase common stock outstanding as of September 30, 2018 at a weighted average exercise price of $6.59 per share;

 

   

1,284,465 shares of our common stock issuable upon the exercise of stock options to be granted in connection with this offering under our 2018 Incentive Award Plan, or the 2018 Plan, which will become effective in connection with this offering, to certain of our directors, executive officers and employees, at an exercise price per share equal to the initial public offering price in this offering;

 

   

843,829 shares of our common stock reserved for future issuance under the 2018 Plan, as well as shares of our common stock that become available pursuant to provisions in the 2018 Plan that automatically increase the share reserve under the 2018 Plan as described in “Executive and Director Compensation—Incentive Plans—2018 Incentive Award Plan”; and

 

   

266,000 shares of our common stock that will become available for future issuance under our 2018 Employee Stock Purchase Plan, or the 2018 ESPP, which will become effective in connection with this offering, as well as shares of our common stock that become available pursuant to provisions in the 2018 ESPP that automatically increase the share reserve under the 2018 ESPP as described in “Executive and Director Compensation—Incentive Plans—2018 Employee Stock Purchase Plan.”

Unless otherwise indicated, this prospectus reflects and assumes the following:

 

   

a 1-for- 6.245 reverse split of our common stock, which became effective on November 2, 2018;



 

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the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 14,979,055 shares of our common stock upon the closing of this offering;

 

   

the issuance of an aggregate of 392,504 shares of our common stock upon the closing of this offering to pay accrued dividends on our Series D preferred stock, assuming a closing date for this offering of November 19, 2018 (for each day prior to or following such assumed closing date that this offering actually closes, such dividends shall decrease or increase, respectively, by an aggregate of approximately 1,157 shares of common stock);

 

   

the automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock, which, based on an assumption that the fair market value of our common stock for purposes of automatic exercise under the warrants will be equal to the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, would result in the issuance of 139,009 shares of our common stock upon the closing of this offering (a $1.00 increase in the assumed initial public offering price of $15.00 per share would increase the number of additional shares of our common stock issuable in connection with such automatic exercise by an aggregate of 33,128 shares; a $1.00 decrease in the assumed initial public offering price of $15.00 per share would decrease the number of additional shares of our common stock issuable in connection with such exercise by an aggregate of 37,864 shares);

 

   

the assumed exercise prior to the closing of this offering of certain outstanding warrants that shall otherwise expire upon such closing to purchase 2,545,405 shares of preferred stock for an aggregate purchase price of approximately $4.5 million, which, assuming the automatic conversion of the shares of preferred stock issued pursuant to such exercise into shares of common stock, would result in the issuance of 407,543 shares of our common stock upon the closing of this offering;

 

   

for purposes of any automatic cashless exercise of warrants, that the fair market value of our common stock immediately prior to the closing of this offering exceeds the exercise price of the applicable warrant;

 

   

no exercise of outstanding options or warrants after September 30, 2018, other than as described above;

 

   

the filing of our restated certificate of incorporation and the adoption of our amended and restated bylaws, which will occur in connection with the closing of this offering; and

 

   

no exercise by the underwriters of their option to purchase additional shares of our common stock.



 

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Summary Financial Data

The following tables set forth a summary of our financial data as of, and for the periods ended on, the dates indicated. We have derived the summary statement of operations data for the years ended December 31, 2016 and 2017 from our audited financial statements appearing at the end of this prospectus. The statement of operations data for the nine months ended September 30, 2017 and 2018 and the balance sheet data as of September 30, 2018 have been derived from our unaudited financial statements appearing at the end of this prospectus and have been prepared on the same basis as the audited financial statements. In the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information in those statements. Our historical results are not necessarily indicative of the results that should be expected in the future, and results for the nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full year ending December 31, 2018. You should read the following summary financial data together with our financial statements and the related notes appearing at the end of this prospectus and the “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this prospectus.

 

    

Year Ended
December 31,

   

Nine Months Ended

September 30,

 
    

2016

   

2017

   

2017

   

2018

 
     (in thousands, except share and per share data)  
                 (unaudited)  

Statements of Operations Data:

        

Revenue

   $ —       $ —       $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses:

        

Research and development

     27,788       17,622       14,077       17,420  

General and administrative

     5,443       6,433       5,119       6,612  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     33,231       24,055       19,196       24,032  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (33,231     (24,055     (19,196     (24,032
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense), net:

        

Interest income

     22       43       19       564  

Interest expense

     (2,126     (983     (617     (205

Loss on conversion of convertible notes payable

     (2,412     (497     —         —    

Loss on disposal of property and equipment

     —         (38     (38     —    

Loss on forgiveness of notes receivable from stockholders

     —         —         —         (599

Loss on extinguishment of long-term debt

     —         —         —         (298

Revaluation of warrant liabilities

     75       475    

 

 

 

339

 

 

    (763
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (4,441     (1,000  

 

 

 

 

 

(297

 

 

    (1,301
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss before income tax benefit

     (37,672     (25,055  

 

 

 

(19,493

 

    (25,333

Income tax benefit

     —         441    

 

 

 

—  

 

 

    —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (37,672     (24,614  

 

 

 

(19,493

 

    (25,333

Plus: Cumulative dividends on convertible preferred stock

     —         (128  

 

 

 

—  

 

 

    (2,791
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (37,672   $ (24,742  

 

 

$

 

 

(19,493

 

 

  $ (28,124
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders, basic and diluted(1)

   $ (30.36   $ (19.91  

 

 

$

 

 

(15.68

 

 

  $ (22.60
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted(1)

     1,240,991       1,242,744    

 

 

 

 

1,243,366

 

 

 

 

    1,244,493  
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(1)

         $ (1.56
        

 

 

 

Weighted average shares used in computing pro forma net loss attributable to common stockholders, basic and diluted (unaudited)(1)

           16,382,243  
        

 

 

 


 

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(1)

See Note 2 to our audited financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the historical and pro forma basic and diluted net loss per common share and the weighted average number of shares used in the computation of the per share amounts.

 

    

As of September 30, 2018

    

 

 
    

Actual

    

Pro Forma(1)

    

Pro Forma As
Adjusted(2)(3)

 
           

(unaudited)

(in thousands)

        

Balance Sheet Data:

        

Cash and cash equivalents

   $ 42,059      $ 46,555      $ 113,205  

Total assets

     52,786        57,282        123,932  

Working capital(4)

     39,963        44,459        111,109  

Long term debt

     7,740        7,740        7,740  

Common stock

     1        17        22  

Convertible preferred stock

     155,627        —          —    

Additional paid-in capital

     5,695        170,309        236,954  

Accumulated deficit

     (125,671      (126,969      (126,969

Total stockholders’ (deficit) equity

     (119,951      43,357        110,007  

 

(1)

The pro forma balance sheet data gives effect to the:

 

   

automatic conversion of all outstanding shares of our preferred stock into an aggregate of 14,979,055 shares of our common stock upon the closing of this offering;

 

   

the issuance of an aggregate of 392,504 shares of our common stock upon the closing of this offering to pay accrued dividends on our Series D preferred stock, assuming a closing date for this offering of November 19, 2018 (for each day prior to or following such assumed closing date that this offering actually closes, such dividends shall decrease or increase, respectively, by an aggregate of approximately 1,157 shares of common stock);

 

   

the automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock, which, based on an assumption that the fair market value of our common stock for purposes of automatic exercise under the warrants will be equal to the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, would result in the issuance of 139,009 shares of our common stock upon the closing of this offering (a $1.00 increase in the assumed initial public offering price of $15.00 per share would increase the number of additional shares of our common stock issuable in connection with such automatic exercise by an aggregate of 33,128 shares; a $1.00 decrease in the assumed initial public offering price of $15.00 per share would decrease the number of additional shares of our common stock issuable in connection with such exercise by an aggregate of 37,864 shares);

 

   

the assumed exercise prior to the closing of this offering of certain outstanding warrants that shall otherwise expire upon such closing to purchase 2,545,405 shares of preferred stock for an aggregate purchase price of approximately $4.5 million, which, assuming the automatic conversion of the shares of preferred stock issued pursuant to such exercise into shares of common stock, would result in the issuance of 407,543 shares of our common stock upon the closing of this offering; and



 

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for purposes of any automatic cashless exercise of warrants, that the fair market value of our common stock immediately prior to the closing of this offering exceeds the exercise price of the applicable warrant.

 

(2)

Reflects the pro forma adjustments described in footnote (1) and the issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(3)

Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, total assets, additional paid-in capital and total stockholders’ equity (deficit) by $4.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us at the assumed initial public offering price would increase (decrease) each of cash and cash equivalents, total assets, additional paid-in capital and total stockholders’ equity (deficit) by $14.0 million. The pro forma information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of our initial public offering determined at pricing.

(4)

We define working capital as current assets less current liabilities.



 

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RISK FACTORS

You should carefully consider the risks and uncertainties described below and the other information in this prospectus before making an investment in our common stock. Our business, financial condition, results of operations or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history and a history of escalating operating losses, which may make it difficult to evaluate the prospects for our future viability.

We are a late clinical-stage biopharmaceutical company established in February 2013 and have only a limited operating history. Our operations to date have been limited to financing and staffing our company, developing our technology and identifying and developing our product candidates. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We have not yet demonstrated an ability to obtain marketing approval, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing, obtaining marketing approval for and commercializing chronic pain treatments.

In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown obstacles. We will eventually need to transition from a company with a research focus and development to a company capable of supporting commercial activities. We may not be successful in such a transition.

As we continue to build our business, we expect our financial condition and operating results may fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any particular quarterly or annual period as indications of future operating performance.

We have incurred significant losses since inception and expect to incur significant additional losses for the foreseeable future. We may never achieve or maintain profitability.

We have incurred significant operating losses since our inception, including operating losses of approximately $33.2 million and $24.1 million for the fiscal years ended December 31, 2016 and December 31, 2017, respectively, and $19.2 million and $24.0 million for the nine months ended September 30, 2017 and 2018, respectively. In addition, we have not commercialized any products and have never generated any revenue from product sales. We have devoted most of our financial resources to research and development, including our pre-clinical development activities.

In addition, we expect to continue to incur significant additional operating losses for the foreseeable future as we seek to advance product candidates through pre-clinical and clinical development, expand our research and development activities, develop new product candidates, complete pre-clinical studies and clinical trials, seek regulatory approval and, if we receive FDA approval, commercialize our products. In order to obtain FDA approval of any product candidate, we must submit to the FDA an NDA demonstrating that the product

 

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candidate is safe for humans and effective for its intended use. This demonstration requires significant research and animal tests, which are referred to as non-clinical or pre-clinical studies, as well as human tests, which are referred to as clinical trials. Furthermore, the costs of advancing product candidates into each succeeding clinical phase tend to increase substantially over time. The total costs to advance any of our product candidates to marketing approval in even a single jurisdiction would be substantial. Because of the numerous risks and uncertainties associated with chronic pain treatment product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to begin generating revenue from the commercialization of products or achieve or maintain profitability. Our expenses will also increase substantially if and as we:

 

   

continue our current research programs and our pre-clinical and clinical development and approval of product candidates from our current research programs;

 

   

seek to identify, assess, acquire and/or develop additional research programs and additional product candidates;

 

   

initiate pre-clinical testing and clinical trials for any product candidates in our pipeline or any other product candidates we identify and develop in the future;

 

   

seek regulatory approvals for our product candidates;

 

   

establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval;

 

   

maintain, expand and protect our intellectual property portfolio;

 

   

add clinical, scientific, commercial and support personnel;

 

   

utilize external vendors for support with respect to research, development, commercialization, regulatory, pharmacovigilance and other functions;

 

   

add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, as well as to support our transition to a public reporting company;

 

   

acquire or in-license other commercial products, product candidates and technologies;

 

   

make royalty, milestone or other payments under current and any future in-license agreements;

 

   

implement additional internal systems and infrastructure; and

 

   

operate as a public company.

Furthermore, our ability to successfully develop, commercialize and license our products and generate product revenue is subject to substantial additional risks and uncertainties. Each of our product candidates will require additional pre-clinical and clinical development and, for some of our product candidates, additional pre-clinical development, potential regulatory approval in multiple jurisdictions, the securing of manufacturing supply, capacity and expertise, the use of external vendors, the building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenue from product sales. As a result, we expect to continue to incur net losses and negative cash flows for the foreseeable future. These net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital.

 

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The amount of future losses and when, if ever, we will achieve profitability are uncertain. We have no products that have generated any commercial revenue, do not expect to generate revenues from the commercial sale of products in the foreseeable future, and might never generate revenues from the sale of products. Our ability to generate revenue and achieve profitability will depend on, among other things, successful completion of the clinical development of our product candidates; obtaining necessary regulatory approvals from the FDA and international regulatory agencies; establishing manufacturing, sales, and marketing infrastructure to commercialize our product candidates for which we obtain approval; and raising sufficient funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.

Even if this offering is successful, we will need additional funding in order to complete development of and obtain regulatory approval for our product candidates and commercialize our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

Even after the consummation of this offering, we will continue to need additional capital beyond the proceeds of this offering, which we may raise through equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources. Additional sources of financing might not be available on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we might be unable to complete planned clinical trials or obtain approval of any of our product candidates from the FDA, or any foreign regulatory authorities, and could be forced to discontinue product development. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and harm our product candidate development efforts.

We will require substantial funds to further develop, obtain approval for and commercialize our product candidates, including CNTX-4975, which is currently in Phase 3 clinical development. We will also require substantial funds to further develop, obtain approval for and commercialize our other product candidates, CNTX-2022, CNTX-6970, CNTX-0290 and CNTX-6016, which are in various stages of development.

Based on our current operating plan, we believe that the net proceeds from this offering and our current cash and cash equivalents will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2020, including the funding of the Phase 3 program and precommercialization expenses for CNTX-4975 through topline results in the first pivotal Phase 3 registration trial, VICTORY-1; the funding of the development of CNTX-0290 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; the funding of the development of CNTX-6970 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; the funding of the development of CNTX-6016 to complete Phase 1 development; and the remainder, if any, for other research and development expenses for our pipeline, including unallocated expenses and expenses for CNTX-2022, and for working capital and other general corporate purposes. This estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control. Because the length of time and activities associated with successful development of CNTX-4975 and our other product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development, approval and any approved marketing and commercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

 

   

the scope and results of our pre-clinical studies and clinical trials;

 

   

the timing of, and the costs involved in, obtaining regulatory approvals for CNTX-4975 and our other product candidates;

 

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the costs and timing of changes in the regulatory environment and enforcement rules;

 

   

the costs and timing in changes in pharmaceutical pricing and reimbursement infrastructure;

 

   

the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other patent-related costs, including any litigation costs and the results of such litigation;

 

   

the effect of competing technological and market developments;

 

   

the costs of operating as a public company;

 

   

the extent to which we in-license or acquire other products and technologies;

 

   

the cost of establishing sales, marketing and distribution capabilities for our product candidates in regions where we choose to commercialize our products; and

 

   

the initiation, progress, timing and results of our commercialization of CNTX-4975 and our other product candidates, if approved for commercial sale.

Depending on our business performance, the economic climate and market conditions, we may be unable to raise additional funds through any sources. If we are unable to obtain adequate funding on a timely basis, we may be required to curtail or discontinue one or more of our development programs for CNTX-4975, CNTX-0290, CNTX-6970, CNTX-2022 or CNTX-6016 or to reduce our operations. If we raise additional funds by issuing equity securities, our then-existing stockholders will experience dilution and the terms of any new equity securities may have preference over those of our existing common stock.

Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.

We have incurred significant operating losses since our inception and have never generated revenue or profit, and it is possible we will never generate revenue or profit. Meaningful revenues will likely not be available until and unless any future product candidates are approved by the FDA or comparable regulatory agencies in other countries and successfully marketed, either by us or a partner, an outcome which may not occur. Accordingly, we have concluded that substantial doubt exists regarding our ability to continue as a going concern. Our audited financial statements appearing at the end of this prospectus have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties related to our ability to operate on a going concern basis. However, in its report on our financial statements for the year ended December 31, 2017, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern.The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.

Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.

 

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Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our operations, our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, redeeming our stock, making certain investments and engaging in certain merger, consolidation or asset sale transactions, among other restrictions. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt. In addition, we may still incur substantially more debt.

As of September 30, 2018, our total indebtedness (excluding facility lease obligations) was approximately $7.7 million, comprised of borrowings under our loan and security agreement with Silicon Valley Bank, or the term loan facility. We may also incur additional indebtedness to meet future financing needs. There is a risk that we may be unable to generate enough cash to pay amounts due in respect of our indebtedness.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy our current indebtedness obligations and any future indebtedness we may incur, as well as to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional debt or equity financing on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness or future indebtedness will depend on the capital markets and our financial condition at such time.

In addition, the loan and security agreement contains, and the agreements that may govern any future indebtedness that we may incur may contain, financial and other restrictive covenants that will limit our ability to engage in activities that may be in our best interests. Our failure to comply with those covenants could result in an event of default under such agreements that, if not cured or waived, could result in the acceleration of a portion or all of our indebtedness. All obligations under the term loan facility are secured by a first priority lien on substantially all of our personal property, subject to certain exceptions including intellectual property assets. As a result, if we default on any of our obligations under the term loan facility, Silicon Valley Bank could foreclose on its security interest and liquidate some or all of the collateral, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations.

 

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We have no approved products.

To date, we have no approved product on the market and have generated no product revenues. Unless we receive approval from the FDA or other regulatory authorities for our product candidates, we will not have product revenues. Therefore, for the foreseeable future, we will have to fund all of our operations and capital expenditures from the net proceeds of this offering, cash on hand, and licensing fees and grants, if any.

Our product candidates are in various stages of development.

We are a biopharmaceutical company focused on the development of therapeutics that are intended to provide patients with relief from chronic pain, all of which treatments are at stages of clinical development. Favorable results in pre-clinical or early stage clinical trials may not be predictive of success in later clinical trials and may not lead to commercially viable products for any of several reasons. For example, our product candidates may fail to be safe and effective in clinical trials or additional pre-clinical studies, or we may have inadequate financial or other resources to pursue discovery and development efforts for new product candidates. Our product candidates will require significant additional development, clinical trials, regulatory clearances and additional investment by us before they can be commercialized.

Our business is highly dependent on the success of our lead product candidate, CNTX-4975, which is being developed as a synthetic, ultra-pure IA injection of trans-capsaicin. CNTX-4975 and our other product candidates will require significant additional clinical testing before we can seek regulatory approval and potentially launch commercial sales. If CNTX-4975 does not receive regulatory approval or is not successfully commercialized, our business may be harmed.

A substantial portion of our business and future success depends on our ability to develop, obtain regulatory approval for and successfully commercialize our lead product candidate, CNTX-4975. We currently have no products that are approved for commercial sale and may never be able to develop marketable products. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to CNTX-4975, which will require additional clinical development, management of clinical, medical affairs and manufacturing activities, regulatory approval in multiple jurisdictions, the securing of manufacturing supply, the building of a commercial organization, substantial investment and significant marketing efforts before we can generate any revenues from any commercial sales. We cannot be certain that CNTX-4975 will be successful in ongoing or future clinical trials, receive regulatory approval or be successfully commercialized even if we receive regulatory approval. Even if we receive approval to market CNTX-4975 from the FDA or other regulatory bodies, we cannot be certain that our product candidates will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives. Nor can we be certain that, if and when approved, the safety and efficacy profile of CNTX-4975 or our other product candidates will be consistent with the profiles observed in clinical trials.

CNTX-4975 is being developed as a synthetic, ultra-pure IA injection of trans-capsaicin for the treatment of moderate to severe chronic pain associated with knee OA as our lead indication. We have also studied CNTX-4975 in Morton’s neuroma and in canine OA, although neither of these programs is actively in development at this time due to our prioritization of the knee OA program. If the CNTX-4975 knee OA program is not successfully completed, required regulatory approvals are not obtained, or any approved products are not commercially successful, our business, financial condition and results of operations may be materially harmed.

CNTX-4975 is our most advanced product candidate, and if we experience regulatory or developmental issues with respect to CNTX-4975, our development plans and business could be significantly harmed. Moreover, if we experience similar regulatory or developmental issues with our other pipeline product candidates, our development plans and business could be significantly harmed. Further, our competitors may be developing products with similar mechanisms of action and may experience problems with their products that could identify problems that would potentially harm our business.

 

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We may not be successful in our efforts to identify and successfully commercialize additional product candidates.

Part of our strategy involves identifying novel product candidates. The process by which we identify product candidates may fail to yield product candidates for clinical development for a number of reasons, including those discussed in these risk factors and also:

 

   

we may not be able to assemble sufficient resources to acquire or discover additional product candidates;

 

   

competitors may develop alternatives that render our potential product candidates obsolete or less attractive;

 

   

potential product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights;

 

   

potential product candidates may, on further study, be shown to have harmful side effects, toxicities or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance;

 

   

potential product candidates may not be effective in treating their targeted diseases or symptoms;

 

   

the market for a potential product candidate may change so that the continued development of that product candidate is no longer reasonable;

 

   

a potential product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; or

 

   

the regulatory pathway for a potential product candidate is highly complex and difficult to navigate successfully or economically.

In addition, we may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful, or to license or purchase a marketed product that does not meet our financial expectations. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases that may later prove to have greater commercial potential, or relinquish valuable rights to such product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights. If we are unable to identify and successfully commercialize additional suitable product candidates, this would adversely impact our business strategy and our financial position.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to timely capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may

 

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relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Risks Related to Discovery, Development, Clinical Testing, Manufacturing and Regulatory Approval

Clinical trials required for our product candidates are expensive and time-consuming, their outcome is uncertain, and if our clinical trials do not meet safety or efficacy endpoints in these evaluations, or if we experience significant delays in these trials, our ability to commercialize our product candidates and our financial position will be impaired.

We dosed our first patient in a pivotal Phase 3 clinical trial of our lead product, CNTX-4975, in February 2018. Our other product candidates are in pre-clinical or clinical development. It is impossible to predict when or if any of our product candidates will prove effective and safe in humans or will receive regulatory approval, and the risk of failure through the development process is high. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete pre-clinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.

Clinical development is a long, expensive and uncertain process that is subject to significant delays. Due to known or unknown circumstances beyond our control, it may take us several years to complete our testing, and failure can occur at any stage of testing. Delays associated with products for which we are directly conducting pre-clinical studies or clinical trials may cause us to incur additional operating expenses. The commencement and rate of completion of pre-clinical studies or clinical trials may be delayed by, or terminated because of, many factors, including:

 

   

the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our pre-clinical studies or clinical trials;

 

   

failure to obtain regulatory approval to commence a trial;

 

   

failure to reach an agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

   

slower than expected rates of recruitment of patients or failure to recruit a sufficient number of patients;

 

   

modification of pre-clinical studies or clinical trial protocols;

 

   

changes in regulatory requirements for pre-clinical studies or clinical trials;

 

   

the impact of unusual placebo effects;

 

   

the lack of effectiveness during pre-clinical studies or clinical trials;

 

   

the emergence of unforeseen safety issues;

 

   

failure to obtain institutional review board, or the IRB, approval at each site;

 

   

delays, suspension, or termination of clinical trials by the IRB responsible for overseeing the trial at a particular trial site;

 

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failure of patients in completing a trial or returning for post-treatment follow-up;

 

   

clinical sites deviating from trial protocol or dropping out of a trial;

 

   

failure to address patient safety concerns that arise during the course of a trial;

 

   

failure to manufacture sufficient quantities of product candidate for use in clinical trials; and

 

   

government, IRB or other regulatory delays or “clinical holds” requiring suspension or termination of the trials.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates or significantly increase the cost of such trials, including:

 

   

we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;

 

   

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon development programs;

 

   

the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;

 

   

we may be unable to enroll a sufficient number of patients in our clinical trials to ensure adequate statistical power to detect any statistically significant treatment effects;

 

   

our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

 

   

regulators, IRBs or independent ethics committees, or IECs, may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or may require that we or our investigators suspend or terminate clinical trials of our product candidates for various reasons, including non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects or other unexpected characteristics, or a finding that the participants are being exposed to unacceptable health risks;

 

   

we may experience delays in reaching or fail to reach agreement on acceptable pre-clinical studies or clinical trial contracts or pre-clinical studies or clinical trial protocols with prospective trial sites;

 

   

the cost of pre-clinical studies or clinical trials of our product candidates may be greater than we anticipate and we may not have funds to cover the costs;

 

   

the supply or quality of our product candidates or other materials necessary to conduct pre-clinical studies or clinical trials of our product candidates may be insufficient or inadequate;

 

   

regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; and

 

   

any future collaborators that conduct pre-clinical studies or clinical trials may face any of the above issues, and may conduct pre-clinical studies or clinical trials in ways they view as advantageous to them but that are suboptimal for us.

 

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If we are required to extend the duration of current pre-clinical studies or clinical trials or to conduct additional pre-clinical studies or clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete pre-clinical studies or clinical trials of our product candidates or other testing, if the results of these trials, studies or tests are not positive or are only modestly positive, if there are safety concerns or if we determine that the observed safety or efficacy profile would not be competitive in the marketplace, we may:

 

   

incur unplanned costs;

 

   

be delayed in obtaining marketing approval for our product candidates or not obtain marketing approval at all;

 

   

obtain marketing approval in some countries and not in others;

 

   

obtain marketing approval for indications or patient populations that are not as broad as intended or desired;

 

   

obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;

 

   

be subject to additional post-marketing testing requirements; or

 

   

have the product removed from the market after obtaining marketing approval.

We could encounter delays if a clinical trial is materially modified, suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a material modification, suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects for our product candidates, or other products or product candidates in the same drug class, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Furthermore, we may rely on CROs and clinical trial sites to ensure the proper and timely conduct of clinical trials and while we would have agreements governing their committed activities, we would have limited influence over their actual performance, as described in “—Risks Related to Our Dependence on Third Parties.”

Our most advanced product candidate, CNTX-4975, is in clinical development and will require the completion of clinical testing before we are prepared to submit an NDA for regulatory approval. We cannot predict if or when we might complete the development of CNTX-4975 and submit an NDA or whether any such NDA will be approved by the FDA. We may also seek feedback from the FDA or other regulatory authorities on our clinical development programs, and the FDA or such regulatory authorities may not provide such feedback on a timely basis, or such feedback may not be favorable, which could further delay our development programs. If the results of ongoing and future clinical trials for CNTX-4975 are positive, we plan to submit an NDA in the United States, and an MAA in Europe, in the second half of 2021. If CNTX-4975 is successfully developed and approved, we anticipate initial commercial sales in 2022. However, no assurance can be given that we will be successful to meet this timeline, obtain regulatory approval or have any commercial sales of CNTX-4975.

Any clinical test may fail to produce results satisfactory to the FDA or foreign regulatory authorities. Pre-clinical and clinical data can be interpreted in different ways by different reviewers and regulators, which could delay, limit or prevent regulatory approval. Drug-related adverse events during a pre-clinical study or clinical trial could cause us to repeat a trial or study, perform an additional trial or study, expand the size and/or

 

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duration of a trial or study, terminate a trial or study or even cancel a pre-clinical or clinical program. The failure of pre-clinical studies or clinical trials to demonstrate safety and effectiveness for the desired indications could harm the development of that product candidate and other product candidates. This failure could cause us to abandon a product candidate and could delay development of other product candidates. Any delay in, or termination of, our clinical trials would delay the filing of our NDAs with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues. A number of companies in the biotechnology and pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Even if our future and ongoing pre-clinical studies and clinical trials are completed as planned, we cannot be certain that their results will support the safety and effectiveness of CNTX-4975 for any potential indication.

If we experience delays in the commencement or completion of, or have to extend or expand, our pre-clinical studies or clinical trials, or if we terminate a pre-clinical study or clinical trial prior to completion, the commercial prospects of CNTX-4975 could be harmed, and our ability to generate revenues from CNTX-4975 may be delayed. In addition, any delays in our pre-clinical studies or clinical trials could increase our costs, slow down the development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and results of operations. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of pre-clinical studies or clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

Our pre-clinical studies and clinical trials may fail to demonstrate adequately the safety and efficacy of any of our product candidates and the development of our product candidates may be delayed or unsuccessful, which could prevent or delay regulatory approval and commercialization.

All of our product candidates are in clinical or pre-clinical development stages. Notwithstanding the data obtained to date with respect to CNTX-4975 in both knee OA and Morton’s neuroma, CNTX-4975, as well as all of our other product candidates, will require additional clinical and non-clinical development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from our product sales. In addition, if we encounter safety or efficacy problems, developmental delays or regulatory issues or other problems, our developmental plans and business could be significantly harmed.

If the clinical development of CNTX-4975 or any of our other product candidates is unsuccessful, our ability to generate revenues will be adversely affected. Our development of current and future product candidates is subject to the risks of failure and delay inherent in the development of new products and product candidates, including:

 

   

delays in product development, pre-clinical or clinical testing or manufacturing;

 

   

unplanned expenditures in product development, pre-clinical or clinical testing or manufacturing;

 

   

failure to receive regulatory approvals;

 

   

failure to secure rights from third parties for new technology;

 

   

failure to achieve market acceptance; and

 

   

emergence of superior or equivalent products.

In addition, product candidates in later stages of clinical trials may fail to show the desired safety profiles and efficacy results despite having progressed through pre-clinical studies and initial clinical trials. A

 

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number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical trials or pre-clinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval.

Additionally, we have not conducted, nor do we believe we are required to conduct, any head-to-head trials comparing CNTX-4975 to other approved or experimental OA pain management drugs. Any such head-to-head trial, if conducted, may show that CNTX-4975 is not more effective than any of such other drugs. Material adverse differences in the relative efficacy of CNTX-4975 could significantly harm the adoptions of CNTX-4975 and our business prospects.

Because of these risks, our research and development efforts may not result in any commercially viable products. If a significant portion of these development efforts are not successfully completed, required regulatory approvals are not obtained, or any approved products are not commercially successful, our business, financial condition and results of operations may be materially harmed.

If the FDA does not conclude that certain of our product candidates satisfy the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for such product candidates under Section 505(b)(2) are not as we expect, the approval pathway for those product candidates may likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.

We are developing proprietary product candidates, including CNTX-4975 and CNTX-2022, for which we may seek FDA approval through the Section 505(b)(2) regulatory pathway. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act, or FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from trials that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to us under the FDCA, would allow an NDA we submit to the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for our product candidates by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as we anticipated, we may need to conduct additional clinical trials, provide additional data and information and meet additional standards for regulatory approval. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, we cannot assure you that our product candidates will receive the requisite approvals for commercialization.

In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our NDAs for up to 30 months or longer depending on the outcome of any litigation. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. In addition, even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to accelerated product development or earlier approval.

Moreover, even if our product candidates are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of

 

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approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.

Any breakthrough therapy designation that we may receive from the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it would not increase the likelihood that our product candidates will receive marketing approval.

A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for accelerated approval.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. The availability of breakthrough therapy designation was established recently with the passage of the Food and Drug Administration Safety and Innovation Act of 2012. We cannot be sure that any evaluation we may make of our product candidates as qualifying for breakthrough therapy designation will meet the FDA’s expectations. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

A Fast Track Designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

CNTX-4975 for the treatment of moderate to severe pain associated with knee OA was granted Fast Track Designation in January 2018, and for Morton’s neuroma in August 2016, and we may seek Fast Track Designation for our other product candidates. If a product is intended for the treatment of a serious or life-threatening condition and the product demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for FDA Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, and even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. A Fast Track Designation may not actually lead to a faster development process, review or approval compared to conventional FDA processes. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.

We may not be able to obtain orphan drug designation for our product candidates, and even if we do, we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. CNTX-4975 for Morton’s neuroma was granted orphan drug designation by the FDA in September 2006. We may seek orphan drug designation for other product candidates, although we have not yet applied for or obtained such designation. Under the Orphan Drug Act of 1983, the FDA may designate a product as an orphan product if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States, or a patient population of greater than 200,000 individuals in the United States, but for which there is no

 

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reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United States.

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product candidate that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full NDA to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity. The applicable exclusivity period is ten years in Europe, but such exclusivity period can be reduced to six years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior if it is shown to be safer, more effective or otherwise makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process, nor does it prevent competitors from obtaining approval of the same product candidate as ours for indications other than those in which we have been granted orphan drug designation.

We have conducted, and in the future, we may conduct clinical trials for our product candidates in sites outside the United States, and the FDA may not accept data from trials conducted in foreign locations.

We have conducted clinical trials of certain of our product candidates outside the United States, and we may in the future choose to conduct other clinical trials outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with good clinical practice, or GCP, including review and approval by an IEC and informed consent from subjects. The study population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. In general, the patient population for any clinical trials conducted outside of the United States must be representative of the population for whom we intend to label the product in the United States. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations. There can be no assurance the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept the data from our clinical trials of our product candidates, it would likely result in the need for additional trials, which would be costly and time-consuming and delay or permanently halt our development of our product candidates.

Interim “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim “top-line” or preliminary data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.

 

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If we fail to obtain the necessary U.S. regulatory approvals to commercialize any product candidate, we will not be able to generate revenue in the U.S. market.

We cannot assure you that we will receive the approvals necessary to commercialize our product candidates, or any product candidate we acquire or develop in the future. We will need FDA approval to commercialize our product candidates in the United States and approvals from equivalent regulatory authorities in foreign jurisdictions to commercialize our product candidates in those jurisdictions. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing. We cannot predict whether our research and clinical efforts will result in drugs that the FDA will determine are safe for humans and effective for their intended uses. The FDA has substantial discretion in the drug approval process and may require us to conduct additional pre-clinical and clinical testing, perform post-marketing studies, address manufacturing concerns, or otherwise limit or impose conditions on any approval we obtain. The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals may:

 

   

delay commercialization of, and our ability to derive product revenues from, our product candidates;

 

   

impose costly procedures on us; and

 

   

diminish any competitive advantages that we may otherwise enjoy.

Even if we receive approval of an NDA or comparable foreign regulatory filing for our product candidates, the FDA or the applicable foreign regulatory body may approve our product candidates for a more limited indication than we originally requested, and the FDA may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our product candidates.

Even if we comply with all FDA requests, the FDA may ultimately reject one or more of our NDAs. We cannot be sure that we will ever obtain regulatory clearance for our product candidates. Failure to obtain FDA approval of our product candidates will severely undermine our business by leaving us without a commercially available product, and therefore without any source of revenues, until another product candidate can be developed or obtained and ultimately approved. There is no guarantee that we will ever be able to develop or acquire another product candidate or that we will be able to obtain FDA approval to commercialize such product candidate.    

Even if we obtain FDA approval for CNTX-4975 in the United States, we may never obtain approval for or commercialize it in any other jurisdiction, which would limit our ability to realize its full market potential.

We intend to market our products in international markets. In order to market any products in the European Union and many other foreign jurisdictions, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions. However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval elsewhere. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country.

Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and increased costs for us and require additional pre-clinical studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the

 

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introduction of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be unrealized.

We may never obtain approval with respect to CNTX-4975 for the other indications we intend to seek or for a broadened indication of the treatment of beyond moderate to severe pain associated with knee OA and into other joint pain associated with OA, which would limit our ability to realize our full market potential.

Our lead indication for CNTX-4975 is the treatment of moderate to severe pain associated with knee OA. If we obtain regulatory approval for this indication, we intend to follow the knee OA indication with data to support use in small joints, such as the carpometacarpal joint, or the base of the thumb, and medium joints, such as the ankle. If we are successful, then the indication for use of CNTX-4975 could potentially be broadened to the treatment of moderate to severe pain associated with OA generally, with no limitation as to which joint is involved. However, there can be no assurance that, even if we obtain approval for one or more of these additional indications, we will obtain approval for any other or all of these additional indications, or for a broadened indication for the treatment of moderate to severe pain associated with OA. If we fail to obtain and maintain required approvals for these additional or broadened indications, or if regulatory approvals are delayed, our ability to realize the full market potential of CNTX-4975 will be unrealized.

Pain trials are difficult to design and execute due to many factors, including a more pronounced placebo effect, which may make efficacy endpoints harder to achieve and, in the case of CNTX-4975, potential pain on administration, which may affect trial blinding, and could adversely impact the likelihood of regulatory approval from FDA or other regulatory agencies, or could adversely impact product labeling, if approved.

The placebo effect refers generally to a clinical response reported by a patient receiving placebo that cannot be attributed to the properties of the placebo itself, and must therefore be due to the patient’s perception of the treatment or other response. The placebo effect can be considered as a form of contextual healing since the beneficial outcome is due to the context of the clinical encounter, rather than to the efficacy of the actual treatment. This complex phenomenon is influenced by many factors including the doctor-subject relationship, interaction with clinical site staff, complexity of the procedure, the subject’s memory of previous treatments, and the subject’s personal characteristics and expectations. Because one of the primary measurements of efficacy in pain trials is based on a patient’s subjective assessment of their pain and not an objective test or measurement, the placebo effect in pain trials can be more pronounced. While we train all of our clinical sites staff on the placebo effect, there can be no assurance that we will not experience an increased placebo effect in our trials, which could impact the ability of our product candidates to achieve significant separation from placebo and ultimately could adversely impact our ability to achieve regulatory approval for such product candidates.

While our clinical trials include a procedure pain control technique and a retrospective statistical analysis of subjects in our TRIUMPH trial demonstrated that procedure pain had no impact on predicted efficacy outcome, transient pain associated with the IA injection of CNTX-4975 could impact the ability of trial subjects to determine whether they have received placebo or CNTX-4975, which could adversely impact trial blinding and the likelihood of regulatory approval from FDA or other regulatory agencies, or could adversely impact product labeling, if approved.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, costly, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous

 

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factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that neither CNTX-4975 nor any other product candidates we may seek to develop in the future will ever obtain regulatory approval. Neither we nor any future collaborator is permitted to market any of our product candidates in the United States until we receive regulatory approval of an NDA from the FDA. It is possible that the FDA may refuse to accept for substantive review any NDAs that we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates.

Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we or our collaborators must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or foreign regulatory agencies, that such product candidates are safe and effective for their intended uses in patients. Results from non-clinical studies and clinical trials can be interpreted in different ways. Even if we believe the non-clinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. The FDA may also require us to conduct additional pre-clinical studies or clinical trials for our product candidates either prior to or post-approval, or it may object to elements of our clinical development program. Depending on the extent of these or any other FDA-required studies, approval of any NDA or other application that we submit may be delayed by several years, or may require us to expend significantly more resources than we have available.

Of the large number of potential products in development, only a small percentage successfully completes the FDA or foreign regulatory approval processes and are commercialized. The lengthy and costly approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidates, which would significantly harm our business, results of operations and prospects.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. The enrollment of patients depends on many factors, including:

 

   

the patient eligibility criteria defined in the protocol;

 

   

the size of the patient population required for analysis of the trial’s primary endpoints;

 

   

the proximity of patients to trial sites;

 

   

the design of the trial;

 

   

our ability to recruit clinical trial investigators with the appropriate competencies and experience;

 

   

clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new products that may be approved for the indications we are investigating;

 

   

our ability to obtain and maintain patient consents; and

 

   

the risk that patients enrolled in clinical trials will drop out of the trials before completion.

 

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In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials in such clinical trial site.

Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop CNTX-4975 or our other product candidates, or could render further development impossible.

Our product candidates may cause serious adverse events or undesirable side effects including injury and death or have other properties which may delay or prevent their regulatory approval, limit the commercial profile of an approved label, or, result in significant negative consequences following marketing approval, if any.

Serious adverse events, or SAEs, or undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Results of our clinical trials or pre-clinical studies could reveal a high and unacceptable severity and prevalence of side effects, toxicities or unexpected characteristics, including death. To date, subjects treated with our lead product candidate, CNTX-4975, have experienced adverse events, including joint pain, headache, pain not otherwise specified, injection site pain, peripheral pain, joint swelling, injection site hemorrhage, nasopharyngitis, burning sensation and nervousness or anxiety, among others. Across the 12 clinical trials of CNTX-4975 we have conducted to date, there were four SAEs in the active groups, all of which were considered not related to CNTX-4975, and which included shoulder OA pain, chest pain, femoral hernia and metrorrhagia.

Subjects enrolled in clinical trials for our other product candidates have also experienced adverse events, albeit at low incidences. In the case of CNTX-0290, subjects in single dose and repeat dose trials reported headache, diarrhea, temporomandibular joint syndrome, nausea, and dry eye. In the case of CNTX-6970, subjects in a single dose trial reported headache and vomiting, among others. The repeat dose trial is ongoing and the clinical trial report will be available before the end of 2018. In the case of CNTX-2022, subjects in a single dose trial reported gastroenteritis, headache and upper respiratory tract infection, among others. CNTX-6016 has not been studied in humans to date. In non-clinical safety toxicology studies of CNTX-6016 in dogs, reported adverse events included increased epileptiform waves at doses 100-times greater than, and seizures at doses equivalent to 400-times greater than, the equivalent starting dose in humans for Phase 1 clinical trials, among others.

If unacceptable side effects arise in the development of our product candidates, we, the FDA, the IRBs at the institutions in which our studies are conducted or DSMB, could materially modify, suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease pre-clinical studies or clinical trials or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We currently train and expect to have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may harm our business, financial condition and prospects significantly.

If any of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by any such product, including during any long-term follow-up observation period

 

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recommended or required for patients who receive treatment using our products, a number of potentially significant negative consequences could result, including:

 

   

regulatory authorities may withdraw approvals of such product;

 

   

we may be required to recall a product or change the way such product is administered to patients;

 

   

additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product;

 

   

regulatory authorities may require additional warnings on the label, such as a “black box” warning or contraindication;

 

   

regulatory authorities may require long-term patient registries for the product;

 

   

we may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a medication guide outlining the risks of such side effects for distribution to patients;

 

   

the product could become less competitive;

 

   

we could be sued and held liable for harm caused to patients; and

 

   

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.

We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, employment practices liability, property, auto, workers’ compensation, umbrella, and directors’ and officers’ insurance.

Any additional product liability insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for CNTX-4975, we intend to acquire insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or series of claims brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business, including preventing or limiting the development and commercialization of any product candidates we develop. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.

We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more

 

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difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.

Our employees and independent contractors, including principal investigators, CROs, consultants, vendors, and any third parties we may engage in connection with research, development, regulatory, manufacturing, quality assurance and other pharmaceutical functions and commercialization may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

Misconduct by our employees and independent contractors, including principal investigators, CROs, consultants, vendors, and any third parties we may engage in connection with research, development, regulatory, manufacturing, quality assurance and other pharmaceutical functions and commercialization, could include intentional, reckless or negligent conduct or unauthorized activities that violate: (i) the laws and regulations of the FDA, the European Medicines Agency, or the EMA, and other similar regulatory authorities, including those laws that require the reporting of true, complete and accurate information to such authorities; (ii) manufacturing standards; (iii) data privacy, security, fraud and abuse and other healthcare laws and regulations; or (iv) laws that require the reporting of true, complete and accurate financial information and data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of pre-clinical studies or clinical trials, creation of fraudulent data in pre-clinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations.

Our business and operations would suffer in the event of system failures.

Our computer systems, as well as those of our CROs and other contractors and consultants, are vulnerable to damage from computer viruses, unauthorized access, natural disasters (including hurricanes), terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product candidate development programs. For example, the loss of pre-clinical studies or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development of CNTX-4975 or any other product candidate could be delayed.

In the ordinary course of our business, we directly or indirectly collect and store sensitive data, including intellectual property, confidential information, pre-clinical and clinical trial data, proprietary business

 

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information, personal data and personally identifiable health information of our clinical trial subjects and employees, in our data centers and on our networks, or on those of third parties. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or internal bad actors, or breached due to employee error, a technical vulnerability, malfeasance or other disruptions. Although, to our knowledge, we have not experienced any such material security breach to date, any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, significant regulatory penalties, and such an event could disrupt our operations, damage our reputation, and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay our clinical development of our product candidates.

Risks Related to Healthcare Laws and Other Legal Compliance Matters

We will be subject to extensive and costly government regulation.

Product candidates employing our technology will be subject to extensive and rigorous domestic government regulation including regulation by the FDA, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the United States Department of Health and Human Services, the United States Department of Justice, state and local governments, and their respective equivalents outside of the United States. The FDA regulates the research, development, pre-clinical and clinical testing, manufacture, safety, effectiveness, record-keeping, reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import, and export of pharmaceutical products. The FDA generally regulates biotechnology products under the Public Health Service Act, as amended. If products employing our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not they have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more demanding than corresponding United States regulation.

Government regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling our products. The regulatory review and approval process, which includes pre-clinical testing and clinical trials of each product candidate, is lengthy, expensive, and uncertain. We or our collaborators must obtain and maintain regulatory authorization to conduct pre-clinical studies and clinical trials. We or our collaborators must obtain regulatory approval for each product we intend to market, and the manufacturing facilities used for the products must be inspected and meet legal requirements. Securing regulatory approval requires the submission of extensive pre-clinical and clinical data and other supporting information for each proposed therapeutic indication in order to establish the product’s safety and efficacy, potency and purity, for each intended use. The development and approval process takes many years, requires substantial resources, and may never lead to the approval of a product.

Even if we are able to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may otherwise limit our ability to promote, sell, and distribute the product, may require that we conduct costly post-marketing surveillance, and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example, manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a previously unknown safety issue.

If we, our collaborators, consultants, contract manufacturers, CROs or other vendors, fail to comply with applicable regulatory requirements at any stage during the regulatory process, such noncompliance could result in, among other things, delays in the approval of applications or supplements to approved applications; refusal of a regulatory authority, including the FDA, to review pending market approval applications or

 

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supplements to approved applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.

Enacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and could adversely affect our business.

In the United States, the EU and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could prevent or delay marketing approval of our products in development, restrict or regulate post-approval activities of our products, impact pricing and reimbursement and impact our ability to sell our products profitably. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. In addition, new regulations and interpretations of existing healthcare statutes and regulations are frequently adopted.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:

 

   

an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;

 

   

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

 

   

new requirements to report certain financial arrangements with physicians and teaching hospitals, including reporting “transfers of value” made or distributed to prescribers and other healthcare providers and reporting investment interests held by physicians and their immediate family members;

 

   

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

 

   

a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

 

   

extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

 

   

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

 

   

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and

 

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establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. For example, the creation of the Independent Payment Advisory Board, which had been included as part of the provisions of the ACA, was repealed in February 2018. The current presidential administration and Congress will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA. It is uncertain the extent to which any such changes may impact our business or financial condition.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011 resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional action is taken by Congress. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other healthcare funding, which could negatively affect our customers and accordingly, our financial operations.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, and review the relationship between pricing and manufacturer patient programs. The Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a “Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. The Department of Health and Human Services has already started the process of soliciting feedback on some of these measures and, at the same, is immediately implementing others under its existing authority. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally-mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical

 

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products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates or put pressure on our product pricing.

In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize our product candidates, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the EU or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of healthcare and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize our product candidates, if approved.

In markets outside of the United States and the EU, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States, the EU or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA, the EMA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with current good manufacturing practice, or cGMP, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and GCP requirements for any clinical trials that we conduct post-approval. In addition, the sponsor of an approved NDA is subject to periodic inspections and other FDA monitoring and reporting obligations, including obligations to monitor and report adverse events and other information such as the failure of a product to meet the specifications in the NDA. NDA sponsors must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. Application holders must also submit advertising and other promotional material to the FDA and report on ongoing clinical trials. The FDA may require changes in the labeling of already approved drug products and require that sponsors conduct post-marketing studies.

Advertising and promotional materials must comply with FDA rules in addition to other potentially applicable federal and state laws. The distribution of product samples to physicians must comply with the requirements of the FDCA. NDA sponsors must obtain FDA approval for product, manufacturing, and labeling changes, depending on the nature of the change.

 

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Depending on the circumstances, failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions, consent decrees of permanent injunction, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter into supply contracts, including government contracts.

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

 

   

restrictions on manufacturing such products;

 

   

restrictions on the labeling or marketing of a product;

 

   

restrictions on product distribution or use;

 

   

requirements to conduct post-marketing studies or clinical trials;

 

   

warning letters or holds on clinical trials;

 

   

withdrawal of the products from the market;

 

   

refusal to approve pending applications or supplements to approved applications that we submit;

 

   

recall of products;

 

   

fines, restitution or disgorgement of profits or revenues;

 

   

suspension or withdrawal of marketing approvals;

 

   

refusal to permit the import or export of our products;

 

   

product seizure or detention; or

 

   

injunctions or the imposition of civil or criminal penalties.

The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of CNTX-4975 or any other product candidate. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained which would adversely affect our business, prospects and ability to achieve or sustain profitability.

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

 

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Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.

Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our product candidates, if approved. Such laws include:

 

   

the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

   

the U.S. federal civil and criminal false claims laws, including the civil False Claims Act, which, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

 

   

the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;

 

   

the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

   

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information;

 

   

the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;

 

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the U.S. Physician Payments Sunshine Act and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

 

   

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

 

   

analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; state and local laws that require the registration of pharmaceutical sales representatives; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and

 

   

similar healthcare laws and regulations in the EU and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of certain protected information, such as the General Data Protection Regulation, or the GDPR, which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the EU (including health data).

Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid or similar programs in other countries or jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment, which could affect our ability to operate our business. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

 

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We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and we are subject to consumer protection laws that regulate our marketing practices and prohibit unfair or deceptive acts or practices. Our actual or perceived failure to comply with such obligations could harm our business.

We are subject to diverse laws and regulations relating to data privacy and security, including, in the United States, HIPAA and, in the EU and the European Economic Area, or EEA, Regulation 2016/679, known as the GDPR. New privacy rules are being enacted in the United States and globally, and existing ones are being updated and strengthened. Complying with these numerous, complex and often changing regulations is expensive and difficult, and failure to comply with any privacy laws or data security laws or any security incident or breach involving the misappropriation, loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, whether by us, one of our business associates or another third-party, could adversely affect our business, financial condition and results of operations, including but not limited to: investigation costs, material fines and penalties; compensatory, special, punitive and statutory damages; litigation; consent orders regarding our privacy and security practices; requirements that we provide notices, credit monitoring services and/or credit restoration services or other relevant services to impacted individuals; adverse actions against our licenses to do business; and injunctive relief. Furthermore, these rules are constantly changing; for example, the GDPR came into force in May 2018 changing the European regime. Before that, the US-EU Safe Harbor framework was declared invalid in 2015 and replaced with the EU-U.S. Privacy Shield framework which, along with other methods which permit transfer under European privacy law, are under ongoing review and subject to challenge.

The privacy laws in the EU have been significantly reformed. On May 25, 2018, the GDPR entered into force and became directly applicable in all EU member states. The GDPR implements more stringent operational requirements than its predecessor legislation. For example, the GDPR requires us to make more detailed disclosures to data subjects, requires disclosure of the legal basis on which we can process personal data, makes it harder for us to obtain valid consent for processing, will require the appointment of data protection officers when sensitive personal data, such as health data, is processed on a large scale, provides more robust rights for data subjects, introduces mandatory data breach notification through the EU, imposes additional obligations on us when contracting with service providers and requires us to adopt appropriate privacy governance including policies, procedures, training and data audit. If we do not comply with our obligations under the GDPR, we could be exposed to fines of up to the greater of €20 million or up to 4% of our total global annual revenue in the event of a significant breach. In addition, we may be the subject of litigation and/or adverse publicity, which could adversely affect our business, results of operations and financial condition.

We cannot assure you that our third-party service providers with access to our or our customers’, suppliers’, trial patients’ and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches or attempts thereof, which could have a corresponding effect on our business, including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition. We cannot assure you that our contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information.

We are subject to environmental, health and safety laws and regulations, and we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities.

Our operations, including our development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to

 

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blood-borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.

As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, the production efforts of our third-party manufacturers or our development efforts may be interrupted or delayed.

Risks Related to Commercialization

Developments by competitors may render our products or technologies obsolete or non-competitive or may reduce the size of our markets.

Our industry has been characterized by extensive research and development efforts, rapid developments in technologies, intense competition and a strong emphasis on proprietary products. We face potential competition from many different sources, including pharmaceutical, biotechnology and specialty pharmaceutical companies either marketing or developing therapeutics to treat chronic pain. Academic research institutions, governmental agencies, as well as public and private institutions are also potential sources of competitive products and technologies. Our competitors may have or may develop superior technologies or approaches, which may provide them with competitive advantages. Our potential products may not compete successfully. If these competitors access the marketplace before we do with better or less expensive drugs, our product candidates, if approved for commercialization, may not be profitable to sell or worthwhile to continue to develop. Technology in the pharmaceutical industry has undergone rapid and significant change, and we expect that it will continue to do so. Any compounds, products or processes that we develop may become obsolete or uneconomical before we recover any expenses incurred in connection with their development. The success of our product candidates will depend upon factors such as product efficacy, safety, reliability, availability, timing, scope of regulatory approval, acceptance and price, among other things. Other important factors to our success include speed in developing product candidates, completing clinical development and laboratory testing, obtaining regulatory approvals and manufacturing and selling commercial quantities of potential products.

Our product candidates are intended to compete directly or indirectly with existing drugs. Even if approved and commercialized, our product candidates may fail to achieve market acceptance with hospitals, physicians or patients. Hospitals, physicians or patients may conclude that our potential products are less safe or effective or otherwise less attractive than these existing drugs. If our product candidates do not receive market acceptance for any reason, our revenue potential would be diminished, which would materially adversely affect our ability to become profitable.

Significant competition exists in the chronic pain field. We will need to compete with all currently available or future therapies within the indications where our development is focused. CNTX-4975, if approved and commercialized, will face significant competition. The main classes of marketed products that are available for the treatment of knee OA pain include opioids, immediate-release and sustained-release injectable steroids, hyaluronic acid, or HA, injections and, to a lesser extent, non-FDA approved treatments such as platelet rich plasma and stem cell injections. Furthermore, numerous monoclonal antibodies targeting nerve growth factor, or NGF inhibitors, are in clinical development, including two product candidates in Phase 3. Also in development are several compounds that seek to produce disease modification through the regeneration of cartilage and/or to reduce cartilage degeneration, though these compounds do not directly treat the pain itself.

There are a number of companies developing or marketing therapies for the treatment and management of chronic pain that may compete with our current product candidates, including many major pharmaceutical and biotechnology companies. Among the companies that currently market or are developing therapies that, if

 

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approved, our product candidates would potentially compete with include: Acorda Therapeutics, Assertio Therapeutics, Biogen, Cara Therapeutics, Eli Lilly and Company, Endo Pharmaceuticals, Flexion Therapeutics, Grunenthal, Horizon Pharma, Janssen Research & Development, Merck & Co., Novartis, Pacira Pharmaceutics, Pain Therapeutics, Pfizer, Purdue Pharma, Sanofi Trevena and Vertex Pharmaceuticals.

Most of our competitors, including many of those listed above, have substantially greater capital resources, robust drug pipelines, established presence in the market and expertise in research and development, manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. As a result, our competitors may achieve product commercialization or patent protection earlier than we can. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified clinical, regulatory, scientific, sales, marketing and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop or that would render any products that we may develop obsolete or noncompetitive.

The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.

The availability of coverage and adequacy of reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford medical services and pharmaceutical products such as our product candidates, assuming FDA approval. Our ability to achieve acceptable levels of coverage and reimbursement for our products or procedures using our products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize our product candidates. Obtaining coverage and adequate reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. Separate reimbursement for the product itself or the treatment or procedure in which our product is used may not be available. A decision by a third-party payor not to cover or separately reimburse for our products or procedures using our products, could reduce physician utilization of our products once approved. Assuming there is coverage for our product candidates or procedures using our product candidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product candidates. Similarly, some of our product candidates, including our lead product candidate, CNTX-4975, are physician-administered injectables and as such, separate reimbursement for the product itself may or may not be available. Instead, the hospital or administering physician may be reimbursed only for providing the treatment or procedure in which our product is used. To the extent separate coverage and reimbursement should become available for CNTX-4975, we anticipate that it will be sold to physicians on a “buy and bill” basis. Buy and bill products must be purchased by healthcare providers before they can be administered to patients. Healthcare providers subsequently must seek reimbursement for the product from the applicable third-party payor, such as Medicare or a health insurance company. Healthcare providers may be reluctant to administer our product candidates, if approved, because they would have to fund the purchase of the product and then seek reimbursement, which may be lower than their purchase price, or because they do not want the additional administrative burden required to obtain reimbursement for the product.

Further, the status of reimbursement codes for any of our product candidates, if approved, could also affect reimbursement. J-Codes and Q-Codes are reimbursement codes maintained by the Centers for Medicare and Medicaid Services, or CMS, that are a component of the Healthcare Common Procedure Coding System and

 

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are typically used to report injectable drugs that ordinarily cannot be self-administered. We currently do not have a specific J-Code or Q-Code for any of our product candidates. If our product candidates are approved, we may apply for one but cannot guarantee that a J-Code or Q-Code will be granted. To the extent separate coverage or reimbursement is available for any product candidate, if approved, and a specific J-Code or Q-Code is not available, physicians would need to use a non-specific miscellaneous J-Code to bill third-party payors for these physician-administered drugs. Because miscellaneous J-Codes may be used for a wide variety of products, health plans may have more difficulty determining the actual product used and billed for the patient. These claims must often be submitted with additional information and manually processed, which can delay claims processing times as well as increase the likelihood for claim denials and claim errors. We cannot be sure that coverage and reimbursement in the United States, the EU or elsewhere will be available for our product candidates or any product that we may develop, and any reimbursement that may become available may not be adequate or may be decreased or eliminated in the future.

Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs and biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidates as substitutable and only offer to reimburse patients for the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing third-party therapeutics may limit the amount we will be able to charge for our product candidates. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in our product candidates. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates, and may not be able to obtain a satisfactory financial return on our product candidates.

There is significant uncertainty related to the insurance coverage and reimbursement of newly-approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models in the United States for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative drug therapies before they will reimburse healthcare providers who use such therapies. We cannot predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in the EU and other jurisdictions have and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our product candidates may be reduced compared with the United States and may be insufficient to generate commercially-reasonable revenue and profits.

 

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Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry of new products.

Even if CNTX-4975 receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success.

If CNTX-4975 receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If it does not achieve an adequate level of acceptance, we may not generate significant product revenues or become profitable. The degree of market acceptance of CNTX-4975, if approved for commercial sale, will depend on a number of factors, including but not limited to:

 

   

perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our drug product;

 

   

the perception by patients and clinicians that our procedure pain control technique does not adequately reduce the pain associated with local application of trans-capsaicin;

 

   

the perception by members of the healthcare community, including physicians, or patients that the process of administering CNTX-4975, including our procedure pain control technique, is not unduly cumbersome;

 

   

the efficacy and potential advantages compared to alternative treatments;

 

   

effectiveness of sales and marketing efforts;

 

   

the cost of treatment in relation to alternative treatments;

 

   

our ability to offer our products for sale at competitive prices;

 

   

the convenience and ease of administration compared to alternative treatments;

 

   

the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

 

   

the strength of marketing and distribution support;

 

   

the timing of market introduction of competitive products;

 

   

the availability of third-party coverage and adequate reimbursement;

 

   

product labeling or product insert requirements of the FDA, the EMA or other regulatory authorities, including any limitations or warnings contained in a product’s approved labeling;

 

   

the prevalence and severity of any side effects; and

 

   

any restrictions on the use of our product together with other medications.

 

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If our product candidates are approved, but do not achieve an adequate level of acceptance by physicians, healthcare payors, and patients, we may not generate sufficient revenue from these products, and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful. In addition, our ability to successfully commercialize our product candidates will depend on our ability to manufacture our products through third-party manufacturers, differentiate our products from competing products and defend the intellectual property of our products.

Because we expect sales of CNTX-4975, if approved, to generate substantially all of our product revenues for a substantial period, the failure of this product to find market acceptance would harm our business and could require us to seek additional financing.

If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not be successful in commercializing CNTX-4975, if approved.

We do not have any infrastructure for the sales, marketing or distribution of our products, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so.

We expect to build our own focused sales, distribution and marketing infrastructure to market CNTX-4975 in the United States, if approved. There are significant expenses and risks involved with establishing our own sales, marketing and distribution capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact the commercialization of CNTX-4975. Additionally, if the commercial launch of CNTX-4975 for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

We do not anticipate having the resources in the foreseeable future to allocate to the sales and marketing of CNTX-4975 or our other product candidates in markets outside of the United States. Therefore, our future sales in these markets will largely depend on our ability to enter into and maintain collaborative relationships for such capabilities, the collaborator’s strategic interest in the product and such collaborator’s ability to successfully market and sell the product. We intend to selectively pursue collaborative arrangements regarding the sale and marketing of CNTX-4975, if approved, for certain markets outside of the United States; however, we cannot assure that we will be able to establish or maintain such collaborative arrangements, or if able to do so, that they will have effective sales forces.

If we are unable to build our own sales force or negotiate a collaborative relationship for the commercialization of CNTX-4975, we may be forced to delay the potential commercialization of CNTX-4975 or reduce the scope of our sales or marketing activities for CNTX-4975. If we elect to increase our expenditures to fund commercialization activities ourselves, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. We could enter into arrangements with collaborative partners at an earlier stage than otherwise would be ideal and we may be required to relinquish rights to CNTX-4975 or otherwise agree to terms unfavorable to us, any of which may have an adverse effect on our business, operating results and prospects.

If we are unable to establish adequate sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we will not be successful in commercializing CNTX-4975 and may not become profitable and may incur significant additional losses. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support

 

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of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

If we cannot compete for market share against other drug companies, we may not achieve sufficient product revenues and our business will suffer.

If our product candidates receive FDA approval, they will compete with a number of existing and future drugs and therapies developed, manufactured and marketed by other companies. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication than our products, or may offer comparable performance at a lower cost. If our products fail to capture and maintain market share, we may not achieve sufficient product revenues and our business will suffer.

We will compete against fully integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors may have compounds already approved or in development in the therapeutic categories that we are targeting with our current and future product candidates. In addition, many of these competitors, either alone or together with their collaborative partners, may operate larger research and development programs or have substantially greater financial resources than we do, as well as greater experience in:

 

   

developing product candidates;

 

   

undertaking pre-clinical testing and clinical trials;

 

   

obtaining NDA approval by the FDA and comparable foreign regulatory approvals of product candidates;

 

   

formulating and manufacturing products; and

 

   

launching, marketing and selling products.

If we obtain approval to commercialize any products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

If CNTX-4975 is approved for commercialization, we intend to selectively partner with third parties to market it in certain jurisdictions outside the United States. We expect that we will be subject to additional risks related to international pharmaceutical operations, including:

 

   

different regulatory requirements for drug approvals and rules governing drug commercialization in foreign countries;

 

   

reduced protection for intellectual property rights;

 

   

foreign reimbursement, pricing and insurance regimes;

 

   

potential noncompliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruption laws in other jurisdictions; and

 

   

production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad.

 

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We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the European Union and many of the individual countries in Europe with which we will need to comply. Many U.S.-based biotechnology companies have found the process of marketing their own products in Europe to be very challenging.

Certain legal and political risks are also inherent in foreign operations. For example, it may be more difficult for us to enforce our agreements or collect receivables through foreign legal systems. There is a risk that foreign governments may nationalize private enterprises in certain countries where we may operate. In certain countries or regions, terrorist activities and the response to such activities may threaten our operations more than in the United States. Social and cultural norms in certain countries may not support compliance with our corporate policies including those that require compliance with substantive laws and regulations. Also, changes in general economic and political conditions in countries where we may operate are a risk to our financial performance and future growth. Additionally, the need to identify financially and commercially strong partners for commercialization outside the United States who will comply with the high manufacturing and legal and regulatory compliance standards we require is a risk to our financial performance. As we operate our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other related risks. There can be no assurance that the consequences of these and other factors relating to our international operations will not have an adverse effect on our business, financial condition or results of operations.

Potential product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.

The use of our product candidates, including CNTX-4975, in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. On occasion, large judgments have been awarded in class action lawsuits based on products that had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs, which may not be covered by insurance. In addition, regardless of merit or eventual outcome, product liability claims may result in:

 

   

impairment of our business reputation and significant negative media attention;

 

   

withdrawal of participants from our clinical trials;

 

   

significant costs to defend the related litigation and related litigation;

 

   

distraction of management’s attention from our primary business;

 

   

substantial monetary awards to patients or other claimants;

 

   

inability to commercialize CNTX-4975 or any other product candidate;

 

   

product recalls, withdrawals or labeling, marketing or promotional restrictions;

 

   

decreased demand for CNTX-4975 or any other product candidate, if approved for commercial sale; and

 

   

loss of revenue.

 

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Risks Related to Our Dependence on Third Parties

We rely on third parties for the manufacture of materials for our research programs, pre-clinical studies and clinical trials and we do not have long-term contracts with any of these parties. This reliance on third parties increases the risk that we will not have sufficient quantities of such materials, product candidates, or any therapies that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts.

We do not own or operate manufacturing facilities and have no plans to build our own clinical or commercial scale manufacturing capabilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates and related raw materials for pre-clinical and clinical development, as well as for commercial manufacture if any of our product candidates receive marketing approval. We do not have a long-term agreement with any of the third-party manufacturers we currently use to provide pre-clinical and clinical drug supply, and purchase any required materials on a purchase order basis. Certain of these manufacturers are critical to our production and the loss of these manufacturers to one of our competitors or otherwise would materially and adversely affect our development and commercialization efforts. Additionally, since certain of our manufacturers have only one facility, we face the risk of not having sufficient supply of our products in the case of a natural disaster, calamity, acts of war or terrorism or other major disturbance. The facilities used by third-party manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit an NDA to the FDA. We do not control the manufacturing process of, and are completely dependent on, third-party manufacturers for compliance with cGMP requirements for manufacture of drug products. If these third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, including requirements related to the manufacturing of high potency compounds, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. Some of our contract manufacturers have not produced a commercially-approved product and therefore have not obtained the requisite FDA approvals to do so. In addition, we have no control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. In addition, we may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms.

Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

 

   

failure of third-party manufacturers to comply with regulatory requirements and maintain quality assurance;

 

   

breach of the manufacturing agreement by the third party;

 

   

failure to manufacture our product according to our specifications;

 

   

failure to manufacture our product according to our schedule or at all;

 

   

misappropriation of our proprietary information, including our trade secrets and know-how; and

 

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termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

Our product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval, and any related remedial measures may be costly or time-consuming to implement. We do not currently have arrangements in place for redundant supply or a second source for all required raw materials used in the manufacture of our product candidates. If our current third-party manufacturers cannot perform as agreed, we may be required to replace such manufacturers and we may be unable to replace them on a timely basis or at all. Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

We rely on third parties to conduct many of our pre-clinical studies and clinical trials. Any failure by a third party to conduct the clinical trials according to GCPs and in a timely manner may delay or prevent our ability to seek or obtain regulatory approval for or commercialize our product candidates.

We are dependent on third parties to conduct our pre-clinical studies and clinical trials, including our ongoing clinical trials for CNTX-4975, CNTX-0290 and CNTX-6970, and any future clinical trials and pre-clinical studies for our product candidates, including CNTX-6016 and CNTX-2022. Specifically, we have used and relied on, and intend to continue to use and rely on, medical institutions, clinical investigators, CROs and consultants to conduct our clinical trials in accordance with our clinical protocols and regulatory requirements. These CROs, investigators and other third parties play a significant role in the conduct and timing of these trials and subsequent collection and analysis of data. While we have agreements governing the activities of our third-party contractors, we have limited influence over their actual performance. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs and other third parties does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs or trial sites fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

There is no guarantee that any such CROs, investigators or other third parties will devote adequate time and resources to such trials or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, or otherwise performs in a substandard manner, our clinical trials may be extended, delayed or terminated. In addition, many of the third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned, and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of any NDA we submit to the FDA. Any such delay or rejection could prevent us from commercializing our product candidates.

 

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If any of our relationships with these third-parties terminate, we may not be able to enter into arrangements with alternative third parties or do so on commercially reasonable terms. Switching or adding additional CROs, investigators and other third parties involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, investigators and other third parties, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

We may collaborate with third parties for the development and commercialization of CNTX-4975 and our other clinical and pre-clinical product candidates. We may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to develop and commercialize CNTX-4975 or our other clinical and pre-clinical product candidates successfully, if at all.

We may seek collaborative relationships for the development and commercialization of CNTX-4975. Failure to obtain a collaborative relationship for CNTX-4975 may significantly impair the potential for this product candidate. We also will need to enter into collaborative relationships to provide funding to support our other research and development programs. The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty, such as:

 

   

a collaboration partner may shift its priorities and resources away from our product candidates due to a change in business strategies, or a merger, acquisition, sale or downsizing;

 

   

a collaboration partner may seek to renegotiate or terminate their relationships with us due to unsatisfactory clinical results, manufacturing issues, a change in business strategy, a change of control or other reasons;

 

   

a collaboration partner may cease development in therapeutic areas which are the subject of our strategic collaboration;

 

   

a collaboration partner may not devote sufficient capital or resources towards our product candidates;

 

   

a collaboration partner may change the success criteria for a product candidate, thereby delaying or ceasing development of such candidate;

 

   

a significant delay in initiation of certain development activities by a collaboration partner will also delay payment of milestones tied to such activities, thereby impacting our ability to fund our own activities;

 

   

a collaboration partner could develop a product that competes, either directly or indirectly, with our product candidate;

 

   

a collaboration partner with commercialization obligations may not commit sufficient financial or human resources to the marketing, distribution or sale of a product;

 

   

a collaboration partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to meet demand requirements;

 

   

a collaboration partner may terminate a strategic alliance;

 

   

a dispute may arise between us and a partner concerning the research, development or commercialization of a product candidate resulting in a delay in milestones, royalty payments or

 

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termination of an alliance and possibly resulting in costly litigation or arbitration which may divert management attention and resources; and

 

   

a partner may use our products or technology in such a way as to invite litigation from a third party.

If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our research, clinical development, manufacturing or commercialization efforts related to that collaboration could be delayed or terminated, or it may be necessary for us to assume responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator. If we are unable to establish and maintain collaborative relationships on acceptable terms or to successfully transition terminated collaborative agreements, we may have to delay or discontinue further development of one or more of our product candidates, undertake development and commercialization activities at our own expense or find alternative sources of capital. Moreover, any collaborative partners we enter into agreements with in the future may shift their priorities and resources away from our product candidates or seek to renegotiate or terminate their relationships with us.

Data provided by collaborators and others upon which we rely that has not been independently verified could turn out to be false, misleading, or incomplete.

We rely on third-party vendors, such as CROs, scientists and collaborators to provide us with significant data and other information related to our projects, pre-clinical studies or clinical trials and our business. If such third parties provide inaccurate, misleading or incomplete data, our business, prospects and results of operations could be materially adversely affected.

We have also in-licensed three products from Boehringer Ingelheim International GmbH, or BI. Our decision to obtain a license to these products was based on pre-clinical and clinical data as well as intellectual property generated by BI. If any such data or information from BI proves to be inaccurate, misleading or incomplete, our business, prospects and results of operations could be materially adversely affected.

We do not have multiple sources of supply for the components used in CNTX-4975 and our other product candidates, nor long-term supply contracts, and certain of our suppliers are critical to our production. If we were to lose a supplier, it could have a material adverse effect on our ability to complete the development of CNTX-4975. If we obtain regulatory approval for CNTX-4975, we would need to expand the supply of its components in order to commercialize them.

We do not have multiple sources of supply for the components used in the manufacturing of CNTX-4975 and our other product candidates. We also do not have long-term supply agreements with any of our component suppliers. We are currently evaluating manufacturers that will commercially manufacture CNTX-4975 and our other product candidates. It is our intention to qualify a second source of supply for CNTX-4975 drug substance and drug product prior to approval by the FDA. If this does not occur and we only qualify one initial supplier that will be approved by the FDA, or if for any reason we are unable to obtain product from the manufacturer we select, then we would have to qualify new manufacturers. We may not be able to establish additional sources of supply for our product candidates, or may be unable to do so on acceptable terms. Manufacturing suppliers are subject to cGMP quality and regulatory requirements, covering manufacturing, testing, quality control and record keeping relating to our product candidates and subject to ongoing inspections by the regulatory agencies. Failure by any of our suppliers to comply with applicable regulations may result in long delays and interruptions in supply. Manufacturing suppliers are also subject to local, state and federal regulations and licensing requirements. Failure by any of our suppliers to comply with all applicable regulations and requirements may result in long delays and interruptions in supply.

The number of suppliers of the raw material components of our product candidates is limited. In the event it is necessary or desirable to acquire supplies from alternative suppliers, we might not be able to obtain them on commercially reasonable terms, if at all. It could also require significant time and expense to redesign

 

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our manufacturing processes to work with another company. Additionally, certain of our suppliers are critical to our production and the loss of these suppliers to one of our competitors or otherwise would materially and adversely affect our development and commercialization efforts.

As part of any marketing approval, a manufacturer of CNTX-4975 and our other product candidates is required to be licensed by the FDA prior to commercialization. This licensing process includes inspections by regulatory authorities that must be successful prior to them being licensed. Failure of manufacturing suppliers to successfully complete these regulatory inspections will result in delays. If supply from the approved supplier is interrupted, there could be a significant disruption in commercial supply. An alternative vendor would need to be qualified through an NDA amendment or supplement which could result in further delay. The FDA or other regulatory agencies outside of the United States may also require additional studies if a new supplier is relied upon for commercial production. Switching vendors may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

If we are unable to obtain the supplies we need at a reasonable price or on a timely basis, it could have a material adverse effect on our ability to complete the development of CNTX-4975 and our other product candidates or, if we obtain regulatory approval for CNTX-4975 or our other product candidates, to commercialize them.

We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues.

In the ordinary course of our business, we may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances, partnerships or other arrangements to develop new products and to pursue new markets. Proposing, negotiating and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products.

Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise with any future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. In addition, we may have limited control over the amount and timing of resources that any future collaborators devote to our or their future products. Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

If we enter into in-bound intellectual property license agreements, we may not be able to fully protect the licensed intellectual property rights or maintain those licenses. Future licensors could retain the right to

 

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prosecute and defend the intellectual property rights licensed to us, in which case we would depend on the ability of our licensors to obtain, maintain and enforce such licensed intellectual property. These licensors may determine not to pursue litigation against other companies or may pursue such litigation less aggressively than we would. Further, entering into such license agreements could impose various diligence, commercialization, royalty or other obligations on us. Future licensors may allege that we have breached our license agreement with them, and accordingly seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects.

Risks Related to Our Intellectual Property

If we are unable to obtain, maintain or adequately protect our intellectual property rights, we may not be able to compete effectively in our markets.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect our intellectual property and prevent others from duplicating our product candidates.

The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own may fail to result in issued patents with claims that cover our product candidates in the United States or in other foreign countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents cover our product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates or prevent others from designing around our claims. In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon our patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

If the patent applications we hold with respect to our programs or product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for our product candidates, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize future products. Several patent applications covering our product candidates have been filed recently. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid or unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by us could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop.

Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file any patent application related to a product candidate. Furthermore, if third parties have filed such patent applications before enactment of the Leahy-Smith Act on March 16, 2013, an interference proceeding in the United States can be initiated by a third party to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. In addition, patents have a limited lifespan. In the United States, the expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for the patent covering a product, we may be open to competition from generic medications.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is either not patentable or that we elect not to patent, processes

 

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for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach.

Although we require all of our employees and consultants to assign their inventions to us, to the extent that employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Further, although we require that all of our employees, consultants, collaborators, advisors and any third parties who have access to our proprietary know-how, information or technology enter into confidentiality agreements, we cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently discover our trade secrets or develop substantially equivalent information and techniques. Any of these parties may breach these agreements and we may not have adequate remedies for any specific breach. Misappropriation or unauthorized disclosure of our trade secrets or other confidential proprietary information could impair our competitive position and may have a material adverse effect on our business. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. Additionally, if the steps taken to maintain our trade secrets or other confidential proprietary information are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret or other confidential proprietary information.

If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

Our commercial success depends in part on our avoiding infringement, or allegations of infringement, of the patents and other proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, reexamination, and inter partes review proceedings before the United States Patent and Trademark Office, or USPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a

 

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license under the applicable patents, which may not be available or may not be available on commercially reasonable terms, or until such patents expire. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license, which may not be available or may not be available on commercially reasonable terms, or until such patent expires.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates and/or harm our reputation and financial results. Defense of these claims, regardless of their merit, could involve substantial litigation expense and could be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may require substantial time and monetary expenditure. Furthermore, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us; alternatively or additionally it could include terms that impede or destroy our ability to compete successfully in the commercial marketplace.

We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. There can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded.

In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

Recent patent reform legislation has increased the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, and may diminish the value of patents in general.

As is the case with other biopharmaceutical companies, our commercial success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Recent wide-ranging patent reform legislation in the United States, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, could increase those uncertainties and costs.

The Leahy-Smith Act includes a number of significant changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The Leahy-Smith Act enlarged the scope of disclosures that qualify as prior art, and it expanded the scope of procedures that a third

 

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party may use to challenge a U.S. patent, including post grant review and inter partes review procedures. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

In addition, recent court rulings in cases such as Association for Molecular Pathology v. Myriad Genetics, Inc., BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litigation, and Promega Corp. v. Life Technologies Corp. have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We may employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employers or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, or our ability to hire personnel, which, in any case of the foregoing, could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market, which could have a material adverse effect on our business.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.

If we initiated legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or

 

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unenforceable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. For example, our European patent, EP 1605956, which is directed towards the administration of certain capsaicinoids and related to the CNTX-4975 product candidate for treating knee OA pain, was opposed by a third party in 2016. Oral proceedings were held at the European Patent Office in January 2018, and the European Patent Office’s Opposition Division mailed a communication on September 10, 2018 revoking the European patent on grounds that changes to the claims during prosecution of the application resulted in patent claims that do not meet written support requirements of European law. We intend to appeal the decision of the European Patent Office’s Opposition Division.

The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our product candidates. Such a loss of patent protection could have a material adverse impact on our business. A defendant could also challenge our ownership of patents assigned to us. For example, our patents and some of our patent applications with respect to CNTX-4975 were acquired from Vallinex, Inc., which acquired them from Arcion Therapeutics, Inc. In turn, Arcion Therapeutics, Inc. acquired them from Anesiva, Inc., which was formed as a result of a reverse merger of AlgoRx Pharmaceuticals into Corgentech Inc., during bankruptcy. Because of the foregoing, we cannot be certain that a third party would not challenge our rights to these patents and patent applications. Any legal proceeding or enforcement action can also be expensive and time-consuming.

Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. For patents that are eligible for extension of patent term, we expect to seek extensions of patent terms in the United States and, if available, in other countries. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). We might not be granted an extension because of, for example, failure to apply within applicable periods, failure to apply prior to the expiration of relevant patents or otherwise failure to satisfy any of the numerous applicable requirements. Moreover, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to obtain approval of competing products following our patent expiration by referencing our clinical and pre-clinical data and launch their product earlier than might otherwise be the case. If this were to occur, it could have a material adverse effect on our ability to generate revenue.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending our intellectual property in all countries throughout the world could be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we

 

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may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuit that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. In addition, many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties (for example, the patent owner has failed to “work” the invention in that country, or the third party has patented improvements) or limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent.

We depend on intellectual property licensed from third parties and termination or modification of any of these licenses could result in the loss of significant rights, which would materially harm our business.

In November 2015, we entered into a patent assignment and licensing agreement with Boehringer Ingelheim International GmbH, or the BI Agreement, pursuant to which BI assigned to us certain patents, and granted us an exclusive, royalty-bearing license to certain know-how owned or controlled by BI, to develop, manufacture and commercialize products containing the CCR2, CB2 and SSTR4 compounds or compounds covered by a claim in the assigned patents, for the treatment or prevention of diseases or conditions in humans or animals.

We are dependent on these patents and the know-how licensed under the BI Agreement. Any termination of or loss of rights under this agreement, or a finding that such intellectual property lacks legal effect, could harm our ability to commercialize any product candidates containing the CCR2, CB2 and SSTR4 compounds. Pursuant to the BI Agreement, in the event that we (or an affiliate or a sublicensee) begin clinical trials or commercialize a competing product that modulates the same target as a product containing the CCR2, CB2 and SSTR4 compounds, BI has the right to convert the exclusivity of our license so that we only have a non-exclusive right to the know-how. In such a situation, BI will also have the right to obtain a perpetual license-back to the assigned patents to independently exploit the products and we will grant BI a license to use any results from our independent exploitation of the compounds and products.

BI may also terminate the BI Agreement in its entirety if we materially breach or default on our obligations under the agreement and do not cure within a specified period of time, which includes a material breach of our obligations to use commercially reasonably efforts to develop and commercialize products under the BI Agreement. If we terminate the BI Agreement for convenience or if BI terminates it due to our uncured material breach, we will no longer have any rights to the patents assigned to us by BI under the BI Agreement and ownership of those patents will transfer back to BI. We will also be obligated to transfer to BI, at its request, all development data and regulatory documentation, approvals and agreements related to the product(s) that are

 

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the subject of the BI Agreement, as well as grant to BI a non-exclusive license to use certain of our intellectual property as may be necessary for the continued development, manufacture and/or commercialization of such product(s).

Disputes may also arise between us and our current or future licensors, including BI, our current or future licensors and their licensors, or us and third parties that co-own intellectual property with our licensors or their licensors, regarding intellectual property subject to a license agreement, including those relating to:

 

   

the scope of rights, if any, granted under the applicable license agreement and other interpretation-related issues;

 

   

whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the applicable license agreement;

 

   

whether our licensor or its licensor had the right to grant the applicable license agreement;

 

   

whether third parties are entitled to compensation or equitable relief, such as an injunction, for our use of the intellectual property without their authorization;

 

   

our right to sublicense rights to third parties under collaborative development relationships;

 

   

whether we are complying with our obligations with respect to the use of licensed technology in relation to our development and commercialization of product candidates;

 

   

the allocation of ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and by us and our partners; and

 

   

the amounts of royalties, milestones or other payments due under the applicable license agreement.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, or are insufficient to provide us the necessary rights to use the intellectual property, we may be unable to successfully develop and commercialize the affected product candidates. If we or any such licensors fail to adequately protect this intellectual property, our ability to commercialize our products could suffer.

We may be required to pay certain milestones and royalties under our license agreements with third-party licensors.

Under our current and future license agreements, we may be required to pay milestones and royalties based on our revenues from sales of our products utilizing the technologies licensed or sublicensed from licensors, including BI, and these royalty payments could adversely affect the overall profitability for us of any products that we may seek to commercialize. In order to maintain our license rights under current and future license agreements, we may need to meet certain specified milestones, subject to certain cure provisions, in the development of our product candidates and in the raising of funding. In addition, these agreements may contain diligence milestones and we may not be successful in meeting all of the milestones in the future on a timely basis or at all. We may need to outsource and rely on third parties for many aspects of the clinical development, sales and marketing of our products covered under our current and future license agreements. Delay or failure by these third parties could adversely affect the continuation of our license agreements with their third-party licensors. Pursuant to the BI Agreement, if we succeed in developing and commercializing products containing compounds active against CCR2, CB2 or SSTR4 we will owe BI regulatory and commercial milestone payments.

 

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If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our trademarks of interest and our business may be adversely affected.

While we seek to protect the trademarks we use in the United States and in other countries, we may be unsuccessful in obtaining registrations and/or otherwise protecting these trademarks. If that were to happen, we may be prevented from using our names, brands and trademarks unless we enter into appropriate royalty, license or coexistence agreements, which may not be available or may not be available on commercially reasonable terms. Over the long term, if we are unable to establish name recognition based on our trademarks, trade names, service marks and domain names, then we may not be able to compete effectively, resulting in a material adverse effect on our business. Our trademarks or trade names that we have already obtained may be challenged, infringed, diluted, misappropriated or declared generic, or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. During trademark registration proceedings, we may receive rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. Effective trademark protection may not be available or may not be sought in every country in which our products are made available. Any name we propose to use for our products in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed product names, we may be required to expend significant additional resources in an effort to identify a usable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

Risks Related to Employee Matters and Managing Growth

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of product candidate development, regulatory affairs and sales, marketing and distribution. As of November 1, 2018, we had 14 full-time employees. To manage our growth activities, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. As we expand our organization, we may have difficulty identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future

 

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financial performance and our ability to commercialize our product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

Many of the biotechnology and pharmaceutical companies that we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer history in the industry than we do. If we are unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which we can discover and develop product candidates and operate our business will be limited.

If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers or other significant personnel or experience increases in our compensation costs, our business may materially suffer.

We are highly dependent on our management and directors, including Jeffrey B. Kindler, James N. Campbell and Sol J. Barer, among others. Due to the specialized knowledge each of our officers and key employees possesses with respect to our product candidates and our operations, the loss of service of any of our officers or directors could delay or prevent the successful enrollment and completion of our clinical trials. We do not carry key man life insurance on our officers or directors. Although we have formal employment agreements with our executive officers, these agreements do not prevent them from terminating their employment with us at any time.

In addition, our future success and growth will depend in part on the continued service of our directors, employees and management personnel and our ability to identify, hire, and retain additional personnel. If we lose one or more of our executive officers or key employees, our ability to implement our business strategy successfully could be seriously harmed. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize product candidates successfully. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be engaged by entities other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to develop and commercialize product candidates will be limited.

Many of our employees have become or will soon become vested in a substantial amount of our common stock or a number of common stock options. Our employees may be more likely to leave us if the shares they own have significantly appreciated in value relative to the original purchase prices of the shares, or if the exercise prices of the options that they hold are significantly below the market price of our common stock, particularly after the expiration of the lock-up agreements described herein. Our future success also depends on our ability to continue to attract and retain additional executive officers and other key employees.

We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.

In the future, we may enter into transactions to acquire other businesses, products or technologies. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all. Any acquisitions we make may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company, which would reduce the

 

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percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely and non-disruptive manner. Acquisitions may also divert management attention from day-to-day responsibilities, lead to a loss of key personnel, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might have on our operating results.

We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters could severely disrupt our operations and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities on which we rely, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business. For example, following Hurricane Maria, shortages in production and delays in a number of medical supplies produced in Puerto Rico resulted, and any similar interruption due to a natural disaster affecting us or any of our third-party manufacturers could materially delay our operations.

Risks Related to Our Common Stock and this Offering

An active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. Although we have applied to have our common stock listed on The Nasdaq Global Select Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares, or at all.

The market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

Our stock price is likely to be volatile. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

 

   

the success of competitive products or technologies;

 

   

actual or expected changes in our growth rate relative to our competitors;

 

   

results of clinical trials of our product candidates or those of our competitors;

 

   

developments related to our existing or any future collaborations;

 

   

regulatory actions with respect to our product candidates or our competitors’ products and product candidates;

 

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regulatory or legal developments in the United States and other countries;

 

   

development of new product candidates that may address our markets and make our product candidates less attractive;

 

   

changes in physician, hospital or healthcare provider practices that may make our product candidates less useful;

 

   

announcements by us, our partners or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

 

   

developments or disputes concerning patent applications, issued patents or other proprietary rights;

 

   

the recruitment or departure of key personnel;

 

   

the level of expenses related to any of our product candidates or clinical development programs;

 

   

failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;

 

   

the results of our efforts to discover, develop, acquire or in-license additional product candidates or products;

 

   

actual or expected changes in estimates as to financial results, development timelines or recommendations by securities analysts;

 

   

variations in our financial results or those of companies that are perceived to be similar to us;

 

   

changes in the structure of healthcare payment systems;

 

   

market conditions in the pharmaceutical and biotechnology sectors;

 

   

general economic, industry and market conditions; and

 

   

the other factors described in this “Risk Factors” section and elsewhere in this prospectus.

After this offering, our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to control or significantly influence all matters submitted to stockholders for approval.

Upon the closing of this offering, based on the number of shares of common stock outstanding as of September 30, 2018, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock before this offering and their respective affiliates will, in the aggregate, hold shares representing approximately 49.5% of our outstanding voting stock. As a result, if these stockholders choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors, the composition of our management and approval of any merger, consolidation or sale of all or substantially all of our assets.

Certain of our existing stockholders, including entities affiliated with certain of our directors, have indicated an interest in purchasing an aggregate of approximately $30 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any or all of these stockholders, or any or all of these stockholders may determine to purchase more, fewer or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering. The foregoing ownership percentage does not give effect to any purchases of shares of our common stock by the stockholders.

 

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If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.

The initial public offering price of our common stock will be substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. To the extent shares subsequently are issued under outstanding options or warrants, you will incur further dilution. Based on an assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), you will experience immediate dilution of $10.35 per share as of September 30, 2018, representing the difference between our pro forma as adjusted net tangible book value per share, after giving effect to this offering, and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately 72.7% of the aggregate price paid by all purchasers of our stock but will own only approximately 22.6% of our common stock outstanding after this offering.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. We expect that we will use the net proceeds of this offering to advance the clinical development of CNTX-4975 and our other product candidates, pursue additional research and development efforts and for general and administrative expenses, working capital and other general corporate purposes as set forth under “Use of Proceeds.” However, our use of these proceeds may differ substantially from our current plans. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have outstanding 22,162,604 shares of common stock based on the number of shares outstanding as of September 30, 2018. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates or existing stockholders. The remaining shares are currently restricted as a result of securities laws or lock-up agreements (which may be waived, with or without notice, by Merrill Lynch, Pierce, Fenner & Smith Incorporated, Leerink Partners LLC and Evercore Group L.L.C.) but will become eligible to be sold at various times beginning 180 days after this offering, unless held by one of our affiliates, in which case the resale of those securities will be subject to volume limitations under Rule 144 of the Securities Act of 1933, as amended, or Rule 144. Moreover, after this offering, holders of an aggregate of 17,105,305 shares of our common stock will have rights, subject to specified conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders, until such shares can otherwise be sold without restriction under Rule 144 or until the rights terminate pursuant to the terms of the stockholders’ agreement between us and such holders. We also intend to register all shares of common

 

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stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the “Underwriting” section of this prospectus.

We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the closing of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

 

   

being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this prospectus;

 

   

not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

 

   

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

   

reduced disclosure obligations regarding executive compensation; and

 

   

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements

 

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of The Nasdaq Global Select Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. We may discover significant deficiencies or material weaknesses, which we may not successfully remediate on a timely basis or at all. Any failure to remediate any significant deficiencies or material weaknesses identified by us or to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have, and may never obtain, research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our target pre-clinical studies or clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

 

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Provisions in our restated certificate of incorporation and restated bylaws and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our restated certificate of incorporation and our restated bylaws, which will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions include those establishing:

 

   

a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

 

   

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

   

the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors;

 

   

the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

 

   

the ability of our board of directors to alter our bylaws without obtaining stockholder approval;

 

   

the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our restated certificate of incorporation regarding the election and removal of directors;

 

   

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

 

   

the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

 

   

advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Furthermore, our restated certificate of incorporation, which

 

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will become effective upon the closing of this offering, specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving claims brought against us by stockholders; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our restated certificate of incorporation described above.

We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it may limit any stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers, employees or agents. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

Because we do not anticipate paying any cash dividends on our common shares in the foreseeable future, capital appreciation, if any, would be your sole source of gain.

We have never declared or paid any cash dividends on our common shares. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common shares would be your sole source of gain on an investment in our common shares for the foreseeable future. See the “Dividend Policy” section of this prospectus for additional information.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Our ability to use our net operating loss carryforwards and research and development credits to offset future taxable income may be subject to certain limitations.

As of December 31, 2017, we had net operating loss carryforwards, or NOLs, of $28.2 million for federal income tax purposes and $28.1 million for state income tax purposes, which may be available to offset our future taxable income, if any, and begin to expire in various amounts in 2030. As of December 31, 2017, we also had federal and state research and development tax credit carryforwards of $2.5 million, which begin to expire in various amounts in 2021. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In general, under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change NOLs and tax credits to offset future taxable income. Our

 

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existing NOLs or credits may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change in connection with or after this offering, our ability to utilize NOLs or credits could be further limited by Sections 382 and 383 of the Code. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs or credits may also be impaired under state law. Furthermore, our ability to use NOLs of companies that we may acquire in the future may be subject to limitations. For these reasons, we may not be able to use a material portion of the NOLs or tax credits, even if we attain profitability. The reduction of the corporate tax rate under the Tax Cuts and Jobs Act of 2017, or the TCJA, may cause a reduction in the economic benefit of our NOLs and other deferred tax assets available to us. Furthermore, under the TCJA, although the treatment of tax losses generated before December 31, 2017 has generally not changed, tax losses generated in calendar year 2018 and beyond may only offset 80% of taxable income. This change may require us to pay federal income taxes in future years despite generating a loss for federal income tax purposes in prior years.

Recent U.S. tax legislation may materially adversely affect our financial condition, results of operations and cash flows.

The TCJA has significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, and revising the rules governing net operating losses. Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions. The TCJA is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service, or IRS, any of which could lessen or increase certain adverse impacts of the TCJA. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.

While some of the changes made by the TCJA may adversely affect the Company in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis. We continue to work with our tax advisors to determine the full impact that the TCJA as a whole will have on us. We urge our investors to consult with their legal and tax advisors with respect to the TCJA.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, future revenue, timing and likelihood of success, plans and objectives of management for future operations, future results of anticipated products and prospects, plans and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “would” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this prospectus and are subject to a number of risks, uncertainties and assumptions described under the sections in this prospectus entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

INDUSTRY AND OTHER DATA

We obtained the industry, market and competitive position data in this prospectus from our own internal estimates and research as well as from industry and general publications and research, surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research as to such matters is reliable and the market definitions are appropriate, neither such research nor these definitions have been verified by any independent source.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from our issuance and sale of shares of our common stock in this offering will be approximately $66.7 million, assuming an initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ option to purchase additional shares from us is exercised in full, we estimate that our net proceeds will be approximately $77.1 million. Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $4.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by $14.0 million, assuming the assumed initial public offering price stays the same.

We anticipate that we will use the net proceeds of this offering, together with our cash, cash equivalents and investments, for the following purposes:

 

   

approximately $52.0 million to $54.0 million to fund the Phase 3 program and pre-commercialization expenses for CNTX-4975 through topline results in the first pivotal Phase 3 registration trial;

 

   

approximately $12.0 million to $14.0 million to fund the development of CNTX-0290 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain;

 

   

approximately $6.0 million to $8.0 million to fund the development of CNTX-6016 to complete Phase 1 development;

 

   

approximately $5.0 million to $7.0 million to fund the development of CNTX-6970 to complete Phase 1 development and initiate a Phase 2 trial for chronic pain; and

 

   

the remainder, if any, for other research and development expenses for our pipeline, including unallocated expenses and expenses for CNTX-2022, and for working capital and other general corporate purposes.

Our priority is to advance the development of CNTX-4975 through Phase 3 registration trials and prepare for potential commercialization. To the extent that our CNTX-4975 development costs are more than we anticipate, we are not able secure additional sources of funding, and/or we raise less than the anticipated amount of net proceeds in this offering, we may elect or be required to delay the initiation of the Phase 2 clinical trials for CNTX-0290 and CNTX-6970, as well as other development efforts, in order to enable funding for the CNTX-4975 Phase 3 development program and pre-commercialization preparations for CNTX-4975.

This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. We may also use a portion of the net proceeds to in-license, acquire, or invest in additional businesses, technologies, products or assets, although currently we have no specific agreements, commitments or understandings in this regard. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the closing of this offering or the amounts that we will actually spend on the uses set forth above. Predicting the cost necessary to develop product candidates can be difficult and we anticipate that we will need additional funds to complete the development of any product candidates we identify. The amounts and timing of our actual expenditures and the extent of clinical development may vary significantly

 

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depending on numerous factors, including the progress of our development efforts, the status of and results from pre-clinical studies and any ongoing clinical trials or clinical trials we may commence in the future, as well as any collaborations that we may enter into with third parties for our product candidates and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

Based on our current operating plan, we believe that the net proceeds from this offering and our current cash and cash equivalents will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2020. We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect. In any event, we do not expect that the net proceeds from this offering and our current cash and cash equivalents will be sufficient to enable us to complete the clinical development of CNTX-4975 or any of our other product candidates, and we will need additional funds to complete such clinical development and initiate commercialization. We may satisfy our future cash needs through the sale of equity securities, debt financings, working capital lines of credit, corporate collaborations or license agreements, grant funding, interest income earned on invested cash balances or a combination of one or more of these sources.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

 

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments. In addition, our term loan facility with Silicon Valley Bank, or SVB, restricts our ability to pay any dividends or make any distribution of our capital stock.

Holders of our Series D preferred stock are entitled to dividends upon the conversion of such shares of preferred stock to our common stock in connection with an initial public offering, which will occur immediately prior to the completion of this offering. Each Series D preferred stockholder is entitled to a cumulative accrued dividend calculated at a rate per annum of $0.117 per share of Series D preferred stock (subject to certain adjustment provisions), payable in shares of common stock based on a value of $11.24 per share.

As of September 30, 2018, cumulative dividends of an aggregate of 2,089,808 shares of our common stock had accrued to our Series D preferred stockholders. These cumulative dividends have continued to accrue subsequent to September 30, 2018. Assuming a closing date of November 19, 2018, we expect to issue 392,504 shares of our common stock in payment of such cumulative accrued dividends to our Series D preferred stockholders. For each day prior to or following the assumed closing date that this offering actually closes, such cumulative accrued dividends decrease or increase, respectively, by an aggregate of approximately 1,157 shares of common stock. Stock dividends will not be paid on any shares purchased in this offering.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2018, as follows:

 

   

on an actual basis;

 

   

on a pro forma basis to reflect:

 

   

the automatic conversion of all outstanding shares of our preferred stock into 14,979,055 shares of common stock upon the closing of this offering;

 

   

the issuance of an aggregate of 392,504 shares of our common stock upon the closing of this offering to pay accrued dividends on our Series D preferred stock, assuming a closing date for this offering of November 19, 2018 (for each day prior to or following such assumed closing date that this offering actually closes, such dividends shall decrease or increase, respectively, by an aggregate of approximately 1,157 shares of common stock);

 

   

the automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock, which, based on an assumption that the fair market value of our common stock for purposes of automatic exercise under the warrants will be equal to the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, would result in the issuance of 139,009 shares of our common stock upon the closing of this offering (a $1.00 increase in the assumed initial public offering price of $15.00 per share would increase the number of additional shares of our common stock issuable in connection with such automatic exercise by an aggregate of 33,128 shares; a $1.00 decrease in the assumed initial public offering price of $15.00 per share would decrease the number of additional shares of our common stock issuable in connection with such exercise by an aggregate of 37,864 shares);

 

   

the assumed exercise prior to the closing of this offering of certain outstanding warrants that shall otherwise expire upon such closing to purchase 2,545,405 shares of preferred stock for an aggregate purchase price of approximately $4.5 million, which, assuming the automatic conversion of the shares of preferred stock issued pursuant to such exercise into shares of common stock, would result in the issuance of 407,543 shares of our common stock upon the closing of this offering;

 

   

for purposes of any automatic cashless exercise of warrants, that the fair market value of our common stock immediately prior to the closing of this offering exceeds the exercise price of the applicable warrant; and

 

   

the filing and effectiveness of our restated certificate of incorporation which will occur upon the closing of this offering.

 

   

on a pro forma as adjusted basis to give further effect to our issuance and sale of 5,000,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this information in

 

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conjunction with our financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.

 

    

As of September 30, 2018

 
     (in thousands, except share data)  
    

Actual

   

Pro Forma

   

Pro Forma As
Adjusted(1)

 

Cash and cash equivalents

   $ 42,059     $ 46,555     $ 113,205  
  

 

 

   

 

 

   

 

 

 

Long term debt

     7,740       7,740       7,740  

Warrant liabilities

     3,209       —         —    

Convertible preferred stock (Series A, B, C and D), par value $0.001 per share; 103,555,395 shares authorized, 93,545,253 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted

     155,627       —         —    

Stockholders’ (deficit) equity:

      

Preferred stock, $0.001 par value; no shares authorized, issued or outstanding, actual; 10,000,000 shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted

     —         —         —    

Common stock, par value $0.001 per share; 200,000,000 shares authorized, 1,244,493 shares issued and outstanding, actual; 200,000,000 shares authorized, pro forma and pro forma as adjusted; 17,162,604 shares issued and outstanding, pro forma; 22,162,604 shares issued and outstanding, pro forma as adjusted

     1       17       22  

Additional paid-in capital

     5,695       170,309       236,954  

Accumulated deficit

     (125,671     (126,969     (126,969
  

 

 

   

 

 

   

 

 

 

Total stockholders’ (deficit) equity

     (119,975     43,357       110,007  
  

 

 

   

 

 

   

 

 

 

Total capitalization

   $ 46,601     $ 51,097     $ 117,747  
  

 

 

   

 

 

   

 

 

 

 

(1)

Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by $4.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us at the assumed initial public offering price per share (the midpoint of the price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by approximately $14.0 million.

The number of shares in the table above does not include:

 

   

1,981,815 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2018, at a weighted-average exercise price of $4.36 per share;

 

   

83,189 shares of our common stock issuable upon the exercise of certain warrants to purchase common stock outstanding as of September 30, 2018 at a weighted average exercise price of $6.59 per share;

 

   

1,284,465 shares of our common stock issuable upon the exercise of stock options to be granted in connection with this offering under the 2018 Plan, which will become effective in connection with this offering, to certain of our directors, executive officers and employees, at an exercise price per share equal to the initial public offering price in this offering;

 

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843,829 shares of our common stock reserved for future issuance under the 2018 Plan, as well as shares of our common stock that become available pursuant to provisions in the 2018 Plan that automatically increase the share reserve under the 2018 Plan as described in “Executive and Director Compensation—Incentive Plans—2018 Incentive Award Plan”; and

 

   

266,000 shares of our common stock that will become available for future issuance under the 2018 ESPP, which will become effective in connection with this offering, as well as shares of our common stock that become available pursuant to provisions in the 2018 ESPP that automatically increase the share reserve under the 2018 ESPP as described in “Executive and Director Compensation—Incentive Plans—2018 Employee Stock Purchase Plan.”

 

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

As of September 30, 2018, we had a historical net tangible book value of $(126.9) million, or $(101.94) per share of common stock. Our historical net tangible book value per share represents total tangible assets less total liabilities and less convertible preferred stock, divided by the number of shares of our common stock outstanding as of September 30, 2018.

Our pro forma net tangible book value as of September 30, 2018 was $36.5 million, or $2.13 per share. Pro forma net tangible book value represents the amount of our total tangible assets less total liabilities, after giving effect to (1) the automatic conversion of all shares of our preferred stock outstanding as of September 30, 2018 into an aggregate of 14,979,055 shares of our common stock upon the closing of this offering, (2) the issuance of an aggregate of 392,504 shares of our common stock immediately prior to the closing of this offering to pay accrued dividends on our Series D preferred stock, assuming a closing date for this offering of November 19, 2018, (3) the automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock, which, based on an assumption that the fair market value of our common stock for purposes of automatic exercise under the warrants will be equal to the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, would result in the issuance of 139,009 shares of our common stock upon the closing of this offering, (4) the assumed exercise prior to the closing of this offering of certain outstanding warrants that shall otherwise expire upon such closing to purchase 2,545,405 shares of preferred stock for an aggregate purchase price of approximately $4.5 million, which, assuming the automatic conversion of the shares of preferred stock issued pursuant to such exercise into shares of common stock, would result in the issuance of 407,543 shares of our common stock upon the closing of this offering and (5) for purposes of any automatic cashless exercise of warrants, that the fair market value of our common stock immediately prior to the closing of this offering exceeds the exercise price of the applicable warrant. Pro forma net tangible book value per share represents our pro forma net tangible book value divided by the total number of shares outstanding as of September 30, 2018, after giving effect to the pro forma adjustment described above.

 

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After giving further effect to receipt of the net proceeds from our issuance and the sale of 5,000,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2018 would have been approximately $103.1 million, or approximately $4.65 per share. This amount represents an immediate increase in pro forma net tangible book value of $2.53 per share to our existing stockholders and an immediate dilution of approximately $10.35 per share to new investors participating in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock. The following table illustrates this dilution:

 

Assumed initial public offering price per share

     $ 15.00  

Historical net tangible book value per share as of September 30, 2018

   $ (101.94  

Increase (decrease) per share attributable to (1) the conversion of our preferred stock, (2) the issuance of shares of common stock to pay accrued dividends on our Series D preferred stock, (3) the automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock, (4) the assumed exercise of certain outstanding warrants to purchase shares of preferred stock that shall otherwise expire upon the closing of this offering and the conversion thereof and (5) for purposes of any automatic cashless exercise of warrants, that the fair market value of our common stock immediately prior to the closing of this offering exceeds the exercise price of the applicable warrant

     104.06    
  

 

 

   

Pro forma net tangible book value (deficit) per share as of September 30, 2018

     2.13    

Increase per share attributable to this offering

     2.53    
  

 

 

   

Pro forma as adjusted net tangible book value per share after this offering

     $ 4.65  
    

 

 

 

Dilution per share to new investors in this offering

     $ 10.35  
    

 

 

 

Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by $0.21, and dilution in pro forma net tangible book value per share to new investors by $0.21, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $0.63 per share and decrease (increase) the dilution to new investors by $0.63 per share, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares of our common stock in full, the pro forma as adjusted net tangible book value after this offering would be $4.96 per share, the increase in pro forma net tangible book value per share would be $2.83 and the dilution per share to new investors would be $10.04 per share, in each case assuming an initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.

The following table summarizes on the pro forma as adjusted basis described above, as of September 30, 2018, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing stockholders and new investors paid. The calculation below is based on an assumed initial public offering price of $15.00 per share (the midpoint of the

 

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price range set forth on the cover page of this prospectus), before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

    

Shares Purchased

   

Total Consideration

   

Average Price

Per Share

 
    

Number

    

Percent

   

Amount

    

Percent

 

Existing stockholders

     17,162,604        77.4   $ 28,119        27.3   $ 1.64  

New investors

     5,000,000        22.6   $ 75,000        72.7   $ 15.00  
  

 

 

    

 

 

   

 

 

    

 

 

   

Total

     22,162,604        100.0   $ 103,119        100.0   $ 4.65  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

(1)

Certain of our existing stockholders, including entities affiliated with certain of our directors, have indicated an interest in purchasing an aggregate of approximately $30 million in shares of our common stock in this offering at the initial public offering price. The presentation in this table regarding ownership by existing stockholders does not give effect to any purchases in this offering by such stockholders.

A $1.00 increase or decrease in the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), would increase or decrease the total consideration paid by new investors by $5.0 million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by 1.5 percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by 1.6 percentage points, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. An increase or decrease of 1.0 million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $15.0 million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by 3.5 percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by 4.6 percentage points, assuming no change in the assumed initial public offering price.

The foregoing tables and calculations are based on the number of shares of our common stock outstanding as of September 30, 2018, and exclude:

 

   

1,981,815 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2018, at a weighted-average exercise price of $4.36 per share;

 

   

83,189 shares of our common stock issuable upon the exercise of certain warrants to purchase common stock outstanding as of September 30, 2018 at a weighted average exercise price of $6.59 per share;

 

   

1,284,465 shares of our common stock issuable upon the exercise of stock options to be granted in connection with this offering under the 2018 Plan, which will become effective in connection with this offering, to certain of our directors, executive officers and employees, at an exercise price per share equal to the initial public offering price in this offering;

 

   

843,829 shares of our common stock reserved for future issuance under the 2018 Plan, as well as shares of our common stock that become available pursuant to provisions in the 2018 Plan that automatically increase the share reserve under the 2018 Plan as described in “Executive and Director Compensation—Incentive Plans—2018 Incentive Award Plan”; and

 

   

266,000 shares of our common stock that will become available for future issuance under the 2018 ESPP, which will become effective in connection with this offering, as well as shares of our common stock that become available pursuant to provisions in the 2018 ESPP that automatically increase the share reserve under the 2018 ESPP as described in “Executive and Director Compensation—Incentive Plans—2018 Employee Stock Purchase Plan.”

 

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To the extent any of these outstanding options or warrants is exercised, there will be further dilution to new investors. If all of such outstanding options had been exercised as of September 30, 2018, the pro forma as adjusted net tangible book value per share after this offering would be $5.07, and total dilution per share to new investors would be $9.93.

If the underwriters exercise their option to purchase additional shares of our common stock in full:

 

   

the percentage of shares of common stock held by existing stockholders will decrease to approximately 74.9% of the total number of shares of our common stock outstanding after this offering; and

 

   

the number of shares held by new investors will increase to 5,750,000, or approximately 25.1% of the total number of shares of our common stock outstanding after this offering.

 

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SELECTED FINANCIAL DATA

The following tables set forth, for the periods and as of the dates indicated, our selected historical financial data. The statements of operations data for the years ended December 31, 2016 and 2017 and the balance sheet data as of December 31, 2016 and 2017 are derived from our audited financial statements appearing at the end of this prospectus. The statement of operations data for the nine months ended September 30, 2017 and 2018 and the balance sheet data as of September 30, 2018 have been derived from our unaudited financial statements appearing at the end of this prospectus and have been prepared on the same basis as the audited financial statements. In the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information in those statements. Our historical results are not necessarily indicative of the results that should be expected in the future, and results for the nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full year ending December 31, 2018. You should read this data together with the more detailed information contained in our audited financial statements and the related notes thereto and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

    

Year Ended December 31,

   

Nine Months Ended September 30,

 
    

2016

   

2017

   

2017

   

2018

 
    

(in thousands, except share data)

 
           (unaudited)  

Revenue

   $ —       $ —       $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research and development

     27,788       17,622       14,077       17,420  

General and administrative

     5,443       6,433       5,119       6,612  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     33,231       24,055       19,196       24,032  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (33,231     (24,055     (19,196     (24,032
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense), net:

        

Interest income

     22       43       19       564  

Interest expense

     (2,126     (983     (617     (205

Loss on conversion of convertible notes payable

     (2,412     (497     —         —    

Loss on disposal of property and equipment

     —         (38     (38     —    

Loss on forgiveness of notes receivable from stockholders

     —         —         —         (599

Loss on extinguishment of long-term debt

     —         —         —         (298

Revaluation of stock warrant liabilities

     75       475       339       (763
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     (4,441     (1,000     (297     (1,301
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss before income tax benefit

     (37,672     (25,055     (19,493     (25,333

Income tax benefit

     —         441       —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (37,672     (24,614     (19,493     (25,333

Plus: Cumulative dividends on convertible preferred stock

     —         (128     —         (2,791
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (37,672   $ (24,742   $ (19,493   $ (28,124
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders, basic and diluted(1)

   $ (30.36   $ (19.91   $ (15.68   $ (22.60
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding, basic and diluted(1)

     1,240,991       1,242,744       1,243,366       1,244,493  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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As of December 31,

    

As of September 30,

 
    

2016

    

2017

    

2018

 
    

(in thousands)

 
            (unaudited)  

Balance Sheet Data:

        

Cash and cash equivalents

   $ 16,231      $ 60,679      $ 42,059  

Working capital(2)

     12,146        56,373        39,963  

Total assets

     24,006        68,337        52,786  

Long-term debt, net of discount

     3,545        1,973        7,740  

Warrant liabilities

     2,348        2,446        3,209  

Convertible preferred stock

     83,678        152,836        155,627  

Accumulated deficit

     (72,805      (97,547      (125,671

Total stockholders’ deficit

     (70,563      (93,884      (119,975

 

(1)

See Note 11 to our financial statements appearing at the end of this prospectus for further details on the calculation of basic and diluted net loss per share attributable to common stockholders.

(2)

We define working capital as current assets less current liabilities.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “Selected Financial Data” and our financial statements and related notes appearing at the end of this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of this prospectus. For convenience of presentation some of the numbers have been rounded in the text below.

Overview

We are a late clinical-stage biopharmaceutical company focused on becoming the leader in identifying, developing and commercializing novel, non-opioid and non-addictive therapies to address the large unmet medical need for the treatment of chronic pain.

Our most advanced product candidate, CNTX-4975, is designed to selectively and locally target and disrupt the signaling of pain-sensing nerve fibers. CNTX-4975 is in pivotal Phase 3 development for the treatment of patients with moderate to severe pain due to knee OA. In a Phase 2 randomized, double-blinded, placebo-controlled clinical trial in 175 subjects with moderate to severe pain due to knee OA, subjects receiving a single IA injection of 1.0 mg of CNTX-4975 experienced statistically significant, onset of activity by second day and durable pain relief, as measured by the Western Ontario and McMaster Universities Arthritis Index, or WOMAC index, and showed an AE profile similar to the placebo group. In this trial, we observed a significant reduction from baseline pain and a clinically meaningful difference compared to the placebo group in subjects with moderate to severe pain associated with knee OA. If the results of our ongoing and future clinical trials are positive, we plan to submit an NDA in the United States, and an MAA in Europe, in the second half of 2021. CNTX-4975 was granted Fast Track Designation by the FDA in January 2018 for the treatment of moderate to severe pain associated with knee OA. We hold worldwide commercialization rights to CNTX-4975, and, if successfully developed and approved, we anticipate initial commercial sales in 2022. In addition to CNTX-4975, we have three other product candidates in clinical development and one in pre-clinical development for the treatment of multiple types of chronic pain. We believe that we have one of the industry’s largest pipelines of novel, non-opioid and non-addictive clinical-stage product candidates for the treatment of chronic pain.

Since our inception in 2013, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, acquiring and developing product and technology rights, and conducting research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date with proceeds from the issuance and sale of convertible notes and preferred stock and borrowings under the term loan facility with Silicon Valley Bank. Through December 31, 2017, we had received gross proceeds of $148.5 million from the sale of our convertible notes and issuances and sales of preferred stock. In addition, as of September 30, 2018, the outstanding principal balance under the term loan facility was $7.7 million.

Since our inception, we have incurred significant operating losses. Our operating loss was $33.2 million for the year ended December 31, 2016, $24.1 million for the year ended December 31, 2017 and $24.0 million for the nine months ended September 30, 2018. Our net loss was $37.7 million for the year ended December 31, 2016 and $24.7 million for the year ended December 31, 2017 and $28.1 for the nine months ended September 30, 2018. As of December 31, 2017, we had an accumulated deficit of $97.5 million and as of September 30, 2018, our accumulated deficit was $125.7 million. We expect to continue to incur significant expenses and

 

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increasing operating and net losses for at least the next several years. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities, as we:

 

   

continue clinical trials for CNTX-4975;

 

   

advance our other product candidates through pre-clinical and clinical development;

 

   

seek regulatory approval for our product candidates;

 

   

hire additional personnel to support our product development, commercialization and administrative efforts;

 

   

commercialize CNTX-4975 in the United States with our own targeted sales and marketing organization and selectively partner outside of the United States; and

 

   

pursue strategic partnerships that maximize the value of our other pipeline while seeking to maintain commercialization rights in the United States for select specialists that treat chronic pain conditions.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Further, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, including borrowings under the existing or additional term loan facilities, or other capital sources, including potential collaborations with other companies or other strategic transactions, including potentially through licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we raise additional funds through collaborations, strategic alliances, or, if applicable, licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates. We will need to generate significant revenue to achieve profitability, and we may never do so.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of December 31, 2017, we had cash and cash equivalents of $60.7 million and as of September 30, 2018, we had cash and cash equivalents of $42.1 million. We believe that our existing cash and cash equivalents as of September 30, 2018, will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2019, without giving effect to any anticipated proceeds from this offering. We believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2020. If we are unable to raise sufficient funding, we may be unable to continue to operate in the long-term. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources.”

 

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In its report on our financial statements for the year ended December 31, 2017, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. See “Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital—Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.”

Components of our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and we do not expect to generate revenue from sales of any product for several years, if at all.

Operating Expenses

Our operating expenses since inception have consisted solely of research and development costs and general and administrative costs.

Research and Development Expenses

Our research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates, which include:

 

   

expenses incurred in connection with the pre-clinical and clinical development of our product candidates and under agreements with CROs;

 

   

employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and development functions;

 

   

facilities, depreciation and other expenses, which include direct and allocated expenses for rent of facilities, travel and insurance; and

 

   

payments made under third-party licensing agreements.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.

Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to consultants, central laboratories, contractors and CROs in connection with our pre-clinical and clinical development activities. We do not allocate employee costs and facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. We use internal resources to manage our development activities.

 

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The table below summarizes our research and development expenses incurred by development program:

 

    

Year Ended December 31,

     Nine Months Ended September 30,  
    

2016

    

2017

    

2017

    

2018

 
    

(in thousands)

 
            (unaudited)  

Direct research and development expenses by program:

           

CNTX-4975 program

   $ 10,789      $ 6,525      $ 4,850      $ 11,028  

Other pre-clinical and clinical programs

     12,628        4,899        4,413        1,708  

Unallocated and other research and development expenses:

                                                     

Personnel related (including stock-based compensation)

     2,341        2,348        1,909        2,135  

Services

     1,487        3,072        2,257        2,054  

Other

     543        778        648        495  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total unallocated and other research and development expenses

     4,371        6,198        4,814        4,684  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 27,788      $ 17,622      $ 14,077      $ 17,420  
  

 

 

    

 

 

    

 

 

    

 

 

 

Research and development activities are critical to our business model. We expect that our research and development expenses will increase substantially in connection with our planned pre-clinical and clinical development activities in the near term and our planned clinical trials in the future. At this time, we cannot reasonably estimate the costs for completing the pre-clinical and clinical development of any of our other product candidates.

The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:

 

   

the scope, progress, outcome and costs of our pre-clinical development activities, clinical trials and other research and development activities;

 

   

establishing an appropriate safety profile with IND-enabling studies;

 

   

successful patient enrollment in, and the initiation and completion of, clinical trials;

 

   

the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

 

   

establishing commercial manufacturing and supply capabilities or making arrangements with third-party manufacturers and suppliers;

 

   

obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

 

   

significant and changing government regulation;

 

   

launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; and

 

   

maintaining a continued acceptable safety profile of the product candidates following approval.

Any changes in the outcome of any of these variables with respect to the development of our product candidates in pre-clinical and clinical development could mean a significant change in the costs and timing

 

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associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation for employees and consultants and other non-employees, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, accounting, audit and other non-employee services.

We anticipate that our general and administrative expenses will increase in the future as we support our continued research activities and development of our product candidates. We also anticipate that we will incur increased accounting, audit, tax, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company.

Other Income and Expense

Other income and expense items include cash paid for interest and non-cash interest expense for the end-of-term charge and amortization of debt discount associated with our term loan facility. Other income and expense items also include non-cash interest expense on convertible note financings for the years ended December 31, 2016 and 2017 ahead of our Series C preferred stock and Series D preferred stock financings, accounting losses on the conversion of those convertible notes into preferred stock, periodic fair value adjustments on warrants issued in connection with those convertible note financings and interest income on the money market fund investments we make with the proceeds from our preferred stock, convertible notes and debt financings prior to the cash being deployed into operations.

Income Taxes

Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits, due to our uncertainty of realizing a benefit from those items. As of December 31, 2017, we had federal and state net operating loss carryforwards of $28.2 million and $28.1 million, respectively, both of which begin to expire in 2030. As of December 31, 2017, we also had federal and state research and development tax credit carryforwards of $2.5 million, which begin to expire in 2021.

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

 

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Research Contract Costs and Accruals

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met. However, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to:

 

   

vendors in connection with the pre-clinical and clinical development activities;

 

   

third-party manufacturers in connection with the production of pre-clinical and clinical trial materials;

 

   

CROs in connection with pre-clinical studies and clinical trials; and

 

   

investigative sites in connection with clinical trials.

We base our expenses related to pre-clinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage pre-clinical studies and clinical trials and third-party manufacturers that manufacture product for our research and development activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from party to party and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

Stock-Based Compensation

We measure stock options and other stock-based awards granted to employees and directors based on the fair value on the date of the grant and recognize the corresponding compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. Generally, we issue stock option awards with only service-based vesting conditions and record the expense for these awards using the straight-line method.

We measure stock-based awards granted to consultants and non-employees based on the fair value of the award on the date at which the related service is complete. Compensation expense is recognized over the period during which services are rendered by such consultants and non-employees until completed. At the end of each financial reporting period prior to completion of the service, we remeasure the fair value of these awards using the then-current fair value of our common stock and updated assumption inputs in the Black-Scholes option-pricing model.

We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our

 

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common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield.

Determination of the Fair Value of Common Stock

As there has been no public market for our common stock to date, the estimated fair value of our common stock has been determined by our board of directors as of the date of each option grant, with input from management, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations were prepared using back-solve method, relying on the implied option created in our then most recent preferred stock financings to determine exit value where those investors could break even. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. These third-party valuations were performed at various dates, which resulted in valuations of our common stock of $4.02 per share as of December 31, 2015, $5.53 per share as of January 31, 2017, $5.63 as of May 30, 2017, $6.93 as of February 16, 2018, $8.31 as of July 27, 2018, $8.56 as of September 12, 2018 and $8.74 as of October 2, 2018. In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, which may be as a date later than the most recent third-party valuation date, including:

 

   

the prices at which we sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to our common stock at the time of each grant;

 

   

the progress of our research and development programs, including the status of pre-clinical and planned clinical trials for our product candidates;

 

   

our stage of development and commercialization and our business strategy;

 

   

external market conditions affecting the biotechnology industry, and trends within the biotechnology industry;

 

   

our financial position, including cash on hand, and our historical and forecasted performance and operating results;

 

   

the lack of an active public market for our common stock and our preferred stock;

 

   

the likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or a sale of our company in light of prevailing market conditions; and

 

   

the analysis of IPOs and the market performance of similar companies in the biopharmaceutical industry.

The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different.

 

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Following the closing of this offering, the fair value of our common stock will be determined based on the quoted market price of our common stock.

Options Granted

The following table sets forth by grant date the number of shares subject to options granted between January 1, 2016 and September 30, 2018, the per share exercise price of the options, the fair value of common stock on each grant date, and the per share estimated fair value of the options:

 

Grant Date

  

Number of Shares
Subject to
Options Granted

    

Per Share
Exercise Price
of Options

    

Fair Value of
Common Stock
per Share
on  Date of
Option Grant

    

Per Share
Estimated Fair
Value of
Options

 

February 2016

     182,315      $ 4.00      $ 4.00      $ 2.50  

February 2016

     97,134        4.00        4.00        2.62  

February 2016

     29,298        4.00        4.00        3.37  

March 2017

     180,803        5.56        5.56        3.62  

March 2017

     106,645        5.56        5.56        3.81  

March 2017

     42,525        5.56        5.56        4.75  

March 2017

     2,402        5.56        5.56        4.62  

June 2017

     5,604        5.62        5.62        3.87  

April 12, 2018

     3,122        6.93        6.93        5.12  

April 12, 2018

     140,519        6.93        6.93        4.93  

April 12, 2018

     29,114        6.93        6.93        6.18  

August 16, 2018

     238,878        8.31        8.31        6.37  

August 16, 2018

     9,608        8.31        8.31        6.37  

On October 3, 2018, we granted options to purchase 268,282 shares of our common stock under the 2013 Plan. The options vest over four years, expire after 10 years and have an exercise price of $8.74 per share.

Valuation of Warrant Liabilities

Outstanding warrants for the purchase of shares of our preferred stock and a number of the warrants for the purchase of shares of our common stock are free-standing financial instruments classified on our balance sheet as liabilities. On issuance, the liability for warrants is initially recorded at fair value, and the liability is subsequently re-measured to fair value at each balance sheet date. Changes in the fair value of warrant liabilities are recognized as a component of other income and expense in our statement of operations and comprehensive loss. We will continue to adjust warrant liabilities for changes in fair value until the earlier of the exercise, conversion or expiration of the warrants.

Fair value of our warrants is determined with reference to the periodic third-party valuations of the Company and our common stock performed with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, with reference to the AICPA’s Statement on Standards for Valuation Services (SSVS) No. 1, Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset (AICPA, Professional Standards, VS sec. 100), ASC 820 (Fair Value Measurement and Disclosures), and ASC 815 (Derivatives and Hedging). Specifically, the valuation of our warrants involves:

 

   

Estimating our value as of the issuance and subsequent remeasurement dates by relying on the periodic third-party valuation performed in compliance with IRS section 409A and for the purposes of estimating the fair value of our common stock for purposes of ASC 718 (Compensation—Stock Compensation), or 409A valuation reports.

 

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For warrants issued prior to the issuance of the underlying securities, or the Pre-Issuance Warrants, we initially estimate the value of the warrant for the purchase of the underlying securities using an Option Pricing Model, or OPM, and allocating our estimated value through the capital structure, or a waterfall analysis.

 

   

For warrants issued concurrent with or after the underlying securities and from the time the underlying securities associated with the pre issuance warrants are issued, or post-issuance warrants, we estimate the value of the warrant for the purchase of the underlying security using scenario analysis first to estimate possible values for the underlying security and subsequently using an OPM model to allocate our estimated value via a waterfall analysis, thereby estimating the value of the post-issuance warrants in each scenario, and ultimately arriving at a probability-weighted-value for the post-issuance warrants.

 

   

On warrant issuance and subsequent remeasurement dates at a time where the probability of an IPO are known or knowable, we adjust the value of the pre-issuance and post-issuance warrants to capture the optionality of this scenario through a Black-Scholes model.

 

   

In the circumstances where we do not have 409A valuation report dated at or near a balance sheet remeasurement date, and provided that no material changes to our business or to our capital structure have taken place, we value the pre-issuance and post-issuance warrants using a linear interpolation of the warrant fair value estimates made at the time of 409A valuation reports before and after the balance sheet remeasurement date.

 

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The following table provides a roll forward of the aggregate fair values of our warrants to purchase convertible preferred stock and common stock for which fair value is determined by Level 3 inputs (in thousands, except number of warrants):

 

   

Warrants for
Series B
Preferred Stock

   

Warrants for

Series C
Preferred Stock

   

Warrants for
Series D
Preferred Stock

   

Warrants for
Common Stock

   

Total

Warrant
Liability

 
   

Number

   

Liability
Amount

   

Number

   

Liability
Amount

   

Number

   

Liability
Amount

   

Number

   

Liability
Amount

 

Balance at January 1, 2016

    619,314     $ 276       —       $ —         —       $ —         126,033       472     $ 748  

Issued as inducement for 2019 Notes

    —         —         1,714,285       982       —         —         —         —         982  

Issued as compensation to placement agent

    —         —         1,353,978       693       —         —         —         —         693  

Exercised

    —         —         —         —         —         —         —         —         —    

Cancelled

    —         —         —         —         —         —         —         —         —    

Adjustment to fair value

    —         42       —         (37     —         —         —         (80     (75
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2016

    619,314       318       3,068,263       1,638       —         —         126,033       392       2,348  

Issued as inducement for 2018 Notes

    —         —         —         —         831,120       514       —         —         514  

Issued as compensation to placement agent

    —         —         —         —         —         —         18,905       59       59  

Exercised

    —         —         —         —         —         —         —         —         —    

Cancelled

    —         —         —         —         —         —         —         —         —    

Adjustment to fair value

    —         (52     —         (252     —         (103     —         (68     (475
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2017

    619,314     $ 266       3,068,263     $ 1,386       831,120     $ 411       144,938     $ 383     $ 2,446  

Exercised

    —         —         —         —         —         —         —         —         —    

Cancelled

    —         —         —         —         —         —         —         —         —    

Adjustment to fair value

    —         6       —         565       —         117       —         75       763  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2018 (unaudited)

    619,314     $ 272       3,068,263     $ 1,951       831,120     $ 528       144,938     $ 458     $ 3,209  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Emerging Growth Company Status

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

 

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Results of Operations

Comparison of Nine Months Ended September 30, 2017 and 2018

The following table summarizes our results of operations for the nine months ended September 30, 2017 and 2018:

 

    

Nine Months Ended
September 30,

    

Increase
(Decrease)

 
    

2017

    

2018

    

 

 
     (in thousands and unaudited)  

Revenue

   $ —        $     —        $       —    
  

 

 

    

 

 

    

 

 

 

Operating expenses:

        

Research and development

     14,077        17,420        3,343  

General and administrative

     5,119        6,612        1,493  
  

 

 

    

 

 

    

 

 

 

Total operating expenses

     19,196        24,032        4,836  
  

 

 

    

 

 

    

 

 

 

Loss from operations

     (19,196      (24,032      4,836  
  

 

 

    

 

 

    

 

 

 

Other income (expense), net:

        

Interest income

     19        564        (545

Interest expense

     (617      (205      (412

Loss on disposal of property and equipment

     (38      —          (38

Loss on forgiveness of notes receivable from stockholders

     —          (599      599  

Loss on extinguishment of long-term debt

     —          (298      298  

Revaluation of stock warrant liabilities

     339        (763      1,102  
  

 

 

    

 

 

    

 

 

 

Total other income (expense), net

     (297      (1,301      1,004  
  

 

 

    

 

 

    

 

 

 

Net loss

   $ (19,493    $ (25,333    $ 5,840  
  

 

 

    

 

 

    

 

 

 

Research and Development Expenses

 

    

Nine Months Ended
September 30,

    

Increase
(Decrease)

 
    

2017

    

2018

    

 

 
     (in thousands and unaudited)  

Direct research and development expenses by program:

                                                           

CNTX-4975 program

   $ 4,850      $ 11,028      $ 6,178  

Other pre-clinical and clinical programs

     4,413        1,708        (2,705

Unallocated and other research and development expenses:

        

Personnel related (including stock-based compensation)

     1,909        2,135        226  

Services

     2,257        2,054        (203

Other

     648        495        (153
  

 

 

    

 

 

    

 

 

 

Total unallocated and other research and development expenses

     4,814        4,684        130  
  

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 14,077      $ 17,420      $ 3,342  
  

 

 

    

 

 

    

 

 

 

Research and development expenses were $14.1 million for the nine months ended September 30, 2017 compared to $17.4 million for the nine months ended September 30, 2018.

Research and development expenses with regard to our most advanced product candidate, CNTX-4975, for the treatment of patients with moderate to severe pain due to knee OA were $4.9 million for the nine months ended September 30, 2017 compared to $11.0 million for the nine months ended September 30, 2018. For the

 

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nine months ended September 30, 2017, expenditures on CNTX-4975 were related primarily to regulatory interactions with the FDA, manufacturing clinical batches of product, and preparing for the initiation of our Phase 3 program. During the nine months ended September 30, 2017, we also conducted Phase 1 Clinical Trial OA-101 to refine options regarding the cooling techniques used as part of the administration of CNTX-4975. In October 2017, we were advised by the FDA that it concurred with our plans to proceed with the Phase 3 program for CNTX-4975 and we are currently in Phase 3 development, which will increase our research and development expense as we advance this product candidate through the Phase 3 clinical trial. The $6.1 million increase in spending on the program in the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017 is primarily attributable to initiation of two pivotal Phase 3 trials, with the first trial now at more than two-thirds of the targeted enrollment, and an open label safety exposure trial, plus the associated manufacturing of the clinical batch.

In addition to CNTX-4975, we have three other product candidates in clinical development and one in pre-clinical development for the treatment of multiple types of chronic pain, including chronic pain of neuropathic and inflammatory origin. Research and development expenses with regard to these other clinical development programs were $4.4 million for the nine months ended September 30, 2017 as compared to $1.7 million for the nine months ended September 30, 2018, representing a decrease of $2.7 million attributable to all four programs.

 

   

CNTX-0290: In the nine months ended September 30, 2017, our expenses related to CNTX-0290 were related primarily to our MAD clinical trial and more limited pre-clinical toxicology studies. In the nine months ended September 30, 2018, our expenses related to CNTX-0290 were related primarily to preparation of documents to support a clinical trial application for a Phase 1 clinical trial in Germany.

 

   

CNTX-6970: In the nine months ended September 30, 2017, our activities were focused on supporting ongoing stability for manufacturing batches and starting the Phase 1 MAD clinical trial in the second half of the year. In the nine months ended September 30, 2018, our expenses related to CNTX-6970 were related primarily to completion of the Phase 1 MAD clinical trial.

 

   

CNTX-2022: Activity and costs in the nine months ended September 30, 2017 and 2018 on CNTX- 2022 related primarily to support of the ongoing drug product stability studies.

 

   

CNTX-6016: In the nine months ended September 30, 2017 and 2018, our expenses related to CNTX-6016 were related primarily to pre-clinical toxicology studies. We have opened an Investigational New Drug Application, or IND, with FDA and are preparing to initiate a Phase 1 SAD clinical trial in the second half of 2018.

Unallocated and other research and development expenses were $4.8 million for the nine months ended September 30, 2017, and $4.7 million for the nine months ended September 30, 2018. We had nine persons employed and engaged in research and development activities as of September 30, 2017 and ten employees engaged in research and development activities as of September 30, 2018. We plan to recruit and hire additional staff in support of research and development activities as we further develop and advance our product candidates.

General and Administrative Expenses

General and administrative expenses were $5.1 million for the nine months ended September 30, 2017, compared to $6.6 million for the nine months ended September 30, 2018. The increase of $1.5 million in general and administrative expenses was due to:

 

   

An increase of $0.1 million in personnel-related costs. As of September 30, 2017, we had three persons employed and engaged in general and administrative activities and as of September 30, 2018, we added two additional employees for a total of five employees engaged in general and administrative activities. We plan to recruit and hire additional staff in support of general and administrative activities as we continue to develop and advance our product candidates.

 

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Services, including commercialization consulting, communications and investor relations, business development, finance and legal fees increased $1.5 million for the for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017.

 

   

Other general and administrative expenses in total decreased $0.1 million for the for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017.

Other Income (Expense), Net

 

    

Nine Months Ended
September 30,

    

Increase
(Decrease)

 
    

2017

    

2018

    

 

 
     (in thousands and unaudited)  

Interest income

   $ 19      $ 564      $ (545

Interest expense

     (617      (205      (412

Loss on disposal of property and equipment

     (38      —          (38

Loss on forgiveness of notes receivable from stockholders

     —          (599      599  

Loss on extinguishment of long-term debt

     —          (298      298  

Revaluation of stock warrant liabilities

     339        (763      1,102  
  

 

 

    

 

 

    

 

 

 

Total other income (expense), net

   $ (297    $ (1,301    $ 1,004  
  

 

 

    

 

 

    

 

 

 

We earn interest income on the money market fund investments we make with the proceeds from our preferred stock, convertible notes and debt financings prior to the cash being deployed into operations. For the nine months ended September 30, 2018, our interest income has increased as a result of having invested the proceeds of our Series D preferred stock financing in December 2017.

Our interest expense in the nine months ended September 30, 2017 primarily relates to the principal amount of $5.3 million of convertible notes payable issued in the first nine months of 2017 ahead of our Series D preferred stock financing, which closed in December 2017. Interest expense includes accrual of the stated interest rate of the convertible notes, which is 10.0% on convertible notes payable issued in 2017 together with the amortization of the discount on the convertible notes that arose on allocation of proceeds to our warrant liability for the fair value of warrants issued together with the convertible notes payable and amortization of costs associated with the issuance of the convertible notes payable. Interest expense in the nine months ended September 30, 2017 and 2018 also includes interest expense and amortization of debt discount associated with our term loan facility.

In April 2018, we fully released executive officers from all liabilities and obligations under partial recourse promissory notes, dated October 8, 2013, resulting in a loss of $0.6 million.

In June 2018, we further amended our loan and security agreement, dated April 22, 2015, entered into with SVB, to provide for a facility of $7.7 million. In connection with this amendment, we wrote-off the discount on the pre-amendment debt balance, the unamortized balance of capitalized debt issue costs and the non-cash charge attendant to the warrants issued to SVB in connection with the 2018 Term Loan, in the aggregate amounting to a loss on extinguishment of long-term debt of $0.3 million.

The fair value of our warrant liabilities has generally been decreasing with each round of additional preferred stock financing we have entered into through the Series D preferred stock financing in December 2017. In 2018, the fair value of our warrant liabilities has been increasing largely due to our assuming an increased probability of an IPO in our scenario analysis. We will continue to adjust warrant liabilities for changes in fair value until the earlier of the exercise, conversion or expiration of the warrants.

 

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Results of Operations

Comparison of the Years Ended December 31, 2016 and 2017

 

    

Year Ended December 31,

    

Increase
(Decrease)

 
    

2016

    

2017

 
     (in thousands)  

Revenue

   $ —        $ —        $ —    
  

 

 

    

 

 

    

 

 

 

Operating expenses:

        

Research and development

     27,788        17,622        (10,166

General and administrative

     5,443        6,433        990  
  

 

 

    

 

 

    

 

 

 

Total operating expenses

     33,231        24,055        (9,176
  

 

 

    

 

 

    

 

 

 

Loss from operations

     (33,231      (24,055      (9,176
  

 

 

    

 

 

    

 

 

 

Other income (expense), net:

        

Interest income

     22        43        (21

Interest expense

     (2,126      (983      (1,143

Loss on conversion of convertible notes payable

     (2,412      (497      (1,915

Loss on disposal of property and equipment

     —          (38      38  

Revaluation of stock warrant liabilities

     75        475        (400
  

 

 

    

 

 

    

 

 

 

Total other income (expense), net

     (4,441      (1,000      (3,441
  

 

 

    

 

 

    

 

 

 

Net loss before income tax benefit

   $ (37,672    $ (24,742    $ (12,930

Income Tax benefit

     —          441        (441
  

 

 

    

 

 

    

 

 

 

Net loss

     (37,672      (24,614      (13,058
  

 

 

    

 

 

    

 

 

 

Research and Development Expenses

 

    

Year Ended December 31,

    

Increase
(Decrease)

 
    

2016

    

2017

 
     (in thousands)  

Direct research and development expenses by program:

                                                  

CNTX-4975 program

   $ 10,789      $ 6,525      $ (4,264

Other pre-clinical and clinical programs

     12,628        4,899        (7,729

Unallocated and other research and development expenses:

        

Personnel related (including stock-based compensation)

     2,341        2,348        7  

Services

     1,487        3,072        1,585  

Other

     543        778        235  
  

 

 

    

 

 

    

 

 

 

Total unallocated and other research and development expenses

     4,371        6,198        1,827  
  

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 27,788      $ 17,622      $ (10,166
  

 

 

    

 

 

    

 

 

 

Research and development expenses were $27.8 million for the year ended December 31, 2016, compared to $17.6 million for the year ended December 31, 2017.

Research and development expenses with regard to our most advanced product candidate, CNTX-4975 for the treatment of patients with moderate to severe pain due to knee OA were $10.8 million for the year ended December 31, 2016, compared to $6.5 million for the year ended December 31, 2017. During 2016, we conducted our Phase 2 TRIUMPH trial and, in December 2016, we announced the results of this trial. In October 2017, we were advised by the FDA that it concurred with our plans to proceed with the Phase 3 program for CNTX-4975 and we are currently in Phase 3 development. We expect our research and development expenses

 

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will significantly increase as we advance this product candidate through Phase 3 clinical trials. In 2017, we also conducted Phase 1 Clinical Trial OA-101 to refine options regarding the procedure pain control technique used as part of the administration of CNTX-4975. The $4.3 million decrease in spending on the program in 2017 as compared to 2016 is primarily attributable to the ongoing Phase 2 TRIUMPH trial for which the last patient visit was in October 2016 and in respect of which topline data became available in December 2016. In 2017, expenditures on CNTX-4975 were related primarily to regulatory interactions with the FDA, manufacturing clinical batches of product, and preparing for the initiation of our Phase 3 program.

In addition to CNTX-4975, we have three other product candidates in clinical development and one in pre-clinical development for the treatment of multiple types of chronic pain, including chronic pain of neuropathic and inflammatory origin. Research and development expenses with regard to these other clinical development programs were $12.6 million for the year ended December 31, 2016, compared to $4.9 million for the year ended December 31, 2017, representing a decrease of $7.7 million attributable to all four programs.

 

   

CNTX-0290: In the year ended December 31, 2016, we conducted our Phase 1 single ascending dose, or SAD, clinical trial in healthy volunteers, non-clinical toxicology studies and had extensive manufacturing activities to optimize bulk drug substance and formulate finished drug product whereas, in the year ended December 31, 2017, our expenses related to CNTX-0290 were related primarily to our multiple ascending dose, or MAD, clinical trial and more limited non-clinical toxicology studies. In addition, in the year ended December 31, 2016, we paid to Boehringer Ingelheim a milestone payment of $1.0 million related to the initiation of the single ascending dose clinical trial in our CNTX-0290 program.

 

   

CNTX-6970: In the year ended December 31, 2016, we conducted extensive manufacturing activities to optimize the drug substance process and formulate tablet finished product for Phase 1 clinical trials, as well as carried-out chronic non-clinical toxicology studies. In the year ended December 31, 2017, our activities were focused on supporting ongoing stability for manufacturing batches and starting the Phase 1 MAD clinical trial in the second half of the year.

 

   

CNTX-2022: In the year ended December 31, 2016, we conducted activities related to planning a Phase 1 clinical trial in healthy volunteers in Australia and a non-clinical toxicology study. We ultimately decided not to move forward with the trial in Australia due to prioritization of other programs. Activity and costs in the year ended December 31, 2017, on CNTX-2022 related primarily to support of the ongoing drug product stability studies.

 

   

CNTX-6016: In the year ended December 31, 2016, we conducted extensive manufacturing activities to optimize bulk drug substance and formulate finished drug product and non-clinical toxicology studies. In the year ended December 31, 2017, our expenses related to CNTX-6016 were related primarily to non-clinical toxicology studies.

Unallocated and other research and development expenses were $4.4 million for the year ended December 31, 2016, compared to $6.2 million for the year ended December 31, 2017, representing an increase of $1.8 million principally due to various contracted research and development services. We had six persons employed and engaged in research and development activities throughout 2016 and 2017. We plan to recruit and hire additional staff in support of research and development activities as we develop and advance our product candidates.

 

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General and Administrative Expenses

General and administrative expenses were $5.4 million for the year ended December 31, 2016, compared to $6.4 million for the year ended December 31, 2017. The increase of $1.0 million in general and administrative expenses was due to:

 

   

An increase of $0.4 million in personnel-related costs. As of December 31, 2016, we had two persons employed and engaged in general and administrative activities and, in the year ended December 31, 2017, we added an additional employee for a total of three employees engaged in general and administrative activities as of December 31, 2017. We plan to recruit and hire additional staff in support of general and administrative activities as we continue to develop and advance our product candidates.

 

   

Services, including commercialization consulting, communications and investor relations, business development, finance and legal fees increased $0.2 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016.

 

   

Other general and administrative expenses in total increased $0.3 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016.

Other Income (Expense), Net

 

    

Year Ended December 31,

    

Increase
(Decrease)

 
    

2016

    

2017

 
     (in thousands)  

Interest income

   $ 22      $ 43      $ (21

Interest expense

     (2,126      (983      (1,143

Loss on conversion of convertible notes payable

     (2,412      (497      (1,915

Loss on disposal of property and equipment

     —          (38      38  

Revaluation of warrant liabilities

     75        475        (400
  

 

 

    

 

 

    

 

 

 

Total other income (expense), net

   $ (4,441    $ (1,000    $ (3,441
  

 

 

    

 

 

    

 

 

 

We earn interest income on the money market fund investments we make of the proceeds from our preferred stock, convertible notes and debt financings prior to the cash being deployed into operations.

Our interest expense in the year ended December 31, 2016 primarily relates to the principal amount of $30.0 million of convertible notes payable issued in 2016 ahead of our Series C preferred stock financing closed in December 2016. Our interest expense in the year ended December 31, 2017 primarily relates to the principal amount of $9.2 million of convertible notes payable issued in 2017 ahead of our Series D preferred stock financing closed in December 2017. Interest expense includes accrual of the stated interest rate of the convertible notes, which is 5.0% on convertible notes payable issued in 2016 and 10.0% on convertible notes payable issued in 2017 together with the amortization of the discount on the convertible notes that arose on allocation of proceeds to our warrant liability for the fair value of warrants issued together with the convertible notes payable and amortization of costs associated with the issuance of the convertible notes payable. Interest expense in the years ended December 31, 2016 and 2017 also includes interest expense and amortization of debt discount associated with our term loan facility.

Our losses on conversion of convertible notes payable into preferred stocks result from the write-off of unamortized discount on the convertible notes together with unamortized issuance costs at the time of conversion of the convertible notes payable into shares of Series C preferred stock, which occurred in 2016, and Series D preferred stock, which occurred in 2017.

 

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The fair value of our warrant liabilities has generally been decreasing with each round of additional preferred stock financing we have entered into. We will continue to adjust warrant liabilities for changes in fair value until the earlier of the exercise, conversion or expiration of the warrants.

Income Tax Benefit

Our income tax benefit for the year ended December 31, 2017 of $441,000 reflects the impact of the reduction in the United States corporate income tax rate from 35% (34% as applies to us) to 21% on our deferred tax liability.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates, which are in various phases of pre-clinical or clinical development, and we do not expect to generate revenue from sales of any product for several years, if at all. We have funded our operations to date with proceeds from the issuance and sales of convertible notes and preferred stock and borrowings under the term loan facility. Through December 31, 2017, we had received gross proceeds of $148.5 million from the issuance and sale of convertible notes and preferred stock. As of December 31, 2017, we had cash and cash equivalents of $60.7 million and as of September 30, 2018, we had cash and cash equivalents of $42.1 million.

On April 22, 2015, we entered into a $10 million term loan facility (the loan thereunder, the “Initial Loan”) with Silicon Valley Bank, or SVB, pursuant to which we could borrow under two separate tranches. Under the Initial Loan, we could borrow up to $7.5 million through February 29, 2016 and, at SVB’s sole and absolute direction, an additional $2.5 million from the date of receipt of positive data with respect to certain clinical trials for CNTX-4975 through June 30, 2016. The repayment requirements and term under each tranche varied. In addition, at the end of each repayment term (or at early termination of the term loan facility), a final payment of 5% of the original principal amount would have been due and payable. Interest accrued under the Initial Loan at a floating rate per annum equal to the sum of the prime rate plus 3.25%. We borrowed an aggregate of $4.8 million under the Initial Loan.

On January 20, 2016, in connection with our entry into the patent assignment and licensing agreement, or the BI Agreement, with Boehringer Ingelheim International, GmbH, or BI, we entered into the consent and first amendment to the loan and security agreement with SVB. Under the amendment, SVB consented to certain milestone and royalty payments to be made under the BI Agreement, waived the then existing default under the term loan facility resulting from our payment of a certain upfront payment under the BI Agreement and amended certain other provisions of the loan and security agreement.

On June 27, 2018, we entered into a second amendment to the loan and security agreement. Under this second amendment, SVB agreed to extend an additional term loan, or the 2018 Loan, of $7.7 million, the proceeds of which were required to be used to pay down the Initial Loan, including certain premiums, interest and fees. Until the earlier of the repayment-in-full of the 2018 Loan or November 1, 2021, we are required to (i) make monthly interest payments in respect of the 2018 Loan, (ii) commencing June 1, 2019 (or, subject to certain conditions, December 1, 2019), make principal repayments in respect of the 2018 Loan and (iii) make a final payment equal to 5% of the 2018 Loan principal amount in addition to any unpaid principal or interest upon the earliest to occur of (x) maturity of the 2018 Loan, (y) early prepayment (whether voluntary or mandatory) in full of the 2018 Loan, or (z) the termination of the loan and security agreement. In addition, any voluntary or mandatory prepayments of the 2018 Loan are subject to payment of a premium of (x) 3% for a prepayment made on or prior to June 27, 2019, (y) 2% for a prepayment made after June 27, 2019 but on or prior to June 27, 2020 and (z) 1% for a prepayment made after June 27, 2020 but prior to the maturity date of the 2018 Loan, in each case of the then outstanding principal amount of the 2018 Loan as of the date immediately preceding such prepayment. The 2018 Loan matures on November 1, 2021 and interest thereunder accrues at a floating rate per annum equal to the greater of 3.5% or the prime rate minus 1.25%. In addition, our obligations under the term

 

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loan facility are secured by a first priority security interest in substantially all of our assets, subject to certain exceptions, including intellectual property assets. The loan and security agreement includes customary restrictive covenants and events of default. On June 27, 2018, we borrowed the full principal amount under the 2018 Loan.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

 

   

Year Ended December 31,

   

Nine Months Ended September 30,

 
   

2016

    

2017

   

2017

   

2018

 
   

(in thousands)

 
          (unaudited)  

Cash used in operating activities

  $ (30,568    $ (22,349   $ (16,827   $ (24,345

Cash used in investing activities

    —          (28     (28     —    

Cash provided by financing activities

    44,176        66,825       3,930       5,725  
 

 

 

    

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

  $ 13,608      $ 44,448     $ (12,925   $ (18,620
 

 

 

    

 

 

   

 

 

   

 

 

 

Operating activities. During the year ended December 31, 2016, net cash used by operating activities was $30.6 million, primarily resulting from the $33.2 million of operating expenses partially offset by non-cash charges of $1.3 million, and by an increase of cash resulting from a net change in our operating assets and liabilities of $1.7 million. During the year ended December 31, 2017, net cash used by operating activities was $22.3 million, primarily resulting from our operating expenses of $24.1 million partially offset by non-cash charges of $1.7 million, and by an increase of cash resulting from a net change in our operating assets and liabilities of $0.2 million.

During the nine months ended September 30, 2017, net cash used by operating activities was $16.8 million, primarily resulting from our operating expenses of $19.2 million partially offset by non-cash charges of $1.5 million, and by an increase of cash resulting from a net decrease in our operating assets and liabilities of $1.0 million. During the nine months ended September 30, 2018, net cash used by operating activities was $24.3 million, primarily resulting from the $24.0 million of operating expenses partially offset by non-cash charges of $1.1 million, $0.6 million of interest income and by an decrease of cash resulting from a net increase in our operating assets and liabilities of $1.9 million.

Investing activities. We had no investing activities during the year ended December 31, 2016. During the year ended December 31, 2017, net cash used in investing activities was $28,000, consisting of our purchases of property and equipment.

During the nine months ended September 30, 2017, net cash used in investing activities was $28,000, consisting of our purchases of property and equipment. We had no investing activities during the nine months ended September 30, 2018.

Financing activities. During the year ended December 31, 2016, net cash provided by financing activities was $44.2 million. During the course of the year, we raised $28.3 million, net, in a series of convertible notes payable financing before we closed our Series C issuance of preferred stock in December 2016, netting a further $15.3 million. In addition, we borrowed an additional $1.8 million and repaid $1.2 million on our term loan facility.

During the year ended December 31, 2017, net cash provided by financing activities was $66.8 million. During the course of the year, we raised, $9.0 million, net, in a series of convertible notes payable financing before we closed our Series D issuance of preferred stock in December 2017, netting a further $59.4 million. In addition, we made payments of $1.6 million on our term loan facility.

 

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During the nine months ended September 30, 2017, net cash provided by financing activities was $3.9 million. During the course of the first nine months of the year, we raised, $5.1 million, net, in a series of convertible notes payable financing before we closed our Series D issuance of preferred stock in December 2017. In addition, we made payments of $1.2 million on our term loan facility.

During the nine months ended September 30, 2018, net cash provided by financing activities was $5.5 million. Financing activities for the first nine months of the year, principally relate to additional borrowings of $7.7 million on our amended term loan facility and repayments of $2.0 million of principal on the term loan facility.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the pre-clinical activities and clinical trials of our product candidates in development. In addition, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.

Our expenses will also increase as we:

 

   

pursue the clinical development of our most advanced product candidates, CNTX-4975;

 

   

continue the research and development of our other product candidates;

 

   

seek to identify and develop additional product candidates;

 

   

seek marketing approvals for any of our product candidates that successfully complete clinical development;

 

   

develop and expand our sales, marketing and distribution capabilities for our product candidates for which we obtain marketing approval;

 

   

scale up our manufacturing processes and capabilities to support our ongoing pre-clinical activities and clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval;

 

   

maintain, expand and protect our intellectual property portfolio;

 

   

expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; and

 

   

increase our product liability and clinical trial insurance coverage as we initiate and continue to conduct our clinical trials and commercialization efforts.

As of December 31, 2017, we had cash and cash equivalents of $60.7 million and as September 30, 2018 our cash and cash equivalents were $42.1 million. We believe that our existing cash and cash equivalents as of September 30, 2018, will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2019, without giving effect to any anticipated proceeds from this offering. If we are unable to raise sufficient funding in 2018 or beyond, we may be unable to continue to operate. We believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2020. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources

 

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sooner than we expect. In its report on our financial statements for the year ended December 31, 2017, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. See “Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital—Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.”

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drugs, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on many factors, including:

 

   

the number and characteristics of the product candidates we pursue;

 

   

the scope, progress, results and costs of researching and developing our product candidates, and conducting pre-clinical studies and clinical trials;

 

   

the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates;

 

   

the timing of, and costs involved in, manufacturing our drug candidates and any drugs we successfully commercialize;

 

   

our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

 

   

delays that may be caused by changing regulatory requirements;

 

   

cost and timing of hiring new employees to support our continued growth;

 

   

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and

 

   

the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any.

Until such time, if ever, as we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaborations agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

 

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2017 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

 

    

Payments Due by Period

 
    

Total

    

Less Than
1 Year

    

1 to 3
Years

    

4 to 5
Years

    

More than
5 Years

 
     (in thousands)  

Operating lease commitments(1)

   $ 3,908      $ 578      $ 1,191      $ 1,237      $ 902  

Loan payable(2)

     2,317        1,679        638        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 6,225      $ 2,257      $ 1,829      $ 1,237      $ 902  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Amounts in the table reflect payments due for our lease of office space in Boston, Massachusetts under an operating lease agreement that, as amended, expires in 2024.

(2)

Amounts in the table reflect the contractually required principal and interest payments payable and end of term charge pursuant to our term loan facility on $2.0 million outstanding as of December 31, 2017 and does not give effect to any subsequent repayments or borrowings thereunder.

The contractual obligations table does not include any potential contingent payments upon the achievement by us of specified clinical, regulatory and commercial events, as applicable, or patent prosecution or royalty payments we may be required to make under license agreements we have entered into with various universities or partners pursuant to which we have in-licensed certain intellectual property, including the BI Agreement. We have excluded these potential payments in the contractual obligations table because the timing and likelihood of these contingent payments are not known. See “Business—License Agreements” for additional information about these license agreements, including with respect to potential payments thereunder.

We enter into contracts in the normal course of business with CROs for clinical trials, pre-clinical research studies and testing and other services and products for operating purposes. These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

On June 27, 2018, we entered into a second amendment to the loan and security agreement with SVB. As of September 30, 2018, we had $7.7 million of borrowings outstanding under our amended term loan facility. See “—Liquidity and Capital Resources” for additional information about our amended term loan facility, including with respect to payments thereunder.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Recently Issued and Adopted Accounting Pronouncements

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 3 to our financial statements appearing at the end of this prospectus, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.

Quantitative and Qualitative Disclosures about Market Risks

We are exposed to market risk related to changes in interest rates. As of September 30, 2018, our cash, cash equivalents consisted of cash and money market funds. Our primary exposure to market risk is interest

 

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income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, an immediate 10% change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.

As of September 30, 2018, we had $7.7 million of borrowings outstanding under our amended term loan facility. The term loan facility bears interest at a floating rate per annum equal to the greater of 3.5% or the prime rate less 1.25%. Based on the $7.7 million of principal outstanding as of September 30, 2018, an immediate 10% change in the prime rate would not have a material impact on our debt-related obligations, financial position or results of operations.

 

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BUSINESS

Overview

We are a late clinical-stage biopharmaceutical company focused on becoming the leader in identifying, developing and commercializing novel, non-opioid and non-addictive therapies to address the large unmet medical need for the treatment of chronic pain.

Pain is a protective reaction that alerts the body to the presence of actual or potential tissue damage so that necessary corrective responses can be mounted. The National Institutes of Health, or NIH, defines chronic pain as pain that persists beyond the normal healing time of an injury or that persists longer than three months. As of 2011, over 40 million adults in the United States and over 1 billion people worldwide suffer from chronic pain each year. This epidemic exacts a tremendous cost in terms of direct treatment and rehabilitation expenditures, lost worker productivity, prevalent addiction to opioid-based drugs, and emotional and financial burden for patients and their families. The World Health Organization, or WHO, and the European Commission estimate the worldwide prevalence of osteoarthritis, or OA, alone will impact 130 million people by 2050, of whom 40 million will be severely disabled by the disease. According to an Institute of Medicine of the National Academies reports, pain is a significant public health problem in the United States that costs society between $560 and $635 billion annually. Despite the magnitude of the pain problem, innovation in the development of therapeutic solutions has been largely absent. Since 2010, there have been 19 approvals by the U.S. Food and Drug Administration, or FDA, for the treatment of pain, of which 11 were opioid variants, one was an extended release generic corticosteroid, five were variants of aspirin, and two were variants of other existing drugs. We are developing a portfolio of novel product candidates designed to overcome the limitations of current treatment options for chronic pain and present patients and physicians with better and safer treatment alternatives.

Our most advanced product candidate, CNTX-4975, is designed to selectively and locally target and disrupt the signaling of pain-sensing nerve fibers. CNTX-4975 is in pivotal Phase 3 development for the treatment of moderate to severe pain due to knee OA. In a Phase 2 randomized, double-blinded, placebo-controlled clinical trial in 175 subjects with moderate to severe pain due to knee OA, we observed that, compared to placebo, subjects receiving a single intra-articular, or IA, injection of 1.0 mg of CNTX-4975 experienced:

 

   

statistically significant and clinically meaningful reduction in pain with walking on a flat surface, corresponding to question A1 of the Western Ontario and McMaster Universities Arthritis Index, or WOMAC index;

 

   

onset of pain relief observed by second day;

 

   

durable pain relief, lasting six months after a single treatment;

 

   

improvement in knee stiffness;

 

   

improvement in knee function;

 

   

no detectable systemic exposure of CNTX-4975 by 24 hours after IA injection; and

 

   

an observed adverse event, or AE, profile similar to the placebo group based on the overall incidence of AEs and distribution of specific AEs.

In the first quarter of 2018, we began enrolling subjects in VICTORY-1, the first of two planned pivotal Phase 3 registration trials for CNTX-4975, and we expect to report topline results in the first quarter of 2020. In the second half of 2018, we began enrolling subjects in OA-303, an open label safety trial with approximately 850 subjects, and in VICTORY-2, the second pivotal Phase 3 registration trial for CNTX-4975 that includes

 

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repeat dosing. We expect to report topline results from OA-303 in the second half of 2019 and VICTORY-2 in the second half of 2020. If the results of these trials are positive, we plan to submit a new drug application, or NDA, in the United States, and a marketing authorization application, or MAA, in Europe, in the second half of 2021. CNTX-4975 was granted Fast Track Designation by the FDA in January 2018 for the treatment of moderate to severe pain associated with knee OA. We hold worldwide commercialization rights to CNTX-4975, and, if successfully developed and approved, we anticipate initial commercial sales in 2022. Issued and pending patent applications are expected to provide protection for CNTX-4975 through 2038.

In addition to CNTX-4975, we have three other product candidates in clinical development and one in pre-clinical development for the treatment of multiple types of pain. We believe that we have one of the industry’s largest pipelines of novel, non-opioid and non-addictive, clinical-stage product candidates for the treatment of chronic pain.

The pharmaceutical industry is highly competitive and we, along with our competitors, face a number of regulatory and technical challenges. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete pre-clinical and clinical development to demonstrate the safety and efficacy of our product candidates. However, we believe that several factors have positioned us to be a leader in the treatment of chronic pain, including our:

 

   

Unique Approach to the Treatment of Chronic Pain—Chronic pain is a highly complex and often misunderstood medical condition. We have a deep understanding of the pathophysiology of chronic pain. We believe we can leverage our knowledge of pain biology to develop targeted treatments that are specific to both the type and source of pain.

 

   

Extensive Clinical Data—We have generated Phase 2 clinical data for our most advanced product candidate, CNTX-4975, that showed onset of response by the second day after administration, a significant reduction from baseline knee OA pain and a clinically meaningful difference compared to the placebo group in subjects with moderate to severe knee OA pain, and the potential for six months of significant pain reduction with a single IA injection. Additionally, in clinical trials to date, the safety profile of CNTX-4975 has been similar to placebo and has shown limited systemic exposure of CNTX-4975 after an IA injection.

 

   

Significant Management Team Expertise—We have assembled a senior management team with over 135 years of collective experience in leadership positions at companies such as Abbott, Celgene, Merck, Pfizer and Roche, with substantial product development experience and a successful track record of navigating complex drug development and regulatory pathways. Our clinical team has led or contributed to the development of 20 products, including Rituxan for rheumatoid arthritis, Otezla and Actemra, all three of which have achieved multi-billion dollars in annual sales.

Since our inception in 2013, we have raised approximately $148.5 million in private financings. Our key investors include New Enterprise Associates, InterWest Partners, Quan Capital Management, Arrowmark Partners, Clough Capital Partners and 6 Dimensions Capital.

 

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Our Product Candidates

Our product candidates are designed to treat pain conditions of multiple etiologies associated with a wide variety of common disease states. The following table summarizes our current product candidate pipeline:

 

LOGO

Our Strategy

Our mission is to develop and commercialize novel, non-opioid and non-addictive therapies to safely and effectively address the significant unmet medical need of chronic pain. The principal elements of our strategy to achieve this mission are the following:

 

   

Create novel, non-opioid and non-addictive therapies by leveraging our understanding of pain biology to address the large and growing problem of chronic pain. While innovation in medical sciences has led to exciting new treatment options in many disease areas, chronic pain has seen limited innovation in recent years. We have a deep understanding of the pathophysiology of chronic pain. We intend to leverage this understanding to bring innovation in the chronic pain treatment paradigm through targeted drug development. Our senior management team has over 135 years of collective experience in leadership positions at companies with substantial product development experience, and understands the complexity of designing and executing clinical trials for and developing pain therapies.

 

   

Advance the development of our lead product candidate, CNTX-4975, designed for the treatment of patients with moderate to severe chronic pain associated with knee OA. There are limited therapeutic options available for patients with moderate to severe knee OA and we believe that CNTX-4975 has the potential to transform the standard of care to a once every-six-months IA injection to substantially improve moderate to severe knee OA pain. In the first quarter of 2018, we began enrolling subjects in VICTORY-1, the first of two planned pivotal Phase 3 registration trials for CNTX-4975, and we expect to report topline results in the first quarter of 2020. In the second half of 2018, we began enrolling subjects in OA-303, an open label safety trial with approximately 850 subjects, and in VICTORY-2, the second pivotal Phase 3 registration trial for CNTX-4975 that includes repeat dosing. We expect to report topline results from OA-303 in the second half of 2019 and VICTORY-2 in the second half of 2020. In January 2018, the FDA granted Fast Track Designation for CNTX-4975 for the treatment of moderate to severe pain associated with knee OA. If successfully developed and approved, we anticipate initial commercial sales in 2022.

 

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Leverage clinical activity of CNTX-4975 to expand into new indications, including pain associated with the arthritis of other joints. We believe that CNTX-4975 may have analgesic utility in additional joints, including small sized joints such as the carpometacarpal joint, or base of the thumb, medium sized joints such as the ankle, and other large joints such as the shoulder. If we are successful in obtaining safety and efficacy data that support the use of CNTX-4975 in both a small and a medium sized joint, in addition to the large joint of the knee, we believe the indication for use of CNTX-4975, if approved, could potentially be broadened to the treatment of moderate to severe pain associated with OA, with no limitation as to which joint is involved. In addition, there are other types of joint disorders associated with chronic pain, such as rheumatoid and psoriatic arthritis, post-traumatic joint injury and temporomandibular joint disorders, where we believe CNTX-4975 may have potential for use as an analgesic.

 

   

Advance our other product candidates through clinical development and pursue development of additional product candidates. Our objective is to build a well-balanced, multi-asset portfolio targeting the large population of patients with chronic pain. To achieve this, in addition to CNTX-4975, we intend to pursue development of our other product candidates, CNTX-0290, CNTX-6970, CNTX-2022 and CNTX-6016, in indications where we believe they could have meaningful impact and address the large unmet medical need. In addition, we may choose to selectively in-license or acquire complementary product candidates by leveraging the insights, network and experience of our management team.

 

   

Maximize the commercial potential of all our product candidates. We currently intend to retain all commercial rights to CNTX-4975 in the United States and selectively partner outside of the United States. Because injectable IA therapies for chronic joint pain in the United States are administered by a relatively small number of specialists, particularly pain management physicians, sports medicine specialists, orthopedists and rheumatologists, we believe that we can effectively commercialize CNTX-4975 in the United States to each of these specialist groups with our own targeted sales and marketing organization and, thereby, retain greater commercial value versus a partnership. As we continue to build and develop our product portfolio, we may opportunistically pursue strategic partnerships that maximize the value of our pipeline while seeking to maintain commercialization rights in the United States for select specialists that treat chronic pain conditions.

 

   

Leverage our management team background and expertise. We have assembled a management team with extensive experience in product development. Our Chief Medical Officer is a rheumatologist with 28 years of drug development experience, our Chief Scientific Officer is a neurosurgeon who also led a pain research laboratory, and our Chief Development Operations Officer has 22 years of development experience, including participation in the development of four approved pain therapies. Their experience with both patients and drug development provides them with deep insight into chronic pain as well as the changing treatment landscape. We believe this experience enables us to better understand unmet medical needs in chronic pain and design and execute efficient clinical trial programs and regulatory strategies.

Chronic Pain

The NIH defines chronic pain as pain that persists either beyond the normal healing time of an injury or longer than three months. Chronic pain represents a significant public health crisis. In the United States, chronic pain affects approximately 40 million adults annually, which is greater than the annual prevalence of each of heart disease, cancer and diabetes. It is also estimated that pain leads to between $560 and $635 billion in healthcare and lost productivity costs each year. Chronic pain is the leading cause of long-term disability in the United States, and approximately 23 million adults in the United States experience severe pain over a three-month period. Globally the prevalence of chronic pain is even larger, with over 1 billion people worldwide affected each year. Common types of chronic pain include those of neuropathic and inflammatory origin and may

 

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involve the skin, muscles, joints, bones, tendons, ligaments, and other soft tissues. Chronic pain is associated with a variety of clinical conditions including, but not limited to, arthritis, spinal conditions, cancer, fibromyalgia, diabetes, surgical recovery, visceral injury and general trauma.

Pain is a necessary protective reaction that alerts the body to the presence of actual or potential tissue damage so that necessary corrective responses can be mounted. Pain is signaled by specialized cells in the peripheral nervous system called nociceptors, or pain-sensing fibers. These pain-sensing fibers normally transmit information about stimuli that approach or exceed harmful intensity from different locations in the body to the brain, which registers this information as a sensation of pain. In the case of tissue injury due to trauma or infection, pain accompanies the associated inflammation, persists for the duration of the inflammatory response, and aids healing by inhibiting use of the affected body part.

Pain also can modify the central nervous system such that the brain becomes sensitized and registers more pain with less provocation. This is called central sensitization. When central sensitization occurs, the nervous system goes through a process called wind-up and gets regulated in a persistent state of high reactivity. This persistent, or up-regulated, state of reactivity lowers the threshold for what triggers the sensation of pain and can result in the sensation of pain even after the initial injury might have healed.

When there is dysfunction in pain signaling, injury to the nervous system, or an unhealed injury, pain becomes no longer just a symptom, but a disease in itself.

Current Therapeutic Approaches to Treating Chronic Pain and Their Limitations

NSAIDs

Some of the most widely used therapies to treat chronic inflammatory pain are non-steroidal anti-inflammatory drugs, or NSAIDs. NSAIDs can have significant side effects that include gastrointestinal bleeding, gastritis, high blood pressure, fluid retention, kidney problems, heart problems and rashes. On April 7, 2005, the FDA announced a decision to require boxed warnings of potential cardiovascular risk for all NSAIDs.

Corticosteroids

Corticosteroids, or steroids, also possess anti-inflammatory properties and are commonly used in the practice of pain management, either systemically or locally, depending on the condition. Steroids work by decreasing inflammation and reducing the activity of the immune system. While steroids are commonly used, they may have numerous and serious side effects. These side effects may include allergic or hypersensitivity reactions, increased risk for infection, adrenal insufficiency, diabetes or decreased glucose tolerance, hypertension, loss of bone density, and loss of joint cartilage volume. In addition, steroids should not be administered when there is an infection present because steroids can inhibit the body’s natural infection-fighting immune response. Also, if a joint is already damaged or is subject to chronic deterioration, IA steroid injections are not likely to provide any long-term restorative benefit. For the above reasons, IA steroid injections are generally recommended to be administered no more often than every six weeks and not more than three to four times per year.

Opioids

Opioids are some of the most widely prescribed therapeutics for chronic and acute pain, and sales of these drugs have quadrupled between 1999 and 2010. According to a National Survey on Drug Use and Health report, in 2016 more than one third of adult Americans were prescribed opioids and 230 million opioid prescriptions were written that year in the United States. Opioids act by binding to specific receptors located on neurons in both the central and peripheral nervous system throughout the body including in the brain, spinal cord and other nervous tissue. Although they can be effective in providing pain relief, the increased medical use of

 

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opioids has been accompanied by an increase in the abuse and misuse of prescription opioids. In addition, for most patients, chronic opioid use is a poor option due to an intolerance to the many side effects, including nausea, vomiting, drowsiness and constipation, and the propensity for opioids to become less effective with long-term use. According to the Centers for Disease Control and Prevention, or CDC, almost two million individuals abused or were dependent on prescription opioids in 2014. CDC figures show that the number of opioid-related overdose deaths has quadrupled between 1999 and 2010, and currently approximately 40% of opioid overdose deaths in the United States involve a prescription opioid. This increase in prescription opioid-related deaths in the United States prompted President Trump to declare the opioid crisis a national Public Health Emergency in October 2017. Opioid abuse has become an epidemic in the United States, ranking as the nation’s second most prevalent illegal drug problem. These major issues create the need to find new approaches to treating chronic pain.

Our Approach to Treating Chronic Pain

The unmet medical need for treating chronic pain reflects the historic failure to develop novel classes of analgesics with comparable or greater efficacy, an acceptable level of adverse effects and a lower abuse liability than those currently available. Some of the reasons for this include the heterogeneity of chronic pain and its related conditions, and the complexity and diversity of the underlying pathophysiological mechanisms for pain. However, recent advances in the understanding of the neurobiology of pain are beginning to offer opportunities to identify new drug targets and develop new therapeutic strategies.

We have taken an innovative and targeted approach to identifying treatments for chronic pain that leverages our understanding of the pathophysiology of pain. Pain is variable—for example, it can be inflammatory or neuropathic in nature, and it may be localized to a specific area of the body or it may be generalized throughout. We believe that the most effective way to treat chronic pain is through therapies that specifically target the origin of the pain signal. We strive to maximize each of our product candidate’s potential based on its unique mechanism of action related to the origin of the pain signal.

Osteoarthritis and Chronic Pain

OA is the most common joint disease in the United States. According to the CDC, OA currently affects more than 30 million Americans. OA is the highest cause of work loss in the United States.

OA occurs when cartilage, the tissue that envelops the structural bones within a joint, gradually deteriorates. Cartilage has a smooth, slippery exterior that allows bones to glide over each other with little friction as the joint flexes and extends. In individuals with OA, the cartilage breaks down, thus causing pain, swelling and problems moving the joint. OA also results in bony changes of the joints, such as bone spurs, deterioration of tendons and ligaments, and various degrees of joint inflammation, known as synovitis. OA is a chronic and progressive disease. OA can affect any joint, but it occurs most often in knees, hips, lower back and neck, small joints of the fingers and the bases of the thumb and big toe. There is no cure for OA and no approved therapy for reversing cartilage degradation. As a result, current treatments are intended to address symptoms, including pain, and improve function.

Osteoarthritis of the Knee

The primary symptoms of OA are pain, joint stiffness and a lack of patient mobility. As knee OA progresses, the joint lining becomes inflamed and the structure of the knee changes. Cartilage erodes exposing bone and nerve fibers. Patients experience inflammatory pain and discomfort moving the joint. The pain is often severe, and can be debilitating, lead to depression, increase the risk for obesity, diabetes, hypertension and cardiovascular disease, and prevent people from continuing employment or carrying out daily activities.

Knee OA is the most common form of OA. It is currently estimated that approximately 18 million people in the United States have been diagnosed with knee OA, and that number is expected to grow to in excess

 

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of 30 million by 2030. Of these patients, over 75% suffer from moderate to severe disease. Each year there are approximately 581,000 patients who are newly diagnosed with knee OA, and we expect this number to rise with the aging of the U.S. population and the increase in the prevalence of obesity. The lifetime risk is of developing knee OA is 45%. While the prevalence of knee OA increases with each decade of life, with the annual incidence of knee OA being highest between age 55 and 64 years old, it is estimated that approximately two million people under the age of 45 have knee OA. Further, more than half of all people with knee OA are younger than age 65 and will likely live for three decades or more after diagnosis.

Finally, among patients with knee OA, approximately 60% have unilateral knee OA and 40% have bilateral knee OA. Of those patients with unilateral knee OA, a substantial portion of those patients will go on to develop bilateral knee OA. A 12-year prospective study of patients suffering from chronic knee pain demonstrated that 70% of the patients had radiographic evidence of bilateral knee OA at year 12, compared to only 26% at baseline. The development of bilateral knee OA could result in increased pain and further functional decline over time.

Current Treatments For Osteoarthritis of the Knee

Since there is no cure for knee OA, the primary goals of current treatments are to control symptomatic pain, to continue exercise that maintains muscle mass that supports the knee, to avoid the inactivity which causes muscle loss, and associated comorbidities, including obesity, hypertension, depression and diabetes, and to delay progression to total knee replacement, or TKR. OA is a progressive condition, and over time, the pain often becomes too much for the patient to manage and can no longer be controlled through medication and physical therapy. When the patient can no longer tolerate the pain and disability, a surgical procedure called arthroplasty can be performed which replaces the natural joint with an artificial joint. On average a patient will spend 19 years attempting to manage chronic pain from knee OA before resorting to surgery. It is estimated that 54% of knee OA patients will eventually undergo TKR. As a greater number of younger patients develop knee OA, joint replacement becomes more problematic, given the expected need for one or more surgical revisions of the joint replacement over the course of these patients’ lifetimes. As a result, there is a large and growing need for safe and effective analgesic treatments that can be used for the long-term management of pain associated with knee OA.

Osteoarthritis pain is a patient-reported measure and is generally referenced to their average daily pain, pain while walking, WOMAC index, or the WOMAC pain subscale, with a high degree of correlation across measurement instruments. Scales for scoring pain have been validated and include a 5-point adjectival scale, a 0-100 mm visual analog scale, or VAS, and an 11-point numeric rating scale, or NRS. The results of clinical trials for NSAIDs, immediate release and sustained release corticosteroids and HA presented below were evaluated on 11-point NRS, 0-100 mm visual analog scale or 5-point adjectival scale. The results of clinical trials that were evaluated on a scale other than 11-point NRS were standardized to an 11-point NRS, whereby each score was divided by the applicable scale maximum and then multiplied by 10, the maximum score possible on the 11-point NRS. Response to treatment may be reported as the actual pain score, the change from baseline pain, the change from baseline pain compared to placebo, or the standardized effect size, which is the difference in effect between active and placebo divided by the pooled standard deviation. An advantage of the standardized effect size is that it accounts for variation across scoring scales and individual studies

The choice of treatment in knee OA is guided primarily by the level of pain severity defined as, mild, moderate, or severe. Moderate pain in patients is graded 4-6 on an 11-point NRS. Patients suffering from severe knee OA have pain scores in the range of 7-10. Patients with moderate disease typically have observable cartilage erosion that manifests as a narrowing of the space between the bones of the knee joint on X-ray imaging. These patients are likely to experience frequent pain, joint stiffness and swelling and decreased function. Patients who progress to severe OA exhibit a dramatically reduced joint space on radiographic or magnetic resonance imaging and have severe joint stiffness that can progress to immobility.

 

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Over time, patients with knee OA tend to become inactive due to pain and joint stiffness and reduced function. In turn, this leads to weight gain that can exacerbate the OA by increasing the weight load on the joint and lack of mobility that can cause deterioration of the muscles supporting the joint. Therefore, part of the treatment regimen for knee OA is to keep the patient active to counter these effects.

Figure 1 below represents the current treatment paradigm for a patient diagnosed with knee OA.

 

 

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Figure 1. Current Knee OA Treatment Paradigm

 

   

Treatments for Mild Knee OA Pain. In early disease, treatment begins with over the counter medications and non-pharmacologic therapy, including exercise, weight control and physical therapy. As the disease progresses and pain becomes more symptomatic, physicians prescribe stronger pharmacologic therapy, beginning with acetaminophen and progressing to oral or topical NSAIDs or certain classes of antidepressants and anticonvulsants believed to have analgesic properties.

Although NSAIDs are non-narcotic, they have limited analgesic efficacy. Trials with common NSAIDs have reported a reduction from baseline pain of 1.0 to 2.7 on an 11-point NRS, a change from baseline pain compared to placebo of 0.09 to 0.51, and a standardized effect size of 0.07 to 0.52. Use of NSAIDs can lead to gastric complications, ulcers, bleeding, cardiovascular events, such as heart attack, kidney damage and failure, increased risk for hospitalization, and death. Further, antidepressants and anticonvulsants may have a role in worsening depression and the emergence of suicidality in certain patients.

 

   

Treatments for Moderate Knee OA Pain. When NSAIDs prove inadequate to manage pain and improve joint mobility, physicians generally transition patients to IA injections. According to IQVIA, each year over five million knee OA patients in the United States receive an IA injection treatment. Often, a patient will first receive an IA of a corticosteroid, or steroids. Steroids work by decreasing inflammation which can, in turn, reduce pain. Steroids generally have a short duration of effect and have to be administered frequently to provide sustained pain relief. Even when sustained release technology is applied to steroids, clinical trial results demonstrate that pain relief only lasts up to three months. Trials with immediate release and sustained release corticosteroids have reported similar reductions from baseline pain of 2.9 to 3.12 on an 11-point NRS, a change from baseline pain compared to placebo of 0.7 to 0.98, and a standardized effect size of 0.09 to 0.61. A patient receiving a sustained release steroid still may need to return for injection up to four times

 

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per year in order to achieve a year of pain relief. However, generally IA steroids are used for short term symptom relief. Further, persistent exposure of joint tissues to steroids has been associated with detrimental effects. A recent clinical trial in patients with knee OA showed that subjects receiving two years of IA steroid had significantly greater cartilage volume loss and no significant difference in knee pain, as compared to those subjects who received IA saline. In the United States, the cost to the patient per course of ZILRETTA®, a sustained release corticosteroid, is approximately $680 for a single injection over a three month treatment period, which if annualized, would be a $2,700 annual treatment cost.

Another IA therapy frequently used in patients with knee OA is injection of a viscoelastic substance called hyaluronic acid, or HA. HA’s viscosity acts as a lubricant in the joint and may confer limited analgesia by reducing friction in the knee joint. Depending on the product, HA is administered as a series of multiple injections that may be repeated for a total of up to six injections within six months, or as a single injection intended to provide relief for up to six months. Trials with HA have reported reduction from baseline pain of 2.18 to 2.94 on an 11-point NRS, a change from baseline pain compared to placebo of less than 0.5 to 0.75, and a standardized effect size of 0.02 to 0.63. In 2013, the American Academy of Orthopedic Surgeons, or AAOS, revised its 2009 clinical practice guideline on the use of HA in patients with knee OA. Based on a meta-analysis of 14 clinical trials assessing HA injections for knee OA, AAOS concluded that HA did not meet the minimum clinically important improvement thresholds. Despite this, worldwide sales of HA in 2016 were approximately $1 billion, with a cost to the patient per course of treatment in the United States ranging from $600 to $1,600. By 2020, the U.S. market for HA is projected to reach over $1.2 billion in revenues.

 

   

Treatments for Severe Knee OA Pain. When patients progress to a state of severe OA, they have often exhausted therapeutic options, including oral therapies, IA injections, articular cartilage grafts, and experimental procedures such as stem cell therapy and platelet rich plasma injections. In a 2014 paper that reviewed Medicare Current Beneficiary Survey Cost and Use files, up to 40% of patients with knee OA received an opioid as part of their treatment. When the pain becomes unbearable and can no longer be controlled therapeutically, many patients elect to undergo TKR. In 2012, there were more than 700,000 TKR surgeries in the United States and this figure is projected to grow to more than 3 million by 2030. TKR is invasive, costly and short-term recovery requires 12 weeks of physical therapy, while long-term recovery can take up to six months. On average an artificial knee joint will last 15 to 20 years before a revision, or replacement of the original artificial joint, will be required. Reasons for revision surgery include mechanical loosening, infection, fracture, instability, wear and breakage of the implant. Consequently, young patients who receive a TKR will likely need a second surgery later in life, which will carry a higher risk of complications. Certain patients are ineligible for a TKR based on their weight or general medical or physical condition. The cost for a TKR varies widely, ranging from approximately $15,000 to over $50,000. Consequently, deferring surgery for as long as possible is a key goal of patients and payors.

As a result of these issues, the current pharmacologic regimens of treatment generally do not provide long term, safe relief from chronic pain associated with knee OA. We have not conducted, nor do we believe we are required to conduct, any head-to-head trials comparing CNTX-4975 to other approved or experimental OA pain management drugs, including trials with NSAIDs, steroids or HA. Any such head-to-head trial, if conducted, may show that CNTX-4975 is not more effective than any of such other drugs.

We believe that there is a significant unmet need for a novel therapy that can provide long term, durable analgesic effect in a safe manner to the following patient populations:

 

   

patients with moderate to severe knee OA pain;

 

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patients who have found available treatments to be inadequate because of safety issues associated with chronic use and progressive lack of durable analgesic effect; and

 

   

patients who have tried and failed non-surgical options, including IA injections, but either do not qualify for surgery due to age, complicating comorbidity or weight, or choose not to proceed with surgery.

We believe CNTX-4975 may have the potential to better address these unmet needs.

CNTX-4975 for the Treatment of Moderate to Severe Chronic Pain Associated with Knee OA

CNTX-4975—Background

We are developing CNTX-4975 as a synthetic, ultra-pure IA injection of trans-capsaicin for the treatment of moderate to severe pain associated with knee OA. CNTX-4975 is an injectable product candidate that is designed to be administered directly into the joint where the pain stimulus originates. In a Phase 2 randomized, double-blinded, placebo-controlled clinical trial in 175 subjects with moderate to severe pain due to knee OA, we observed that compared to placebo, a single IA injection of 1.0 mg of CNTX-4975 demonstrated statistically significant (p<0.0001 through the week 12 primary endpoint), onset of activity by second day and significant at week 1 (p=0.0237) and durable (p=0.0002 through week 24) reduction in pain, as measured by the change from baseline pain while walking on a flat surface from question A1 of the WOMAC index, and showed an AE profile similar to the placebo group. In the first quarter of 2018, we began enrolling subjects in VICTORY-1 the first of two planned pivotal Phase 3 registration trials for CNTX-4975. We began enrolling subjects in OA-303, an open label safety trial with approximately 850 subjects, and for VICTORY-2, the second pivotal Phase 3 registration trial for CNTX-4975 that includes repeat dosing, in the third quarter of 2018. In January 2018, the FDA granted Fast Track Designation for CNTX-4975 for the treatment of moderate to severe pain associated with knee OA.

Nociceptors are specialized nerve fibers that sense pain and itch as a result of injury or inflammation in tissues. In the case of knee OA, eroded cartilage exposes nociceptors in the exposed subchondral bone. In addition, in an arthritic knee joint, nociceptors are activated in the adjacent inflamed soft tissue of the joint capsule, meniscus and other structures. As the knee joint deteriorates with OA, there is potential for greater nociceptor activation, and therefore greater pain. The activation of the transient receptor potential vanilloid subtype 1, or TRPV1, a receptor selectively expressed on pain sensing nociceptors, is an initiator of a pain stimulus. The active ingredient in CNTX-4975 is trans-capsaicin, an ultrapure, synthetically-derived form of capsaicin, the pungent compound found in chili peppers that has analgesic properties. Capsaicin is a highly selective activator, or agonist, for the TRPV1 receptor. When given in a sufficient concentration, the action of capsaicin on the TRPV1 receptor induces a localized, reversible degeneration of the pain sensing fibers. This degeneration begins within minutes and prevents the pain sensing fibers from sending a pain signal, whether from stimulation of TRPV1 or other pain receptors. As a result, there is relief from pain until these nociceptors regenerate. Consequently, the analgesia conferred by trimming back the pain sensing fibers, lasts for weeks to months, depending on the level of exposure, until these nerve fibers regenerate and return to their normal functional state. TRPV1 is not present on sensory nerve fibers that mediate touch, pressure, or proprioception or motor nerve fibers, so these functions are not affected. Also, not all pain fibers express the TRPV1 receptor. Thus, capsaicin does not reversibly trim all pain fibers. Therefore, we believe that if there is progressive or new trauma to the knee, newly exposed or activated nociceptors will still signal a pain response. We describe the novel and unique mechanism by which CNTX-4975 is designed to function as “molecular neurosurgery,” where the trans-capsaicin is designed to trim back only the pain sensing nociceptive fibers, while leaving the other nerve fibers, such as those sensing position, touch and pressure, intact and functioning normally.

 

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Figure 2 below depicts this selective inactivation of pain fibers by CNTX-4975.

 

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Figure 2. Illustration of Pain Fiber Inactivation by CNTX-4975

Exposure to capsaicin can induce a transient burning or stinging pain sensation. The level of this pain varies widely between individuals. In the initial clinical development of CNTX-4975 it was observed that this activation pain was transient, peaking within the first 30 minutes after IA injection, and typically resolving over an interval of one to two hours. In clinical trials, we have decreased this pain using a proprietary technique which involves controlled cooling of the joint in combination with IA administration of lidocaine before injection of CNTX-4975.

Data generated to date have shown an IA injection of 1.0 mg of CNTX-4975 to have an AE profile similar to placebo based on the incidence of AEs and distribution of specific AEs. This is due in part to CNTX-4975 having shown a short duration of systemic drug exposure, which we believe may reduce the potential for systemic side effects. In clinical trials, the maximum systemic exposure in blood plasma after a 1.0 mg IA injection has been less than the level following ingestion of a meal prepared with capsaicin as a spice. By eight hours after injection, the plasma levels of CNTX-4975 have fallen below the limit of quantitation.

We believe that CNTX-4975, if successfully developed and approved, will be positioned as a non-opioid and non-addictive IA injectable for patients with moderate to severe knee OA pain. We believe that CNTX-4975 has the potential provide substantial pain relief for moderate to severe knee OA pain because of the following attributes shown in the Phase 2 clinical trial, which we refer to as the TRIUMPH trial:

 

   

onset of response seen by second day with statistically significant (p=0.0237) separation for the 1.0 mg dose compared to placebo observed at one week after CNTX-4975 injection;

 

   

potential for six months of significant pain reduction after a single treatment as compared with placebo (p=0.0002 through week 24);

 

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a decrease of 4.4 points on an 11-point NRS at week 12, and a clinically meaningful difference compared to the placebo group with a separation of 1.5 points at week 12; and

 

   

no detectable systemic exposure of CNTX-4975 by 24 hours after IA injection; and

 

   

an observed adverse event, or AE, profile similar to the placebo group based on the overall incidence of AEs and distribution of specific AEs.

In 2018, we commissioned quantitative market research through a survey of 391 physicians in four specialty areas in the United States likely to use CNTX-4975, if approved: orthopedic surgery, rheumatology, sports medicine and pain management. Physicians were presented with a targeted product candidate profile that had been generalized from results from the Phase 2 clinical trial of CNTX-4975 to manage moderate to severe knee OA pain patients who have failed prior therapies, which profile may differ from CNTX-4975, if approved. This profile included a description of the mechanism of action, onset of activity within one week of treatment, approximately six months duration of activity, and less than 24 hours of systemic exposure to drug after injection. Efficacy was described based on approximately 70% of patients at three months and 40% of patients at six months maintaining a pain score of less than 4 on an 11-point NRS and the extrapolation from the responder analysis plots at 12 weeks, whereby approximately 70% of patients reported a 50% or greater reduction in pain, 50% of patients reported a 70% or greater reduction in pain, and 25% of patients reported a 90% or greater reduction in pain. Safety results were described as similar to the placebo group. The treatment administration was described as an injection once every six months as an in-office procedure, that procedure pain 30 minutes after injection was similar to baseline knee OA pain, and that the procedure involved about 10 minutes of professional time for injections and 60 to 75 minutes for the patient to cool the knee. According to the survey, 99% of physicians believed that CNTX-4975 addresses an unmet medical need for patients with knee OA. 77% of physicians indicated that a drug with the profile presented would be a top three choice for managing moderate knee OA pain and 71% indicated the same for severe knee OA pain. Regarding the administration procedure, 74% of physicians were neutral to positive towards the procedure. The weighted average across physician specialty groups indicated they would use a drug with the profile presented in 40% of their moderate to severe knee OA patients.

CNTX-4975—Clinical Development

TRIUMPH Trial

In December 2016, we announced results from our Phase 2 TRIUMPH trial. The study evaluated the safety and tolerability of a single injection of CNTX-4975 in subjects with chronic, moderate to severe OA knee pain over a period of 24 weeks. A total of 175 subjects were enrolled at 16 sites in the United States.

The trial was designed to measure the efficacy and tolerability of CNTX-4975 when administered as a single injection. In the intent to treat, or ITT, population, 175 subjects were divided into 70 subjects who received a placebo injection, 34 subjects who received a dose of 0.5 mg of CNTX-4975, and 71 subjects who received a dose of 1.0 mg of CNTX-4975. In the modified intent to treat, or mITT, population, 172 subjects were divided into 69 subjects who received a placebo injection, 33 subjects who received a dose of 0.5 mg of CNTX-4975, and 70 subjects who received a dose of 1.0 mg of CNTX-4975. The mITT population excluded three subjects from the efficacy analysis prior to unblinding for the following reasons: one subject entered the trial at two centers, received two IA injections, and was initially counted as two separate subjects, and one subject received trial medication but left the trial site and could not be contacted thereafter. There was no difference in the results between analyses with the ITT and mITT populations. A total of 157 subjects, or 90% of all subjects who were randomized, completed the full 24-week trial.

Key inclusion criteria for the trial included: that the subjects must have been between 45 and 80 years of age with a body mass index, or BMI, less than or equal to 45 kg/m2; that the subjects must have had moderate to

 

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severe pain in the index knee associated with OA that was stable for a minimum of two months prior to screening and evidence, based on radiography, of chronic OA with a Kellgren-Lawrence grade of 2, 3, or 4, with grade 4 limited to 10 percent of the study population; and that the subjects must have had a certain mean pain score based on their pain while walking from the WOMAC index in the index knee over the seven days prior to study drug injection. In addition, all subjects must have had a therapeutic failure, such as inadequate or no relief or an adverse reaction that resulted in their stopping at least one previous treatment, and/or a contraindication to standard of care therapy.

Key exclusion criteria for the trial included: previous index TKR or open surgery of the index knee within 12 months, or arthroscopic surgery of the index knee within three months prior to commencing the trial; any pain in the index knee due to joint disease other than OA; any other chronic pain that requires use of analgesic medications; periarticular knee pain from any other cause; use of topical capsaicin or corticosteroid injection in the index knee, or IA viscosupplementation, within 90 days prior to commencing the trial; and pain in the non-index knee that was greater than 3 when walking. For rescue pain relief, subjects were allowed concomitant treatment with recommended daily doses of acetaminophen, ibuprofen, naproxen, celecoxib, meloxicam, or tramadol.

The primary variable was change from baseline pain while walking, which is part of the WOMAC index. The WOMAC index is the most widely used evaluation standard for assessment in arthritis research. The WOMAC index consists of a proprietary set of standardized questions designed to evaluate the condition of subjects with knee OA, including pain, stiffness, and physical functioning of the joint. Specifically, the WOMAC index measures the following:

 

   

Part A: Pain during walking, using stairs, in bed, sitting or lying, and standing.

 

   

Part B: Stiffness after first waking and later in the day.

 

   

Part C: Physical function including stair use, rising from sitting, standing, bending, walking, getting in and out of a car, shopping, putting on and taking off socks, rising from bed, lying in bed, getting in and out of bath, sitting, getting on and off the toilet, heavy household duties and light household duties.

The primary endpoint of the trial was the change in average pain with walking on a flat surface through week 12, which corresponds to question A1 of the WOMAC index. Average pain with walking has been widely used as a primary variable in multiple clinical trials, including recently by Flexion for the approval of ZILRETTA®. The pre-specified primary endpoint was a comparison of the change in pain in the 1.0 mg of CNTX-4975 group versus the placebo group using a statistical method known as area under the curve, or AUC, to measure the difference between the active and placebo groups through 12-weeks. This results in a standardized change from baseline score over the 12 weeks. To generate these results, subjects recorded their daily question A1 score each evening through week 12, and then weekly between weeks 12 and 24, using a 11-point NRS, with zero being “no pain” and 10 being “pain as bad as you can imagine.”

Secondary outcome measures included question A1 through 24 weeks evaluated by the AUC method, question A1 taken as an average weekly score and evaluated by a mixed model repeated measures, or MMRM, analysis at each week of the trial, knee joint stiffness and function as assessed by parts B and C of the WOMAC index, the patient global impression of change, or PGIC, the proportion of subjects improved by percent reduction from their baseline pain, and safety and tolerability. We conducted additional exploratory post-hoc analyses on the datasets, such as the impact of unilateral or bilateral knee OA, the severity of the radiographic signs of OA, and the per protocol population, or all subjects who conformed to all requirements of the protocol.

Safety monitoring occurred through week 24. Clinical laboratory parameters were assessed at screening, baseline, and weeks 12 and 24.

 

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For clinical trial subjects, the average baseline pain level with walking was rated as moderate to severe and was similar across the three groups with an average pain score of 7.3 on the 11-point NRS. The mean age of the subjects was 59.8 years and ranged in age from 45 to 80 years. The subjects had a mean body mass index, or BMI, of 32.7 kg/m2. Commonly accepted BMI weight ranges are characterized as: 1) underweight below 18.5 kg/m2; 2) normal weight 18.5 to 25 kg/m2; 3) overweight 25 to 30 kg/m2; and 4) obese over 30 kg/m2, with greater than 35 kg/m2 considered morbidly obese. Many OA studies limit BMI to about 37 kg/m2 because increased BMI puts more stress on the joint. In contrast, we allowed subjects to have a BMI up to 45 kg/m2.

The statistical significance, based on the mITT population, was measured by the probability value, or p-value, a statistical measure which determines the risk of concluding that a difference exists when there is no actual difference.

The p-value for significance is set prior to starting the trial. For a pivotal trial, FDA requires a p-value less than or equal to 0.05, which means there is a 5% risk of concluding that a difference exists when there is no actual difference. For a non-pivotal trial, such as a Phase 2 trial, where the sample size is smaller, there is flexibility to set a different p-value. In the case of our Phase 2 TRIUMPH trial, we set the threshold p-value at or below 0.1, or a 10% risk of concluding that a difference exists when there is no actual difference. In Figure 3 below, the standardized reduction from baseline pain based on the AUC is shown through weeks 12 and 24 for each dose and placebo. Larger negative values denote greater improvement. The results demonstrated a statistically significant reduction in pain in comparison to placebo through both time points for the 1.0 mg treatment group. In the 1.0 mg treatment group the p-value was less than 0.0001 for the AUC analysis through week 12 and equal to 0.0002 through week 24.

 

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Figure 3. Statistically Significant Reductions in Pain Observed in Subjects Treated with 1.0 mg CNTX-4975 Compared to Placebo through Weeks 12 and 24 Based on the AUC of the WOMAC A1 Change from Baseline Pain

We also used an MMRM analysis to test the treatment effect for the average weekly change from baseline pain scores at specific time points. As shown in Figure 4 below, the onset of pain reduction occurred within days of the injection and reached statistical significance (p=0.0237) at the first statistical evaluation at week one. The maximum effect was seen at week five, and a stable, statistically significant response was

 

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observed for the primary endpoint at week 12 (p=0.0003) and week 24 (p=0.0667). The clinical trial data showed an absolute reduction of 4.4 points through week 12 which was a 1.5 point greater reduction in baseline pain than placebo. The results also indicated that at week 24 the reduction in pain from baseline was 3.76 points, which was a 0.9 point greater reduction in baseline pain than placebo. Based on these data, we believe that one injection every six months may be sufficient to manage moderate to severe pain associated with knee OA.

 

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Figure 4. 0.5 mg CNTX-4975 and 1.0 mg CNTX-4975 Change from Baseline Pain While Walking Compared to Placebo— Statistically Significant Reductions in Pain Observed in Subjects Treated with 1.0 mg CNTX-4975 Compared to Placebo at Weeks 1 to 19 and 23 to 24

The TRIUMPH trial results were also clinically meaningful. The Initiative on Methods, Measurement, and Pain Assessment in Clinical Trials, or IMMPACT, defines changes of approximately 30% to 36% to represent clinically meaningful decreases in chronic pain and a decrease of greater than 50% to represent a substantial change in pain. Standardized effect size can also be used to determine whether a result is clinically meaningful. A standardized effect size greater than 0.3 is considered clinically meaningful. For the TRIUMPH trial, the primary variable of pain while walking for the AUC analysis through week 12 and the MMRM analysis at week 12 resulted in decreases in pain while walking for the 1.0 mg dose of CNTX-4975 of 56% and 61%, respectively, based on mean reductions in pain of 4.1 and 4.4 points, respectively, and a baseline score of 7.2. Similarly, the standardized effect sizes for the AUC and MMRM analyses for the 1.0 mg dose of CNTX-4975 were 0.69 and 0.55, respectively, based on a difference from placebo of 1.49 and 1.40 and a pooled standard deviation of 2.14 and 2.55, respectively.

 

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The proportion of subjects improved by percent reduction from their baseline pain is a responder analysis. Responder analysis evaluation for weekly reduction from baseline pain were performed as an exploratory analysis and the values for the population achieving at least a 30%, 50%, 70% or 90% reduction were tabulated as a post-hoc analysis. As shown in Figure 5 below, at the 1.0 mg dose of CNTX-4975, 61% of subjects achieved at least a 50% reduction in pain and 44% of subjects achieved a 70% or greater reduction in pain at week 12.

 

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Figure 5. Post-Hoc Responder Analysis Demonstrating the Proportion of Subjects treated with 1.0 mg of CNTX-4975 Compared to Placebo that Decreased Their Pain Score by at Least 30%, 50%, 70% or 90%

In addition to the primary endpoint, the trial achieved statistical significance on its secondary endpoints. An analysis was performed for the changes from baseline in weekly average WOMAC B (knee stiffness) and WOMAC C (physical function) scores using a MMRM analysis. Overall, a 49% to 60% improvement in both knee stiffness and physical function was observed for the 1.0 mg injection of CNTX-4975, which was statistically significant at a p-value less than 0.05, compared with placebo through 16 weeks.

There were no drug-related severe adverse events, or SAEs, and the overall blinded assessment of AEs was similar to that seen with placebo in previous clinical trial of CNTX-4975. One subject in the 0.5 mg CNTX-4975 group experienced an unrelated SAE of intractable shoulder pain from OA. No subject discontinued due to an AE. The most reported AE in the placebo group was arthralgia, or joint pain, not related to the injection, which occurred in 5.7% of the subjects. The most reported AEs in the 0.5 mg CNTX-4975 group was arthralgia and joint effusion, which occurred in 8.8% of the subjects. The most reported AE in the 1.0 mg CNTX-4975 group was arthralgia which occurred in 7.0% of the subjects. Approximately half of the subjects with arthralgia reported the pain in a joint other than the injected knee joint.

 

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Table 1 below depicts the incidence of treatment emergent adverse events, or TEAEs, in the placebo and 1.0 mg CNTX-4975 groups.

Category

   Placebo
(n=70)
     1.0 mg
CNTX-4975
(n=71)
 

Subjects with at least one TEAE

     21 (30.0%0        21 (29.6%)  

Subjects with at least one TEAE by severity

     

Mild

     13 (18.6%)        14 (19.7%)  

Moderate

     8 (11.4%)        7 (9.9%)  

Severe

     0        0  

Treatment Day 1 TEAEs

     2 (2.9%)        3 (4.2%)  

Non-Treatment Day 1 TEAE

     21 (30.0%)        20 (28.2%)  

Subjects with at least one Serious AE

     0        0  

Other Ongoing and Planned Clinical Trials

In October 2017, we were advised by the FDA that it concurred with our plans to proceed with the Phase 3 program for CNTX-4975.

The Phase 3 clinical trial development plan includes the following studies:

 

   

VICTORY-1:

 

   

A pivotal, randomized, double-blind, placebo-controlled, single injection, 52-week clinical trial to evaluate the efficacy and tolerability of a single IA injection of CNTX-4975 in subjects with chronic, moderate to severe pain resulting from knee OA. We expect to enroll 325 subjects in this trial at 30 sites in the United States. The first subject was randomized on February 15, 2018. As of October 15, 2018, the trial had enrolled 259 subjects. We expect 52-week topline data from the VICTORY-1 trial to be available in the first quarter of 2020.

 

   

The primary efficacy endpoint is pain with walking, as measured at week 12. This is consistent with the primary efficacy endpoints of the TRIUMPH trial. We will also assess secondary endpoints including those measured by the WOMAC Parts A, B and C, as well as other instruments pertaining to quality of life, sleep, worker productivity, and others. We are exploring the clinical outcome measures through week 52 following a single injection of 1.0 mg of CNTX-4975. Radiographic assessment of the knee will be performed at baseline, week 12 and week 52.

 

   

VICTORY-2:

 

   

A pivotal, randomized, double-blind, placebo-controlled, two injections, 52-week clinical trial to evaluate the efficacy and tolerability of a repeat IA injection of CNTX-4975 six months apart in subjects with chronic, moderate to severe pain resulting from knee OA. We expect to enroll 325 subjects in this trial at 30 sites in the United States. We began screening subjects for the VICTORY-2 trial in the third quarter of 2018, and as of October 16, 2018, the trial had enrolled two subjects. Topline results are expected in the second half of 2020.

 

   

The primary efficacy endpoint will be pain with walking, as measured at week 12. This is consistent with the primary efficacy endpoints of the TRIUMPH trial. We will also assess secondary endpoints, including those measured by the WOMAC Parts A, B and C, as well as other instruments pertaining to quality of life, sleep, worker productivity, and others. Finally, the trial will evaluate the clinical outcome measures through week 52 following an initial

 

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injection on day one and a second injection at week 26 of 1.0 mg of CNTX-4975. Radiographic assessment of the knee will be performed at baseline and week 52.

 

   

Clinical Trial OA-303:

 

   

An open label, eight-week trial to evaluate the tolerability of a single IA injection of 1.0 mg of CNTX-4975 in subjects with chronic moderate to severe pain resulting from knee OA. We expect to enroll 850 subjects in this trial at 45 sites, divided approximately evenly between the United States and Europe. We began screening subjects for OA-303 in the third quarter of 2018, and as of October 15, 2018, the trial had enrolled ten subjects. Topline results are expected in the second half of 2019.

 

   

In addition to expanding the safety database for CNTX-4975, this trial will include variations of the procedure pain control technique designed to enable physicians to select options that best fit their practice dynamics and patient needs.

We are also conducting a Phase 1 trial, which we refer to as Clinical Trial OA-101, to refine options regarding the procedure pain control technique. This trial enrolled 15 subjects with bilateral moderate-to-severe knee OA pain in both knees and both knees were treated with IA 1 mg of CNTX-4975 within a one-week interval. All subjects returned for the second injection. Results from this trial are expected in the first half of 2019. Preliminary efficacy data from the trial indicated that the baseline knee OA pain while walking was six out of 10. At day 42 after treatment of both knees, pain while walking had decreased by a mean of 4.5 points to a mean score of 1.5. Preliminary results for the procedure pain control techniques studies are discussed below under the caption “Procedure Pain Control Technique.” Techniques used in this trial are included in design elements for Clinical Trial OA-303.

Clinical Trial OA-102 is a Phase 1 clinical trial, which commenced in June 2018, that compares the systemic pharmacokinetics, or PK, of CNTX-4975, administered by IA injection in subjects with moderate to severe knee OA pain, with that of the QUTENZA® 8% capsaicin patch for transdermal application. The purpose of this trial is to determine how the systemic exposure following an IA injection into the knee of 1.0 mg of CNTX-4975 relates to that with the labeled dosage for the QUTENZA patch, which allows up to four patches applied simultaneously for one hour. Results of this trial are expected by the end of 2018.

If the results of the clinical trials are positive, we plan to submit an NDA in the United States, and an MAA in Europe, in the second half of 2021. We hold worldwide commercialization rights to CNTX-4975, and if approved, we anticipate our first commercial sales of CNTX-4975 will take place in 2022.

Procedure Pain Control Technique

IA injection of any placebo or drug may be associated with pain. Local application of capsaicin may be associated with pain, most frequently described as burning. In clinical trials with CNTX-4975 administered either via IA injection or by injection into soft tissue, without intervention, procedure pain was transient, most evident between 15 minutes and two hours after injection, and ranged from none to severe. Prior to initiating the TRIUMPH clinical trial, we developed a technique to decrease procedure pain involving a combination of local anesthetic and controlled cooling to the injected joint. Prior to the start of the procedure, subjects in the placebo and 1.0 mg groups reported that their average knee pain at rest was mild to moderate. Thirty minutes after injection of placebo or 1.0 mg of CNTX-4975, subjects reported the full range of possible pain scores and a post-hoc analysis demonstrated there was no correlation between pain associated with the procedure and the primary variable for knee OA pain at week 12, with correlation coefficients of 0.0413 for the placebo group and 0.0028 for the 1.0 mg group, respectively. Following the injection procedure, 27% of subjects receiving 1.0 mg CNTX-4975 reported no pain at rest, and the reported average pain at rest was between mild to moderate. 61% of subjects receiving the placebo injection reported no pain at rest, and the reported average pain at rest was between no pain and mild.

 

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In our TRIUMPH clinical trial and the VICTORY-1 and VICTORY-2 pivotal Phase 3 clinical trials, we used or are using an aggregate of 75 minutes of controlled cooling using a water-based cooling device. In Clinical Trial OA-101, we studied alternative methods to reduce the method and time of controlled cooling. As depicted in Figure 6 below, we observed that the use of the pump-driven water-based cooling device or a gel-based device each resulted in a greater reduction of procedure pain than when using an ice pack on a subject-reported 11-point NRS. We also observed that a meaningful reduction in cooling time achieved similar results.

 

LOGO

Figure 6. Use of Water-Based and Gel-Based Cooling Devices Resulted in Greater Reduction of Procedure Pain than Ice Pack in Subjects Treated with 1.0 mg of CNTX-4975. Baseline Pain While Walking was 6.0 out of 10.

We are now evaluating these variations of the cooling technique in our OA-303 trial with the goal of meaningful shortening the total controlled cooling time, using different cooling devices that allow untethered patient mobility during the procedure and reducing the time between injection steps during the procedure. We believe the results will enable physicians to select options that best fit their practice dynamics and patient needs.

Early Trials

Prior to 2015, CNTX-4975 was studied in Phase 1 and 2 clinical trials for a number of potential indications, including knee OA, Morton’s neuroma, or MN, and post-operative pain. There were six clinical trials involving knee OA. Results of these trials contributed to proof of concept for managing pain associated with OA, identification of the likely dose range, systemic plasma levels and PK following IA injection, and methods to reduce the transient procedure pain following injection of CNTX-4975.

The most commonly reported systemic AE has been arthralgia, or joint pain, frequently arising from a non-treated joint. In addition to the SAE for unrelated shoulder OA pain noted for the TRIUMPH clinical trial above, earlier knee OA clinical trials had three SAEs in the active groups, all of which were considered not related to study drug, and included chest pain, femoral hernia, and abnormal menstrual bleeding.

 

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CNTX-4975—Regulatory Strategy

Capsaicin has been previously approved as the active component of the QUTENZA® 8% capsaicin patch. This means the approval path for CNTX-4975 is through a 505(b)(2) NDA, which we intend to pursue.

If the systemic exposure levels following 1.0 mg of CNTX-4975 injected to the joint are less than or equal to the maximum labeled dose of up to four patches for the topically applied QUTENZA 8% capsaicin patch, we can reference the FDA’s prior findings for a limited amount of the systemic safety exposure data. Clinical Trial OA-102 is a Phase 1 clinical trial described above that compares the systemic PK of CNTX-4975 administered by the IA route into osteoarthritic knees with that of the QUTENZA® 8% capsaicin patch by transdermal application. Since local exposure with CNTX-4975 is delivered by a different route of administration and dosage form, data regarding local safety exposure and efficacy to manage moderate to severe knee OA pain with CNTX-4975 will be supported by our trials. In total, we have conducted more than 40 systemic and local safety, non-clinical studies to support the safety of CNTX-4975 and have conducted, or plan to conduct, 12 clinical trials in humans, including the two pivotal and one open label Phase 3 clinical trials, to support the safety and efficacy of CNTX-4975 with IA administration. Consequently, whether or not we can reference the QUTENZA systemic safety exposure data has little impact on the composition of our expected NDA filing.

In discussions with the FDA, we have agreed that the safety exposure database for IA injection of CNTX-4975 be comprised of at least 1,500 subjects. This is aligned with the relevant International Conference on Harmonisation Tripartite Guideline regarding extent of population exposure. We believe the available safety data for CNTX-4975, the FDA’s prior findings with QUTENZA®, and the common use of capsaicin as a dietary ingredient, have all contributed to the relatively low safety database population requirements. For drug classes with known side effects, such as the anti-NGF antibodies and certain NSAIDs, the requirement can be 10,000 or more subjects.

The FDA offers Fast Track Designation to facilitate the development and expedite the review of drugs to treat serious conditions and fill an unmet medical need and breakthrough therapy designation to expedite the development and review of drugs that are intended to treat a serious condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint. We applied for both of these designations for CNTX-4975 and were granted Fast Track Designation but denied breakthrough therapy designation. We understand that since 2013, no chronic pain therapy has been awarded breakthrough therapy designation.

Fast Track Designation makes us eligible for more frequent meetings with the FDA to discuss the drug’s development plan and ensure collection of appropriate data needed to support drug approval, more frequent written communication from the FDA about such things as the design of the proposed clinical trials and use of biomarkers, eligibility for accelerated approval and priority review, if relevant criteria are met. Additionally, Fast Track Designation makes us eligible for rolling review, which means we can submit completed sections of our NDA for review by the FDA on a rolling basis, rather than waiting until every section of the NDA is completed before the entire application can be reviewed. Breakthrough therapy designation would provide us with more intensive guidance on an efficient drug development program, beginning as early as Phase 1, and additional FDA organizational commitment involving senior managers. As such, we believe that Fast Track Designation gives us the primary benefits of eligibility for accelerated approval and priority review that would also be provided by breakthrough therapy designation.

We intend to follow the pain associated with knee OA indication with data to support use in small joints, such as the carpometacarpal joint and medium joints, such as the ankle. If we are successful, then the indication for use of CNTX-4975 could potentially be broadened to the treatment of moderate to severe pain associated with OA, with no limitation as to which joint is involved.

 

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CNTX-4975—Commercial Strategy

We currently intend to build a commercial infrastructure in the United States to effectively support the commercialization CNTX-4975, if we are successful in obtaining FDA approval.

We believe that we can cost effectively promote CNTX-4975 to the four subspecialties that treat the majority of patients with moderate to severe pain associated with knee OA: pain management physicians, sports medicine specialists, orthopedists and rheumatologists. We anticipate our commercial operation to include our own sales management, internal sales support, distribution support and an internal marketing group. Additional requisite capabilities will include focused management of key accounts, such as managed care organizations, group purchasing organizations, and government accounts.

We intend to selectively partner outside of the United States for the worldwide commercialization of CNTX-4975.

CNTX-4975—Additional Indications

We believe that CNTX-4975 may have utility as an analgesic beyond the current planned use in the knee joint.

OA occurs in many other joints in the body, including small sized joints, such as the hand and the carpometacarpal joint, medium sized joints, such as the ankle, and other large joints, such as the shoulder. In addition, there are other types of arthritis, such as inflammatory arthritis, rheumatoid and psoriatic arthritis, where we believe CNTX-4975 may be developed as an analgesic. We believe CNTX-4975 has the potential to be developed as an analgesic for other types of joint pain, including post-traumatic chronic pain, temporomandibular joint pain, as well as nerve generated pain, such as MN.

We plan to test CNTX-4975 in exploratory clinical trials with certain other joints in the body, including large joints such as the shoulder, small sized joints such as the hand, and medium sized joints such as the ankle, to test the drug candidate’s efficacy and tolerability.

Morton’s Neuroma

MN is characterized by a discrete swelling of the common digital nerve that provides sensation in the toes. The hallmark symptom is pain, which can be severe, particularly with walking. Patients may also experience numbness and tingling. We have completed multiple clinical trials with CNTX-4975 in MN, the most recent of which was a Phase 2 clinical trial that we refer to as the STRIDE clinical trial. This trial was a double-blind, randomized placebo controlled clinical trial in 119 patients aimed at evaluating the efficacy and safety of CNTX-4975. Single doses of 200 mcg and 600 mcg of injectable trans-capsaicin were studied. The primary endpoint of this trial was average daily foot pain with walking. In this trial, patients had moderate to severe pain while walking before treatment. On the 11-point NRS, the average baseline pain score was approximately 6. The trial results suggested a clinically meaningful, but not statistically significant, reduction in pain that lasted for 12 weeks. Therefore, the trial failed to meet its primary efficacy endpoint. Additionally, there were no SAEs associated with treatment.

Upon evaluation of outcomes from the STRIDE clinical trial, one of the 13 sites in the trial was excluded in a post-hoc analysis due to a number of factors, including unusually fast enrollment rate, a nearly two-fold greater standard error on the primary end point, and an unusually high placebo response. When this site was removed, the general pattern of treatment response remained intact. However, with removal of the data from this site, the primary endpoint achieved statistical significance with the 200 mcg dose at p<0.05 at week 12. The 600 mcg dose did not achieve statistical significance in the post-hoc analysis.

 

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In February 2018 we held an end of Phase 2 meeting with the FDA and obtained feedback regarding our Phase 3 regulatory plan. The FDA authorized us to initiate pivotal Phase 3 clinical trials, which have the potential to comprise part of the data package necessary for an NDA. We have prioritized the development of CNTX-4975 for pain associated with knee OA and, at present, have no plans to initiate any Phase 3 clinical trials in pain associated with MN.

Other Early Stage Product Candidates

We have three additional clinical stage product candidates and one in pre-clinical development that are designed to work on multiple types of chronic pain, including chronic pain of neuropathic and inflammatory origin. These pain conditions are associated with a wide variety of diseases where pain is a co-morbid condition. We believe by directly targeting the dysfunction of the nociceptive system, injury to the nervous system, and abnormal pain signaling from unhealed injury, our product candidates have the potential to treat chronic pain originating from multiple causes.

In November 2015, we acquired the rights to three product candidates from Boehringer Ingelheim International GMBH, or BI. We are currently developing these product candidates in Phase 1 clinical trials and pre-clinical studies. We plan to progress or continue to progress these product candidates into clinical development either on our own or in collaboration with third parties.

CNTX-0290—Background

Somatostatin, also known as growth hormone-inhibiting hormone is a peptide hormone found in many sites throughout the body that acts to inhibit the release of certain hormones and other secretory proteins. Somatostatin receptor type 4, or SSTR4, is one of five discrete receptors activated by somatostatin. Multiple studies indicate that somatostatin has analgesic effects, and more recently it has been discovered that these effects are mediated through SSTR4 activation. When activated, SSTR4 modulates certain other known pain associated receptors within the nociceptors and there is a reduction in transmission of the resulting pain signals to the brain.

Our product candidate, CNTX-0290, is an investigational small molecule SSTR4 agonist for chronic pain associated with inflammatory, neuropathic, and mixed pain conditions. We have observed that CNTX-0290 delivered orally confers analgesia in multiple types of pre-clinical chronic pain models. Potential indications include chronic low back pain, chronic neck pain, OA, migraine, rheumatoid arthritis pain and multiple sclerosis pain.

CNTX-0290—Clinical Development

We have completed a Phase 1 single ascending dose, or SAD, clinical trial with CNTX-0290. In the SAD trial, we measured the safety of single doses of CNTX-0290 in healthy subjects. The administered single doses ranged from a base of 20 mg up to 400 mg. We also measured the pharmacokinetics, or PK, of CNTX-0290, which refers to the time course of absorption, bioavailability, distribution, metabolism, and excretion of a drug candidate.

We have also completed a Phase 1 multiple ascending dose, or MAD, clinical trial with CNTX-0290. Healthy subjects were administered repeated doses of CNTX-0290 over a period of 10 days. The administered doses in adult subjects younger than 65 years of age, were as follows: 100 mg once daily, or QD, 100 mg twice daily, or BID, 140 mg BID, and 380 mg/day, wherein subjects received the study drug BID as 200 mg in the morning and 180 mg in the evening. Part 2 of the MAD trial include 12 elderly subjects, 65 years to 80 years of age, that were divided to receive placebo, 40 mg QD, 100 mg QD, and 200 mg QD.

The results of the SAD and MAD clinical trials showed that the drug was well-tolerated and observed AEs were predominately not related to CNTX-0290 and there were no SAEs. Subjects in the single dose and

 

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repeat dose trials reported a low incidence of headache, diarrhea, temporomandibular joint syndrome, nausea, and dry eye. We also did not observe any clinically meaningful laboratory abnormalities and PK measurements indicated a linear dose response.

In the second half of 2018, we plan to initiate an experimental pain trial in healthy volunteers to assess whether certain doses of CNTX-0290 can decrease pain sensation in response to a number of painful stimuli. The results of this trial will be used to identify potential types of indications and doses to be used in Phase 2 indication selection trials.

CNTX-6970—Background

Cytokines and chemokines are both proteins made by cells in the immune system that help regulate responses to infection or injury such as inflammation. Cytokines are the general category of messenger molecules, while chemokines are a special type of cytokine that direct the migration of white blood cells to infected or damaged tissues.

Chemokine receptor type 2, or CCR2, is the receptor for a cytokine known as monocyte chemoattractant protein-1, or MCP-1. Pre-clinical data suggest that CCR2, and MCP-1, are upregulated in cells, such as macrophages, microglial cells and astrocytes which play a central role in the origination of pain signals.

Our product candidate, CNTX-6970, is a novel, potent and selective investigational CCR2 antagonist. CNTX-6970 is a small molecule intended to be administered orally. We believe that by using CNTX-6970 to block CCR2, we can reduce pain signaling by inhibiting monocyte activation, as well as having a direct effect on sensory nerves responsible for the pain signal. We have observed that CNTX-6970 conferred analgesia in multiple pre-clinical chronic pain models, with particular activity in models of inflammatory pain. We believe these results support our expectation that CNTX-6970 could make a viable drug candidate for the treatment of inflammatory chronic pain by antagonizing CCR2.

CNTX-6970—Clinical Development

We have completed a Phase 1 SAD clinical trial with CNTX-6970. In the SAD trial we measured the safety of single doses of CNTX-0290 in healthy subjects. The administered doses ranged from a base of 10 mg up to 600 mg. The results of the SAD clinical trial showed that the drug was well-tolerated and observed AEs were predominately not related to CNTX-6970 and there were no SAEs. Subjects reported a low incidence of headache and vomiting, among others. We also did not observe any clinically meaningful laboratory abnormalities. We measured the PK of CNTX-6970 and observed dose-proportional levels in plasma. In addition, target engagement was demonstrated, as evidenced by a dose-dependent inhibition of labeled MCP-1 binding to the CCR2 receptor on monocytes.

The Phase 1 MAD clinical trial with CNTX-6970 at dose levels of 100 mg, 300 mg and 600 mg was completed in August 2018. The clinical trial report will be available before the end of 2018. We plan to initiate an experimental pain trial in healthy volunteers to assess the doses needed to decrease pain sensation in response to a number of painful stimuli in 2019. Results of this trial will be used to identify potential indications and doses to be used in Phase 2 indication selection trials.

CNTX-6016—Background

Cannabinoid receptors are proteins that are part of the endocannabinoid system, which is involved in a variety of physiological processes, including pain sensation. There is interest in the role cannabinoids play in the management and treatment of multiple diseases. There are two distinct cannabinoid receptors, CB1 and CB2. A major factor holding back the development of drugs targeting the cannabinoid receptors relates to psychotropic adverse effects from CB1 activation in the central nervous system, or CNS. Whereas adverse CNS effects appear to relate to activation of CB1, published studies support that activation of CB2 receptors results in analgesia without the CB1 psychotropic effects.

 

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Pre-clinical studies showed that CNTX-6016 was in excess of 16,000-fold selective for CB2 over CB1 in humans. We believe that this selectively can confer analgesia without inducing psychotropic and other side effects seen with less selective cannabinoid agonists. In non-clinical safety toxicology studies of CNTX-6016 in dogs, reported adverse events included increased epileptiform waves at doses equivalent to 100-times greater and seizures at doses equivalent to 400-times greater than the equivalent starting dose in humans for human Phase 1 clinical trials. We have observed that CNTX-6016 conferred analgesia in multiple pre-clinical chronic pain models, with particular activity in models of neuropathic pain. These results support our belief that CNTX-6016 is a viable drug candidate for the treatment of chronic neuropathic pain. Potential indications include diabetic and autoimmune neuropathic pain and chemotherapy induced neuropathy.

We have an open IND with the FDA for CNTX-6016. Following discussions with the FDA regarding the permissible high dose for the Phase 1 SAD clinical trial, we conducted additional pharmacology and toxicology studies and then submitted an IND amendment to the FDA. The FDA has not raised any objections to the amended protocol, and we believe we have reached consensus with the FDA regarding additional safety monitoring measures in the trial protocol. We are now preparing to initiate a Phase 1 SAD clinical trial by the fourth quarter of 2018. This will be followed by a Phase 1 MAD clinical trial.

CNTX-2022—Background

Lidocaine is widely used as a local anesthetic in injectable, topical and patch delivery formulations. Lidocaine is characterized by its rapid onset of action. It acts to block sodium ion channels on nerves, which normally work to transmit neuronal signals. As a topical treatment, low concentration lidocaine products can relieve itching, burning, and pain from skin inflammation. Topical delivery has the potential to limit systemic exposure and associated side effects/tolerability issues, as well as drug-drug interactions. Topical lidocaine in the form of a prescription 5.0% patch has an established track record of safety and efficacy for the treatment of post-herpetic neuralgia, with sales in 2012 near $1.0 billion in the United States.

Our product candidate, CNTX-2022, is a proprietary, high concentration topical gel formulation of lidocaine. We believe CNTX-2022 has the potential to be used to address pain across a broad range of indications, including superficial musculoskeletal pain, dermatologic itch and pain, as well as superficial neuropathic pain. As the gel dries, it deposits lidocaine under the skin as a depot, then the residual gel can be washed off with no effect on lidocaine delivery. This differs from many topical patches, such as the LIDODERM patch, that require the patch to be worn for 12 hours and to not get wet. Unlike many topical preparations, clothes can be placed over the area without concern for staining. We believe a topical gel formulation offers convenience and the potential to provide better pain relief, as it can be used on skin conditions and topographies that are not amenable to patches, such as the face, feet and hands, areas that sweat, over areas that are mobile, such as joints, and areas with hair.

In a Phase 1 SAD clinical trial, CNTX-2022 topical gel was used to deliver lidocaine through the skin. There were no safety signals or patterns indicating a safety concern. Subjects in the trial reported a low incidence of gastroenteritis, headache and upper respiratory tract infection, among others. A single application resulted in blood plasma levels that are supportive of once daily administration. The next step will be to initiate a Phase 1 MAD clinical trial in the second half of 2019. This trial will be designed to address the PK requirements for a potential 505(b)(2) regulatory pathway.

Manufacturing

We currently do not have manufacturing facilities and utilize contract manufacturers to produce our drug substances and drug products. Manufacture of CNTX-4975 is a complex process and there are a limited number of contract manufacturing sites with synthetically-derived capsaicin experience and capability to handle its irritant properties in concentrated form. Certain steps in the manufacturing process are protected by our trade secrets. We use contract manufacturers to produce our proprietary formulated product for clinical supplies. Capsaicin inherently has low solubility and stability in water-based formulations, which typically necessitates an organic solvent-based formulation and an additional dilution or handling step prior to administration. We have submitted a composition of matter and method of use patent application for water-based, injectable formulations of trans-capsaicin, which allow CNTX-4975 to be packaged in a ready-to-use, pre-filled syringe that is stable at

 

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room temperature and convenient to administer. The CNTX-4975 study drug used in each of the ongoing Phase 3 clinical trials is such a formulation.

We currently rely on a sole source of supply for the CNTX-4975 drug substance. Because of the low dose required for efficacy and the long term stability of the drug substance, we believe we can stockpile reserves to guard against disruptions in supply. Nonetheless, we will initiate a program in 2019 to identify a secondary source of drug substance supply prior to any potential launch. To date, we have relied on a sole source of supply of CNTX-4975 drug product that is capable of supporting the program through commercialization and launch. We are initiating a program in the second half of 2018 to identify a secondary source of supply for drug product.

Competition

The biotechnology and pharmaceutical industries are characterized by extensive research and development efforts, rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We are focused on the development and commercialization of our multi-asset pipeline of novel, non-opioid and non-addictive therapies for chronic pain. The number of patients suffering from chronic pain is large and growing. While we believe that our product candidates, development experience and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including pharmaceutical, biotechnology and specialty pharmaceutical companies either marketing or developing therapeutics to treat chronic pain. Academic research institutions, governmental agencies, as well as public and private institutions are also potential sources of competitive products and technologies.

Our competitors may have significantly greater financial resources, robust drug pipelines, established presence in the market and expertise in research and development, manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified clinical, regulatory, scientific, sales, marketing and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, durability, safety, price and the availability of reimbursement from government and other third-party payors.

Significant competition exists in the chronic pain field. Although we believe our approach to developing novel treatments for chronic pain is unique from most other existing or investigational therapies, such as NSAIDs, corticosteroids and opioids, we will need to compete with all currently available or future therapies within the indications where our development is focused.

With respect to CNTX-4975, the main classes of marketed products that are available for the treatment of knee OA pain include NSAIDs, opioids, immediate-release and sustained-release injectable steroids, HA injections, and, to a lesser extent, non-FDA approved treatments such as platelet-rich plasma and stem cell injections. Furthermore, numerous monoclonal antibodies targeting nerve growth factor, or NGF inhibitors, are in clinical development, including two product candidates in Phase 3. These anti-NGF antibodies may be priced as biologics, which would be at least $6,000 per year as an analgesic, based on current prices for disease modifying monoclonal antibody therapies for rheumatic diseases. Also in development are several compounds that seek to produce disease modification through the regeneration of cartilage and/or to reduce cartilage degeneration, though these compounds do not directly treat the pain itself.

There are a number of companies developing or marketing therapies for the treatment and management of chronic pain that may compete with our current product candidates, including many major pharmaceutical and

 

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biotechnology companies. Among the companies that currently market or are developing therapies that, if approved, our product candidates would potentially compete with include: Acorda Therapeutics, Assertio Therapeutics, Biogen, Cara Therapeutics, Eli Lilly and Company, Endo Pharmaceuticals, Flexion Therapeutics, Grunenthal, Horizon Pharma, Janssen Research & Development, Merck & Co., Novartis, Pacira Pharmaceuticals, Pain Therapeutics, Pfizer, Purdue Pharma, Sanofi, Trevena and Vertex Pharmaceuticals.

Intellectual Property

Our success depends in large part upon our ability to obtain and maintain proprietary protection for our products and technologies, and to operate without infringing or otherwise violating the proprietary rights of others. We endeavor to protect our products using a combination of intellectual property protections and available government regulatory and marketing exclusivities afforded to new medicines. For example, we endeavor to protect our products by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business. We also use other forms of protection, such as confidential information, trade secrets and know-how, and trademarks to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable.

The proprietary nature of, and protection for, our product candidates, processes and know-how are important to our business. We have sought patent protection in the United States and multiple foreign countries for CNTX-4975 for treating knee OA pain, and for product candidates CNTX-0290, CNTX-6016, CNTX-6970, CNTX-2022, and other inventions, where available and when appropriate. Our policy is to pursue, maintain and defend intellectual property rights, and to protect the technology, inventions, and improvements that are commercially important to our business.

CNTX-4975

The patent portfolio that we own relating to our CNTX-4975 product candidate contains patents directed to methods of use, as well as patent applications directed to compositions of matter and methods of use. As of August 28, 2018, the patent portfolio that we own relating to our CNTX-4975 product candidate contains patents in the United States, Japan, Europe, Australia, Canada, and other foreign countries. Our U.S. patent directed to a method of attenuating pain is scheduled to expire in 2026, and foreign counterpart patents are scheduled to expire in 2023. We own two pending international patent applications directed to CNTX-4975. Our first pending international patent application contains composition of matter and method of use claims directed to our ready-to-use formulation of capsaicin, whereby patents, if granted based on applications arising from this international patent application, would expire in 2037. Our second pending international patent application is directed to techniques for reducing capsaicin post-injection procedure pain, whereby any patents, if granted, based on applications arising from this international patent application, would expire in 2038. Also, we own a pending U.S. provisional patent application directed to repeat dosing of capsaicin to achieve extended relief from osteoarthritic knee pain, whereby patents, if granted, based on applications arising from this U.S. provisional patent application would expire in 2039.

Our European patent related to the CNTX-4975 product candidate for treating knee OA pain was granted in 2015 and was opposed by a third-party in 2016. Oral proceedings were held at the European Patent Office in January 2018, and the European Patent Office’s Opposition Division mailed a communication on September 10, 2018 revoking the European patent on grounds that changes to the claims during prosecution of the application resulted in patent claims that do not meet written support requirements of European law. We intend to appeal the decision of the Opposition Division. Separate from this European patent, CNTX-4975 is eligible for eight years of data exclusivity plus two years of marketing exclusivity after approval in Europe. Additional protections in Europe may be obtained from patents, if any, that grant based on our two pending international patent applications.

 

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CNTX-0290

The patent portfolio that we own relating to our CNTX-0290 product candidate contains patents and patent applications directed to compositions of matter and methods of use. As of August 28, 2018, the patent portfolio that we own relating to CNTX-0290 contains patents in the United States, Europe, and other foreign countries, as well as patent applications pending in the United States, Australia, Canada, Japan, and other foreign countries. Our first U.S. patent contains claims to compositions of matter, and our second U.S. patent contains claims to methods of treating pain. Our U.S. and foreign patents to CNTX-0290 are scheduled to expire in 2034, and any patents, if granted, based on our pending patent applications, would expire in 2034.

CNTX-6016

The patent portfolio that we own relating to our CNTX-6016 product candidate contains patents and patent applications directed to compositions of matter and to methods of use. As of August 28, 2018, the patent portfolio that we own relating to CNTX-6016 contains patents in the United States, Europe, Japan, and other foreign countries, as well as patent applications pending in the United States, Australia, Canada, and other foreign countries. We own two U.S. patents, each with claims to compositions of matter and methods of treating pain. Our U.S. and foreign patents to CNTX-6016 are scheduled to expire in 2034, and any patents, if granted, based on our pending patent applications would expire in 2034.

CNTX-6970

The patent portfolio that we own relating to our CNTX-6970 product candidate contains patents and patent applications directed to compositions of matter and to methods of use. As of August 28, 2018, the patent portfolio that we own relating to CNTX-6970 contains patents in the United States, Europe, Japan, Australia, Canada, and other foreign countries, as well as patent applications pending in the United States, Europe, Japan, Australia, Canada, and other foreign countries. Our U.S. patent with composition of matter claims to CNTX-6970 is scheduled to expire in 2032, while our U.S. patent with claims to methods of using CNTX-6970 is scheduled to expire in 2030. Our patents relating to CNTX-6970 in foreign countries are scheduled to expire from 2029 to 2030, and patents that may issue in the future based on counterpart patent applications would expire from 2029 to 2030. One segment of our patent portfolio relating to CNTX-6970 is patent applications pending in the United States, Europe, Japan, Australia, Canada, and other foreign countries directed to a salt form of CNTX-6970, whereby any patents, if granted, based on these patent applications would expire in 2036.

CNTX-2022

The patent portfolio that we own relating to our CNTX-2022 product candidate contains patents and patent applications directed to compositions of matter and to methods of use. As of August 28, 2018, the patent portfolio that we own relating to CNTX-2022 contains patents in the United States, Japan, Australia, and Canada, as well as patent applications pending in the United States, Europe, and Hong Kong. Our U.S. patents with method of use claims to CNTX-2022 are scheduled to expire in 2029, while our patents in Japan, Australia, and Canada are scheduled to expire in 2028. Patents that may issue in the future based on our pending European and Hong Kong patent applications would expire in 2028.

Trade Secrets and Other Proprietary Information

In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. For example, we have developed methods for the more efficient manufacture of high-purity trans-capsaicin used in CNTX-4975. We seek to protect our proprietary information, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners.

 

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License Agreements

Patent Assignment and Licensing Agreement with Boehringer Ingelheim

In November 2015 we entered into a patent assignment and exclusive license agreement with BI, or the BI Agreement. Under the BI Agreement, BI assigned to us certain patents and granted to us an exclusive, worldwide, royalty-bearing license to certain know-how owned or controlled by BI, in order to develop, manufacture and commercialize products containing the CCR2 compounds (which includes CNTX-6970), CB2 compounds (which includes CNTX-6016) and SSTR4 compounds (which includes CNTX-0290) or any compounds covered by a claim in the assigned patents, for the treatment or prevention of diseases or conditions in humans and/or animals. The terms of the BI Agreement require us to use commercially reasonable efforts to develop and commercialize these products.

Pursuant to the terms of the BI Agreement, we paid BI an upfront payment upon execution of the agreement. In addition, if we succeed in developing and commercializing products containing compounds active against CCR2, CB2 and SSTR4, as applicable, we may owe BI up to the following total payments (i) for CCR2, $103 million for regulatory milestones and $240 million for commercial milestones, (ii) for CB2, $97 million for regulatory milestones and $180 million for commercial milestones, and (iii) for SSTR4, $97 million for regulatory milestones and $180 million for commercial milestones.

BI is entitled to receive low single-digit to low teens percentage royalties on global annual net sales of products calculated on a country-by-country and product-by-product basis. Our royalty obligations to BI will expire on a country-by-country and product-by-product basis upon the later of (a) the date on which such product is no longer covered by a valid claim of an assigned patent, (b) the date on which such product is no longer covered by any other governmental grant of exclusivity in such country in the indication, or (c) 10 years from first launch of the respective product in the country, provided the licensed know-how is still proprietary. Scheduled expiration dates of assigned patents for CNTX-0290, CNTX-6016, and CNTX-6970 are as set forth above under the caption “Intellectual Property.”

Under the BI Agreement, we may sublicense the licensed rights to third parties, subject to BI’s prior written consent, and provided that the sublicense agreement is consistent with the terms of the BI Agreement. Should we enter into a sublicense agreement, we remain responsible for paying any amounts due on account of sales or other dispositions of the compounds and products by sublicensees.

Pursuant to the BI Agreement, we have control of patent prosecution, defense, and maintenance of the assigned patents. If we cease payment for patent prosecution of an assigned patent, BI has the right to request cost-free assignment and transfer of the assigned patent. We have the primary right, but not obligation, to take action in the prosecution or prevention of any infringement by a third party of the assigned patent rights. If three months after either party becomes aware of an infringement we have not obtained a discontinuance of the infringement or filed an infringement lawsuit, BI will have the right, but not the obligation, to take action in the prosecution or prevention of the infringement.

Pursuant to the BI Agreement, in the event that an affiliate, a sublicensee, or we begin clinical trials or commercialize a competing product that modulates as its primary mechanism of action the same target as a product containing the CCR2, CB2 and SSTR4 compounds and is developed for the treatment or prevention of pain in humans or animals, BI will have the right to terminate our exclusivity of the license so that we retain a non-exclusive right to the know-how. BI will also have the right to obtain a perpetual license-back to the assigned patents to independently exploit the products and we will grant BI a license to use any results from our independent exploitation of the compounds and products.

The agreement will expire on a country-by-country and product-by-product basis on the expiration of our last payment obligation. Prior to the expiration date, we may terminate the BI Agreement with written

 

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notification to BI. Additionally, prior to the expiration date, we or BI may terminate the BI Agreement if the other party materially breaches or defaults on its obligations under the agreement and does not cure within a specified period of time, such material breach to include our obligations to use commercially reasonable efforts to develop and commercialize products under the BI Agreement. Subject to possible further adjustments if agreed to by BI, the BI Agreement currently requires that the Company commence a Phase 1 trial for CNTX-6016 in early 2019 and later conduct a Phase 2a trial for CNTX-6970. If we terminate the BI Agreement for convenience or if BI terminates it due to our uncured material breach, we will no longer have any rights to the patents assigned to us by BI under the BI Agreement and ownership of those patents will transfer back to BI. We will also be obligated to transfer to BI, at its request, all development data and regulatory documentation, approvals and agreements related to the product(s) that are the subject of the BI Agreement, as well as grant to BI a non-exclusive license to use certain of our intellectual property as may be necessary for the continued development, manufacture and/or commercialization of such product(s). Upon expiration of the BI Agreement, we will retain a perpetual, fully paid-up, non-exclusive and cost-free right to use the licensed know-how solely for the products, on a country-by-country and product-by-product basis.

Commercial Operations

We currently have no marketing and sales organization. We have retained global rights to all of our product candidates, and, if one of our product candidates is approved by the FDA, expect to access the market in the United States through a specialty pain-focused sales force. We expect that our sales force will be supported by sales management, internal sales support, an internal marketing group and distribution support. We intend to invest in our commercial capabilities prudently by focusing our marketing efforts on the physician subspecialties that treat patients with chronic pain. These physicians include, but are not limited to, pain management specialists, rheumatologist, orthopedic surgeons and sports medicine physicians. We will also evaluate licensing and partnering with third parties to help us reach other sales channels and geographic markets outside of the United States.

Government Regulation

The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs, such as those we are developing. These agencies, and other federal, state and local entities regulate, among other things, the research and development, testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion, distribution, post-approval monitoring and reporting, sampling and export and import of our product candidates.

U.S. Government Regulation of Drug Products

In the United States, the FDA regulates drugs under the FDCA and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

 

   

completion of pre-clinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations;

 

   

submission to the FDA of an IND which must become effective before human clinical trials may begin;

 

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approval by an IRB at each clinical site before each trial may be initiated;

 

   

performance of adequate and well-controlled human clinical trials in accordance with GCP requirements to establish the safety and efficacy of the proposed drug product for each indication;

 

   

submission to the FDA of an NDA;

 

   

satisfactory completion of an FDA advisory committee review, if applicable;

 

   

satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; and

 

   

satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;

 

   

payment of user fees and securing FDA and approval of the NDA; and

 

   

compliance with any post-approval requirements, including the potential requirement to implement a REMS and the potential requirement to conduct post-approval studies.

Pre-clinical Studies

Pre-clinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy. An IND sponsor must submit the results of the pre-clinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. Some pre-clinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. Clinical holds also may be imposed by the FDA at any time before or during clinical trials, due to safety concerns about on-going or proposed clinical trials, or non-compliance with specific FDA requirements, and the trials may not begin or continue until the FDA notifies the sponsor that the hold has been lifted.

Clinical Trials

Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their www.clinicaltrials.gov website. The information contained in, or accessible through, this website does not constitute a part of this prospectus. We have included this website address in this prospectus solely as an inactive textual reference.

 

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Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

 

   

Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.

 

   

Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

 

   

Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

Post-approval trials, sometimes referred to as Phase 4 trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. In addition, some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board or committee. Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial.

During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the meetings at the end of the Phase 2 trial to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug. In addition, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

While the IND is active and before approval, progress reports summarizing the results of the clinical trials and non-clinical studies performed since the last progress report must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any

 

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clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

United States Review and Approval Process

The results of product development, pre-clinical and other non-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality and purity. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes twelve months from the date the NDA is submitted to FDA because the FDA has approximately two months to make a “filing” decision after it the application is submitted. The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP requirements.

After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes the specific deficiencies in the NDA identified by the FDA and may require additional clinical data, such as an additional pivotal Phase 3 trial or other significant and time-consuming requirements related to clinical trials, non-clinical studies or manufacturing. If a Complete Response Letter is issued, the sponsor must resubmit the NDA or, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase 4 testing, which involves clinical trials designed to further assess a drug’s safety and effectiveness after NDA approval, and may require testing and surveillance programs to monitor the safety of approved products which have been commercialized. The FDA may also place other conditions on approval including the requirement for REMS, to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS. The FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods,

 

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patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Marketing approval may be withdrawn for non-compliance with regulatory requirements or if problems occur following initial marketing.

The FDASIA, made permanent the Pediatric Research Equity Act, or PREA, which requires a sponsor to conduct pediatric clinical trials for most drugs, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs and supplements must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA may request a deferral of pediatric clinical trials for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric clinical trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric clinical trials begin. The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request for approval of a pediatric formulation.

Special FDA Expedited Review and Approval Programs

The FDA has various programs, including Fast Track Designation, accelerated approval, priority review, and breakthrough therapy designation, which are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.

To be eligible for a Fast Track Designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. The FDA may review sections of the NDA for a fast track product on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.

The FDA may give a priority review designation to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists. A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current PDUFA guidelines. Under the new PDUFA agreement, these six and ten month review periods are measured from the “filing” date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review and decision from the date of submission. Most products that are eligible for Fast Track Designation are also likely to be considered appropriate to receive a priority review.

In addition, products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may be eligible for accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a drug receiving accelerated approval to perform post-marketing studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint, and the drug may be subject to accelerated withdrawal procedures.

 

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Moreover, under the provisions of the FDASIA, a sponsor can request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs designated as breakthrough therapies are also eligible for accelerated approval. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. We may explore some of these opportunities for our product candidates as appropriate.

Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual user program fee requirements for any marketed products.

The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval of a drug or medical device is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

 

   

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

 

   

fines, warning letters or holds on post-approval clinical trials;

 

   

refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;

 

   

product seizure or detention, or refusal to permit the import or export of products; or

 

   

injunctions or the imposition of civil or criminal penalties.

 

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The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs or devices may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.

If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee. A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

The Hatch-Waxman Amendments

The Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act, added two pathways for FDA drug approval. First, the Hatch-Waxman amendments authorized the FDA to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from trials not conducted by or for the applicant and for which the applicant has not obtained a right of reference from the data owner. The applicant may rely upon the FDA’s findings of safety and efficacy for an approved product that acts as the “listed drug.” The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support the change from the listed drug. The FDA may then approve the new product candidate for all, or some, of the label indications for which the branded reference drug has been approved, as well as for any new indication sought by the 505(b)(2) applicant.

Second, the Hatch-Waxman amendments to the FDCA also established a statutory procedure for submission and FDA review and approval of abbreviated new drug applications, or ANDAs, for generic versions of branded drugs previously approved by the FDA (such previously approved drugs are referred to as “listed drugs”). An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. Premarket applications for generic drugs are termed abbreviated because they generally do not include pre-clinical and clinical data to demonstrate safety and effectiveness. However, a generic manufacturer is

 

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typically required to conduct bioequivalence studies of its test product against the listed drug. The bioequivalence studies for orally administered, systemically available drug products assess the rate and extent to which the API is absorbed into the bloodstream from the drug product and becomes available at the site of action. Bioequivalence is established when there is an absence of a significant difference in the rate and extent for absorption of the generic product and the listed drug. For some drugs, other means of demonstrating bioequivalence may be required by the FDA, especially where rate and/or extent of absorption are difficult or impossible to measure. The FDA will approve the generic product as suitable for an ANDA application if it finds that the generic product does not raise new questions of safety and effectiveness as compared to the innovator product. A product is not eligible for ANDA approval if the FDA determines that it is not bioequivalent to the referenced innovator drug, if it is intended for a different use, or if it is not subject to an approved Suitability Petition.

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant’s product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a paragraph IV certification. A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers. The applicant may also elect to submit a “section viii” statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

If the reference NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited from approving the application until the earlier of 30 months from the receipt of the paragraph IV certification expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the applicant. The ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the branded reference drug has expired.

Marketing Exclusivity

Market exclusivity provisions under the FDCA can delay the submission or the approval of certain marketing applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not approve or even accept for review an abbreviated new drug application, or ANDA, or a NDA submitted under Section 505(b)(2), or 505(b)(2) NDA, submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.

The FDCA alternatively provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for

 

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which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the pre-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric exclusivity provides for an additional six months of marketing exclusivity attached to another period of exclusivity if a sponsor conducts clinical trials in children in response to a written request from the FDA. The issuance of a written request does not require the sponsor to undertake the described clinical trials. In addition, orphan drug exclusivity, as described above, may offer a seven-year period of marketing exclusivity, except in certain circumstances.

U.S. Coverage and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any therapeutic product candidate for which we may seek regulatory approval. Sales in the United States will depend in part on the availability of adequate financial coverage and reimbursement from third-party payors, which include government health programs such as Medicare, Medicaid, TRICARE and the Veterans Administration, as well as managed care organizations and private health insurers. Prices at which we or our customers seek reimbursement for our therapeutic product candidates can be subject to challenge, reduction or denial by payors.

The process for determining whether a payor will provide coverage for a product is typically separate from the process for setting the reimbursement rate that the payor will pay for the product. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be available. Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product that might be approved for marketing, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of any products, which would be in addition to the costs expended to obtain regulatory approvals. Third-party payors may not consider our product candidates to be medically necessary or cost-effective compared to other available therapies, or the rebate percentages required to secure favorable coverage may not yield an adequate margin over cost or may not enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development.

Healthcare Reform

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of drug product candidates, restrict or regulate post-approval activities, and affect the profitable sale of drug product candidates.

Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the ACA was passed, which substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things: (i) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations; (ii) established an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and

 

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biologic agents apportioned among these entities according to their market share in some government healthcare programs; (iii) expanded the availability of lower pricing under the 340B drug pricing program by adding new entities to the program; (iv) increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; (v) expanded the eligibility criteria for Medicaid programs; (vi) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and (vii) established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drugs.

Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. While Congress has not passed comprehensive repeal legislation, bills affecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices.

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

U.S. Healthcare Fraud and Abuse Laws and Compliance Requirements

Federal and state healthcare laws and regulations restrict business practices in the pharmaceutical industry. The U.S. laws that may affect our ability to operate include:

 

   

the federal Anti-Kickback Statute, which prohibits, among other things, persons from soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

 

   

the federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent;

 

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HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

 

   

HIPAA, as amended by the federal Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;

 

   

the federal Physician Payments Sunshine Act, which among other things requires certain manufacturers of drugs, devices, and biologics, that are reimbursable by a federal healthcare program to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members; and

 

   

similar federal laws and state law equivalents of each of the above federal laws.

Regulation Outside the United States

To the extent that any of our product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.

In order to market our future products in the EEA and many other foreign jurisdictions, we must obtain separate regulatory approvals. More concretely, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

 

   

the Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use of the EMA and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, advanced therapy products, and medicinal products containing a new active substance indicated for the treatment certain diseases, such as AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU; and

 

   

National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure.

Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

Data and Marketing Exclusivity

In the EEA, new products authorized for marketing, or reference products, qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The data exclusivity

 

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period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until 10 years have elapsed from the initial authorization of the reference product in the EU. The 10-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those 10 years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. In Japan, medicinal products approved for administration to a patient via a new route of administration qualify for six years of market exclusivity.

Pediatric Investigation Plan

In the EEA, MAAs for new medicinal products not authorized have to include the results of studies conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP, agreed with the EMA’s Pediatric Committee, or PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which marketing authorization is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data is not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the marketing authorization is obtained in all Member States of the EU and study results are included in the product information, even when negative, the product is eligible for six months’ supplementary protection certificate extension.

Orphan Drug Designation

In the EEA, a medicinal product can be designated as an orphan drug if its sponsor can establish that the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made, or that the product is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the European Community and that without incentives it is unlikely that the marketing of the drug in the EU would generate sufficient return to justify the necessary investment. For either of these conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the drug will be of significant benefit to those affected by that condition.

In the EEA, an application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. Marketing authorization for an orphan drug leads to a ten-year period of market exclusivity. During this market exclusivity period, the EMA or the member state competent authorities, cannot accept another application for a marketing authorization, or grant a marketing authorization, for a similar medicinal product for the same indication. The period of market exclusivity is extended by two years for medicines that have also complied with an agreed PIP.

This period may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan drug designation, for example because the product is sufficiently profitable not to justify market exclusivity. Market exclusivity can be revoked only in very selected cases, such as consent from the marketing authorization holder, inability to supply sufficient quantities of the product, demonstration of “clinical superiority” by a similar medicinal product, or, after a review by the Committee for Orphan Medicinal Products, requested by a member state in the fifth year of the marketing exclusivity period (if the designation criteria are believed to no longer apply). Medicinal products designated as orphan drugs pursuant

 

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are eligible for incentives made available by the EU and its Member States to support research into, and the development and availability of, orphan drugs.

Clinical Trials

Clinical trials of medicinal products in the European Union must be conducted in accordance with European Union and national regulations and the International Conference on Harmonization, or ICH, guidelines on GCPs. Additional GCP guidelines from the European Commission, focusing in particular on traceability, apply to clinical trials of advanced therapy medicinal products. If the sponsor of the clinical trial is not established within the European Union, it must appoint an entity within the European Union to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most EU countries, the sponsor is liable to provide “no fault” compensation to any study subject injured in the clinical trial.

Prior to commencing a clinical trial, the sponsor must obtain a clinical trial authorization from the competent authority, and a positive opinion from an IEC. The application for a clinical trial authorization must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation. Currently, clinical trial authorization applications must be submitted to the competent authority in each EU Member State in which the trial will be conducted. Under the new Regulation on Clinical Trials, which is currently expected to take effect in 2019, there will be a centralized application procedure where one national authority takes the lead in reviewing the application and the other national authorities have only a limited involvement. Any substantial changes to the trial protocol or other information submitted with the clinical trial applications must be notified to or approved by the relevant competent authorities and ethics committees. Medicines used in clinical trials must be manufactured in accordance with cGMP. Other national and European Union-wide regulatory requirements also apply.

Employees

As of November 1, 2018, we had 14 full-time employees, including a total of 5 employees with M.D., Sc.D. or Ph.D. degrees. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.

Facilities

Our principal facilities consist of office space. We occupy approximately 11,486 square feet of office space in Boston, Massachusetts under a lease that currently expires in 2024.

Corporate Information

We were incorporated under the laws of the State of Delaware in February 2013.

Legal Proceedings

We are not currently subject to any material legal proceedings.

 

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MANAGEMENT

Executive Officers and Directors

The following table sets forth the name, age and position of each of our executive officers and directors as of November 1, 2018.

 

Name

  

Age

  

Position

Executive Officers

     

Jeffrey B. Kindler

   63    Chief Executive Officer and Director

James N. Campbell, M.D.

   70    President, Chief Scientific Officer and Director

Randall Stevens, M.D.

   60    Executive Vice President, Chief Medical Officer

Andrew Partridge

   50    Executive Vice President, Chief Commercial Officer

B. Nicholas Harvey

   58    Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Peter Hanson, DVM, Ph.D.

   55    Executive Vice President, Chief Development Operations Officer

Kerrie L. Brady

   56    Chief Business Officer and Executive Vice President, Corporate Strategy

Directors

     

Sol J. Barer, Ph.D.(2)

   71    Chairman of the Board of Directors

Isaac Blech(1)

   68    Vice Chairman of the Board of Directors

Daniel N. Mendelson(3)

   54    Director

Sara Nayeem, M.D.(2)(3)

   41    Director

Arnold L. Oronsky, Ph.D.(1)(2)

   79    Director

Joseph R. Swedish(1)(3)

   67    Director

Shawn Tomasello(2)(3)

   60    Director

Stella Xu, Ph.D.(1)

   48    Director

 

(1)

Member of the audit committee.

(2)

Member of the compensation committee.

(3)

Member of the nominating and corporate governance committee.

Executive Officers and Key Employees

Jeffrey B. Kindler has served as our Chief Executive Officer and a member of our board of directors since 2013. Since 2012, Mr. Kindler has been a venture partner at Lux Capital Management LLC, a venture capital firm. He is also a managing director at Starboard Capital Partners LLC, a private equity firm, and provides consulting services to MacAndrew & Forbes. Mr. Kindler’s current roles at public companies are the executive chairman and director of vTv Therapeutics Inc., a development stage biopharmaceutical company; a director at Intrexon Corporation, a synthetic biology company; a director at Perrigo Company plc, a healthcare company; and a director at Siga Technologies, Inc., a developer of antiviral therapeutics. He also serves on the boards of directors of a number of other privately held companies. Previously, Mr. Kindler was chairman and Chief Executive Officer of Pfizer Inc. from 2006 to 2010, and vice chairman and Executive Vice President from 2002 to 2006. He was also President of Partner Brands, Executive Vice President and General Counsel at McDonald’s Corporation, and Vice President of Litigation and Legal Policy at General Electric Company. In addition, Mr. Kindler serves as global chair of the GLG Institute, a membership-based learning community for leading executives. He also served on President Barack Obama’s Management Advisory Board and on the board of trustees of Tufts University. Mr. Kindler received his J.D. from Harvard Law School in 1980, and his B.A. from Tufts University in 1977. We believe that Mr. Kindler’s significant experience with public companies, including pharmaceutical companies, qualifies him to serve as a member of our board of directors.

James N. Campbell, M.D. has served as our President, Chief Scientific Officer, and a member of our board of directors since 2013. Dr. Campbell is Professor Emeritus of neurosurgery at Johns Hopkins University

 

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School of Medicine. Dr. Campbell co-founded Amplimmune, Inc. (which was acquired by AstraZeneca plc) and CNS Therapeutics Inc. (which was acquired by Covidien plc). Previously, he served as Chief Executive Officer at Vallinex, Inc., a pain therapeutics company, and Arcion Therapeutics, Inc., also a pain therapeutics company. In addition, he served as Executive-in-Residence at InterWest Partners, a California based venture firm, and for several years also served as a consultant. Dr. Campbell received his M.D. from Yale University and his B.A. in psychology from the University of Michigan. We believe that Dr. Campbell’s significant experience with biotechnology companies and his medical expertise qualify him to serve as a member of our board of directors.

Randall Stevens, M.D. has served as our Chief Medical Officer since April 2015 and Executive Vice President since October 2018. Dr. Stevens is a board-certified internist and rheumatologist with more than 25 years of experience in pharmaceutical medicine. From August 2007 to April 2015, he served as the corporate vice president, head of inflammation and immunology clinical development for Celgene Corporation, a pharmaceutical company. Earlier in his career, Dr. Stevens spent 11 years at F. Hoffmann La Roche Inc. where he was a global leader in inflammation and immunology clinical research. Additionally, he has been a clinical professor of medicine at Robert Wood Johnson School of Medicine since 1990 and a board member for Outcome Measures Rheumatic Clinical Trials since 2007. He holds a B.A. in chemistry and Spanish, and an M.D. from Case Western Reserve University School of Medicine.

Andrew Partridge has served as our Executive Vice President, Chief Commercial Officer and as a consultant to us since October 2018. We expect that Mr. Partridge will join us as a full-time employee in November 2018. Since 2013, Mr. Partridge has served as senior vice president and regional head of North America Commercial at Vertex Pharmaceuticals. From 2003 to 2013 he worked at Amgen, serving as the executive director of sales, oncology business unit in the United States. Prior to Amgen, he held positions of increasing responsibility at Roche and Schering-Plough. Mr. Partridge received a Higher National Diploma in Medical Laboratory Sciences at Birmingham City University in the United Kingdom.

B. Nicholas Harvey has served as our Chief Financial Officer since July 2018, Executive Vice President and Treasurer since October 2018 and Secretary since November 2018. From June 2017 through June 2018, he served as an independent consultant to private and public life science companies. Previously, he served as the Chief Financial Officer of Radius Health Inc., or Radius, from December 2006 to May 2017. Prior to joining Radius, he served as Managing Director of Shiprock Capital, a venture capital firm, from its inception in February 2003 to December 2006 and as a senior advisor to the predecessor entities since March 2002. Before that Mr. Harvey served as Chief Financial Officer of several private, venture-backed life sciences companies, including Transfusion Technologies Corporation and Transcend Therapeutics Inc. He received a Bachelor of Economics degree and a Bachelor of Laws degree with first-class honors from the Australian National University and an M.B.A. from the Harvard Business School.

Peter Hanson, DVM, Ph.D. has served as our Chief Development Operations Officer since 2014 and Executive Vice President since October 2018. He is a Diplomate of the American College of Veterinary Surgeons with more than 20 years of experience in pharmaceutical medicine. Prior to joining us, Dr. Hanson was the head of research and development and medical affairs for Abbott Animal Health Inc. From 1996 to 2012, he worked at Merial Ltd., a global animal health company, serving as the global head, project and portfolio management, the head of pharmaceutical R&D and the executive director, pharmaceutical R&D projects. Dr. Hanson holds a B.A. in biology and a D.V.M. from the University of Minnesota. He also holds a residency certificate, an M.S. and Ph.D. in veterinary science from the University of Wisconsin-Madison.

Kerrie L. Brady has served as our Chief Business Officer and Executive Vice President, Corporate Strategy since 2013. Previously, Ms. Brady served as Chief Operations Officer at Vallinex Inc., a pain therapeutics company, and Arcion Therapeutics Inc., also a pain therapeutics company. Before that, she was the Founder, President and Chief Executive Officer of Traxion Therapeutics, Inc., a biotech company focused on the development of new drugs to treat intractable pain. Ms. Brady holds a Bachelor of Pharmacy from Monash University’s Victorian College of Pharmacy, an M.B.A. from the University of Melbourne and an M.S. in Biopharmaceuticals from the University of New South Wales.

 

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Non-Employee Directors

Sol J. Barer, Ph.D. has served as our chairman and a member of our board of directors since 2013. Since 1987, Dr. Barer has served as managing partner at SJ Barer Consulting, LLC, a consulting firm, and a member at Barer & Son Capital LLC, an investment firm. He is also an advisor to the Israel Biotechnology Fund, an investor in Israeli-based biotech companies. He is also the Founding Chair of the Hackensack Meridian Health Center for Discovery & Innovation. Dr. Barer’s current roles at public companies are chairman and director of Edge Therapeutics, Inc., Teva Pharmaceutical Industries Limited, and Aevi Genomic Medicine, Inc., and lead independent director of ContraFect Corporation. Dr. Barer previously served as chairman and director of InspireMD, Inc. from 2011 to 2017, and as a director of Amicus Therapeutics, Inc. from 2009 to 2017 and Aegerion Pharmaceuticals, Inc. from 2011 to 2016. From 1987 to 2011, Dr. Barer held various leadership positions at Celgene Corporation, a global biopharmaceutical company. He was chairman from January 2011 until June 2011, executive chairman from June 2010 until January 2011, and chairman and Chief Executive Officer from May 2006 until June 2010. He was also President from 1993, and Chief Operating Officer from 1994, in each case until May 2006. Dr. Barer was the founder of the biotechnology group at the Celanese Research Company that was subsequently spun off as Celgene Corporation. Dr. Barer received his Ph.D. in organic and physical chemistry from Rutgers University and his B.S. in chemistry from Brooklyn College of the City University of New York. We believe that Dr. Barer’s significant scientific, executive and board leadership experience in the biopharmaceutical industry qualifies him to serve as a member of our board of directors.

Isaac Blech has served as our Vice Chairman and a member of our board of directors since 2013. Mr. Blech’s current roles at public companies are vice chairman and director of Edge Therapeutics, Inc., Cerocer Inc., and Diffusion Pharmaceuticals, Inc., and director of ContraFect Corporation, SpendSmart Networks, Inc., and Marina Biotech, Inc. He is also vice chairman of numerous private companies, including Alveo Technologies, Aridis Pharmaceuticals, Elucida Oncology Inc., Nacuity Pharmaceuticals, Inc., Sapience Therapeutics, Inc., X4 Pharmaceuticals, Inc. and X-VAX Technology, Inc. Previously, Mr. Blech served on the Board of Directors of Medgenics, Inc. from 2011 to 2017, of lnspireMD, Inc. from 2016 to 2017, and of root9B Holdings, Inc. from 2011 to 2017. Over the past 38 years, Mr. Blech has helped found many biotechnology companies, including Celgene Corporation, ICOS Corporation, Pathogenesis Corporation, Nova Pharmaceutical Corporation and Genetic Systems Corporation. Mr. Blech received his B.A. from Baruch College in 1975. We believe that Mr. Blech’s extensive experience as a founder, director and major investor in numerous biotechnology companies qualifies him to serve as a member of our board of directors.

Daniel N. Mendelson has served as a member of our board of directors since August 2018. Mr. Mendelson is the founder of Avalere Health LLC, a strategic advisory company focused on solving complex healthcare problems, which he founded in 2000 and sold to Inovalon Holdings in 2015. Prior to founding Avalere, Mr. Mendelson served as Associate Director of Health at the White House Office of Management and Budget (OMB) from 1998 to 2000, where he was responsible for Medicare, Medicaid, discretionary budgetary policy, and the implementation of the Balanced Budget Act healthcare provisions during the Clinton Administration. Prior to joining OMB, Mr. Mendelson was Senior Vice President of The Lewin Group and Director of the Medical Technology practice. Mr. Mendelson currently serves on the board of Champions Oncology, Inc., a service provider to pharmaceutical and biotechnology companies, and previously served on the boards of Coventry Healthcare (which was sold to Aetna in 2013), PharMerica Corporation and HMS Holdings Corp. He holds an undergraduate degree in economics and viola performance from Oberlin College, and an M.P.P. from the Kennedy School of Government at Harvard University. We believe that his business experience in healthcare companies and experience in government and business administration education qualify him to serve as a member of our board of directors.

Sara Nayeem, M.D. has served as a member of our board of directors since 2017. Dr. Nayeem joined New Enterprise Associates LLC, a venture capital firm, in 2009 and has served as a partner since 2015. Dr. Nayeem currently serves as a director of several private companies, including Cydan Development Inc., Imara Inc., Complexa Inc. and BioHealth Innovation Inc. Previously, she served on the board of Mersana

 

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Therapeutics, Inc. and Vtesse, Inc. (which was acquired by Sucampo). Prior to joining New Enterprise Associates, Dr. Nayeem was an Associate with Merrill Lynch’s Global Healthcare Group, where she advised biotechnology, pharmaceutical and medical device companies on numerous mergers, acquisitions and financing transactions. Dr. Nayeem received her M.D. and M.B.A. from Yale University, and her B.A. in biology from Harvard University. We believe that Dr. Nayeem’s experience working with biopharmaceutical companies and her scientific expertise qualify her to serve as a member of our board of directors.

Arnold L. Oronsky, Ph.D. has served as a member of our board of directors since 2013. Since 1994, Dr. Oronsky has been a managing director of InterWest Partners, a California based venture firm, where he is now a senior partner. Prior to joining InterWest, Dr. Oronsky was vice president for discovery research at the Lederle Laboratories division of American Cyanamid Company. Dr. Oronsky is a senior lecturer in the Department of Medicine at The Johns Hopkins Medical School. Dr. Oronsky’s current roles at public companies are chairman and director of Dynavax Technologies Corporation, and director of KalVista Pharmaceuticals, Inc. and, Tesaro, Inc. Previously, he served as director of MacroGenics, Inc. from 2000 to 2014 and of Applied Genetic Technologies Corporation from 2003 to 2017. Dr. Oronsky received his Ph.D. in immunology from Columbia University and his B.A. from New York University. We believe that his extensive board experience at biotechnology companies and his scientific expertise qualify him to serve as a member of our board of directors.

Joseph R. Swedish has served as a member of our board of directors since June 2018. Mr. Swedish was President and Chief Executive Officer of Anthem, Inc., a large health insurer, from March 2013 to November 2017 and was Chairman from December 2015 to May 2018. Mr. Swedish currently serves as a senior advisor to the board of directors of Anthem. In addition, his current roles at public companies are director of CDW Corporation, an IT provider, director of International Business Machines Corporation, a technology and services company, and director of Mesoblast Limited, a biotech company. He also serves as director of America’s Health Insurance Plans and Proteus Digital Health, and on the Board of Visitors of Duke University’s Fuqua School of Business and the Duke Margolis External Advisory Board. He is also a co-founder and partner at Concord Health Partners, a private equity firm. Previously, Mr. Swedish served as President and Chief Executive Officer of Trinity Health Corporation from 2004 to 2013 and of Centura Health from 1999 to 2004. In addition, Mr. Swedish served as director of Coventry Health Care, Inc. from 2010 to February 2013, and of the Blue Cross Blue Shield Association, the National Institute for Health Care Management, and the Central Indiana Corporate Partnership, each through November 2017. He also served as chair of the Catholic Health Association and on the board of Loyola University Chicago. Mr. Swedish earned a bachelor’s degree in healthcare administration and management from the University of North Carolina at Charlotte and a master’s degree in the same from Duke University. We believe that his extensive board and leadership experience in the healthcare industry qualifies him to serve as a member of our board of directors.

Shawn Tomasello has served as a member of our board of directors since 2017. Ms. Tomasello was the Chief Commercial Officer of Kite Pharma, Inc. (which was acquired by Gilead Sciences, Inc. in August 2017) from December 2015 to July 2018. She is currently a director of Diplomat Pharmacy, Inc., a specialty pharmacy services provider, Clementia Pharmaceuticals Inc., a biopharmaceutical company, Mesoblast Limited, a biotech company, and UroGen Pharma Ltd., a biopharmaceutical company. She also serves as director of Oxford BioTherapeutics Limited, a private oncology company and Geneos Therapeutics, also a private oncology company. Previously, Ms. Tomasello served as founder and Chief Executive Officer of Shawn Tomasello Consulting LLC from August to December 2015 and as the Chief Commercial Officer of Pharmacyclics LLC (which was acquired by Abbvie, Inc. in 2015) from August 2014 to July 2015. Between April 2005 to August 2014, Ms. Tomasello was employed at Celgene Corporation, initially as the Vice President, Sales and Training, and then as President of the Americas, Hematology and Oncology. Prior to that, Ms. Tomasello held positions at Genentech, Inc., Pfizer Laboratories, Miles Pharmaceuticals and The Proctor & Gamble Company. Ms. Tomasello received her B.S. in marketing from the University of Cincinnati and her M.B.A. from Murray State University. We believe that Ms. Tomasello’s considerable experience in drug commercialization, operation and executive management qualifies her to serve as a member of our board of directors.

 

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Stella Xu, Ph.D. has served as a member of our board of directors since January 2018. Dr. Xu currently serves as director of Tempest Therapeutics, Inc., and previously served as a director of ARMO BioSciences, Inc. prior to its acquisition by Eli Lilly. Since August 2017, Dr. Xu has been a managing director of Quan Capital, a life sciences venture fund with offices in China and the United States. Previously, Dr. Xu was Vice President and site head of Roche Innovation Center Shanghai, and a member of the global management team for Roche’s Immunology, Inflammation & Infectious Diseases Discovery and Translation Area beginning in September 2012. Dr. Xu joined Roche from McKinsey & Company, a consultancy. Dr. Xu received her Ph.D. in immunology from Northwestern University, and her B.S. in biophysics from Peking University. We believe that her extensive, global experience in the development and commercialization of innovative therapies qualifies her to serve as a member of our board of directors.

Board Composition and Election of Directors

Director Independence

Our board of directors currently consists of ten members. Our board of directors has determined that, of our ten directors, Sol J. Barer, Ph.D., Isaac Blech, Daniel N. Mendelson, Sara Nayeem, M.D., Arnold L Oronsky, Ph.D., Joseph R. Swedish, Shawn Tomasello and Stella Xu, Ph.D. do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the rules of The Nasdaq Stock Market LLC, or Nasdaq. There are no family relationships among any of our directors or executive officers.

Classified Board of Directors

In accordance with our restated certificate of incorporation that will go into effect upon the closing of this offering, our board of directors will be divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Effective upon the closing of this offering, our directors will be divided among the three classes as follows:

 

   

the Class I directors will be Sol J. Barer, Ph.D., Isaac Blech, Daniel N. Mendelson and Stella Xu, Ph.D., and their terms will expire at our first annual meeting of stockholders following this offering;

 

   

the Class II directors will be James N. Campbell, M.D., Sara Nayeem, M.D. and Arnold L. Oronsky, Ph.D., and their terms will expire at our second annual meeting of stockholders following this offering; and

 

   

the Class III directors will be Jeffrey B. Kindler, Joseph R. Swedish and Shawn Tomasello, and their terms will expire at the third annual meeting of stockholders following this offering.

Our restated certificate of incorporation that will go into effect upon the closing of this offering will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control of our company. Our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock entitled to vote in the election of directors.

Board Leadership Structure

Our board of directors is currently chaired by Sol J. Barer, Ph.D. Our corporate governance guidelines provide that, if the chairman of the board is a member of management or does not otherwise qualify as

 

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independent, the independent directors of the board may elect a lead director. The lead director’s responsibilities include, but are not limited to: presiding over all meetings of the board of directors at which the chairman is not present, including any executive sessions of the independent directors; approving board meeting schedules and agendas; and acting as the liaison between the independent directors and the chief executive officer and chairman of the board. Our corporate governance guidelines further provide the flexibility for our board of directors to modify our leadership structure in the future as it deems appropriate.

Role of the Board in Risk Oversight

One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure and our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our audit committee also monitors compliance with legal and regulatory requirements. Our nominating and corporate governance committee monitors the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our entire board of directors is regularly informed through committee reports about such risks.

Board Committees

Our board of directors has established three standing committees—audit, compensation and nominating and corporate governance—each of which operates under a charter that has been approved by our board of directors. Upon our listing on The Nasdaq Global Select Market, each committee’s charter will be available under the Corporate Governance section of our website at www.centrexion.com. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.

Audit Committee

The audit committee’s responsibilities include:

 

   

appointing, approving the compensation of, and assessing the independence of our registered public accounting firm;

 

   

overseeing the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm;

 

   

reviewing and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures;

 

   

coordinating our board of directors’ oversight of our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;

 

   

discussing our risk management policies;

 

   

meeting independently with our internal auditing staff, if any, registered public accounting firm and management;

 

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reviewing and approving or ratifying any related person transactions; and

 

   

preparing the audit committee report required by Securities Exchange Commission, or SEC, rules.

The members of our audit committee are Isaac Blech, Arnold L. Oronsky, Ph.D., Joseph R. Swedish and Stella Xu, Ph.D. Mr. Swedish serves as the chairperson of the committee. All members of our audit committee meet the requirements for financial literacy under the applicable listing rules of Nasdaq (the “Nasdaq rules”). Our board of directors has determined that Messrs. Blech and Swedish, and Drs. Oronsky and Xu meet the independence requirements of Rule 10A-3 under the Exchange Act and the applicable Nasdaq rules. Our board of directors has determined that Mr. Swedish is an “audit committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable Nasdaq rules.

Compensation Committee

The compensation committee’s responsibilities include:

 

   

reviewing and approving, or recommending for approval by the board of directors, the compensation of our CEO and our other executive officers;

 

   

overseeing and administering our cash and equity incentive plans;

 

   

reviewing and making recommendations to our board of directors with respect to director compensation;

 

   

reviewing and discussing annually with management our “Compensation Discussion and Analysis,” to the extent required; and

 

   

preparing the annual compensation committee report required by SEC rules, to the extent required.

The members of our compensation committee are Sol J. Barer, Ph.D., Sara M. Nayeem, M.D., Arnold L. Oronsky, Ph.D. and Shawn Tomasello. Dr. Barer serves as the chairperson of the committee. Our board of directors has determined that each of Drs. Barer, Nayeem and Oronsky and Ms. Tomasello is independent under the applicable Nasdaq rules, including the Nasdaq rules specific to membership on the compensation committee, and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee’s responsibilities include:

 

   

identifying individuals qualified to become board members;

 

   

recommending to our board of directors the persons to be nominated for election as directors and to each board committee;

 

   

developing and recommending to our board of directors corporate governance guidelines, and reviewing and recommending to our board of directors proposed changes to our corporate governance guidelines from time to time; and

 

   

overseeing a periodic evaluation of our board of directors.

The members of our nominating and corporate governance committee are Daniel N. Mendelson, Sara Nayeem, M.D., Joseph R. Swedish and Shawn Tomasello. Mr. Mendelson serves as the chairperson of the committee. Our board of directors has determined that each of Messrs. Mendelson and Swedish, Dr. Nayeem and Ms. Tomasello are independent under the applicable Nasdaq rules.

 

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Compensation Committee Interlocks and Insider Participation

No member of our compensation committee is or has been our current or former officer or employee. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as a director or member of our compensation committee during the fiscal year ended December 31, 2017.

Code of Ethics and Code of Conduct

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Upon our listing on The Nasdaq Global Select Market, our code of business conduct and ethics will be available under the Corporate Governance section of our website at www.centrexion.com. In addition, we intend to post on our website all disclosures that are required by law or the Nasdaq rules concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.

 

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EXECUTIVE AND DIRECTOR COMPENSATION

This section discusses the material components of the executive compensation program for our executive officers who are named in the “2017 Summary Compensation Table” below. In 2017, our “named executive officers” and their positions were as follows:

 

   

Jeffrey B. Kindler, Chief Executive Officer;

 

   

Kerrie Brady, Chief Business Officer, Executive Vice President, Corporate Strategy; and

 

   

Peter Hanson, DVM, Ph.D., Chief Development Operations Officer.

This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt following the completion of this offering may differ materially from the currently planned programs summarized in this discussion.

2017 Summary Compensation Table

The following table sets forth information concerning the compensation of our named executive officers for the year ended December 31, 2017.

 

Name and Principal Position

 

Year

   

Salary ($)

   

Option
Awards
($)(1)

   

Non-Equity
Incentive Plan
Compensation
($)(2)

   

All Other
Compensation
($)

   

Total ($)

 

Jeffrey B. Kindler

    2017       351,689       170,447       351,689       357 (3)      874,182  

Chief Executive Officer

           

Kerrie Brady

    2017       333,720       33,481       141,831       51,625 (4)      560,657  

Chief Business Officer

           

Peter Hanson, DVM, Ph.D.

    2017       336,192       33,481       150,000       51,625 (4)      571,298  

Chief Development Operations Officer

           

 

(1)

Amounts reflect the aggregate grant date fair value of stock options granted during 2017 computed in accordance with ASC Topic 718. We provide information regarding the assumptions used to calculate the value of all stock option awards made to named executive officers in Note 10 to the financial statements included in this prospectus.

(2)

Amounts reflect the annual performance bonus earned in 2017 and paid in 2018. The amount disclosed for each named executive officer was paid in the form of stock options granted in 2018 that are fully vested. For additional information, refer to the discussion in the “Narrative to Summary Compensation Table” below under the heading “—Annual Performance-Based Incentive Opportunity.”

(3)

Consists of travel expense reimbursement and a payment to offset any tax liability Mr. Kindler incurs as a result of such expenses.

(4)

Consists of a payment of $50,000 for relocation expenses and $1,625 allowance for cellular telephone service.

NARRATIVE TO SUMMARY COMPENSATION TABLE

Annual Base Salaries

The named executive officers receive a base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of

 

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compensation reflecting the executive’s skill set, experience, role and responsibilities. The 2017 and 2018 annual base salaries for our named executive officers were:

 

Name

  

2017 Annual Base Salary ($)

    

2018 Annual Base Salary ($)

 

Jeffrey B. Kindler

     351,689        362,240  

Kerrie Brady

     333,720        343,732  

Peter Hanson, DVM, Ph.D.

     343,546        346,278  

The annual base salary for each named executive officer became effective on January 1 of the applicable year.

Annual Performance-Based Incentive Opportunity

In addition to base salaries, our named executive officers are eligible to receive annual performance-based incentives which are designed to motivate our executives to achieve corporate goals and to reward our executives for their contributions towards achievement of these goals. The annual performance-based incentive that each named executive officer was eligible to receive in 2017 was generally based on the Company’s achievement of corporate goals and, for Ms. Brady and Dr. Hanson, the named executive officer’s achievement of individual objectives. The corporate goals constituted 70% of the named executive officer’s target bonus opportunity and the individual goals constituted 30% of the named executive officer’s target bonus opportunity, except that Mr. Kindler’s annual performance-based incentive was based entirely on the Company’s achievement of corporate goals. After the end of 2017, the compensation committee reviewed Mr. Kindler’s assessment of corporate and individual performance and, after considering his recommendations, determined the extent to which each goal was achieved.

Mr. Kindler was eligible to receive an annual bonus for 2017 targeted at an amount equal to the greater of 100% of his annual salary and 0.5% of the value of our equity as of the first day of the fiscal year for which the bonus award is made while each of Ms. Brady and Dr. Hanson was eligible to receive an annual bonus for 2017 with a target amount of up to 50% and 40%, respectively, of their annual base salary. However, there is no guaranteed bonus percentage or amount established for the named executive officers and, as a result, the bonus amounts have varied from year to year based on corporate and individual performance. As determined by our compensation committee, the annual bonus may be payable in the form of cash or equity (including stock options) or a combination thereof, and any such equity will not be subject to a vesting schedule. Historically, the compensation committee has typically elected to pay annual bonuses in the form of stock options.

In determining the 2017 annual bonuses for our named executive officers, our compensation committee reviewed Mr. Kindler’s assessment of our performance during 2017 and determined that on an overall basis, the Company had made significant progress and achieved certain key corporate goals, taking into account accomplishments related to clinical, regulatory, chemical, manufacturing and control, financing, intellectual property, business development, public and government relations, and scientific presentation objectives. The compensation committee also reviewed Ms. Brady and Dr. Hanson’s individual performance during 2017, taking into account their efforts with respect to the functional areas that they control. In recognition of this achievement and the efforts of each executive, our compensation committee awarded each of our named executive officers their performance bonus for 2017 in the form of stock options, which were granted in 2018 and were fully vested as of the grant date.

The actual value of the annual bonuses awarded to each named executive officer for 2017 performance are set forth above in the 2017 Summary Compensation Table in the column titled “Non-Equity Incentive Plan Compensation.”

Equity Compensation

We generally offer stock options to our employees, including our named executive officers, as the long-term incentive component of our compensation program. Our stock options generally allow employees to

 

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purchase shares of our common stock at a price equal to the fair market value of our common stock on the date of grant, as determined by the board of directors. Our stock options generally vest as to 25% of the underlying shares on the first anniversary of the date of grant and in equal quarterly installments over the following three years, subject to the holder’s continued employment with us. From time to time, our board of directors may also construct alternate vesting schedules as it determines are appropriate to motivate particular employees. Historically, our stock options have been intended to qualify as “incentive stock options” to the extent permitted under the Internal Revenue Code.

The following table sets forth the stock options granted to our named executive officers during 2017 as the long-term incentive component of our compensation program. These options were granted under our 2013 Equity Incentive Plan, which we refer to as the Prior Plan, with exercise prices equal to the fair market value of our common stock on the date of grant, as determined by the board of directors, and subject to our standard vesting schedule described above.

 

Named Executive Officer

  

2017 Stock Options Granted

 

Jeffrey B. Kindler

     44,835  

Kerrie Brady

     8,807  

Peter Hanson, DVM, Ph.D.

     8,807  

In addition to the stock options set forth above, the board of directors awarded each of our named executive officers eligible for performance bonuses a portion of their target bonus opportunity for 2016 in the form of stock options, which were fully vested as of the grant date. These awards were granted in 2017 and consisted of 65,980 stock options for Mr. Kindler, 30,879 stock options for Ms. Brady and 26,911 stock options for Dr. Hanson.

We intend to adopt the 2018 Plan in order to facilitate the grant of cash and equity incentives to directors, employees (including our named executive officers) and consultants of our company and certain of its affiliates and to enable our company and certain of its affiliates to obtain and retain services of these individuals, which is essential to our long-term success. We expect that the 2018 Plan will be effective on the date on which it is adopted by our board of directors, subject to approval of such plan by our stockholders. Following the effective date of the 2018 Plan, we will not make any further grants under the Prior Plan. However, the Prior Plan will continue to govern the terms and conditions of the outstanding awards granted under it. For additional information about the 2018 Plan, please see the section titled “Incentive Compensation Plans” below.

Other Elements of Compensation: Employee Benefits and Perquisites

Health/Welfare Plans. During their employment and in accordance with their respective employment arrangements, our named executive officers are eligible to participate in our employee benefit plans and programs, including medical and dental benefits, to the same extent as our other full-time employees, subject to the terms and eligibility requirements of those plans.

Other Expenses: We have agreed to provide Mr. Kindler with an office in Fairfield County, Connecticut and to make other arrangements to reimburse him for use of an office in such area. We have also agreed to reimburse Mr. Kindler for travel from Connecticut to our headquarters in Boston, Massachusetts such that he will have no after-tax cost of such travel. In 2017, we also provided each of Ms. Brady and Dr. Hanson a payment of $50,000 for relocation expenses and an allowance of $1,625 for cellular telephone service.

 

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Outstanding Equity Awards at 2017 Fiscal Year-End

The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2017.

 

          

Option Awards

 

Name

  

Grant
Date

   

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

    

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

    

Option
Exercise
Price
($)

    

Option
Expiration
Date

 

Jeffrey B. Kindler

     7/23/14 (1)      39,031        9,007      $ 2.03        7/23/24  
     2/18/15 (2)      94,874        —        $ 3.03        2/18/25  
     2/18/15 (1)      27,411        12,460      $ 3.03        2/18/25  
     2/16/16 (2)      58,844        —        $ 4.02        2/16/26  
     2/16/16 (1)      15,727        20,221      $ 4.02        2/16/26  
     3/8/17 (2)      65,980        —        $ 5.54        3/8/27  
     3/8/17 (1)      —          44,835      $ 5.54        3/8/27  

Kerrie Brady

     11/20/13 (3)      120,096        —        $ 2.03        11/20/23  
     7/23/14 (1)      9,757        2,252      $ 2.03        7/23/24  
     2/18/15 (2)      38,922        —        $ 3.03        2/18/25  
     2/18/15 (1)      11,008        5,004      $ 3.03        2/18/25  
     2/16/16 (2)      34,278        —        $ 4.02        2/16/26  
     2/16/16 (1)      3,600        4,630      $ 4.02        2/16/26  
     3/8/17 (2)      30,879        —        $ 5.54        3/8/27  
     3/8/17 (1)      —          8,807      $ 5.54        3/8/27  

Peter Hanson, DVM, Ph.D.

     7/23/14 (3)      96,076        —        $ 2.03        7/23/24  
     2/18/15 (2)      24,569        —        $ 3.03        2/18/25  
     2/18/15 (1)      11,008        5,004      $ 3.03        2/18/25  
     2/16/16 (2)      27,375        —        $ 4.02        2/16/26  
     2/16/16 (1)      3,600        4,630      $ 4.02        2/16/26  
     3/8/17 (2)      26,911        —        $ 5.54        3/8/27  
     3/8/17 (1)      —          8,807      $ 5.54        3/8/27  

 

(1)

Option to purchase shares of our common stock is eligible to vest as to 25% of such shares on the first anniversary of the grant date and as to the remaining shares in equal quarterly installments over the following three years.

(2)

Option to purchase shares of our common stock were fully vested on date of grant.

(3)

Option to purchase shares of our common stock is eligible to vest in 36 equal monthly installments over the three years following the grant date.

Employment Arrangements

We have entered into employment agreements or offer letters with Mr. Kindler, Ms. Brady and Dr. Hanson. The material terms and conditions of these agreements are described below.

Mr. Kindler

We entered into an employment agreement with Mr. Kindler, dated October 8, 2013, pursuant to which we employ Mr. Kindler as our Chief Executive Officer. The employment agreement also provides for Mr. Kindler to serve as a member of our board of directors for as long as he is employed as our Chief Executive Officer. The employment agreement had an initial term of three years, and automatically renews for successive one-year terms unless Mr. Kindler or the Company provides sixty days’ prior written notice to the other party that the agreement shall not be so extended.

 

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The employment agreement entitles Mr. Kindler to an annual bonus targeted at an amount equal to the greater of one hundred percent (100%) of Mr. Kindler’s base salary and one half of one percent (0.5%) of the value of our equity as of the first day of the fiscal year for which the bonus award is made. The actual amount of the bonus will be determined by the board of directors based on its assessment of the performance of Mr. Kindler and that of the Company against established goals determined and agreed to by our board of directors and Mr. Kindler. Mr. Kindler’s current base salary is listed in the table above in the “Narrative to Summary Compensation Table” under the heading “—Annual Base Salaries.” Mr. Kindler is eligible to receive reimbursement for use of an office by him in Fairfield County, Connecticut, and for travel from such area to our headquarters in Boston, Massachusetts and, in all events, a payment to offset any tax liability Mr. Kindler incurs as a result of any reimbursed travel expenses. The employment agreement further provides that Mr. Kindler will accrue up to four weeks of vacation per year.

In the event the Company terminates Mr. Kindler’s employment without “cause” (as such term is defined in his employment agreement) or he resigns for “good reason” (as such term is defined in his employment agreement), subject to his execution of a general release of claims in our favor, Mr. Kindler is entitled to the following termination payments: (a) continuation of base salary for twelve months, which we refer to as the Salary Continuation Period; (b) a monthly payment equal to the monthly cost of continuation of group health plan benefits, less the amount of the monthly premium being paid as of the Date of Termination, until the earlier of: (i) the end of the Salary Continuation Period; or (ii) the date Mr. Kindler becomes eligible for health insurance through another employer; and (c) a pro rata bonus for the fiscal year in which his termination occurs based on the bonus which would have been earned for such year.

In the event the employment of Mr. Kindler is terminated for any other reason, he is entitled to receive all accrued and unpaid base salary and vacation, and, if such termination of employment is the result of death or disability, a pro-rated target bonus for the calendar year in which such termination of employment occurs.

Mr. Kindler has also agreed to refrain from disclosing our confidential information during or at any time following his employment with us and from competing with us or soliciting our employees or customers during his employment and for twelve months following termination of his employment.

Additionally, in 2018, we agreed to forgive a loan that we had previously made to Mr. Kindler. Mr. Kindler consequently became indebted to us for an amount equal to $189,918.99, which relates to tax withholding amounts due in connection with the loan forgiveness and which was repaid in September 2018.

Ms. Brady and Dr. Hanson

We entered into offer letter agreements with Ms. Brady, dated November 7, 2013, and Dr. Hanson, dated May 30, 2014. The employment of Ms. Brady and Dr. Hanson is “at will” and the agreements endure until terminated by either party. Under the terms of their agreements, Ms. Brady and Dr. Hanson are eligible to participate in any annual bonus programs as may be established from time to time by our board of directors. Under such bonus programs, for 2017, Ms. Brady was eligible to receive a target annual bonus of 50% of her annual base salary and Dr. Hanson was eligible to receive a target annual bonus of up to 40% of his annual base salary. The current base salary of Ms. Brady and Dr. Hanson are listed in the table above in the “Narrative to Summary Compensation Table” under the heading “—Annual Base Salaries.” Under their respective offer letter agreements, we agreed to grant each of Ms. Brady and Dr. Hanson initial awards of incentive stock options covering 750,000 and 600,000 shares of our common stock, respectively. Ms. Brady and Dr. Hanson have each agreed to refrain from disclosing our confidential information during or at any time following their employment with us and from competing with us or soliciting our employees or customers during their employment and for twelve months following termination of their employment.

Executive Compensation Arrangements Effective on Closing of this Offering

In November 2018, in anticipation and subject to the consummation of this offering, our board of directors approved certain changes to our named executive officers’ compensation arrangements. These included

 

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adjusting annual base salaries and target bonus opportunities and granting equity incentive awards, each as described in more detail below.

Annual Base Salaries

Our board of directors approved the following increases to the annual base salaries for our named executive officers: $600,000 for Mr. Kindler, $344,000 for Ms. Brady and $380,000 for Dr. Hanson. The increases to annual base salaries will become effective upon the consummation of this offering and Mr. Kindler’s employment agreement will be amended to document his new annual base salary.

Target Bonuses

Our board of directors approved target bonus amounts for our named executive officers, setting Mr. Kindler’s target bonus at 65% of his base salary, and setting the target bonus for each of Ms. Brady and Dr. Hanson at 50% of their respective salaries. The target bonuses will become effective upon the consummation of this offering and Mr. Kindler’s employment agreement will be amended to document his new annual target bonus amount.

Equity Incentive Awards

Effective on the date that the registration statement of which this prospectus forms a part becomes effective, our board of directors granted stock options under the 2018 Plan to our named executive officers in the following amounts: Mr. Kindler: 799,200 shares and Dr. Hanson: 66,600 shares. The stock options will have a per share exercise price equal to the initial public offering price of our common stock and will vest as to 25% of the underlying shares on the first anniversary of the date of grant and in equal monthly installments over the following three years, subject to the holder’s continued employment with us.

Director Compensation

Our officers, employees, consultants or advisors who also serve as directors do not receive additional compensation for their service as directors. Our board of directors has historically awarded directors who are not our officers, employees, consultants or advisors, who we refer to as our non-employee directors, a grant of equity awards under the Prior Plan as follows:

 

   

an option to purchase 5,604 shares of our common stock at an exercise price per share equal to the fair market value of our common stock on the date of grant, as determined by the board of directors, on the date of initial election or appointment to the board of directors; and

 

   

an annual option grant to purchase 5,604 shares of our common stock at an exercise price per share equal to the fair market value of our common stock on the date of grant, as determined by the board of directors.

2017 Director Compensation Table

 

Name

  

Option
Awards
($)(1)

    

Total ($)

 

Sol J. Barer, Ph.D.

     21,306        21,306  

Isaac Blech

     21,306        21,306  

Arnold L. Oronsky, Ph.D.

     21,306        21,306  

Shengda Zan(2)

     21,306        21,306  

Shawn Tomasello(3)

     21,739        21,739  

 

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(1)

Amounts reflect the aggregate grant date fair value of stock options granted during 2017 computed in accordance with ASC Topic 718. We provide information regarding the assumptions used to calculate the value of all stock option awards made to our directors in Note 10 to the financial statements included in this prospectus. The stock options were granted with an exercise price equal to the fair market value of our common stock on the date of grant, as determined by our board of directors, and vest as to 25% of the underlying shares on the first anniversary of the date of grant and in equal monthly installments over the following 36 months.

(2)

Mr. Zan resigned from the board of directors effective July 27, 2017.

(3)

Ms. Tomasello was appointed to the board of directors on June 22, 2017.

The table below shows the aggregate numbers of option awards (exercisable and unexercisable) held as of December 31, 2017 by each non-employee director who was serving as of December 31, 2017.

 

Name

  

Options Outstanding at
Fiscal Year End

 

Sol J. Barer, Ph.D.

     16,812  

Isaac Blech

     16,812  

Arnold L. Oronsky, Ph.D.

     16,812  

Shawn Tomasello

     5,604  

Recent Developments Regarding Director Compensation

In November 2018, in anticipation and subject to the consummation of this offering, our board of directors approved the following grants of options to purchase shares of our common stock for our non-employee directors, effective on the date that the registration statement of which this prospectus forms a part becomes effective: Sol J. Barer, Ph.D., 37,500 shares; Isaac Blech, 37,500 shares; Daniel N. Mendelson, 16,000 shares; Sara Nayeem, M.D., 37,500 shares; Arnold L. Oronsky, Ph.D., 37,500 shares; Joseph R. Swedish, 16,000 shares; Shawn Tomasello, 37,500 shares; and Stella Xu, 37,500 shares. The options will have an exercise price equal to the initial public offering price of our common stock and will vest, subject to the holder’s continued service to us, in a single installment on the first anniversary of the effective date of grant, provided that the option will vest in full upon the occurrence of a change in control.

In addition, effective on the effectiveness of the registration statement of which this prospectus forms a part, we adopted and, prior to commencing this offering, our stockholders approved a compensation program for our non-employee directors under which each non-employee director will receive the following amounts for their services on our board of directors:

 

   

an option to purchase 20,000 shares of our common stock upon the director’s initial election or appointment to our board of directors that occurs after our initial public offering;

 

   

if the director has served on our board of directors for at least six months as of the date of an annual meeting of stockholders and will continue to serve as a director immediately following such meeting, an option to purchase 10,000 shares of our common stock on the date of the annual meeting;

 

   

an annual director fee of $40,000; and

 

   

if the director serves on a committee of our board of directors, an additional annual fee as follows:

 

   

chairman of the board, $35,000;

 

   

chairman of the audit committee, $15,000;

 

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audit committee member other than the chairman, $7,500;

 

   

chairman of the compensation committee, $12,000;

 

   

compensation committee member other than the chairman, $6,000;

 

   

chairman of the nominating and corporate governance committee, $8,000; and

 

   

nominating and corporate governance committee member other than the chairman, $4,000.

Director fees under the program will be payable in arrears in four equal quarterly installments not later than the fifteenth day following the final day of each calendar quarter, provided that the amount of each payment will be prorated for any portion of a quarter that a director is not serving on our board and no fee will be payable in respect of any period prior to the effective date of the registration statement of which this prospectus is a part. Additionally, beginning with annual retainers earned in 2019, each director may elect to receive stock options to purchase shares of our common stock in lieu of all (or a portion of) the annual retainers, which we refer to as elective options. The number of elective options will be determined by dividing the annual retainer (or portion thereof) subject to the election by the elective option’s per share fair value of the option determined as of the option’s date of grant using the Black-Scholes option pricing model that we most recently used in preparing our (audited or unaudited) consolidated financial statements that have been filed with the Securities and Exchange Commission.

Stock options granted to our non-employee directors under the program will have an exercise price equal to the fair market value of our common stock on the date of grant and will expire not later than ten years after the date of grant. The stock options granted upon a director’s initial election or appointment will vest in three equal installments on each of the first three anniversaries of the date of grant. The stock options granted annually to directors will vest in a single installment on the earlier of the day before the next annual meeting or the first anniversary of the date of grant. Elective options will vest and become exercisable as to 25% on each of March 31, June 30, September 30 and December 31 of the year to which the elective option relates, provided that if a non-employee director’s service terminates during a calendar quarter, the elective option will become vested as to the portion of the option that would have otherwise vested on the next vesting date, prorated based on the number of days served in such calendar quarter. In addition, all unvested stock options will vest in full upon the occurrence of a change in control.

Incentive Compensation Plans

The following summarizes the material terms of 2018 Plan and the 2018 ESPP, which we intend to adopt in connection with this offering and which we expect will be the long-term incentive compensation plans in which our directors and named executive officers are eligible to participate following the consummation of this offering, and the Prior Plan, under which we have previously made periodic grants of equity and equity-based awards to our directors and named executive officers.

2018 Incentive Award Plan

Our board of directors adopted and our stockholders approved, effective the day prior to the first public trading date of our common stock, the 2018 Plan, under which we may grant cash and equity-based incentive awards to eligible service providers in order to attract, retain and motivate the persons who make important contributions to our company. The material terms of the 2018 Plan are summarized below.

Eligibility and Administration

Our employees, consultants and directors, and employees and consultants of our subsidiaries, will be eligible to receive awards under the 2018 Plan. The 2018 Plan will be administered by our board of directors,

 

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which may delegate its duties and responsibilities to one or more committees of our directors and/or officers (referred to collectively as the plan administrator below), subject to the limitations imposed under the 2018 Plan, Section 16 of the Exchange Act, stock exchange rules and other applicable laws. The plan administrator will have the authority to take all actions and make all determinations under the 2018 Plan, to interpret the 2018 Plan and award agreements and to adopt, amend and repeal rules for the administration of the 2018 Plan as it deems advisable. The plan administrator will also have the authority to grant awards, determine which eligible service providers receive awards and set the terms and conditions of all awards under the 2018 Plan, including any vesting and vesting acceleration provisions, subject to the conditions and limitations in the 2018 Plan.

Shares Available for Awards

An aggregate of 2,128,294 shares of our common stock will initially be available for issuance under the 2018 Plan. The number of shares initially available for issuance will be increased by an annual increase on January 1 of each calendar year beginning in 2019 and ending in and including 2028, equal to the lesser of (A) 4% of the shares of common stock outstanding on the final day of the immediately preceding calendar year and (B) a smaller number of shares determined by our board of directors. No more than 10,000,000 shares of common stock may be issued under the 2018 Plan upon the exercise of incentive stock options. Shares issued under the 2018 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares.

If an award under the 2018 Plan or the Prior Plan, expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, any unused shares subject to the award will, as applicable, become or again be available for new grants under the 2018 Plan. Awards granted under the 2018 Plan in substitution for any options or other stock or stock-based awards granted by an entity before the entity’s merger or consolidation with us or our acquisition of the entity’s property or stock will not reduce the shares available for grant under the 2018 Plan, but may count against the maximum number of shares that may be issued upon the exercise of incentive stock options, or ISOs.

Awards

The 2018 Plan provides for the grant of stock options, including ISOs, and nonqualified stock options, or NSOs, stock appreciation rights, or SARs, restricted stock, dividend equivalents, restricted stock units, or RSUs, and other stock or cash based awards. Certain awards under the 2018 Plan may constitute or provide for payment of “nonqualified deferred compensation” under Section 409A of the Code. All awards under the 2018 Plan will be set forth in award agreements, which will detail the terms and conditions of awards, including any applicable vesting and payment terms and post-termination exercise limitations. A brief description of each award type follows.

 

   

Stock Options and SARs. Stock options provide for the purchase of shares of our common stock in the future at an exercise price set on the grant date. ISOs, by contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are satisfied. SARs entitle their holder, upon exercise, to receive from us an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The plan administrator will determine the number of shares covered by each option and SAR, the exercise price of each option and SAR and the conditions and limitations applicable to the exercise of each option and SAR. The exercise price of a stock option or SAR will not be less than 100% of the fair market value of the underlying share on the grant date (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction. The term of a stock option or SAR may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders).

 

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Restricted Stock and RSUs. Restricted stock is an award of nontransferable shares of our common stock that remain forfeitable unless and until specified conditions are met and which may be subject to a purchase price. RSUs are contractual promises to deliver shares of our common stock in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of our common stock prior to the delivery of the underlying shares. The plan administrator may provide that the delivery of the shares underlying RSUs will be deferred on a mandatory basis or at the election of the participant. The terms and conditions applicable to restricted stock and RSUs will be determined by the plan administrator, subject to the conditions and limitations contained in the 2018 Plan.

 

   

Other Stock or Cash Based Awards. Other stock or cash based awards are awards of cash, fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock or other property. Other stock or cash based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of compensation to which a participant is otherwise entitled. The plan administrator will determine the terms and conditions of other stock or cash based awards, which may include any purchase price, performance goal, transfer restrictions and vesting conditions.

Performance Criteria

The plan administrator may select performance criteria for an award to establish performance goals for a performance period. Performance criteria under the 2018 Plan may include, but are not limited to, the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to the company’s performance or the performance of a subsidiary, division, business segment or business unit of the company or a subsidiary, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies. When determining performance goals, the plan administrator may provide for exclusion of the impact of an event or occurrence which the plan administrator determines should appropriately be excluded, including, without limitation, non-recurring charges or events, acquisitions or divestitures, changes in the corporate or capital structure, events unrelated to the business or outside of the control of management, foreign exchange considerations, and legal, regulatory, tax or accounting changes.

 

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Certain Transactions

In connection with certain corporate transactions and events affecting our common stock, including a change in control, or change in any applicable laws or accounting principles, the plan administrator has broad discretion to take action under the 2018 Plan to prevent the dilution or enlargement of intended benefits, facilitate the transaction or event or give effect to the change in applicable laws or accounting principles. This includes canceling awards for cash or property, accelerating the vesting of awards, providing for the assumption or substitution of awards by a successor entity, adjusting the number and type of shares subject to outstanding awards and/or with respect to which awards may be granted under the 2018 Plan and replacing or terminating awards under the 2018 Plan. In addition, in the event of certain non-reciprocal transactions with our stockholders, the plan administrator will make equitable adjustments to awards outstanding under the 2018 Plan as it deems appropriate to reflect the transaction.

Provisions of the 2018 Plan Relating to Director Compensation.

The 2018 Plan provides that the plan administrator may establish compensation for non-employee directors from time to time subject to the 2018 Plan’s limitations. Prior to commencing this offering, our stockholders approved a compensation program for our non-employee directors, which is described above under the heading “Director Compensation.” Our board of directors or its authorized committee may modify the non-employee director compensation program from time to time in the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation or other compensation and the grant date fair value of any equity awards granted under the 2018 Plan as compensation for services as a non-employee director during any fiscal year may not exceed $1,100,000 in the fiscal year of the non-employee director’s initial service or the fiscal year in which this offering occurs, and $750,000 in any other fiscal year. The plan administrator may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the plan administrator may determine in its discretion, subject to the limitations in the 2018 Plan.

Plan Amendment and Termination

Our board of directors may amend or terminate the 2018 Plan at any time; however, no amendment, other than an amendment that increases the number of shares available under the 2018 Plan, may materially and adversely affect an award outstanding under the 2018 Plan without the consent of the affected participant and stockholder approval will be obtained for any amendment to the extent necessary to comply with applicable laws. Further, the plan administrator cannot, without the approval of our stockholders, amend any outstanding stock option or SAR to reduce its price per share, other than in the context of corporate transactions or equity restructurings, as described above. The 2018 Plan will remain in effect until the tenth anniversary of its effective date, unless earlier terminated by our board of directors. No awards may be granted under the 2018 Plan after its termination.

Foreign Participants, Claw-Back Provisions, Transferability and Participant Payments

The plan administrator may modify awards granted to participants who are foreign nationals or employed outside the United States or establish subplans or procedures to address differences in laws, rules, regulations or customs of such foreign jurisdictions. All awards will be subject to any company claw-back policy as set forth in such claw-back policy or the applicable award agreement. Except as the plan administrator may determine or provide in an award agreement, awards under the 2018 Plan are generally non-transferrable, except by will or the laws of descent and distribution, or, subject to the plan administrator’s consent, pursuant to a domestic relations order, and are generally exercisable only by the participant. With regard to tax withholding obligations arising in connection with awards under the 2018 Plan and exercise price obligations arising in connection with the exercise of stock options under the 2018 Plan, the plan administrator may, in its discretion, accept cash, wire transfer or check, shares of our common stock that meet specified conditions, a promissory

 

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note, a “market sell order,” such other consideration as the plan administrator deems suitable or any combination of the foregoing.

2018 Employee Stock Purchase Plan

Our board of directors adopted and our stockholders approved, effective the day prior to the first public trading date of our common stock, the 2018 ESPP, the material terms of which are summarized below.

Shares Available for Awards; Administration

A total of 266,000 shares of our common stock will initially be reserved for issuance under the 2018 ESPP. In addition, the number of shares available for issuance under the 2018 ESPP will be annually increased on January 1 of each calendar year beginning in 2019 and ending in and including 2028, by an amount equal to the lesser of (A) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of shares as is determined by our board of directors, provided that no more than 3,697,572 shares of our common stock may be issued under the 2018 ESPP. Our board of directors or a committee of our board of directors will administer and will have authority to interpret the terms of the 2018 ESPP and determine eligibility of participants. We expect that the compensation committee will be the initial administrator of the 2018 ESPP.

Eligibility

All of our employees are eligible to participate in the 2018 ESPP. However, an employee may not be granted rights to purchase stock under our 2018 ESPP if the employee, immediately after the grant, would own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of our stock.

Grant of Rights

The 2018 ESPP is intended to qualify under Section 423 of the Code and stock will be offered under the 2018 ESPP during offering periods. The length of the offering periods under the 2018 ESPP will be determined by the plan administrator and may be up to twenty-seven months long. Employee payroll deductions will be used to purchase shares on each purchase date during an offering period. The purchase dates for each offering period will be the final trading day in the offering period. Offering periods under the 2018 ESPP will commence when determined by the plan administrator. The plan administrator may, in its discretion, modify the terms of future offering periods.

The 2018 ESPP permits participants to purchase common stock through payroll deductions of up to a specified percentage of their eligible compensation. The plan administrator will establish a maximum number of shares that may be purchased by a participant during any offering period. In addition, no employee will be permitted to accrue the right to purchase stock under the 2018 ESPP at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of our common stock as of the first day of the offering period).

On the first trading day of each offering period, each participant will automatically be granted an option to purchase shares of our common stock. The option will expire at the end of the applicable offering period, and will be exercised at that time to the extent of the payroll deductions accumulated during the offering period. The purchase price of the shares, in the absence of a contrary designation, will be 85% of the lower of the fair market value of our common stock on the first trading day of the offering period or on the purchase date. Participants may voluntarily end their participation in the 2018 ESPP at any time during a specified period prior to the end of the applicable offering period, and will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock. Participation ends automatically upon a participant’s termination of employment.

 

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A participant may not transfer rights granted under the 2018 ESPP other than by will or the laws of descent and distribution, and are generally exercisable only by the participant.

Certain Transactions

In the event of certain non-reciprocal transactions or events affecting our common stock, the plan administrator will make equitable adjustments to the 2018 ESPP and outstanding rights. In the event of certain unusual or non-recurring events or transactions, including a change in control, the plan administrator may provide for (1) either the replacement of outstanding rights with other rights or property or termination of outstanding rights in exchange for cash, (2) the assumption or substitution of outstanding rights by the successor or survivor corporation or parent or subsidiary thereof, if any, (3) the adjustment in the number and type of shares of stock subject to outstanding rights, (4) the use of participants’ accumulated payroll deductions to purchase stock on a new purchase date prior to the next scheduled purchase date and termination of any rights under ongoing offering periods or (5) the termination of all outstanding rights.

Plan Amendment

The plan administrator may amend, suspend or terminate the 2018 ESPP at any time. However, stockholder approval will be obtained for any amendment that increases the aggregate number or changes the type of shares that may be sold pursuant to rights under the 2018 ESPP, changes the corporations or classes of corporations whose employees are eligible to participate in the 2018 ESPP or changes the 2018 ESPP in any manner that would cause the 2018 ESPP to no longer be an employee stock purchase plan within the meaning of Section 423(b) of the Code.

2013 Equity Incentive Plan

Our board of directors and stockholders have approved our Prior Plan, under which we may grant stock options and other stock-based awards to employees, directors and consultants of our company or its affiliates. We have reserved a total of 2,305,844 shares of our common stock for issuance under the Prior Plan.

Following the effectiveness of the 2018 Plan, we will not make any further grants under the Prior Plan. However, the Prior Plan will continue to govern the terms and conditions of the outstanding awards granted under it. Shares of our common stock subject to awards granted under the Prior Plan that are forfeited, lapse unexercised or are settled in cash and which following the effective date of the 2018 Plan are not issued under the Prior Plan will be available for issuance under the 2018 Plan.

Eligibility and Administration

Our employees, consultants and directors are eligible to receive awards under the Prior Plan. Our compensation committee will administer the Prior Plan unless our board of directors assumes authority for administration. Subject to the express terms and conditions of the Prior Plan, the plan administrator has the authority to make all determinations and interpretations under the plan, prescribe all forms for use with the plan and adopt, alter and/or rescind rules, guidance and practices for the administration of the Prior Plan. The plan administrator also sets the terms and conditions of all awards under the plan, including any vesting and vesting acceleration conditions.

Awards

The Prior Plan provides for the grant of stock options (including NSOs and ISOs), restricted stock, RSUs, and other equity-based awards. As of the date of this prospectus, only awards of stock options are outstanding under the Prior Plan.

 

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Certain Transactions

The plan administrator has broad discretion to adjust the provisions of the Prior Plan and the terms and conditions of existing and future awards, including with respect to aggregate number and kind of shares subject to the Prior Plan and awards granted pursuant to the Prior Plan and the purchase or exercise price of awards granted pursuant to the Prior Plan, to prevent substantial dilution or enlargement of the rights of participants under the Prior Plan in the event of certain transactions and events affecting our common stock, such as stock dividends, stock splits, mergers, consolidations and other corporate transactions. The plan administrator may also provide for the acceleration, cash-out, termination, assumption, substitution or conversion of awards in the event of a change in control, provided that upon the occurrence of certain acquisitions, participants may be entitled to receive twenty days to exercise outstanding vested awards prior to termination.

Amendment and Termination

Our board of directors or compensation committee (to the extent permitted by law) may terminate, amend or modify the Prior Plan at any time and from time to time, provided that if the compensation committee determines that the rights of a participant with respect to awards granted prior to such amendment, suspension or termination may be adversely affected, the consent of such participant will be required. Furthermore, we must generally obtain stockholder approval to increase the number of shares available under the Prior Plan (other than in connection with certain corporate events, as described above) or to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule).

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following includes a summary of transactions since January 1, 2015 to which we have been a party in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive and Director Compensation.” We also describe below certain other transactions with our directors, executive officers and stockholders.

Formation and Executive Promissory Notes

On October 8, 2013, Jeffrey B. Kindler, our Chief Executive Officer and a member of our board of directors, acquired 320,256 shares of Common Stock for the purchase price of $1.36 per share. On October 7, 2013, James N. Campbell, M.D., our President and Chief Scientific Officer and one of our directors, acquired 120,000 shares of common stock for the purchase price of $1.36 per share. Mr. Kindler and Dr. Campbell paid for their respective shares of common stock by delivering cash payment to us in an amount equal to the aggregate par value of the shares, and the remainder paid by delivering to us 50% recourse promissory notes, or the Executive Notes, with a principal amount equal to the aggregate purchase price less the aggregate par value of the common stock purchased from us. The Executive Notes accrued interest at a rate of 0.32% per annum and matured on October 8, 2016, and were secured by the respective shares of common stock purchased by Mr. Kindler and Dr. Campbell with the proceeds of the Executive Notes. On April 12, 2018, our board of directors forgave all indebtedness and released all collateral in respect of the Executive Notes.

Preferred Stock Financings and Convertible Notes Financings

2019 Notes. From March 1, 2016 to June 15, 2016, we issued convertible promissory notes in the aggregate principal amount of $30.0 million due 2019, or the 2019 notes. The 2019 notes accrued at an interest rate of 5% per annum. On December 30, 2016, we completed the Series C preferred stock financing described below. At that time, all 2019 notes and the then accrued interest totaling $1,039,835 were converted into 17,244,322 shares of Series C preferred stock. We issued to 2019 note holders and, in compensation for certain services, to Maxim Partners LLC, warrants to purchase an aggregate of 3,068,263 shares of Series C preferred stock. Certain of our officers and/or directors, including Sol J. Barer, Ph.D., Isaac Blech, James N. Campbell, M.D., Jeffrey B. Kindler and Arnold L. Oronsky, Ph.D., participated in the 2019 notes financing either personally or through affiliated trusts or funds.

Series C Preferred Stock Financing. On December 30, 2016, we issued and sold to investors in a private placement 26,446,984 shares of our Series C preferred stock at a price per share of $1.80, for aggregate consideration of approximately $47.6 million, consisting of $16.6 million in cash proceeds plus the conversion of our promissory notes in the aggregate amount of approximately $31.0 million. On January 6, 2017, we issued and sold an additional 111,334 shares of our Series C preferred stock for aggregate consideration of approximately $0.2 million. Certain of our officers and/or directors, including Sol J. Barer, Ph.D., Isaac Blech, James N. Campbell, M.D., Jeffrey B. Kindler and Arnold L. Oronsky, Ph.D., participated in the Series C preferred stock financing either personally or through affiliated trusts or funds.

2018 Notes. From April 28, 2017 to October 10, 2017, we issued convertible promissory notes in the aggregate principal amount of $9.2 million due 2018, or the 2018 notes. The 2018 notes accrued at an interest rate of 10% per annum. On December 18, 2017, we completed the Series D preferred stock financing described below. At that time, all 2018 notes and the then accrued interest totaling $406,306 were converted into 5,328,476 shares of Series D preferred stock. We issued to 2018 note holders warrants to purchase an aggregate of 831,120 shares of Series D preferred stock. In addition, in compensation for certain services, we issued to Brookline Capital Markets a warrant to purchase 18,905 shares of common stock. Certain of our officers and/or directors,

 

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including Sol J. Barer, Ph.D., James N. Campbell, M.D., Jeffrey B. Kindler, Arnold L. Oronsky, Ph.D., Randall Stevens, M.D. and Shawn Tomasello, participated in the 2017 notes financing either personally or through affiliated trusts or funds.

Series D Preferred Stock Financing. On December 18, 2017, we issued and sold to investors in a private placement 36,717,364 shares of our Series D preferred stock at a price per share of $1.80, for aggregate consideration of approximately $66.1 million, consisting of $56.5 million in cash proceeds plus the conversion of our promissory notes in the aggregate amount of approximately $9.6 million. On December 20, 2017, we issued and sold an additional 3,888,885 shares of our Series D preferred stock for aggregate consideration of approximately $7.0 million. Certain of our officers and/or directors, including Sol J. Barer, Ph.D., James N. Campbell, M.D., Jeffrey B. Kindler, Sara Nayeem, M.D., Arnold L. Oronsky, Ph.D., Randall Stevens, M.D., Shawn Tomasello and Stella Xu, Ph.D., participated in the Series D preferred stock financing either personally or through affiliated trusts or funds.

The following table sets forth the aggregate number of shares of our capital stock acquired by beneficial owners of more than 5% of our capital stock and certain officers and directors in the financing transactions described above. Each share of our Series C preferred stock identified in the following table will convert into one share of common stock immediately prior to the closing of this offering. Each share of our Series D preferred stock identified in the following table will convert into one share of common stock immediately prior to the closing of this offering.

 

Participants(1)

 

Series C
Preferred
Stock

   

Warrants to
Purchase
Shares of
Series C
Preferred
Stock

   

Series D
Preferred
Stock

   

Warrants to
Purchase
Shares of
Series D
Preferred
Stock

 

5% or Greater Stockholders

 

Entities Affiliated with New Enterprise Associates(2)

    —         —         13,888,889       —    

Entities Affiliated with InterWest Partners LLC(3)

    1,731,734       171,428       4,735,980       355,556  

Quan Venture Fund I, L.P.

    —         —         6,944,444       —    

Kala International Investment Co. Ltd

    8,388,889       —         83,333       —    

Shanghai Healthcare Industry Investment Fund New York, LLC

    5,706,240       571,429       —         —    

Officers and/or Directors

 

Sol J. Barer, Ph.D.(4)

    57,869       5,714       318,614       51,389  

Isaac Blech(5)

    57,579       5,714       —         —    

James N. Campbell, M.D.(6)

    28,710       2,857       118,143       11,111  

Jeffrey B. Kindler(7)

    57,579       5,714       742,815       155,556  

Randall Stevens, M.D.(8)

    —         —         115,631       19,445  

Shawn Tomasello(9)

    —         —         282,800       69,444  

 

(1)

Additional details regarding these stockholders and their equity holdings are provided in this prospectus under the caption “Principal Stockholders.”

(2)

Represents securities acquired by (i) NEA Ventures 2017, L.P. and (ii) NEA Partners 16, L.P.

(3)

Represents securities acquired by (i) InterWest Partners VIII, L.P., (ii) InterWest Investors VIII, L.P., (iii) InterWest Investors Q VIII, L.P. and (iv) InterWest Partners IX, L.P. Includes 1,731,734 shares of Series C preferred stock issued upon conversion of an aggregate amount of $3,117,123.28 in principal and accrued interest of the 2019 notes. Includes 1,958,203 shares of Series D preferred stock issued upon conversion of an aggregate amount of $3.5 million in principal and accrued interest of the 2018 notes.

(4)

Represents securities acquired by (i) Sol J. Barer, Ph.D. and (ii) Barer & Son Capital, LLC. Includes 57,869 shares of Series C preferred stock issued upon conversion of an aggregate amount of $104,164.38 in principal and accrued interest of the 2019 notes. Includes 177,214 shares of Series D preferred stock issued upon conversion of an aggregate amount of $318,986.30 in principal and accrued interest of the 2018 notes.

 

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(5)

Represents securities acquired by River Charitable Remainder Trust f/b/o Isaac Blech of which Isaac Blech is the sole trustee. Includes 57,579 shares of Series C preferred stock issued upon conversion of an aggregate amount of $103,643.84 in principal and accrued interest of the 2019 notes.

(6)

Represents securities acquired by (i) James N. Campbell 2012 Dynasty Trust, Regina H. Anderson & Louis F. Friedman, Trustees and (ii) James N. Campbell Regina Anderson. Includes 28,710 shares of Series C preferred stock issued upon conversion of an aggregate amount of $51,678.08 in principal and accrued interest of the 2019 notes. Includes 118,143 shares of Series D preferred stock issued upon conversion of an aggregate amount of $212,657.53 in principal and accrued interest of the 2018 notes.

(7)

Includes 57,579 shares of Series C preferred stock issued upon conversion of an aggregate amount of $103,643.84 in principal and accrued interest of the 2019 notes. Includes 742,815 shares of Series D preferred stock issued upon conversion of an aggregate amount of $1,337,068.49 in principal and accrued interest of the 2018 notes.

(8)

Includes 115,631 shares of Series D preferred stock issued upon conversion of an aggregate amount of $208,136.99 in principal and accrued interest of the 2018 notes.

(9)

Includes 282,800 shares of Series D preferred stock issued upon conversion of an aggregate amount of $509,041.10 in principal and accrued interest of the 2018 notes.

Some of our directors are associated with our principal stockholders as indicated in the table below:

 

Director

  

Principal Stockholder

Sara Nayeem, M.D.    Entities Affiliated with New Enterprise Associates
Arnold L. Oronsky, Ph.D.    Entities Affiliated with InterWest Partners LLC
Stella Xu, Ph.D.    Quan Venture Fund I, L.P.

Stockholders’ Agreement

We entered into a stockholders’ agreement in 2013, which was further amended and restated December 18, 2017, as amended on November 2, 2018, with the holders of our preferred stock, including entities with which certain of our directors are related. The stockholders’ agreement provides for certain rights relating to the registration of such holders’ common stock, including shares issuable upon conversion of preferred stock, and a right of first refusal to purchase future securities sold by us. See “Description of Capital Stock—Registration Rights” for additional information.

The stockholders’ agreement also certain voting covenants, pursuant to which the following directors were elected to serve as members on our board of directors and, as of the date of this prospectus, continue to so serve: Sol J. Barer, Ph.D., Isaac Blech, James N. Campbell, M.D., Jeffrey B. Kindler, Sara Nayeem, M.D., Arnold L. Oronsky, Ph.D. and Shawn Tomasello. Jeffrey Kindler was initially selected to serve on our board of directors in his capacity as our chief executive officer. James Campbell was initially selected to serve on our board of directors in his capacity as our chief scientific officer. Sara Nayeem, Arnold Oronsky and Stella Xu were initially selected to serve on our board of directors as representatives of holders of our preferred stock, as designated by entities affiliated with New Enterprise Associates 16, Limited Partnership, InterWest Partners LLC and Quan Venture Fund I, L.P., respectively. Shawn Tomasello was initially selected to serve on our board of directors as a director who is mutually acceptable to a majority of the other directors.

Certain provisions of the stockholders’ agreement will terminate upon the closing of this offering, including the above voting provision, and members previously elected to our board of directors pursuant to this agreement will continue to serve as directors until they resign, are removed or their successors are duly elected by the holders of our common stock. The composition of our board of directors after this offering is described in more detail under “Management—Board Composition and Election of Directors.”

License Agreement with James N. Campbell, M.D.

As successor to the initial licensee, AlgoRx Pharmaceuticals, Inc., we are party to a license agreement, dated August 28, 2001, with James N. Campbell, M.D., one of our officers and directors, whereby Dr. Campbell

 

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and the other inventors party to the agreement granted an exclusive license under certain technology, including both patent rights and know-how related to capsaicin. The license agreement provides for a possible $350,000 milestone payment payable upon FDA approval of the licensed product, which has not yet occurred. All patents licensed under the license agreement have expired. For a complete description of the license agreement, you should refer to the copy of the agreement that has been filed as an exhibit to the registration statement of which this prospectus is a part.

Employment Agreements

We have entered into employment agreements with our named executive officers. For more information regarding the agreements with our named executive officers, see “Executive and Director Compensation—Executive Compensation Arrangements.”

Indemnification Agreements

We intend to enter into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us or will require us to indemnify each director (and in certain cases their related venture capital funds) and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer. For further information, see “Executive and Director Compensation—Limitations of Liability and Indemnification.”

Stock Option Grants to Executive Officers and Directors

We have granted stock options to our executive officers and certain of our directors as more fully described in the section entitled “Executive and Director Compensation.”

Participation in This Offering

Certain of our existing stockholders, including entities affiliated with certain of our directors, have indicated an interest in purchasing an aggregate of approximately $30 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any or all of these stockholders, or any or all of these stockholders may determine to purchase more, fewer or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering.

Policies and Procedures for Related Person Transactions

Our board of directors has adopted a written related person transaction policy, to be effective upon the closing of this offering, setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved exceeds $120,000 in any fiscal year and a related person had, has or will have a direct or indirect material interest, including without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. All of the transactions described in this section occurred prior to the adoption of this policy.

 

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PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial ownership of our common stock, as of September 30, 2018 by:

 

   

each person or group of affiliated persons known by us to beneficially own more than 5% of our common stock;

 

   

each of our named executive officers;

 

   

each of our directors; and

 

   

all of our executive officers and directors as a group.

The number of shares beneficially owned by each stockholder is determined under rules issued by the Securities and Exchange Commission. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Applicable percentage ownership is based on 17,162,604 shares of common stock outstanding as of September 30, 2018, assuming the conversion of all outstanding shares of preferred stock into common stock. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of September 30, 2018 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless noted otherwise, the address of all listed stockholders is 200 State Street, Boston, Massachusetts 02109. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.

 

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Certain of our existing stockholders, including entities affiliated with certain of our directors, have indicated an interest in purchasing an aggregate of approximately $30 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any or all of these stockholders, or any or all of these stockholders may determine to purchase more, fewer or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering. The following table does not reflect any such potential purchases by these existing stockholders or their affiliated entities. If any shares are purchased by these stockholders, the number of shares of common stock beneficially owned after this offering and the percentage of common stock beneficially owned after this offering would increase from that set forth in the table below.

 

    

Number

of Shares

Beneficially

Owned

Prior to
Offering

    

Percentage of
Shares

Beneficially Owned

 
 

Name of Beneficial Owner

  

Prior to

Offering

   

After

Offering

 

5% or Greater Stockholders

       

Entities Affiliated with New Enterprise Associates(1)

     2,358,263        13.7     10.6

Entities Affiliated with InterWest Partners LLC(2)

     1,932,003        11.2     8.7

Quan Venture Fund I, L.P.(3)

     1,179,131        6.9     5.3

Kala International Investment Co Ltd.(4)

     1,357,445        7.9     6.1

Shanghai Healthcare Industry Investment Fund New York, LLC(5)

     1,005,230        5.8     4.5

Named Executive Officers and Directors

       

Jeffrey B. Kindler(6)

     879,260        5.0     3.9

B. Nicholas Harvey

     —          —         —    

Kerrie L. Brady(7)

     285,179        1.6     1.3

Peter Hanson(8)

     220,737        1.3     *  

Sol J. Barer, Ph.D.(9)

     170,218        *       *  

Isaac Blech(10)

     341,596        2.0     1.5

James N. Campbell, M.D.(11)

     554,816        3.2     2.5

Daniel N. Mendelson

     —          —         —    

Sara Nayeem, M.D.(1)

     —          —         —    

Arnold L. Oronsky, Ph.D.(2)

     1,943,209        11.3     8.7

Joseph R. Swedish

     —          —         —    

Shawn Tomasello(12)

     60,887        *       *  

Stella Xu, Ph.D.(3)

     1,179,131        6.9     5.3

All executive officers and directors as a group (15 persons)

     5,635,033        32.5     25.3

 

*

Less than 1%.

(1)

Consists of (A)(i) 2,222,667 shares of common stock issuable upon the conversion of shares of preferred stock and (ii) 134,182 shares of common stock issuable as a dividend upon the closing of this offering, in each case held by New Enterprise Associates 16, L.P., or NEA 16 and (B)(i) 1,334 shares of common stock issuable upon the conversion of shares of preferred stock and (ii) 80 shares of common stock issuable as a dividend upon the closing of this offering, in each case held by NEA Ventures 2017, L.P., or Ven 2017. The shares directly held by NEA 16 are indirectly held by NEA Partners 16, L.P., or NEA Partners 16, the sole general partner of NEA 16, NEA 16 GP, LLC, or NEA 16 LLC, the sole general partner of NEA Partners 16, and each of the individual Directors of NEA 16 LLC. The individual Managers of NEA 16 LLC (collectively, the “Managers”), are Peter J. Barris, Forest Baskett, Anthony A. Florence, David M. Mott, Mohamad Makhzoumi, Chetan Puttagunta, Jon Sakoda, Joshua Makower, Peter Sonsini, Ravi Viswanathan and Scott D. Sandell. NEA Partners 16, NEA 16 LLC and the Managers share voting and dispositive power with regard to the securities directly held by NEA 16. The shares held directly by Ven 2017 are indirectly held by Karen P. Welsh, the general partner of Ven 2017. Karen P. Welsh has voting and dispositive power

 

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  with regard to the shares of the securities directly held by Ven 2017. Sara Nayeem, M.D., a member of our board of directors and an affiliate of NEA 16 and Ven 2017, has no voting or investment control over any of the shares held by NEA 16 and Ven 2017 and disclaims beneficial ownership of all shares owned by NEA 16 and Ven 2017, except to the extent of any pecuniary interest therein. All indirect holders of the above referenced securities disclaim beneficial ownership of all applicable shares except to the extent of their actual pecuniary interest therein. The address of New Enterprise Associates is 1954 Greenspring Drive, Suite 600, Timonium, Maryland 21093.
(2)

Consists of (A)(i) 332,252 shares of common stock issuable upon the conversion of shares of preferred stock and (ii) 1,026 shares of common stock issuable upon exercise of warrants to purchase shares of common stock, in each case held by InterWest Partners VIII, L.P., or IW VIII, (B)(i) 2,617 shares of common stock issuable upon the conversion of shares of preferred stock and (ii) 8 shares of common stock issuable upon exercise of warrants to purchase shares of common stock, in each case held by InterWest Investors VIII, L.P, or II VIII, (C)(i) 9,501 shares of common stock issuable upon the conversion of shares of preferred stock and (ii) 29 shares of common stock issuable upon exercise of warrants to purchase shares of common stock, in each case held by InterWest Investors Q VIII, L.P, or IIQ VIII, and (D)(i) 1,455,607 shares of common stock issuable upon the conversion of shares of preferred stock, (ii) 45,782 shares of common stock issuable as a dividend upon the closing of this offering and (iii) 85,181 shares of common stock issuable upon exercise of warrants to purchase shares of common stock and/or upon conversion of shares of preferred stock issuable upon exercise of warrants to purchase shares of preferred stock, in each case held by InterWest Partners IX, L.P, or IW IX. InterWest Management Partners VIII, LLC, or IMP VIII, is the general partner of IW VIII, II VIII and IIQ VIII. Philip T. Gianos, W. Stephen Holmes, Gilbert H. Kliman and Arnold L. Oronsky are the managing directors of IMP VIII and share voting and investment power with respect to the shares held by IW VIII, II VIII and IIQ VIII. IW IX is a California limited partnership, whose general partner is InterWest Management Partners IX, LLC, or IMP IX. The managing directors of IMP IX are Philip T. Gianos, W. Stephen Holmes, Gilbert H. Kliman and Arnold L. Oronsky. Khaled A. Nasr is a venture member of IMP IX. Each managing director and venture member of IMP IX shares voting and investment power with respect to the securities held by IW IX and disclaims beneficial ownership of such shares except to the extent of his or her pecuniary interest therein. Arnold L. Oronsky, Ph.D., is a managing director of IMP VIII and IMP IX and is a member of our board of directors. The address for the entities is 2710 Sand Hill Road, Suite 200, Menlo Park, CA 94025.

(3)

Consists of (i) 1,112,000 shares of common stock issuable upon the conversion of shares of preferred stock and (ii) 67,131 shares of common stock issuable as a dividend upon the closing of this offering, in each case held by Quan Venture Fund I, L.P., or Quan Capital. The general partner of Quan Capital is Quan Venture Partners I, L.L.C. Dr. Xu, a member of our board of directors, is a manager of Quan Venture Partners I, L.L.C. and shares the ultimate power to vote or dispose of the shares held by Quan Capital. Dr. Xu disclaims beneficial ownership of the shares held by Quan Capital, except to the extent of her pecuniary interest, if any. The principal business address of Quan Capital is Ugland House, PO Box 309, Grand Cayman, Cayman Islands KYI-1104.

(4)

Consists of (i) 1,356,640 shares of common stock issuable upon the conversion of shares of preferred stock and (ii) 805 shares of common stock issuable as a dividend upon the closing of this offering, in each case held by Kala International Investment Co Ltd., or Kala. The chief executive officer of Kala is Rong XIAO, who holds the ultimate power to vote or dispose of the shares held by Kala. The principal business address of Kala is One Penn Plaza, Suite 2508, New York, New York 10119.

(5)

Consists of 913,729 shares of common stock issuable upon conversion of preferred stock held by Shanghai Healthcare Industry Investment Fund New York, LLC, or Shanghai Healthcare New York. The manager of Shanghai Healthcare is Shanghai Healthcare Industry Investment Fund, LP, or Shanghai Healthcare LP. The general partner of Shanghai Healthcare LP is Shanghai Good Health Capital, Co., Ltd., Sun Feng is currently the CEO of Shanghai Good Health Capital, Co., Ltd., who holds the ultimate power to vote or dispose of the shares held by Shanghai Healthcare New York. The principal business address of Shanghai Healthcare New York is 30 Wall St., 8th Floor, New York, NY 10005.

(6)

Includes (i) 128,165 shares of common stock issuable upon the conversion of preferred stock, (ii) 7,180 shares of common stock issuable as a dividend upon the closing of this offering, (iii) 25,822 shares of

 

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  common stock issuable upon the conversion of shares of preferred stock issuable upon exercise of warrants to purchase shares of preferred stock and (iv) options to purchase 397,837 shares of common stock that are or will be immediately exercisable within 60 days of September 30, 2018.
(7)

Includes (i) 4,378 shares of common stock issuable upon the conversion of preferred stock and (ii) options to purchase 280,801 shares of common stock that are or will be immediately exercisable within 60 days of September 30, 2018.

(8)

Includes options to purchase 220,737 shares of common stock that are or will be immediately exercisable within 60 days of September 30, 2018.

(9)

Includes (i) 84,399 shares of common stock issuable upon the conversion of preferred stock, (ii) 1,713 shares of common stock issuable as a dividend upon the closing of this offering, (iii) 5,267 shares of common stock issuable upon exercise of warrants to purchase shares of common stock, (iv) 3,582 shares of common stock issuable upon the conversion of shares of preferred stock issuable upon exercise of warrants to purchase shares of preferred stock and (v) options to purchase 11,206 shares of common stock that are or will be immediately exercisable within 60 days of September 30, 2018.

(10)

Includes (A)(i) 320,256 shares of common stock and (ii) options to purchase 11,206 shares of common stock that are or will be immediately exercisable within 60 days of September 30, 2018, in each case held by Mr. Blech individually and (B)(i) 9,220 shares of common stock and (ii) 914 shares of common stock issuable upon the conversion of shares of preferred stock issuable upon exercise of warrants to purchase shares of preferred stock, in each case held by River Charitable Trust, of which Mr. Blech is the sole Trustee.

(11)

Includes (A)(i) 127,367 shares of common stock, 7,271 shares of which are issuable upon the conversion of preferred stock and (ii) options to purchase 347,389 shares of common stock that are or will be immediately exercisable within 60 days of September 30, 2018, in each case held by Dr. Campbell individually, (B)(i) 18,918 shares of common stock issuable upon the conversion of preferred stock and (ii) 1,142 shares of common stock held issuable as a dividend upon the closing of this offering, in each case held by James N. Campbell 2012 Dynasty Trust, (C)(i) 4,597 shares of common stock issuable upon the conversion of preferred stock and (ii) 457 shares of common stock issuable upon the conversion of shares of preferred stock issuable upon exercise of warrants to purchase shares of preferred stock, in each case held by James N. Campbell, M.D. and Regina Anderson as joint tenants, and (D) 53,167 shares of common stock issuable upon the conversion of preferred stock held by ARC 1 Inc., of which Dr. Campbell is the President.

(12)

Includes (i) 45,284 shares of common stock issuable upon the conversion of preferred stock (ii) 2,733 shares of common stock issuable as a dividend upon the closing of this offering, (iii) 11,119 shares of common stock issuable upon conversion of shares of preferred stock issuable upon exercise of warrants to purchase shares of preferred stock and (iv) options to purchase 1,751 shares of common stock that are or will be immediately exercisable within 60 days of September 30, 2018.

 

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DESCRIPTION OF CAPITAL STOCK

General

The following description summarizes some of the terms of our amended and restated certificate of incorporation and amended and restated bylaws that will become effective upon the closing of this offering, the stockholders’ agreement and of the General Corporation Law of the State of Delaware. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our amended and restated certificate of incorporation, amended and restated bylaws and stockholders’ agreement, copies of which have been or will be filed as exhibits to the registration statement of which this prospectus is a part, as well as the relevant provisions of the General Corporation Law of the State of Delaware. The description of our common stock and preferred stock reflects changes to our capital structure that will occur immediately prior the closing of this offering.

Following the closing of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.

As of September 30, 2018, we had issued and outstanding the following numbers of capital stock, held of record by 358 stockholders:

 

   

1,244,493 shares of our common stock outstanding;

 

   

5,000,000 shares of our Series A preferred stock that are automatically convertible into 800,632 shares of our common stock in connection with this offering;

 

   

21,380,685 shares of our Series B preferred stock that are automatically convertible into 3,423,547 shares of our common stock in connection with this offering;

 

   

26,558,319 shares of our Series C preferred stock that are automatically convertible into 4,252,706 shares of our common stock in connection with this offering; and

 

   

40,606,249 shares of our Series D preferred stock that are automatically convertible into 6,502,170 shares of our common stock in connection with this offering.

Common Stock

As of September 30, 2018, there were 1,244,493 shares of our common stock outstanding and 14,979,055 shares of our common stock issuable upon the automatic conversion of all outstanding shares of our preferred stock upon the closing of this offering.

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Subject to the supermajority votes for some matters, other matters shall be decided by the affirmative vote of our stockholders having a majority in voting power of the votes cast by the stockholders present or represented and voting on such matter. Our amended and restated certificate of incorporation and amended and restated bylaws also provide that our directors may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock entitled to vote thereon. In addition, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock entitled to vote thereon is required to amend or repeal, or to adopt any provision inconsistent with, several of the provisions of our amended and restated certificate of incorporation. See below under “—Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws—Amendment of Charter Provisions.” Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of any series of preferred stock that we may designate and issue in the future.

 

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In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately our net assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. Our outstanding shares of common stock are, and the shares offered by us in this offering will be, when issued and paid for, validly issued, fully paid and nonassessable. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

Preferred Stock

Under the terms of our amended and restated certificate of incorporation that will become effective upon the closing of this offering, our board of directors is authorized to direct us to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.

The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Upon the closing of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock.

Options

As of September 30, 2018, options to purchase 1,981,815 shares of our common stock were outstanding under our 2013 Plan, of which 1,590,812 were vested and exercisable as of that date.

Warrants

Warrants to Purchase Common Stock

As of September 30, 2018, warrants to purchase a total of 436,294 shares of our common stock were outstanding with exercise prices ranging from $3.03 per share to $12.56 per share. These warrants are exercisable immediately and expire on various dates.

The warrants to purchase common stock include warrants to purchase 83,189 shares issued to SVB and one of its affiliates in connection with entering into and amending the loan and security agreement between us and SVB. In connection with entering into our loan and security agreement, in April 2015, we issued SVB and its affiliate warrants to purchase an aggregate of 24,372 shares of our common stock at an exercise price of $3.03 per share. If unexercised, these warrants will expire on April 15, 2022. In connection with entering into an amendment to our loan and security agreement, in June 2018, we issued SVB a warrant to purchase 58,817 shares of common stock at an exercise price of $8.06 per share. If unexercised, this warrant will expire on June 27, 2028. Collectively, we refer to these warrants as the bank common stock warrants. The bank common stock warrants will neither expire nor be automatically exercised upon the closing of this offering. The bank common stock warrants provide that the holders thereof may elect to exercise such warrants on a net “cashless” basis at any time prior to the expiration thereof. Assuming the closing of this offering occurs, the fair market value of one share of our common stock in connection with any cashless exercise shall be the closing price or last sale price per share of our common stock on the Nasdaq Global Select Market or other public trading market on which our common stock is traded on the business day immediately prior to the date such holder elects to exercise such warrant on a cashless basis.

 

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In addition, the warrants to purchase common stock also include warrants to purchase 353,105 shares, with exercise prices ranging from $10.93 per share to $12.56 per share, issued to investors and other persons in connection with certain corporate, financing and consulting transactions. Collectively, we refer to these warrants as the investor common stock warrants. The investor common stock warrants provide that, unless earlier exercised, they will be automatically exercised, on a cashless basis, immediately prior to the closing of our initial public offering, so long as the fair market value of our common stock at the closing of our initial public offering exceeds the exercise price of the applicable warrant. For investor common stock warrants to purchase 277,073 shares of our common stock, the fair market value in connection with any cashless exercise prior to the consummation of this offering shall be the initial public offering price of our common stock. For investor common stock warrants to purchase 76,032 shares of our common stock, the fair market value in connection with any cashless exercise prior to the consummation of this offering shall be determined in good faith by the board of directors. Following the effective date of the registration statement of which this prospectus is a part and prior to the consummation of this offering, we expect the board of directors would determine the fair market value of one share of our common stock to be equal to the last reported sale price for our common stock on The Nasdaq Global Select Market. Based on an assumption that the fair market value of our common stock for purposes of automatic exercise under the investor common stock warrants will be equal to the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover of this prospectus, the investor common stock warrants would be exercised, on a cashless basis, for 84,744 shares of common stock immediately prior to the closing of this offering. A $1.00 increase or decrease in the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would, in case of an increase, increase the number of shares of common stock issuable by 16,771 shares and, in case of a decrease, decrease the number of shares of common stock issuable by 19,171 shares, upon the automatic exercise, on a cashless basis, of the investor common stock warrants.

Warrants to Purchase Preferred Stock

As of September 30, 2018, warrants to purchase a total of 4,518,697 shares of our preferred stock were outstanding with exercise prices ranging from $1.75 per share to $2.01 per share of our preferred stock. These warrants are exercisable immediately and expire on various dates.

The warrants to purchase preferred stock include warrants to purchase 1,973,292 shares of our preferred stock, with exercise prices ranging from $1.98 per share to $2.01 per share of preferred stock, issued to our former placement agent in connection with certain financing transactions. Collectively, we refer to these warrants as the placement agent preferred stock warrants. The placement agent preferred stock warrants provide that, unless earlier exercised, they will be automatically exercised, on a cashless basis, immediately prior to the closing of our initial public offering, so long as the fair market value of our common stock at the closing of our initial public offering exceeds the exercise price of the applicable warrant. The fair market value of our common stock in connection with any cashless exercise prior to the consummation of this offering under these warrants shall be the initial public offering price of our common stock. Assuming a fair market value of our common stock for purposes of automatic exercise under the placement agent preferred stock warrants equal to the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover of this prospectus, and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, the placement agent preferred stock warrants would be exercised, on a cashless basis, for 54,265 shares of common stock immediately prior to the closing of this offering. A $1.00 increase or decrease in the assumed exercise price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would, in case of an increase, increase the number of shares of common stock issuable by 16,357 shares and, in case of a decrease, decrease the number of shares of common stock issuable by 18,693 shares, upon the automatic exercise, on a cashless basis, of the placement agent preferred stock warrants.

In addition, the warrants to purchase preferred stock also include warrants to purchase 2,545,405 shares of our preferred stock, with exercise prices ranging from $1.75 to $1.80 per share of preferred stock, issued to investors and other persons in connection with certain corporate and financing transactions. We refer to these

 

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warrants as the investor preferred stock warrants. The investor preferred stock warrants provide that, unless earlier exercised, they will expire and no longer be exercisable upon the closing of our initial public offering.

Registration Rights

Holders of 17,105,305 shares of our common stock are entitled to certain rights with respect to the registration of such shares for public resale under the Securities Act, pursuant to the third amended and restated stockholders’ agreement by and among us and certain of our stockholders, until the rights otherwise terminate pursuant to the terms of the stockholders’ agreement. The registration of shares of common stock as a result of the following rights being exercised would enable holders to trade these shares without restriction under the Securities Act when the applicable registration statement is declared effective.

Form S-1 Registration Rights

If at any time beginning 180 days after the date the registration statement of which this prospectus is a part is declared effective the holders of at least 35% of the registrable securities request in writing that we effect a registration with respect to at least 35% of the registrable securities then outstanding and having an anticipated aggregate offering price that would exceed $10,000,000, net of expenses, we may be required to register their shares. We are obligated to effect at most two registrations in response to these demand registration rights. If the holders requesting registration intend to distribute their shares by means of an underwriting, the managing underwriter of such offering will have the right to limit the numbers of shares to be underwritten for reasons related to the marketing of the shares.

Piggyback Registration Rights

If at any time after this offering we propose to register any shares of our common stock under the Securities Act, subject to certain exceptions, the holders of registrable securities will be entitled to notice of the registration and to include their shares of registrable securities in the registration. If our proposed registration involves an underwriting, the managing underwriter of such offering will have the right to limit the number of shares to be underwritten for reasons related to the marketing of the shares.

Form S-3 Registration Rights

If, at any time after we become entitled under the Securities Act to register our shares on a registration statement on Form S-3, the holders of at least 10% of the registrable securities request in writing that we effect a registration with respect to registrable securities at an aggregate price to the public in the offering of at least $5,000,000, net of expenses, we will be required to effect such registration; provided, however, that we will not be required to effect such a registration if, within any twelve month period, we have already effected two registrations on Form S-3 for the holders of registrable securities.

Expenses and Indemnification

Ordinarily, other than underwriting discounts and commissions, we will be required to pay all expenses incurred by us related to any registration effected pursuant to the exercise of these registration rights. These expenses may include all registration and filing fees, printing expenses, fees and disbursements of our counsel, reasonable fees and disbursements of a counsel for the selling securityholders and blue sky fees and expenses. Additionally, we have agreed to indemnify selling stockholders for damages, and any legal or other expenses reasonably incurred, arising from or based upon any untrue statement of a material fact contained in any registration statement, an omission or alleged omission to state a material fact in any registration statement or necessary to make the statements therein not misleading, or any violation or alleged violation by the indemnifying party of securities laws, subject to certain exceptions.

 

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Termination of Registration Rights

The registration rights with respect to any holder of registrable securities terminate upon the earlier of (i) the closing of a “Sale of the Company,” as defined in the third amended and restated stockholders’ agreement, (ii) such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all such holders’ shares and (iii) December 18, 2022, which is the fifth anniversary of the date of the third amended and restated stockholders’ agreement.

Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws

Some provisions of Delaware law, our restated certificate of incorporation and our restated bylaws could make the following transactions more difficult: an acquisition of us by means of a tender offer; an acquisition of us by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions which provide for payment of a premium over the market price for our shares.

These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of the increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

Undesignated Preferred Stock

The ability of our board of directors, without action by the stockholders, to issue up to 10,000,000 shares of undesignated preferred stock with voting or other rights or preferences as designated by our board of directors could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company.

Stockholder Meetings

Our restated bylaws provide that a special meeting of stockholders may be called only by our chairman of the board, chief executive officer or president (in the absence of a chief executive officer), or by a resolution adopted by a majority of our board of directors.

Requirements for Advance Notification of Stockholder Nominations and Proposals

Our restated bylaws establish advance notice procedures with respect to stockholder proposals to be brought before a stockholder meeting and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.

Elimination of Stockholder Action by Written Consent

Our restated certificate of incorporation eliminates the right of stockholders to act by written consent without a meeting.

Staggered Board

Our board of directors is divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders. For more information on the classified board, see

 

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“Management—Board Composition and Election of Directors.” This system of electing and removing directors may tend to discourage a third-party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors.

Removal of Directors

Our restated certificate of incorporation provides that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of the holders of at least two-thirds in voting power of the outstanding shares of stock entitled to vote in the election of directors.

Stockholders Not Entitled to Cumulative Voting

Our restated certificate of incorporation does not permit stockholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they choose, other than any directors that holders of our preferred stock may be entitled to elect.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the General Corporation Law of the State of Delaware, which prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors.

Choice of Forum

Our restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative form, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders; (3) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware or our certificate of incorporation or bylaws; (4) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; or (5) any action asserting a claim governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our restated certificate of incorporation also provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to this choice of forum provision. It is possible that a court of law could rule that the choice of forum provision contained in our restated certificate of incorporation is inapplicable or unenforceable if it is challenged in a proceeding or otherwise.

Amendment of Charter Provisions

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approval by holders of at least two-thirds in voting power of the outstanding shares of stock entitled to vote thereon.

The provisions of Delaware law, our restated certificate of incorporation and our restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of our board and management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company, LLC.

Stock Exchange Listing

We have applied to have our common stock listed on The Nasdaq Global Select Market under the symbol “CNTX.”

 

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SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this offering, there was no public market for our common stock. Future sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could adversely affect the market price of our common stock.

Upon the closing of this offering, we will have outstanding an aggregate of 22,162,604 shares of common stock, assuming (1) the issuance of 5,000,000 shares of common stock offered by us in this offering, (2) the automatic conversion of all shares of our preferred stock into an aggregate of 14,979,055 shares of our common stock upon the closing of this offering, (3) the issuance of an aggregate of 392,504 shares of our common stock upon the closing of this offering to pay accrued dividends on our Series D preferred stock, assuming a closing date for this offering of November 19, 2018, (4) the automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock, which, based on an assumption that the fair market value of our common stock for purposed of automatic exercise under the warrants will be equal to the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, would result in the issuance of 139,009 shares of our common stock upon the closing of this offering, (5) the assumed exercise prior to the closing of this offering of certain outstanding warrants that shall otherwise expire upon such closing to purchase 2,545,405 shares of preferred stock, which, assuming the automatic conversion of the shares of preferred stock issued pursuant to such exercise into shares of common stock, would result in the issuance of 407,543 shares of our common stock upon the closing of this offering, (6) for purposes of any automatic cashless exercise of warrants, that the fair market value of our common stock immediately prior to the closing of this offering exceeds the exercise price of the applicable warrant and (7) no exercise of outstanding options or warrants after September 30, 2018, other than as described above. Of these shares, all shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, whose sales would be subject to the Rule 144 resale restrictions described below, other than the holding period requirement.

The remaining 17,162,604 shares of common stock will be “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized below. We expect that substantially all of these shares will be subject to the 180-day lock-up period under the lock-up agreements described below. Upon expiration of the lock-up period, we estimate that approximately 17,162,604 shares will be available for sale in the public market, subject in some cases to applicable volume limitations under Rule 144.

In addition, of the 1,981,815 shares of our common stock that were subject to stock options outstanding as of September 30, 2018, options to purchase 1,590,812 shares of common stock were vested as of September 30, 2018 and, upon exercise, these shares will be eligible for sale subject to the lock—up agreements described below and Rules 144 and 701 under the Securities Act.

Lock-Up Agreements

We and each of our directors and executive officers and holders of substantially all of our outstanding capital stock, have agreed that, without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Leerink Partners LLC and Evercore Group L.L.C., we and they will not, subject to certain exceptions, during the period ending 180 days after the date of this prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for common stock, whether now owned or hereafter acquired (including the power of disposition thereof); (ii) enter into any swap or other arrangement that

 

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transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of our common stock, whether any transaction described above is to be settled by delivery of our common stock or such other securities, in cash or otherwise; or (iii) publicly disclose the intention to do any of the foregoing described in (i) and (ii) above.

Upon the expiration of the applicable lock-up periods, substantially all of the shares subject to such lock-up restrictions will become eligible for sale, subject to the limitations discussed above. For a further description of these lock-up agreements, please see “Underwriting.”

Rule 144

Affiliate Resales of Restricted Securities

In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours, or who was an affiliate at any time during the 90 days before a sale, who has beneficially owned shares of our common stock for at least six months would be entitled to sell in “broker’s transactions” or certain “riskless principal transactions” or to market makers, a number of shares within any three-month period that does not exceed the greater of:

 

   

1% of the number of shares of our common stock then outstanding, which will equal approximately 221,591 shares immediately after this offering; or

 

   

the average weekly trading volume in our common stock on The Nasdaq Global Select Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Affiliate resales under Rule 144 are also subject to the availability of current public information about us. In addition, if the number of shares being sold under Rule 144 by an affiliate during any three-month period exceeds 5,000 shares or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the Securities and Exchange Commission and Nasdaq concurrently with either the placing of a sale order with the broker or the execution directly with a market maker.

Non-Affiliate Resales of Restricted Securities

In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is not an affiliate of ours at the time of sale, and has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months but less than a year, is entitled to sell such shares subject only to the availability of current public information about us. If such person has held our shares for at least one year, such person can resell under Rule 144(b)(1) without regard to any Rule 144 restrictions, including the 90-day public company requirement and the current public information requirement.

Non-affiliate resales are not subject to the manner of sale, volume limitation or notice filing provisions of Rule 144.

Rule 701

In general, under Rule 701, any of an issuer’s employees, directors, officers, consultants or advisors who purchases shares from the issuer in connection with a compensatory stock or option plan or other written agreement before the effective date of a registration statement under the Securities Act is entitled to sell such shares 90 days after such effective date in reliance on Rule 144. An affiliate of the issuer can resell shares in reliance on Rule 144 without having to comply with the holding period requirement, and non-affiliates of the issuer can resell shares in reliance on Rule 144 without having to comply with the current public information and holding period requirements.

 

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The Securities and Exchange Commission has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after an issuer becomes subject to the reporting requirements of the Exchange Act.

Equity Plans

We intend to file one or more registration statements on Form S-8 under the Securities Act to register all shares of common stock subject to outstanding stock options and common stock issued or issuable under our stock plans. We expect to file the registration statement covering shares offered pursuant to our stock plans shortly after the date of this prospectus, permitting the resale of such shares by non-affiliates in the public market without restriction under the Securities Act and the sale by affiliates in the public market, subject to compliance with the resale provisions of Rule 144.

Registration Rights

Upon the closing of this offering, the holders of 17,105,305 shares of common stock, which includes all of the shares of common stock issuable upon the automatic conversion of our preferred stock upon the closing of this offering, or their transferees will be entitled to various rights with respect to the registration of these shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See “Description of Capital Stock—Registration Rights” for additional information. Shares covered by a registration statement will be eligible for sale in the public market upon the expiration or release from the terms of the lock-up agreement.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following discussion is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the purchase, ownership and disposition of the shares of common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or foreign tax laws are not discussed. This discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS, in effect as of the date of this offering. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a non-U.S. holder of our common stock. We have not sought and do not intend to seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position regarding the tax consequences of the purchase, ownership and disposition of our common stock.

This discussion is limited to non-U.S. holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a non-U.S. holder’s particular circumstances, including the impact of the alternative minimum tax or the unearned income Medicare contribution tax. In addition, it does not address consequences relevant to holders subject to particular rules, including, without limitation:

 

   

U.S. expatriates and certain former citizens or long-term residents of the United States;

 

   

persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

 

   

banks, insurance companies, and other financial institutions;

 

   

brokers, dealers or traders in securities or currencies;

 

   

“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;

 

   

partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

 

   

tax-exempt organizations or governmental organizations;

 

   

persons deemed to sell our common stock under the constructive sale provisions of the Code;

 

   

persons subject to special tax accounting rules as a result of any item of gross income with respect to the stock being taken into account in an applicable financial statement;

 

   

persons for whom our common stock constitutes “qualified small business stock” within the meaning of Section 1202 of the Code;

 

   

persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation or upon conversion of Series D preferred stock into our common stock; and

 

   

tax-qualified retirement plans.

 

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If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in that partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors.

THIS DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT INTENDED AS LEGAL OR TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Definition of a Non-U.S. Holder

For purposes of this discussion, a “non-U.S. holder” is any beneficial owner of our common stock that is not a “U.S. person,” a partnership or an entity disregarded as separate from its owner, each for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

 

   

a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code), or (2) has made a valid election under applicable Treasury Regulations to continue to be treated as a U.S. person.

Distributions

As described in the section entitled “Dividend Policy,” we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, if we do make distributions on our common stock, such distributions of cash or property on our common stock will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and will first be applied against and reduce a non-U.S. holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below in the section relating to the sale or disposition of our common stock. Because we may not know the extent to which a distribution is a dividend for U.S. federal income tax purposes at the time it is made, for purposes of the withholding rules discussed below, we or the applicable withholding agent may treat the entire distribution as a dividend. If tax is withheld on the amount of a distribution in excess of the amount constituting a dividend, then a refund of any such excess amounts may be obtained if a claim for refund is timely filed with the IRS.

Subject to the discussion below on backup withholding and foreign accounts, dividends paid to a non-U.S. holder of our common stock that are not effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty).

Non-U.S. holders may be entitled to a reduction in or an exemption from U.S. federal withholding on dividends as a result of either (a) an applicable income tax treaty or (b) the non-U.S. holder holding our common

 

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stock in connection with the conduct of a trade or business within the United States and dividends being effectively connected with that trade or business. To claim such a reduction in or exemption from withholding, the non-U.S. holder must provide the applicable withholding agent with a properly executed (a) IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) claiming an exemption from or reduction of the withholding tax under the benefit of an income tax treaty between the United States and the country in which the non-U.S. holder resides or is established, or (b) IRS Form W-8ECI stating that the dividends are not subject to withholding tax because they are effectively connected with the conduct by the non-U.S. holder of a trade or business within the United States, as may be applicable. These certifications must be provided to the applicable withholding agent prior to the payment of dividends and must be updated periodically. Non-U.S. holders that do not timely provide the applicable withholding agent with the required certification, but that qualify for a reduced rate under an applicable income tax treaty, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

If dividends paid to a non-U.S. holder are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such dividends are attributable), then, although exempt from U.S. federal withholding tax (provided the non-U.S. holder provides appropriate certification, as described above), the non-U.S. holder will be subject to U.S. federal income tax on such dividends on a net income basis at the regular graduated U.S. federal income tax rates. In addition, a non-U.S. holder that is a corporation may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits for the taxable year that are attributable to such dividends, as adjusted for certain items. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.

Sale or Other Disposition of Common Stock

Subject to the discussions below on backup withholding and foreign accounts, a non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

 

   

the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such gain is attributable);

 

   

the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or

 

   

our common stock constitutes U.S. real property interests, or USRPIs, by reason of our status as a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes.

Gain described in the first bullet point above will generally be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates. A non-U.S. holder that is a foreign corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.

A non-U.S. holder described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on any gain derived from the disposition, which may be offset by certain U.S. source capital losses of the non-U.S. holder (even though the individual is not considered a resident of the United States) provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.

With respect to the third bullet point above, we believe we are not currently a USRPHC, and we do not anticipate becoming a USRPHC in the future. Because the determination of whether we are a USRPHC depends

 

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on the fair market value of our USRPIs relative to the fair market value of our other business assets and our non-U.S. real property interests, however, there can be no assurance we are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a non-U.S. holder of our common stock will not be subject to U.S. federal income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such non-U.S. holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the non-U.S. holder’s holding period. If we are a USRPHC and either our common stock is not regularly traded on an established securities market or a non-U.S. holder holds more than 5% of our outstanding common stock, directly or indirectly, during the applicable testing period, such non-U.S. holder’s gain on the disposition of shares of our common stock generally will be taxed in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that the branch profits tax generally will not apply. If we are a USRPHC and our common stock is not regularly traded on an established securities market, a non-U.S. holder’s proceeds received on the disposition of shares will also generally be subject to withholding at a rate of 15%. Prospective investors are encouraged to consult their tax advisors regarding the possible consequences to them if we are, or were to become, a USRPHC and regarding potentially applicable income tax treaties that may provide for different rules from those described above.

Information Reporting and Backup Withholding

Subject to the discussion below on foreign accounts, a non-U.S. holder will not be subject to backup withholding with respect to distributions on our common stock we make to the non-U.S. holder, provided the applicable withholding agent does not have actual knowledge or reason to know such holder is a U.S. person and the holder certifies its non-U.S. status, such as by providing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or other applicable certification. However, information returns generally will be filed with the IRS in connection with any distributions made on our common stock to the non-U.S. holder, regardless of whether any tax was actually withheld. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the non-U.S. holder resides or is established.

Information reporting and backup withholding may apply to the proceeds of a sale or other taxable disposition of our common stock within the United States, and information reporting may (although backup withholding generally will not) apply to the proceeds of a sale or other taxable disposition of our common stock outside the United States conducted through certain U.S.-related financial intermediaries, in each case, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder on IRS Form W-8BEN or W-8BEN-E, or other applicable form (and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. person) or such owner otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under the Foreign Account Tax Compliance Act, or FATCA, on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends paid on our common stock, or gross proceeds from the sale or other disposition of our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United

 

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States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends paid on our common stock, and will apply to payments of gross proceeds from the sale or other disposition of common stock on or after January 1, 2019. Because we may not know the extent to which a distribution is a dividend for U.S. federal income tax purposes at the time it is made, for purposes of these withholding rules we or the applicable withholding agent may treat the entire distribution as a dividend. Prospective investors should consult their tax advisors regarding the potential application of these withholding provisions.

 

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UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Leerink Partners LLC and Evercore Group L.L.C. are acting as representatives of each of the underwriters named below. Subject to the terms and conditions set forth in an underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the number of shares of common stock set forth opposite its name below.

 

                          Underwriter   

Number of
Shares

 

Merrill Lynch, Pierce, Fenner & Smith

                       

                      Incorporated

  

Leerink Partners LLC

  

Evercore Group L.L.C.

  
  

 

 

 

                      Total

     5,000,000  
  

 

 

 

Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.

We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Commissions and Discounts

The representatives have advised us that the underwriters propose initially to offer the shares to the public at the public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $         per share. After the initial offering, the public offering price, concession or any other term of the offering may be changed.

The following table shows the public offering price, underwriting discount and proceeds before expenses to us. The information assumes either no exercise or full exercise by the underwriters of their option to purchase additional shares.

 

    

Per Share

    

Without Option

    

With Option

 

Public offering price

   $                    $                    $                

Underwriting discount

   $        $        $    

Proceeds, before expenses, to us

   $        $        $    

The expenses of the offering, not including the underwriting discount, are estimated at $3.1 million and are payable by us. We have also agreed to reimburse the underwriters for their expenses relating to clearance of this offering with the Financial Industry Regulatory Authority in an amount up to $50,000.

 

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Option to Purchase Additional Shares

We have granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to 750,000 additional shares at the public offering price, less the underwriting discount. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional shares proportionate to that underwriter’s initial amount reflected in the above table.

No Sales of Similar Securities

We, our executive officers and directors and our other existing security holders have agreed not to sell or transfer any common stock or securities convertible into, exchangeable for, exercisable for, or repayable with common stock, for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Leerink Partners LLC and Evercore Group L.L.C. Specifically, we and these other persons have agreed, with certain limited exceptions, not to directly or indirectly

 

   

offer, pledge, sell or contract to sell any common stock,

 

   

sell any option or contract to purchase any common stock,

 

   

purchase any option or contract to sell any common stock,

 

   

grant any option, right or warrant for the sale of any common stock,

 

   

lend or otherwise dispose of or transfer any common stock,

 

   

request or demand that we file or make a confidential submission of a registration statement related to the common stock,

 

   

enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise, or

 

   

publicly disclose the intention to do any of the foregoing.

This lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Leerink Partners LLC and Evercore Group L.L.C., in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. In addition, in the event that any stockholder holding in excess of five percent of our outstanding shares of common stock, or a Major Holder, is granted an early release from the lock-up restrictions with respect to our securities in an aggregate amount in excess of one percent of our issued and outstanding shares of common stock (whether in one or multiple releases), then each other Major Holder automatically will be granted an equivalent early release from its obligations under the lock-up agreement on a pro-rata basis. Such release shall not be applicable in the event of an underwritten primary or secondary public offering or sale of our common stock during the period ending 180 days after the date of this prospectus.

Nasdaq Global Select Market Listing

We expect the shares to be approved for listing on The Nasdaq Global Select Market, subject to notice of issuance, under the symbol “CNTX.”

 

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Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations between us and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the initial public offering price are

 

   

the valuation multiples of publicly traded companies that the representatives believe to be comparable to us,

 

   

our financial information,

 

   

the history of, and the prospects for, our company and the industry in which we compete,

 

   

an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues,

 

   

the present state of our development, and

 

   

the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.

The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.

Price Stabilization, Short Positions and Penalty Bids

Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.

In connection with the offering, the underwriters may purchase and sell our common stock in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares described above. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the option granted to them. “Naked” short sales are sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of shares of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a

 

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decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. The underwriters may conduct these transactions on The Nasdaq Global Select Market, in the over-the-counter market or otherwise.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Electronic Distribution

In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail.

Other Relationships

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.

In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

In addition, affiliates of Leerink Partners LLC, one of the underwriters for this offering, are beneficial owners of less than 1% of our outstanding capital stock prior to giving effect to the offering.

Notice to Prospective Investors in the European Economic Area

In relation to each member state of the EEA, no offer of ordinary shares which are the subject of the offering has been, or will be made to the public in that Member State, other than under the following exemptions under the Prospectus Directive:

 

  (a)

to any legal entity which is a qualified investor as defined in the Prospectus Directive;

 

  (b)

to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the representatives for any such offer; or

 

  (c)

in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of ordinary shares referred to in (a) to (c) above shall result in a requirement for the Company or any representative to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

 

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Each person located in a Member State to whom any offer of ordinary shares is made or who receives any communication in respect of an offer of ordinary shares, or who initially acquires any ordinary shares will be deemed to have represented, warranted, acknowledged and agreed to and with each representative and the Company that (1) it is a “qualified investor” within the meaning of the law in that Member State implementing Article 2(1)(e) of the Prospectus Directive; and (2) in the case of any ordinary shares acquired by it as a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, the ordinary shares acquired by it in the offer have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which the prior consent of the representatives has been given to the offer or resale; or where ordinary shares have been acquired by it on behalf of persons in any Member State other than qualified investors, the offer of those ordinary shares to it is not treated under the Prospectus Directive as having been made to such persons.

The Company, the representatives and their respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgments and agreements.

This prospectus has been prepared on the basis that any offer of shares in any Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make an offer in that Member State of shares which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for the Company or any of the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither the Company nor the representatives have authorized, nor do they authorize, the making of any offer of shares in circumstances in which an obligation arises for the Company or the representatives to publish a prospectus for such offer.

For the purposes of this provision, the expression an “offer of ordinary shares to the public” in relation to any ordinary shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the ordinary shares to be offered so as to enable an investor to decide to purchase or subscribe the ordinary shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (as amended) and includes any relevant implementing measure in each Member State.

The above selling restriction is in addition to any other selling restrictions set out below.

Notice to Prospective Investors in the United Kingdom

In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.

Notice to Prospective Investors in Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the

 

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Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the Company, or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

Notice to Prospective Investors in the Dubai International Financial Centre

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

Notice to Prospective Investors in Australia

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

Any offer in Australia of the shares may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.

The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.

This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

 

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Notice to Prospective Investors in Hong Kong

The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

Notice to Prospective Investors in Japan

The shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.

Notice to Prospective Investors in Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

  (a)

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

 

  (b)

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

 

  (a)

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

 

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  (b)

where no consideration is or will be given for the transfer;

 

  (c)

where the transfer is by operation of law;

 

  (d)

as specified in Section 276(7) of the SFA; or

 

  (e)

as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

Notice to Prospective Investors in Canada

The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

 

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LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon for us by Latham & Watkins LLP. Certain legal matters will be passed upon for the underwriters by Shearman & Sterling LLP.

EXPERTS

The financial statements of Centrexion Therapeutics Corporation as of December 31, 2017 and 2016, and for each of the years then ended, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

The audit report covering the December 31, 2017 financial statements contains an explanatory paragraph that states that the Company’s recurring losses from operations and negative operating cash flows raise substantial doubt about the entity’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of that uncertainty.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed thereto. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. Upon completion of this offering, we will be required to file periodic reports, proxy statements, and other information with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. You may read and copy this information at the Public Reference Room of the Securities and Exchange Commission, 100 F Street, N.E., Room 1580, Washington, District of Columbia. 20549. You may obtain information on the operation of the public reference rooms by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also maintains an Internet website that contains reports, proxy statements and other information about registrants, like us, that file electronically with the Securities and Exchange Commission. The address of that site is www.sec.gov.

 

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INDEX TO FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm

   F-2

Balance Sheets

   F-3

Statements of Operations

   F-4

Statements of Convertible Preferred Stock and Stockholders’ Deficit

   F-5

Statements of Cash Flows

   F-6

Notes to Financial Statements

   F-7

 

F-1


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Centrexion Therapeutics Corporation:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Centrexion Therapeutics Corporation (the Company) as of December 31, 2016 and 2017, the related statements of operations, convertible preferred stock and stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company incurred operating losses and negative cash flows from operations since inception, expects to continue to incur operating losses for the foreseeable future, and will need to raise additional capital to finance its future operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 1. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2018.

Cambridge, MA

September 10, 2018, except for Note 16, as to which the date is November 5, 2018

 

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CENTREXION THERAPEUTICS CORPORATION

BALANCE SHEETS

(in thousands, except share and per share data)

 

   

December 31,

   

September 30,

   

Pro forma
September 30,

 
   

2016

   

2017

   

2018

   

2018

 
                (unaudited)     (unaudited)  

Assets

       

Current assets:

       

Cash and cash equivalents

  $ 16,231     $ 60,679     $ 42,059     $ 42,059  

Prepaid expenses and other current assets

    827       665       3,807       3,807  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    17,058       61,344       45,866       45,866  

Property and equipment, net

    60       29       23       23  

Goodwill

    1,396       1,396       1,396       1,396  

Acquired in-process research and development

    5,492       5,492       5,492       5,492  

Other assets

    —         76       9       9  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 24,006     $ 68,337     $ 52,786     $ 52,786  
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities, Convertible Preferred Stock and Stockholders’ Deficit

       

Current liabilities:

       

Accounts payable

  $ 1,693     $ 2,025     $ 3,269     $ 3,269  

Accrued expenses and other current liabilities

    1,636       1,363       1,602       1,602  

Long-term debt, current portion

    1,583       1,583       1,032       1,032  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    4,912       4,971       5,903       5,903  

Long-term debt, net of discount

    1,962       390       6,708       6,708  

Warrant liabilities

    2,348       2,446       3,209       1,671  

Deferred tax liability (Note 14)

    1,440       999       999       999  

Other long-term liabilities

    229       579       315       315  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    10,891       9,385       17,134       15,596  
 

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies (Note 12)

       

Convertible preferred stock (Series A, B, C, and D), $0.001 par value; 60,333,333 shares authorized at December 31, 2016, 103,555,395 shares authorized at December 31, 2017 and September 30, 2018 (unaudited); 52,939,004 issued and outstanding at December 31, 2016 and 93,545,253 shares issued and outstanding at December 31, 2017 and September 30, 2018 (unaudited); aggregate liquidation preference of $167,191 at December 31, 2017 and September 30, 2018 (unaudited)

    83,678       152,836       155,627       —    

Stockholders’ deficit:

       

Common stock, $0.001 par value; 150,000,000 shares authorized at December 31, 2016, 200,000,000 shares authorized at December 31, 2017, September 30, 2018 (unaudited) and pro forma September 30, 2018 (unaudited); 1,240,991 shares issued and outstanding at December 31, 2016, 1,244,493 shares issued and outstanding at December 31, 2017 and September 30, 2018 (unaudited), 16,697,197 shares issued and outstanding pro forma September 30, 2018 (unaudited)

    1       1       1       17  

Additional paid-in capital

    2,838       4,259       5,695       164,945  

Notes receivable from stockholders

    (597     (597     —         —    

Accumulated deficit

    (72,805     (97,547     (125,671     (127,772
 

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ deficit

    (70,563     (93,884     (119,975     37,190  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities, convertible preferred stock and stockholders’ deficit

  $ 24,006     $ 68,337     $ 52,786     $ 52,786  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

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CENTREXION THERAPEUTICS CORPORATION

STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

 

    

Year Ended December 31,

   

Nine Months Ended
September 30,

 
    

2016

   

2017

   

2017

   

2018

 
                 (unaudited)  

Revenue

   $ —       $ —       $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research and development

     27,788       17,622       14,077       17,420  

General and administrative

     5,443       6,433       5,119       6,612  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     33,231       24,055       19,196       24,032  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (33,231     (24,055     (19,196     (24,032
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense), net:

        

Interest income

     22       43       19       564  

Interest expense

     (2,126     (983     (617     (205

Loss on conversion of convertible notes payable

     (2,412     (497     —         —    

Loss on disposal of property and equipment

     —         (38     (38     —    

Loss on forgiveness of notes receivable from stockholders

     —         —         —         (599

Loss on extinguishment of long-term debt

     —         —         —         (298

Revaluation of stock warrant liabilities

     75       475       339       (763
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     (4,441     (1,000     (297     (1,301
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss before income tax benefit

     (37,672     (25,055     (19,493     (25,333

Income tax benefit

     —         441       —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (37,672     (24,614     (19,493     (25,333

Plus: Cumulative dividends on convertible preferred stock

     —         (128     —         (2,791
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (37,672   $ (24,742   $ (19,493   $ (28,124
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders— basic and diluted

   $ (30.36   $ (19.91   $ (15.68   $ (22.60
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding—basic and diluted

     1,240,991       1,242,744       1,243,366       1,244,493  
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net-loss per share attributable to common stockholders—basic and diluted (unaudited)

         $ (1.56
        

 

 

 

Pro forma weighted average common shares outstanding—basic and diluted (unaudited)

           16,382,243  
        

 

 

 

 

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CENTREXION THERAPEUTICS CORPORATION

STATEMENT OF CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ DEFICIT

(in thousands, except share and per share data)

 

   

Series A, B, C and D

Convertible

    Preferred Stock    

   

Common Stock

   

Additional
Paid-In
Capital

   

Note
Receivable
from
Stockholders

   

Accumulated
Deficit

   

Total
Stockholders’
Deficit

 
   

Number of
Shares

   

Amount

   

Number of
Shares

   

Par
Value

 

Balance at December 31, 2015

    26,380,685     $ 37,600       1,240,991     $ 1     $ 1,684     $ (597   $ (35,133   $ (34,045

Issuance of Series C convertible preferred stock, net of issuance costs of $1,727

    9,313,996       15,038       —         —         —         —         —         —    

Conversion of convertible notes payable and accrued interest into Series C convertible preferred stock

    17,244,323       31,040       —         —         —         —         —         —    

Stock-based compensation expense

    —         —         —         —         1,154       —         —         1,154  

Net loss

    —         —         —         —           —         (37,672     (37,672
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2016

    52,939,004       83,678       1,240,991       1       2,838       (597     (72,805     (70,563

Exercise of stock options

    —         —         3,502       —         11       —         —         11  

Issuance of Series D convertible preferred stock, net of offering costs of $4,061

    35,277,773       59,439       —         —         —         —         —         —    

Conversion of convertible notes payable and accrued interest into Series D convertible preferred stock

    5,328,476       9,591       —         —         —         —         —         —    

Stock-based compensation expense

    —         —         —         —         1,410       —         —         1,410  

Dividends accrued on Series D convertible preferred stock

    —         128       —         —         —         —         (128     (128

Net loss

    —         —         —         —         —         —         (24,614     (24,614
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2017

    93,545,253       152,836       1,244,493       1       4,259       (597     (97,547     (93,884

Forgiveness of notes receivable from stockholders

    —         —         —         —         —         597       —         597  

Stock-based compensation expense

    —         —         —         —         1,153       —         —         1,153  

Issuance of common stock warrants

    —         —         —         —         283       —         —         283  

Dividends accrued on Series D convertible preferred stock

    —         2,791       —         —         —         —         (2,791     (2,791

Net loss

    —         —         —         —         —         —         (25,333     (25,333
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2018 (unaudited)

    93,545,253     $ 155,627       1,244,493     $ 1     $ 5,695     $ —       $ (125,671   $ (119,975
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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CENTREXION THERAPEUTICS CORPORATION

STATEMENTS OF CASH FLOWS

(in thousands, except share and per share data)

 

    

Years Ended
December 31,

   

Nine Months Ended
September 30,

 
    

2016

   

2017

   

2017

   

2018

 
                 (unaudited)  

Cash flows from operating activities:

        

Net loss

   $ (37,672   $ (24,614   $ (19,493   $ (25,333

Adjustments to reconcile net loss to net cash used in operating activities:

        

Stock-based compensation

     1,154       1,410       1,262       1,153  

Noncash rent expense

     78       228       217       (11

Noncash interest expense

     1,040       468       279       62  

Change in fair value of preferred stock warrant liabilities

     (75     (475     (339     763  

Income tax benefit

     —         (441     —         —    

Depreciation and amortization

     36       21       19       6  

Loss on disposal of property and equipment

     —         38       38       —    

Loss on conversion of convertible notes payable

     2,412       497       —         —    

Loss on extinguishment of long-term debt

     —         —         —         298  

Amortization of debt discount and deferred financing costs

     709       315       177       7  

Forgiveness of loan receivable from stockholders

     —         —         —         597  

Changes in operating assets and liabilities:

        

Prepaid expenses and other current assets

     (183     238       68       (3,093

Accounts payable

     1,046       358       1,922       1,201  

Accrued expenses and other current liabilities

     887       (392     (977     5  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in operating activities

     (30,568     (22,349     (16,827     (24,345
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

        

Purchases of property and equipment

     —         (28     (28     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     —         (28     (28     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

        

Proceeds from issuance of convertible notes payable

     30,000       9,185       5,335       —    

Proceeds from sales of convertible preferred stock

     16,765       63,500       —         —    

Cash paid for issuance costs of convertible notes payable, long-term debt and convertible preferred stock

     (3,151     (4,288     (228     (22

Proceeds from exercise of stock options

     —         11       11       —    

Proceeds from note payable

     1,750       —         —         7,740  

Payments on note payable

     (1,188     (1,583     (1,188     (1,979

Payment of end of term charge and prepayment penalty on long-term debt

     —         —         —         (14
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by financing activities

     44,176       66,825       3,930       5,725  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     13,608       44,448       (12,925     (18,620

Cash and cash equivalents—beginning of period

     2,623       16,231       16,231       60,679  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents—end of period

   $ 16,231     $ 60,679     $ 3,306     $ 42,059  
  

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental disclosures of noncash investing and financing activities:

        

Conversion of convertible notes payable and accrued interest into convertible preferred stock, net

   $ 31,040     $ 9,591     $ —       $ —    

Supplemental cash flow information—Interest paid

   $ 269     $ 208     $ 166     $ 72  

 

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Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

1. Nature of the Business and Basis of Presentation

Centrexion Therapeutics Corporation (the “Company”) was incorporated under the laws of the State of Delaware in February 2013 under the name Centrex Corporation. In August 2013, the company changed its name to Centrex Therapeutics Corporation, and in July 2015 the Company changed its name to Centrexion Therapeutics Corporation. The Company is a late clinical-stage biopharmaceutical company focused on becoming the leader in identifying, developing and commercializing novel, non-opioid, non-addictive therapies to address the large unmet medical need for the treatment of chronic pain.

Risks and Uncertainties

The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.

The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.

Liquidity and Going Concern

The Company has incurred operating losses and negative cash flows from operations since inception, incurred a net loss of $37,672 and $24,742 during the years ended December 31, 2016 and 2017, respectively, and $25,333 (unaudited) for the nine months ended September 30, 2018, and had an accumulated deficit of $97,547 as of December 31, 2017 and $125,671 (unaudited) as of September 30, 2018. The Company has primarily funded these losses through the sale of preferred stock to outside investors. To date, the Company has no product revenue and management expects operating losses to continue for the foreseeable future. The Company has devoted substantially all of its resources to its drug development efforts, comprising research and development, manufacturing, conducting clinical trials for its product candidates, protecting its intellectual property and general and administrative functions relating to these operations. The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain profitable operations. At December 31, 2017, the Company had $60,679 of cash and cash equivalents on hand and at September 30, 2018, the Company had $42,059 (unaudited) of cash and cash equivalents on hand.

The Company is subject to a number of risks, including the need for substantial additional capital for clinical research and product development. Based upon the Company’s $60,679 in existing cash and cash equivalents as of December 31, 2017 and $42,059 (unaudited) as of September 30, 2018, the Company does not have sufficient existing cash and cash equivalents to support operations for at least the next year following the date that the financial statements are issued.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

The conditions in the preceding paragraph raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. Management’s plans to alleviate the conditions that raise substantial doubt regarding the Company’s ability to continue as a going concern include pursuing one or more of the following steps to raise additional funding and/or reduce expenditures:

 

   

Raise funding through the possible sales of the Company’s common or preferred stock, including public or private equity financings.

 

   

Seek a partner to advance development of CNTX-4975 or one or more the Company’s other product candidates in development.

 

   

Defer or terminate planned clinical trials.

There can be no assurance, however, that the Company will receive cash proceeds from any of these potential resources or reduce its operating expenses. Furthermore, to the extent cash proceeds are received or expenses are reduced, there can be no assurance that those proceeds or reductions in expenses would be sufficient to support the Company’s operations for at least the next year following the date that the financial statements are issued. Management has concluded that the likelihood that its plans to obtain sufficient funding from one or more of these sources will be successful or its plans to reduce its operating expenses, while reasonably possible, is less than probable. Accordingly, management has concluded that substantial doubt exists regarding the Company’s ability to continue as a going concern.

If the Company is unable to raise capital when needed or on attractive terms, or if it is unable to procure partnership arrangements to advance its programs, or if it is unable to reduce its operating expenses, the Company would be forced to delay, reduce or eliminate its research and development programs and any future commercialization efforts.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with GAAP and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) requires the use of estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

historical experience, known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although management believes its estimates and assumptions are reasonable when made, they are based upon available information. Management evaluates the estimates and assumptions on an ongoing basis and, if necessary, will make adjustments to reflect current facts and circumstances. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the acquired in-process research and development intangible asset, recoverability of goodwill, research contract costs and accruals, valuation of share-based compensation and valuation convertible preferred stock warrants. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions and, given the subjective element of the estimates and assumptions made, actual results may differ from estimated results.

Interim Financial Information (Unaudited)

The accompanying balance sheet as of September 30, 2018, the statements of operations and of cash flows for the nine months ended September 30, 2017 and 2018, and the statement of convertible preferred stock and stockholders’ deficit for the nine months ended September 30, 2018 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2018 and the results of its operations and its cash flows for the nine months ended September 30, 2017 and 2018. The financial data and other information disclosed in these notes related to the nine months ended September 30, 2017 and 2018 are unaudited. The results for the nine months ended September 30, 2018 are not necessarily indicative of results to be expected for the year ending December 31, 2018, any other interim periods, or any future year or period.

Pro Forma Information (Unaudited)

The accompanying unaudited pro forma balance sheet as of September 30, 2018 has been prepared to give effect to the:

 

   

automatic conversion of all outstanding shares of our preferred stock into an aggregate of 14,979,055 shares of our common stock upon the closing of this offering;

 

   

issuance of an aggregate of 323,061 shares of our common stock upon the closing of the proposed initial public offering to pay accrued dividends on the Company’s Series D preferred stock, assuming the proposed initial public offering had occurred on September 30, 2018;

 

   

automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock assuming the proposed initial public offering had occurred on September 30, 2018, which, based on an assumption that the fair market value of our common stock for purposes of automatic exercise under the warrants will be equal to the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, would result in the issuance of 139,009 shares of our common stock upon the closing of this proposed initial public offering assuming it had occurred on September 30, 2018.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

In the accompanying statements of operations, unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the nine months ended September 30, 2018 has been prepared to give effect to the:

 

   

automatic conversion of all outstanding shares of our preferred stock into an aggregate of 14,979,055 shares of our common stock upon the closing of this proposed initial public offering assuming it had occurred on January 1, 2018;

 

   

issuance of an aggregate of 19,684 shares of our common stock upon the closing of the proposed public offering to pay accrued dividends on the Company’s Series D preferred stock, assuming the proposed initial public offering had occurred on January 1, 2018; and

 

   

automatic cashless exercise of certain outstanding warrants to purchase shares of common stock and preferred stock assuming the proposed initial public offering had occurred on January 1, 2018, which, based on an assumption that the fair market value of our common stock for purposes of automatic exercise under the warrants will be equal to the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and assuming the automatic conversion of the shares of preferred stock issued pursuant to such automatic cashless exercise into shares of common stock, would result in the issuance of 139,009 shares of our common stock upon the closing of this offering.

The accompanying unaudited pro forma information does not give effect to any exercise prior to the closing of this offering of certain outstanding warrants that shall otherwise expire upon such closing to purchase 2,545,405 shares of preferred stock.

Segment Information

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment operating exclusively in the United States.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original or remaining maturity from the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents includes bank demand deposits and a money market fund that invests in U.S. Government and U.S. Treasury securities.

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially subject the Company to concentrations of credit risk principally consist of cash equivalents. The Company limits its credit risk associated with cash equivalents by placing investments in a highly-rated money market fund. The Company has all cash and cash equivalents balances at one accredited financial institution, in amounts that exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including pre-clinical and clinical testing. These programs could be adversely affected by a significant interruption in the supply of such drug substance products.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

Property and Equipment

Property and equipment are stated at cost. Leasehold improvements are amortized over the shorter of the term of the lease or their estimated useful lives. Depreciation of equipment, furniture and fixtures is calculated using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance costs are expensed. The Company reviews the recoverability of all long-lived assets, including the related useful life, whenever events or changes in circumstances indicate that the carrying value amount of a long-lived asset may not be recoverable. The Company uses an estimated useful life of five years for furniture and equipment.

Acquired In-process Research and Development

Acquired in-process research and development (“IPRD”) represents the value of CNTX-4975 to which the Company obtained the rights in its November 20, 2013 acquisition of Vallinex, Inc., and CNTX-2022 which the Company acquired from Arcion, Inc. in a related transaction. The Company reviews IPRD annually to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life of the asset. There were no triggering events or circumstances that would indicate IPRD is impaired as of December 31, 2017.

Goodwill

Goodwill represents the excess of cost over fair value of net assets acquired. The Company evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill might be impaired. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. This step serves as the basis for determining whether it is necessary to perform the two-step goodwill impairment test. If the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying value, then it will perform the two-step test. The two-step test first compares the fair value of the reporting unit to its carrying value. If the fair value exceeds the carrying value, no impairment exists, and the second step is not performed. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded as part of the second step of the test, to the extent that the implied fair value of the reporting unit goodwill is less than the carrying value. The Company performed a qualitative analysis of goodwill in the fourth quarter of 2017, in which management concluded that there was no impairment.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount.

Warrant Liabilities

Warrants outstanding for the purchase of the Company’s convertible preferred stock are a form of a contingently redeemable instrument and, as such, are classified as liabilities on the Company’s balance sheet. Warrant liabilities are revalued at each reporting period, with changes in fair value recorded in the Company’s statement of operations as a component of other income or expense. The warrants will continue to be revalued at each reporting period until such time as they are exercised, expire, are reclassified to permanent equity or are otherwise settled. Valuation of warrant liabilities is based upon estimates of the fair value of the underlying

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

convertible preferred stock and the related volatility and expected term for an illiquid instrument, which could vary significantly from period to period. Fair value of warrant liabilities is determined with reference to the periodic third-party valuations of the Company and its common stock.

Research Contract Costs and Accruals

The Company has entered into various research and development contracts with research institutions and other companies. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs based on progress of the work to date, phase or completion of events, invoices received, contracted costs and related payments. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

   

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

   

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

   

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and preferred stock warrant liabilities are carried at fair value (a Level 1 measurement and Level 3 measurement, respectively), determined according to the fair value hierarchy described above (see Note 4). The carrying values of the Company’s, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. The carrying value of the Company’s outstanding debt as of December 31, 2016 and 2017 and September 30, 2018 (unaudited) (see Note 7) approximated fair value (a Level 3 measurement) based on interest rates currently available to the Company.

Research and Development Costs

Costs incurred in connection with research and development activities are expensed as incurred. Research and development expenses include (i) employee-related expenses, including salaries, benefits, travel and share-based compensation expense, (ii) external research and development expenses incurred under arrangements with third parties, such as contract research and contract manufacturing organizations, investigational sites and consultants, (iii) the cost of acquiring, developing and manufacturing clinical trial materials, and (iv) costs associated with preclinical and clinical activities and regulatory operations. Nonrefundable advance payments for goods and services that will be used in future research and development activities are recorded as prepaid expenses and expensed when the activity is performed or when the goods have been received.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

Patent Costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Accounting for Stock-Based Compensation

The Company measures all stock options and other stock-based awards granted to employees and directors based on the fair value on the date of the grant and recognizes compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company issues stock options and restricted stock awards with only service-based vesting conditions and records the expense for these awards using the straight-line method.

The Company measures stock-based awards granted to consultants and non-employees based on the fair value of the award on the date on which the related service is complete. Compensation expense is recognized over the period during which services are rendered by such consultants and non-employees until completed. At the end of each financial reporting period prior to completion of the service, the fair value of these awards is remeasured using the then-current fair value of the Company’s common stock and updated assumption inputs in the Black-Scholes option-pricing model.

The Company classifies stock-based compensation expense in its statement of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified. The Company records forfeitures as they occur.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the remaining contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

The Company accounts for uncertainty in income taxes recognized. If the tax position is deemed more-likely-than-not to be sustained and would then be assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. To date the Company has no uncertain tax positions and there have been no interest and penalties.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ deficit that result from transactions and economic events other than those with stockholders. There was no difference between net loss and comprehensive loss for each of the years ended December 31, 2016 and 2017 and for each of the nine months ended September 30, 2017 and 2018 (unaudited).

Net Loss per Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options and warrants and unvested restricted stock.

The Company’s convertible preferred stock contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders for all periods presented, since the effects of potentially dilutive securities are anti-dilutive.

Recently Issued and Adopted Accounting Pronouncements

In April 2012, the Jump-Start Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” As an emerging growth company, the Company elected to not take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

In May 2014, the FASB issued ASU 2014-09,Revenue from Contracts with Customers” (Topic 606), regarding the accounting for and disclosures of revenue recognition, with an effective date for public companies of annual and interim periods beginning after December 15, 2016. In July 2015, the FASB issued ASU 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which deferred the effective date of the previously issued revenue recognition guidance by one year. This guidance will be effective for public companies for annual and interim periods beginning after December 15, 2017. For all other entities, including

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

emerging growth companies, this standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods with annual periods beginning after December 15, 2019. Early adoption is permitted.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements–Going Concern (Subtopic 205-40) in which management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. This update is effective for annual periods beginning after December 15, 2016, and early application is permitted for any annual or interim period thereafter. With the adoption of the ASU 2014-15, the Company has expanded its disclosures within the Liquidity and Going Concern section of Note 1.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), with guidance regarding the accounting for and disclosure of leases. The update requires lessees to recognize all leases, including operating leases, with a term greater than 12 months on the balance sheet. This update also requires lessees and lessors to disclose key information about their leasing transactions. This guidance will be effective for public companies for annual and interim periods beginning after December 15, 2018. For all other entities, including emerging growth companies, this standard is effective for annual reporting periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the effect that this guidance will have on its financial statements and related disclosures.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): “Scope of Modification Accounting,” which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. This guidance was effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company adopted the new guidance effective January 1, 2018, and it did not have an effect on its financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently assessing the potential impact of adopting ASU 2017-11 on its financial statements and related disclosures.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07. Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the guidance in Topic 718 to include share-based payments for goods and services to non-employees and generally aligns it with the guidance for share-based payments to employees. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company does not anticipate a significant impact upon adoption.

3. Fair Value of Financial Assets and Liabilities

A summary of the financial assets and liabilities that are measured on a recurring basis at fair value as of December 31, 2016 and 2017, and September 30, 2018 (unaudited), is as follows:

 

    

December 31, 2016

 
                  

Fair Value Measurement Based on

 
    

Carrying
Amount

    

Fair Value

    

Quoted Prices in
Active Markets
(Level 1)

    

Significant
Other
Observable
Inputs (Level 2)

    

Significant
Unobservable
Inputs (Level 3)

 

Assets

              

Money market funds (cash equivalents)

   $ 11,231      $ 11,231      $ 11,231      $ —        $ —    

Liabilities

              

Convertible preferred stock warrant liabilities

   $ 2,348      $ 2,348      $ —        $ —        $ 2,348  

 

    

December 31, 2017

 
                  

Fair Value Measurement Based on

 
    

Carrying
Amount

    

Fair Value

    

Quoted Prices in
Active Markets
(Level 1)

    

Significant
Other
Observable
Inputs (Level 2)

    

Significant
Unobservable
Inputs (Level 3)

 

Assets

              

Money market funds (cash equivalents)

   $ 56,354      $ 56,354      $ 56,354      $ —        $ —    

Liabilities

              

Convertible preferred stock warrant liabilities

   $ 2,446      $ 2,446      $ —        $ —        $ 2,446  

 

    

September 30, 2018 (unaudited)

 
                  

Fair Value Measurement Based on

 
    

Carrying
Amount

    

Fair Value

    

Quoted Prices in
Active Markets
(Level 1)

    

Significant
Other
Observable
Inputs (Level 2)

    

Significant
Unobservable
Inputs (Level 3)

 

Assets

              

Money market funds (cash equivalents)

   $ 37,057      $ 37,057      $ 37,057      $ —        $ —    

Liabilities

              

Convertible preferred stock warrant liabilities

   $ 3,209      $ 3,209      $ —        $ —        $ 3,209  

Money market funds were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 1 measurement within the fair value hierarchy.

During the years ended December 31, 2016 and 2017, and nine months ended September 30, 2018 there were no transfers between Level 1, Level 2 and Level 3. During the years ended December 31, 2016 and 2017,

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

and nine months ended September 30, 2018 there were new issuance and fair value adjustments in the Company’s Level 3 financial liabilities as disclosed in note 8.

The preferred stock warrant liability represents the fair values of warrants to purchase Series B, Series C and Series D convertible preferred stock. The fair values of the warrants are based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the preferred stock warrants utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the preferred stock warrants. The Company assessed these assumptions and estimates on a quarterly basis as additional information impacting the assumptions was obtained.

The quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the preferred stock warrant liability include the fair value per share of the underlying convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying convertible preferred stock. The Company determines the fair value per share of the underlying preferred stock by taking into consideration its most recent sales of its convertible preferred stock as well as additional factors that the Company deems relevant. The Company estimates its expected stock volatility based on the historical volatility of a representative group of public companies in the biotechnology industry for the expected terms. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the expected terms. The Company has estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends.

Fair value of the Company’s warrants is determined with reference to the periodic third-party valuations of the Company’s preferred and common stock.

4. Property and Equipment, Net

Property and equipment, net, consisted of the following:

 

    

  As of December 31,  

    

As of September 30,

 
    

2016

    

2017

    

2018

 
                   (unaudited)  

Furniture and equipment

   $ 93      $ 43      $ 43  

Leasehold improvements

     38        —          —    
  

 

 

    

 

 

    

 

 

 
     131        43        43  

Less accumulated depreciation and amortization

     (71      (14      (20
  

 

 

    

 

 

    

 

 

 

Property and equipment, net

   $ 60      $ 29      $ 23  
  

 

 

    

 

 

    

 

 

 

Depreciation expense was $36 and $21 for the years ended December 31, 2016 and 2017, respectively, and $6 (unaudited) for the nine months ended September 30, 2018.

In October 2016, the Company entered into a lease for office space in Boston, Massachusetts, and in June 2017, relocated its corporate offices from Baltimore, Maryland. As a result of the relocation of its offices, the Company disposed of certain office furniture and equipment and recorded a loss on disposal of assets of $38 for the year ended December 31, 2017.

 

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Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

 

    

As of December 31,

    

As of September 30,

 
    

2016

    

2017

    

2018

 
                   (unaudited)  

Clinical trial costs

   $ 1,132      $ 835      $ 887  

Compensation and benefits

     172        114        119  

Consulting

     68        50        299  

Legal fees

     205        —          113  

Offering costs

     18        258        —    

Interest

     21        13        24  

Other

     20        93        160  
  

 

 

    

 

 

    

 

 

 
   $ 1,636      $ 1,363      $ 1,602  
  

 

 

    

 

 

    

 

 

 

6. Long-term Debt

On April 22, 2015 (the “Closing Date”), the Company entered into a term loan facility of up to $10,000 (the “Term Loan”) with Silicon Valley Bank (“SVB”). The proceeds were used for general corporate and working capital purposes. At December 31, 2017, the Company had $1,979 in principal outstanding under the Term Loan.

The Term Loan is governed by a loan and security agreement, dated April 22, 2015, as amended on January 20, 2016, January 1, 2017 and June 29, 2018, between the Company and SVB (the “SVB Loan Agreement”). The SVB Loan Agreement provided for two separate tranches under which the Company could borrow. The first tranche was for up to $7,500 and was available until February 29, 2016, with an initial borrowing of $3,000 required on the Closing Date. The second tranche was available until January 31, 2017 for $2,500 and required that the Company meet certain milestone events. On February 29, 2016, the Company borrowed an additional $1,750 million under the first tranche for a total of $4,750 borrowed against the Term Loan. There were no additional borrowings under the Term Loan.

 

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Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

On June 29, 2018, the SVB and the Company further amended the SVB Loan Agreement to provide for a facility of $7,740 (unaudited) that was advanced to the Company in a single net amount of $6,302 (unaudited) after repaying in full the Company’s then outstanding obligations and liabilities to the bank under the Term Loan (the “2018 Term Loan”). The 2018 Term Loan matures on November 1, 2021 and accrues interest at a floating rate per annum equal to the greater of 3.5% or the prime rate less 1.25% (4.0% as of September 30, 2018). The 2018 Term Loan provides for interest-only payments on a monthly basis until June 1, 2019. Thereafter, payments are payable in equal monthly installments of principal, plus all accrued and unpaid interest. The Company may prepay the Term Loan in whole upon 30 days’ prior written notice to SVB. Any such prepayment of the Term Loan is subject to a prepayment charge as follows: for a prepayment made on or prior to June 27, 2019, 3.0% of the then outstanding principal amount; for a prepayment made after June 27, 2019, but on or prior to June 27, 2020, 2.0% of the then outstanding principal amount; and for a prepayment made after June 27, 2020 but prior to the loan maturity date, 1.0% of the then outstanding principal balance. Amounts outstanding during an event of default are payable upon SVB’s demand and will accrue interest at an additional rate of 4.0% per annum of the past due amount outstanding. The minimum future principal payments are as follows (unaudited):

 

Year ending December 31,

  

2018

   $ —    

2019

     1,806  

2020

     3,096  

2021

     2,838  

Unamortized discount relating to deferred financing costs

     (20
  

 

 

 

Total

     7,720  

Less current portion

     (1,032
  

 

 

 

Long-term portion

   $ 6,688  
  

 

 

 

At the end of the loan term (whether at maturity, by prepayment in full or otherwise), the Company is required to pay a final end of term charge to SVB in the amount of 5.0% of the aggregate original principal amount advanced by SVB. The amount of the end of term charge is being accrued over the loan term as interest expense.

In connection with the Term Loan, in April 2015 the Company issued to each of SVB and its affiliate a warrant to purchase shares of the common stock of the Company at an exercise price of $3.03 per share. The warrants are exercisable for total of 24,272 shares of common stock. The warrants are exercisable until April 21, 2022. The Company estimated the fair value of the warrants for shares exercisable on the issue date in April 2015 to be $56. The value of the warrants was recorded as a discount to the loan. The fair value of the warrants was estimated on the date of issue for the exercisable shares at that date using the Black-Scholes option-pricing model. The Black-Scholes assumptions used to value the warrants were: 7-year contractual life, 85.5% volatility rate, 1.75% risk-free interest rate and zero dividends.

In connection with the 2018 Term Loan, in June 2018, the Company issued to SVB a warrant to purchase 58,817 shares of the common stock of the Company at an exercise price of $8.06 per share and exercisable until June 26, 2028. The Company estimated the fair value of the warrants for shares exercisable on the issue date in June 2018 to be $283 (unaudited). In connection with the 2018 Term Loan and repayment of the existing loan the Company recognized a $298 (unaudited) extinguishment loss.

At September 30, 2018 (unaudited), the Company’s balance of unamortized deferred financing costs was $20 which is being amortized to interest expense using the effective interest method over the term of the loan.

 

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Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

7. Convertible Notes Payable

2019 Notes

From March to June 2016, the Company issued convertible notes to various parties and stockholders totaling $30,000 (the “2019 Notes”). The 2019 Notes bore interest at 5% per annum. All unpaid principal, together with the then accrued interest, for each 2019 Note outstanding was due and payable at any time after June 1, 2019. The 2019 Notes contained a number of conversion, repayment, and prepayment provisions:

 

   

Automatic conversion—In the event of certain defined financing activities prior to maturity, the outstanding amount of the 2019 Notes were to convert into shares or principal amount of the securities issued in such financing at a price per share or principal amount equal to one hundred percent (100%) of the price per share or principal amount paid for the newly issued securities by investors in the financing.

 

   

Optional conversion—In the event of a financing outside the defined financing activities prior to maturity, upon prior written consent of the majority of the 2019 note holders the outstanding amount of the 2019 Notes would have converted into shares or principal amount of the securities issued in such financing at a price per share or principal amount equal to one hundred percent (100%) of the price per share or principal amount paid for the newly issued securities by investors in the financing.

 

   

Events of default—Upon the occurrence or existence of any event of default involving a failure to pay, breach of representation or warranty, or breach of covenant, the holders of the 2019 Notes may have declared the 2019 Notes immediately due and payable. Upon the occurrence or existence of any event of default involving voluntary or involuntary bankruptcy or insolvency proceedings, the 2019 Notes would have automatically become immediately due and payable.

 

   

Voluntary prepayment—The 2019 Notes were not to be prepaid in whole or in part at any time by the Company without prior written consent of the holders of a majority of the then aggregate outstanding amount of the 2019 Notes.

 

   

Mandatory prepayment—In the event of a change in control prior to a conversion of the 2019 Notes, the outstanding amount may have been repaid to the holders in an amount equal to the higher of (a) one and one-half times (1.5x) the outstanding amount, immediately after the closing of such change in control, or (b) the amount in cash the holders would have received upon consummation of such change in control if such holder’s 2019 notes had been converted into shares of the Company’s common stock at a price per share equal to $11.24 per share immediately prior thereto.

In conjunction with the 2019 Notes, the Company issued an aggregate of 1,714,285 warrants to the 2019 Note holders to purchase securities in the conversion of the 2019 Notes with an initial exercise price of $1.75 per share. The warrants issued in connection with the 2019 Notes are considered freestanding financial instruments and are classified as liabilities in the Company’s balance sheets as of December 31, 2016 and 2017 (See Note 8).

In December 2016, the Company completed a qualified financing and all of the 2019 Notes and the accrued interest were converted into shares of Series C preferred stock. At the time of the conversion the company recorded a loss on the conversion of the 2019 Notes which is included in other income (expense), net in the accompanying statements of operations.

 

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Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

The issuance and conversion of the 2019 Notes for Series C preferred stock is summarized as follows:

 

    

2016

 

2019 Note proceeds

   $ 30,000  

Warrant liability on issuance

     (987
  

 

 

 

Allocation of proceeds to 2019 Notes

     29,013  

Amortization of discount on 2019 Notes to interest expense

     224  

Loss on conversion

     763  
  

 

 

 
     30,000  

Accrued interest on conversion

     1,040  
  

 

 

 

Outstanding amount of 2019 Notes on conversion

     31,040  

Series C preferred stock price

   $ 1.80  
  

 

 

 

Series C preferred stock shares

     17,244,322  
  

 

 

 

Direct and incremental costs related to the issuance of the 2019 Notes amounted to $2,113. From the date of issuance of the 2019 Notes to the date of conversion, the Company had amortized $464 of the issuance costs to interest expense. On conversion of the 2019 Notes into shares of Series C preferred stock in December 2016, the Company recorded the unamortized balance of the 2019 Note issue costs ($1,649) as an additional loss on the conversion of the 2019 Notes which is included in other income (expense), net in the accompanying statements of operations.

2018 Notes

From April to October 2017, the Company issued notes to various parties and stockholders totaling $9,185 (the “2018 Notes”). The 2018 Notes bore interest at 10% per annum. All unpaid principal, together with the then accrued interest, for each 2018 Note outstanding was due and payable at any time after December 31, 2018. The 2018 Notes contained a number of conversion, repayment, and prepayment provisions:

 

   

Automatic conversion—In the event of certain defined financing activities prior to maturity, the outstanding amount of the 2018 Notes were to convert into shares or principal amount of the securities issued in such financing at a price per share or principal amount equal to one hundred percent (100%) of the price per share or principal amount paid for the newly issued securities by investors in the financing.

 

   

Optional conversion—In the event of a financing outside the defined financing activities prior to maturity, upon prior written consent of the majority of the 2018 note holders the outstanding amount of the 2018 Notes would have converted into shares or principal amount of the securities issued in such financing at a price per share or principal amount equal to one hundred percent (100%) of the price per share or principal amount paid for the newly issued securities by investors in the financing.

 

   

Event of default—Upon the occurrence or existence of any event of default involving a failure to pay, breach of representation or warranty, or breach of covenant, the holders of the 2018 Notes may have declared the 2018 Notes immediately due and payable. Upon the occurrence or existence of any event of default involving voluntary or involuntary bankruptcy or insolvency proceedings, the 2018 Notes would have automatically become immediately due and payable.

 

F-21


Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

   

Voluntary prepayment—The 2018 Notes were not to be prepaid in whole or in part at any time by the Company without prior written consent of the holders of a majority of the then aggregate outstanding amount of the 2018 Notes.

 

   

Mandatory prepayment—In the event of a change in control prior to a conversion of the 2018 Notes, the outstanding amount may have been repaid to the holders in an amount equal to the higher of (a) one and one-half times (1.5x) the outstanding amount, immediately after the closing of such change in control, or (b) the amount in cash the holders would have received upon consummation of such change in control if such holder’s 2018 notes had been converted into shares of the Company’s common stock at a price per share equal to $11.24 per share immediately prior thereto.

In conjunction with the 2018 Notes, the Company issued an aggregate of 831,120 warrants to the 2018 Note holders to purchase securities in the conversion of the 2018 Notes with an initial exercise price of $1.80 per share. The warrants issued in connection with the 2018 Notes are considered freestanding financial instruments and are classified as liabilities in the Company’s balance sheets as of December 31, 2017 (See Note 8).

In December 2017, the Company completed a qualified financing and all of the 2018 Notes and accrued interest were converted into shares of Series D preferred stock. At the time of the conversion the Company recorded a loss on the conversion of the 2018 Notes which is included in other income (expense), net in the accompanying statements of operations.

The issuance and conversion of the 2018 Notes for Series D preferred stock is summarized as follows:

 

    

2017

 

2018 Note proceeds

   $ 9,185  

Warrant liability on issuance

     (509
  

 

 

 

Allocation of proceeds to 2018 Notes

     8,676  

Amortization of discount on 2018 Notes to interest expense

     143  

Loss on conversion

     366  
  

 

 

 
     9,185  

Accrued interest on conversion

     406  
  

 

 

 

Outstanding amount of 2018 Notes on conversion

     9,591  

Series D preferred stock price

   $ 1.80  
  

 

 

 

Series D preferred stock shares

     5,328,476  
  

 

 

 

Direct and incremental costs related to the issuance of the 2018 Notes amounted to $291. From the date of issuance of the 2018 Notes to the date of conversion the Company had amortized $160 of the issuance costs to interest expense. On conversion of the 2018 Notes into shares of Series D preferred stock in December 2017, the Company recorded the unamortized balance of the 2018 Note issue costs ($131) as an additional loss on the conversion of the 2018 Notes which is included in other income (expense), net in the accompanying statements of operations.

 

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Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

8. Warrant Liabilities

Outstanding warrants for the purchase of shares of the Company’s series of preferred stock and common stock and the associated liabilities included in the Company’s balance sheets as of December 31, 2016 and 2017 are summarized as follows:

 

   

Warrants for
Series B
Preferred Stock

   

Warrants for

Series C
Preferred Stock

   

Warrants for
Series D
Preferred Stock

   

Warrants for
Common Stock

   

Total

Warrant
Liability

 
   

Number

   

Liability
Amount

   

Number

   

Liability
Amount

   

Number

   

Liability
Amount

   

Number

   

Liability
Amount

 

Balance at January 1, 2016

    619,314     $ 276       —       $ —         —       $ —         126,033       472     $ 748  

Issued as inducement for 2019 Notes

    —         —         1,714,285       982       —         —         —         —         982  

Issued as compensation to placement agent

    —         —         1,353,978       693       —         —         —         —         693  

Exercised

    —         —         —         —         —         —         —         —         —    

Cancelled

    —         —         —         —         —         —         —         —         —    

Adjustment to fair value

    —         42       —         (37     —         —         —         (80     (75
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2016

    619,314       318       3,068,263       1,638       —         —         126,033       392       2,348  

Issued as inducement for 2018 Notes

    —         —         —         —         831,120       514       —         —         514  

Issued as compensation to placement agent

    —         —         —         —         —         —         18,905       59       59  

Exercised

    —         —         —         —         —         —         —         —         —    

Cancelled

    —         —         —         —         —         —         —         —         —    

Adjustment to fair value

    —         (52     —         (252     —         (103     —         (68     (475
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2017

    619,314     $ 266       3,068,263     $ 1,386       831,120     $ 411       144,938     $ 383     $ 2,446  

Exercised

    —         —         —         —         —         —         —         —         —    

Cancelled

    —         —         —         —         —         —         —         —         —    

Adjustment to fair value

    —         6       —         565       —         117       —         75       763  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2018 (unaudited)

    619,314     $ 272       3,068,263     $ 1,951       831,120     $ 528       144,938     $ 458     $ 3,209  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Warrants for Series B Preferred Stock

In connection with closings of the Company’s Series B preferred stock 2013 and 2014, the Company granted to its placement agent an aggregate of 619,314 warrants to purchase Series B convertible preferred stock with an exercise price of $2.01 per warrant for a share of Series B preferred stock and a term of five years from issuance (the “Series B Warrants”).

The fair value of the Series B Warrants at issuance ($209) was recorded as a Series B Warrants liability. The Company recorded fair value adjustments that resulted in a loss of $42 for the year ended December 31, 2016, a gain of $52 for the year ended December 31, 2017 and a loss of $6 for the nine months ended September 30, 2018 (unaudited).

 

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Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

Warrants for Series C Preferred Stock

In connection with closings of the Company’s 2019 Notes in 2016, the Company granted an aggregate of 1,714,285 warrants to purchase what became the Company’s Series C convertible preferred stock on conversion of the 2019 Notes in December 2016 with an exercise price of $1.75 per warrant for a share of Series C preferred stock and a term of five years from issuance (See Note 7). In addition, in December 2016 the Company granted 1,353,978 warrants to purchase the Company’s Series C convertible preferred stock to the placement agent involved in securing the Series C convertible preferred stock financing with an exercise price of $1.98 per warrant for a share of Series C preferred stock and a term of five years from issuance. Together, the “Series C Warrants”.

The fair value of the Series C Warrants at issuance (an aggregate of $1,675) was recorded as a Series C Warrants liability. The Company recorded fair value adjustments resulting in gains of $37 and $252 for the years ended December 31, 2016 and 2017, respectively, and a loss of $565 for the nine months ended September 30, 2018 (unaudited).

Warrants for Series D Preferred Stock

In connection with closings of the Company’s 2018 Notes in 2017, the Company granted an aggregate of 831,120 warrants to purchase what became the Company’s Series D convertible preferred stock on conversion of the 2018 Notes in December 2017 with an exercise price of $1.80 per warrant for a share of Series D preferred stock and a term of five years from issuance (See Note 7).

The fair value of the Series D Warrants at issuance (an aggregate of $514) was recorded as a Series D Warrants liability. The Company recorded fair value adjustments resulting in a gain of $103 for the year ended December 31, 2017 and a loss of $117 for the nine months ended September 30, 2018 (unaudited).

Warrants for Common Stock

In connection with closings of convertible notes in 2013, the Company granted an aggregate of 27,993 warrants to purchase the Company’s common stock with an exercise price of $10.93 per warrant for a share of common stock and a term of five years from issuance. In addition, the Company granted 98,040 warrants to purchase the Company’s common stock to the placement agent involved in securing the Series B convertible preferred stock financing with an exercise price of $12.56 per warrant for a share of common stock and a term of five years from issuance.

In connection with closings of the Company’s Series D preferred stock in 2017, the Company granted to its placement agent an aggregate of 18,905 warrants to purchase common stock with an exercise price of $11.25 per warrant for a share of common stock and a term of five years from issuance. The fair value of the common warrant at issuance ($59) was recorded as a common warrant liability.

The Company recorded fair value adjustments that resulted in gains of $80 and $68 for the years ended December 31, 2016 and 2017, respectively, and a loss of $75 for the nine months ended September 30, 2018 (unaudited).

The Company’s liability-classified warrants are exercisable as follows:

 

   

2,545,405 of the warrants having exercise prices ranging from $1.75 to $1.80 are exercisable on a cash basis and expire upon the earlier to occur of the fifth anniversary of their date of issue (which begin in December 2018 and range through December 2022), a change of control of the Company, or the closing of an initial public offering.

 

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Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

   

2,878,369 of the warrants having exercise prices ranging from $1.75 to $2.01 are exercisable at various dates any time prior to the fifth anniversary of their date of issue (which begin in November 2018 and range through December 2022) and automatically exercise on a net cashless basis in the event of a change of control of the Company or an initial public offering.

9. Convertible Preferred Stock

The Company has issued Series A, Series B, Series C, and Series D convertible preferred stock (collectively, the “Convertible Preferred Stock”). As of December 31, 2017, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 103,555,395 shares of $0.001 par value preferred stock. All of the Company’s convertible preferred stock is classified outside of stockholders’ deficit because the shares contain deemed liquidation rights that are a contingent redemption feature not solely within the control of the Company.

The following table summarizes the Company’s outstanding convertible preferred stock as of December 31, 2016 and 2017:

 

    

Shares
Authorized

    

Shares
Issued and
Outstanding

    

Carrying
Value

    

Liquidation
Preference

    

Conversion
Price (Per
Share)

 

Series A

     5,000,000        5,000,000      $ 5,672      $ 8,750      $ 10.93  

Series B

     21,999,999        21,380,685        31,927        37,416      $ 10.93  

Series C

     33,333,334        26,558,319        46,079        47,805      $ 11.24  
  

 

 

    

 

 

    

 

 

    

 

 

    

Balance at December 31, 2016

     60,333,333        52,939,004        83,678        93,971     

Series D

     43,222,062        40,606,249        69,158        73,220      $ 11.24  
  

 

 

    

 

 

    

 

 

    

 

 

    

Balance at December 31, 2017 and September 30, 2018 (unaudited)

     103,555,395        93,545,253      $ 152,836      $ 167,191     
  

 

 

    

 

 

    

 

 

    

 

 

    

The holders of the Convertible Preferred Stock have the following rights and preferences:

Voting

Each holder of outstanding shares of convertible preferred stock shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of convertible preferred stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Holders of convertible preferred stock shall vote together with the holders of common stock as a single class.

At any time when at least 10,805,515 shares of Series D convertible preferred stock are outstanding the Company shall not (a) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Company in a manner that material adversely affects the powers, preferences or rights of the Series D convertible preferred stock, (b) or authorize, create, or issue any additional class or series of capital stock that ranks senior to or pari passu with the Series D convertible preferred stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends or rights of redemption, (c) effect any merger or consolidation or voluntarily liquidate, dissolve or wind-up the business and affairs of the Company, (d) redeem or repurchase any shares of capital stock of the Corporation unless (i) at the lower of fair market value or cost, or (ii) approved by the Board of Directors, (e) declare or pay any dividend, or make any distribution on, any shares of the Company’s capital stock except dividends or other distributions payable on the

 

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Table of Contents

CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

Common Stock solely in the form of additional shares of Common Stock, Accruing Dividends and as otherwise provided in the Certificate of Incorporation, (f) amend or adopt any equity incentive plan, or (g) increase or decrease the number of directors constituting the entire Board of Directors.

Dividends

The holders of Series D convertible preferred stock accrue dividends at the rate per annum of $0.117 per share, from and after the date of issuance, until the earliest to occur of (a) the first anniversary of such date of issuance, (b) any conversion of such shares of Series D convertible preferred stock, (c) any dissolution or winding up of the Company, and (d) any Deemed Liquidation Event (the “Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and payable in kind in shares of Common Stock (based on a value of $11.24 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock) on the earliest to occur of (i) the first anniversary of issuance of the applicable share of Series D convertible preferred stock, (ii) any conversion of such share of Series D convertible preferred stock, (iii) any liquidation, dissolution or winding up of the Company, and (iv) any Deemed Liquidation Event.

Other than Accruing Dividends, which are payable in accordance with the terms outlined above, dividends are payable only when, as, and if declared by the board of directors. The holders of preferred shares shall be entitled to receive dividends out of the assets of the Company legally available. If a dividend is paid or declared, the holders of Series D preferred stock shall first receive a dividend on each outstanding share, followed by Series C preferred stock, Series B preferred stock and Series A preferred stock, respectively. The dividend is to be equal to that dividend per share as would equal the product of the dividend payable on each share of such class or series and the number of shares of common stock issuable upon conversion of a share of preferred stock on the dividend declaration date.

Liquidation

In the event of any liquidation, voluntary or involuntary, dissolution or winding up of the Company or Deemed Liquidation Event (as defined below), holders of shares of Convertible Preferred Stock then outstanding are entitled to receive, prior and in preference to all other stockholders and/or any other class or series of securities ranking junior to the Convertible Preferred Stock, and to the extent available, an amount per share equal to the greater of (i) the Original Issue Price (as defined below), plus any Accruing Dividends accrued but unpaid, whether or not declared, together with any other dividends declared but unpaid, or (ii) such amount per share as would have been payable had all shares of Convertible Preferred Stock been converted into Common Stock immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event. In the event that proceeds are not sufficient to permit payment in full to these holders, the proceeds will be ratably distributed among the holders of Convertible Preferred Stock on a pari passu basis to the full preferential amount each such holder is otherwise entitled to receive. The Original Issue Price is $1.75 per share for Series A convertible preferred stock, $1.75 per share for Series B convertible preferred stock, $1.80 per share for Series C convertible preferred stock, and $1.80 per share for Series D convertible preferred stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Convertible Preferred Stock.

After payments have been made in full to the holders of convertible preferred stock, then, to the extent available, holders of common stock will receive the remaining amounts available for distribution ratably in proportion to the number of common shares held provided.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

A Deemed Liquidation Event includes a merger or consolidation (other than one in which stockholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company.

Conversion Rights

Each share of preferred stock shall be convertible, at the option of the holder, into such number of common shares as determined by dividing the Original Issue Price for each series of shares by the conversion price. The conversion price for the Series A convertible preferred stock is $10.93, for the Series B convertible preferred stock is $10.93, for the Series C convertible preferred stock is $11.24 and for the Series D convertible preferred stock is $11.24.

Mandatory Conversion

Upon either the closing of sales of shares of common stock to the public pursuant to an effective registration resulting in $50,000,000 of gross proceeds or the vote or written consent of at least a majority of the then outstanding shares of Series A or B convertible preferred stock, all outstanding shares shall automatically be converted into shares of common stock at the then effective conversion rate.

Anti-Dilution

Holders of preferred stock are afforded anti-dilution protection with respect to corporate events such as stock splits and recapitalizations.

10. Stockholders’ Deficit

Common Stock

As of December 31, 2017, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 200,000,000 shares of $0.001 par value common stock.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of the Convertible Preferred Stock. When dividends are declared on shares of common stock, the Company must declare at the same time a dividend payable to the holders of Convertible Preferred Stock equivalent to the dividend amount they would receive if each preferred share were converted into common stock. The Company may not pay dividends to common stockholders until all dividends accrued or declared but unpaid on the Convertible Preferred Stock have been paid in full. No dividends had been declared to date.

As of December 31, 2017 and September 30, 2018 (unaudited), the Company had reserved 103,555,395 shares for the conversion of the outstanding shares of Convertible Preferred Stock (see Note 9), the exercise of outstanding stock options and the number of shares remaining available for future grant under the Company’s 2013 Plan, the exercise of outstanding common stock warrants, and the exercise of outstanding warrants to purchase Series B, Series C and Series D convertible preferred stock assuming they become warrants to purchase common stock (see Note 8).

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

Common Stock Warrants

In addition to the liability classified warrants for the purchase of shares of the Company’s series of preferred stock and common stock (Note 8), the Company has the following equity classified warrants outstanding for the purchase of shares of the Company’s common stock:

 

Balance at January 1, 2016 and December 31, 2016

     72,411  

Issued as compensation for strategic consulting services

     160,128  
  

 

 

 

Balance at December 31, 2017

     232,539  

Issued to SVB in connection with 2018 Term Loan (note 6)

     58,817  
  

 

 

 

Balance at September 30, 2018 (unaudited)

     291,356  
  

 

 

 

In addition to the warrants to purchase shares of the common stock of the Company issued to SVB and its affiliate in connection with Term Loan (Note 6), equity classified warrants include those issued to the two consultants as compensation for services provided to the Company. These warrants have an exercise price of $10.93 per warrant to purchase common stock, a term of five years from issuance and are fully vested to the consultants as of December 31, 2017.

The Company’s equity-classified warrants are exercisable as follows:

 

   

160,128 warrants issued as compensation for strategic consulting services with an exercise price of $10.93 are exercisable at any time prior to December 30, 2021 and automatically exercise on a net cashless basis in the event of a change of control of the Company or an initial public offering.

 

   

48,039 warrants issued as compensation for strategic consulting services with an exercise price of $10.93 are exercisable at any time prior to February 1, 2019 and automatically exercise on a net cashless basis in the event of a change of control of the Company or an initial public offering.

 

   

83,189 warrants issued to SVB in connection with the Company’s term loan facility having exercise prices ranging from $3.03 to $8.06 are exercisable on a cash or cashless basis at any time prior to April 22, 2022 and do not expire or automatically exercise in the event of an initial public offering.

2013 Stock Incentive Plan

On November 19, 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Plan”) which provides for the Company to grant incentive stock options or nonqualified stock options for the purchase of common stock, or other stock-based awarded, to employees, members of the board of directors and consultants of the Company. The 2013 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of stock option may not be greater than ten years. The Company generally grants stock-based awards with service conditions only (“service-based” awards).

Stock options granted under the 2013 Plan generally vest over four years and expire after ten years, although options have been granted with vesting terms less than four years.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

The total number of shares of common stock that may be issued under the 2013 Plan was 1,200,961 shares when the 2013 Plan was adopted. In February 2016 and July 2017, the Company increased the number of shares of common stock reserved for issuance under the 2013 Plan by 400,320 shares and 624,500 shares, respectively. In August 2018 the board of directors of the Company adopted and approved, and the stockholders of the Company approved, an amendment to the 2013 Plan to increase the number of shares of the Company’s common stock, reserved and authorized for issuance to a total of 2,305,844 shares. The total number of shares of common stock that may be issued under the 2013 Plan was 2,225,781 shares as of December 31, 2017, of which 661,699 shares remained available for future grant. The total number of shares of common stock that may be issued under the 2013 Plan was 2,305,844 as of September 30, 2018 (unaudited), of which 320,527 shares remained available for future grant. See Subsequent events Note 16.

As required by the 2013 Plan, the exercise price for stock options granted is not to be less than the fair value of common shares as determined by the Company as of the date of grant. The Company values its common stock by taking into consideration its most recently available valuation of common shares performed by management and the board of directors as well as additional factors which may have changed since the date of the most recent contemporaneous valuation through the date of grant.

A summary of stock option activity for employee and nonemployee awards under the 2013 Plan is presented below:

 

    

Number of
Shares

    

Weighted
Average
Exercise
Price

    

Weighted
Average
Remaining
Contractual
Term

    

Aggregate
Intrinsic
Value

 

Outstanding as of December 31, 2015

     938,047      $ 2.52        8.7      $ 772  

Granted

     308,737      $ 4.02        

Exercised

     —        $ 0.00        

Cancelled

     —        $ 0.00        
  

 

 

          

Outstanding as of December 31, 2016

     1,246,784      $ 2.89        8.0      $ 2,415  

Granted

     337,973      $ 5.54        

Exercised

     (3,502    $ 3.26        

Cancelled

     (20,675    $ 4.06        
  

 

 

          

Outstanding as of December 31, 2017

     1,560,580      $ 3.45        7.5      $ 3,064  

Granted

     421,235      $ 7.74        

Exercised

     —        $ 0.00        

Cancelled

     —        $ 0.00        
  

 

 

          

Outstanding as of September 30, 2018 (unaudited)

     1,981,815      $ 4.36        7.4      $ 7,684  
  

 

 

          

Options vested and expected to vest at December 31, 2017

     1,560,580           

Options exercisable at December 31, 2017

     1,308,237           

Options vested and expected to vest at September 30, 2018 (unaudited)

     1,981,815           

Options exercisable at September 30, 2018 (unaudited)

     1,590,812           

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

The weighted average grant-date fair value of stock options granted during the years ended December 31, 2016 and 2017 was $4.00, and $5.56 per share, respectively. The total intrinsic value of stock options exercised during the year ended December 31, 2017 was $8.

The weighted average grant-date fair value of stock options granted during the nine months ended September 30, 2018 was $5.87 (unaudited). There were no stock options exercised during the nine months ended September 30, 2018 (unaudited).

As of December 31, 2016 and 2017, and September 30, 2018 there were no outstanding unvested service-based stock options held by non-employees.

Stock-based Compensation

The Company has recorded stock-based compensation expense for employees of $926, and $1,168 during the years ended December 31, 2016, and 2017, respectively. As of December 31, 2017, there was $625 of unrecognized compensation cost related to unvested stock-based compensation arrangements granted under the 2013 Plan. The compensation is expected to be recognized over a weighted-average period of 2.5 years at December 31, 2017.

The Company has recorded stock-based compensation expense of $1,153 during the nine months ended September 30, 2018 (unaudited). As of September 30, 2018, there was $1,925 of unrecognized compensation cost related to unvested stock-based compensation arrangements granted under the 2013 Plan (unaudited). The compensation is expected to be recognized over a weighted-average period of 3.4 years at September 30, 2018 (unaudited).

Stock-based compensation expense recorded as research and development and general and administrative expenses is as follows:

 

    

Year Ended
December 31,

    

Nine Months Ended
September 30,

 
    

2016

    

2017

    

2017

    

  2018  

 
                   (unaudited)  

Research and Development

   $ 456      $ 454      $ 421      $ 442  

General and Administrative

     470        714        671        714  

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions noted in the table below. Expected volatility for the Company’s common stock was determined based on an average of the historical volatility of a peer-group of similar public companies. The Company has limited option exercise information, as such, the expected term of the options granted was calculated using the simplified method. The risk-free rate for periods within the contractual life of the option is based upon the U.S. Treasury yield curve in effect at the time of grant.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

The assumptions used in the Black-Scholes option-pricing model for stock options granted to employees during the years ended December 31, 2016 and 2017 are as follows:

 

    

Year Ended December 31

   

Nine Months Ended
September 30,

 
    

2016

   

2017

   

2017

   

2018

 
                

(unaudited)

 

Risk-free interest rate

     1.1%-1.3     1.9%-2.2     1.9%-2.2     2.7%-2.8

Expected term (in years)

     5.0-6.1       5.0-6.0       5.0-6.0       5.0-6.0  

Expected volatility

     73.7%-76.4     78.2%-80.4     78.2%-80.4     86.1%-92.3

Expected dividend yield

     0     0     0     0

The Company recorded stock-based compensation expense related to nonemployee awards of $104 and $211 for the years ended December 31, 2016, and 2017, respectively, and $175 for the nine months ended September 30, 2018 (unaudited). The compensation expense related to the nonemployee awards is included in the total stock-based compensation each year and is subject to re-measurement until the options vest. The Black-Scholes assumptions used to estimate the fair value of these awards for the years ended December 31, 2016, and 2017, and nine months ended September 30, 2018 were as follows:

 

    

     Year Ended December 31      

   

Nine Months Ended
September 30,

 
    

2016

   

2017

   

2017

   

2018

 
                

(unaudited)

 

Risk-free interest rate

     1.6     2.5     2.5     2.8

Expected term (in years)

     10.0       9.2-10.0       9.2-10.0       10.0  

Expected volatility

     85.4     87.6     87.6     91.0

Expected dividend yield

     0     0     0     0

The Company granted nonemployee stock options to consultants for the purchase of 29,297 and 44,926 shares of the Company’s common stock during the years ended December 31, 2016, and 2017, respectively. The weighted-average exercise price of nonemployee stock options granted for the year ended December 31, 2016, and 2017, was $4.02 and $5.54 per share, respectively. The weighted-average fair value of nonemployee stock options granted for the year ended December 31, 2016 and 2017 was $3.31 and $4.68 per share, respectively. The fair value of the grants is being expensed over the vesting period of the options on a straight-line basis as the services are being provided.

The Company granted nonemployee stock options to consultants for the purchase of 29,114 shares of the Company’s common stock during the nine months ended September 30, 2018 (unaudited). The weighted-average exercise price of nonemployee stock options granted for the nine months ended September 30, 2018 was $6.93 (unaudited). The weighted-average fair value of nonemployee stock options granted for the nine months ended September 30, 2018 was $6.06 (unaudited). The fair value of the grants is being expensed over the vesting period of the options on a straight-line basis as the services are being provided.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

11. Net Loss Per Share Attributable to Common Stockholders

The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company:

 

    

Year Ended December 31,

    Nine Months Ended
September 30,
 
    

2016

   

2017

   

2017

   

2018

 
                

(Unaudited)

 

Net loss

   $ (37,672   $ (24,614   $ (19,493   $ (25,333

Plus: Cumulative dividends on convertible preferred stock

     —         (128     —         (2,791
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (37,672   $ (24,742   $ (19,493   $ (28,124
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding, basic and diluted

     1,240,991       1,242,744       1,243,366       1,244,493  

Net loss per share attributable to common stockholders, basic and diluted

   $ (30.36   $ (19.91   $ (15.68   $ (22.60

The Company has reported a net loss for all periods presented, therefore diluted net loss per common share is the same as basic net loss per common share.

The Company’s potential dilutive securities, which include convertible preferred stock, warrants for the purchase of convertible preferred shares, warrants for the purchase of common stock and common stock options, have been excluded from the computation of diluted net loss per share as the effect would be antidilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

 

    

December 31,

     September 30,  
    

2016

    

2017

    

2018

 
                   (unaudited)  

Convertible preferred shares (as converted to common stock)

     8,476,886        14,979,055        14,979,055  

Warrants for the purchase of convertible preferred stock (as converted to common stock)

     590,455        723,516        723,516  

Warrants to purchase common stock

     358,572        377,477        436,294  

Options to purchase common stock

     1,246,784        1,560,580        1,981,815  
  

 

 

    

 

 

    

 

 

 
     10,672,697        17,640,628        18,120,680  
  

 

 

    

 

 

    

 

 

 

12. Commitments

Facility Lease

On October 24, 2016, the Company entered into a noncancelable operating lease with a third party for office space that is scheduled to expire in May 2024. The lease agreement includes base rent escalation over the lease term which will be amortized on a straight-line basis over the lease term with the resulting deferred liability recorded in other current and long-term liabilities. The resulting deferred liability recorded in other current and

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

long-term liabilities as of December 31, 2017 was $306. The lease requires the Company to share in prorated expenses and property taxes based upon actual amounts incurred. Rent expense under this lease was $561 for the year ended December 31, 2017.

Future minimum lease payments under the non-cancelable operating lease are as follows:

 

Year Ending December 31,

  

2018

   $ 578  

2019

     590  

2020

     601  

2021

     613  

2022

     624  

2023 and thereafter

     902  
  

 

 

 

Total minimum lease payments

   $ 3,908  
  

 

 

 

13. Licenses

Boehringer Ingelheim

The Company is party to a patent assignment and license agreement (the “PALA”) with Boehringer Ingelheim International GmbH (“BI”) for three product compounds. The Company paid a nonrefundable one-time upfront fee in November 2015 upon entering into the agreement. In accordance with the agreement, the Company is required to use commercially reasonable efforts to develop and commercialize the product compounds under a specified development plan.

Under the patent assignment and license agreement, the Company paid Boehringer Ingelheim a $1,000 clinical development milestone which was recorded as research and development expense in September 2016 upon initiation of the Phase 1 clinical trial for CNTX-0290. In addition, if the Company succeeds in developing and commercializing products containing the product compounds, it may owe BI total payments up to $297 million for regulatory milestones and $600 million for commercial milestones.

BI is entitled to receive low single-digit to low teens percentage royalties on global annual net sales of products calculated on a country-by-country and product-by-product basis. The Company’s royalty obligations to BI will expire on a country-by-country and product-by-product basis upon the later of (a) the date on which such product is no longer covered by a valid claim of an assigned patent, (b) the date on which such product is no longer covered by any other governmental grant of exclusivity in such country in the indication, or (c) 10 years from first launch of the respective product in the country, provided the licensed know-how is still proprietary.

14. Income Taxes

The Company’s loss before income taxes was $37,672 and $25,055 for the years ended December 31, 2016 and 2017, respectively, and was generated entirely in the United States. The Company recorded no income tax benefits for the net operating losses incurred in each year due to its uncertainty of realizing a benefit from those items.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

A reconciliation of the statutory United States federal income tax rate to the Company’s effective tax rate is as follows:

 

    

Tax Year ended

December 31,

 
    

2016

   

2017

 

U.S. federal statutory income tax rate

     (34.0 )%      (34.0 )% 

State and local taxes, net of federal benefit

     (5.5 )%      (5.3 )% 

Nondeductible expenses

     2.9     2.3

Research and development credits

     (2.1 )%      (2.5 )% 

Change in valuation allowance

     39.1     (5.6 )% 

Other

     (0.5 )%      0.4

Effect of US tax reform

     0.0     44.7

Effect of US tax reform - tax benefit

     0.0     (1.8 )% 
  

 

 

   

 

 

 

Effective income tax rate

     0.0     0.0
  

 

 

   

 

 

 

Net deferred tax assets as of December 31, 2016 and 2017 consisted of the following:

 

    

Tax Year ended
December 31,

 
    

2016

    

2017

 

Net operating loss carryforwards

   $ 7,746      $ 7,698  

Research and development tax credit carryforwards

     1,907        2,535  

Capitalized research and development expenses

     18,014        16,621  

Intangible asset

     1,972        1,368  

Share-based compensation

     58        108  

Other

     (133      (168
  

 

 

    

 

 

 

Total deferred tax assets

     29,564        28,162  

Less: Valuation allowance

     (29,564      (28,162
  

 

 

    

 

 

 

Net deferred tax assets

   $ —        $ —    
  

 

 

    

 

 

 

In-process research and development from acquisition

     (1,440      (999
  

 

 

    

 

 

 

Total deferred tax liability

   $ (1,440    $ (999
  

 

 

    

 

 

 

In assessing the realizability of the net deferred tax asset, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. Management believes that it is more likely than not that the Company’s deferred income tax assets will not be realized. As such, there is a full valuation allowance against the net deferred tax assets as of December 31, 2016 and 2017. The valuation allowance increased by $14,748 during the year ended December 31, 2016 due primarily to the generation of net operating losses during the year and decreased by $1,402 during the year ended December 31, 2017 due primarily to the decrease in the federal income tax rate from 34% to 21%.

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

The following table summarizes carryforwards of federal net operating losses and tax credits as of December 31, 2017:

 

    

Amount

    

Expiration
Beginning in

 

Federal net operating losses

   $ 28,156        2030  

State net operating losses

   $ 28,093        2030  

Federal and state research and development credits

   $ 2,535        2021  

Utilization of the U.S. net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382.

The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2017, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations. Due to net operating loss and tax credit carry forwards that remain unutilized, income tax returns for tax years from inception through 2017 remain subject to examination by the taxing jurisdictions.

In December 2017, the Tax Cuts and Jobs Act (2017 Tax Act) was enacted. The 2017 Tax Act includes a number of changes to existing United States tax laws that impact the company, most notably a reduction of the United States corporate income tax rate from 35% (34% for the Company) to 21% for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for a one-time transition tax on certain foreign earnings and the acceleration of depreciation for certain assets placed into service after September 27, 2017, as well as prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, capitalization of research and development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest. Due to the enactment of the 2017 Tax Act, the Company reduced both its gross deferred tax assets and the related valuation allowance by $10,753 as of December 31, 2017, resulting in no net effect on the Company’s statement of operations for the year ended December 31, 2017.

15. Related Party Transactions

The Company is a party to a license agreement with an officer and director whereby the Company officer and director and the other investors party to the agreement granted an exclusive license under certain technology, including both patent rights and know-how related to capsaicin. The license agreement provides for a possible $350 milestone payable upon FDA approval of the licensed product, which has not yet occurred.

The Company issued partial recourse promissory notes to two executive officers in connection with their purchase of shares of Company common stock in 2013. At December 31, 2016 and 2017, the balance of

 

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CENTREXION THERAPEUTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

those notes receivable from stockholders was $597 and included in stockholders deficit in the Company’s balance sheet (See Note 16). In April 2018, the board of directors determined to fully release executive officers from all liabilities and obligations under partial recourse promissory notes, dated October 8, 2013, in the aggregate principal amount of $597.

16. Subsequent Events

In preparing the financial statements as of and for the year ended December 31, 2017, the Company has evaluated subsequent events for recognition and measurement purposes through September 10, 2018, the date the financial statements were originally issued, and has evaluated for disclosures and subsequent events occurring after such date through November 5, 2018, which is the date these financial statements were available for reissuance. The Company has concluded that no events or transactions have occurred that require disclosure in the accompanying financial statements other than the following:

On October 3, 2018, the Company granted options to purchase 268,282 shares of common stock to new employees under the 2013 Plan. The stock options granted vest over four years, expire after ten years and have an exercise price of $8.74.

On November 2, 2018, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation which will become effective in connection with the effectiveness of the Company’s proposed initial public offering, to provide that the authorized capital stock of the Corporation shall consist of 200 million shares of common stock, and 10 million shares of preferred stock.

On November 2, 2018, the Company effected a one-for-6.245 reverse split of the Company’s common stock and a proportional adjustment to the existing conversion ratios for each of the series of the Company’s preferred stock (see Note 9). All common share and per share information and related information included in the accompanying financial statements have been adjusted retroactively, where applicable, to reflect the reverse split and adjustment of the preferred stock conversion ratios.

On November 2, 2018, the Company’s stockholders approved the 2018 Incentive Award Plan (“2018 Plan”) which will become effective in connection with the effectiveness of the Company’s proposed initial public offering. The 2018 Plan provides for the granting of equity-based awards. Upon the effectiveness of the Company’s proposed initial public offering, shares of common stock will become available for future issuance. The provisions of the 2018 Plan allow for periodic automatic increases for shares reserved under the 2018 Plan.

On November 2, 2018, the Company’s stockholders approved the 2018 Employee Stock Purchase Plan (“2018 ESPP”) which will become effective upon the effectiveness of the Company’s proposed initial public offering. The 2018 ESPP initially provides for the issuance of up to 266,000 shares of common stock to employees. The provisions of the 2018 ESPP provide for automatic periodic increases for shares reserved under the 2018 ESPP.

 

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Through and including                 , 2018, (the 25th day after the date of this prospectus), all dealers effecting transactions in the Common Stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

            Shares

 

LOGO

Common Stock

 

 

PROSPECTUS

 

BofA Merrill Lynch

Leerink Partners

Evercore ISI

                , 2018

 

 

 


Table of Contents

Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee and the Nasdaq listing fee.

 

    

Amount

 

Securities and Exchange Commission registration fee

   $ 11,151  

FINRA filing fee

     13,428  

Initial listing fee

     125,000  

Accountants’ fees and expenses

     850,000  

Legal fees and expenses

     1,750,000  

Blue Sky fees and expenses

     15,000  

Transfer Agent’s fees and expenses

     6,500  

Printing and engraving expenses

     250,000  

Miscellaneous

     78,921  
  

 

 

 

Total expenses

   $ 3,100,000  
  

 

 

 

Item 14. Indemnification of Directors and Officers.

Section 102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our restated certificate of incorporation provides that no director of the Registrant shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.

Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Our restated certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of us) by reason of the fact that he or she is or was, or has agreed to become, a

 

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director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our restated certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys’ fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.

We have entered into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.

We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.

In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended , or the Securities Act, against certain liabilities.

Item 15. Recent Sales of Unregistered Securities.

Set forth below is information regarding shares of capital stock issued by us within the past three years. Also included is the consideration received by us for such shares and information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed.

 

  (a)

Issuance of Capital Stock.

On December 30, 2016, the registrant issued 26,446,985 shares of its Series C preferred stock at a price per share of $1.80, for aggregate consideration of approximately $47.6 million, to accredited investors pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering. The aggregate consideration consisted of $16.6 million in cash proceeds in exchange for 9,202,663 shares of Series C preferred stock, and the conversion of the promissory notes in the aggregate amount of the $30.0 million in principal and $1,039,835 in accrued interest into 17,244,322 shares of Series C preferred stock.

 

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On January 6, 2017, the registrant issued an additional 111,334 shares of its Series C preferred Stock at a price per share of $1.80, for aggregate consideration of approximately $0.2 million, to accredited investors pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering.

On December 18, 2017, the registrant issued 36,717,364 shares of its Series D preferred stock at a price per share of $1.80, for aggregate consideration of approximately $66.1 million, to accredited investors pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering. The aggregate consideration consisted of $56.5 million in cash proceeds plus the conversion of the promissory notes and accrued interest in the aggregate amount of approximately $9.6 million.

On December 20, 2017, the registrant issued an additional 3,888,885 shares of its Series D Preferred Stock at a price per share of $1.80, for aggregate consideration of approximately $7.0 million, to accredited investors pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering.

 

  (b)

Equity Grants.

Since October 17, 2015, the registrant granted stock options to purchase an aggregate of 1,336,227 shares of its common stock with exercise prices ranging between $4.02 and $8.74 per share to employees, non-employees, and directors in connection with services provided to the registrant by such parties. In November 2018, the registrant granted stock options to purchase an aggregate of 1,284,465 shares of common stock, which will become effective in connection with this offering, to certain of the registrant’s directors, executive officers and employees, at an exercise price per share equal to the initial public offering price in this offering in connection with services provided to the registrant.

The issuances of such stock options, the shares of common stock issuable upon the exercise of such options and such restricted shares of common stock were issued pursuant to written compensatory plans or arrangements with the registrant’s employees, directors and consultants, in reliance on the exemption provided by Rule 701 promulgated under the Securities Act, or pursuant to Section 4(a)(2) under the Securities Act, relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required.

 

  (c)

Warrants.

From March 1, 2016 to June 15, 2016, the registrant issued warrants to purchase an aggregate 3,068,263 shares of Series C preferred stock to accredited investors and Maxim Partners, LLC pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering.

From April 28, 2017 to October 10, 2017, the registrant issued warrants to purchase an aggregate of 831,120 shares of Series D preferred stock to accredited investors pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering.

On December 19, 2017, the registrant issued a warrant to purchase 18,905 shares of common stock to Brookline Capital Markets pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering.

On June 27, 2018, the registrant issued a warrant to purchase 58,817 shares of common stock to SVB pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering.

 

  (d)

Issuance of Notes.

From March 1, 2016 to June 15, 2016, the registrant issued convertible promissory notes in the aggregate principal amount of $30.0 million to accredited investors pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering. On December 30, 2016, upon the closing of the Series C preferred stock financing, these convertible promissory notes, as well as $1,039,835 in then-accrued interest thereon, converted into 17,244,322 shares of Series C preferred stock.

 

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From April 28, 2017 to October 10, 2017, the registrant issued convertible promissory notes in the aggregate principal amount of $9.2 million to accredited investors pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering. On December 18, 2017, upon the closing of the Series D preferred stock financing, these promissory notes, as well as $406,306 in then-accrued interest thereon, converted into 5,328,476 shares of Series D Preferred Stock.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits.

 

Exhibit
Number

  

Description of Exhibit

       1.1    Form of Underwriting Agreement
       3.1    Certificate of Incorporation of the Registrant, as amended (currently in effect)
       3.2**    Bylaws of the Registrant, as amended (currently in effect)
       3.3    Form of Restated Certificate of Incorporation of the Registrant (to be effective upon the closing of this offering)
       3.4    Form of Restated Bylaws of the Registrant (to be effective upon the closing of this offering)
       4.1    Third Amended and Restated Stockholders Agreement, as amended
       4.2    Specimen stock certificate evidencing the shares of common stock
       4.3.1    Warrant to Purchase Common Stock, dated April 22, 2015, issued by the Company to Silicon Valley Bank
       4.3.2    Warrant to Purchase Common Stock, dated April 22, 2015, issued by the Company to Life Science Loans, LLC
       4.3.3    Warrant to Purchase Common Stock, dated June 27, 2018, issued by the Company to Silicon Valley Bank
       4.4.1    Form of Amended and Restated Warrant to Purchase Common Stock, dated various dates, issued by the Company to various affiliates of Brookline Capital Markets, together with a schedule of warrants and warrantholders
       4.4.2    Form of Warrant to Purchase Common Stock, dated various dates, issued by the Company to various investors and other persons, together with a schedule of warrants and warrantholders
       4.4.3    Form of Warrant to Purchase Common stock, dated June 2, 2014, issued by the Company to a former consultant and independent contractor, together with a schedule of warrants and warrantholders
       4.4.4    Form of Amended and Restated Warrant to Purchase Preferred Stock, dated various dates, issued by the Company to Maxim Partners, LLC, together with a schedule of warrants
       4.5.1    Warrant to Purchase Common Stock, dated December 30, 2016, issued by the Company to a former consultant
       4.5.2    Form of Warrant to Purchase Series C Preferred Stock, dated various dates, issued by the Company to various investors, together with a schedule of warrants and warrantholders
       4.5.3    Form of Warrant to Purchase Series D Preferred Stock, dated various dates, issued by the Company to various investors, together with a schedule of warrants and warrantholders
       5.1    Opinion of Latham & Watkins LLP

 

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Exhibit
Number

  

Description of Exhibit

     10.1#**    2013 Equity Incentive Plan, as amended, and form of option agreements thereunder
     10.2#    2018 Incentive Award Plan and forms of agreements thereunder
     10.3#    2018 Employee Stock Purchase Plan
     10.4#    Non-Employee Director Compensation Program
     10.5#    Form of Indemnification Agreement for Directors and Officers
     10.6**    Office Lease Agreement, dated October 24, 2016, between the Company and GLL 200 State Street, L.P.
     10.7.1†    Patent Assignment and Licensing Agreement, dated as of November 11, 2015, between the Company and Boehringer Ingelheim International, GmbH
     10.7.2†    Amendment #1 to Patent Assignment and Licensing Agreement, dated as of January 29, 2018, between the Company and Boehringer Ingelheim International, GmbH
     10.8**    License Agreement, dated August  28, 2001, among James N. Campbell, M.D., Richard A. Meyer, M.S. and Marco Pappagallo, M.D. and the Company (as successor to AlgoRx Pharmaceuticals, Inc.)
     10.9#    Executive Employment Agreement between the Company and Jeffrey B. Kindler, dated October 8, 2013, as amended on November 2, 2018
     10.10#**    Offer Letter to Kerrie Brady, dated November 7, 2013
     10.11#**    Offer Letter to Peter Hanson, DVM, Ph.D., dated May 30, 2014
     21.1**    Subsidiaries of the Registrant
     23.1    Consent of KPMG LLP
     23.2    Consent of Latham & Watkins LLP (included in Exhibit 5.1)
     24.1    Power of Attorney (included on signature page)

 

**

Previously filed.

#

Indicates management contract or compensatory plan.

Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 406 under the Securities Exchange Act of 1933, as amended.

(b) Financial Statement Schedules. Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 17. Undertakings.

The undersigned registrant hereby undertakes to provide to the underwriter, at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against

 

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public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned hereby undertakes that:

 

  (1)

For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

  (2)

For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

  (3)

For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

  (4)

In a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

  (i)

Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

  (ii)

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

  (iii)

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

  (iv)

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts, on this 5th day of November, 2018.

 

CENTREXION THERAPEUTICS CORPORATION
By:  

/s/ Jeffrey B. Kindler

  Jeffrey B. Kindler
  Chief Executive Officer

SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities held on the dates indicated.

 

Signature

  

Title

 

Date

/s/ Jeffrey B. Kindler

Jeffrey B. Kindler

   Chief Executive Officer and Director (principal executive officer)   November 5, 2018

/s/ B. Nicholas Harvey

B. Nicholas Harvey

   Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)   November 5, 2018

*

Sol J. Barer, Ph.D.

   Director   November 5, 2018

*

Isaac Blech

   Director   November 5, 2018

*

James N. Campbell, M.D.

   Director   November 5, 2018

*

Daniel N. Mendelson

   Director   November 5, 2018

*

Sara Nayeem, M.D.

   Director   November 5, 2018

*

Arnold L. Oronsky, Ph.D.

   Director   November 5, 2018

*

Joseph R. Swedish

   Director   November 5, 2018

*

Shawn Tomasello

   Director   November 5, 2018

*

Stella Xu, Ph.D.

   Director   November 5, 2018

 

*By:  

/s/ Jeffrey B. Kindler

  Jeffrey B. Kindler
  Attorney-in-fact

EX-1.1

Exhibit 1.1

 

 

 

CENTREXION THERAPEUTICS CORPORATION

(a Delaware corporation)

[•] Shares of Common Stock

UNDERWRITING AGREEMENT

Dated: [•], 2018

 

 

 


CENTREXION THERAPEUTICS CORPORATION

(a Delaware corporation)

[•] Shares of Common Stock

UNDERWRITING AGREEMENT

[•], 2018

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

Leerink Partners LLC

Evercore Group L.L.C.

as Representatives of the several Underwriters

 

c/o

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

One Bryant Park

New York, New York 10036

 

c/o

Leerink Partners LLC

One Federal Street, 37th Floor

Boston, Massachusetts 02110

 

c/o

Evercore Group L.L.C.

55 East 52nd Street

New York, New York 10055

Ladies and Gentlemen:

Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), confirms its agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), Leerink Partners LLC (“Leerink”), Evercore Group L.L.C. (“Evercore”) and each of the other Underwriters named in Schedule A hereto (collectively, the “Underwriters,” which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch, Leerink and Evercore are acting as representatives (in such capacity, the “Representatives”), with respect to (i) the sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of shares of Common Stock, par value $0.001 per share, of the Company (“Common Stock”) set forth in Schedule A hereto and (ii) the grant by the Company to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of [•] additional shares of Common Stock. The aforesaid [•] shares of Common Stock (the “Initial Securities”) to be purchased by the Underwriters and all or any part of the [•] shares of Common Stock subject to the option described in Section 2(b) hereof (the “Option Securities”) are herein called, collectively, the “Securities.”

The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representatives deem advisable after this Underwriting Agreement (this “Agreement”) has been executed and delivered.


The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (No. 333-227902), including the related preliminary prospectus or prospectuses, covering the registration of the sale of the Securities under the Securities Act of 1933, as amended (the “1933 Act”). Promptly after execution and delivery of this Agreement, the Company will prepare and file a prospectus in accordance with the provisions of Rule 430A (“Rule 430A”) of the rules and regulations of the Commission under the 1933 Act (the “1933 Act Regulations”) and Rule 424(b) (“Rule 424(b)”) of the 1933 Act Regulations. The information included in such prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective pursuant to Rule 430A(b) is herein called the “Rule 430A Information.” Such registration statement, including the amendments thereto, the exhibits thereto and any schedules thereto, at the time it became effective, and including the Rule 430A Information, is herein called the “Registration Statement.” Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein called the “Rule 462(b) Registration Statement” and, after such filing, the term “Registration Statement” shall include the Rule 462(b) Registration Statement. Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “preliminary prospectus.” The final prospectus, in the form first furnished to the Underwriters for use in connection with the offering of the Securities, is herein called the “Prospectus.” For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system or any successor system (“EDGAR”).

As used in this Agreement:

“Applicable Time” means [•] [P.]/[A.]M., New York City time, on [•], 2018 or such other time as agreed by the Company and the Representatives.

“General Disclosure Package” means any Issuer General Use Free Writing Prospectuses issued at or prior to the Applicable Time, the most recent preliminary prospectus that is distributed to investors prior to the Applicable Time and the information included on Schedule B-1 hereto, all considered together.

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the 1933 Act Regulations (“Rule 405”)) relating to the Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433 (the “Bona Fide Electronic Road Show”)), as evidenced by its being specified in Schedule B-2 hereto.

“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

 

2


“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the 1933 Act.

“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the 1933 Act.

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter as of the date hereof, the Applicable Time, the Closing Time (as defined below) and any Date of Delivery (as defined below), and agrees with each Underwriter, as follows:

(i) Registration Statement and Prospectuses. Each of the Registration Statement and any amendment thereto has become effective under the 1933 Act. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated. The Company has complied with each request (if any) from the Commission for additional information.

Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. Each preliminary prospectus, the Prospectus and any amendment or supplement thereto, at the time each was filed with the Commission, complied in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. Each preliminary prospectus delivered to the Underwriters for use in connection with this offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(ii) Accurate Disclosure. Neither the Registration Statement nor any amendment thereto, at its effective time, at the Closing Time or at any Date of Delivery, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. At the Applicable Time and any Date of Delivery, none of (A) the General Disclosure Package, (B) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package and (C) any individual Written Testing-the-Waters Communication, when considered together with the General Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither the Prospectus nor any amendment or supplement thereto, as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Time or at any Date of Delivery, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement (or any amendment thereto), the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the

 

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Representatives expressly for use therein. For purposes of this Agreement, the only information so furnished shall be the information in the first paragraph under the heading “Underwriting–Commissions and Discounts,” the information in the second, third and fourth paragraphs under the heading “Underwriting–Price Stabilization, Short Positions and Penalty Bids” and the information under the heading “Underwriting–Electronic Distribution” in each case contained in the Prospectus (collectively, the “Underwriter Information”).

(iii) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified. The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii) such that no filing of any “road show” (as defined in Rule 433(h)) is required in connection with the offering of the Securities.

(iv) Testing-the-Waters Materials. The Company (A) has not engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representatives with entities that are qualified institutional buyers within the meaning of Rule 144A under the 1933 Act or institutions that are accredited investors within the meaning of Rule 501 under the 1933 Act and (B) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule B-3 hereto.

(v) Company Not Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the 1933 Act Regulations) of the Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.

(vi) Emerging Growth Company Status. From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any individual or entity (“Person”) authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the 1933 Act (an “Emerging Growth Company”).

(vii) Independent Accountants. The accountants who certified the financial statements and supporting schedules included in the Registration Statement, the General Disclosure Package and the Prospectus are independent public accountants as required by the 1933 Act, the 1933 Act Regulations and the Public Company Accounting Oversight Board.

(viii) Financial Statements. The financial statements included in the Registration Statement, the General Disclosure Package and the Prospectus, together with the related schedules and notes, present fairly, in all material respects, the financial position of the Company at the dates indicated and the statement of operations, stockholders’ equity and cash flows of the Company for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved. The supporting schedules, if any, present fairly, in all material

 

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respects, in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included therein. Except as included therein, no historical or pro forma financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the General Disclosure Package or the Prospectus under the 1933 Act or the 1933 Act Regulations.

(ix) No Material Adverse Change in Business. Except as otherwise stated therein, since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company, other than those in the ordinary course of business, which are material with respect to the Company, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.

(x) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect.

(xi) No Subsidiaries. The Company has no subsidiaries.

(xii) Capitalization. The authorized, issued and outstanding shares of capital stock of the Company are as set forth in the Registration Statement, the General Disclosure Package and the Prospectus in the column entitled “Actual” under the caption “Capitalization” (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Registration Statement, the General Disclosure Package and the Prospectus or pursuant to the exercise of convertible securities, options or warrants referred to in the Registration Statement, the General Disclosure Package and the Prospectus or pursuant to the automatic conversions of preferred stock of the Company into shares of Common Stock as a result of the public offering contemplated hereby as described in the Registration Statement, the General Disclosure Package and the Prospectus). The outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable. None of the outstanding shares of capital stock of the Company were issued in violation of the preemptive or other similar rights of any securityholder of the Company.

(xiii) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Company.

 

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(xiv) Authorization and Description of Securities. The Securities to be purchased by the Underwriters from the Company have been duly authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid and non-assessable; and the issuance of the Securities is not subject to the preemptive or other similar rights of any securityholder of the Company. The Common Stock conforms in all material respects to all statements relating thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus and such description conforms in all material respects to the rights set forth in the instruments defining the same. No holder of Securities will be subject to personal liability solely by reason of being such a holder.

(xv) Registration Rights. There are no persons with registration rights or other similar rights to have any securities registered for sale pursuant to the Registration Statement or otherwise registered for sale or sold by the Company under the 1933 Act pursuant to this Agreement.

(xvi) Absence of Violations, Defaults and Conflicts. The Company is not (A) in violation of its charter, by-laws or similar organizational document, (B) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company is a party or by which it may be bound or to which any of the properties or assets of the Company is subject (collectively, “Agreements and Instruments”), except for such defaults that would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, or (C) in violation of any law, statute, rule, regulation, judgment, order, writ or decree of any arbitrator, court, governmental body, regulatory body, administrative agency or other authority, body or agency having jurisdiction over the Company or any of its properties, assets or operations (each, a “Governmental Entity”), except for such violations that would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein and in the Registration Statement, the General Disclosure Package and the Prospectus (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described therein under the caption “Use of Proceeds”) and compliance by the Company with its obligations hereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Company pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment Events or liens, charges or encumbrances that would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect), nor will such action result in any violation of (x) the provisions of the charter, by-laws or similar organizational document of the Company or (y) any law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity, except with respect to clause (y), such violations as would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company.

(xvii) Absence of Labor Dispute. Except as would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, (a) no labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent, and (b) to the Company’s knowledge, there is no existing or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers, customers or contractors.

 

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(xviii) Absence of Proceedings. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Entity (including, without limitation, any action, suit, proceeding, inquiry or investigation before or brought by the U.S. Food and Drug Administration (the “FDA”) or the European Medicines Agency (the “EMA”)) now pending or, to the knowledge of the Company, threatened, against or affecting the Company, which would reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, or which would reasonably be expected to, singly or in the aggregate, materially and adversely affect its properties or assets or the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations hereunder; and the aggregate of all pending legal or governmental actions, suits, inquiries, investigations or proceedings to which the Company is a party or of which any of its properties or assets is the subject which are not described in the Registration Statement, the General Disclosure Package and the Prospectus, including ordinary routine litigation incidental to the business, would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect.

(xix) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement, the General Disclosure Package or the Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required.

(xx) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement, except such as have been already obtained or as may be required under the 1933 Act, the 1933 Act Regulations, the rules of the Nasdaq Global Market, state securities laws or the rules of FINRA.

(xxi) Possession of Licenses and Permits. The Company possesses such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Entities necessary to conduct the business now operated by it (including, without limitation, all such permits, licenses, approvals, consents and other authorizations required by the FDA, the EMA, or any other federal, state, local or foreign agencies or bodies engaged in the regulation of clinical or preclinical studies, pharmaceuticals, biologics, biohazardous substances or activities related to the business now operated by the Company), except where the failure so to possess would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. The Company is in compliance with the terms and conditions of all Governmental Licenses, except where the failure so to comply would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. The Company has fulfilled and performed all of its material obligations with respect to the Governmental Licenses and, to the knowledge of the Company, no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the Company as a holder of any permit, except where the failure to so fulfill or perform, or the occurrence of such event, would not, singly or in the aggregate, result in a Material Adverse Effect. All of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. The Company has not received any notice of proceedings relating to the revocation or modification of any Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect.

 

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(xxii) Title to Property. The Company has good and marketable title to all real property owned by it and good title to all other properties owned by it, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (A) are described in the Registration Statement, the General Disclosure Package and the Prospectus or (B) do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company; and all of the leases and subleases material to the business of the Company, and under which the Company holds properties described in the Registration Statement, the General Disclosure Package or the Prospectus, are in full force and effect, and the Company has no notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company to the continued possession of the leased or subleased premises under any such lease or sublease.

(xxiii) Intellectual Property. The Company owns or possesses, has license to, or can acquire rights to (whether by ownership or license) on reasonable terms, all patents, patent applications, statutory invention rights, community designs, invention disclosures, rights in utility models and industrial designs, inventions, registered and unregistered copyrights (including copyrights in software), intellectual property rights in technology, software, data, know how (including inventions, trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names, business names, logos, slogans, trade dress, design rights, Internet domain names, social media accounts, any other designations of source or origin, and any applications (including provisional applications), registrations, or renewals for any of the foregoing, rights to publicity and privacy and/or other intellectual property (collectively, “Intellectual Property”) necessary to carry on the business now operated by them and, to the knowledge of the Company, as currently proposed to be conducted as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus. The Company has not received any notice of, nor is otherwise aware of (i) any infringement, misappropriation or other violation of any Intellectual Property rights of any third party by the Company, (ii) any pending or threatened action, suit, proceeding or claim regarding the subject matter of the foregoing and (iii) any facts or circumstances which would form a reasonable basis for any such claim. All Intellectual Property owned by or exclusively licensed to the Company (such Intellectual Property, the “Company Intellectual Property”) is valid and enforceable and, to the knowledge of the Company, there is no infringement, misappropriation or violation of any Company Intellectual Property by any third party. There is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by any third party: (A) challenging the Company’s rights in or to any Company Intellectual Property; (B) challenging the validity, enforceability or scope of any Company Intellectual Property; or (C) asserting that the Company infringes, misappropriates or otherwise violates, or would, upon the commercialization of any product or service under development as described in the Registration Statement, the General Disclosure Package and the Prospectus, infringe, misappropriate or otherwise violate, any Intellectual Property rights of such third parties in any material respect. The Company has complied in all material respects with the terms of each agreement pursuant to which Intellectual Property has been licensed to the Company, and no Intellectual Property has been obtained or is being used by the Company in violation of any material contractual obligations binding on the Company or, to the Company’s knowledge, in violation of any contractual rights of any person, and all such license agreements are in full force and effect. All Company Intellectual Property has been duly maintained in all material respects and is in full force and effect and there are no

 

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material defects in any of the Company Intellectual Property that is owned by the Company, or to the Company’s knowledge, in-licensed to the Company. Each person who is or was an employee or contractor of the Company and who is or was involved in the creation or development of any Intellectual Property for or on behalf of the Company has signed an agreement containing an assignment to the Company of such person’s rights in and to such Intellectual Property and to the Company’s knowledge, no employee or contractor of the Company is in or has ever been in violation of any material term of any agreement or covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company or actions undertaken by the employee while employed with the Company. The Company has taken reasonable steps necessary to protect, maintain and safeguard the confidentiality of the material trade secrets, all material confidential Intellectual Property used in connection with the business of the Company, and its rights and licenses under material Intellectual Property owned by or licensed to the Company, including the execution of appropriate nondisclosure and confidentiality agreements.

(xxiv) Environmental Laws. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus or would not, singly or in the aggregate, result in a Material Adverse Effect, (A) the Company is not in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, biological materials, toxic substances, hazardous substances, petroleum or petroleum products, asbestos-containing materials or mold (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the Company has all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or, to the knowledge of the Company, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating to any Environmental Law against the Company and (D) to the knowledge of the Company, there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or Governmental Entity, against or affecting the Company relating to Hazardous Materials or any Environmental Laws.

(xxv) Regulatory Matters. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, and except as would not, singly or in the aggregate, have or reasonably be expected to have a Material Adverse Effect: (i) the Company has not received any written notice of adverse filing, warning letter, untitled letter or other correspondence or notice from the FDA, the EMA or other relevant regulatory authorities, or any other court or arbitrator or federal, state, local or foreign governmental or regulatory authority, alleging or asserting material noncompliance with the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 301 et seq.), as amended, and the regulations promulgated thereunder (the “FFDCA”), or similar state, federal or foreign law or regulation (collectively, “Health Care Laws”); (ii) the Company is and has been in compliance in all material respects with applicable Health Care Laws; (iii) the Company has not received written notice of any ongoing claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any U.S. or non-U.S. federal, national, state, local or other governmental or regulatory authority, governmental or

 

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regulatory agency or body, court, arbitrator or self-regulatory organization (each, a “Governmental Authority”) or third party alleging that any product operation or activity is in violation of any Health Care Laws; (iv) the Company has filed, obtained, maintained or submitted all reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by applicable Health Care Laws, and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete, correct and not misleading on the date filed (or were corrected or supplemented by a subsequent submission); (v) neither the Company nor any of its directors, officers, employees or agents is or has been debarred, suspended or excluded, or has been convicted of any crime or engaged in any conduct that would result in a debarment, suspension or exclusion from any federal or state government health care program; and (vi) the Company is not a party to and the Company does not have any ongoing reporting obligations pursuant to, any corporate integrity agreements, deferred prosecution agreements, monitoring agreements, consent decrees, settlement orders, plans of correction or similar agreements with or imposed by an Governmental Authority.

(xxvi) Preclinical and Clinical Studies and Tests. The preclinical and clinical studies and tests conducted by, on behalf of or sponsored by the Company, or in which the Company has participated, that are described in, or the results of which are referred to in, the Registration Statement, the General Disclosure Package and the Prospectus, or the results of which are referred to in the Registration Statement, the General Disclosure Package and the Prospectus, as applicable, were, and if still pending are, being conducted in accordance with the experimental protocols established for each study or trial, as well as any conditions of approval and policies imposed by any institutional review board, ethics review board or committee responsible for the oversight of such preclinical and clinical studies and tests, and all applicable local, state and federal laws, rules and regulations of the FDA, the EMA and comparable drug regulatory agencies outside of the United States to which they are subject (collectively, the “Regulatory Authorities”) except where the failure to be so in compliance has not resulted and would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect; the descriptions in the Registration Statement, the General Disclosure Package or the Prospectus of the results of such studies and tests are accurate and not misleading in all material respects with respect to the portions of such studies being described and fairly present the data derived from such studies or tests; the Company has no knowledge of any other studies or tests not described in the Registration Statement, the General Disclosure Package and the Prospectus, the results of which are inconsistent with or reasonably call into question the results described or referred to in the Registration Statement, the General Disclosure Package and the Prospectus when viewed in the context in which such results are described and the current state of development; the Company has not received any written notice, correspondence or other communications from the Regulatory Authorities requiring or threatening (i) the termination or suspension of any preclinical and clinical studies or tests that are described in, or the results of which are referred to in, the Registration Statement, the General Disclosure Package and the Prospectus, or (ii) the material modification of any preclinical and clinical studies or tests that would cause them to differ from their descriptions in the Registration Statement, the General Disclosure Package and the Prospectus, other than ordinary course communications with respect to modifications in connection with the design and implementation of such studies or tests, and, to the Company’s knowledge, there are no reasonable grounds for the same.

(xxvii) Accounting Controls. The Company maintains effective internal control over financial reporting (as defined under Rules 13-a15 and 15d-15 under the 1934 Act Regulations) and a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity

 

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with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over financial reporting that has materially and adversely affected, or is reasonably likely to materially and adversely affect, the Company’s internal control over financial reporting.

(xxviii) Compliance with the Sarbanes-Oxley Act. The Company has taken all necessary actions to ensure that, upon the effectiveness of the Registration Statement, it will be in compliance in all material respects with all provisions of the Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated thereunder or implementing the provisions thereof (the “Sarbanes-Oxley Act”) that are then in effect and with which the Company is required to comply as of the effectiveness of the Registration Statement, and is taking reasonable steps to enable it to be in compliance with other provisions of the Sarbanes-Oxley Act not currently in effect, upon the effectiveness of such provisions, or which will become applicable to the Company at all times after the effectiveness of the Registration Statement.

(xxix) Payment of Taxes. All United States federal income tax returns of the Company required by law to be filed have been filed and all taxes shown by such returns or otherwise assessed, which are due and payable, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided in accordance with GAAP by the Company. The United States federal income tax returns of the Company through the fiscal year ended December 31, 2017 have been settled and no assessment in connection therewith has been made against the Company. The Company has filed all other tax returns that are required to have been filed by it pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, and has paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been established by the Company. The charges, accruals and reserves on the books of the Company in respect of any income and corporation tax liability for any years not finally determined are adequate to meet any assessments or re-assessments for additional income tax for any years not finally determined, except to the extent of any inadequacy that would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect.

(xxx) Insurance. The Company carries or is entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is generally maintained by similarly sized companies of established repute engaged in the same or similar business, and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able (A) to renew its existing insurance coverage as and when such policies expire or (B) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. The Company has not been denied any insurance coverage which it has sought or for which it has applied.

 

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(xxxi) Investment Company Act. The Company is not required, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Registration Statement, the General Disclosure Package and the Prospectus will not be required, to register as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).

(xxxii) Absence of Manipulation. None of the Company or any controlled affiliate, or to the knowledge of the Company, any non-controlled affiliate has taken, nor will the Company or any controlled affiliate, or to the knowledge of the Company, any non-controlled affiliate, take, directly or indirectly, any action which is designed, or would be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities or to result in a violation of Regulation M under the 1934 Act.

(xxxiii) Foreign Corrupt Practices Act. None of the Company or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.

(xxxiv) Money Laundering Laws. The operations of the Company are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

(xxxv) OFAC. None of the Company or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or representative of the Company is a Person currently the subject or target of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company located, organized or resident in a country or territory that is the subject of Sanctions; and the Company will not directly or indirectly use the proceeds of the sale of the Securities, or lend, contribute or otherwise make available such proceeds to any subsidiaries, joint venture partners or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.

 

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(xxxvi) Lending Relationship. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of any Underwriter and (ii) does not intend to use any of the proceeds from the sale of the Securities to repay any outstanding debt owed to any affiliate of any Underwriter.

(xxxvii) Statistical and Market-Related Data. Any statistical and market-related data included in the Registration Statement, the General Disclosure Package or the Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate in all material respects and, to the extent required, the Company has obtained the written consent to the use of such data from such sources.

(xxxviii) No Rated Securities. The Company has no debt securities or preferred stock that are rated by any “nationally recognized statistical rating organization” (as defined in Section 3(a)(62) of the 1934 Act).

(xxxix) ERISA Compliance. Except as would not reasonably be expected to result in a Material Adverse Effect: (a) the Company and any “Employee Benefit Plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company or its “ERISA Affiliates” (as defined below) is and has been operated in compliance with its terms and all applicable laws, including ERISA and the Code; (b) no “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any Employee Benefit Plan established or maintained by the Company or any of its ERISA Affiliates; (c) no failure to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA), whether or not waived, has occurred or is reasonably expected to occur with respect to any Employee Benefit Plan; (d) no Employee Benefit Plan established or maintained by the Company or any of its ERISA Affiliates, if such Employee Benefit Plan were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA), as the fair market value of the assets under each Employee Benefit Plan (excluding for these purposes accrued but unpaid contributions) exceeds the present value of all benefits accrued under such Employee Benefit Plan (determined based on those assumptions used to fund such Employee Benefit Plan); (e) neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any Employee Benefit Plan, (ii) Sections 412 and 430, 4971, 4975 or 4980B of the Code or (iii) Sections 302 and 303, 406, 4063 and 4064 of ERISA; and (f) each Employee Benefit Plan established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would reasonably be expected to cause the loss of such qualification. There is no pending audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other governmental or other regulatory entity or agency with respect to any Employee Benefit Plan that could reasonably be expected to result in a Material Adverse Effect. Except as would not reasonably be expected to result in a Material Adverse Effect, the Company has no “accumulated post-retirement benefit obligations” (within the meaning of Statement of Financial Accounting Standards 106). For the purposes of this Section 1(a)(xl), “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company is a member.

 

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(xl) No Safety Notices. (i) There have been no recalls, field notifications, field corrections, market withdrawals or replacements, warnings, “dear doctor” letters, investigator notices, safety alerts or other notice of action relating to an alleged lack of safety, efficacy, or regulatory compliance of the Company’s product candidates (“Safety Notices”), except as would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, and (ii) there are no facts that would be reasonably likely to result in (x) a Safety Notice with respect to the Company’s product candidates or (y) a termination or suspension of testing of any of the Company’s product candidates, except, in each of cases (x) or (y) such as would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect.

(xli) Privacy and Data Protection. The Company has operated its business in a manner compliant in all material respects with all United States federal, state, local and non-United States privacy, data security and data protection laws and regulations applicable to the Company’s collection, use, transfer, protection, disposal, disclosure, handling, storage and analysis of personal data. The Company has been and is in compliance in all material respects with internal policies and procedures designed to ensure the integrity and security of the data collected, handled or stored in connection with its business; the Company has been and is in compliance in all material respects with internal policies and procedures designed to ensure compliance with the Health Care Laws that govern privacy and data security and take, and have taken reasonably appropriate steps designed to assure compliance with such policies and procedures. The Company has taken reasonable steps to maintain the confidentiality of its personally identifiable information, protected health information, consumer information and other confidential information of the Company and any third parties in its possession (“Sensitive Company Data”). The tangible or digital information technology systems (including computers, screens, servers, workstations, routers, hubs, switches, networks, data communications lines, technical data and hardware), software and telecommunications systems used or held for use by the Company (the “Company IT Assets”) are adequate and operational for, in accordance with their documentation and functional specifications, the business of the Company as now operated and as currently proposed to be conducted as described in the Registration Statement, the General Disclosure Package and the Prospectus. The Company has used reasonable efforts to establish, and has established, commercially reasonable disaster recovery and security plans, procedures and facilities for the business consistent with industry standards and practices in all material respects, including, without limitation, for the Company IT Assets and data held or used by or for the Company. The Company has not suffered or incurred any security breaches, compromises or incidents with respect to any Company IT Asset or Sensitive Company Data, except where such breaches, compromises or incidents would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect; and there has been no unauthorized or illegal use of or access to any Company IT Asset or Sensitive Company Data by any unauthorized third party. The Company has not been required to notify any individual of any information security breach, compromise or incident involving Sensitive Company Data.

(b) Officer’s Certificates. Any certificate signed by any officer of the Company delivered to the Representatives or to counsel for the Underwriters shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby.

SECTION 2. Sale and Delivery to Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per share set forth in Schedule A, that number of Initial Securities set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, subject, in each case, to such adjustments among the Underwriters as Merrill Lynch in its sole discretion shall make to eliminate any sales or purchases of fractional shares.

 

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(b) Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional [•] shares of Common Stock, at the price per share set forth in Schedule A, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities. The option hereby granted may be exercised for 30 days after the date hereof and may be exercised in whole or in part at any time from time to time upon notice by the Representatives to the Company setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a “Date of Delivery”) shall be determined by the Representatives, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time. If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial Securities, subject, in each case, to such adjustments as Merrill Lynch in its sole discretion shall make to eliminate any sales or purchases of fractional shares.

(c) Payment. Payment of the purchase price for, and delivery of certificates or security entitlements for, the Initial Securities shall be made at the offices of Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York 10022, or at such other place as shall be agreed upon by the Representatives and the Company, at 9:00 A.M. (New York City time) on the second (third, if the pricing occurs after 4:30 P.M. (New York City time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10 hereof), or such other time not later than ten business days after such date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery being herein called “Closing Time”).

In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates or security entitlements for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representatives and the Company, on each Date of Delivery as specified in the notice from Merrill Lynch to the Company.

Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company against delivery to the Representatives for the respective accounts of the Underwriters of certificates or security entitlements for the Securities to be purchased by them. It is understood that each Underwriter has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.

 

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SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows:

(a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b) hereof, will comply with the requirements of Rule 430A, and will promptly notify the Representatives, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any preliminary prospectus or the Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the 1933 Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the 1933 Act in connection with the offering of the Securities. The Company will effect all filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will use reasonable best efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof as soon as practicable.

(b) Continued Compliance with Securities Laws. The Company will comply with the 1933 Act and the 1933 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Registration Statement, the General Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172 of the 1933 Act Regulations (“Rule 172”), would be) required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) amend or supplement the General Disclosure Package or the Prospectus in order that the General Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the General Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly (A) give the Representatives notice of such event, (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the General Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representatives with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representatives or counsel for the Underwriters shall object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representatives notice of any filings made pursuant to the 1934 Act or 1934 Act Regulations within 48 hours prior to the Applicable Time; the Company will give the Representatives notice of its intention to make any such filing from the Applicable Time to the Closing Time and will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing, as the case may be.

 

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(c) Delivery of Registration Statements. The Company has furnished or will deliver to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Representatives, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(e) Blue Sky Qualifications. The Company will use its reasonable best efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

(f) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide to the Underwriters the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.

(g) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Registration Statement, the General Disclosure Package and the Prospectus under “Use of Proceeds.”

(h) Listing. The Company will use its reasonable best efforts to effect and maintain the listing of the Common Stock (including the Securities) on the Nasdaq Global Market.

(i) Restriction on Sale of Securities. During a period of 180 days from the date of the Prospectus, the Company will not, without the prior written consent of the Representatives, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file or confidentially submit any registration statement under the 1933 Act with respect to any of the foregoing, (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any

 

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such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise or (iii) publicly disclose the intention to do any of the foregoing described in clauses (i) and (ii). The foregoing sentence shall not apply to (A) the Securities to be sold hereunder, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Registration Statement, the General Disclosure Package and the Prospectus, (C) any shares of Common Stock issued or options to purchase Common Stock or other equity awards covering Common Stock granted, in either case, pursuant to existing employee benefit plans of the Company referred to in the Registration Statement, the General Disclosure Package and the Prospectus, (D) any shares of Common Stock issued pursuant to any non-employee director compensation plan or program or dividend reinvestment plan referred to in the Registration Statement, the General Disclosure Package and the Prospectus, (E) the filing by the Company of a registration statement with the Commission on Form S-8 in respect of any shares or other equity instruments issued pursuant to any plans or programs described in (C) or (D) above, or (F) the sale or issuance of or entry into an agreement to sell or issue shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock in connection with any (1) mergers, (2) acquisition of securities, businesses, property or other assets, (3) joint ventures or (4) strategic alliances or relationships; provided, that the aggregate number of shares of Common Stock or securities convertible into or exercisable for Common Stock (on an as-converted or as-exercised basis, as the case may be) that the Company may sell or issue or agree to sell or issue pursuant to this clause (F) shall not exceed 5% of the total number of shares of the Company’s Common Stock issued and outstanding immediately following the completion of the transactions contemplated by this Agreement; and provided further, that each recipient of shares of Common Stock or securities convertible into or exercisable for Common Stock pursuant to this clause (E) shall execute a lock-up agreement substantially in the form of Exhibit A hereto.

(j) If the Representatives, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up agreement described in Section 5(i) hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two business days before the effective date of the release or waiver.

(k) Reporting Requirements. The Company, during the period when a Prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and 1934 Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Securities as may be required under Rule 463 under the 1933 Act.

(l) Issuer Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representatives, it will not make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representatives will be deemed to have consented to the Issuer Free Writing Prospectuses listed on Schedule B-2 hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representatives. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Representatives as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or

 

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occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement which has not been superseded or modified, any preliminary prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.

(m) Testing-the-Waters Materials. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.

(n) Emerging Growth Company Status. The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Securities within the meaning of the 1933 Act and (ii) completion of the 180-day restricted period referred to in Section 3(i) hereof.

SECTION 4. Payment of Expenses.

(a) Expenses. The Company will pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of copies of each preliminary prospectus, each Issuer Free Writing Prospectus and the Prospectus and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by the Underwriters to investors, (iii) the preparation, issuance and delivery of the certificates or security entitlements for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees and disbursements of the Company’s counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(e) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the fees and expenses of any transfer agent or registrar for the Securities, (vii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged by the Company in connection with the road show presentations, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and 50% of the cost of any private aircraft and other transportation chartered in connection with the road show, (viii) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by FINRA of the terms of the sale of the Securities, with such legal fees, taken together with the legal fees described in clause (v) above, not to exceed $50,000, (ix) the fees and expenses incurred in connection with the listing of the Securities on the Nasdaq Global Market and (x) the costs and expenses (including, without limitation, any damages or other amounts payable in connection with legal or contractual liability) associated with the reforming of any contracts for sale of the Securities made by the

 

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Underwriters caused by a breach of the representation contained in the third sentence of Section 1(a)(ii) hereof; provided that any expenses payable under clauses (v) and (viii) above and any expenses relating to the remaining 50% of the cost of any private aircraft or other transportation chartered in connection with the road show described in clause (vii) above are invoiced in a reasonably timely manner.

(b) Termination of Agreement. If this Agreement is terminated by the Representatives in accordance with the provisions of Section 5, Section 9(a)(i) or (iii) or Section 10 hereof, the Company shall reimburse the non-defaulting Underwriters for all of their documented out-of-pocket expenses, including the reasonable and documented fees and disbursements of counsel for the Underwriters.

SECTION 5. Conditions of Underwriters’ Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company contained herein or in certificates of any officer of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions:

(a) Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and, at the Closing Time, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated; and the Company has complied with each request (if any) from the Commission for additional information. A prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) without reliance on Rule 424(b)(8) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.

(b) Opinions of Counsel for the Company. At the Closing Time, the Representatives shall have received:

(i) the opinions and negative assurance letter, each dated the Closing Time, of Latham & Watkins LLP, counsel for the Company, in form and substance reasonably satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letters for each of the Underwriters;

(ii) the opinion, dated the Closing Time, of Dechert LLP, intellectual property counsel for the Company, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the Underwriters; and

(c) Opinion of Counsel for the Underwriters. At the Closing Time, the Representatives shall have received the opinion and negative assurance letter, each dated the Closing Time, of Shearman & Sterling LLP, counsel for the Underwriters, in form and substance reasonably satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters.

(d) Officers’ Certificate. At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, whether or not arising in the ordinary course of business, and the Representatives shall have received a certificate of the

 

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Chief Executive Officer or the President of the Company and of the Chief Financial or Chief Accounting Officer of the Company, dated the Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties of the Company in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement under the 1933 Act has been issued, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to their knowledge, contemplated by the Commission.

(e) Accountant’s Comfort Letter. At the time of the execution of this Agreement, the Representatives shall have received from KPMG LLP a letter, dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the General Disclosure Package and the Prospectus.

(f) Bring-down Comfort Letter. At the Closing Time, the Representatives shall have received from KPMG LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time.

(g) Approval of Listing. At the Closing Time, the Securities shall have been approved for listing on the Nasdaq Global Market, subject only to official notice of issuance.

(h) No Objection. FINRA has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements relating to the offering of the Securities.

(i) Lock-up Agreements. At the date of this Agreement, the Representatives shall have received an agreement substantially in the form of Exhibit A hereto signed by the officers, directors and substantially all holders of Common Stock or securities convertible or exchangeable into Common Stock, in each case, of the Company.

(j) Rating. The Company has no debt securities or preferred stock that are rated by any “nationally recognized statistical rating agency” (as defined in Section 3(a)(62) of the 1934 Act).

(k) Conditions to Purchase of Option Securities. In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representatives shall have received:

(i) Officers’ Certificate. A certificate, dated such Date of Delivery, of the President or a Vice President of the Company and of the Chief Financial or Chief Accounting Officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery.

(ii) Opinion of Counsel for the Company. If requested by the Representatives, (x) the opinion and negative assurance letter of Latham & Watkins LLP, counsel for the Company, and (y) the opinion of Dechert LLP, intellectual property counsel for the Company, each in form and substance reasonably satisfactory to counsel for the Underwriters, each dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinions and negative assurance letter required by Section 5(b) hereof, as applicable.

 

21


(iii) Opinion of Counsel for the Underwriters. If requested by the Representatives, the opinion and negative assurance letter of Shearman & Sterling LLP, counsel for the Underwriters, each dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof.

(v) Bring-down Comfort Letter. If requested by the Representatives, a letter from KPMG LLP, in form and substance satisfactory to the Representatives and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Representatives pursuant to Section 5(e) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery.

(l) Additional Documents. At the Closing Time and at each Date of Delivery (if any) counsel for the Underwriters shall have been furnished with such other documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters.

(m) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representatives by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 hereof and except that Sections 1, 6, 7, 8, 14, 15 and 16 hereof shall survive any such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its affiliates (as such term is defined in Rule 501(b) under the 1933 Act (each, an “Affiliate”)), its selling agents and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included (A) in any preliminary prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto), or (B) in any materials or information provided to investors by, or with the approval of, the

 

22


Company in connection with the marketing of the offering of the Securities (“Marketing Materials”), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically), or the omission or alleged omission in any preliminary prospectus, Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, Prospectus or in any Marketing Materials of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) hereof) any such settlement is effected with the written consent of the Company;

(iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.

(b) Indemnification of Company, Directors and Officers. Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.

(c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) hereof, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b) hereof, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No

 

23


indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

(d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) hereof effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and of the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount received by the Underwriters, on the other hand, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of the Securities as set forth on the cover of the Prospectus.

The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

 

24


Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the underwriting commissions received by such Underwriter in connection with the Securities underwritten by it and distributed to the public.

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each Underwriter’s Affiliates and selling agents shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company and (ii) delivery of and payment for the Securities.

SECTION 9. Termination of Agreement.

(a) Termination. The Representatives may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, in the judgment of the Representatives, since the time of execution of this Agreement or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the completion of the offering or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the Nasdaq Global Market, or (iv) if trading generally on the NYSE MKT or the New York Stock Exchange or in the Nasdaq Global Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other governmental authority, or (v) a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States or with respect to Clearstream or Euroclear systems in Europe, or (vi) if a banking moratorium has been declared by either Federal or New York authorities.

 

25


(b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7, 8, 14, 15 and 16 hereof shall survive such termination and remain in full force and effect.

SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the “Defaulted Securities”), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters reasonably satisfactory to the Company, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then:

(i) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or

(ii) if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase, and the Company to sell, the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.

No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.

In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the Underwriters to purchase and the Company to sell the relevant Option Securities, as the case may be, either the (i) Representatives or (ii) the Company shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement, the General Disclosure Package or the Prospectus or in any other documents or arrangements. As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.

SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to:

Merrill Lynch at One Bryant Park, New York, New York 10036, attention of Syndicate Department (facsimile: (646) 855-3073), with a copy to ECM Legal (facsimile: (212) 230-8730);

Leerink at One Federal Street, 37th Floor, Boston, Massachusetts 02110, attention of Jack Fitzgerald; and

Evercore at 55 East 52nd Street, New York, New York 10055, attention of ECM General Counsel, with a copy to Shearman & Sterling LLP at 599 Lexington Avenue, New York, New York 10022, attention of Ilir Mujalovic;

 

26


notices to the Company shall be directed to it at 200 State Street, Boston, Massachusetts 02109, attention of Chief Executive Officer, with a copy to Latham & Watkins LLP, 200 Clarendon Street, 27th Floor, Boston, Massachusetts 02116, attention of Peter N. Handrinos.

SECTION 12. No Advisory or Fiduciary Relationship. The Company acknowledges and agrees that (a) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the initial public offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other hand, (b) in connection with the offering of the Securities and the process leading thereto, each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company or its stockholders, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering of the Securities or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) and no Underwriter has any obligation to the Company with respect to the offering of the Securities except the obligations expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and (e) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering of the Securities and the Company has consulted its own respective legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.

SECTION 13. Parties. This Agreement shall each inure to the benefit of and be binding upon the Underwriters and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 hereof and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.

SECTION 14. Trial by Jury. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

SECTION 15. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK.

SECTION 16. Consent to Jurisdiction; Waiver of Immunity. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby shall be instituted in (i) the federal courts of the United States of America located in the City and County of New York, Borough of Manhattan or (ii) the courts of the State of New York located in the City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and each party irrevocably

 

27


submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court, as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.

SECTION 17. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 18. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.

SECTION 19. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

[Signature Pages Follow]

 

28


If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters and the Company in accordance with its terms.

 

Very truly yours,
CENTREXION THERAPEUTICS CORPORATION
By     
  Title:

[Signature Page to Underwriting Agreement]


CONFIRMED AND ACCEPTED,

as of the date first above written:

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By    
 

Authorized Signatory

LEERINK PARTNERS LLC
By    
 

Authorized Signatory

EVERCORE GROUP L.L.C.
By    
 

Authorized Signatory

For themselves and as Representatives of the other Underwriters named in Schedule A hereto.

[Signature Page to Underwriting Agreement]


SCHEDULE A

The initial public offering price per share for the Securities shall be $[•].

The purchase price per share for the Securities to be paid by the several Underwriters shall be $[•], being the amount equal to the initial public offering price set forth above less $[•] per share, subject to adjustment in accordance with Section 2(b) for dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities.

 

Name of Underwriter   

Number of
Initial Securities

Merrill Lynch, Pierce, Fenner & Smith Incorporated

   [●]

Leerink Partners LLC

   [●]

Evercore Group L.L.C.

   [●]

Total

  

[●]

 

  

 

 

Sch A - 1


SCHEDULE B-1

Pricing Terms

1. The Company is selling [•] shares of Common Stock.

2. The Company has granted an option to the Underwriters, severally and not jointly, to purchase up to an additional [•] shares of Common Stock.

3. The initial public offering price per share for the Securities shall be $[•].

 

Sch B - 1


SCHEDULE B-2

Free Writing Prospectuses

[•]

 

Sch B - 2


SCHEDULE B-3

Written Testing-the-Waters Communications

Presentations dated September 24, 2018, September 25, 2018, September 26, 2018, September 27, 2018, September 28, 2018, October 2, 2018, October 4, 2018, October 5, 2018, October 16, 2018, October 23, 2018, October 31, 2018 and November 2, 2018.

 

Sch B - 3


Exhibit A

FORM OF LOCK-UP AGREEMENT

                    , 2018

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

Leerink Partners LLC

Evercore Group L.L.C.

as representatives of the several underwriters

 

c/o

  

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

One Bryant Park

New York, New York 10036

 

c/o

  

Leerink Partners LLC

One Federal Street, 37th Floor

Boston, Massachusetts 02110

 

c/o

  

Evercore Group L.L.C.

55 East 52nd Street

New York, New York 10055

Re: Proposed Public Offering by Centrexion Therapeutics Corporation

Dear Sirs/Madams:

The undersigned, a stockholder and/or officer and/or director of Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), understands that Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), Leerink Partners LLC (“Leerink”) and Evercore Group L.L.C. (“Evercore” and, together with Merrill Lynch and Leerink, the “Lock-Up Representatives”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with the Company and the other underwriters party thereto providing for the public offering (the “Public Offering”) of shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter to be named in the Underwriting Agreement that, during the period beginning on the date hereof and ending on the date that is 180 days from the date of the Underwriting Agreement (subject to extensions as discussed below) (the “Lock-Up Period”), the undersigned will not, without the prior written consent of the Lock-Up Representatives, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of the Company’s Common Stock or any securities convertible into or exercisable or exchangeable for shares of the Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”), or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such swap or transaction is to be settled by delivery of shares of the Common Stock or other securities, in cash or otherwise or (iii) publicly disclose the intention to do any of the foregoing described in clauses (i) and (ii).

 

Exh A - 1


If the undersigned is an officer or director of the Company, (1) the Lock-Up Representatives agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of the Common Stock, the Lock-Up Representatives will notify the Company of the impending release or waiver, and (2) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by the Lock-Up Representatives hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (i) the release or waiver is effected solely to permit a transfer not for consideration and (ii) the transferee has agreed in writing to be bound by the same terms described in this letter to the extent and for the duration that such terms remain in effect at the time of the transfer.

Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer or otherwise dispose of the Lock-Up Securities without the prior written consent of the Lock-Up Representatives, provided that (1) the Lock-Up Representatives receive a signed lock-up agreement for the balance of the Lock-Up Period from each donee, trustee, distributee, or transferee, as the case may be, (2) (x) in the case of clauses (i) through (v) below, such transfers are not dispositions for value or required to be reported with the Securities and Exchange Commission (the “SEC”) on Form 4 in accordance with Section 16 of the Securities Exchange Act of 1934, as amended and (y) in the case of clauses (vi) through (ix) below, any such required Form 4 shall state the reason for such transfer, and (3) the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfers:

 

  (i)

as a bona fide gift or gifts; or

 

  (ii)

to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this lock-up agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin); or

 

  (iii)

as a distribution to limited or general partners, stockholders or members of the undersigned; or

 

  (iv)

to the undersigned’s affiliates or to any investment fund or other entity controlled or managed by the undersigned; or

 

  (v)

by will or intestacy; or

 

  (vi)

to the Company in connection with the exercise of options, warrants or other rights to acquire shares of the Common Stock or any security convertible into or exercisable for shares of the Common Stock of the Company by way of net exercise and/or to cover withholding tax obligations in connection with such exercise pursuant to an employee benefit plan, option, warrant or other right disclosed in the prospectus for the Public Offering, provided that any such shares of the Common Stock issued upon exercise of such option, warrant or other right shall be subject to the restrictions set forth herein; or

 

  (vii)

pursuant to a court order or settlement agreement related to the distribution of assets in connection with the dissolution of a marriage or civil union; or

 

Exh-A - 2


  (viii)

to the Company pursuant to agreements under which the Company has the option to repurchase such shares or a right of first refusal with respect to transfers of such shares upon termination of service of the undersigned; or

 

  (ix)

pursuant to the automatic conversion of outstanding preferred shares of the Company into shares of the Common Stock of the Company in connection with the Public Offering, provided that the shares of the Common Stock received upon such conversion shall be subject to the restrictions set forth herein; or

 

  (x)

to any nominee or custodian of a person or entity to whom a transfer or disposition would be permissible under clauses (i) through (ix) above; or

 

  (xi)

to a bona fide third party pursuant to a merger, consolidation, tender offer or other similar transaction occuring after the consummation of the Public Offering made to all holders of shares of the Common Stock and involving a Change of Control of the Company and approved by the Company’s board of directors; provided that, in the event that such Change of Control is not completed, the undersigned’s Lock-Up Securities shall remain subject to the restrictions contained herein, provided further that any shares of the Common Stock not transferred in such merger, consolidation, tender offer or other transaction shall remain subject to the restrictions contained herein. “Change of Control” shall mean the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter pursuant to the Public Offering), of the Company’s voting securities if, after such transfer, such person or group of affiliated persons would hold more than 50% of the outstanding voting securities of the Company (or the surviving entity).

Furthermore, notwithstanding anything to the contrary herein, the undersigned may sell shares of Common Stock of the Company purchased by the undersigned on the open market following the Public Offering if and only if (i) such sales are not required to be reported in any public report or filing with the SEC, or otherwise and (ii) the undersigned does not otherwise voluntarily effect any public filing or report regarding such sales.

The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the Lock-Up Securities except in compliance with the foregoing restrictions.

Notwithstanding the foregoing, the undersigned may establish a trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, provided, that (i) the undersigned is not required to and does not otherwise effect any public filing or report regarding the establishment of such plan during the Lock-Up Period and (ii) no sales are made during the Lock-Up Period pursuant to such plan.

In addition, the undersigned hereby waives any rights the undersigned may have to require registration of shares of the Common Stock in connection with the filing of a registration statement relating to the Public Offering. The undersigned further agrees that, for the Lock-Up Period, the undersigned will not, without the prior written consent of the Lock-Up Representatives, make any demand for, or exercise any right with respect to, or file or cause to be filed any registration statement with respect to, the registration of shares of the Common Stock or any securities convertible into or exercisable or exchangeable for shares of the Common Stock, or warrants or other rights to purchase shares of the Common Stock or any such securities. In addition, the undersigned hereby waives any and

 

Exh-A - 3


all preemptive rights, participation rights (including concurrent private placement rights), resale rights, rights of first refusal and similar rights that the undersigned may have in connection with the Public Offering or with any issuance or sale by the Company of any equity or other securities before the Public Offering, except for any such rights as have been heretofore duly exercised.

[If any record or beneficial owner of any securities of the Company is granted an early release from the restrictions described herein during the Lock-Up Period with respect to an aggregate amount of securities of the Company in excess of one percent of the issued and outstanding shares of the Company (whether in one or multiple releases), then each Major Holder (as defined below) shall also be granted an early release from its obligations hereunder on a pro rata basis with all other record or beneficial holders of similarly restricted securities of the Company based on the maximum percentage of shares held by any such record or beneficial holder being released from such holder’s lock-up agreement; provided, however, that in the case of an early release from the restrictions described herein during the Lock-Up Period in connection with an underwritten public offering, whether or not such offering or sale is wholly or partially a secondary offering of the Company’s Common Stock (an “Underwritten Sale”), such early release shall only apply with respect to such Major Holder’s participation in such Underwritten Sale. For purposes of this lock-up agreement, each of the following persons is a “Major Holder”: each record or beneficial owner, as of the date hereof, of more than 5% of the outstanding shares of securities of the Company (for purposes of determining record or beneficial ownership of a stockholder, all shares of securities held by investment funds affiliated with such stockholder shall be aggregated).]1

This agreement (and for the avoidance of doubt, the Lock-Up Period described herein) and related restrictions shall automatically terminate upon the earliest to occur, if any, of (i) either the Company, on the one hand, or the Lock-Up Representatives, on the other hand, advising the other in writing prior to the execution of the Underwriting Agreement that it has determined not to proceed with the Public Offering, (ii) the termination of the Underwriting Agreement before the sale of any shares of the Common Stock to the underwriters, (iii) the registration statement filed with the SEC with respect to the Public Offering contemplated by the Underwriting Agreement is withdrawn or (iv) June 30, 2019, in the event the closing of the Public Offering shall not have occurred on or before such date (provided, that the Company may by written notice to the undersigned prior to June 30, 2019 extend such date for a period of up to an additional three months).

[Signature page follows]

 

1 

To be added for major holders.

 

Exh-A-4


Very truly yours,
Signature:    
Print Name:    

 

Exh-A-5


Exhibit B

FORM OF PRESS RELEASE

TO BE ISSUED PURSUANT TO SECTION 3(j)

Centrexion Therapeutics Corporation

[•], 2018

Centrexion Therapeutics Corporation (the “Company”) announced today that BofA Merrill Lynch, Leerink Partners and Evercore ISI, the lead book-running managers in the Company’s recent public sale of [•] shares of common stock, are [waiving] [releasing] a lock-up restriction with respect to [•] shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on [•], 20[•], and the shares may be sold on or after such date.

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 

Exh-B-1


EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

CENTREXION THERAPEUTICS CORPORATION

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

Centrexion Therapeutics Corporation, a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),

DOES HEREBY CERTIFY:

1.    That the name of this corporation is Centrexion Therapeutics Corporation, and that this corporation was originally incorporated pursuant to the General Corporation Law on February 20, 2013 under the name Centrex Corporation.

2.    That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:

FIRST:    The name of this corporation is Centrexion Therapeutics Corporation (the “Corporation”).

SECOND:    The address of the registered office of the Corporation in the State of Delaware is 251 Little Falls Drive, Wilmington, New Castle County, Delaware 19808. The name of its registered agent at that address is Corporation Service Company.

THIRD:    The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

FOURTH:    The total number of shares of all classes of stock which the Corporation shall have authority to issue is 303,555,395 shares, consisting of (i) 200,000,000 shares of Common Stock, $0.001 par value per share (“Common Stock”) and (ii) 103,555,395 shares of Preferred Stock, $0.001 par value per share (“Preferred Stock”).

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 


  A.

COMMON STOCK

1.    General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

2.    Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings); provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to the Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to the Certificate of Incorporation or pursuant to the General Corporation Law. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

 

  B.

PREFERRED STOCK

5,000,000 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Convertible Preferred Stock” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations, 21,999,999 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series B Convertible Preferred Stock” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations, 33,333,334 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series C Convertible Preferred Stock” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations and 43,222,062 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series D Convertible Preferred Stock” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “Sections” or “Subsections” in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth.

1.    Dividends. The holders of the shares of Series D Convertible Preferred Stock, Series C Convertible Preferred Stock, Series B Convertible Preferred Stock, Series A Convertible Preferred Stock and Common Stock shall be entitled to receive dividends out of the assets of the Corporation legally available therefor in accordance with this Section 1. Any dividends accrued in accordance with this Section 1 shall be subject to the priority and rankings set forth in accordance with this Section 1.

 

2


1.1    From and after the date of issuance of any shares of Series D Convertible Preferred Stock until the earliest to occur of (a) the first anniversary of such date of issuance, (b) any conversion of such shares of Series D Convertible Preferred Stock, (c) any liquidation, dissolution or winding up of the Corporation, and (d) any Deemed Liquidation Event (as defined in Subsection 2.3.1), dividends at the rate per annum of $0.117 per share shall accrue on such shares of Series D Convertible Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Convertible Preferred Stock) (the “Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and payable in kind in shares of Common Stock (based on a value of $1.80 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock) on the earliest to occur of (i) the first anniversary of issuance of the applicable share of Series D Convertible Preferred Stock, (ii) any conversion of such share of Series D Convertible Preferred Stock, (iii) any liquidation, dissolution or winding up of the Corporation, and (iv) any Deemed Liquidation Event (as defined in Subsection 2.3.1).

1.2    The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series D Convertible Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series D Convertible Preferred Stock prior and in preference to any declaration or payment of any dividend on the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock and/or any other class or series of securities ranking junior to the Series D Convertible Preferred Stock in an amount at least equal to that dividend per share of Series D Convertible Preferred Stock as would equal the product of (a) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of Series D Convertible Preferred Stock calculated on the record date for determination of holders entitled to receive such dividend.

1.3    The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than the Accruing Dividends or dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series C Convertible Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series C Convertible Preferred Stock prior and in preference to any declaration or payment of any dividend on the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock and/or any other class or series of securities ranking junior to the Series C Convertible Preferred Stock in an amount at least equal to that dividend per share of Series C Convertible Preferred Stock as would equal the product of (a) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of Series C Convertible Preferred Stock calculated on the record date for determination of holders entitled to receive such dividend.

 

3


1.4    The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than the Accruing Dividends or dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series B Convertible Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Convertible Preferred Stock prior and in preference to any declaration or payment of any dividend on the Series A Convertible Preferred Stock and/or any other class or series of securities ranking junior to the Series B Convertible Preferred Stock in an amount at least equal to that dividend per share of Series B Convertible Preferred Stock as would equal the product of (a) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of Series B Convertible Preferred Stock calculated on the record date for determination of holders entitled to receive such dividend.

1.5    The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than the Accruing Dividends or dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series A Convertible Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A Convertible Preferred Stock prior and in preference to any declaration or payment of any dividend on any other class or series of securities ranking junior to the Series A Convertible Preferred Stock in an amount at least equal to that dividend per share of Series A Convertible Preferred Stock as would equal the product of (a) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of Series A Convertible Preferred Stock calculated on the record date for determination of holders entitled to receive such dividend.

2.    Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

2.1    Payments to Holders of Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the (a) holders of shares of Series D Convertible Preferred Stock then outstanding shall be entitled to receive prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock, Common Stock and/or any other class or series of securities ranking junior to the Series D Convertible Preferred Stock, by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series D Original Issue Price (as defined below), plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series D Convertible Preferred Stock been converted into Common Stock pursuant to Section 4.1 immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event (including, for the avoidance of doubt, giving effect to the payment of the Accruing Dividend as

 

4


described in Subsection 1.1) and (b) holders of shares of Series C Convertible Preferred Stock then outstanding shall be entitled to receive after the payment of all preferential amounts required to be paid to the holders of shares of Series D Convertible Preferred Stock and prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Common Stock and/or any other class or series of securities ranking junior to the Series C Convertible Preferred Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series C Original Issue Price (as defined below) or (ii) such amount per share as would have been payable had all shares of Series C Convertible Preferred Stock been converted into Common Stock pursuant to Section 4.1 immediately prior to such liquidation, dissolution or winding up or a Deemed Liquidation Event and (c) holders of shares of Series B Convertible Preferred Stock then outstanding shall be entitled to receive after the payment of all preferential amounts required to be paid to the holders of shares of Series D Convertible Preferred Stock and Series C Convertible Preferred Stock and prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Series A Convertible Preferred Stock, Common Stock and/or any other class or series of securities ranking junior to the Series B Convertible Preferred Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series B Original Issue Price (as defined below) or (ii) such amount per share as would have been payable had all shares of Series B Convertible Preferred Stock been converted into Common Stock pursuant to Section 4.1 immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event and (d) holders of shares of Series A Convertible Preferred Stock then outstanding shall be entitled to receive after the payment of all preferential amounts required to be paid to the holders of shares of Series D Convertible Preferred Stock, Series C Convertible Preferred Stock and Series B Convertible Preferred Stock and prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Common Stock and/or any other class or series of securities ranking junior to the Series A Convertible Preferred Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series A Original Issue Price (as defined below) or (ii) such amount per share as would have been payable had all shares of Series A Convertible Preferred Stock been converted into Common Stock pursuant to Section 4.1 immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay (A) the holders of shares of Series D Convertible Preferred Stock the full amount to which they shall be entitled under this Section 2.1, then the holders of shares of Series D Convertible Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of such shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full and (B) the holders of shares of Series C Convertible Preferred Stock the full amount to which they shall be entitled under this Section 2.1, then the holders of shares of Series C Convertible Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of such shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full and (C) the holders of shares of Series B Convertible Preferred Stock the full amount to which they shall be entitled under this Section 2.1, then the holders of shares of Series B Convertible Preferred Stock shall share ratably in any

 

5


distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of such shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full and (D) the holders of shares of Series A Convertible Preferred Stock the full amount to which they shall be entitled under this Section 2.1, then the holders of shares of Series A Convertible Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of such shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The “Series D Original Issue Price” shall mean $1.80 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Convertible Preferred Stock. The “Series C Original Issue Price” shall mean $1.80 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series C Convertible Preferred Stock. The “Series B Original Issue Price” shall mean $1.75 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Convertible Preferred Stock. The “Series A Original Issue Price” shall mean $1.75 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Convertible Preferred Stock.

2.2    Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock pursuant to Section 2.1, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder.

2.3    Deemed Liquidation Events.

2.3.1.    Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of (x) a majority of the outstanding shares of Preferred Stock and (y) a majority of the outstanding shares of Series D Convertible Preferred Stock elect otherwise by written notice sent to the Corporation at least 10 days prior to the effective date of any such event:

 

  (a)

a merger or consolidation in which:

 

  (i)

the Corporation is a constituent party, or

 

  (ii)

a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

 

6


except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation, or

(b)    the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation, of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale, lease, transfer, exclusive license or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation.

2.3.2.    Effecting a Deemed Liquidation Event. The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2.

2.3.3.    Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such Deemed Liquidation Event shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity in accordance with Sections 2.1 and 2.2. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.

2.3.4.    Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event pursuant to Subsection 2.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the definitive transaction agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 2.3.4, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

 

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3.    Voting.

3.1    General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class.

3.2    Series D Convertible Preferred Stock Protective Provisions. At any time when at least 10,805,515 shares of Series D Convertible Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Convertible Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series D Convertible Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class:

(a)    amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that materially adversely affects the powers, preferences or rights of the Series D Convertible Preferred Stock;

(b)    increase or decrease the authorized number of shares of Series D Convertible Preferred Stock (other than by reason of subdivisions of shares of such series or dividends on such series payable in shares of such series) or authorize, create, or issue (including by reclassification or otherwise) any additional class or series of capital stock that ranks senior to or pari passu with the Series D Convertible Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption;

(c)    effect any merger or consolidation or any other any other Deemed Liquidation Event or voluntarily liquidate, dissolve or wind-up the business and affairs of the Corporation;

(d)    redeem or repurchase any shares of capital stock of the Corporation (other than in connection with capital stock repurchased from former employees or consultants in connection with the cessation of their employment/services), unless (i) at the lower of fair market value or cost, or (ii) approved by the Board of Directors, including the NEA Designee (as defined in the Third Amended and Restated Stockholders Agreement, dated on or about the Series D Original Issue Date (as defined below), by and among the Corporation and the stockholders party thereto, as it may be amended and/or restated from time to time (the “Stockholders Agreement”));

 

8


(e)    declare or pay any dividend, or make any distribution on, any shares of the Corporation’s capital stock except dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock, Accruing Dividends and as otherwise provided in the Certificate of Incorporation;

(f)    amend or adopt any equity incentive plan (including any increase in the number of shares available for issuance thereunder); or

(g)    increase or decrease the number of directors constituting the entire Board of Directors.

4.    Optional Conversion.

The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

4.1    Right to Convert.

4.1.1.    Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully-paid and nonassessable shares of Common Stock as is determined by dividing (a) the Series A Original Issue Price by the Series A Conversion Price (as defined below), in the case of Series A Convertible Preferred Stock, (b) the Series B Original Issue Price by the Series B Conversion Price (as defined below), in the case of Series B Convertible Preferred Stock, (c) the Series C Original Issue Price by the Series C Conversion Price (as defined below), in the case of Series C Convertible Preferred Stock and (d) the Series D Original Issue Price by the Series D Conversion Price (as defined below), in the case of Series D Convertible Preferred Stock, in each case, in effect at the time of conversion. The “Series A Conversion Price” shall initially be equal to $1.75. The “Series B Conversion Price” shall initially be equal to $1.75. The “Series C Conversion Price” shall initially be equal to $1.80. The “Series D Conversion Price” shall initially be equal to $1.80. Such initial Series A Conversion Price, Series B Conversion Price, Series C Conversion Price and Series D Conversion Price, and the rate at which shares of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

4.1.2.    Termination of Conversion Rights. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock.

4.2    Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

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4.3    Mechanics of Conversion.

4.3.1.    Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for such Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (b) pay in cash such amount as provided in Section 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (c) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

4.3.2.    Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the Series A Conversion Price, the Series B Conversion Price, the Series C

 

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Conversion Price or the Series D Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock, Series C Convertible Preferred Stock or the Series D Convertible Preferred Stock, respectively, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully-paid and nonassessable shares of Common Stock at such adjusted Series A Conversion Price, Series B Conversion Price, Series C Conversion Price and Series D Conversion Price.

4.3.3.    Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 4.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock accordingly.

4.3.4.    No Further Adjustment. Upon any such conversion, no adjustment to the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price or Series D Conversion Price shall be made for any declared but unpaid dividends on the Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock or Series D Convertible Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

4.3.5.    Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Subsection 4.3.5. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

4.4    Adjustments to Conversion Prices for Diluting Issues.

4.4.1.    Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

(a)    “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

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(b)    “Series D Original Issue Date” shall mean the date on which the first share of Series D Convertible Preferred Stock was issued.

(c)    “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

(d)    “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series D Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

 

  (i)

shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series C Convertible Preferred Stock or Series D Convertible Preferred Stock;

 

  (ii)

shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Sections 4.5, 4.6, 4.7 or 4.8;

 

  (iii)

shares of Common Stock issued or issuable pursuant to a public offering;

 

  (iv)

shares of Series D Convertible Preferred Stock sold pursuant to that certain Series D Preferred Stock Purchase Agreement, dated on or about the Series D Original Issue Date, by and among the Corporation and the purchasers of Series D Convertible Preferred Stock named therein, as such agreement is amended from time to time;

 

  (v)

shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation;

 

  (vi)

shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;

 

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  (vii)

shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation;

 

  (viii)

shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation;

 

  (ix)

shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by the Board of Directors of the Corporation;

 

  (x)

shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation; or

 

  (xi)

shares of Common Stock issued or issuable in any other transaction in which exemption from Section 4.4 is approved by the holders of a majority of the outstanding shares of Series D Convertible Preferred Stock, which approval shall expressly refer to this Subsection 4.4.1(d)(xi) and the issuance approved.

 

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4.4.2.    No Adjustment of Conversion Price. No adjustment in the Series C Conversion Price or the Series D Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Series D Convertible Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

4.4.3.    Deemed Issue of Additional Shares of Common Stock.

(a)    If the Corporation at any time or from time to time after the Series D Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

(b)    If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series C Conversion Price or Series D Conversion Price pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Series C Conversion Price or Series D Conversion Price, as the case may be, computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Series C Conversion Price or Series D Conversion Price, as the case may be, as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the Series C Conversion Price or Series D Conversion Price, as the case may be, to an amount which exceeds the lower of (i) the Series C Conversion Price or Series D Conversion Price, as the case may be, in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Series C Conversion Price or Series D Conversion Price, as the case may be, that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

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(c)    If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Series C Conversion Price or Series D Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Series C Conversion Price or Series D Conversion Price, as the case may be, then in effect, or because such Option or Convertible Security was issued before the Series D Original Issue Date), are revised after the Series D Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

(d)    Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series C Conversion Price or Series D Conversion Price, as the case may be, pursuant to the terms of Subsection 4.4.4, the Series C Conversion Price or Series D Conversion Price, as the case may be, shall be readjusted to such Series C Conversion Price or Series D Conversion Price, as the case may be, as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

(e)    If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series C Conversion Price or Series D Conversion Price, as the case may be, provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Series C Conversion Price or Series D Conversion Price, as the case may be, that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series C Conversion Price or Series D Conversion Price, as the case may be, that such issuance or amendment took place at the time such calculation can first be made.

 

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4.4.4.    Adjustment of Conversion Prices Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Series D Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than the Series C Conversion Price or Series D Conversion Price, as the case may be, in effect immediately prior to such issue, then the Series C Conversion Price or Series D Conversion Price, as the case may be, shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

CP2 = CP1* (A + B) ÷ (A + C).

For purposes of the foregoing formula, the following definitions shall apply:

(a)    “CP2” shall mean (1) in the case of the Series C Conversion Price, the Series C Conversion Price in effect immediately after such issue of Additional Shares of Common Stock and (2) in the case of the Series D Conversion Price, the Series D Conversion Price in effect immediately after such issue of Additional Shares of Common Stock;

(b)    “CP1” shall mean (1) in the case of the Series C Conversion Price, the Series C Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock and (2) in the case of the Series D Conversion Price, the Series D Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;

(c)    “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);

(d)    “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and

(e)    “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

4.4.5.    Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

(a)    Cash and Property: Such consideration shall:

 

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  (i)

insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

  (ii)

insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and

 

  (iii)

in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation.

(b)    Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing:

 

  (i)

The total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

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  (ii)

the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

4.4.6.    Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Series C Conversion Price and/or Series D Conversion Price pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, the Series C Conversion Price and/or the Series D Conversion Price, as the case may be, shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

4.5    Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series D Original Issue Date effect a subdivision of the outstanding Common Stock, the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price and the Series D Conversion Price, each as in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series D Original Issue Date combine the outstanding shares of Common Stock, the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price and the Series D Conversion Price, each as in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

4.6    Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series D Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price and the Series D Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price and the Series D Conversion Price then in effect by a fraction:

 

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(a)    the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and

(b)    the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Notwithstanding the foregoing, (i) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price and the Series D Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price and the Series D Conversion Price shall be adjusted pursuant to this Section as of the time of actual payment of such dividends or distributions and (ii) that no such adjustment shall be made if the holders of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock or Series D Convertible Preferred Stock, as the case may be, had been converted into Common Stock on the date of such event.

4.7    Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series D Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock had been converted into Common Stock on the date of such event.

4.8    Adjustment for Merger or Reorganization, etc. Subject to the provisions of Section 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.5, 4.6 or 4.7), then, following any such

 

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reorganization, recapitalization, reclassification, consolidation or merger, each share of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of the applicable series of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock and the Series D Convertible Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price and the Series D Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the such Preferred Stock.

4.9    Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price or the Series D Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of the applicable series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the applicable series of Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock (but in any event not later than 30 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price or Series D Conversion Price, as applicable, then in effect and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of the applicable series of Preferred Stock.

4.10    Notice of Record Date. In the event:

(a)    the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security,

(b)    of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event or

(c)    of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

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then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

5.    Mandatory Conversion.

5.1    Trigger Events. Upon either (a) the closing of the sale of shares of Common Stock to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended, for a price per share equal to at least $2.25 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization) and resulting in at least $50,000,000 of gross proceeds to the Corporation and the listing of such shares of Common Stock on a national securities exchange or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Series D Convertible Preferred Stock (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), then (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Subsection 4.1.1 and (ii) such shares may not be reissued by the Corporation.

5.2    Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement)

 

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therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of each applicable series of Preferred Stock accordingly.

6.    Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption.

7.    Waiver. Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived, either prospectively or retrospectively, on behalf of such series of Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of such series of Preferred Stock then outstanding. Any of the rights, powers, preferences and other terms of the Series A Convertible Preferred Stock set forth herein may be waived, either prospectively or retrospectively, on behalf of all holders of the Series A Convertible Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of Series A Convertible Preferred Stock then outstanding. Any of the rights, powers, preferences and other terms of the Series B Convertible Preferred Stock set forth herein may be waived, either prospectively or retrospectively, on behalf of all holders of the Series B Convertible Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of Series B Convertible Preferred Stock then outstanding. Any of the rights, powers, preferences and other terms of the Series C Convertible Preferred Stock set forth herein may be waived, either prospectively or retrospectively, on behalf of all holders of the Series C Convertible Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of Series C Convertible Preferred Stock then outstanding. Any of the rights, powers, preferences and other terms of the Series D Convertible Preferred Stock set forth herein may be waived, either prospectively or retrospectively, on behalf of all holders of the Series D Convertible Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of Series D Convertible Preferred Stock then outstanding.

8.    Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

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FIFTH:    Subject to any additional vote required by the Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

SIXTH:    Subject to any additional vote required by the Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation and the Stockholders Agreement.

SEVENTH:    Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

EIGHTH:    Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

NINTH:    To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.

Any repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

TENTH:    The following indemnification provisions shall apply to the persons enumerated below.

1.    Right to Indemnification of Directors and Officers. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an “Indemnified Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 3 of this Article Tenth, the Corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.

 

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2.    Prepayment of Expenses of Directors and Officers. The Corporation shall pay the expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced if it should be ultimately determined that the Indemnified Person is not entitled to be indemnified under this Article Tenth or otherwise.

3.    Claims by Directors and Officers. If a claim for indemnification or advancement of expenses under this Article Tenth is not paid in full within 30 days after a written claim therefor by the Indemnified Person has been received by the Corporation, the Indemnified Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Indemnified Person is not entitled to the requested indemnification or advancement of expenses under applicable law.

4.    Indemnification of Employees and Agents. The Corporation may indemnify and advance expenses to any person who was or is made or is threatened to be made or is otherwise involved in any Proceeding by reason of the fact that such person, or a person for whom such person is the legal representative, is or was an employee or agent of the Corporation or, while an employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person in connection with such Proceeding. The ultimate determination of entitlement to indemnification of persons who are non-director or officer employees or agents shall be made in such manner as is determined by the Board of Directors in its sole discretion. Notwithstanding the foregoing sentence, the Corporation shall not be required to indemnify a person in connection with a Proceeding initiated by such person if the Proceeding was not authorized in advance by the Board of Directors.

5.    Advancement of Expenses of Employees and Agents. The Corporation may pay the expenses (including attorneys’ fees) incurred by an employee or agent in defending any Proceeding in advance of its final disposition on such terms and conditions as may be determined by the Board of Directors.

6.    Non-Exclusivity of Rights. The rights conferred on any person by this Article Tenth shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

7.    Other Indemnification. The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer or employee of another Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise shall be reduced by any amount such person may collect as indemnification from such other Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise.

 

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8.    Insurance. The Board of Directors may, to the full extent permitted by applicable law as it presently exists, or may hereafter be amended from time to time, authorize an appropriate officer or officers to purchase and maintain at the Corporation’s expense insurance: (a) to indemnify the Corporation for any obligation which it incurs as a result of the indemnification of directors, officers and employees under the provisions of this Article Tenth and (b) to indemnify or insure directors, officers and employees against liability in instances in which they may not otherwise be indemnified by the Corporation under the provisions of this Article Tenth.

9.    Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article Tenth shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. The rights provided hereunder shall inure to the benefit of any Indemnified Person and such person’s heirs, executors and administrators.

ELEVENTH:    The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.

TWELFTH:    Unless the corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the certificate of incorporation or the by-laws of the Corporation or (d) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.

*  *  *

 

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3.    That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

4.    That this Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on December 15th, 2017.

 

CENTREXION THERAPEUTICS CORPORATION
By:   /s/ Jeffrey B. Kindler
  Name: Jeffrey B. Kindler
  Title:   Chief Executive Officer

 

 

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CERTIFICATE OF AMENDMENT

TO

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

CENTREXION THERAPEUTICS CORPORATION

Centrexion Therapeutics Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY:

 

FIRST:

That the Board of Directors of the Corporation duly adopted resolutions by written consent recommending and declaring advisable that the Amended and Restated Certificate of Incorporation of the Corporation be amended and that such amendment be submitted to the stockholders of the Corporation for their consideration, as follows:

RESOLVED, that the first paragraph of Article FOURTH of the Amended and Restated Certificate of Incorporation of the Corporation be amended and restated in its entirety to read as follows:

“Effective on the filing of this Certificate of Amendment to Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Effective Time”), a one-for-6.245 reverse split of the Corporation’s Common Stock shall become effective, pursuant to which each 6.245 shares of Common Stock outstanding and held of record by each stockholder of the Corporation (including treasury shares) immediately prior to the Effective Time shall be reclassified and combined into one validly issued, fully-paid and nonassessable share of Common Stock automatically and without any action by the holder thereof upon the Effective Time and shall represent one share of Common Stock from and after the Effective Time (such reclassification and combination of shares, the “Reverse Stock Split”). The par value of the Common Stock and the Preferred Stock following the Reverse Stock Split shall remain at $0.001 per share. No fractional shares of Common Stock shall be issued as a result of the Reverse Stock Split and, in lieu thereof, upon surrender after the Effective Time of a certificate which formerly represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time, any person who would otherwise be entitled to a fractional share of Common Stock as a result of the Reverse Stock Split, following the Effective Time, shall be entitled to receive a cash payment equal to the fraction of which such holder would otherwise be entitled multiplied by the fair value per share as determined by the Board of Directors.

Each stock certificate that, immediately prior to the Effective Time, represented shares of Common Stock that were issued and


outstanding immediately prior to the Effective Time shall, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent that number of whole shares of Common Stock after the Effective Time into which the shares formerly represented by such certificate have been reclassified (as well as the right to receive cash in lieu of fractional shares of Common Stock after the Effective Time); provided, however, that each person of record holding a certificate that represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall receive, upon surrender of such certificate, a new certificate evidencing and representing the number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified; and provided further, however, that whether or not fractional shares would be issuable as a result of the Reverse Stock Split shall be determined on the basis of (i) the total number of shares of Common Stock that were issued and outstanding immediately prior to the Effective Time formerly represented by certificates that the holder is at the time surrendering for a new certificate evidencing and representing the number of whole shares of Common Stock after the Effective Time and (ii) the aggregate number of shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificates shall have been reclassified.

The total number of shares of all classes of stock which the Corporation shall have authority to issue is 303,555,395, consisting of (i) 200,000,000 shares of Common Stock, $0.001 par value per share (“Common Stock”), and (ii) 103,555,395 shares of Preferred Stock, $0.001 par value per share (“Preferred Stock”).”

RESOLVED FURTHER, that Subsection 5.1 of Part B of Article FOURTH of the Amended and Restated Certificate of Incorporation of the Corporation be amended and restated in its entirety to read as follows:

“Upon the earliest to occur of the following: (a) the closing of the sale of shares of Common Stock to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended, for a price per share equal to at least $14.05125 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization other than the Reverse Stock Split) and resulting in at least $50,000,000 of gross proceeds to the Corporation and the listing of such shares of Common Stock on a national securities exchange, (b) the closing of the sale of shares of Common Stock to the public pursuant to the Corporation’s Registration Statement on Form S-1 (Reg. No. 333-227902), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Series D Convertible Preferred Stock (the time of any such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the


Mandatory Conversion Time”), then (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Subsection 4.1.1 and (ii) such shares may not be reissued by the Corporation.”

 

SECOND:

That in lieu of a meeting and vote of stockholders, the stockholders have given written consent to said amendments in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.

 

THIRD:

That the aforesaid amendments were duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.

* * *


IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Jeffrey B. Kindler, the Chief Executive Officer of the Corporation, this 2nd day of November, 2018.

 

CENTREXION THERAPEUTICS CORPORATION
By:   /s/ Jeffrey B. Kindler
  Jeffrey B. Kindler
  Chief Executive Officer

EX-3.3

Exhibit 3.3

RESTATED CERTIFICATE OF INCORPORATION

OF

CENTREXION THERAPEUTICS CORPORATION

The name of the corporation is Centrexion Therapeutics Corporation. The corporation was originally incorporated under the name “Centrex Corporation” by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on February 20, 2013. This Restated Certificate of Incorporation of the corporation, which restates and integrates and also further amends the provisions of the corporation’s Certificate of Incorporation, was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware and by the written consent of its stockholders in accordance with Section 228 of the General Corporation Law of the State of Delaware. The Certificate of Incorporation of the corporation is hereby amended, integrated and restated to read in its entirety as follows:

FIRST: The name of the Corporation is Centrexion Therapeutics Corporation.

SECOND: The address of the Corporation’s registered office in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, Delaware 19808. The name of its registered agent at that address is Corporation Service Company.

THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 210,000,000, consisting of (a) 200,000,000 shares of Common Stock, $0.001 par value per share (“Common Stock”), and (b) 10,000,000 shares of Preferred Stock, $0.001 par value per share (“Preferred Stock”).

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

A. COMMON STOCK.

1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors of the Corporation (the “Board of Directors”) upon any issuance of the Preferred Stock of any series.

2. Voting. The holders of the Common Stock shall have voting rights at all meetings of stockholders, each such holder being entitled to one vote for each share thereof held by such holder; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Restated Certificate of Incorporation

 

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(which, as used herein, shall mean the certificate of incorporation of the Corporation, as amended from time to time, including the terms of any certificate of designations of any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Restated Certificate of Incorporation or the General Corporation Law of the State of Delaware. There shall be no cumulative voting.

The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.

3. Dividends. Dividends may be declared and paid on the Common Stock if, as and when determined by the Board of Directors subject to any preferential dividend or other rights of any then outstanding Preferred Stock and to the requirements of applicable law.

4. Liquidation. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential or other rights of any then outstanding Preferred Stock.

B. PREFERRED STOCK.

Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided.

Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate of designations relating thereto in accordance with the General Corporation Law of the State of Delaware, to determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the fullest extent now or hereafter permitted by the General Corporation Law of the State of Delaware. The powers, preferences and relative, participating, optional and other special rights of each such series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. Without limiting the generality of the foregoing, the resolution or resolutions providing for the issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of Preferred Stock to the extent permitted by law.

 

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Subject to the rights of the holders of any series of Preferred Stock pursuant to the terms of this Restated Certificate of Incorporation or any resolution or resolutions providing for the issuance of such series of stock adopted by the Board of Directors, the number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.

FIFTH: Except as otherwise provided herein, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Restated Certificate of Incorporation, and all rights conferred upon stockholders, directors or any other persons herein are granted subject to this reservation.

SIXTH: In furtherance and not in limitation of the powers conferred upon it by the General Corporation Law of the State of Delaware, and subject to the terms of any series of Preferred Stock, the Board of Directors shall have the power to adopt, amend, alter or repeal the Bylaws of the Corporation. The stockholders may not adopt, amend, alter or repeal the Bylaws of the Corporation, or adopt any provision inconsistent therewith, unless such action is approved, in addition to any other vote required by this Restated Certificate of Incorporation, by the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon. Notwithstanding any other provisions of law, this Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article SIXTH.

SEVENTH: Except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. If the General Corporation Law of the State of Delaware is amended to permit further elimination or limitation of the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware as so amended.

EIGHTH: This Article EIGHTH is inserted for the management of the business and for the conduct of the affairs of the Corporation.

1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

 

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2. Number of Directors; Election of Directors. Subject to the rights of holders of any series of Preferred Stock to elect directors, the number of directors of the Corporation shall be established from time to time by the Board of Directors. Election of directors need not be by written ballot, except as and to the extent provided in the Bylaws of the Corporation.

3. Classes of Directors. Subject to the rights of holders of any series of Preferred Stock to elect directors, the Board of Directors shall be and is divided into three classes, designated as Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The Board of Directors is authorized to assign members of the Board of Directors to Class I, Class II or Class III.

4. Terms of Office. Subject to the rights of holders of any series of Preferred Stock to elect directors, each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that each director initially assigned to Class I shall serve for a term expiring at the Corporation’s first annual meeting of stockholders held after the effectiveness of this Restated Certificate of Incorporation; each director initially assigned to Class II shall serve for a term expiring at the Corporation’s second annual meeting of stockholders held after the effectiveness of this Restated Certificate of Incorporation; and each director initially assigned to Class III shall serve for a term expiring at the Corporation’s third annual meeting of stockholders held after the effectiveness of this Restated Certificate of Incorporation; provided further, that the term of each director shall continue until the election and qualification of his or her successor and be subject to his or her earlier death, resignation or removal.

5. Quorum. The greater of (a) a majority of the directors at any time in office and (b) one-third of the number of directors fixed pursuant to Section 2 of this Article EIGHTH shall constitute a quorum of the Board of Directors. If at any meeting of the Board of Directors there shall be less than such a quorum, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.

6. Action at Meeting. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors unless a greater number is required by law or by this Restated Certificate of Incorporation.

7. Removal. Subject to the rights of holders of any series of Preferred Stock, directors of the Corporation may be removed but only for cause and only by the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote at an election of directors.

8. Vacancies. Subject to the rights of holders of any series of Preferred Stock, any vacancy or newly created directorship in the Board of Directors, however occurring, shall be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director and shall not be filled by the stockholders, unless the Board of

 

4


Directors determines by resolution that any such vacancy or newly created directorship shall be filled by the stockholders. A director elected to fill a vacancy shall hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of a successor and to such director’s earlier death, resignation or removal.

9. Stockholder Nominations and Introduction of Business, Etc. Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the Bylaws of the Corporation.

10. Amendments to Article. Notwithstanding any other provisions of law, this Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article EIGHTH.

NINTH: No action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting. Notwithstanding any other provisions of law, this Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article NINTH.

TENTH: Special meetings of stockholders for any purpose or purposes may be called at any time only by the Board of Directors, the chairperson of the Board of Directors, the chief executive officer or the president (in the absence of a chief executive officer) of the Corporation, and may not be called by any other person or persons. Business transacted at any special meeting of stockholders shall be limited to the purpose or purposes stated in the notice of meeting. Notwithstanding any other provisions of law, this Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TENTH.

ELEVENTH: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of fiduciary duty owed by any director, officer, employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware or (d) any action asserting a claim governed by the internal affairs doctrine, in each

 

5


case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein; provided that, this exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. To the fullest extent permitted by applicable law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article ELEVENTH. Notwithstanding any other provisions of law, this Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article ELEVENTH. If any provision or provisions of this Article ELEVENTH shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article ELEVENTH (including, without limitation, each portion of any sentence of this Article ELEVENTH containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

 

6


IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which restates, integrates and amends the certificate of incorporation of the Corporation, and which has been duly adopted in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware, has been executed by its duly authorized officer this      day of                 , 2018.

 

CENTREXION THERAPEUTICS CORPORATION
By:  

 

  Name:   Jeffrey B. Kindler
  Title:   Chief Executive Officer

EX-3.4

Exhibit 3.4

AMENDED AND RESTATED

BYLAWS

OF

CENTREXION THERAPEUTICS CORPORATION

(a Delaware corporation)


TABLE OF CONTENTS

 

         Page  

ARTICLE I - CORPORATE OFFICES

     1  

1.1

 

REGISTERED OFFICE

     1  

1.2

 

OTHER OFFICES

     1  

ARTICLE II - MEETINGS OF STOCKHOLDERS

     1  

2.1

 

PLACE OF MEETINGS

     1  

2.2

 

ANNUAL MEETING

     1  

2.3

 

SPECIAL MEETING

     1  

2.4

 

ADVANCE NOTICE PROCEDURES FOR BUSINESS BROUGHT BEFORE A MEETING

     2  

2.5

 

ADVANCE NOTICE PROCEDURES FOR NOMINATIONS OF DIRECTORS

     8  

2.6

 

NOTICE OF STOCKHOLDERS’ MEETINGS

     12  

2.7

 

MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

     12  

2.8

 

QUORUM

     13  

2.9

 

ADJOURNED MEETING; NOTICE

     13  

2.10

 

CONDUCT OF BUSINESS

     13  

2.11

 

VOTING

     14  

2.12

 

STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

     15  

2.13

 

RECORD DATE FOR STOCKHOLDER NOTICE; VOTING

     15  

2.14

 

PROXIES

     15  

2.15

 

LIST OF STOCKHOLDERS ENTITLED TO VOTE

     16  

2.16

 

POSTPONEMENT, ADJOURNMENT AND CANCELLATION OF MEETING.

     16  

2.17

 

INSPECTORS OF ELECTION

     16  

ARTICLE III - DIRECTORS

     17  

3.1

 

POWERS

     17  

3.2

 

NUMBER OF DIRECTORS

     17  

3.3

 

ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS

     17  

3.4

 

RESIGNATION AND VACANCIES

     17  

3.5

 

PLACE OF MEETINGS; MEETINGS BY TELEPHONE

     18  

3.6

 

REGULAR MEETINGS

     18  

3.7

 

SPECIAL MEETINGS; NOTICE

     18  

3.8

 

QUORUM

     19  

3.9

 

BOARD ACTION BY CONSENT WITHOUT A MEETING

     19  

3.10

 

FEES AND COMPENSATION OF DIRECTORS

     19  

3.11

 

REMOVAL OF DIRECTORS

     19  

ARTICLE IV - COMMITTEES

     20  

4.1

 

COMMITTEES OF DIRECTORS

     20  

4.2

 

COMMITTEE MINUTES

     20  

4.3

 

MEETINGS AND ACTION OF COMMITTEES

     20  

ARTICLE V - OFFICERS

     21  

5.1

 

OFFICERS

     21  

5.2

 

APPOINTMENT OF OFFICERS

     21  

 

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TABLE OF CONTENTS

(continued)

 

         Page  

5.3

 

SUBORDINATE OFFICERS

     21  

5.4

 

REMOVAL AND RESIGNATION OF OFFICERS

     22  

5.5

 

VACANCIES IN OFFICES

     22  

5.6

 

REPRESENTATION OF SHARES OF OTHER ENTITIES

     22  

5.7

 

AUTHORITY AND DUTIES OF OFFICERS

     22  

ARTICLE VI - RECORDS AND REPORTS

     22  

6.1

 

MAINTENANCE OF RECORDS

     22  

ARTICLE VII - GENERAL MATTERS

     23  

7.1

 

EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS

     23  

7.2

 

STOCK CERTIFICATES; PARTLY PAID SHARES

     23  

7.3

 

MULTIPLES CLASSES OR SERIES OF STOCK

     23  

7.4

 

LOST CERTIFICATES

     24  

7.5

 

CONSTRUCTION; DEFINITIONS

     24  

7.6

 

DIVIDENDS

     24  

7.7

 

FISCAL YEAR

     25  

7.8

 

SEAL

     25  

7.9

 

TRANSFER OF STOCK

     25  

7.10

 

STOCK TRANSFER AGREEMENTS

     25  

7.11

 

REGISTERED STOCKHOLDERS

     25  

7.12

 

WAIVER OF NOTICE

     26  

ARTICLE VIII - NOTICE BY ELECTRONIC TRANSMISSION

     26  

8.1

 

NOTICE BY ELECTRONIC TRANSMISSION

     26  

8.2

 

DEFINITION OF ELECTRONIC TRANSMISSION

     27  

ARTICLE IX - INDEMNIFICATION AND ADVANCEMENT

     27  

9.1

 

ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION

     27  

9.2

 

ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION

     28  

9.3

 

INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY

     28  

9.4

 

NOTIFICATION AND DEFENSE OF CLAIM

     29  

9.5

 

ADVANCE OF EXPENSES

     29  

9.6

 

PROCEDURE FOR INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

     30  

9.7

 

REMEDIES

     30  

9.8

 

LIMITATIONS

     31  

9.9

 

SUBSEQUENT AMENDMENT

     31  

9.10

 

OTHER RIGHTS

     31  

9.11

 

PARTIAL INDEMNIFICATION

     32  

9.12

 

INSURANCE

     32  

9.13

 

SAVINGS CLAUSE

     32  

9.14

 

DEFINITIONS

     32  

 

ARTICLE X - AMENDMENTS

   33

 

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AMENDED AND RESTATED BYLAWS

OF

CENTREXION THERAPEUTICS CORPORATION

 

 

ARTICLE I - CORPORATE OFFICES

1.1 REGISTERED OFFICE.

The registered office of Centrexion Therapeutics Corporation (the “Corporation”) shall be fixed in the Corporation’s certificate of incorporation, as the same may be amended and/or restated from time to time (the “certificate of incorporation”).

1.2 OTHER OFFICES.

The Corporation may have other offices at any place or places, either within or outside the State of Delaware, as the Corporation’s board of directors (the “Board”) shall from time to time determine or the business of the Corporation may from time to time require.

ARTICLE II - MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS.

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a) of the General Corporation Law of the State of Delaware (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office.

2.2 ANNUAL MEETING.

The Board shall designate the date and time of the annual meeting. At the annual meeting, directors shall be elected and other proper business properly brought before the meeting in accordance with Section 2.4 of these bylaws may be transacted.

2.3 SPECIAL MEETING.

A special meeting of the stockholders may be called at any time by the Board, chairperson of the Board, chief executive officer or president (in the absence of a chief executive officer) of the Corporation, but such special meetings may not be called by any other person or persons.


No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

2.4 ADVANCE NOTICE PROCEDURES FOR BUSINESS BROUGHT BEFORE A MEETING.

(a) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) brought before the meeting by the Corporation and specified in a notice of meeting given by or at the direction of the Board, (ii) brought before the meeting by or at the direction of the Board (or a committee thereof) or (iii) otherwise properly brought before the meeting by a stockholder who (A) was a stockholder of record of the Corporation (and, with respect to any beneficial owner, if different, on whose behalf such business is proposed, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting, (B) is entitled to vote at the meeting and (C) has complied with this Section 2.4 as to such business. Except for proposals properly made in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”), and included in the notice of meeting given by or at the direction of the Board, the foregoing clause (iii) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders. Stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders, and the only matters that may be brought before a special meeting are the matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 2.3 of these bylaws. Stockholders seeking to nominate persons for election to the Board must comply with Section 2.5 of these bylaws, and this Section 2.4 shall not be applicable to nominations except as expressly provided in Section 2.5 of these bylaws.

(b) Without qualification, for business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of the second sentence of Section 2.4(a) of these bylaws, the stockholder must (i) provide Timely Notice (as defined below) thereof in writing and in proper form to the secretary of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholder’s notice must be delivered to, or mailed and received by the Secretary at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that (x) if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date or (y) with respect to the first annual meeting held after the Company’s initial public offering of its shares pursuant to a registration statement on Form S-1, notice by the stockholder to be timely must be so delivered,

 

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or mailed and received, not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the later of the close of business on the ninetieth (90th) day prior to such annual meeting and the close of business on the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “Timely Notice”). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of Timely Notice as described above.

(c) To be in proper form for purposes of this Section 2.4, a stockholder’s notice to the secretary of the Corporation shall set forth:

(i) As to each Proposing Person (as defined below), (A) the name and address of such Proposing Person (including, without limitation, if applicable, the name and address that appear on the Corporation’s books and records) and (B) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (A) and (B) are referred to as “Stockholder Information”);

(ii) As to each Proposing Person, (A) any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to give such Proposing Person economic risk similar to ownership of shares of any class or series of the Corporation, including, without limitation, due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares of any class or series of the Corporation, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of the Corporation (“Synthetic Equity Interests”), which Synthetic Equity Interests shall be disclosed without regard to whether (x) the derivative, swap or other transactions convey any voting rights in such shares to such Proposing Person, (y) the derivative, swap or other transactions are required to be, or are capable of being, settled through delivery of such shares or (z) such Proposing Person may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions, (B) any proxy (other than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A), agreement, arrangement, understanding or relationship pursuant to which such Proposing Person has or

 

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shares a right to vote any shares of any class or series of the Corporation, (C) any agreement, arrangement, understanding or relationship, including, without limitation, any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares of any class or series of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such Proposing Person with respect to the shares of any class or series of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares of any class or series of the Corporation (“Short Interests”), (D) any rights to dividends on the shares of any class or series of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (E) any performance related fees (other than an asset based fee) that such Proposing Person is entitled to based on any increase or decrease in the price or value of shares of any class or series of the Corporation, or any Synthetic Equity Interests or Short Interests, if any, (F)(x) if such Proposing Person is not a natural person, the identity of the natural person or persons associated with such Proposing Person responsible for the formulation of and decision to propose the business to be brought before the meeting (such person or persons, the “Responsible Person”), the manner in which such Responsible Person was selected, any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such Proposing Person, the qualifications and background of such Responsible Person and any material interests or relationships of such Responsible Person that are not shared generally by any other record or beneficial holder of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, and (y) if such Proposing Person is a natural person, the qualifications and background of such natural person and any material interests or relationships of such natural person that are not shared generally by any other record or beneficial holder of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, (G) any significant equity interests or any Synthetic Equity Interests or Short Interests in any principal competitor of the Corporation held by such Proposing Persons, (H) any direct or indirect interest of such Proposing Person in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, without limitation, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), (I) any pending or threatened litigation in which such Proposing Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (J) any material transaction occurring during the prior twelve months between such Proposing

 

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Person, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand, (K) a summary of any material discussions regarding the business proposed to be brought before the meeting (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other record or beneficial holder of the shares of any class or series of the Corporation (including, without limitation, their names) and (L) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (A) through (L) are referred to as “Disclosable Interests”); provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and

(iii) As to each item of business that the stockholder proposes to bring before the annual meeting, (A) a reasonably brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (B) the text of the proposal or business (including, without limitation, the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the bylaws of the Corporation, the language of the proposed amendment), (C) a reasonably detailed description of all agreements, arrangements and understandings between or among any of the Proposing Persons or between or among any Proposing Person and any other person or entity (including, without limitation, their names) in connection with the proposal of such business by such stockholder, (D) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business, (E) a representation whether the Proposing Person intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal and/or (2) otherwise to solicit proxies or votes from stockholders in support of such proposal and (F) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act; provided, however, that the disclosures required by this paragraph (c)(iii) shall not include any disclosures with respect to any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner.

 

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(d) For purposes of this Section 2.4, the term “Proposing Person shall mean (i) the stockholder providing the notice of business proposed to be brought before an annual meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made, (iii) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act for the purposes of these bylaws) of such stockholder or beneficial owner and (iv) any other person with whom such stockholder or beneficial owner (or any of their respective affiliates or associates) is Acting in Concert (as defined below).

(e) A person shall be deemed to be “Acting in Concert” with another person for purposes of these bylaws if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the management, governance or control of the Corporation in parallel with, such other person where (i) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (ii) at least one additional factor suggests that such persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.

(f) A stockholder providing notice of business proposed to be brought before an annual meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for determining stockholders entitled to notice of the annual meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining stockholders entitled to notice of the annual meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

 

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(g) Notwithstanding anything in these bylaws to the contrary and except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, no business shall be conducted at an annual meeting except in accordance with this Section 2.4. The presiding officer of an annual meeting of stockholders shall have the power and duty (a) to determine that any business was not properly brought before the meeting in accordance with this Section 2.4 (including whether the stockholder or beneficial owner, if any, on whose behalf the business proposed to be brought before the annual meeting is made, solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s business in compliance with such stockholder’s representation as required by clause (c)(iii)(E) of this Section 2.4); and (b) if any proposed business was not proposed in compliance with this Section 2.4 to declare to the meeting that any such business not properly brought before the meeting shall not be transacted.

(h) The foregoing notice requirements of this Section 2.4 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

(i) For purposes of these bylaws, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(j) Notwithstanding the foregoing provisions of this Section 2.4, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting to present proposed business, such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.4, except as provided under Rule 14a-8 under the Exchange Act, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the annual meeting and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the annual meeting.

 

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(k) Notwithstanding the foregoing provisions of this Section 2.4, a stockholder shall also comply with all applicable requirements of the Exchange Act with respect to the matters set forth in this Section 2.4; provided however, that any references in these bylaws to the Exchange Act are not intended to and shall not limit any requirements applicable to proposals as to any business to be considered pursuant to this Section 2.4 (including paragraph (a)(iii) hereof), and compliance with paragraph (a)(iii) of this Section 2.4 shall be the exclusive means for a stockholder to submit business (other than, as provided in the first sentence of paragraph (h) of this Section 2.4, business brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time).

2.5 ADVANCE NOTICE PROCEDURES FOR NOMINATIONS OF DIRECTORS.

(a) Nominations of any person for election to the Board at an annual meeting or at a special meeting (but, in the case of a special meeting, only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) by or at the direction of the Board or any committee thereof, or (ii) by a stockholder who (A) was a stockholder of record of the Corporation (and, with respect to any beneficial owner, if different, on whose behalf such nomination is proposed to be made, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting, (B) is entitled to vote at the meeting and (C) has complied with this Section 2.5 as to such nomination. The foregoing clause (ii) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board to be considered by the stockholders at an annual meeting or special meeting.

(b) Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting, the stockholder must (i) provide Timely Notice (as defined in Section 2.4(b) of these bylaws) thereof in writing and in proper form to the secretary of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. Notwithstanding anything in this paragraph to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting is increased effective after the time period for which nominations would otherwise by due under this paragraph (b) and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by paragraph (b) of this Section 2.5 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation. Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting, then for a

 

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stockholder to make any nomination of a person or persons for election to such position(s) as specified in the notice of the special meeting, the stockholder must (i) provide timely notice thereof in writing and in proper form to the secretary of the Corporation at the principal executive offices of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. To be timely, a stockholder’s notice for nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the later of the close of business on the ninetieth (90th) day prior to such special meeting and the close of business on the tenth (10th) day following the day on which public disclosure (as defined in Section 2.4(i) of these bylaws) of the date of such special meeting was first made. In no event shall any adjournment or postponement of an annual meeting or special meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(c) To be in proper form for purposes of this Section 2.5, a stockholder’s notice to the secretary of the Corporation shall set forth:

(i) As to each Nominating Person (as defined below), the Stockholder Information (as defined in Section 2.4(c)(i) of these bylaws) except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(c)(i);

(ii) As to each Nominating Person, any Disclosable Interests (as defined in Section 2.4(c)(ii), except that for purposes of this Section 2.5 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(c)(ii) and the disclosure in clause (L) of Section 2.4(c)(ii) shall be made with respect to the election of directors at the meeting) provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Nominating Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and;

(iii) As to each person whom a Nominating Person proposes to nominate for election as a director, (A) all information with respect to such proposed nominee that would be required to be set forth in a stockholder’s notice pursuant to this Section 2.5 if such proposed nominee were a Nominating Person, (B) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including, without limitation, such proposed nominee’s written consent to being named in the proxy statement as a

 

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nominee and to serving as a director if elected), (C) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among any Nominating Person, on the one hand, and each proposed nominee, his or her respective affiliates and associates and any other persons with whom such proposed nominee (or any of his or her respective affiliates and associates) is Acting in Concert (as defined in Section 2.4(e) of these bylaws), on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant (the disclosures to be made pursuant to the foregoing clauses (A) through (C) are referred to as “Nominee Information”), (D) a representation that the Nominating Person is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such nomination, (E) a representation whether the Nominating Person intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to elect the nominee and/or (2) otherwise to solicit proxies or votes from stockholders in support of such nomination and (F) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(g); and

(iv) The Corporation may require any proposed nominee to furnish such other information (A) as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation in accordance with the Corporation’s Corporate Governance Guidelines or (B) that could be material to a reasonable stockholder’s understanding of the independence or lack of independence of such proposed nominee.

(d) For purposes of this Section 2.5, the term “Nominating Person shall mean (i) the stockholder providing the notice of the nomination proposed to be made at the meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, (iii) any affiliate or associate of such stockholder or beneficial owner and (iv) any other person with whom such stockholder or such beneficial owner (or any of their respective affiliates or associates) is Acting in Concert.

(e) A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for determining stockholders entitled to notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and

 

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received by, the secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining stockholders entitled to notice of the meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

(f) Notwithstanding anything in these bylaws to the contrary, no person shall be eligible for election as a director of the Corporation unless nominated in accordance with this Section 2.5, except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act. The presiding officer at any meeting of stockholders shall have the power and duty to (a) determine that a nomination was not properly made in accordance with this Section 2.5 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination was made, solicited or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s nomination in compliance with such stockholder’s representation as required by clause (c)(iii)(E) of this Section 2.5); and (b) if any proposed nomination was not made in compliance with this Section 2.5 to declare such determination to the meeting that the defective nomination shall be disregarded.

(g) To be eligible to be a nominee for election as a director of the Corporation, the proposed nominee must deliver (in accordance with the time periods prescribed for delivery of notice under this Section 2.5) to the secretary of the Corporation at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such proposed nominee (which questionnaire shall be provided by the secretary upon written request) and a written representation and agreement (in form provided by the secretary upon written request) that such proposed nominee (i) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a director of the Corporation, with such proposed nominee’s fiduciary duties under applicable law, (ii) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with candidacy, service or action as a director that has not been disclosed to the Corporation and (iii) in such proposed nominee’s individual capacity and on behalf of the stockholder (and the beneficial owner, if different, on whose behalf the nomination is made) would be in compliance, if elected as a director of the Corporation, and will comply with applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

 

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(h) In addition to the requirements of this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Nominating Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.

(i) Notwithstanding the foregoing provisions of this Section 2.5, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the meeting to present the proposed nomination, such proposed nomination shall not be considered, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.5, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting.

2.6 NOTICE OF STOCKHOLDERS’ MEETINGS.

Unless otherwise provided by law, the certificate of incorporation or these bylaws, the notice of any meeting of stockholders shall be given in accordance with either Section 2.7 or Section 8.1 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting. The notice shall specify the place, if any, date and hour of the meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting), the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

2.7 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.

Notice of any meeting of stockholders shall be deemed given:

(a) if mailed, when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the Corporation’s records; or

(b) if electronically transmitted, as provided in Section 8.1 of these bylaws.

An affidavit of the secretary or an assistant secretary of the Corporation or of the transfer agent or any other agent of the Corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

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2.8 QUORUM.

Unless otherwise provided by law, the certificate of incorporation or these bylaws, the holders of a majority in voting power of the capital stock issued and outstanding and entitled to vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, a quorum is not present or represented at any meeting of the stockholders, then either (a) the chairperson of the meeting or (b) a majority in voting power of the stockholders entitled to vote thereon, present in person, or by remote communication, if applicable, or represented by proxy, shall have power to adjourn the meeting from time to time in the manner provided in Section 2.9 of these bylaws until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

2.9 ADJOURNED MEETING; NOTICE.

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date for determining the stockholders entitled to vote is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting as of the record date for determining the stockholders entitled to notice of the adjourned meeting.

2.10 CONDUCT OF BUSINESS.

The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures (which need not be in writing) and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding person of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present (including, without limitation, rules and procedures for removal of disruptive persons from the meeting); (c)

 

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limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting (including, without limitation, determinations with respect to the administration and/or interpretation of any of the rules, regulations or procedures of the meeting, whether adopted by the Board or prescribed by the person presiding over the meeting), shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

2.11 VOTING.

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

Except as may be otherwise provided in the certificate of incorporation or these bylaws, each stockholder shall be entitled to one (1) vote for each share of capital stock held by such stockholder.

At all duly called or convened meetings of stockholders, at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient to elect a director. All other elections and questions presented to the stockholders at a duly called or convened meeting, at which a quorum is present, shall, unless a different or minimum vote is required by the certificate of incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or any law or regulation applicable to the Corporation or its securities, in which case such different or minimum vote shall be the applicable vote on the matter, be decided by the affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the meeting by the holders entitled to vote thereon.

 

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2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.

In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which shall not be more than sixty (60) days prior to such other action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

2.14 PROXIES.

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A proxy may be in the form of a telegram, cablegram or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram or other means of electronic transmission was authorized by the stockholder.

 

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2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE.

The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the date of the meeting), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the Corporation’s principal executive office. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to the identity of the stockholders entitled to vote in person or by proxy and the number of shares held by each of them, and as to the stockholders entitled to examine the list of stockholders.

2.16 POSTPONEMENT, ADJOURNMENT AND CANCELLATION OF MEETING.

Any previously scheduled annual or special meeting of the stockholders may be postponed or adjourned, and any previously scheduled annual or special meeting of the stockholders may be canceled, by resolution of the Board.

2.17 INSPECTORS OF ELECTION.

Before any meeting of stockholders, the Board shall appoint an inspector or inspectors of election to act at the meeting or its adjournment or postponement and make a written report thereof. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that

 

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vacancy. Unless otherwise required by law, inspectors may be officers, employees or agents of the Corporation. Such inspectors shall have the duties prescribed by law. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

ARTICLE III - DIRECTORS

3.1 POWERS.

Subject to the provisions of the DGCL and any limitations in the certificate of incorporation, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board.

3.2 NUMBER OF DIRECTORS.

The authorized number of directors shall be determined from time to time by resolution of the Board, provided the Board shall consist of at least one (1) member. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.

Except as provided in Section 3.4 of these bylaws, each director, including, without limitation, a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The Corporation may also have, at the discretion of the Board, a chairperson of the Board and a vice chairperson of the Board. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.

3.4 RESIGNATION AND VACANCIES.

Any director may resign at any time upon notice given in writing or by electronic transmission to the chairperson of the Board or the Corporation’s chief executive officer, president or secretary. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.

 

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Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors shall, unless the Board determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board shall be deemed to exist under these bylaws in the case of the death, removal or resignation of any director.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this bylaw shall constitute presence in person at the meeting.

3.6 REGULAR MEETINGS.

Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board; provided that any director who is absent when such determination is made shall be given notice of the determination. A regular meeting of the Board may be held without notice immediately after and at the same place as the annual meeting of stockholders.

3.7 SPECIAL MEETINGS; NOTICE.

Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or a majority of the authorized number of directors.

Notice of the time and place of special meetings shall be:

(a) delivered personally by hand, by courier or by telephone;

(b) sent by United States first-class mail, postage prepaid;

(c) sent by facsimile; or

 

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(d) sent by electronic mail, electronic transmission or other similar means,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail or other electronic address, as the case may be, as shown on the Corporation’s records.

If the notice is (a) delivered personally by hand, by courier or by telephone, (b) sent by facsimile or (c) sent by electronic mail or electronic transmission, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive office) nor the purpose of the meeting.

3.8 QUORUM.

The greater of (a) a majority of the directors at any time in office and (b) one-third of the number of directors established by the Board pursuant to Section 3.2 of these bylaws shall constitute a quorum of the Board for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

3.9 BOARD ACTION BY CONSENT WITHOUT A MEETING.

Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

3.10 FEES AND COMPENSATION OF DIRECTORS.

Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

3.11 REMOVAL OF DIRECTORS.

Subject to the rights of the holders of the shares of any series of preferred stock of the Corporation, the Board or any individual director may be removed from office only for cause and only by the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon.

 

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ARTICLE IV - COMMITTEES

4.1 COMMITTEES OF DIRECTORS.

The Board may designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the Corporation. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (a) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (b) adopt, amend or repeal any bylaw of the Corporation.

4.2 COMMITTEE MINUTES.

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

4.3 MEETINGS AND ACTION OF COMMITTEES.

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(a) Section 3.5 of these bylaws (place of meetings and meetings by telephone);

(b) Section 3.6 of these bylaws (regular meetings);

(c) Section 3.7 of these bylaws (special meetings and notice);

(d) Section 3.8 of these bylaws (quorum);

(e) Section 7.12 of these bylaws (waiver of notice); and

 

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(f) Section 3.9 of these bylaws (action without a meeting),

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However:

(i) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii) special meetings of committees may also be called by resolution of the Board; and

(iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the governance of any committee not inconsistent with the provisions (or any part thereof) of these bylaws.

ARTICLE V - OFFICERS

5.1 OFFICERS.

The officers of the Corporation shall be a president and a secretary. The Corporation may also have, at the discretion of the Board, a chief executive officer, a chief financial officer or treasurer, one (1) or more vice presidents, one (1) or more assistant vice presidents, one (1) or more assistant treasurers, one (1) or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

5.2 APPOINTMENT OF OFFICERS.

The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.

5.3 SUBORDINATE OFFICERS.

The Board may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers shall hold office for such period, as is provided in these bylaws or as the Board may from time to time determine.

 

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5.4 REMOVAL AND RESIGNATION OF OFFICERS.

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

5.5 VACANCIES IN OFFICES.

Any vacancy occurring in any office of the Corporation shall be filled by the Board or as provided in Section 5.3 of these bylaws.

5.6 REPRESENTATION OF SHARES OF OTHER ENTITIES.

The chairperson of the Board, the president, any vice president, the treasurer, the secretary or assistant secretary of this Corporation, or any other person authorized by the Board or the president or a vice president, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all securities of any other entity or entities standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

5.7 AUTHORITY AND DUTIES OF OFFICERS.

All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

ARTICLE VI - RECORDS AND REPORTS

6.1 MAINTENANCE OF RECORDS.

Subject to applicable law, the Corporation shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books and other records.

 

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ARTICLE VII - GENERAL MATTERS

7.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.

The Board, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

7.2 STOCK CERTIFICATES; PARTLY PAID SHARES.

The shares of the Corporation shall be represented by certificates provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of stock shall be uncertificated shares. Certificates for the shares of stock, if any, shall be in such form as is consistent with the certificate of incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by any two authorized officers of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

7.3 MULTIPLES CLASSES OR SERIES OF STOCK.

If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the

 

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face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to the DGCL or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

7.4 LOST CERTIFICATES.

Except as provided in this Section 7.4, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation in accordance with applicable law. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

7.5 CONSTRUCTION; DEFINITIONS.

Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

7.6 DIVIDENDS.

The Board, subject to any restrictions contained in either (a) the DGCL or (b) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.

The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.

 

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7.7 FISCAL YEAR.

The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.

7.8 SEAL.

The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

7.9 TRANSFER OF STOCK.

Shares of the Corporation shall be transferable in the manner prescribed by law and in these bylaws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. To the fullest extent permitted by law, no transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred.

7.10 STOCK TRANSFER AGREEMENTS.

The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

7.11 REGISTERED STOCKHOLDERS.

The Corporation, to the fullest extent permitted by law,:

(a) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

(b) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

 

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(c) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

7.12 WAIVER OF NOTICE.

Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

ARTICLE VIII - NOTICE BY ELECTRONIC TRANSMISSION

8.1 NOTICE BY ELECTRONIC TRANSMISSION.

Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the Corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if:

(a) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices given by the Corporation in accordance with such consent; and

(b) such inability becomes known to the secretary or an assistant secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice.

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Any notice given pursuant to the preceding paragraph shall be deemed given:

 

  (a)

if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

 

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  (b)

if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

 

  (c)

if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate notice; and

 

  (d)

if by any other form of electronic transmission, when directed to the stockholder.

An affidavit of the secretary or an assistant secretary of the Corporation or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

8.2 DEFINITION OF ELECTRONIC TRANSMISSION.

For the purposes of these bylaws, an “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

ARTICLE IX - INDEMNIFICATION AND ADVANCEMENT

9.1 ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.

The Corporation shall indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was, or has agreed to become, a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) (all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including, without limitation, attorneys’ fees), liabilities, losses, judgments, fines (including, without limitation, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974), and amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit

 

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or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

9.2 ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION.

The Corporation shall indemnify any Indemnitee who was or is a party to or threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was, or has agreed to become, a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made under this Section 9.2 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation, unless, and only to the extent, that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses (including, without limitation, attorneys’ fees) which the Court of Chancery of Delaware or such other court shall deem proper.

9.3 INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY.

Notwithstanding any other provisions of this Article IX, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 9.1 and 9.2 of these bylaws, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, Indemnitee shall be indemnified to the fullest extent permitted by law against all expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by or on behalf of Indemnitee in connection therewith.

 

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9.4 NOTIFICATION AND DEFENSE OF CLAIM.

As a condition precedent to an Indemnitee’s right to be indemnified, such Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving such Indemnitee for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to Indemnitee. After notice from the Corporation to Indemnitee of its election so to assume such defense, the Corporation shall not be liable to Indemnitee for any legal or other expenses subsequently incurred by Indemnitee in connection with such action, suit, proceeding or investigation, other than as provided below in this Section 9.4. Indemnitee shall have the right to employ his or her own counsel in connection with such action, suit, proceeding or investigation, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless (a) the employment of counsel by Indemnitee has been authorized by the Corporation, (b) counsel to Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and Indemnitee in the conduct of the defense of such action, suit, proceeding or investigation or (c) the Corporation shall not in fact have employed counsel to assume the defense of such action, suit, proceeding or investigation, in each of which cases the fees and expenses of counsel for Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article IX. The Corporation shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for Indemnitee shall have reasonably made the conclusion provided for in clause (b) above. The Corporation shall not be required to indemnify Indemnitee under this Article IX for any amounts paid in settlement of any action, suit, proceeding or investigation effected without its written consent. The Corporation shall not settle any action, suit, proceeding or investigation in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent. Neither the Corporation nor Indemnitee will unreasonably withhold or delay its consent to any proposed settlement.

9.5 ADVANCE OF EXPENSES.

Subject to the provisions of Sections 9.4 and 9.6 of these bylaws, in the event of any threatened or pending action, suit, proceeding or investigation of which the Corporation receives notice under this Article IX, any expenses (including, without limitation, attorneys’ fees) incurred by or on behalf of Indemnitee in defending an action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter to the fullest extent permitted by law; provided, however, that, to the extent required by law, the payment of such expenses incurred by or on behalf of Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined by final judicial decision from which there is no further right to appeal that Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article IX or otherwise; and provided further that no such advancement of expenses shall be made under this Article IX if it is determined (in the manner described in Section 9.6 of these bylaws) that (a) Indemnitee did not act in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, or (b) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe his or her conduct was unlawful. Such undertaking shall be accepted without reference to the financial ability of Indemnitee to make such repayment.

 

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9.6 PROCEDURE FOR INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.

In order to obtain indemnification or advancement of expenses pursuant to Section 9.1, 9.2, 9.3 or 9.5 of these bylaws, an Indemnitee shall submit to the Corporation a written request. Any such advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of Indemnitee, unless (a) the Corporation has assumed the defense pursuant to Section 9.4 of these bylaws (and none of the circumstances described in Section 9.4 of these bylaws that would nonetheless entitle the Indemnitee to indemnification for the fees and expenses of separate counsel have occurred) or (b) the Corporation determines within such 60-day period that Indemnitee did not meet the applicable standard of conduct set forth in Section 9.1, 9.2 or 9.5 of these bylaws, as the case may be. Any such indemnification, unless ordered by a court, shall be made with respect to requests under Section 9.1 or 9.2 of these bylaws only as authorized in the specific case upon a determination by the Corporation that the indemnification of Indemnitee is proper because Indemnitee has met the applicable standard of conduct set forth in Section 9.1 or 9.2 of these bylaws, as the case may be. Such determination shall be made in each instance (a) by a majority vote of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question (“disinterested directors”), whether or not a quorum, (b) by a committee of disinterested directors designated by majority vote of disinterested directors, whether or not a quorum, (c) if there are no disinterested directors, or if the disinterested directors so direct, by independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the Corporation) in a written opinion or (d) by the stockholders of the Corporation.

9.7 REMEDIES.

To the fullest extent permitted by law, the right to indemnification or advancement of expenses as granted by this Article IX shall be enforceable by Indemnitee in any court of competent jurisdiction. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 9.6 of these bylaws that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. In any suit brought by Indemnitee to enforce a right to indemnification or advancement, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall have the burden of proving that Indemnitee is not entitled to be indemnified, or to such advancement of expenses,

 

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under this Article IX. Indemnitee’s expenses (including, without limitation, attorneys’ fees) reasonably incurred in connection with successfully establishing Indemnitee’s right to indemnification or advancement, in whole or in part, in any such proceeding shall also be indemnified by the Corporation to the fullest extent permitted by law. Notwithstanding the foregoing, in any suit brought by Indemnitee to enforce a right to indemnification hereunder it shall be a defense that the Indemnitee has not met any applicable standard for indemnification set forth in the DGCL.

9.8 LIMITATIONS.

Notwithstanding anything to the contrary in this Article IX, except as set forth in Section 9.7 of these bylaws, the Corporation shall not indemnify an Indemnitee pursuant to this Article IX in connection with a proceeding (or part thereof) initiated by such Indemnitee unless the initiation thereof was approved by the Board. Notwithstanding anything to the contrary in this Article IX, the Corporation shall not indemnify (or advance expenses to) an Indemnitee to the extent such Indemnitee is reimbursed (or advanced expenses) from the proceeds of insurance, and in the event the Corporation makes any indemnification (or advancement) payments to an Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund indemnification (or advancement) payments to the Corporation to the extent of such insurance reimbursement.

9.9 SUBSEQUENT AMENDMENT.

No amendment, termination or repeal of this Article IX or of the relevant provisions of the DGCL or any other applicable laws shall adversely affect or diminish in any way the rights of any Indemnitee to indemnification or advancement of expenses under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.

9.10 OTHER RIGHTS.

The indemnification and advancement of expenses provided by this Article IX shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in Indemnitee’s official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of Indemnitee. Nothing contained in this Article IX shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification and advancement rights and procedures different from those set forth in this Article IX. In addition, the Corporation may, to the extent authorized from time to time by the Board, grant indemnification and advancement rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article IX.

 

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9.11 PARTIAL INDEMNIFICATION.

If an Indemnitee is entitled under any provision of this Article IX to indemnification by the Corporation for some or a portion of the expenses (including, without limitation, attorneys’ fees), liabilities, losses, judgments, fines (including, without limitation, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974, as amended) or amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such expenses (including, without limitation, attorneys’ fees), liabilities, losses, judgments, fines (including, without limitation, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974, as amended) or amounts paid in settlement to which Indemnitee is entitled.

9.12 INSURANCE.

The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) against any expense, liability or loss incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

9.13 SAVINGS CLAUSE.

If this Article IX or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including, without limitation, attorneys’ fees), liabilities, losses, judgments, fines (including, without limitation, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974, as amended) and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article IX that shall not have been invalidated and to the fullest extent permitted by applicable law.

9.14 DEFINITIONS.

Terms used in this Article IX and defined in Section 145(h) and Section 145(i) of the DGCL shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i).

 

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ARTICLE X - AMENDMENTS.

Subject to the limitations set forth in Section 9.9 of these bylaws or the provisions of the certificate of incorporation, the Board is expressly empowered to adopt, amend or repeal the bylaws of the Corporation. The stockholders also shall have power to adopt, amend or repeal the bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the certificate of incorporation, such action by stockholders shall require the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon.

 

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EX-4.1

Exhibit 4.1

THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

THIS THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this “Agreement”), is made as of December 18, 2017, by and among Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), the Key Holders (as defined below), each Holder (as defined below) listed on Schedule I hereto (each Key Holder and Holder, a “Stockholder” and collectively, the “Stockholders”) and each stockholder of the Company that becomes a party to this Agreement in accordance with Section 6.9 hereof (each, an “Additional Stockholder”). Capitalized terms used in this Agreement but not otherwise defined have the meanings set forth in Sections 1.1 and 1.2.

RECITALS

WHEREAS, certain Stockholders (the “Existing Stockholders”) possess certain rights pursuant to that certain Second Amended and Restated Stockholders Agreement, dated as of December 30, 2016 (the “Prior Agreement”); and

WHEREAS, certain Stockholders are parties to that certain Series D Preferred Stock Purchase Agreement, dated as of the date hereof, entered into in connection with a private placement of the Series D Convertible Preferred Stock of the Company (the “Purchase Agreement”), under which certain of the Company’s and such Stockholders’ obligations are conditioned upon the execution and delivery of this Agreement; and

WHEREAS, pursuant to Section 6.6 of the Prior Agreement, any terms thereof may be amended with the written consent of (a) the Holders (as defined in the Prior Agreement) of a majority of the Voting Securities (as defined in the Prior Agreement) then outstanding, (b) the Holders (as defined in the Prior Agreement) of a majority of the Common Stock, (c) the Holders (as defined in the Prior Agreement) of a majority of the Series A Convertible Preferred Stock (collectively, the Requisite Stockholders”), and the Company; and

WHEREAS, the Company and the Requisite Stockholders desire to amend and restate the Prior Agreement as set forth herein; and

WHEREAS, the Stockholders and the Company hereby agree that this Agreement shall govern the rights and obligations of the Stockholders and the Company and certain other matters as set forth in this Agreement, subject to the approval of the Requisite Stockholders.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Requisite Stockholders hereby agree that the Prior Agreement is hereby amended and restated in its entirety to read as follows, and the parties hereto agree as follows:

1. Definitions.

1.1 Definitions. For purposes of this Agreement:

Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund or other pooled investment fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person. For purposes of this definition, the term “control” (including the terms controlling, controlled by and under common control with) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities or instruments, by contract, or otherwise.


Board” means the board of directors of the Company.

Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required to close.

Certificate of Incorporation” means the Company’s Amended and Restated Certificate of Incorporation, as may be amended and/or restated from time to time.

Common Stock” means shares of the Company’s common stock, par value $0.001 per share.

Competitor” means a Person engaged, directly or indirectly (including through any partnership, limited liability company, corporation, joint venture or similar arrangement (whether now existing or formed hereafter)), in the business of the Company or contemplated to be entered into by the Company, but shall not include any financial investment firm or collective investment vehicle that, together with its Affiliates, holds less than five percent (5%) of the outstanding equity of any Competitor and does not, nor do any of its Affiliates, have a right, directly or indirectly, to designate any members of the board of directors of any Competitor.

Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (a) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (b) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (c) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law.

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Excluded Registration” means (a) a registration (including a registration on Form S-8) relating to the sale of securities or instruments to employees of the Company or a subsidiary pursuant to a stock option, stock purchase or similar plan; (b) a registration relating to an SEC Rule 145 transaction; (c) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or (d) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

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FINRA” means Financial Industry Regulatory Authority, Inc.

Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.

GAAP” means generally accepted accounting principles in the United States.

Holder” means any holder of Registrable Securities who is a party to this Agreement.

Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, life partners or others covered under the applicable domestic relations statute, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including, adoptive relationships, of a natural person referred to herein.

Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

IPO” means the Company’s first underwritten public offering of the Common Stock pursuant to a registration statement under the Securities Act.

Key Holders” means (a) Sol J. Barer so long as he is the Holder of a majority of the Voting Securities held by him as of November 20, 2013, and after a Transfer of a majority of such Voting Securities, the transferee of a majority of such Voting Securities, (b) Isaac Blech so long as he is the Holder of a majority of the Voting Securities held by him as of November 20, 2013, and after a Transfer of a majority of such Voting Securities, the transferee of a majority of such Voting Securities and (c) Jeffrey B. Kindler so long as he is the Holder of a majority of the Voting Securities held by him as of November 20, 2013, and after a Transfer of a majority of such Voting Securities, the transferee of a majority of such Voting Securities.

NYSE” means the New York Stock Exchange.

Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

Preferred Stock” means, collectively, the Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock.

 

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Proposed Key Holder Transfer” means any assignment, sale, offer to sell, pledge, mortgage, hypothecation, encumbrance, disposition of or any other like transfer or encumbering of any Transfer Stock (or any interest therein) proposed by any of the Key Holders.

Proposed Transfer Notice” means written notice from a Key Holder setting forth the terms and conditions of a Proposed Key Holder Transfer.

Proposed Transferee” means any person to whom a Key Holder proposes to make a Proposed Key Holder Transfer.

Pro Rata Portion” means, with respect to the number of shares of Common Stock to be sold by each participating Stockholder pursuant to Section 5.2, the number of shares of Common Stock equal to the product of (x) the total number of shares of Common Stock the Proposed Transferee proposes to purchase and (y) a fraction (A) the numerator of which is equal to the number of shares of Common Stock then held by such Stockholder and (B) the denominator of which is equal to the number of shares then held by all of the participating Stockholders (including, for the avoidance of doubt, the Selling Stockholder).

Registrable Securities” means (a) the Common Stock held by the Stockholders on the date hereof or acquired after the date hereof and prior to the IPO, (b) the Common Stock issuable or issued upon conversion of the Preferred Stock (the “Conversion Common Stock”); (c) the Common Stock issuable or issued upon exercise of the Warrants; (d) any Common Stock issued prior to the IPO upon the exercise of a Company stock option and (e) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security or instrument that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, Conversion Common Stock; excluding in all cases other than with respect to Section 4, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.12.

Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities or instruments that are Registrable Securities.

Sale of the Company” shall mean (a) a transaction that qualifies as a Deemed Liquidation Event (as defined in the Certificate of Incorporation) or (b) a transaction or series of related transactions in which a Person, or a group of related Persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company (a “Stock Sale”).

Sale Notice” means a written notice delivered by the Selling Stockholder to the Company as required by Section 5.2, including the detail set forth in Section 5.2.

SEC” means the Securities and Exchange Commission.

 

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SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

Selling Expenses” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Stockholder Counsel borne and paid by the Company as provided in Section 2.6.

Selling Stockholder” means a Holder who, together with its Affiliates, holds no less than 50% of the outstanding Common Stock of the Company, on an as-converted basis.

Series A Convertible Preferred Stock” means shares of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share.

Series B Convertible Preferred Stock” means shares of the Company’s Series B Convertible Preferred Stock, par value $0.001 per share.

Series C Convertible Preferred Stock” means shares of the Company’s Series C Convertible Preferred Stock, par value $0.001 per share.

Series D Convertible Preferred Stock” means shares of the Company’s Series D Convertible Preferred Stock, par value $0.001 per share.

Tag-along Notice” means the notice delivered by each Tag-along Stockholder to the Selling Stockholder pursuant to Section 5.2.

Tag-along Period” means the period between receipt of a Sale Notice and five Business Days thereafter, during which time a Tag-along Stockholder may deliver a Tag-along Notice.

Tag-along Sale” means a sale of Common Stock by a Selling Stockholder, in which Stockholders are entitled to participate pursuant to Section 5.2.

Tag-along Stockholder” means a Stockholder electing to participate in a Tag-along Sale pursuant to Section 5.2.

Transfer” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any shares Voting Securities owned by a Person or any interest (including a beneficial interest) in any Voting Securities owned by a Person. “Transfer”, when used as a noun, shall have a correlative meaning.

 

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Voting Securities” means the Common Stock, the Preferred Stock and any other securities or instruments of the Company that have a right to vote in respect of any matters related to the Company, in each case, currently owned or hereafter acquired by a Stockholder, and any securities or instruments issued in respect of any of the foregoing, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or similar reorganization.

Warrants” means (i) those certain Warrants to purchase Series C Convertible Preferred Stock issued pursuant to the terms of that certain Note and Warrant Purchase Agreement, dated as of March 1, 2016, April 8, 2016, April 29, 2016 and June 14, 2016 and (ii) those certain Warrants to purchase Series D Convertible Preferred Stock issued pursuant to the terms of that certain Note and Warrant Purchase Agreement, dated as of October 10, 2017.

1.2 Construction.

(a) For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include the masculine and feminine genders.

(b) Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

(c) The words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

(d) Except as otherwise indicated, all references in this Agreement to “Sections” and “Schedules” are intended to refer to Sections and Schedules to this Agreement.

(e) The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(f) References to “Dollars” and “$” mean dollars in lawful currency of the United States of America.

(g) References to accounting terms shall be interpreted in accordance with GAAP unless otherwise specified.

 

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2. Registration Rights. The Company covenants and agrees as follows:

2.1 Demand Registration.

(a) Form S-1 Demand. If at any time one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of at least thirty-five percent (35%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to at least thirty-five percent (35%) of the Registrable Securities then outstanding in which the anticipated aggregate offering price, net of Selling Expenses, would exceed $10 million, then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c) and 2.3.

(b) Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least ten percent (10%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $5 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c) and 2.3.

(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than sixty (60) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than twice in any twelve (12) month period (which may be for consecutive sixty (60) day periods aggregating to one hundred twenty (120) days); and provided further that the Company shall not register any securities or instruments for its own account or that of any other stockholder during such period other than an Excluded Registration.

(d) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Section 2.1(a) or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request

 

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made pursuant to Section 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b) (A) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective or (B) if the Company has effected two registrations pursuant to Section 2.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(d).

2.2 Piggyback Registration Rights. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in the IPO or an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration, provided, however, that a Stockholder may not invoke this right more than once in any twelve (12) month period. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

2.3 Underwriting Requirements.

(a) If, pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 2.3, if the underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the

 

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Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares.

(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by Stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering or (ii) the number of Registrable Securities included in the offering be reduced below twenty percent (20%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company or corporation, the partners, members, retired partners, retired members, Stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members and retired members, and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

(c) For purposes of Section 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

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2.4 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended for up to two hundred forty (240) days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

(f) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

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(h) promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.

2.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

2.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings or qualifications pursuant to this Section 2, including all registration, filing and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $25,000, of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Sections 2.1(a) or 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Sections 2.1(a) or 2.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

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2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

2.8 Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person or other aforementioned Person expressly for use in connection with such registration.

(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

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(c) Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions or other actions that resulted in such loss, claim, damage, liability or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case (A) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement and (B) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

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(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

2.9 Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

2.10 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of (i) prior to the IPO, the Holders holding a majority of the shares of Series D Convertible Preferred Stock then held by the Holders or (ii) following the IPO, the Holders holding a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that allow such holder or prospective holder (a) to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included or (b) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to any Additional Stockholder.

 

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2.11 “Market Stand-off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company for its own behalf of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1 or Form S-3 in an underwritten offering, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days), (i) Transfer, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock owned by such Holder as of the date of the IPO or (ii) enter into any swap or other arrangement that Transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing provisions of this Section 2.11 shall apply only to the IPO, shall be applicable to the Holders only if all officers, directors and Stockholders owning at least 1% of the Common Stock on an as-converted basis are subject to the same restrictions, and shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, or the Transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such Transfer shall not involve a disposition for value. The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions set forth herein or in any agreement described in the preceding sentence shall be promptly disclosed in writing by the Company to all Holders, and shall be deemed to apply to all such agreements on a pro rata basis based on the numbers of shares of Common Stock held by the Holders party to such agreements on an as-converted basis.

2.12 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Sections 2.1 or 2.2 shall terminate upon the earliest to occur of:

(a) the closing of a Sale of the Company;

(b) such time as SEC Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation during a three-month period without registration, except that the termination of registration rights set forth in this Section 2.12(b) shall not apply to any Holder of Registrable Securities who is a director or executive officer of the Company; and

(c) the fifth (5th) anniversary of the date of this Agreement.

 

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3. Confidentiality.

3.1 Confidentiality. Each Stockholder agrees that such Stockholder will keep confidential and will not disclose, divulge or use for any purpose (other than (x) to monitor its investment in the Company or (y) in the case that a Stockholder is an employee of the Company, to act on behalf of the Company in such Stockholder’s capacity as an employee of the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.1 by such Stockholder), (b) is or has been independently developed or conceived by the Stockholder without use of the Company’s confidential information or (c) is or has been made known or disclosed to the Stockholder by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Stockholder may disclose confidential information (i) to its attorneys, accountants, consultants and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Voting Securities from such Stockholder, if such prospective purchaser agrees to be bound by the provisions of this Section 3.1 provided that such prospective purchaser is not a Competitor; (iii) to any existing or prospective Affiliate, partner, member, stockholder or wholly owned subsidiary of such Stockholder in the ordinary course of business, provided that such Stockholder informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Stockholder promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

4. Voting Agreements.

4.1 Voting Provisions Regarding Board of Directors.

(a) Size of the Board. Each Stockholder (with respect to all shares of Voting Securities that such Stockholder owns or over which such Stockholder otherwise exercises voting power) hereby agrees to vote, or cause to be voted, in person, by proxy or by action by written consent, as applicable, from time to time and at all times, in whatever manner as shall be necessary to ensure that the size of the Board shall be set at the number of directors determined by the Board from time to time.

(b) Board Composition. Each Stockholder (with respect to all shares of Voting Securities that such Stockholder owns or over which such Stockholder otherwise exercises voting power) hereby agrees to vote, or cause to be voted, in person, by proxy or by action by written consent, as applicable, from time to time and at all times, in whatever manner as shall be necessary to ensure that at each annual or special meeting of Stockholders at which an election of directors is held or pursuant to any written consent of the Stockholders, the following persons shall be elected to the Board:

(i) For so long as Sol J. Barer holds shares of Common Stock or Preferred Stock, one individual designated by Sol J. Barer, which individual shall initially be Sol J. Barer;

 

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(ii) For so long as Isaac Blech holds shares of Common Stock or Preferred Stock, one individual designated by Isaac Blech, which individual shall initially be Isaac Blech;

(iii) For so long as InterWest Partners LP (the “InterWest Designee”) holds shares of Common Stock or Preferred Stock, one individual designated by the InterWest Designee, which individual shall initially be Arnold Oronsky;

(iv) For so long as New Enterprise Associates 16, Limited Partnership (“NEA”) holds shares of Series D Convertible Preferred Stock, one individual designated by NEA (the “NEA Designee”), which individual shall initially be Sara Nayeem;

(v) For so long as Quan Venture Fund I, L.P. (“Quan”) holds shares of Series D Convertible Preferred Stock, one individual designated by Quan and reasonably acceptable to the Board and NEA (the “Quan Designee”), which directorship shall initially be vacant;

(vi) The Company’s Chief Executive Officer (the “CEO Director”), who shall initially be Jeffrey B. Kindler, provided that if for any reason the CEO Director shall cease to serve as the Chief Executive Officer of the Company, each of the Stockholders shall promptly vote their respective shares (i) to remove the former Chief Executive Officer from the Board if such person has not resigned as a member of the Board and (ii) to elect such person’s replacement as Chief Executive Officer of the Company as the new CEO Director;

(vii) The Company’s Chief Scientific Officer (the “CSO Director”), who shall initially be James Campbell, provided that if for any reason the CSO Director shall cease to serve as the Chief Scientific Officer of the Company, each of the Stockholders shall promptly vote their respective shares to remove the former Chief Scientific Officer from the Board if such person has not resigned as a member of the Board; and

(viii) Subject to Sections 4.1(b)(i) through (vii), any individual designated by the Board, one of which individual(s) shall initially be Shawn Tomasello.

To the extent that any of clauses (i) through (vii) above shall not be applicable, any member of the Board who would otherwise have been designated in accordance with the terms thereof shall instead be designated by the Board.

(c) Failure to Designate a Board Member. In the absence of any designation from the Persons or groups with the right to designate a director as specified in Section 4.1(b), the director previously designated by them and then serving shall be reelected if still eligible to serve as provided herein.

(d) Removal of Board Members. Each Stockholder also agrees to vote, or cause to be voted, all Voting Securities owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that:

 

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(i) subject to Section 4.1(e), no director elected pursuant to Section 4.1(b) of this Agreement may be removed from office unless the Person(s) originally entitled to designate or approve such director or occupy such Board seat pursuant to Section 4.1(b) is no longer so entitled to designate or approve such director or occupy such Board seat;

(ii) any vacancies created by the resignation, removal or death of a director elected pursuant to Section 4.1(b) shall be filled pursuant to the provisions of this Section 4.1; and

(iii) upon the request of any party entitled to designate a director as provided in Section 4.1(b) to remove such director, such director shall be removed.

All Stockholders agree to execute any written consents required to perform the obligations of this Agreement, and the Company agrees at the request of any party entitled to designate directors to call a special meeting of Stockholders for the purpose of electing directors.

(e) Removal of a Board Member for Cause. Each Stockholder (with respect to all shares of Voting Securities that such Stockholder owns or over which such Stockholder otherwise exercises voting power) hereby agrees to vote, or cause to be voted, in person, by proxy or by action by written consent, as applicable, from time to time and at all times, in favor of removal of a director, and hereby gives an irrevocable proxy to the Chairman of the Board and to the Chief Executive Officer of the Company, and each of them acting individually without the other, to vote such Stockholder’s shares to remove a director, if the Board, after receiving advice of counsel, concludes that the director should be removed from the Board because either (a) the director could be removed for “cause” under then existing law or (b) disclosure should be made about the director under Item 401(f) of the SEC’s Regulation S-K (relating to involvement in certain legal proceedings by directors, executive officers, promoters and control persons, a copy of which is attached hereto as Annex A) or under common law relating to matters covered by Item 401(f) were the Company subject to the SEC’s the proxy rules and requirements. Such irrevocable proxy and all authority granted hereby shall be coupled with an interest and therefore shall be irrevocable and shall not be terminated by any act such Stockholder. Such Stockholder agrees that, at the request of the Chairman of the Board or the Chief Executive Officer, he, she or it promptly will execute and deliver to the Company a separate power of attorney on the same terms set forth in this Section 4.1(e), such execution to be witnessed and notarized, and in recordable form (if necessary).

(f) No Liability for Election of Recommended Directors. No Stockholder, nor any Affiliate of any Stockholder, shall have any liability as a result of designating a person for election as a director for any act or omission by such designated person in his or her capacity as a director of the Company, nor shall any Stockholder have any liability as a result of voting for any such designee in accordance with the provisions of this Agreement.

4.2 Vote to Increase Authorized Common Stock. Each Stockholder (with respect to all shares of Voting Securities that such Stockholder owns or over which such Stockholder otherwise exercises voting power) hereby agrees to vote or cause to be voted, in person, by proxy or by action by written consent, as applicable, in whatever manner as shall be necessary to increase the number of authorized shares of Common Stock from time to time to ensure that there will be sufficient shares of Common Stock available for conversion of all of the shares of Preferred Stock outstanding at any given time.

 

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4.3 Drag-Along Right.

(a) Actions to be Taken. In the event that (i) the holders of (x) a majority in voting power of the shares Preferred Stock held by the Stockholders and (y) a majority of the shares of Series D Convertible Preferred Stock held by the Stockholders (the “Selling Investors”); and (ii) the Board of Directors (collectively, the “Electing Holders”) approve a Sale of the Company in writing, specifying that this Section 4.3 shall apply to such transaction, then each Stockholder and the Company hereby agree:

(i) if such transaction requires stockholder approval, with respect to all Voting Securities that such Stockholder owns or over which such Stockholder otherwise exercises voting power, to vote (in person, by proxy or by action by written consent, as applicable) all Voting Securities in favor of, and adopt, such Sale of the Company (together with any related amendment to the Certificate of Incorporation required in order to implement such Sale of the Company) and to vote in opposition to any and all other proposals that could reasonably be expected to delay or impair the ability of the Company to consummate such Sale of the Company;

(ii) if such transaction is a Stock Sale, to sell the same proportion of shares of capital stock of the Company beneficially held by such Stockholder as is being sold by the Selling Investors to the Person to whom the Selling Investors propose to sell their Voting Securities, and, except as permitted in Section 4.3(b) below, on the same terms and conditions as the Selling Investors;

(iii) to execute and deliver all related documentation and take such other action in support of the Sale of the Company as shall reasonably be requested by the Company or the Selling Investors in order to carry out the terms and provision of this Section 4.3, including, without limitation, executing and delivering instruments of conveyance and transfer, and any purchase agreement, merger agreement, indemnity agreement, escrow agreement, consent, waiver, governmental filing, share certificates duly endorsed for transfer (free and clear of impermissible liens, claims and encumbrances), and any similar or related documents;

(iv) not to deposit, and to cause their Affiliates not to deposit, except as provided in this Agreement, any Voting Securities of the Company owned by such party or Affiliate in a voting trust or subject any Voting Securities to any arrangement or agreement with respect to the voting of such Voting Securities, unless specifically requested to do so by the acquiror in connection with the Sale of the Company;

(v) to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to such Sale of the Company;

 

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(vi) if the consideration to be paid in exchange for the Voting Securities pursuant to this Section 4.3 includes any securities and due receipt thereof by any Stockholder would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities; or (y) the provision to any Stockholder of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to any such Stockholder in lieu thereof, against surrender of the Voting Securities which would have otherwise been sold by such Stockholder, an amount in cash equal to the fair value (as determined in good faith by the Company) of the securities which such Stockholder would otherwise receive as of the date of the issuance of such securities in exchange for the Voting Securities; and

(vii) in the event that the Selling Investors, in connection with such Sale of the Company, appoint a stockholder representative (the “Stockholder Representative”) with respect to matters affecting the Stockholders under the applicable definitive transaction agreements following consummation of such Sale of the Company, (x) to consent to (i) the appointment of such Stockholder Representative, (ii) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (iii) the payment of such Stockholder’s pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all reasonable fees and expenses to such Stockholder Representative in connection with such Stockholder Representative’s services and duties in connection with such Sale of the Company and its related service as the representative of the Stockholders, and (y) not to assert any claim or commence any suit against the Stockholder Representative or any other Stockholder with respect to any action or inaction taken or failed to be taken by the Stockholder Representative in connection with its service as the Stockholder Representative, absent fraud or willful misconduct.

(b) Exceptions. Notwithstanding the foregoing, a Stockholder will not be required to comply with Section 4.3(a) above in connection with any proposed Sale of the Company (the “Proposed Sale”), unless:

(i) any representations and warranties to be made by such Stockholder in connection with the Proposed Sale are limited to representations and warranties related to authority, ownership and the ability to convey title to such Shares, including, but not limited to, representations and warranties that (a) the Stockholder holds all right, title and interest in and to the Shares such Stockholder purports to hold, free and clear of all liens and encumbrances, (b) the obligations of the Stockholder in connection with the transaction have been duly authorized, if applicable, (c) the documents to be entered into by the Stockholder have been duly executed by the Stockholder and delivered to the acquirer and are enforceable against the Stockholder in accordance with their respective terms, and (d) neither the execution and delivery of documents to be entered into in connection with the transaction, nor the performance of the Stockholder’s obligations thereunder, will cause a breach or violation of the terms of any agreement, law or judgment, order or decree of any court or governmental agency;

(ii) such Stockholder shall not be liable for the inaccuracy of any representation or warranty made by any other Person in connection with the Proposed Sale, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of identical representations, warranties and covenants provided by all stockholders);

 

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(iii) the liability for indemnification, if any, of such Stockholder in the Proposed Sale and for the inaccuracy of any representations and warranties made by the Company or its Stockholders in connection with such Proposed Sale, is several and not joint with any other Person (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of identical representations, warranties and covenants provided by all stockholders), and subject to the provisions of the Certificate of Incorporation related to the allocation of the escrow, is pro rata in proportion to, and does not exceed, the amount of consideration paid to such Stockholder in connection with such Proposed Sale; and

(iv) upon the consummation of the Proposed Sale (i) each holder of each class or series of the Company’s stock will receive the same form of consideration for their shares of such class or series as is received by other holders in respect of their shares of such same class or series of stock, (ii) each holder of a series of Preferred Stock will receive the same amount of consideration per share of such series of Preferred Stock as is received by other holders in respect of their shares of such same series, (iii) each holder of Common Stock will receive the same amount of consideration per share of Common Stock as is received by other holders in respect of their shares of Common Stock, and (iv) unless the holders of a majority of the shares of Common Stock then issued or issuable upon conversion of the shares of Preferred Stock (to include the holders of a majority of the shares of Common Stock then issued or issuable upon conversion of the shares of Series D Convertible Preferred Stock) elect to receive a lesser amount by written notice given to the Company at least ten (10) days prior to the effective date of any such Proposed Sale, the aggregate consideration receivable by all holders of the Preferred Stock and Common Stock shall be allocated among the holders of Preferred Stock and Common Stock on the basis of the relative liquidation preferences to which the holders of each respective series of Preferred Stock and the holders of Common Stock are entitled in a Deemed Liquidation Event (assuming for this purpose that the Proposed Sale is a Deemed Liquidation Event) in accordance with the Company’s Certificate of Incorporation in effect immediately prior to the Proposed Sale; provided, however, that, notwithstanding the foregoing, if the consideration to be paid in exchange for the Key Holder Voting Securities or Preferred Stock, as applicable, pursuant to this Section 4.3(b)(iv) includes any securities and due receipt thereof by any Key Holder or holder of Preferred Stock would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities; or (y) the provision to any Key Holder or holder of Preferred Stock of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to any such Key Holder or holder of Preferred Stock in lieu thereof, against surrender of the Key Holder Voting Securities or Preferred Stock, as applicable, which would have otherwise been sold by such Key Holder or holder of Preferred Stock, an amount in cash equal to the fair value

 

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(as determined in good faith by the Company) of the securities which such Key Holder or holder of Preferred Stock would otherwise receive as of the date of the issuance of such securities in exchange for the Key Holder Voting Securities or Preferred Stock, as applicable.

(c) Restrictions on Sales of Control of the Company. No Stockholder shall be a party to any Stock Sale unless all holders of Preferred Stock are allowed to participate in such transaction and the consideration received pursuant to such transaction is allocated among the parties thereto in the manner specified in the Company’s Certificate of Incorporation in effect immediately prior to the Stock Sale (as if such transaction were a Deemed Liquidation Event), unless the holders of a majority in voting power of the Preferred Stock then outstanding and the holders of a majority of the Series D Convertible Preferred Stock then outstanding elect otherwise by written notice given to the Company at least 10 days prior to the effective date of any such transaction or series of related transactions.

4.4 Termination of Voting Rights. The covenants set forth in this Section 4 shall terminate and be of no further force and effect (a) immediately before the consummation of the IPO, (b) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act or (c) upon a Sale of the Company, whichever event occurs first.

5. Additional Covenants and Agreements.

5.1 Restrictions on Transfer.

(a) The Voting Securities shall not be Transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such Transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed transferee of the Voting Securities held by such Holder to agree to take and hold such Voting Securities subject to the provisions and upon the conditions specified in this Agreement.

(b) Each certificate or instrument representing the Voting Securities shall be stamped or otherwise imprinted with a legend substantially in the following form:

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

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THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THE CENTREXION THERAPEUTICS CORPORATION THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF DECEMBER 18, 2017, AMONG THE COMPANY, EACH STOCKHOLDER PARTY THERETO, AS MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Voting Securities in order to implement the restrictions on Transfer set forth in this Section 5.1.

(c) The Holder of each certificate representing Voting Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 5.1. Before any proposed Transfer of any Voting Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such Transfer. Each such notice shall describe the manner and circumstances of the proposed Transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act, (ii) a “no action” letter from the SEC to the effect that the proposed Transfer of such Voting Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed Transfer of the Voting Securities may be effected without registration under the Securities Act, whereupon the Holder of such Voting Securities shall be entitled to Transfer such Voting Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter (A) in any transaction in compliance with SEC Rule 144 or (B) in any transaction in which such Holder distributes Voting Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Section 5.1. Each certificate or instrument evidencing the Voting Securities Transferred as above provided shall bear, except if such Transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 5.1(b).

(d) None of the Stockholders may Transfer any shares of Common Stock or Preferred Stock to any Person that is not an “accredited investor,” as defined in Rule 501 under the Securities Act.

5.2 Tag-along Rights. If a Selling Stockholder proposes to sell any of its shares of Common Stock to an independent third party, the Stockholders that hold Series D Convertible Preferred Stock and Series C Convertible Preferred Stock shall be permitted to participate in such sale on the terms and conditions set forth in this Section 5.2.

 

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(a) Prior to the consummation of the sale described above, the Selling Stockholder shall deliver to the Company and each other Holder a Sale Notice no more than ten (10) Business Days after the execution and delivery by all parties thereto of the definitive agreement entered into with respect to the sale, and, in any event, no later than twenty (20) Business Days prior to the closing date of the proposed sale. The Sale Notice shall make reference to the tag-along rights hereunder and shall describe in reasonable detail (i) the number of shares of Common Stock to be sold by the Selling Stockholder, (ii) the name of the Proposed Transferee; (iii) the per share purchase price and the other material terms and conditions of the sale, including a description of any non-cash consideration in sufficient detail to permit the valuation thereof; (iv) the proposed date, time and location of the closing of the sale; and (v) a copy of any form of agreement proposed to be executed in connection therewith.

(b) Shares to be Sold.

(i) Each Tag-along Stockholder shall exercise its right to participate in a sale of Common Stock by the Selling Stockholder subject to this Section 5.2 by delivering to the Selling Stockholder a Tag-along Notice stating its election to do so and specifying the number of shares of Common Stock to be sold by it no later than five Business Days after receipt of the Sale Notice. The offer of each Tag-along Stockholder set forth in a Tag-along Notice shall be irrevocable, and, to the extent such offer is accepted, such Tag-along Stockholder shall be bound and obligated to sell in the proposed sale on the terms and conditions set forth in this Section 5.2. Each Tag-along Stockholder shall have the right to sell in a sale subject to this Section 5.2 the number of shares of Common Stock equal to the product obtained by multiplying (x) the number of shares of Common Stock held by the Tag-along Stockholder by (y) a fraction (A) the numerator of which is equal to the number of shares of Common Stock the Selling Stockholder proposes to sell or transfer to the Proposed Transferee and (B) denominator of which is equal to the number of shares of Common Stock then owned by such Selling Stockholder.

(ii) The Selling Stockholder shall use its commercially reasonable efforts to include in the proposed sale to the Proposed Transferee all of the shares of Common Stock that the Tag-along Stockholders have requested to have included pursuant to the applicable Tag-along Notices, it being understood that the Proposed Transferee shall not be required to purchase shares of Common Stock in excess of the number set forth in the Sale Notice. In the event the Proposed Transferee elects to purchase less than all of the shares of Common Stock sought to be sold by the Tag-along Stockholders, the number of shares to be sold to the Proposed Transferee by the Selling Stockholder and each Tag-along Stockholder shall be reduced so that each such Stockholder is entitled to sell its Pro Rata Portion of the number of shares of Common Stock the Proposed Transferee elects to purchase (which in no event may be less than the number of shares of Common Stock set forth in the Sale Notice).

(iii) Each Tag-along Stockholder who does not deliver a Tag-along Notice in compliance with clause (i) above shall be deemed to have waived all of such Tag-along Stockholder’s rights to participate in such sale, and the Selling Stockholder shall (subject to the rights of any participating Tag-along Stockholder) thereafter be free to sell to the Proposed Transferee its shares of Common Stock at a per share price that is no greater than the per share price set forth in the Sale Notice and on other same terms and conditions which are not materially more favorable to the Selling Stockholder than those set forth in the Sale Notice, without any further obligation to the non-accepting Tag-along Stockholders.

 

24


(c) Consideration. Each Tag-along Stockholder participating in a sale pursuant to this Section 5.2 shall receive the same consideration per share after deduction of such Tag-along Stockholder’s proportionate share of the related expenses in accordance with Section 5.2(e).

(d) Conditions of Sale. Each Tag-along Stockholder shall make or provide the same representations, warranties, covenants, indemnities and agreements as the Selling Stockholder makes or provides in connection with the Tag-along Sale (except that in the case of representations, warranties, covenants, indemnities and agreements pertaining specifically to the Selling Stockholder, the Tag-along Stockholder shall make the comparable representations, warranties, covenants, indemnities and agreements pertaining specifically to itself); provided, that all representations, warranties, covenants and indemnities shall be made by the Selling Stockholder and each other Tag-along Stockholder severally and not jointly and any indemnification obligation in respect of breaches of representations and warranties that do not relate to such Tag-along Stockholder shall be in an amount not to exceed the aggregate proceeds received by such Tag-along Stockholder in connection with any sale consummated pursuant to this Section 5.2.

(e) Expenses. The fees and expenses of the Selling Stockholder incurred in connection with a sale under this Section 5.2 and for the benefit of all participating Stockholders (it being understood that costs incurred by or on behalf of the Selling Stockholder for its sole benefit will not be considered to be for the benefit of all participating Stockholders), to the extent not paid or reimbursed by the Company or the Proposed Transferee, shall be shared by all participating Stockholders on a pro rata basis, based on the consideration received by each Stockholder; provided, that no Stockholder shall be obligated to make any out-of-pocket expenditure prior to the consummation of the transaction consummated pursuant to this Section 5.2.

(f) Cooperation. Each Tag-along Stockholder shall take all actions as may be reasonably necessary to consummate the Tag-along Sale, including, without limitation, entering into agreements and delivering certificates and instruments, in each case, consistent with the agreements being entered into and the certificates being delivered by the Selling Stockholder.

(g) Deadline for Completion of Sale. The Selling Stockholder shall have 90 Business Days following the expiration of the Tag-along Period in which to sell the shares of Common Stock described in the Sale Notice, on terms not more favorable to the Selling Stockholder than those set forth in the Sale Notice (which such 90 Business Day period may be extended for a reasonable time not to exceed 120 Business Days to the extent reasonably necessary to obtain any regulatory approvals). If at the end of such period the Selling Stockholder has not completed such sale, the Selling Stockholder may not then effect a sale of Common Stock subject to this Section 5.2 without again fully complying with the provisions of this Section 5.2.

 

25


(h) Sales in Violation of the Tag-along Rights. If the Selling Stockholder sells or otherwise transfers to the Proposed Transferee any of its shares of Common Stock in breach of this Section 5.2, then each Tag-along Stockholder shall have the right to sell to the Selling Stockholder, and the Selling Stockholder undertakes to purchase from each Tag-along Stockholder, the number of shares of Common Stock that such Tag-along Stockholder would have had the right to sell to the Proposed Transferee pursuant to this Section 5.2, for a per share amount and form of consideration and upon the terms and conditions on which the Proposed Transferee bought such Common Stock from the Selling Stockholder, but without indemnity being granted by any Tag-along Stockholder to the Selling Stockholder; provided, that nothing contained in this Section 5.2 shall preclude any Tag-along Stockholder from seeking alternative remedies against such Selling Stockholder as a result of its breach of this Section 5.2. The Selling Stockholder shall also reimburse each Tag-along Stockholder for any and all reasonable and documented out-of-pocket fees and expenses, including reasonable legal fees and expenses, incurred pursuant to the exercise or the attempted exercise of the Tag-along Stockholder’s rights under this Section 5.2(h).

5.3 Termination of Certain Covenants. The covenants set forth in Sections 5.1 and 5.2 shall terminate and be of no further force or effect (a) immediately before the consummation of the IPO or (b) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act or (c) upon a Sale of the Company, whichever event occurs first.

5.4 Series C Warrants. For the avoidance of doubt, each holder of a Series C Warrant (as defined below) acknowledges and agrees that the Series C Warrants are exercisable only for shares of the Company’s Series C Convertible Preferred Stock (and no other class or series of capital stock of the Company) pursuant to the terms and conditions thereof and shall not be exercisable for shares issued in any Qualified Financing (as defined in the Series C Warrants) other than the Qualified Financing that consisted of the issuance of the Company’s Series C Convertible Preferred Stock. For purposes of this Section 5.4, the “Series C Warrants” shall mean the warrants to purchase securities of the Company issued to various parties together with those certain unsecured convertible promissory notes dated March 1, 2016, April 8, 2016, April 29, 2016 and June 14, 2016.

6. Miscellaneous.

6.1 Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Voting Securities that (a) is an Affiliate of a Holder or (b) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; provided, however, that (i) the Company is, within a reasonable time after such Transfer, furnished with written notice of the name and address of such transferee and the Voting Securities with respect to which such rights are being Transferred and (ii) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11. For the purposes of determining the number of shares of Voting Securities held by a transferee, the holdings of a transferee (A) that is an Affiliate or stockholder of a Holder, (B) who is a Holder’s Immediate Family Member or (C) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action

 

26


under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

6.2 Governing Law. This Agreement and the rights and obligations of the parties hereto shall be governed, construed and interpreted in all respects in accordance with the General Corporation Law of the State of Delaware as to matters governed by such General Corporation Law, and as to all other matters in accordance with the laws of the Commonwealth of Massachusetts without regard to its choice of laws principles.

6.3 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

6.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

6.5 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (a) personal delivery to the party to be notified; (b) when sent, if sent by electronic mail during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (d) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on the signature pages hereto or the Purchase Agreement or in the Company’s records, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address or address as subsequently modified by written notice given in accordance with this Section 6.5.

6.6 Amendments, Terminations and Waivers. Any term of this Agreement may be amended or terminated, and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of (X) prior to the IPO, (a) the Company and (b) the Holders holding a majority of shares of Series D Convertible Preferred Stock then held by the Holders and (Y) following the IPO (a) the Company and (b) the Holders holding a majority of the Registrable Securities then outstanding, provided that (i) the Company may in its sole discretion waive compliance with Sections 5.1(b) or (c) (and the Company’s failure to object promptly in writing after notification of a proposed Transfer allegedly in violation of Sections 5.1(b) or (c) shall be deemed to be a waiver) and (ii) that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this

 

27


Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Stockholder without the written consent of such Stockholder, unless such amendment, termination or waiver applies to all Stockholders in the same fashion. Notwithstanding any other provision of this Agreement, (1) neither Section 4.1(b)(i) nor this subclause (1) shall be amended or waived without the written consent of Sol Barer so long as Sol Barer is entitled to designate a director under Section 4.1(b)(i); (2) neither Section 4.1(b)(ii) nor this subclause (2) shall be amended or waived without the written consent of Isaac Blech so long as Isaac Blech is entitled to designate a director under Section 4.1(b)(ii); (3) neither Section 4.1(b)(iii) nor this subclause (3) shall be amended or waived without the written consent of InterWest Partners LP so long as InterWest Partners LP is entitled to designate a director under Section 4.1(b)(iii); (4) neither Section 4.1(b)(iv) nor this subclause (4) shall be amended or waived without the written consent of NEA so long as NEA is entitled to designate a director under Section 4.1(b)(iv); (5) neither Section 4.1(b)(v) nor this subclause (5) shall be amended or waived without the written consent of Quan and NEA so long as Quan is entitled to designate a director under Section 4.1(b)(v); and (6) neither Section 4.1(b)(vi) nor this subclause (6) shall be amended or waived without the written consent of Jeffrey Kindler so long as Jeffrey Kindler is the CEO Director. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination or waiver. Any amendment, termination or waiver effected in accordance with this Section 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition or provision.

6.7 Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal or unenforceable provision shall be reformed and construed so that it will be valid, legal and enforceable to the maximum extent permitted by law.

6.8 Aggregation of Stock. All shares of Voting Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

6.9 Additional Stockholders. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of Voting Securities after the date of this Agreement, any purchaser of such shares of Voting Securities may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed a “Stockholder” for all purposes hereunder. No action or consent by the Stockholders shall be required for such joinder to this Agreement by such Additional Stockholder, so long as such Additional Stockholder has agreed in writing to be bound by all of the obligations as a “Stockholder” hereunder.

 

28


6.10 Entire Agreement. This Agreement (including any hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly cancelled. Each Stockholder (including an Additional Stockholder) party hereto acknowledges that his Agreement shall be binding upon such Stockholder in respect of the Common Stock, Preferred Stock and any other equity of the Company held by such Stockholder even if less than all of the stockholders of the Company execute and deliver this Agreement.

6.11 Dispute Resolution.

(a) The parties (i) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Massachusetts and to the jurisdiction of the United States District Court for the District of Massachusetts and in any Massachusetts State Court sitting in Suffolk County, Commonwealth of Massachusetts for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (ii) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the United States District Court for the District of Massachusetts and in any Massachusetts State Court sitting in Suffolk County, Commonwealth of Massachusetts and (iii) hereby waive, and agree not to assert, by way of motion, as a defense or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

(b) WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

6.12 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

29


6.13 Acknowledgment. The Company acknowledges that the Stockholders may be in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company. Nothing in this Agreement shall preclude or in any way restrict the Stockholders from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

6.14 Effect on Prior Agreement. Upon the execution and delivery of this Agreement by the Company and the Requisite Stockholders, the Prior Agreement automatically shall be of no further force and effect and shall be amended and restated in its entirety to read as set forth in this Agreement.

[Remainder of Page Intentionally Left Blank]

 

30


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

CENTREXION THERAPEUTICS CORPORATION
By:   /s/ Jeffrey B. Kindler
Name:   Jeffrey B. Kindler
Title:   Chief Executive Officer


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

KEY HOLDERS:
/s/ Sol J. Barer
Sol J. Barer
/s/ Isaac Blech
Isaac Blech
/s/ Jeffrey B. Kindler
Jeffrey B. Kindler


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  New
  AAR Associates, L.P.
  (Name of Entity)
  By:   /s/ Ralph Finerman
  Name:   Ralph Finerman
  Title:   General Partner
(if individual)
  STOCKHOLDER:
   
  Name:    
  Address:   [***]
    [***]
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  ACB HOLDINGS LP
  (Name of Entity)
  By:   /s/ Adam C. Blum
  Name:   ADAM C. BLUM
  Title:   MANAGER OF THROCKMORTON MANAGEMENT, LLC, GENERAL PARTNER
(if individual)
  STOCKHOLDER:
   
  Name:                                            
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  ACNYC, LLC
  (Name of Entity)
  By:   /s/ Andrew Cader
  Name:   Andrew Cader
  Title:   Managing Member
(if individual)
  STOCKHOLDER:
   
  Name:                                            
  Address:    
   
Email Address:                                            
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Leonard H. Adelson
  Name:   LEONARD H. ADELSON
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Gilya Alchits
  Name:   Gilya Alchits
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Nigel V. Alexander
  Name:  

NIGEL V. ALEXANDER

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Monte D Anglin /s/ Janet S Anglin
  Name:  

Monte D Anglin & Janet S Anglin

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

AR Properties

  (Name of Entity)
*   By:  

/s/ Dennis Repp

  Name:  

Dennis Repp

  Title:  

Gen Ptr

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:    
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

ARROWMARK FUNDAMENTAL OPPORTUNITY FUND, L.P.
By:   its Investment Advisor
  ArrowMark Colorado Holdings, LLC
By:   /s/ David Corkins
Name:   David Corkins
Title:   Managing Member


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Barclay Armitage
  Name:  

Barclay Armitage

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

AVAVODHA, INC.

  (Name of Entity)
  By:  

/s/ Mark Ast

  Name:  

MARK AST

  Title:  

President

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Robert L. Bahr
  Name:  

Robert L. Bahr

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

The Bahr Family Limited Partnership

  (Name of Entity)
  By:  

/s/ Robert L. Bahr

  Name:  

Robert L. Bahr

  Title:  

Trustee of the General Partner

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

STOCKHOLDER:
/s/ Sol J. Barer
Sol J. Barer
Address:   [***]
 
 
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

STOCKHOLDER:
BARER & SONS LLC
By:   /s/ Sol J. Barer
Name:   Sol J. Barer
Title:   Partner
Address:   [***]
 
 
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Martin Becker
  Name:  

MARTIN BECKER

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name;    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Stephen Bender
  Name;  

Stephen Bender

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Franklin M. Berger
  Name:  

FRANKLIN M. BERGER

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

BES Investments LLC

  (Name of Entity)
  By:  

/s/ Jeffrey Enslin

  Name:  

Jeffrey Enslin

  Title:  

Manager

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Blairoma, LLC

  (Name of Entity)
  By:  

/s/ Arthur J. Simon

  Name:  

Arthur J. Simon

  Title:  

Director

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

STOCKHOLDER:
/s/ Isaac Blech
Isaac Blech
Address:   [***]
 
 
Email Address:                       
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

STOCKHOLDER:
RIVER CHARITABLE REMAINDER UNIT TRUST FBO ISAAC BLECH U/A/D 7/20/87
By:   /s/ Isaac Blech
Name:   Isaac Blech
Title:   Trustee
Address:                                                
 
 
Email Address:                       
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

The Irwin Blitt Trust

  (Name of Entity)
  By:  

/s/ Joel Bayer

  Name:  

Joel Bayer

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Richard I. Bowling Jr.
  Name:  

Richard I. Bowling Jr.

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Roger D. Bozarth
  Name:  

Roger D. Bozarth

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

BRADLEY RESOURCES COMPANY LLC
By:  

/s/ G W Holbrook

Name:   G W Holbrook
Title:   President, CEO


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

STOCKHOLDER:
/s/ Kerrie Brady

Kerrie Brady

Address:   [***]
 
 
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Charles F. Brinkley
  Name:  

Charles F. Brinkley

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Franklin D. Brown
  Name:  

Franklin D. Brown

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Graham Burton
  Name:  

GRAHAM BURTON

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

STOCKHOLDER:
JAMES N. CAMPBELL 2012 DYNASTY TRUST
By:   /s/ Regina Anderson
Name:   REGINA ANDERSON
Title:  
By:    
Name:  
Title:  
Address:   [***]
 
 
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

STOCKHOLDER:
JAMES N. CAMPBELL 2012 DYNASTY TRUST
By:   /s/ Louis F. Friedman
Name:   LOUIS F. FRIEDMAN
Title:  

TRUSTEE

By:    
Name:  
Title:  
Address:   [***]
 
 
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

STOCKHOLDER:
/s/ James N. Campbell
James N. Campbell
Address:   [***]
 
 
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

STOCKHOLDER:
/s/ James N. Campbell
James N. Campbell, as joint tenant
/s/ Regina Anderson
Regina Anderson, as joint tenant
Address:   [***]
 
 
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Adolfo Carmona / /s/ Donna Carmona
  Name:  

Adolfo and Donna Carmona

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

CF ASCENT LLC
By:   /s/ David Corkins
Name:   David Corkins
Title:   Managing Member


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Chih-Kai Cheng
  Name:  

Chih-Kai Cheng

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

CLOUGH HEALTHCARE MASTER FUND, L.P.
By:   Clough Capital Partners L.P., its investment advisor
By:   /s/ Daniel J. Gillis
Name:   Daniel Gillis
Title:   Chief Compliance Officer


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

CLOUGH GLOBAL EQUITY FUND
By:   Clough Capital Partners L.P., its investment advisor
By:   /s/ Daniel J. Gillis
Name:   Daniel Gillis
Title:   Chief Compliance Officer


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

CLOUGH GLOBAL OPPORTUNITIES FUND
By:   Clough Capital Partners L.P., its investment advisor
By:   /s/ Daniel J. Gillis
Name:   Daniel Gillis
Title:   Chief Compliance Officer


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                       
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Marc A. Cohen
  Name:   MARC A. COHEN
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                                   
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Michael Cohn /s/ Paula Cohn
  Name:   Michael Cohn and Paula Cohn
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Mark H. Coleman
  Name:   MARK H. COLEMAN
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                           
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ David S. Cooper
  Name:   David S. Cooper
  Address:   [***]
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                       
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Charles J. Costich /s/ Karin J. Costich
  Name:   Charles and Karin Costich
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                       
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Ben Crown
  Name:   Ben Crown
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                       
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Stephen D’Antonio
  Name:   Stephen D’Antonio
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
          The Jonathan Davis Trust
  By:                       
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Jonathan Davis
  Name  

 

  Address:  

 

   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                       
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Michael Dan
  Name:   Michael Dan
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                   
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ C Barnes Darwin, II
  Name:   C BARNES DARWIN, II
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                       
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Patrick deCavaignac
  Name:   Patrick deCavaignac
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                   
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ David Dent
  Name:   DAVID DENT
  Address:   [***]
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

DIANA AND DAVID FRESHWATER LIVING TRUST

  (Name of Entity)
  By:   /s/ David Freshwater
  Name:   DAVID FRESHWATER
  Title:   TRUSTEE
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ James M. Diasio
  Name:   James M. Diasio
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                   
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ James T. Dietz
  Name:   James T. Dietz
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                   
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Rollyn P. Dritz
  Name   Rollyn P. Dritz
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Russell S. Dietz
  Name:   Russell S. Dritz
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Juli-Ann Cialone
  Name:   Juli-Ann Cialone
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                   
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Alyson D. Schlosser
  Name   Alyson D. Schlosser
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ James L. Dritz
  Name:   James L. Dritz
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Paul Ehrlich CPA Defined Benefit Plan

  (Name of Entity)
  By:   /s/ Paul Ehrlich
  Name:   Paul Ehrlich
  Title:   Trustee
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Paul Ehrman
  Name:   Paul Ehrman
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

EFUNG RUIBO LIMITED
By:   /s/ Zhu Jin Qiao
Name:   Zhu Jin Qiao
Title:   Corporate Representative


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

E.L. II Properties Trust dtd July 1, 1983

  (Name of Entity)            as amended
  By:   /s/ Robert C. Kopple
  Name:   Robert C. Kopple
  Title:   Trustee
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ George Elefther /s/ Karin Elefther
  Name:   George Elefther/Karin Elefther
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Ron Eller /s/ Beth Eller
  Name:   Ron and Beth Eller
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                   
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Adrien Ellul
  Name:   Adrien Ellul
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Daniel Erlanger /s/ Beth Erlanger
  Name:   Daniel and Beth Erlanger
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  EZMM&B HOLDINGS, LLC,
 

A DELAWARE LIMITED LIABILITY COMPANY

  (Name of Entity)
  By:    
  Name:   BRYAN EZRALOW AS TRUSTEE OF THE
  Title:   BRYAN EZRALOW 1994 TRUST U/T/D/ 12.22.1994 MANAGER AND MEMBER
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  EZ COLONY PARTNERS, LLC,
 

A DELAWARE LIMITED LIABILITY COMPANY

  (Name of Entity)
  By:    
  Name:   BRYAN EZRALOW AS TRUSTEE OF THE
  Title:   BRYAN EZRALOW 1994 TRUST U/T/D/ 12.22.1994 MANAGER AND MEMBER
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

F3F S.P.A.

  (Name of Entity)
  By:   /s/ Laura Iris Ferro
  Name:   Laura Iris Ferro
  Title:   Chairman
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Faith Family Holdings, LP

  (Name of Entity)
  By:   /s/ Robert A. Faith
  Name:   Robert A. Faith
  Title:   Managing General Partner
(if individual)
  STOCKHOLDER:
   
  Name               
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Steven Farber
  Name:   Steven Farber
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Gary M. Ferman
  Name:   Gary M. Ferman
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ William Filon
  Name:   William Filon
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Trevor Fetter
  Name:   Trevor Fetter
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Cynthia Finerman Living Trust
  (Name of Entity)
  By:   /s/ Cynthia Finerman
  Name:   Cynthia Finerman
  Title:   Trustee
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                   
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Ralph Finerman
  Name:   Ralph Finerman
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Donald A. Fishbein
  Name:   Donald A. Fishbein
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Fortezza Investments L.P.

  (Name of Entity)
  By:   /s/ Michael Marocco
  Name:   Michael Marocco
  Title:   Managing Member of Fortezza Capital Management, its general partner
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Peter Friedland
  Name:   Peter Friedland
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ David L. Frydrych
  Name:   David L. Frydrych
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Michael J. Gahan
  Name:   Michael J. Gahan
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Garfinkle Revocable Trust

  (Name of Entity)
  By:   /s/ Morris Garfinkle
  Name:   Morris Garfinkle
  Title:   Trustee
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Keith J. Gelles
  Name:   Keith Gelles
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Albert Gentile /s/ Hiedi Gentile
  Name:   Albert Gentile/Hiedi Gentile
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

GH HEALTHLINK CAPITAL LIMITED

  (Name of Entity)
  By:   /s/ Lau Yuen Yee, Sam
  Name:   Lau Yuen Yee, Sam
  Title:   Director
(if individual)
  STOCKHOLDER:
   
  Name:               
  Address:    
   
Email Address:   [***]
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:               
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Steven Gladstone
  Name:   Steven Gladstone
  Address:   [***]
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:    12.14.2017
  /s/ Laura K. Goethe / /s/ Bruce D. Goethe
  Name:  

Bruce D. and Laura K. Goethe

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Jeffrey E. Goldman
  Name:  

Jeffrey E. Goldman

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Robert K Green Trust

  (Name of Entity)
  By:  

/s/ Robert K Green

  Name:  

Robert K Green

  Title:  

Managing General Partner

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Robert K Green
  Name:  

Robert K Green

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ William F. Grieco
  Name:  

William F. Grieco

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Robert P. Giesen
  Name:  

Robert P. Giesen

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Nathan Halegua
  Name:    
  Address:    
   
Email Address:               
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Timothy P. Hanley /s/ Monica Hanley
  Name:  

Timothy P. Hanley/Monica Hanley

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ William H. Harris
  Name:  

William H. Harris

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Henry Herzing Revocable Trust

  (Name of Entity)
  By:  

/s/ Henry Herzing

  Name:  

Henry Herzing

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

HG Phanstiel, LP

  (Name of Entity)
  By:  

/s/ Howard G. Phanstiel

  Name:  

Howard G. Phanstiel

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Joel L. Hochman Rev. Trust

  (Name of Entity)
  By:  

/s/ Joel L. Hochman

  Name:  

Joel L. Hochman

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

 

  (Name of Entity)
  By:  

 

  Name:  

 

  Title:  

 

(if individual)
  STOCKHOLDER:
  /s/ Evan B. Azriliant
  Name:   Evan B. Azriliant
  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 
  (Name of Entity)
  By:  

 

  Name:  

 

  Title:  

 

(if individual)
  STOCKHOLDER:
  /s/ Timothy Hogue
  Name:   Timothy Hogue
  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                                 

  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Thomas Huang
  Name:   Thomas Huang
  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                                 

  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ William Huff                                 12/13/17
  Name:   William Huff
  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

  STOCKHOLDER:
  Interwest Investors VIII, LP
  By:  

/s/ Arnold Oronsky

  Name:  

Arnold Oronsky

  Title:  

Managing Director

  Address:  

[***]

   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

  STOCKHOLDER:
  Interwest Investors Q VIII, LP
  By:  

/s/ Arnold Oronsky

  Name:  

Arnold Oronsky

  Title:  

Managing Director

  Address:  

[***]

   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

  STOCKHOLDER:
  Interwest Partners VIII, LP
  By:  

/s/ Arnold Oronsky

  Name:  

Arnold Oronsky

  Title:  

Managing Director

  Address:  

[***]

   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

  STOCKHOLDER:
  Interwest Partners IX, LP
  By:  

/s/ Arnold Oronsky

  Name:  

Arnold Oronsky

  Title:  

Managing Director

  Address:  

[***]

   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Bruce P. Inglis + Maney M. Inglis JTWROS
  Name:   Bruce P. Inglis + Maney M. Inglis JTWROS
  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                             

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Marc R. Jalbert
  Name:   Marc R. Jalbert
  Address:  

[***]

   
Email Address:  

[***]

Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                             

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Robert C. Jamo
  Name:   Robert C. Jamo
  Address:  

[***]

   
Email Address:  

[***]

Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Edgar D. Jannotta, Jr. Exempt Family Trust

  (Name of Entity)
  By:  

/s/ Erika C. Pearsall

  Name:  

Erika C. Pearsall

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
   
  Name                                                    
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

JPM Partners, LP

  (Name of Entity)
  By:  

/s/ John W. Puth

  Name:  

John W. Puth

  Title:  

General Partner

(if individual)
  STOCKHOLDER:
   
  Name                                                    
  Address:    
   
Email Address:  

[***]

Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

JLB Family Trust

  (Name of Entity)
  Premier Trust, Inc., Trustee
  By:  

/s/ Brian Simmons

  Name:  

Brian Simmons

  Title:  

SVP/Trust Officer

(if individual)
  STOCKHOLDER:
   
  Name                                                    
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Brandon Jones
  Name:   Brandon Jones
  Address:  

[***]

   
Email Address:  

[***]

Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Kala International Investment Co Ltd.

  (Name of Entity)
  By:  

/s/ Rong XIAO

  Name:  

Rong XIAO

  Title:    
(if individual)
  STOCKHOLDER:
   
  Name                               
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

William M. Kargman Revocable Trust UAD

12/02/2009

  (Name of Entity)
  By:  

/s/ William M. Kargman

  Name:  

William M. Kargman

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
   
  Name                               
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Marjie B. Kargman Robert M. Kargman,
  Name:  

Marjie B. Kargman Robert M.

Kargman, JTWROS

  Address:  

[***]

   
Email Address:  

[***]

Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

RM Kargman 2012 Life Insurance Trust

  (Name of Entity)
  By:  

/s/ Edward J. Bartlett, Jr.

  Name:  

Edward J. Bartlett, Jr.

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Katanick Family Limited Partnership

  (Name of Entity)
  By:  

/s/ Jaye Katanick

  Name:  

Jaye Katanick

  Title:  

Pres

(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:                   
Phone Number:                   


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Gary Katzmann
  Name:   Gary Katzmann
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

CM Loeb Trust

  (Name of Entity)
  By:  

/s/ Thomas Kempner

  Name:  

Thomas Kempner

  Title:  

Chairman & CEO of Loeb Holding Corp.

(if individual)
  STOCKHOLDER:
  /s/ Thomas Kempner
  Name:   Thomas Kempner
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

  STOCKHOLDER:
  /s/ Jeffrey B. Kindler
  Address:   [***]        
                                                   
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Trust for Descendants of Charles & Elizabeth

Kontulis UAD 1/27/10

  (Name of Entity)
  By:  

/s/ Martha F. Morse

  Name:  

Martha F. Morse

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:    
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Thomas C. Kotyk
  Name:   Thomas C. Kotyk
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:    
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Klaus Kretschmer
  Name   Klaus Kretschmer
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

L & Co., LLC

  (Name of Entity)
  By:  

/s/ James E. Lineberger, Jr.

  Name:  

James E. Lineberger, Jr.

  Title:  

Member

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:                   
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Lagom LLC

  (Name of Entity)
  By:  

/s/ Marika Lindholm

  Name:  

Marika Lindholm

  Title:  

Manager

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:   [***]
   
Email Address:   [***]
Phone Number:                   


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Roger Lash
  Name:   Roger Lash
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Holler Liepmann
  Name:   Holler Liepmann
  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

James E. Lineberger Revocable Trust

  (Name of Entity)
  By:  

/s/ James E. Lineberger

  Name:  

James E. Lineberger

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
   
  Name           
  Address:    
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

LEERINK HOLDINGS LLC
By:  

/s/ Joseph R. Gentile

Name:   Joseph R. Gentile
Title:   CAO


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

LEERINK SWANN CO-INVESTMENT FUND, LLC
By:  

/s/ Joseph R. Gentile

Name   Joseph R. Gentile
Title:   Manager


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

LOOKFAR INVESTMENTS, LLC
By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

/s/ Steven K. Luminais

  Name:  

Steven K. Luminais

  Title:    
(if individual)
  STOCKHOLDER:
 

/s/ Elizabeth K. Luminais

  Name:  

Elizabeth K. Luminais

  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
      Estate of William L. Lurie
 

/s/ Rita M. Lurie

  Name:  

Rita M. Lurie Executrix

  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
 

/s/ Rick D. Mace

  Name:  

Rick D. Mace

  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
 

/s/ Charles J. Magolske

  Name:  

Charles J. Magolske

  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Mai 2, LLC

  (Name of Entity)
  By:  

/s/ Brian Finn

  Name:  

Brian Finn

  Title:  

Administrator

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Stanley M. Marks
  Name:                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

MARSHALL S. EZRALOW ROTH IRA

  (Name of Entity)
  By:  

/s/ Marshall S. Ezralow

  Name:  

Marshall S. Ezralow

  Title:  

Participant

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Robert Masters
  Name:   Robert Masters
  Address:   [***]
   
Email Address:  

[***]

Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

MERIDIAN SMALL CAP GROWTH FUND
By:   its Investment Advisor ArrowMark Colorado Holdings, LLC
By:   /s/ David Corkins
Name:   David Corkins
Title:   Managing Member


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Stephen J. Meringoff
  Name:   Stephen J. Meringoff
  Address:   [***]
   
Email Address:  

[***]

Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Arthur F. Michaelis
  Name:   Arthur F. Michaelis
  Address:   [***]
   
Email Address:  

[***]

Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Christine Renee Monks
  Name:  

Christine Renee Monks

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Montauk, LLC

  (Name of Entity)
  By:  

/s/ William Laverack, Jr.

  Name:  

William Laverack, Jr.

  Title:  

Managing Member

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ James Moonier
  Name:  

James Moonier

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
                                                       
  (Name of Entity)
  By:                                                            
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Reed Moskowitz
  Name:  

Reed Moskowitz

  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                                                         

  Name  

                                                         

  Title:  

                                                     

(if individual)
  STOCKHOLDER:
  /s/ Michael Mullins
  Name:                                                            
  Address:   [***]
   
Email Address: [***]
Phone Number: [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                                                     

  Name    
  Title:  

                                                     

(if individual)
  STOCKHOLDER:
  /s/ Mitchell L. Mutter
  Name:  

Mitchell L. Mutter

  Address:  

[***]

   
Email Address: [***]
Phone Number: [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                                             

  Name  

                                                     

  Title:  

                                                     

(if individual)
  STOCKHOLDER:
 

/s/ Robert M. Newsome

  Name:  

Robert M. Newsome

  Address:  

[***]

   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

NEW ENTERPRISE ASSOCIATES 16, L.P.
By: NEA Partners 16, L.P., its general partner
By: NEA 16 GP, LLC, its general partner
By:  

/s/ Louis S. Citron                        

Name:   Louis S. Citron
Title:   Chief Legal Officer
Address:   [***]
NEA VENTURES 2017, Limited Partnership
By:  

/s/ Louis S. Citron

Name:   Louis S. Citron
Title:   Vice-President
Address:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Northlea Partners

  (Name of Entity)
  By:  

/s/ John H Abeles MD

  Name  

John H Abeles MD

  Title:  

Manager of General Partner

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:  

[***]

Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Northstar Consulting, LLC

  (Name of Entity)
  By:  

/s/ William K Schmidt, PhD

  Name:  

William K Schmidt, PhD

  Title:  

President

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

The Notas Family Trust

  (Name of Entity)
  By:  

/s/ Bernard Notas

  Name:  

Bernard Notas

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

The Oaks Family, LLC

  (Name of Entity)
  By:  

/s/ Robert Kargman

  Name  

Robert Kargman,

  Title:  

Manager duly authorized

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Oakwood Capital, LLC

  (Name of Entity)
  By:  

/s/ Kurt G. Conti

  Name:  

Kurt G. Conti

  Title:  

President

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

The Oberkfell Living Trust dtd 12/18/02

  (Name of Entity)
  By:  

H. F. Oberkfell

  Name:  

H. F. Oberkfell

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  /s/ Karin O. Brainard
   
  Name(s):   Karin O. Brainard
        (please print)
  Title:    
    (if Stockholder is not an individual)
  Address:    
   
   


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Josh & Julie Ofman Family Trust
  (Name of Entity)
  By:   /s/ Josh Ofman
  Name:  

Josh Ofman

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  /s/ David R. Olson
   
  Name(s):   David R. Olson
        (please print)
  Title:    
    (if Stockholder is not an individual)
  Address:   [***]
   
   


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Stanford Baratz Rev. Trust
  (Name of Entity)
  By:   /s/ Stanford Baratz
  Name:   Stanford Baratz
  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                               
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Isaac Blech
  Name:   Isaac Blech
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Presdio Partners 2007, L.P.
  (Name of Entity)
  Presido Partners 2007 GP, L.P., its general partner
  Presidio Partners 2007 GP, LLC, its general partner
  By:   /s/ David J. Collier
  Name:   David J. Collier
  Title:   Managing Director
(if individual)
  STOCKHOLDER:
   
  Name                       
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Presidio Partners 2007 (Parallel), L.P.
  (Name of Entity)
  Presidio Partners 2007 (Parallel), GP, L.P., its general partner
  Presidio Partners 2007 (Parallel), GP, LLC, its general partner
  By:   /s/ David J. Collier
  Name:   David J. Collier
  Title:   Managing Director
(if individual)
  STOCKHOLDER:
                             
  Name                       
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:                           
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Michael P. Ross
  Name:   Michael P. Ross
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

                         

  (Name of Entity)
  By:  

                         

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Matthew Orlando
  Name:   Matthew Orlando
  Address:   [***]
 
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  OSI Holdings LLC
  (Name of Entity)
  By:   /s/ Kevin P. McCarthy
  Name:   Kevin P. McCarthy
  Title:   President and Member
(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
      STOCKHOLDER:
 

Osprey I, LLC

  (Name of Entity)
  By:  

/s/ Dale Burns

  Name:  

Dale Burns

  Title:  

Manager

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
    STOCKHOLDER:
   
  (Name of Entity)
  By:    
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Gregg P. Otto
  Name:   Gregg P. Otto Jeanne G. Otto
  Address:   [***]
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Panella Living Trust dtd 5/11/2004
  (Name of Entity)
  By:   /s/ Joseph A Panella
  Name:   Joseph A Panella
  Title:   Trustee
(if individual)
  STOCKHOLDER:
                                                   
  Name:                                                    
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
    STOCKHOLDER:
   
  (Name of Entity)
  By:    
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Jonathan P. Patronik
  Name:   Jonathan P. Patronik
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
    STOCKHOLDER:
   
  (Name of Entity)
  By:    
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Paul G. Roberts
  Name:   Paul G. Roberts
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
    STOCKHOLDER:
   
  (Name of Entity)
  By:    
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Andrew L. Perito
  Name:   Andrew L. Perito
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
    STOCKHOLDER:
   
  (Name of Entity)
  By:    
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Edward V. Pershing
  Name:   Edward V. Pershing
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
    STOCKHOLDER:
   
  (Name of Entity)
  By:    
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Daniel Petro
  Name:   Daniel Petro
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
    STOCKHOLDER:
   
  (Name of Entity)
  By:    
  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Neal Polan
  Name:   Neal Polan
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Brian Potiker Revocable Trust UAD 8/7/96
  (Name of Entity)
  By:   /s/ Brian Potiker
  Name:   Brian Potiker
  Title:   Trustee
(if individual)
    STOCKHOLDER:
   
  Name    
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                             

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Robert C. Pozen
  Name:   Robert C. Pozen
  Address:   [***]
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  David EI Pyott Living Trust
  (Name of Entity)
  By:   /s/ David EI Pyott
  Name:   David EI Pyott
  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

QUAN VENTURE FUND I, L.P.
By:   Quan Venture Partners I, L.L.C.
Its:   General Partner
By:   /s/ Marietta Wu
Name:   Marietta Wu
Title:   Managing Director


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Stephen R. Quazzo Trust dated 11/9/95
  (Name of Entity)
  By:   /s/ Stephen R. Quazzo
  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  James B. Ramo Revocable Trust
  (Name of Entity)
  By:   /s/ James Ramo
  Name:   James Ramo
  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                             

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Todd A. Rathe
  Name:   Todd A. Rathe
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Rehoboth Hundred LLC

  (Name of Entity)
  By:  

/s/ Joseph Ruggiero

  Name:  

Joseph J. Ruggiero

  Title:  

Managing Partner

(if individual)
  STOCKHOLDER:
   
  Name                                                    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                         

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Mark Reutlinger Analee P. Reutlinger
  Name:   Mark & Analee P. Reutlinger
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                         

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Michael Rieber
  Name:   Michael Rieber
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Stephen E. Riffee Rev Trust
  (Name of Entity)
  By:  

/s/ Stephen E. Riffee

  Name:  

Stephen E. Riffee

  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  River Charitable Remainder Trust
  (Name of Entity)
  By:  

/s/ Isaac Blech

  Name:   Isaac Blech
  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Rockledge Associates, LLC
  (Name of Entity)
  By:  

/s/ Richard A. Bernstein

  Name:  

Richard A. Bernstein

  Title:   Managing Member
(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                         

  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Jeff Roberts
  Name:   Jeff Roberts
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Dyke Rogers
  Name:   Dyke Rogers
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ T. Mark Rogstad
  Name:   T. Mark Rogstad
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                         

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Ken Rosenblum /s/ Ann Simonds
  Name:   Ken Rosenblum and Ann Simonds
  Address:   [***]
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Mark Ross
  Name:   Mark Ross
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

/s/ Steven Rothstein MD

  Name:  

Steven Rothstein MD

  Title:    
(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Marc A. Rotter
  Name:   Marc A. Rotter
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Lisa Rudes Grandchildren Trust
  (Name of Entity)
  By:  

/s/ Lisa Rudes Sandel

  Name:   Lisa Rudes Sandel
  Title:  

Trustee

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Rudes GCT Investment Partnership

  (Name of Entity)
  By:  

/s/ Lisa Rudes Sandel

  Name:  

Lisa Rudes Sandel

  Title:  

President

(if individual)
  STOCKHOLDER:
                                                   
  Name                                                    
  Address:    
   
Email Address:                   
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

                                                     

  (Name of Entity)
  By:  

                                         

  Name  

                                                 

  Title:  

                                 

(if individual)
  STOCKHOLDER:
  /s/ Philip T. Ruegger
  Name:   Philip T. Ruegger
  Address:   [***]
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

                                                     

  (Name of Entity)
  By:  

                                         

  Name  

                                                 

  Title:  

                                 

(if individual)
  STOCKHOLDER:
  /s/ Peter D. Schiffrin
  Name:   Peter D. Schiffrin
  Address:   [***]
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

                                                     

  (Name of Entity)
  By:  

                                         

  Name  

                                                 

  Title:  

                                 

(if individual)
  STOCKHOLDER:
  /s/ David Schneider
  Name:   David Schneider
  Address:   [***]
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Shamus, LLC

  (Name of Entity)
  By:  

/s/ David E. Smith

  Name:  

David E. Smith

  Title:  

President of Coast Asset Management, LLC,

its trading advisor

(if individual)
  STOCKHOLDER:
                                           
  Name                                   
  Address:                           
   
Email Address:                                   
Phone Number:  

                                 


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

Shanghai Healthcare Industry Investment Fund/New

York, LLC

  (Name of Entity)
  By:  

/s/ Sun Feng

  Name:  

Sun Feng

  Title:  

CEO

(if individual)
  STOCKHOLDER:
                                           
  Name                                   
  Address:                           
   
Email Address:                                   
Phone Number:  

                                 


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

                                         

  (Name of Entity)
  By:  

                                 

  Name  

                                         

  Title:  

                

(if individual)
  STOCKHOLDER:
  /s/ Dennis Shasha
  Name:   Dennis Shasha
  Address:   [***]
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

                                         

  (Name of Entity)
  By:  

                                 

  Name  

                                         

  Title:  

                

(if individual)
  STOCKHOLDER:
  /s/ William Sheppard
  Name:   William Sheppard
  Address:   [***]
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

                                         

  (Name of Entity)
  By:  

                                 

  Name  

                                         

  Title:  

                

(if individual)
  STOCKHOLDER:
  /s/ Richard A Smith
  Name:   Richard A Smith
  Address:   [***]
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
 

                                         

  (Name of Entity)
  By:  

                                 

  Name  

                                         

  Title:  

                

(if individual)
  STOCKHOLDER:
  /s/ Bryan Spille
  Name:   Bryan Spille
  Address:   [***]
   
Email Address:   [***]
Phone Number:  

[***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Starlight Investment Holdings Limited
  (Name of Entity)
  By:  

/s/ Nicola Hodge

  Name:  

Nicola Hodge

  Title:   Director
(if individual)
  STOCKHOLDER:
   
  Name  

                     

  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Lawrence D. Stern 2010 Qualified Annuity Trust
  (Name of Entity)
  By:  

/s/ Rebecca A. M. Stern

  Name:  

Rebecca A. M. Stern

  Title:   Trustee
(if individual)
  STOCKHOLDER:
   
  Name  

                     

  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Randall M. Stevens
  Name:   Randall M. Stevens
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ William Strawbridge
  Name:   William Strawbridge
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Clayton A. Struve
  Name:   Clayton A. Struve
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

THB IRON ROSE, LLC LIFE SCIENCE PORTFOLIO
By:  

its Investment Advisor

ArrowMark Colorado Holdings, LLC

By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

THB IRON ROSE, LLC
By:   its Investment Advisor
  ArrowMark Colorado Holdings, LLC
By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ James W. Thomas
  Name:   James W. Thomas
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

  STOCKHOLDER:
  /s/ Shawn Tomasello
  Shawn Tomasello
  Address:   [***]
   
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Terrence E. Troy
  Name:   Terrence E. Troy
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name:    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Carleen A. Tufo
  Name:   Carleen A. Tufo
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  United Acquisition Corp.
  (Name of Entity)
  By:  

/s/ John A. Catsimatidis

  Name:  

John A. Catsimatidis

  Title:   Chairman and CEO
(if individual)
  STOCKHOLDER:
   
  Name                           
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Arnold Ursaner
  Name:   Arnold Ursaner
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Steve Valko
  Name:   Steve Valko
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                     

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ John V. Wagner
  Name:   John V. Wagner
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Neil H. Wasserman
  Name:   Neil H. Wasserman
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Steven J. Wice
  Name:   Steven J. Wice
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Howard J. Workman
  Name:   Howard J. Workman
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

/s/ Tony Yao

Tony Yao


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ illegible
  Name:    
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Steven and Kaye Yost Family Trust
  (Name of Entity)
  By:  

/s/ Steven Yost

  Name:   Steven Yost
  Title:   Trustee
(if individual)
  STOCKHOLDER:
   
  Name    
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Steven Yost Roth IRA
  (Name of Entity)
  By:  

/s/ Steven Yost

  Name:  

Steven Yost

  Title:   Roth IRA Owner
(if individual)
  STOCKHOLDER:
   
  Name    
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Henry M. Zachs
  Name:   Henry M. Zachs
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ George Zelinski
  Name:   George Zelinski
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  The Irrevocable Aloha Trust UAD 05/01/2002
  (Name of Entity)
  By:  

/s/ Marianne Schmitt Hellauer

  Name:  

Marianne Schmitt Hellauer

  Title:   Trustee
(if individual)
  STOCKHOLDER:
   
  Name    
  Address:    
   
Email Address:    
Phone Number:    


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Seymour H. Block Defined Benefit Plan
  (Name of Entity)
  By:  

/s/ Seymour H. Block

  Name:  

Seymour H. Block

  Title:   Trustee
(if individual)
  STOCKHOLDER:
   
  Name               
  Address:    
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
  Booknet LLC
  (Name of Entity)
  By:  

/s/ D. Karp

  Name:  

D. Karp

  Title:   Member
(if individual)
  STOCKHOLDER:
   
  Name    
  Address:    
   
Email Address:    
Phone Number:    

 


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Richard Brown
  Name:   Richard Brown
  Address:   [***]
   


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Brandon Jones
  Name:   Brandon Jones
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

            

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Jeff Kurtz
  Name:   Jeff Kurtz
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                                         

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Charles J. Magolske
  Name:   Charles J. Magolske
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                                                             

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Stephen R. Mut
  Name:   Stephen R. Mut
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

(if entity)
  STOCKHOLDER:
   
  (Name of Entity)
  By:  

                                             

  Name    
  Title:    
(if individual)
  STOCKHOLDER:
  /s/ Richard A. Smith
  Name:   Richard A. Smith
  Address:   [***]
   
Email Address:   [***]
Phone Number:   [***]


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

6 DIMENSIONS CAPITAL, L.P.
By:   6 Dimensions Capital GP, LLC, its General Partner
By:  

/s/ Wei Li

Name:   Wei Li
Title:   Director
6 DIMENSIONS AFFILIATES FUND, L.P.
By:   6 Dimensions Capital GP, LLC, its General Partner
By:  

/s/ Wei Li

Name:   Wei Li
Title:   Director


ADOPTION AGREEMENT

This Adoption Agreement (“Adoption Agreement”), effective as of May 15, 2018, is entered into by the undersigned (the “Holder”) pursuant to the terms of that certain Third Amended and Restated Stockholders Agreement dated as of December 18, 2017 (the “Agreement”), by and among the Company and certain of its Stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.

1.1 Acknowledgement. Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “Stock”), for one of the following reasons (Check the correct box):

 

 

as a transferee of Shares from a party in such party’s capacity as an “Investor” bound by the Agreement, and after such transfer, Holder shall be considered an “Investor” and a “Stockholder” for all purposes of the Agreement.

 

 

as a transferee of Shares from a party in such party’s capacity as a “Key Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Key Holder” and a “Stockholder” for all purposes of the Agreement.

1.2 Agreement. Holder hereby (a) agrees that the Stock, and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.

1.3 Notice. Any notice required or permitted by the Agreement shall be given to Holder at the address, email address or facsimile number listed below Holder’s signature hereto.

 

HOLDER:     ACCEPTED AND AGREED:
SHEPHERD 98, LLC     CENTREXION THERAPEUTICS
By:  

/s/ Ron Ellen

    By:  

/s/ Gregg Beloff

Name:   Ron Ellen     Name:   Gregg Beloff
Title:   Manager     Title:   Chief Financial Officer
Address: [***]      
Email: [***]      
Facsimile Number:                                                            


ADOPTION AGREEMENT

This Adoption Agreement (“Adoption Agreement”), effective as of June 14, 2018, is entered into by the undersigned (the “Holder”) pursuant to the terms of that certain Third Amended and Restated Stockholders Agreement dated as of December 18, 2017 (the “Agreement”), by and among the Company and certain of its Stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.

1.1 Acknowledgement. Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “Stock”), for one of the following reasons (Check the correct box):

 

 

as a transferee of Shares from a party in such party’s capacity as an “Investor” bound by the Agreement, and after such transfer, Holder shall be considered an “Investor” and a “Stockholder” for all purposes of the Agreement.

 

 

as a transferee of Shares from a party in such party’s capacity as a “Key Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Key Holder” and a “Stockholder” for all purposes of the Agreement.

1.2 Agreement. Holder hereby (a) agrees that the Stock, and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.

1.3 Notice. Any notice required or permitted by the Agreement shall be given to Holder at the address, email address or facsimile number listed below Holder’s signature hereto.

 

HOLDER:     ACCEPTED AND AGREED:
ARROWMARK LIFE SCIENCE FUND, LP     CENTREXION THERAPEUTICS
By:   its General Partner ArrowMark Partners GP, LLC    
By:  

/s/ David Corkins

    By:  

/s/ Gregg Beloff

Name:   David Corkins     Name:   Gregg Beloff
Title:   Managing Member     Title:   Chief Financial Officer
Address: [***]      
Phone:      
Email:      


ADOPTION AGREEMENT

This Adoption Agreement (“Adoption Agreement”), dated July     , 2018 and effective as of March 28, 2018, is entered into by the undersigned (the “Holder”) pursuant to the terms of that certain Third Amended and Restated Stockholders Agreement dated as of December 18, 2017 (the “Agreement”), by and among the Company and certain of its Stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.

1.1 Acknowledgement. Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “Stock”), for one of the following reasons (Check the correct box):

 

 

as a transferee of Shares from a party in such party’s capacity as an “Investor” bound by the Agreement, and after such transfer, Holder shall be considered an “Investor” and a “Stockholder” for all purposes of the Agreement.

 

 

as a transferee of Shares from a party in such party’s capacity as a “Key Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Key Holder” and a “Stockholder” for all purposes of the Agreement.

1.2 Agreement. Holder hereby (a) agrees that the Stock, and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.

1.3 Notice. Any notice required or permitted by the Agreement shall be given to Holder at the address, email address or facsimile number listed below Holder’s signature hereto.

 

HOLDER:       ACCEPTED AND AGREED:
      CENTREXION THERAPEUTICS

/s/ Denice M. Dan

      By:   

/s/ B. N. Harvey

Denice M. Dan          B. N. Harvey, CFO
Address: [***]         
Email Address: [***]         
Facsimile Number:                                                                       


ADOPTION AGREEMENT

This Adoption Agreement (“Adoption Agreement”), dated February     , 2018 and effective as of March 28, 2018, is entered into by the undersigned (the “Holder”) pursuant to the terms of that certain Third Amended and Restated Stockholders Agreement dated as of December 18, 2017 (the “Agreement”), by and among the Company and certain of its Stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.

1.1 Acknowledgement. Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “Stock”), for one of the following reasons (Check the correct box):

 

 

as a transferee of Shares from a party in such party’s capacity as an “Investor” bound by the Agreement, and after such transfer, Holder shall be considered an “Investor” and a “Stockholder” for all purposes of the Agreement.

 

 

as a transferee of Shares from a party in such party’s capacity as a “Key Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Key Holder” and a “Stockholder” for all purposes of the Agreement.

1.2 Agreement. Holder hereby (a) agrees that the Stock, and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.

1.3 Notice. Any notice required or permitted by the Agreement shall be given to Holder at the address, email address or facsimile number listed below Holder’s signature hereto.

 

HOLDER:     ACCEPTED AND AGREED:
POZEN FAMILY 2016 TRUST     CENTREXION THERAPEUTICS

/s/ David Pozen

    By:  

/s/ Gregg Beloff

David Pozen and Joanna Pozen, Trustees     Name:   Gregg Beloff
      Title:   Chief Financial Officer
Address: [***]      
Email Address: [***]      
Facsimile Number:                                                                       


Schedule I

Isaac Blech

75 Rockefeller Plaza

29th Floor

New York, NY 10019

Sol J. Barer

2 Barer Lane

Mendham, NJ 07945

Jeffrey B. Kindler

29 Surf Road

Westport, CT 06880


AMENDMENT NO. 1

TO

THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

THIS AMENDMENT NO. 1 TO THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this “Amendment”) is made and entered into as of November 2, 2018, by and among Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), and the undersigned parties to that certain Third Amended and Restated Stockholders Agreement, dated as of December 18, 2017 (the “Agreement”);

WHEREAS, pursuant to Section 6.6 of the Agreement, the Agreement may be amended by written agreement of (i) the Company, and (ii) the Holders holding a majority of the shares of Series D Convertible Preferred Stock then held by the Holders (collectively, the “Requisite Parties”);

WHEREAS, the Company and the undersigned parties to the Agreement constitute the Requisite Parties; and

WHEREAS, the parties hereto desire to amend the Agreement as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby covenant and agree to be bound as follows:

Section 1. Capitalized Terms. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to them in the Agreement.

Section 2. Amendments.

(a) The preamble of the Agreement is hereby amended and restated in its entirety to read as follows:

“THIS THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this “Agreement”), is made as of December 18, 2017, by and among Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), each option holder, warrant holder and stockholder of the Company listed on Schedule I hereto (each, a “Stockholder” and collectively, the “Stockholders”) and each stockholder of the Company that becomes a party to this Agreement in accordance with Section 6.9 hereof (each, an “Additional Stockholder”).”

(b) Schedule I to the Agreement shall be replaced with Schedule I attached to this Amendment.

Section 3. No Other Amendments; Conflicts. No term or provision of the Agreement shall be affected by this Amendment, unless specifically set forth herein and any term or provision not affected by this Amendment shall remain in full force and effect following the date hereof. In the event of a conflict between the terms of the Agreement and the terms of this Amendment, the terms of this Amendment shall control.


Section 4. Governing Law. This Amendment and the rights and obligations of the parties hereto shall be governed, construed and interpreted in all respects in accordance with the General Corporation Law of the State of Delaware as to matters governed by such General Corporation Law, and as to all other matters in accordance with the laws of the Commonwealth of Massachusetts without regard to its choice of laws principles.

Section 5. Captions; Pronouns. All articles and section headings or captions contained in this Amendment are inserted only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Amendment or the intent of any provision thereof. References in the Agreement to the Agreement shall mean the Agreement, as amended by this Amendment.

Section 6. Severability. If any provision of this Amendment or application to any party or circumstance shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Amendment or the application of such provision to any other party or circumstances shall not be affected thereby, and each provision shall be valid and shall be enforced to the fullest extent permitted by law.

Section 7. Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. The exchange of copies of this Amendment and of signature pages by facsimile transmission or other electronic means shall constitute effective execution and delivery of this Amendment as to the parties and may be used in lieu of the original Amendment for all purposes.

[Signature Pages Follow]


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

 

KEY HOLDERS:    

/s/ Sol J. Barer

    Sol J. Barer
   

/s/ Isaac Blech

    Isaac Blech
   

/s/ Jeffrey B. Kindler

    Jeffrey B. Kindler

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

NEW ENTERPRISE ASSOCIATES 16, L.P.
By: NEA Partners 16, L.P., its general partner
By: NEA 16 GP, LLC, its general partner
By:  

/s/ Louis Citron

Name:   Louis Citron
Title:   Chief Legal Officer
NEA VENTURES 2017, Limited Partnership
By:  

/s/ Louis Citron

Name:   Louis Citron
Title:   Chief Legal Officer

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

QUAN VENTURE FUND I, L.P.
By: Quan Venture Partners I, L.L.C.,
its general partner
By:  

/s/ Stella Xu

Name:   Stella Xu
Title:   Managing Director

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

ARROWMARK FUNDAMENTAL OPPORTUNITY FUND, L.P.
By: its Investment Advisor
ArrowMark Colorado Holdings, LLC
By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member
ARROWMARK LIFE SCIENCE FUND, L.P.
By: its General Partner
ArrowMark Partners GP, LLC
By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member
MERIDIAN SMALL CAP GROWTH FUND
By: its Investment Advisor
ArrowMark Colorado Holdings, LLC
By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member
THB IRON ROSE, LLC LIFE SCIENCE PORTFOLIO
By: its Investment Advisor
ArrowMark Colorado Holdings, LLC
By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member

/s/ Tony Yao

Tony Yao

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

LOOKFAR INVESTMENTS, LLC
By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member
CF ASCENT LLC
By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member
THB IRON ROSE LLC
By: its Investment Advisor
ArrowMark Colorado Holdings, LLC
By:  

/s/ David Corkins

Name:   David Corkins
Title:   Managing Member

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

CLOUGH HEALTHCARE MASTER FUND, L.P.
By: Clough Capital Partners L.P., its investment advisor
By:  

/s/ Daniel Gillis

Name:   Daniel Gillis
Title:   Chief Compliance Officer
CLOUGH GLOBAL EQUITY FUND
By: Clough Capital Partners L.P., its investment advisor
By:  

/s/ Daniel Gillis

Name:   Daniel Gillis
Title:   Chief Compliance Officer
CLOUGH GLOBAL OPPORTUNITIES FUND
By: Clough Capital Partners L.P., its investment advisor
By:  

/s/ Daniel Gillis

Name:   Daniel Gillis
Title:   Chief Compliance Officer

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

INTERWEST INVESTORS VIII, L.P.
By: InterWest Management Partners VIII, LLC, its general partner
By:  

/s/ Arnold L. Oronsky

Name:   Arnold L. Oronsky
Title:   Managing Director
INTERWEST INVESTORS Q VIII, L.P.
By: InterWest Management Partners VIII, LLC, its general partner
By:  

/s/ Arnold L. Oronsky

Name:   Arnold L. Oronsky
Title:   Managing Director
INTERWEST PARTNERS VIII, L.P.
By: InterWest Management Partners VIII, LLC, its general partner
By:  

/s/ Arnold L. Oronsky

Name:   Arnold L. Oronsky
Title:   Managing Director
INTERWEST PARTNERS IX, L.P.
By: InterWest Management Partners IX, LLC, its general partner
By:  

/s/ Arnold L. Oronsky

Name:   Arnold L. Oronsky
Title:   Managing Director

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

EFUNG RUIBO LIMITED
By:  

/s/ Zhu Jinqiao

Name:   Zhu Jinqiao
Title:   President

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

LEERINK HOLDINGS LLC
By:  

/s/ Timothy A.G. Gerhold

Name:   Timothy A.G. Gerhold
Title:   Senior Legal Advisor
LEERINK PARTNERS CO-INVESTMENT FUND, LLC
By:  

/s/ Jeffrey A. Leerink

Name:   Jeffrey A. Leerink
Title:   Manager

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

6 DIMENSIONS CAPITAL, L.P.
By: 6 Dimensions Capital GP, LLC, its general partner
By:  

/s/ Wei Li

Name:   Wei Li
Title:   Director
6 DIMENSIONS AFFILIATES FUND, L.P.
By: 6 Dimensions Capital GP, LLC, its general partner
By:  

/s/ Wei Li

Name:   Wei Li
Title:   Director

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

/s/ Sol J. Barer

Sol J. Barer, Ph.D.
BARER & SON CAPITAL, LLC
By:  

/s/ Joshua Barer

Name:   Joshua Barer
Title:   Managing Partner

/s/ Joshua Barer

Joshua Barer

/s/ Lori Ingber

Lori Ingber

 

Ilyssa Maisono

/s/ Jennifer Zairi

Jennifer Zairi

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

/s/ Jeffrey B. Kindler

Jeffrey B. Kindler

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

/s/ James N. Campbell

James N. Campbell, M.D.
ARC 1, INC.
By:  

/s/ James N. Campbell

Name:   James N. Campbell
Title:   President
JAMES N. CAMPBELL 2012 DYNASTY TRUST
By:  

/s/ Louis Friedman, /s/ Regina Anderson

Name:   Louis Friedman, Regina Anderson
Title:   Trustees
JAMES N. CAMPBELL AND REGINA ANDERSON, AS JOINT TENANTS

/s/ James N. Campbell

Name:   James N. Campbell, M.D.

/s/ Regina Anderson

Name:   Regina Anderson

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

/s/ Isaac Blech

Isaac Blech
RIVER CHARITABLE REMAINDER UNIT TRUST
By:  

Isaac Blech

Name:   Isaac Blech
Title:   Trustee

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

/s/ Kerrie L. Brady

Kerrie L. Brady

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

/s/ Randall Stevens

Randall Stevens, M.D.

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

/s/ Shawn Tomasello

Shawn Tomasello

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

KALA INTERNATIONAL INVESTMENT CO. LTD
By:  

 

Name:  
Title:  

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

SHANGHAI HEALTHCARE INDUSTRY INVESTMENT FUND NEW YORK, LLC
By:  

 

Name:  
Title:  

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

PRESIDIO PARTNERS 2007 L.P. (f/k/a CMEA VENTURES VII L.P.)
By:  

/s/ David J. Collier

its General Partner
By:  

/s/ David J. Collier

Name:   David J. Collier
Title:   Managing Director

PRESIDIO PARTNERS 2007 PARALLEL L.P.

(f/k/a CMEA VENTURES VII (PARALLEL) L.P.)

By:  

/s/ David J. Collier

its General Partner
By:  

/s/ David J. Collier

Name:   David J. Collier
Title:   Managing Director

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

ALPHA SPRING LIMITED
By:  

 

Name:  
Title:  

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

MAXIM PARTNERS LLC
By:  

 

Name:  
Title:  

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


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

 

[if partnership entity]
STOCKHOLDER:

 

By:  

 

its General Partner
By:  

 

Name:  
Title:  
[if corporate entity]
STOCKHOLDER:

 

By:  

 

Name:  
Title:  
[if individual]

 

Name:  

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


AGREED AND ACKNOWLEDGED:

CENTREXION THERAPEUTICS CORPORATION

 

By:  

/s/ Jeffrey B. Kindler

Name:   Jeffrey B. Kindler
Title:   Chief Executive Officer

 

Signature Page to Amendment No. 1 to Third Amended and Restated Stockholders Agreement


Schedule I

Common Stock

SOL J. BARER, PH.D.

[***]

ISAAC BLECH

[***]

MAXIM PARTNERS LLC

[***]

JEFFREY B KINDLER

[***]

JAMES N. CAMPBELL, M.D.

[***]

LORI INGBER

[***]

JENNIFER ZAIRI

[***]

ILYSSA MAISANO

[***]

JOSHUA BARER

[***]

COLEEN NYE

[***]

Series A Convertible Preferred Stock

ALTA CALIFORNIA PARTNERS III, L.P.

[***]

ALTA EMBARCADERO PARTNERS III, LLC

[***]

ALTA PARTNERS VIII, L.P.

[***]

ARC 1, INC.

[***]


ARTHUR MICHAELIS

[***]

BCS STATISTICAL SOLUTIONS LLC

[***]

PRESIDIO PARTNERS 2007 PARALLEL LP

[***]

PRESIDIO PARTNERS 2007 LP

[***]

CYNTHIA MCCORMICK

[***]

INTERWEST INVESTORS Q VIII, LP

[***]

INTERWEST INVESTORS VIII, LP

[***]

INTERWEST PARTNERS IX, LP

[***]

INTERWEST PARTNERS VIII, LP

[***]

JAMES N. CAMPBELL

[***]

KARIN PETERSON

[***]

KERRIE BRADY

[***]

MICHAEL ROWBOTHAM

[***]

NORTHSTAR CONSULTING LLC

[***]

VLG INVESTMENTS 2007 LLC

[***]

 

2


Series B Convertible Preferred Stock

ALPHA SPRING LIMITED

[***]

SOL J. BARER

[***]

INTERWEST PARTNERS VIII LP

[***]

INTERWEST PARTNERS IX LP

[***]

INTERWEST INVESTORS Q VIII LP

[***]

INTERWEST INVESTORS VIII LP

[***]

PRESIDIO PARTNERS 2007 LP

[***]

PRESIDIO PARTNERS 2007 PARALLEL LP

[***]

JLB FAMILY TRUST UAD 06/07/10

[***]

MENDHAM STRATEGIC GROUP LLC

[***]

MAXIM PARTNERS LLC

[***]

A R PROPERTIES GP

[***]

ADOLFO & DONNA CARMONA

DONNA CARMONA JT TEN

[***]

ADRIEN ELLUL

HEBE HAVEN YACHT CLUB

[***]

ALBERT & HIEDI GENTILE

[***]

 

3


ALYSON D SCHLOSSER

[***]

ANIL K SHARMA

[***]

ARNOLD E SPANGLER

[***]

BRIAN POTIKER REVOCABLE TRUST UAD 8/7/96

[***]

BRUCE P INGLIS & NANCY M INGLIS

[***]

BRYAN S SPILLE

[***]

C BARNES DARWIN II

[***]

CHARLES F BRINKLEY

[***]

CHARLES J COSTICH III

KARIN J COSTICH JT TEN

[***]

CLAYTON A STRUVE

[***]

DANIEL P PETRO

[***]

DAVID E SCHWARTZ

[***]

DAVID & JENNIFER FORTI

[***]

DAVID L FRYDRYCH

[***]

DAVID SCHNEIDER

[***]

DENNIS SHASHA

[***]

 

4


DOMINICK ABEL

[***]

ERNEST W MOODY TTEE

[***]

FORTEZZA INVESTMENTS LP

MICHAEL MOROCCO

[***]

GARY M FERMAN

[***]

GEORGE KALIL

[***]

GERALD A TOMSIC TRUSTEE

[***]

GILYA ALCHITS

[***]

GREGORY L STORM

[***]

HENRY HERZING REVOCABLE LIVING TRUST UAD 10/27/93

HENRY G HERZING TRUSTEE

[***]

CARLEEN TUFO

[***]

HENRY SCOVERN

LAURA PAKAROW TEN ENT

[***]

HOWARD J WORMAN

[***]

I CRAIG HENDERSON

[***]

IRWIN BLITT REVOCABLE TRUST UAD 01/28/78

IRWIN BLITT TTEE

[***]

JAMES A KLUGE

[***]

 

5


JAMES B & KAREN A GLAVIN FAMILY TRUST UAD 10/30/98

JAMES B & KAREN A GLAVIN TTEES

[***]

JAMES E LINEBERGER REVOCABLE TRUST UAD 03/29/10

JAMES E LINEBERGER TTEE

[***]

JAMES W THOMAS

[***]

JEFF KURTZ

[***]

JIM AUKSTUOLIS

[***]

JUSTIN BANNAN

[***]

JOHN HAWK

[***]

JOHN V WAGNER

[***]

JONATHAN PATRONIK

[***]

JULI-ANN CIALONE

[***]

KAZUAKI YONEMOTO

[***]

KEITH GELLES

[***]

L & CO LLC

LINEBERGER & CO., LLC

JAMES E LINEBERGER JR

[***]

LISA RUDES GRANDCHILDREN TRUST UAD 02/13/03

LISA RUDES SANDEL TTEE

[***]

 

6


MARC A COHEN

[***]

MARK RAVICH

[***]

MARK & ANALEE REUTLINGER

[***]

MARKETPLACE LOFTS LIMITED PARTNERSHIP

JEFFREY STONBERG

[***]

MICHAEL HAROLD RIEBER

[***]

MICHAEL PIERCE

[***]

MIN SUN

[***]

MONTE D ANGLIN

JANET S ANGLIN JT TEN ROS

[***]

NATHAN HALEGUA

[***]

NEIL WASSERMAN

[***]

NIGEL ALEXANDER

[***]

OSI HOLDINGS LLC

KEVIN MCCARTHY

[***]

With a copy to:

OSI HOLDINGS LLC

KEVIN MCCARTHY PRINCIPAL & DIRECTOR

[***]

OSPREY I LLC

DALE BURNS MANAGER

[***]

 

7


JOSEPH A PANELLA

[***]

PATRICK DECAVAIGNAC

NANCY J CONNOLY JT TEN

[***]

PAUL D EHRMAN

[***]

Periscope Partners L.P.

[***]

EDWARD BARTLETT TTEE

[***]

RAY ALAN BRUENING

[***]

REED MOSKOWITZ

[***]

REPUBLIC CONSTRUCTION CORP

RICHARD L ARNOS PRESIDENT

[***]

RICHARD STILLMAN

[***]

RICK D MACE

[***]

ROBERT BAHR

[***]

CHRISTINE RENEE MONKS

[***]

ROBERT GIESEN

[***]

ROBERT M NEWSOME

[***]

SHEPHERD 98, LLC

[***]

 

8


RONALD ARTINIAN

[***]

RUDES GCT INVESTMENTS PARTNERSHIP

LISA SANDEL PARTNER

[***]

RUSSELL S DRITZ

[***]

1998 CHILDRENS TRUST UAD 01/29/98

DON WIER TTEE

[***]

SHAMUS LLC

[***]

STEVEN A & KAYE L YOST TTEES

STEVEN & KAYE YOST FAMILY TRUST UAD 02/07/92

[***]

STEVEN FARBER

[***]

STEVEN K LUMINAIS

ELIZABETH K LUMINAIS

[***]

TED VANVICK

[***]

THE BAHR FAMILY LIMITED PARTNERSHIP

ROBERT L BAHR

[***]

THE DIANA & DAVID FRESHWATER LIVING TRUST UAD 01/20/94

DAVID FRESHWATER TTEE

[***]

JAMES B RAMO TTEE

[***]

THE STANFORD BARATZ REVOCABLE TRUST UAD 09/07/94

STANFORD BARATZ TTEE

[***]

 

9


THOMAS KOTYK

[***]

TIMOTHY & MONICA HANLEY

[***]

TROY TAYLOR

[***]

VICTOR F KEEN

[***]

WILLIAM F GRIECO

[***]

WILLIAM LURIE

[***]

WILLIAM M KARGMAN

[***]

WILLIAM SHEPPARD

[***]

ACNYC LLC

ANDREW CADER MANAGING MEMBER

[***]

ADAM T & LUCY S DROBOT

[***]

CARL J DOMINO

[***]

DANIEL B & BETH L ERLANGER

[***]

DAVID ABRAMSON

[***]

DAVID & YVONNE COOPER

[***]

DAVID R VICTOR REVOCABLE TRUST UAD 03/29/00

[***]

 

10


DJ&J LLC

DAVID VICTOR MANAGER

[***]

GARFINKLE REVOCABLE TRUST UAD 5/15/08

MORRIS GARFINKLE TTEE

[***]

GARRY H HIGDEM

[***]

GEORGE M ZELINSKI

[***]

GREGG P OTTO AND JEANNE G OTTO

[***]

HOWARD B BRODSKY REVOCABLE TRUST OF 1988 UAD 10/24/88

HOWARD B BRODSKY TTEE

[***]

KAREN BRAINARD

[***]

KENNETH WIDELITZ

[***]

PETER D SCHIFFRIN

[***]

STEVEN A YOST

[***]

STEVEN GLASSMAN

[***]

THOMAS HUANG

[***]

JAMES B FRYFOGLE

[***]

JAMES M DIASIO

[***]

JAMES L DRITZ

[***]

 

11


JAMES W SWISTOCK

[***]

JOEL L HOCHMAN REVOCABLE TRUST UAD 12/08/94

[***]

JORDAN FAMILY LLC

PATRICIA J JORDAN CHIEF MANAGER

[***]

JOSHUA SCHEIN 2009 TRUST UAD 12/28/09

BRANDON J & JACLYN

[***]

KEN ROSENBLUM & ANN SIMONDS

[***]

BMO HARRIS BANK NA AS DIRECTED TSTEE OF THE LAPP LIBRA 401K PLAN FBO WILLIAM LAPP

MELISSA HISEK & CARMEN SCHEWEILER TRUST OFFICERS

[***]

LARRY HOPFENSPIRGER

[***]

MARC R JALBERT

[***]

MARTIN L REICH

[***]

MATTHEW T MILAR

[***]

MICHAEL COHN

PAULA COHN

[***]

MICHAEL P ROSS

[***]

OAKWOOD CAPITAL LLC

KURT CONTI MANAGING MEMBER

[***]

PAUL EHRLICH CPA DEFINED BENEFIT PLAN

[***]

 

12


PAUL G ROBERTS

[***]

RICHARD FILIP

[***]

RICHARD L ROEHL

[***]

RICHARD R WILLISON

[***]

ROBERT E. TRUSKOWSKI

[***]

ROBERT GRINBERG

[***]

ROBERT & MARJIE KARGMAN

[***]

ROBERT STANGER

[***]

ROLLYN P DRITZ

[***]

SCOTT ALLEN EDELBACH

MICHELLE LYNNE EDELBACH

[***]

SCOTT V DOLS

VICKI N DOLS JT TEN

[***]

SIDNEY K SWANK

KATHRYN A SWANK

[***]

SIDNEY AZEEZ TRUST FOR FAMILY OF MICHAEL AZEEZ UAD 11/30/95

MICHAEL AZEEZ TTEE

[***]

STEPHEN BENDER

[***]

 

13


STEPHEN E RIFFEE REVOCABLE TRUST UAD 10/16/06

BRENDA A & STEPHEN E RIFFEE TTEES

[***]

STEPHEN M PAYNE

[***]

STEVEN ROTHSTEIN

[***]

THE OAKS FAMILY LLC

ROBERT KARGMAN MANAGER

[***]

THE OBERKFELL LIVING TRUST UAD 12/18/02

HAROLD F OBERKFELL TTEE

[***]

TODD A RATHE

[***]

WILLIAM FILON

[***]

WILLIAM HUFF

[***]

ANASTASIOS RAPTIS &HARIKLIA EFTHIMIOU

[***]

ANDREW FISHER

[***]

ANDREW L PERITO

[***]

ARNOLD T HAGLER SEPARATE PROPERTY TRUST UAD 09/17/97

ARNOLD T HAGLER TTEE

[***]

AVAVODHA INC

MARK AST PRESIDENT

[***]

BARCLAY ARMITAGE

[***]

 

14


BEN CROWN

[***]

BRUCE D & LAURA K GOETHE

[***]

CHIH-KAI CHENG

[***]

DAVE A DENT

[***]

DAVID ABRAHAM / JOANN ABRAHAM

[***]

DAVID L FRYDRYCH

[***]

DOUGLAS YOAKLEY

[***]

EDWARD V PERSHING

[***]

EVAN B AZRILANT

[***]

FENG MING INVESTMENT

[***]

FRANKLIN D BROWN

[***]

GEORGE & KARIN ALEXA ELEFTHER

[***]

ITASCA CAPITAL PARTNERS LLC

[***]

JAMES T & BARBARA J DIETZ

[***]

JERRY WILLIAM POPE

[***]

KATANICK FAMILY LIMITED PARTNERSHIP

JANET KATANICK GENERAL PARTNER

[***]

 

15


MARC A ROTTER

[***]

MARK & TATYANA GRINBAUM

[***]

MARK ROSS

[***]

MARTIN BECKER

[***]

MITCHELL L MUTTER

[***]

RICHARD D COHEN

[***]

RICHARD I BOWLING JR

[***]

SHAMUS LLC

[***]

STANLEY M MARKS

[***]

STEPHEN S GLADSTONE

[***]

STEVEN J VALKO

[***]

DAVID R OLSON - STRATEGY ADVISORS PSP

[***]

THE AMERIAN FAMILY TRUST UAD 7/26/99

MARY LEE AMERIAN TTEE

[***]

THE JOSHUA AND JULIE OFMAN TRUST UAD

[***]

DAVID BENADERET

[***]

WILLIAM H HARMS

[***]

 

16


BES INVESTMENTS LLC

[***]

DRAGON INVESTMENT PARTNERS LTD

JAY PENSKE GENERAL PARTNER

[***]

EDWARD M COHEN / LORI COHEN

[***]

EZ COLONY PARTNERS, A DELAWARE LIMITED LIABILITY COMPANY

[***]

G & D CONNIFF LLC

GEORGE CONNIFF MANAGING MEMBER

[***]

HOLGER LIEPMANN

[***]

MARSHALL S EZRALOW ROTH IRA

[***]

LEONARD H & RITA ADELSON

[***]

PETER A MORGAN

[***]

RICHARD F BRAUN

[***]

RRR & J INVESTMENTS, LLC

[***]

POZEN FAMILY 2016 TRUST (ROBERT AND ELIZABETH POZEN)

[***]

STEVEN H ORAM REVOCABLE TRUST UAD 05/17/06

STEVEN H & TERRI ORAM TTEES

[***]

TERRENCE E TROY

[***]

THE CARNAHAN TRUST

KEVIN & LAURIE CARNAHAN TTEES

[***]

 

17


THOMAS M ROGSTAD

[***]

TOM BENDER

[***]

UNITED ACQUISITION CORP

[***]

WALTER G GANS

[***]

Series C Convertible Preferred Stock

ACB HOLDINGS

ADAM BLUM

[***]

APTORUM GROUP LIMITED

(F/K/A STRIKER ASIA OPPORTUNITIES FUND CORP.)

[***]

AR PROPERTIES

[***]

BES INVESTMENTS LLC

JEFFREY ENSLIN, MANAGER

[***]

BLAIROMA LLC

[***]

DAVID PYOTT LIVING TRUST

[***]

DAVID SCHWARTZ

[***]

DENICE HILL

[***]

DJ&J LLC

[***]

DONALD FISHBEIN

[***]

 

18


DYKE ROGERS

[***]

EZ MM&B HOLDINGS LLC

BRYAN EZRALOW

[***]

F3F SPA

[***]

GARFINKLE REVOCABLE TRUST UAD 5/15/08, MORRIS GARFINKLE & STEPHANIE GARFINKLE TTEES

[***]

GARY FERMAN

[***]

GH HEALTHLINK CAPITAL

[***]

HENRY MORRIS ZACHS

[***]

INSYS THERAPEUTICS, INC.

[***]

INTERWEST PARTNERS IX, LP

[***]

IRREVOCABLE ALOHA TRUST

MARIANNE SCHMITT HELLAUER TRUSTEE

[***]

IRWIN BLITT REVOCABLE TRUST

[***]

JAMES AND ARLENE PAYNE

[***]

JAMES CAMPBELL REGINA ANDERSON

[***]

JEFFREY B. KINDLER

[***]

 

19


JIM AUKSTUOLIS

[***]

JONATHAN PERELMAN

[***]

KF BUSINESS VENTURES

[***]

LAWRENCE D STERN ANNUITY TRUST

[***]

LAWRENCE M BLATT TRUST

[***]

LISA RUDES GRANDCHILDREN TRUST

[***]

MAHYAR EIDGAH

[***]

MAI 2 LLC

[***]

MARC COHEN

[***]

MARK RUBIN

[***]

MARKETPLACE LOFTS LP

[***]

MATTHEW ORLANDO

[***]

MICHAEL T. DAN

[***]

DENISE HILL

[***]

PETER FRIEDLAND

[***]

 

20


POZEN FAMILY 2016 TRUST (ROBERT AND ELIZABETH POZEN)

[***]

RICK MACE

[***]

RIVER CHARITABLE REMAINDER TRUST

[***]

RM KARGMAN LIFE INSURANCE TRUST

EDWARD BARTLETT

[***]

ROBERT AND MARJIE KARGMAN

[***]

ROBERT GREEN TRUST

[***]

ROBERT K. GREEN TOD

[***]

ROBERT GRINBERG

[***]

ROBERT JAMES BRICKLEY

[***]

ROGER LASH REVOCABLE LIVING TRUST

[***]

RUDES GCT INVESTMENT PTN.

[***]

SHANGHAI HEALTHCARE INDUSTRY

INVESTMENT FUND NEW YORK, LLC

[***]

SOL BARER

[***]

STEPHEN MERINGOFF

[***]

STEVEN GLASSMAN

[***]

 

21


THE DIANA & DAVID FRESHWATER LIVING TRUST UAD 01/20/94

DAVID FRESHWATER TTEE

[***]

THE JONATHAN G. DAVIS TRUST U/A/D

[***]

THE NOTAS FAMILY TRUST UAD 8/13/97

[***]

THOMAS KEMPNER

[***]

TRANSPAC INVESTMENTS LIMITED

[***]

U/W CARL M. LOEB 01/03/55 TRUST FBO

[***]

WILLIAM KARGMAN REVOCABLE TRUST

[***]

WILLIAM STRAWBRIDGE

[***]

SIDNEY AZEEZ TRUST FOR THE FAMILY OF MICHAEL AZEEZ UAD 11/30/95 MICHAEL AZEEZ TTE

[***]

ROBERT FROME

[***]

JDA PARTNERS LP

[***]

KALA IINTERNATIONAL INVESTMENT CO LTD

[***]

GARY KATZMAN

[***]

ROCKLEDGE ASSOCIATES LLC

RICHARD A. BERNSTEIN

[***]

DAVID E. SCHWARTZ

[***]

 

22


ZHAOXIA YANG

[***]

HARRY KARGMAN

[***]

JOHN WAGNER

[***]

Series D Convertible Preferred Stock

NEW ENTERPRISE ASSOCIATES 16, L.P.

[***]

NEA VENTURES 2017, LIMITED PARTNERSHIP

[***]

QUAN VENTURE FUND I, L.P.

[***]

MERIDIAN SMALL CAP GROWTH FUND

[***]

THB IRON ROSE, LLC LIFE SCIENCE PORTFOLIO

[***]

TONY YAO

[***]

ARROWMARK FUNDAMENTAL OPPORTUNITY FUND, LP

[***]

ARROWMARK LIFE SCIENCE FUND, LP

[***]

LOOKFAR INVESTMENTS, LLC

[***]

CF ASCENT LLC

[***]

THB IRON ROSE LLC

[***]

 

23


CLOUGH HEALTHCARE MASTER FUND, L.P.

[***]

CLOUGH GLOBAL EQUITY FUND

[***]

CLOUGH GLOBAL OPPORTUNITIES FUND

[***]

INTERWEST PARTNERS IX, LP

[***]

EFUNG RUIBO LIMITED

[***]

LEERINK HOLDINGS LLC

[***]

LEERINK SWANN CO-INVESTMENT FUND, LLC

[***]

GRAHAM BURTON

[***]

E.L. II PROPERTIES TRUST DATED JULY 1, 1983 AS AMENDED

[***]

DYKE ROGERS

[***]

MARGIE B. KARGMAN AND ROBERT M. KARGMAN

[***]

POZEN FAMILY 2016 TRUST

DAVID POZEN AND JOANNA POZEN, TRUSTEES

[***]

KALA INTERNATIONAL INVESTMENT CO. LTD

[***]

TRUST LAWRENCE D. STERN 2010 QUALIFIED ANNUITY TRUST

[***]

HG PHANSTIEL LP

[***]

 

24


JAMES N. CAMPBELL 2012 DYNASTY TRUST, REGINA H. ANDERSON & LOUIS F. FRIEDMAN, TRUSTEES

[***]

JEFFREY B. KINDLER

[***]

DR. RANDALL M. STEVENS

[***]

SOL J. BARER

[***]

BARER & SON CAPITAL, LLC

[***]

AAR ASSOCIATES, L.P.

[***]

BOOKNET LLC

[***]

BRADLEY RESOURCES CO LLC

[***]

BRANDON JONES

[***]

CHARLES J. MAGOLSKE

[***]

EDGAR D. JANNOTTA, JR. EXEMPT FAMILY TRUST

[***]

FAITH FAMILY HOLDINGS, LP

[***]

FRANKLIN M. BERGER

[***]

JAMES MOONIER

[***]

JEFF ROBERTS

[***]

 

25


KLAUS KRETSCHMER

[***]

LAGOM LLC

[***]

MARK COLEMAN

[***]

MICHAEL J. GAHAN

[***]

MICHAEL MULLINS

[***]

MONTAUK, LLC

[***]

NEAL POLAN

[***]

NORTHLEA PARTNERS

[***]

PHILIP T. RUEGGER

[***]

RALPH FINERMAN

[***]

RICHARD A. SMITH

[***]

ROBERT C. JAMO

[***]

ROBERT MASTERS

[***]

SEYMOUR H. BLOCK DEFINED BENEFIT PLAN

[***]

STARLIGHT INVESTMENT HOLDINGS LIMITED

[***] 

 

26


STEPHEN D’ANTONIO

[***]

STEPHEN R. MUT

[***]

STEVEN J. WICE

[***]

TIMOTHY HOGUE

[***]

TREVOR FETTER

[***]

TRUST FOR DESCENDANTS OF CHARLES & ELIZABETH KONTULIS UAD 1/27/10

[***]

CYNTHIA FINERMAN LIVING TRUST

[***]

JEFFREY E. GOLDMAN

[***]

REHOBOTH HUNDRED LLC

[***]

STEPHEN R. QUAZZO TRUST DATED 11/9/95

[***]

ARNOLD URSANER

[***]

SHAWN TOMASELLO

[***]

6 DIMENSIONS CAPITAL, L.P.

[***]

6 DIMENSIONS AFFILIATES FUND, L.P.

[***]

 

27


EX-4.2

Exhibit 4.2

 

     

LOGO

Exhibit 4.2 COMMON STOCK SHARES SPECIMEN CUSIP 15643W 10 0 SEE REVERSE FOR CERTAIN DEFINITIONS INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THIS CERTIFIES THAT IS THE RECORD HOLDER OF FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $0.001 PAR VALUE, OF CENTREXION THERAPEUTICS CORPORATION transferable only on the books of the Corporation in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar. WITNESS the facsimile signatures of the Corporation’s duly authorized officers. Dated: EXECUTIVE VICE PRESIDENT, CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL EXECUTIVE OFFICER VICE PRESIDENT, AND TREASURER COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER TRUST& COMPANY, LLC (Brooklyn, NY) BY TRANSFER AGENT AND REGISTRAR AUTHORIZED SIGNATURE CNTX


LOGO

THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THE SAME HAVE BEEN DETERMINED, AND OF THE AUTHORITY, IF ANY, OF THE BOARD TO DIVIDE THE SHARES INTO CLASSES OR SERIES AND TO DETERMINE AND CHANGE THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ANY CLASS OR SERIES. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT NAMED ON THIS CERTIFICATE. according The to following applicable abbreviations, laws or regulations: when used in the inscription on the face of this certificate, shall be construed as though they were written out in full TEN COM – as tenants in common TEN ENT – as tenants by the entireties JT TEN – as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT– Custodian (Cust) (Minor) under Uniform Gifts to Minors Act (State) Additional abbreviations may also be used though not in the above list. For Value Received, hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) shares of the Common Stock represented by this Certificate, and does hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated By: NOTICE: THE THE CERTIFICATE SIGNATURE TO IN EVERY THIS ASSIGNMENT PARTICULAR, MUST WITHOUT CORRESPOND ALTERATION WITH OR THE ENLARGEMENT NAME AS WRITTEN OR ANYCHANGE UPON THE WHATEVER. FACE OF SIGNATURE(S) GUARANTEED: By: STOCKBROKERS, THE SIGNATURE(S) SAVINGS SHOULD AND BE LOAN GUARANTEED ASSOCIATIONS BY AN AND ELIGIBLE CREDIT GUARANTOR UNIONS WITH INSTITUTION MEMBERSHIP (BANKS, IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.


EX-4.3.1

Exhibit 4.3.1

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

WARRANT TO PURCHASE STOCK

Company: Centrexion Corporation, a Delaware corporation

Number of Shares: 76,107, subject to adjustment

Type/Series of Stock: Common Stock, $0,001 par value per share

Warrant Price: $0,484 per Share, subject to adjustment

Issue Date: April 22, 2015

Expiration Date: April 21, 2022         See also Section 5.1(b).

Credit Facility: This Warrant to Purchase Stock (“Warrant”) is issued in connection with that certain Loan and Security Agreement of even date herewith among Silicon Valley Bank, the Company, Centrexion I, Inc. and Centrexion II, LLC (as amended and/or modified and in effect from time to time, the “Loan Agreement”).

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

SECTION 1. EXERCISE.

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

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

X = Y(A-B)/A


where:

  X

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

 

  Y

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

 

  A

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

 

  B

= the Warrant Price.

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

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

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

1.6 Treatment of Warrant Upon Acquisition of Company.

(a) Acquisition. For the purpose of this Warrant, Acquisition means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.

 

2


(b) Treatment of Warrant at Acquisition. In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a Cash/Public Acquisition”), and the fair market value of one Share as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date immediately prior to such Cash/Public Acquisition, and Holder has not exercised this Warrant pursuant to Section 1.1 above as to all Shares, then this Warrant shall automatically be deemed to be Cashless Exercised pursuant to Section 1.2 above as to all Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition. In connection with such Cashless Exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as of the date thereof and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one Share as determined in accordance with Section 1.3 above would be less than the Warrant Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.

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

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

SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.

2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in additional shares of the Class or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

3


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

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

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

SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

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

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of a share of the Class as determined by the most recently completed valuation, approved by the Company’s Board of Directors, of the Company’s stock for purposes of its compliance with Section 409A of the Internal Revenue Code of 1986, as amended.

(b) The number of Shares for which this Warrant is exercisable on and as of the Issue Date hereof represents not less than 0.1750% of the Company’s total issued and outstanding shares of common stock, calculated on a fully-diluted basis assuming (i) the conversion into common stock of all outstanding securities and instruments (including, without limitation, securities deemed to be outstanding pursuant to clause (ii) of this Section 3.1(b)) convertible by their terms into shares of common stock (regardless of whether such securities or instruments are by their terms now so convertible), and (ii) the exercise in full of all outstanding options, warrants (including, without limitation, this Warrant) and other rights to purchase or acquire shares of common stock or securities exercisable for or convertible into shares of common stock (regardless of whether such options, warrants or other rights to purchase or acquire are by their terms now exercisable).

 

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

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

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

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

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

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

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

(e) effect its initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under the Act (the “IPO”);

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

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

(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event and such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such event giving rise to the notice); and

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

 

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The Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

SECTION 4. REPRESENTATIONS, WARRANTIES, OF THE HOLDER.

The Holder represents and warrants to the Company as follows:

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

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

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

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

4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.

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

 

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SECTION 5. MISCELLANEOUS.

5.1 Term; Automatic Cashless Exercise Upon Expiration.

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

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

5.2 Legends. Each certificate evidencing Shares shall be imprinted with a legend in substantially the following form:

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED APRIL 22, 2015, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

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

5.4 Transfer Procedure. After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group. By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations and warranties set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof. Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issued upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant and/or Shares being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall

 

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agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.

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

SVB Financial Group

Attn: Treasury Department

3003 Tasman Drive, HC 215

Santa Clara, CA 95054

Telephone: (408) 654-7400

Facsimile: (408) 988-8317

Email address: derivatives@svb.com

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

Centrexion Corporation

Attn: Chief Financial Officer

509 S. Exeter Street

Suite 202

Baltimore, MD 21202

Telephone:

Facsimile:

Email:

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

Proskauer Rose LLP

Attn: Arnie Jacobs, Partner

11 Times Square

New York, NY 10036

Telephone: 212-969-3210

Facsimile: 212-969-2900

Email: ajacobs@proskauer.com

 

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

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

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

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

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

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

[Remainder of page left blank intentionally]

[Signature page follows]

 

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

 

“COMPANY”
CENTREXION CORPORATION
By:  

/s/ Jeffrey B. Kindler

Name:   Jeffrey B. Kindler
 

 

(Print)

Title:   Chief Executive Officer

 

“HOLDER”
SILICON VALLEY BANK
By:  

/s/ Anthony Raley

Name:   Anthony Raley
 

 

(Print)

Title:   VP

 

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APPENDIX 1

NOTICE OF EXERCISE

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

 

           [    ]    check in the amount of $            payable to order of the Company enclosed
     herewith
  [    ]    Wire transfer of immediately available funds to the Company’s account
  [    ]    Cashless Exercise pursuant to Section 1.2 of the Warrant
  [    ]    Other [Describe]                                                                                                  

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

 

 

Holder’s Name

 

 

 

 

(Address)

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

 

HOLDER:

 

By:

 

 

Name:

 

 

Title:

 

 

(Date):

 

 

 

Appendix 1


EX-4.3.2

Exhibit 4.3.2

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

WARRANT TO PURCHASE STOCK

Company: Centrexion Corporation, a Delaware corporation

Number of Shares: 76,107, subject to adjustment

Type/Series of Stock: Common Stock, $0,001 par value per share

Warrant Price: $0,484 per Share, subject to adjustment

Issue Date: April 22, 2015

Expiration Date: April 21, 2022         See also Section 5.1(b).

Credit Facility: This Warrant to Purchase Stock (“Warrant”) is issued in connection with that certain Loan and Security Agreement of even date herewith among Silicon Valley Bank, the Company, Centrexion I, Inc. and Centrexion II, LLC (as amended and/or modified and in effect from time to time, the “Loan Agreement”) and the participation therein of Life Science Loans, LLC pursuant to an agreement between Silicon Valley Bank and Life Science Loans, LLC.

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, LIFE SCIENCE LOANS, LLC (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares (the “Shares”) of the above-stated Type/Series of Stock (the “Class”) of the above-named company (the “Company”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

SECTION 1. EXERCISE.

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

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

X = Y(A-B)/A


where:

                X    =    the number of Shares to be issued to the Holder;
   Y    =    the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);
   A    =    the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and
   B    =    the Warrant Price.

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

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

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

1.6 Treatment of Warrant Upon Acquisition of Company.

(a) Acquisition. For the purpose of this Warrant, Acquisition means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.

 

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(b) Treatment of Warrant at Acquisition. In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a Cash/Public Acquisition”), and the fair market value of one Share as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date immediately prior to such Cash/Public Acquisition, and Holder has not exercised this Warrant pursuant to Section 1.1 above as to all Shares, then this Warrant shall automatically be deemed to be Cashless Exercised pursuant to Section 1.2 above as to all Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition. In connection with such Cashless Exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as of the date thereof and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one Share as determined in accordance with Section 1.3 above would be less than the Warrant Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.

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

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

SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.

2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in additional shares of the Class or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

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

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

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

SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

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

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of a share of the Class as determined by the most recently completed valuation, approved by the Company’s Board of Directors, of the Company’s stock for purposes of its compliance with Section 409A of the Internal Revenue Code of 1986, as amended.

(b) The number of Shares for which this Warrant is exercisable on and as of the Issue Date hereof represents not less than 0.1750% of the Company’s total issued and outstanding shares of common stock, calculated on a fully-diluted basis assuming (i) the conversion into common stock of all outstanding securities and instruments (including, without limitation, securities deemed to be outstanding pursuant to clause (ii) of this Section 3.1(b)) convertible by their terms into shares of common stock (regardless of whether such securities or instruments are by their terms now so convertible), and (ii) the exercise in full of all outstanding options, warrants (including, without limitation, this Warrant) and other rights to purchase or acquire shares of common stock or securities exercisable for or convertible into shares of common stock (regardless of whether such options, warrants or other rights to purchase or acquire are by their terms now exercisable).

 

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

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

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

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

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

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

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

(e) effect its initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under the Act (the “IPO”);

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

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

(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event and such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such event giving rise to the notice); and

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

The Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

 

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SECTION 4. REPRESENTATIONS. WARRANTIES OF THE HOLDER.

The Holder represents and warrants to the Company as follows:

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

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

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

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

4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.

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

 

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SECTION 5. MISCELLANEOUS.

5.1 Term; Automatic Cashless Exercise Upon Expiration.

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

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

5.2 Legends. Each certificate evidencing Shares shall be imprinted with a legend in substantially the following form:

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO LIFE SCIENCE LOANS, LLC DATED APRIL 22, 2015, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

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

5.4 Transfer Procedure. Subject to the provisions of Section 5.3 and upon providing the Company with written notice, Holder may transfer all or part of this Warrant or the Shares issued upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant and/or Shares being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.

 

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

Life Science Loans, LLC

c/o Chief Financial Officer

3720 Carillon Point

Kirkland, Washington 98033-7455

Attention: Trent Dawson

Telephone: (425) 952-3951

Email: tdawson@westrivermgmt.com

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

Perkins Coie LLP

1201 Third Avenue, Suite 4800

Seattle, Washington 98101-3099

Attention: David C. Clarke

Telephone: (206) 359-8612

Email: dclarke@perkinscoie.com

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

Centrexion Corporation

Attn: Chief Financial Officer

509 S. Exeter Street

Suite 202

Baltimore, MD 21202

Telephone:

Facsimile:

Email:

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

Proskauer Rose LLP

Attn: Arnie Jacobs, Partner

11 Times Square

New York, NY 10036

Telephone: 212-969-3210

Facsimile: 212-969-2900

Email: ajacobs@proskauer.com

 

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

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

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

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

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

5.11 Business Days. “Business Day” is any day that is not a Saturday, Sunday or a day on which Life Science Loans, LLC is closed.

[Remainder of page left blank intentionally]

[Signature page follows]

 

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

 

“COMPANY”
CENTREXION CORPORATION
By:  

/s/ Jeffrey B. Kindler

Name: Jeffrey B. Kindler

      (print)
Title: Chief Excective Officer

 

“HOLDER”
LIFE SCIENCE LOANS, LLC
By:  

Loan Manager, LLC, its

Managing Member

By:  

/s/ Trent Dawson

  Trent Dawson, Chief Financial Officer

 

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APPENDIX 1

NOTICE OF EXERCISE

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

 

[    ]    check in the amount of $                payable to order of the Company enclosed herewith
[    ]    Wire transfer of immediately available funds to the Company’s account
[    ]    Cashless Exercise pursuant to Section 1.2 of the Warrant
[    ]    Other [Describe]                                                     

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

below:

 

  

 

                             Holder’s Name

  

 

  

 

                               (Address)

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

 

HOLDER:

 

By:  

 

Name:  

 

Title:  

 

(Date):  

 

 

Appendix 1


EX-4.3.3

Exhibit 4.3.3

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OE 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OE ANY STATE AND, EXCEPT AS SET EORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OEEERED, SOLD, PLEDGED OR OTHERWISE TRANSEERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

WARRANT TO PURCHASE STOCK

Company: Centrexion Therapeutics Corporation, a Delaware corporation

Number of Shares: 367,316 subject to adjustment

Type/Series of Stock: Common Stock, $0,001 par value per share

Warrant Price: $1.29 per Share, subject to adjustment

Issue Date: June 27, 2018

Expiration Date: June 26, 2028         See also Section 5.1(b).

Credit

Facility: This Warrant to Purchase Stock (Warrant) is issued in connection with that certain Second Amendment, of even date herewith, to that certain Loan and Security Agreement dated April 22, 2015, among Silicon Valley Bank, the Company, Centrexion I, Inc. and Centrexion II, LLC, as amended (collectively, and as may be further amended and/or modified and in effect from time to time, the Loan Agreement).

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

SECTION 1. EXERCISE.

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

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

X = Y(A-B)/A


where:

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

Y = the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the

Company in payment of the aggregate Warrant Price);

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

B = the Warrant Price.

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

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

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

1.6 Treatment of Warrant Upon Acquisition of Company.

(a) Acquisition. For the purpose of this Warrant, Acquisition means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.

 

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(b) Treatment of Warrant at Acquisition. In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a Cash/Public Acquisition), and the fair market value of one Share as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date immediately prior to such Cash/Public Acquisition, and Holder has not exercised this Warrant pursuant to Section 1.1 above as to all Shares, then this Warrant shall automatically be deemed to be Cashless Exercised pursuant to Section 1.2 above as to all Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition. In connection with such Cashless Exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as of the date thereof and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one Share as determined in accordance with Section 1.3 above would be less than the Warrant Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.

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

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

SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.

2.1 Stock Dividends. Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in additional shares of the Class or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired. Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

3


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

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

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

SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

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

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of a share of the Class as determined by the most recently completed valuation, approved by the Company’s Board of Directors, of the Company’s stock for purposes of its compliance with Section 409A of the Internal Revenue Code of 1986, as amended.

(b) The number of Shares for which this Warrant is exercisable on and as of the Issue Date hereof represents not less than 0.30% of the Company’s total issued and outstanding shares of common stock, calculated on a fully-diluted basis assuming (i) the conversion into common stock of all outstanding securities and instruments (including, without limitation, securities deemed to be outstanding pursuant to clause (ii) of this Section 3.1(b)) convertible by their terms into shares of common stock (regardless of whether such securities or instruments are by their terms now so convertible), and (ii) the exercise in full of all outstanding options, warrants (including, without limitation, this Warrant) and other rights to purchase or acquire shares of common stock or securities exercisable for or convertible into shares of common stock (regardless of whether such options, warrants or other rights to purchase or acquire are by their terms now exercisable).

 

4


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

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

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

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

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

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

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

(e) effect its initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under the Act (the “IPO”);

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

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

(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event and such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such event giving rise to the notice); and

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

The Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

 

5


SECTION 4. REPRESENTATIONS. WARRANTIES OF THE HOLDER.

The Holder represents and warrants to the Company as follows:

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

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

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

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

4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.

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

 

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SECTION 5. MISCELLANEOUS.

5.1 Term; Automatic Cashless Exercise Upon Expiration.

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

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

5.2 Legends. Each certificate evidencing Shares shall be imprinted with a legend in substantially the following form:

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED JUNE 27, 2018, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

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

5.4 Transfer Procedure. After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group. By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations and warranties set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof. Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issued upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant and/or Shares being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall

 

7


agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.

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

SVB Financial Group

Attn: Treasury Department

3003 Tasman Drive, HC 215

Santa Clara, CA 95054

Telephone: (408) 654-7400

Facsimile: (408) 988-8317

Email address: derivatives@svb.com

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

Centrexion Therapeutics Corporation

Attn: Chief Financial Officer

200 State Street, 6* Floor

Boston, MA 02109

Telephone: (617) 837-6911

Email: gbeloff@centrexion.com

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

Proskauer Rose LLP

Attn: Arnie Jacobs, Partner

11 Times Square

New York, NY 10036

Telephone: 212-969-3210

Facsimile: 212-969-2900

Email: ajacobs@proskauer.com

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

 

8


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

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

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

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

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

[Remainder of page left blank intentionally]

[Signature page follows]

 

9


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

“COMPANY”

CENTREXION THERAPEUTICS CORPORATION

 

By:  

/s/ Gregg Beloff

Name:   Gregg Beloff
 

 

(Print)

Title:   Chief Financial Officer
“HOLDER”
SILICON VALLEY BANK
By:  

/s/ Lauren GG

Name:   Lauren GG
 

 

(Print)

Title:   Vice President

 

10


APPENDIX 1

NOTICE OF EXERCISE

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

 

[    ]            check in the amount of $              payable to order of the Company enclosed herewith
[    ]       Wire transfer of immediately available funds to the Company’s account
[    ]       Cashless Exercise pursuant to Section 1.2 of the Warrant
[    ]       Other [Describe]                                     

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

 

 

            Holder’s Name

 

 

            (Address)

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

 

HOLDER:

 

By:

 

                  

Name:

 

                  

Title:

 

                  

(Date):

 

                  

 

Appendix 1


EX-4.4.1

Exhibit 4.4.1

Schedule of Holders of

Warrants to Purchase Common Stock

 

Holder

   Number of
Shares
     Exercise
Price
     Expiration
Date
 

Scott Katzmann

     5,326      $ 11.25        12/19/2022  

Harris Lydon

     5,326      $ 11.25        12/19/2022  

William B. Buchanan, Jr.

     5,326      $ 11.25        12/19/2022  

Graham Powis

     841      $ 11.25        12/19/2022  

Andrew Daniels

     161      $ 11.25        12/19/2022  

Michael Fontaine

     161      $ 11.25        12/19/2022  

John J. Slaughter

     321      $ 11.25        12/19/2022  

Dexter Pearson

     961      $ 11.25        12/19/2022  

Andrew Miles

     161      $ 11.25        12/19/2022  

Joseph Ruggiero

     321      $ 11.25        12/19/2022  


THE WARRANT REPRESENTED HEREBY AND THE COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK NOR ANY INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH SECURITIES ACT AND SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER. THE COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF DECEMBER 18, 2017, AS MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT.

Date of Issuance of Original Warrant: December 19, 2017

Date of Issuance of the Prior Warrant: February 13, 2018

Date of Issuance of this Warrant: November 5, 2018

AMENDED AND RESTATED COMMON STOCK WARRANT

CENTREXION THERAPEUTICS CORPORATION

This warrant (this “Warrant”) amends and restates that certain Common Stock Warrant, dated February 13, 2018 (the “Prior Warrant”), issued by the Company to the Holder (each as defined below) in accordance with Section 8 of the Prior Warrant. The Prior Warrant was issued in respect of a transfer of a warrant of like tenor that was originally issued to Brookline Capital Markets on December 19, 2017 (the “Original Warrant”). The Original Warrant was issued pursuant to that certain Placement Agency Agreement, dated March 17, 2017, by and between Brookline Capital Markets and the Company. This Warrant replaces the Prior Warrant, the Original Warrant and any other warrant provided to the Holder in respect of the Original Warrant, and neither the Original Warrant nor the Prior Warrant nor any such other warrant shall have any further force or effect.

THIS IS TO CERTIFY THAT for value received,                      (the “Holder”) is entitled, subject to the terms and conditions set forth below, to purchase from Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”),                  (                ) shares (the “Warrant Shares”) of common stock, par value $0.001 per share, of the Company (“Common Stock”), at a price per share equal to $11.25 (the “Exercise Price”). For the avoidance of doubt, the reverse stock split of the Common Stock effected on November 2, 2018 has been reflected in the number of Warrant Shares and the Exercise Price contained in this Warrant.

1. Manner of Exercise; Expiration Date.

(a) This Warrant shall be exercisable in accordance with this Section 1 and Section 2 below from and after the date hereof until 5:00 p.m., New York time on December 19, 2022 (the “Exercise Period”). The Holder may from time to time during the Exercise Period on any business day exercise this Warrant, for all or any part of the Warrant Shares purchasable at such time hereunder, by delivering to the Company at its principal office (i) a written notice of the Holder’s election to exercise this Warrant (an “Exercise Notice”), which Exercise Notice shall be irrevocable and shall specify the number of Warrant Shares to be purchased, (ii) payment of the aggregate Exercise Price for the applicable number of Warrant Shares to be purchased by check or wire transfer of immediately available funds to an account then specified by the Company and (iii) this Warrant (the date on which the foregoing items are delivered to the Company being hereinafter referred to as the “Exercise Date”). Such Exercise Notice shall be in the form of Annex A hereto, duly executed by the Holder or its duly authorized agent.

 

2


(b) Upon receipt of the items specified in Section 1(a), the Company shall execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full Warrant Shares issuable upon such exercise. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date.

(c) If this Warrant is exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued, deliver to the Holder a new warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant. Such new warrant shall in all other respects be identical to this Warrant.

(d) The Company shall pay any and all issue and other taxes (other than income taxes) that may be payable in respect of the issuance of this Warrant or any issuance or delivery of Warrant Shares on exercise of this Warrant; provided, however, that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder of record of this Warrant in connection with any such exercise.

(e) The Company shall at all times reserve and keep available out of its authorized but unissued shares of capital stock, solely for the purpose of effecting the exercise of this Warrant, such number of its shares of capital stock as shall from time to time be sufficient to effect such exercise of this Warrant for the maximum number of shares of such class or series of capital stock issuable upon exercise of this Warrant; and if at any time the number of authorized but unissued shares of such capital stock shall not be sufficient to effect such exercise of this Warrant for the maximum number of shares of such capital stock then issuable upon exercise hereunder, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of such capital stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Company’s Certificate of Incorporation (as amended from time to time). The Company will not at any time close its stock transfer books in a manner which prevents the timely exercise of this Warrant.

(f) If the Holder has not exercised this Warrant prior to the closing of a Corporate Transaction (as defined below) or in connection with a Corporate Transaction as provided in Section 12, this Warrant shall automatically be deemed to be exercised in full in the manner set forth in Section 2, without any further action on behalf of the Holder, immediately prior to the closing of a Corporate Transaction. In such case, if the fair market value of one share of Common Stock is equal to or less than the Exercise Price (at the date of calculation as set forth in Section 2), this Warrant will be deemed to be terminated without any further payment. “Corporate Transaction” shall mean (A) the closing of the sale, transfer or other disposition of all or substantially all of the Company’s assets, (B) the consummation of the merger or consolidation of the Company with or into another entity (except a merger or consolidation in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 50% of the voting power of the capital stock of the Company or the surviving or acquiring entity), (C) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of the Company’s securities), of the Company’s securities if, after such closing, such person or group of affiliated persons would hold 50% or more of the outstanding voting stock of the Company (or the surviving or acquiring entity), (D) an Initial Public Offering (as defined below) of the Company or (E) a liquidation, dissolution or winding up of the Company; provided, however, that a transaction shall not constitute a Corporate Transaction if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately prior to such transaction. Notwithstanding the prior sentence, the sale of shares of the Company’s preferred stock in a bona fide financing transaction shall not be deemed a “Corporate Transaction.

 

3


2. Net Exercise Issue. Notwithstanding any provision herein to the contrary, if the fair market value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Exercise Notice in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

X = Y (A-B)

A

 

   Where    X = the number of Warrant Shares to be issued to the Holder
      Y = the number of Warrant Shares with respect to which this Warrant is being exercised
      A = the fair market value of one share of Common Stock (at the date of such calculation)
      B = Exercise Price (as adjusted to the date of such calculation)

For purposes of the above calculation, the fair market value of one share of Common Stock shall be equal to $1.80, or, if the Company has consummated any other financing in which the Company issues capital stock of the Company in exchange for cash, the price per share of such capital stock (on an as-converted basis to Common Stock) sold in the latest financing. Notwithstanding anything herein to the contrary, if this Warrant is being exercised pursuant to Section 1(f) above in the manner set forth in this Section 2 in connection with a Corporate Transaction that is a bona fide firm commitment underwritten public offering pursuant to a registration statement on Form S-1 (or a successor form) under the Securities Act (an “Initial Public Offering”), then the fair market value of one share of Common Stock shall be equal to the public offering price per share of Common Stock in such Initial Public Offering.

3. Adjustment of Exercise Price and Number of Conversion Shares.

(a) Adjustments for Stock Dividends, Splits, etc. If the Company declares or pays a dividend on the outstanding shares of the Common Stock or other securities, then upon exercise of this Warrant, for each Warrant Share acquired, the Holder shall receive, without cost to the Holder, the total number and kind of securities to which the Holder would have been entitled had the Holder owned the Warrant Shares of record as of the date the dividend occurred. If the Company subdivides the outstanding shares of Common Stock by reclassification or otherwise into a greater number of shares, the number of Warrant Shares purchasable hereunder shall be proportionately increased and the Exercise Price shall be proportionately decreased. If the outstanding shares of Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Exercise Price shall be proportionately increased and the number of Warrant Shares shall be proportionately decreased.

(b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, change in the capital stock of the Company, or consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property, then, as a condition of such reclassification, reorganization, change or consolidation

 

4


or merger, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities or property receivable in connection with such reclassification, reorganization, change or consolidation or merger by a holder of the same number and type of securities as were purchasable as Warrant Shares by the Holder immediately prior to such reclassification, reorganization, change or consolidation or merger. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities or property deliverable upon exercise hereof, and appropriate adjustments shall be made to the Exercise Price per Warrant Share payable hereunder, provided the aggregate Exercise Price shall remain the same.

4. Fractional Shares. No fractional Warrant Shares shall be issuable upon exercise or conversion of the Warrant and the number of Warrant Shares to be issued shall be rounded down to the nearest whole Warrant Share.

5. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

6. Negotiability, etc. This Warrant is issued upon the following terms, all of which the Holder hereof by the taking hereof consents and agrees:

(a) The Holder shall not be entitled to pledge, mortgage, transfer, endorse or otherwise convey this Warrant (a “Transfer”), in whole or in part, without with the prior written consent of the Company, other than to Affiliates (as defined below). To the extent permitted by the preceding sentence, the Holder and its direct and indirect transferees may Transfer all or any portion of this Warrant by surrendering this Warrant to the Company together with a completed assignment in the form attached hereto as Annex B. Upon such surrender, the Company shall deliver a new Warrant or Warrants to the person or persons entitled thereto and, if applicable, shall deliver to the Holder a new Warrant evidencing the right of the Holder to purchase the balance of the Warrant Shares subject to purchase hereunder. The term “Holder” as used herein shall include any transferee to whom this Warrant has been Transferred in accordance with this Section 6. The term “Affiliate” as used herein means, with respect to any Holder, any other person or entity who, directly or indirectly, controls, is controlled by, or is under common control with such Holder, including without limitation any general partner, managing member, limited partner, officer or director of such Holder or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Holder.

(b) The Holder shall not be entitled to vote or to receive dividends or to be deemed the Holder of capital stock that may at any time be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the Holder any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until the Holder shall have exercised this Warrant and been issued shares of capital stock in accordance with the provisions hereof.

 

5


(c) Neither this Warrant nor any shares of capital stock or other securities purchased pursuant to this Warrant have been registered under the Securities Act and applicable state securities laws. Therefore, the transfer or exchange of this Warrant or such shares may be made only in a transaction permitted under the Securities Act and applicable state securities laws or pursuant to an exemption therefrom. Prior to registration, the certificates evidencing the Warrant Shares or other securities issued on the exercise of this Warrant shall bear a legend to the effect that the shares evidenced by such certificates have not been registered under the Securities Act and applicable state securities laws.

(d) Until this Warrant is transferred on the books of the Company, the Company may treat the registered Holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

7. Notices, etc. All notices and other communications from the Company to the Holder of this Warrant shall be sent by electronic transmission or overnight courier or shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. All such notices and communications shall, when mailed, be effective when deposited in the mails and, when sent by electronic transmission or overnight courier, delivered, be effective when received.

8. Amendments. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

9. Governing Law. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Delaware without regard to the laws that might be applied under any conflict of laws principles.

10. Headings. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

11. Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

12. Assumption of Warrant. Subject to Section 1(f), if at any time while this Warrant, or any portion thereof, is outstanding and unexpired there shall be a Corporate Transaction, then, as a part of such transaction, the Company shall provide notice to the Holder prior to the closing of such Corporate Transaction and lawful provision shall be made so that the Holder shall be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from the Corporate Transaction which a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such Corporate Transaction if this Warrant had been exercised immediately before such Corporate Transaction, all subject to adjustment as provided in Section 3. If the Holder does not exercise this Warrant pursuant to this Section 12 prior to the closing of a Corporate Transaction, then Section 1(f) shall apply.

[END OF TEXT. SIGNATURE PAGE FOLLOWS.]

 

6


IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by a duly authorized officer as of the date first written above.

 

CENTREXION THERAPEUTICS CORPORATION
By:  

                     

  Name:
  Title:

 

ACCEPTED AND AGREED:

 

Name:


Annex A

Form of Exercise Notice

(To be executed if the Holder desires to exercise the Warrants evidenced by this Warrant Certificate).

TO CENTREXION THERAPEUTICS CORPORATION

 

 

The undersigned hereby (1) irrevocably elects to exercise                      Warrant Shares represented by this Warrant to purchase                          shares of Common Stock issuable upon the exercise of such Warrant, (2) makes payment in full of the aggregate Exercise Price for such Warrants by enclosure of a certified or bank cashier’s check therefor, upon condition that a new Warrant be issued for the balance of the Warrant Shares remaining, if any, and (3) requests that a certificate for the shares of Common Stock purchased hereunder be issued in the name of and delivered to:

(Please print name and address)

 

 

The undersigned hereby elects to convert                         percent (        %) of the value of the Warrant pursuant to the provisions of Section 2 of the Warrant.

If such number of Warrant Shares not be all of the Warrant Shares evidenced by this Warrant Certificate, a new Warrant for the balance remaining of such Warrant Shares shall be registered in the name of and delivered to:

(Please print name and address)

 

Dated:  

                 

Signature:  

                 


Annex B

Form of Assignment

(To be executed by the registered Holder if such Holder desires to transfer the attached Warrant.)

FOR VALUE RECEIVED,                                          hereby sells, assigns, and transfers unto                                          a Warrant to purchase                      shares of Common Stock, par value $0.001 per share, of Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint                      attorney to transfer such Warrant on the books of the Company, with full power of substitution.

The undersigned represents, unless the sale of this Warrant has been registered under the Securities Act of 1933, as amended (the “Securities Act”), that the undersigned is acquiring such Warrant for its own account for investment and not with a view to or for sale in connection with any distribution thereof (except for any resale pursuant to a Registration Statement under the Securities Act).

 

Dated:  

 

Signature:  

 


EX-4.4.2

Exhibit 4.4.2

Schedule of Holders of

Warrants to Purchase Common Stock

 

Holder

   Number of
Shares
     Exercise
Price
     Issuance
Date
     Expiration
Date
 

Sol Barer

     121,227      $ 1.75        5/16/2014        5/16/2019  

InterWest Partners VIII, LP

     23,632      $ 1.75        5/16/2014        5/16/2019  

InterWest Partners IX, LP

     18,357      $ 1.75        5/16/2014        5/16/2019  

InterWest Investors Q VIII, LP

     680      $ 1.75        5/16/2014        5/16/2019  

InterWest Investors VIII, LP

     189      $ 1.75        5/16/2014        5/16/2019  

CMEA Ventures VII, L.P.

     10,446      $ 1.75        5/16/2014        5/16/2019  

CMEA Ventures VII (Parallel), L.P.

     268      $ 1.75        5/16/2014        5/16/2019  

Maxim Partners, LLC

     612,255      $ 1.75        5/16/2014        5/16/2019  


THE WARRANT REPRESENTED HEREBY AND THE COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK NOR ANY INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH SECURITIES ACT AND SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER. THE COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED AS OF THE DATE HEREOF, AS MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT.

Warrant Certificate No. C-_

Dated:                     

COMMON STOCK WARRANT

CENTREXION CORPORATION

THIS IS TO CERTIFY THAT for value received,                          (the “Holder”) is entitled, subject to the terms and conditions set forth below, to purchase from Centrexion Corporation, a Delaware corporation (the “Company”),                      (        ) shares (the “Warrant Shares”) of Common Stock, par value $0.001 per share, of the Company (“Common Stock”), at a price per share equal to $1.75 (the “Exercise Price”). This warrant (this “Warrant”) is being issued in connection with [the Placement Agency Agreement, dated October 14, 2013 (the “Placement Agency”), by and between             and the Company. This Warrant is being issued in exchange for and replaces the Series B Convertible Preferred Stock Warrant (Certificate No.         ),]1 [that certain Convertible Promissory Note, dated as of October 7, 2013, issued by Parent in favor of                     , having an aggregate principal amount of $             (the “Bridge Note”). This Warrant is being issued in exchange for and replaces the Series B Convertible Preferred Stock Warrant (Certificate No.         )]2, dated November 20, 2013 (the “Original Issuance Date”), issued by the Company to the Holder to purchase              shares of Series B Preferred Stock (the “Original Warrant”), after which the Original Warrant will be cancelled and be of no further force and effect. All Warrant Shares issued under this Warrant pursuant to the Bridge Note are referred to herein, collectively, as the “Warrants.”

1. Manner of Exercise; Expiration Date.

(a) This Warrant shall be exercisable in accordance with this Section 1 and Section 2 below from and after the date hereof until 5:00 p.m., New York time on the fifth (5th) anniversary of the Original Issuance Date (the “Exercise Period”). The Holder may from time to time during the Exercise Period on any business day exercise this Warrant, for all or any part of the Warrant Shares purchasable at such time hereunder, by delivering to the Company at its principal office (i) a written notice of the Holder’s election to exercise this Warrant (an “Exercise Notice”), which Exercise Notice shall be irrevocable and shall specify the number of Warrant Shares to be purchased, (ii) payment of the aggregate Exercise Price for the applicable number of Warrant Shares to be purchased by check or wire transfer of immediately available funds to an account then specified by the Company and (iii) this Warrant (the date on which the foregoing items are delivered to the Company being hereinafter referred to as the “Exercise Date”). Such Exercise Notice shall be in the form of Annex A hereto, duly executed by the Holder or its duly authorized agent.

 

1 

This language applies only to the warrant issued to Maxim Partners, LLC.

2 

This language is omitted in the warrant issued to Maxim Partners, LLC.


(b) Upon receipt of the items specified in Section 1(a), the Company shall execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full Warrant Shares issuable upon such exercise. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder shall be deemed to have become a Holder of record of such shares for all purposes, as of the Exercise Date.

(c) If this Warrant is exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(d) The Company shall pay any and all issue and other taxes (other than income taxes) that may be payable in respect of the issuance of this Warrant or any issuance or delivery of Warrant Shares on exercise of this Warrant; provided, however, that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder of record of this Warrant in connection with any such exercise.

(e) The Company shall at all times reserve and keep available out of its authorized but unissued shares of capital stock, solely for the purpose of effecting the exercise of this Warrant, such number of its shares of capital stock as shall from time to time be sufficient to effect such exercise of this Warrant for the maximum number of shares of such class or series of capital stock issuable upon exercise of this Warrant; and if at any time the number of authorized but unissued shares of such capital stock shall not be sufficient to effect such exercise of this Warrant for the maximum number of shares of such capital stock then issuable upon exercise hereunder, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of such capital stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Company’s Certificate of Incorporation (as amended from time to time). The Company will not at any time close its stock transfer books in a manner which prevents the timely exercise of this Warrant.

(f) If the Holder has not exercised this Warrant prior to the closing of a Corporate Transaction (as defined below) or in connection with a Corporation Transaction as provided in Section 12, this Warrant shall automatically be deemed to be exercised in full in the manner set forth in Section 2, without any further action on behalf of the Holder, immediately prior to such closing. In such case, if the fair market value of one share of Common Stock is less than the Exercise Price (at the date of calculation as set forth in Section 2), this Warrant will be deemed to be terminated without any further payment. “Corporate Transaction” shall mean (A) the closing of the sale, transfer or other disposition of all or substantially all of the Company’s assets, (B) the consummation of the merger or consolidation of the Company with or into another entity (except a merger or consolidation in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 50% of the voting power of the capital stock of the Company or the surviving or acquiring entity), (C) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of this corporation’s securities), of the Company’s securities if, after such closing, such person or group of

 

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affiliated persons would hold 50% or more of the outstanding voting stock of this corporation (or the surviving or acquiring entity), (D) an Initial Public Offering (as defined below) of the Company or (E) a liquidation, dissolution or winding up of this corporation; provided, however, that a transaction shall not constitute a Corporate Transaction if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately prior to such transaction. Notwithstanding the prior sentence, the sale of shares of the Company’s preferred stock in a bona fide financing transaction shall not be deemed a “Corporate Transaction.

2. Net Exercise Issue. Notwithstanding any provision herein to the contrary, if the fair market value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Exercise Notice in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

X = Y (A-B)

A

Where X =   the number of Warrant Shares to be issued to the Holder

Y =   the number of Warrant Shares with respect to which this Warrant is being exercised

A =   the fair market value of one share of Common Stock (at the date of such calculation)

B =   Exercise Price (as adjusted to the date of such calculation)

For purposes of the above calculation, (a) if the Company has consummated a sale of shares of its equity securities in a bona fide firm commitment underwritten public offering pursuant to a registration statement on Form S-1 (or a successor form) under the Securities Act (an “Initial Public Offering”), then the fair market value of one share of Common Stock shall be valued at the volume weighted average price of the Common Stock for the 30 trading days immediately prior to the Exercise Date, as reported by Bloomberg; or (b) if the Company has not consummated an Initial Public Offering, then the fair market value shall be determined in good faith by the Board of Directors of the Company.

3. Adjustment of Exercise Price and Number of Conversion Shares.

(a) Adjustments for Stock Dividends, Splits, etc. If the Company declares or pays a dividend on the outstanding shares of the Common Stock or other securities, then upon exercise of this Warrant, for each Warrant Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Warrant Shares of record as of the date the dividend occurred. If the Company subdivides the outstanding shares of Common Stock by reclassification or otherwise into a greater number of shares, the number of Warrant Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Warrant Shares shall be proportionately decreased.

 

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(b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization or change in the capital stock of the Company, then, as a condition of such reclassification, reorganization or change, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities or property receivable in connection with such reclassification, reorganization or change by a holder of the same number and type of securities as were purchasable as Warrant Shares by the Holder immediately prior to such reclassification, reorganization or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities or property deliverable upon exercise hereof, and appropriate adjustments shall be made to the Exercise Price per Warrant Share payable hereunder, provided the aggregate Exercise Price shall remain the same.

4. Fractional Shares. No fractional Warrant Shares shall be issuable upon exercise or conversion of the Warrant and the number of Warrant Shares to be issued shall be rounded up to the nearest whole Warrant Share.

5. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

6. Negotiability, etc. This Warrant is issued upon the following terms, all of which the Holder hereof by the taking hereof consents and agrees:

(a) The Holder shall not be entitled to pledge, mortgage, transfer, endorse or otherwise convey this Warrant (a “Transfer”), in whole or in part, without with the prior written consent of the Company, other than to Affiliates (as defined below). To the extent permitted by the preceding sentence, the Holder and its direct and indirect transferees may Transfer all or any portion of this Warrant by surrendering this Warrant to the Company together with a completed assignment in the form attached hereto as Annex B. Upon such surrender, the Company shall deliver a new Warrant or Warrants to the person or persons entitled thereto and, if applicable, shall deliver to Holder a new Warrant evidencing the right of Holder to purchase the balance of the Warrant Shares subject to purchase hereunder. The term “Holder” as used herein shall include any transferee to whom this Warrant has been Transferred in accordance with this Section 6. The term “Affiliate” as used herein means, with respect to any Holder, any other person or entity who, directly or indirectly, controls, is controlled by, or is under common control with such Holder, including without limitation any general partner, managing member, limited partner, officer or director of such Holder or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Holder.

 

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(b) The Holder shall not be entitled to vote or to receive dividends or to be deemed the Holder of capital stock that may at any time be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the Holder any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until the Holder shall have exercised this Warrant and been issued shares of capital stock in accordance with the provisions hereof.

(c) Neither this Warrant nor any shares of capital stock or other securities purchased pursuant to this Warrant have been registered under the Securities Act and applicable state securities laws. Therefore, the transfer or exchange of this Warrant or such shares may be made only in a transaction permitted under the Securities Act and applicable state securities laws or pursuant to an exemption therefrom. Prior to registration, the certificates evidencing the Warrant Shares or other securities issued on the exercise of this Warrant shall bear a legend to the effect that the shares evidenced by such certificates have not been registered under the Securities Act and applicable state securities laws.

(d) Until this Warrant is transferred on the books of the Company, the Company may treat the registered Holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

7. Notices, etc. All notices and other communications from the Company to the Holder of this Warrant shall be sent by electronic transmission or overnight courier or shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. All such notices and communications shall, when mailed, be effective when deposited in the mails and, when sent by electronic transmission or overnight courier, delivered, be effective when received.

8. Amendments. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

9. Governing Law. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Delaware without regard to the laws that might be applied under any conflict of laws principles.

10. Headings. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

11. Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

12. Assumption of Warrant. Subject to Section 1(f), if at any time while this Warrant, or any portion thereof, is outstanding and unexpired there shall be a Corporate Transaction, then, as a part of such transaction, the Company shall provide notice to the Holder prior to the closing of such Corporate Transaction and lawful provision shall be made so that the Holder shall be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the

 

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number of shares of stock or other securities or property of the successor corporation resulting from the Corporate Transaction which a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such Corporate Transaction if this Warrant had been exercised immediately before such Corporate Transaction, all subject to adjustment as provided in Section 3. If the Holder does not exercise this Warrant pursuant to this Section 12 prior to the closing of a Corporate Transaction, then Section 1(f) shall apply.

[END OF TEXT. SIGNATURE PAGE FOLLOWS.]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by a duly authorized officer as of the date first written above.

 

CENTREXION CORPORATION
By:  

                     

Name:  
Title:  

 

ACCEPTED AND AGREED:
By:  

                     

Name:  
Title:  

 

[Signature Page to Common Stock Warrant]


Annex A

Form of Exercise Notice

(To be executed if Holder desires to exercise the Warrants evidenced by this Warrant Certificate).

TO CENTREXION CORPORATION

 

 

The undersigned hereby (1) irrevocably elects to exercise                     Warrant Shares represented by this Warrant to purchase                     shares of Common Stock issuable upon the exercise of such Warrant, (2) makes payment in full of the aggregate Exercise Price for such Warrants by enclosure of a certified or bank cashier’s check therefor, upon condition that a new Warrant be issued for the balance of the Warrant Shares remaining, if any, and (3) requests that a certificate for the shares of Common Stock purchased hereunder be issued in the name of and delivered to:

(Please print name and address)

 

 

The undersigned hereby elects to convert                                         percent (        %) of the value of the Warrant pursuant to the provisions of Section 2 of the Warrant.

If such number of Warrant Shares not be all of the Warrant Shares evidenced by this Warrant Certificate, a new Warrant for the balance remaining of such Warrant Shares shall be registered in the name of and delivered to:

(Please print name and address)

 

Dated:  

 

Signature:  

 

 

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Annex B

Form of Assignment

(To be executed by the registered Holder if such Holder desires to transfer the attached Warrant.)

FOR VALUE RECEIVED,                                          hereby sells, assigns, and transfers unto                                         a Warrant to purchase     shares of Common Stock, par value $0.001 per share, of Centrexion Corporation, a Delaware corporation (the “Company”), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint                     attorney to transfer such Warrant on the books of the Company, with full power of substitution.

The undersigned represents, unless the sale of this Warrant has been registered under the Securities Act of 1933, as amended (the “Securities Act”), that the undersigned is acquiring such Warrant for its own account for investment and not with a view to or for sale in connection with any distribution thereof (except for any resale pursuant to a Registration Statement under the Securities Act).

 

Dated:  

                     

Signature:  

                     

 

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EX-4.4.3

Exhibit 4.4.3

Schedule of Holders of

Warrants to Purchase Common Stock

 

Holder

   Number
of Shares
     Exercise
Price
     Issuance
Date
     Expiration
Date
     Preamble
Original
Issuance
Date
 

CIFCO International Group

     210,000      $ 1.75        6/2/2014        6/2/2019        11/20/2013  

Tianning (Tina) Yu

     90,000      $ 1.75        6/2/2014        6/2/2019        6/1/2014  


THE WARRANT REPRESENTED HEREBY AND THE COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK NOR ANY INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH SECURITIES ACT AND SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER. THE COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED AS OF NOVEMBER 20, 2013, AS MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT.

Warrant Certificate No. C-_

Dated:                             

COMMON STOCK WARRANT

CENTREXION CORPORATION

THIS IS TO CERTIFY THAT for value received,                                  (the “Holder”) is entitled, subject to the terms and conditions set forth below, to purchase from Centrexion Corporation, a Delaware corporation (the “Company”),                              (            ) shares (the “Warrant Shares”) of Common Stock, par value $0.001 per share, of the Company (“Common Stock”), at a price per share equal to $1.75 (the “Exercise Price”). This warrant (this “Warrant”) is being issued in connection with that certain Consulting and Independent Contractor Agreement, dated as of February 1, 2014 (as amended from time to time, the “Consulting Agreement”). This Warrant and the Common Stock Warrant (Certificate No.     ), dated as of June 2, 2014 issued by the Company to                                  to purchase          shares of Common Stock, are being issued pursuant to Section 6 hereof in exchange for and replace the Common Stock Warrant (Certificate No. C-_), dated [November 20, 2013][June 1, 2014] (the “Original Issuance Date”), issued by the Company to                      to purchase          shares of Common Stock (the “Original Warrant”) after which the Original Warrant will be cancelled and be of no further force and effect. All Warrant Shares issued under this Warrant pursuant to the Consulting Agreement are referred to herein, collectively, as the “Warrants.”

1. Manner of Exercise; Expiration Date.

(a) This Warrant shall be exercisable in accordance with this Section 1 and Section 2 below from and after the date hereof until 5:00 p.m., New York time on the fifth (5th) anniversary of the Original Issuance Date (the “Exercise Period”). The Holder may from time to time during the Exercise Period on any business day exercise this Warrant, for all or any part of the Warrant Shares purchasable at such time hereunder, by delivering to the Company at its principal office (i) a written notice of the Holder’s election to exercise this Warrant (an “Exercise Notice”), which Exercise Notice shall be irrevocable and shall specify the number of Warrant Shares to be purchased, (ii) payment of the aggregate Exercise Price for the applicable number of Warrant Shares to be purchased by check or wire transfer of immediately available funds to an account then specified by the Company and (iii) this Warrant (the date on which the foregoing items are delivered to the Company being hereinafter referred to as the “Exercise Date”). Such Exercise Notice shall be in the form of Annex A hereto, duly executed by the Holder or its duly authorized agent.

 

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(b) Upon receipt of the items specified in Section 1(a), the Company shall execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full Warrant Shares issuable upon such exercise. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder shall be deemed to have become a Holder of record of such shares for all purposes, as of the Exercise Date.

(c) If this Warrant is exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(d) The Company shall pay any and all issue and other taxes (other than income taxes) that may be payable in respect of the issuance of this Warrant or any issuance or delivery of Warrant Shares on exercise of this Warrant; provided, however, that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder of record of this Warrant in connection with any such exercise.

(e) The Company shall at all times reserve and keep available out of its authorized but unissued shares of capital stock, solely for the purpose of effecting the exercise of this Warrant, such number of its shares of capital stock as shall from time to time be sufficient to effect such exercise of this Warrant for the maximum number of shares of such class or series of capital stock issuable upon exercise of this Warrant; and if at any time the number of authorized but unissued shares of such capital stock shall not be sufficient to effect such exercise of this Warrant for the maximum number of shares of such capital stock then issuable upon exercise hereunder, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of such capital stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Company’s Certificate of Incorporation (as amended from time to time). The Company will not at any time close its stock transfer books in a manner which prevents the timely exercise of this Warrant.

(f) If the Holder has not exercised this Warrant prior to the closing of a Corporate Transaction (as defined below) or in connection with a Corporation Transaction as provided in Section 12, this Warrant shall automatically be deemed to be exercised in full in the manner set forth in Section 2, without any further action on behalf of the Holder, immediately prior to such closing. In such case, if the fair market value of one share of Common Stock is less than the Exercise Price (at the date of calculation as set forth in Section 2), this Warrant will be deemed to be terminated without any further payment. “Corporate Transaction” shall mean (A) the closing of the sale, transfer or other disposition of all or substantially all of the Company’s assets, (B) the consummation of the merger or consolidation of the Company with or into another entity (except a merger or consolidation in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 50% of the voting power of the capital stock of the Company or the surviving or acquiring entity), (C) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of this corporation’s securities), of the Company’s securities if, after such closing, such person or group of

 

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affiliated persons would hold 50% or more of the outstanding voting stock of this corporation (or the surviving or acquiring entity), (D) an Initial Public Offering (as defined below) of the Company or (E) a liquidation, dissolution or winding up of this corporation; provided, however, that a transaction shall not constitute a Corporate Transaction if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately prior to such transaction. Notwithstanding the prior sentence, the sale of shares of the Company’s preferred stock in a bona fide financing transaction shall not be deemed a “Corporate Transaction.

2. Net Exercise Issue. Notwithstanding any provision herein to the contrary, if the fair market value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Exercise Notice in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

X = Y (A-B)

A

Where X =     the number of Warrant Shares to be issued to the Holder

Y =     the number of Warrant Shares with respect to which this Warrant is being exercised

A =     the fair market value of one share of Common Stock (at the date of such calculation)

B =     Exercise Price (as adjusted to the date of such calculation)

For purposes of the above calculation, (a) if the Company has consummated a sale of shares of its equity securities in a bona fide firm commitment underwritten public offering pursuant to a registration statement on Form S-1 (or a successor form) under the Securities Act (an “Initial Public Offering”), then the fair market value of one share of Common Stock shall be valued at the volume weighted average price of the Common Stock for the 30 trading days immediately prior to the Exercise Date, as reported by Bloomberg; or (b) if the Company has not consummated an Initial Public Offering, then the fair market value shall be determined in good faith by the Board of Directors of the Company.

3. Adjustment of Exercise Price and Number of Conversion Shares.

(a) Adjustments for Stock Dividends, Splits, etc. If the Company declares or pays a dividend on the outstanding shares of the Common Stock or other securities, then upon exercise of this Warrant, for each Warrant Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Warrant Shares of record as of the date the dividend occurred. If the Company subdivides the outstanding shares of Common Stock by reclassification or otherwise into a greater number of shares, the number of Warrant Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Warrant Shares shall be proportionately decreased.

 

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(b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization or change in the capital stock of the Company, then, as a condition of such reclassification, reorganization or change, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities or property receivable in connection with such reclassification, reorganization or change by a holder of the same number and type of securities as were purchasable as Warrant Shares by the Holder immediately prior to such reclassification, reorganization or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities or property deliverable upon exercise hereof, and appropriate adjustments shall be made to the Exercise Price per Warrant Share payable hereunder, provided the aggregate Exercise Price shall remain the same.

4. Fractional Shares. No fractional Warrant Shares shall be issuable upon exercise or conversion of the Warrant and the number of Warrant Shares to be issued shall be rounded up to the nearest whole Warrant Share.

5. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

6. Negotiability, etc. This Warrant is issued upon the following terms, all of which the Holder hereof by the taking hereof consents and agrees:

(a) The Holder shall not be entitled to pledge, mortgage, transfer, endorse or otherwise convey this Warrant (a “Transfer”), in whole or in part, without with the prior written consent of the Company, other than to Affiliates (as defined below). To the extent permitted by the preceding sentence, the Holder and its direct and indirect transferees may Transfer all or any portion of this Warrant by surrendering this Warrant to the Company together with a completed assignment in the form attached hereto as Annex B. Upon such surrender, the Company shall deliver a new Warrant or Warrants to the person or persons entitled thereto and, if applicable, shall deliver to Holder a new Warrant evidencing the right of Holder to purchase the balance of the Warrant Shares subject to purchase hereunder. The term “Holder” as used herein shall include any transferee to whom this Warrant has been Transferred in accordance with this Section 6. The term “Affiliate” as used herein means, with respect to any Holder, any other person or entity who, directly or indirectly, controls, is controlled by, or is under common control with such Holder, including without limitation any general partner, managing member, limited partner, officer or director of such Holder or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Holder.

 

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(b) The Holder shall not be entitled to vote or to receive dividends or to be deemed the Holder of capital stock that may at any time be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the Holder any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until the Holder shall have exercised this Warrant and been issued shares of capital stock in accordance with the provisions hereof.

(c) Neither this Warrant nor any shares of capital stock or other securities purchased pursuant to this Warrant have been registered under the Securities Act and applicable state securities laws. Therefore, the transfer or exchange of this Warrant or such shares may be made only in a transaction permitted under the Securities Act and applicable state securities laws or pursuant to an exemption therefrom. Prior to registration, the certificates evidencing the Warrant Shares or other securities issued on the exercise of this Warrant shall bear a legend to the effect that the shares evidenced by such certificates have not been registered under the Securities Act and applicable state securities laws.

(d) Until this Warrant is transferred on the books of the Company, the Company may treat the registered Holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

7. Notices, etc. All notices and other communications from the Company to the Holder of this Warrant shall be sent by electronic transmission or overnight courier or shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. All such notices and communications shall, when mailed, be effective when deposited in the mails and, when sent by electronic transmission or overnight courier, delivered, be effective when received.

8. Amendments. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

9. Governing Law. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Delaware without regard to the laws that might be applied under any conflict of laws principles.

10. Headings. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

11. Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

12. Assumption of Warrant. Subject to Section 1(f), if at any time while this Warrant, or any portion thereof, is outstanding and unexpired there shall be a Corporate Transaction, then, as a part of such transaction, the Company shall provide notice to the Holder prior to the closing of such Corporate Transaction and lawful provision shall be made so that the Holder shall be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the

 

5


number of shares of stock or other securities or property of the successor corporation resulting from the Corporate Transaction which a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such Corporate Transaction if this Warrant had been exercised immediately before such Corporate Transaction, all subject to adjustment as provided in Section 3. If the Holder does not exercise this Warrant pursuant to this Section 12 prior to the closing of a Corporate Transaction, then Section 1(f) shall apply.

[END OF TEXT. SIGNATURE PAGE FOLLOWS.]

 

6


IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by a duly authorized officer as of the date first written above.

 

CENTREXION CORPORATION
By:  

                     

Name:
Title:  

 

ACCEPTED AND AGREED:
By:  

                     

Name:  
Title:  

 

[Signature Page to Common Stock Warrant]


Annex A

Form of Exercise Notice

(To be executed if Holder desires to exercise the Warrants evidenced by this Warrant Certificate).

TO CENTREXION CORPORATION

 

 

The undersigned hereby (1) irrevocably elects to exercise                     Warrant Shares represented by this Warrant to purchase                     shares of Common Stock issuable upon the exercise of such Warrant, (2) makes payment in full of the aggregate Exercise Price for such Warrants by enclosure of a certified or bank cashier’s check therefor, upon condition that a new Warrant be issued for the balance of the Warrant Shares remaining, if any, and (3) requests that a certificate for the shares of Common Stock purchased hereunder be issued in the name of and delivered to:

(Please print name and address)

 

 

The undersigned hereby elects to convert                                     percent (        %) of the value of the Warrant pursuant to the provisions of Section 2 of the Warrant.

If such number of Warrant Shares not be all of the Warrant Shares evidenced by this Warrant Certificate, a new Warrant for the balance remaining of such Warrant Shares shall be registered in the name of and delivered to:

(Please print name and address)

 

Dated:  

                     

Signature:  

                     

 

8


Annex B

Form of Assignment

(To be executed by the registered Holder if such Holder desires to transfer the attached Warrant.)

FOR VALUE RECEIVED,                                          hereby sells, assigns, and transfers unto                                         a Warrant to purchase     shares of Common Stock, par value $0.001 per share, of Centrexion Corporation, a Delaware corporation (the “Company”), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint                     attorney to transfer such Warrant on the books of the Company, with full power of substitution.

The undersigned represents, unless the sale of this Warrant has been registered under the Securities Act of 1933, as amended (the “Securities Act”), that the undersigned is acquiring such Warrant for its own account for investment and not with a view to or for sale in connection with any distribution thereof (except for any resale pursuant to a Registration Statement under the Securities Act).

 

Dated:  

                     

Signature:  

                     

 

9


EX-4.4.4

Exhibit 4.4.4

Schedule of Holders of

Warrants to Purchase Preferred Stock

 

Holder

  Number of
Shares
    Exercise
Price
    Original Issuance
Date / Date Prior
Warrant Was
Issued
    Expiration
Date
    Default Fair
Market
Value
    Conversion
Shares
    Date of
Placement
Agency Agreement
in Preamble
 

Maxim Partners LLC

    316,373     $ 2.01       12/18/2013       12/18/2018     $ 1.75       Series B Preferred       October 14, 2013  

Maxim Partners LLC

    119,749     $ 2.01       01/22/2014       01/22/2019     $ 1.75       Series B Preferred       October 14, 2013  

Maxim Partners LLC

    122,126     $ 2.01       02/28/2014       02/28/2019     $ 1.75       Series B Preferred       October 14, 2013  

Maxim Partners LLC

    61,066     $ 2.01       05/16/2014       11/20/2018     $ 1.75       Series B Preferred       October 14, 2013  

Maxim Partners LLC

    786,805     $ 1.98       12/30/2016       12/30/2021     $ 1.80       Series C Preferred       December 28, 2015  

Maxim Partners LLC

    558,840     $ 1.98       12/30/2016       12/30/2021     $ 1.80       Series C Preferred       September 7, 2016  

Maxim Partners LLC

    8,333     $ 1.98       04/28/2017       04/28/2022     $ 1.80       Series C Preferred       December 28, 2015  


THE WARRANT REPRESENTED HEREBY AND THE SERIES      CONVERTIBLE PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR THE SERIES      CONVERTIBLE PREFERRED STOCK NOR ANY INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH SECURITIES ACT AND SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER. THE SERIES      CONVERTIBLE PREFERRED STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF DECEMBER 18, 2017, AS MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT.

[Date of Issuance of Original Warrant: November 20, 2013]1

Date of Issuance of Prior Warrant:                                                  

Date of Issuance of this Warrant: November 5, 2018

AMENDED AND RESTATED SERIES      CONVERTIBLE PREFERRED STOCK WARRANT

CENTREXION THERAPEUTICS CORPORATION

This warrant (this “Warrant”) amends and restates that certain Series          Convertible Preferred Stock Warrant (the “Prior Warrant”), dated                 ,             [(the “Original Issuance Date”)]2, issued by the Company to the Holder (each as defined below) in accordance with Section 8 of the Prior Warrant. The Prior Warrant was issued pursuant to the Placement Agency Agreement, dated             ,             (the “Placement Agency Agreement”), by and between Maxim Partners LLC and the Company. [The Prior Warrant and the Common Stock Warrant (Certificate No. C-8), dated as of May 16, 2014, issued by the Company to the Holder to purchase 612,255 shares of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”), were issued in exchange for and replaced the Series B Convertible Preferred Stock Warrant (Certificate No. 8), dated November 20, 2013 (the “Original Issuance Date”), issued by the Company to the Holder to purchase 673,321 shares of Series B Preferred Stock (the “Original Warrant”), after which the Original Warrant was cancelled and was of no further force and effect.]1

THIS IS TO CERTIFY THAT for value received, MAXIM PARTNERS LLC (the “Holder”) is entitled, subject to the terms and conditions set forth below, to purchase from Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”),                                          (                ) shares (the “Warrant Shares”) of Series      Convertible Preferred Stock, par value $0.001 per share, of the Company (“Series      Preferred Stock”), at a price per share equal to $             (the “Exercise Price”). All Warrant Shares issued under this Warrant pursuant to the Placement Agency Agreement are referred to herein, collectively, as the “Warrants.”

1. Manner of Exercise; Expiration Date.

(a) This Warrant shall be exercisable in accordance with this Section 1 and Section 2 below from and after the date hereof until 5:00 p.m., New York time on the fifth (5th) anniversary of the Original Issue Date (the “Exercise Period”). The Holder may from time to time during the Exercise Period on any business day exercise this Warrant, for all or any part of the Warrant Shares purchasable at

 

1 

Included only in warrant with Original Issuance Date of May 16, 2014.

2 

Included in all warrants other than warrant with Original Issuance Date of May 16, 2014.


such time hereunder, by delivering to the Company at its principal office (i) a written notice of the Holder’s election to exercise this Warrant (an “Exercise Notice”), which Exercise Notice shall be irrevocable and shall specify the number of Warrant Shares to be purchased, (ii) payment of the aggregate Exercise Price for the applicable number of Warrant Shares to be purchased by check or wire transfer of immediately available funds to an account then specified by the Company and (iii) this Warrant (the date on which the foregoing items are delivered to the Company being hereinafter referred to as the “Exercise Date”). Such Exercise Notice shall be in the form of Annex A hereto, duly executed by the Holder or its duly authorized agent.

(b)    Upon receipt of the items specified in Section 1(a), the Company shall execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full Warrant Shares issuable upon such exercise. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date.

(c)    If this Warrant is exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued, deliver to the Holder a new warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant. Such new warrant shall in all other respects be identical to this Warrant.

(d)    The Company shall pay any and all issue and other taxes (other than income taxes) that may be payable in respect of the issuance of this Warrant or any issuance or delivery of Warrant Shares on exercise of this Warrant; provided, however, that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder of record of this Warrant in connection with any such exercise.

(e)    The Company shall at all times reserve and keep available out of its authorized but unissued shares of capital stock, solely for the purpose of effecting the exercise of this Warrant, such number of its shares of capital stock as shall from time to time be sufficient to effect such exercise of this Warrant for the maximum number of shares of such class or series of capital stock issuable upon exercise of this Warrant; and if at any time the number of authorized but unissued shares of such capital stock shall not be sufficient to effect such exercise of this Warrant for the maximum number of shares of such capital stock then issuable upon exercise hereunder, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of such capital stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Company’s Certificate of Incorporation (as amended from time to time). The Company will not at any time close its stock transfer books in a manner which prevents the timely exercise of this Warrant.

(f)    If the Holder has not exercised this Warrant prior to the closing of a Corporate Transaction (as defined below) or in connection with a Corporate Transaction as provided in Section 12, this Warrant shall automatically be deemed to be exercised in full in the manner set forth in Section 2, without any further action on behalf of the Holder, immediately prior to the closing of a Corporate Transaction. In such case, if the fair market value of one share of Series      Preferred Stock is less than the Exercise Price (at the date of calculation as set forth in Section 2), this Warrant will be deemed to be terminated without any further payment. “Corporate Transaction” shall mean (A) the closing of the sale, transfer or other disposition of all or substantially all of the Company’s assets, (B) the consummation of the merger or consolidation of the Company with or into another entity (except a merger or consolidation in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 50% of the voting power of the capital stock of the

 

2


Company or the surviving or acquiring entity), (C) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of the Company’s securities), of the Company’s securities if, after such closing, such person or group of affiliated persons would hold 50% or more of the outstanding voting stock of the Company (or the surviving or acquiring entity), (D) an Initial Public Offering (as defined below) of the Company or (E) a liquidation, dissolution or winding up of the Company; provided, however, that a transaction shall not constitute a Corporate Transaction if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately prior to such transaction. Notwithstanding the prior sentence, the sale of shares of the Company’s preferred stock in a bona fide financing transaction shall not be deemed a “Corporate Transaction.

2.    Net Exercise Issue. Notwithstanding any provision herein to the contrary, if the fair market value of one share of Series      Preferred Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Exercise Notice in which event the Company shall issue to the Holder a number of shares of Series      Preferred Stock computed using the following formula:

X = Y (A-B)

A

Where X     =     the number of Warrant Shares to be issued to the Holder

 

  Y

=     the number of Warrant Shares with respect to which this Warrant is being exercised

 

  A

=     the fair market value of one share of Series      Preferred Stock (at the date of such calculation)

 

  B

=     Exercise Price (as adjusted to the date of such calculation)

For purposes of the above calculation, the fair market value of one share of Series      Preferred Stock shall be equal to $            , or, if the Company has consummated any other financing in which the Company issues capital stock of the Company in exchange for cash, the price per share of such capital stock (on an as-converted basis to Common Stock) sold in the latest financing. Notwithstanding anything herein to the contrary, if this Warrant is being exercised pursuant to Section 1(f) above in the manner set forth in this Section 2 in connection with a Corporate Transaction that is a bona fide firm commitment underwritten public offering pursuant to a registration statement on Form S-1 (or a successor form) under the Securities Act (an “Initial Public Offering”), then the fair market value of one share of Series      Preferred Stock shall be equal to the product of (i) the public offering price per share of Common Stock in such Initial Public Offering and (ii) the number of shares of Common Stock issuable upon conversion of one share of Series      Preferred Stock.

3.    Adjustment of Exercise Price and Number of Conversion Shares.

(a)    Adjustments for Stock Dividends, Splits, etc. If the Company declares or pays a dividend on the outstanding shares of the Series      Preferred Stock or other

 

3


securities, then upon exercise of this Warrant, for each Warrant Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Warrant Shares of record as of the date the dividend occurred. If the Company subdivides the outstanding shares of Series      Preferred Stock by reclassification or otherwise into a greater number of shares, the number of Warrant Shares purchasable hereunder shall be proportionately increased and the Exercise Price shall be proportionately decreased. If the outstanding shares of Series      Preferred Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Exercise Price shall be proportionately increased and the number of Warrant Shares shall be proportionately decreased.

(b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization or change in the capital stock of the Company, then, as a condition of such reclassification, reorganization or change, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities or property receivable in connection with such reclassification, reorganization or change by a holder of the same number and type of securities as were purchasable as Warrant Shares by the Holder immediately prior to such reclassification, reorganization or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities or property deliverable upon exercise hereof, and appropriate adjustments shall be made to the Exercise Price per Warrant Share payable hereunder, provided the aggregate Exercise Price shall remain the same.

4. Fractional Shares. No fractional Warrant Shares shall be issuable upon exercise or conversion of the Warrant and the number of Warrant Shares to be issued shall be rounded down to the nearest whole Warrant Share.

5. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

6. Negotiability, etc. This Warrant is issued upon the following terms, all of which the Holder hereof by the taking hereof consents and agrees:

(a) The Holder shall not be entitled to pledge, mortgage, transfer, endorse or otherwise convey this Warrant (a “Transfer”), in whole or in part, without with the prior written consent of the Company, other than to Affiliates (as defined below). To the extent permitted by the preceding sentence, the Holder and its direct and indirect transferees may Transfer all or any portion of this Warrant by surrendering this Warrant to the Company together with a completed assignment in the form attached hereto as Annex B. Upon such surrender, the Company shall deliver a new Warrant or Warrants to the person or persons entitled thereto and, if applicable, shall deliver to Holder a new Warrant evidencing the right of Holder to purchase the balance of the Warrant Shares subject to purchase hereunder. The term “Holder” as used herein shall include any transferee to whom this Warrant has been Transferred in accordance with this Section 6. The term “Affiliate” as used herein means, with respect to any Holder, any other person or entity who, directly or indirectly, controls, is controlled by, or is under common control with such Holder, including without limitation any general partner, managing member, limited partner, officer or director of such Holder or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Holder.

 

4


(b) The Holder shall not be entitled to vote or to receive dividends or to be deemed the Holder of capital stock that may at any time be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the Holder any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until the Holder shall have exercised this Warrant and been issued shares of capital stock in accordance with the provisions hereof.

(c) Neither this Warrant nor any shares of capital stock or other securities purchased pursuant to this Warrant have been registered under the Securities Act and applicable state securities laws. Therefore, the transfer or exchange of this Warrant or such shares may be made only in a transaction permitted under the Securities Act and applicable state securities laws or pursuant to an exemption therefrom. Prior to registration, the certificates evidencing the Warrant Shares or other securities issued on the exercise of this Warrant shall bear a legend to the effect that the shares evidenced by such certificates have not been registered under the Securities Act and applicable state securities laws.

(d) Until this Warrant is transferred on the books of the Company, the Company may treat the registered Holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

7. Notices, etc. All notices and other communications from the Company to the Holder of this Warrant shall be sent by electronic transmission or overnight courier or shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. All such notices and communications shall, when mailed, be effective when deposited in the mails and, when sent by electronic transmission or overnight courier, delivered, be effective when received.

8. Amendments. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

9. Governing Law. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Delaware without regard to the laws that might be applied under any conflict of laws principles.

10. Headings. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

11. Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

12. Assumption of Warrant. Subject to Section 1(f), if at any time while this Warrant, or any portion thereof, is outstanding and unexpired there shall be a Corporate Transaction, then, as a part of such transaction, the Company shall provide notice to the Holder prior to the closing of such Corporate Transaction and lawful provision shall be made so that the Holder shall be entitled to receive

 

5


upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from the Corporate Transaction which a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such Corporate Transaction if this Warrant had been exercised immediately before such Corporate Transaction, all subject to adjustment as provided in Section 3. If the Holder does not exercise this Warrant pursuant to this Section 12 prior to the closing of a Corporate Transaction, then Section 1(f) shall apply.

[END OF TEXT. SIGNATURE PAGE FOLLOWS.]

 

6


IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by a duly authorized officer as of the date first written above.

 

CENTREXION THERAPEUTICS CORPORATION
By:  

 

 

Name:

Title:

 

ACCEPTED AND AGREED:

MAXIM PARTNERS, LLC

By:    
Name:  
Title:  


Annex A

Form of Exercise Notice

(To be executed if Holder desires to exercise the Warrants evidenced by this Warrant Certificate).

TO CENTREXION THERAPEUTICS CORPORATION

 

 

The undersigned hereby (1) irrevocably elects to exercise                      Warrant Shares represented by this Warrant to purchase                      shares of Series      Preferred Stock issuable upon the exercise of such Warrant, (2) makes payment in full of the aggregate Exercise Price for such Warrants by enclosure of a certified or bank cashier’s check therefor, upon condition that a new Warrant be issued for the balance of the Warrant Shares remaining, if any, and (3) requests that a certificate for the shares of Series      Preferred Stock purchased hereunder be issued in the name of and delivered to:

(Please print name and address)

 

 

The undersigned hereby elects to convert                                                   percent (            %) of the value of the Warrant pursuant to the provisions of Section 2 of the Warrant.

If such number of Warrant Shares not be all of the Warrant Shares evidenced by this Warrant Certificate, a new Warrant for the balance remaining of such Warrant Shares shall be registered in the name of and delivered to:

(Please print name and address)

 

Dated:                                                  

 

Signature:                                            

 

8


Annex B

Form of Assignment

(To be executed by the registered Holder if such Holder desires to transfer the attached Warrant.)

FOR VALUE RECEIVED,                                                   hereby sells, assigns, and transfers unto                                                   a Warrant to purchase                      shares of Series      Convertible Preferred Stock, par value $0.001 per share, of Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint                      attorney to transfer such Warrant on the books of the Company, with full power of substitution.

The undersigned represents, unless the sale of this Warrant has been registered under the Securities Act of 1933, as amended (the “Securities Act”), that the undersigned is acquiring such Warrant for its own account for investment and not with a view to or for sale in connection with any distribution thereof (except for any resale pursuant to a Registration Statement under the Securities Act).

 

Dated:                                             

 

Signature:                                       

 

9


EX-4.5.1

Exhibit 4.5.1

EXECUTION VERSION

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

 

 

CENTREXION THERAPEUTICS CORPORATION

WARRANT TO PURCHASE SHARES

This Warrant is issued to Mr. Zhang Xuefeng by Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), as of December 30, 2016 (the “Effective Date”), in connection with the holder’s provision of consulting services to the Company pursuant to the consulting agreement, dated as of December 30, 2016 (the “Consulting Agreement.”)

1. Purchase of Shares. Subject to the terms and conditions hereinafter set forth, the holder of this Warrant is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to one million (1,000,000) shares, as adjusted pursuant to Section 8 below (the “Shares”), of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at the Exercise Price (as defined below).

2. Definitions.

(a) Change of Control. The term “Change of Control” shall mean (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions with the Company (including, without limitation, any stock purchase, reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (ii) a sale of all or substantially all of the assets of the Company, unless the Company’ stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (solely by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity.

(b) Exercise Price. The exercise price for the Shares shall be $1.75 per Share, as adjusted for any stock splits, dividends, combinations and the like as provided in Section 8 below (such price, as adjusted from time to time, is herein referred to as the “Exercise Price”).

(c) Initial Public Offering. The term “Initial Public Offering” shall mean an initial underwritten public offering of the Common Stock, which results in gross proceeds of at least $20,000,000.


3. Change of Control. In the event of a Change of Control, then, subject to Section 3 of the subordination agreement agreed upon among the holder of this warrant, the Company and Silicon Valley Bank (the “Subordination Agreement”), the holder of this Warrant will be entitled to receive in cash the amount they would have received upon consummation of such Change of Control if this Warrant had been exercised for shares of Common Stock at the Exercise Price immediately prior thereto.

4. Initial Public Offering. In the event that the Company completes an Initial Public Offering and this Warrant has not yet been exercised, then this Warrant shall automatically, without any further action on the part of the holder of this Warrant or the Company, be exercised on a cashless basis. The Company shall issue to the holder hereof a number of shares of Common Stock computed using the following formula:

 

  Y (A - B)

X =

  A

Where

X — The number of shares of Common Stock to be issued to the holder of this Warrant.

Y — The number of shares of Common Stock purchasable under this Warrant.

A — The price to the public per share of Common Stock on the cover of the final prospectus for the Initial Public Offering.

B — The Exercise Price (as adjusted to the date of such calculations).

5. Exercise. (a) Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

(i) the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

(ii) the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

(b) Exercise Period. This Warrant shall be immediately exercisable upon the Effective Date in the amount of 500,000 Shares. The remaining 500,000 Shares shall vest and become exercisable in equal amounts (i.e., 41,667 Shares per month) over the twelve months beginning on the Effective Date, for so long as the Consulting Agreement is in effect, In the event that the Consulting Agreement is terminated for any reason, then this Warrant shall cease to vest, but may be exercisable for all Shares that vested prior to the date of termination. This Warrant shall cease to be exercisable upon the expiration of this Warrant pursuant to Section 15 hereof.

 

2


6. Certificates for Shares. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the subscription notice.

7. Issuance of Shares. The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof.

8. Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

(a) Subdivisions, Combinations and Other Issuances. If the Company shall at any time prior to the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 8(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

(b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 8(a) above), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c) Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

 

3


9. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

10. Representations of the Company. The Company represents that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.

11. Representations and Warranties by the Holder. The Holder represents and warrants to the Company as follows:

(a) This Warrant and the Shares issuable upon exercise thereof are being acquired for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”). Upon exercise of this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.

(b) The Holder understands that the Warrant and the Shares have not been registered under the Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Act pursuant to Section 4(a)(2) thereof, and that they must be held by the Holder indefinitely, and that the Holder must therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Act or is exempted from such registration.

(c) The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Shares purchasable pursuant to the terms of this Warrant and of protecting its interests in connection therewith.

(d) The Holder is able to bear the economic risk of the purchase of the Shares pursuant to the terms of this Warrant.

(e) The Holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act.

 

4


12. Restrictive Legend.

The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.

13. Warrants Transferable. Subject to compliance with the terms and conditions of this Section 13, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes), upon surrender of this Warrant properly endorsed or accompanied by written instructions of transfer. With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or the Shares and indicating whether or not under the Act certificates for this Warrant or the Shares to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 13 that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Each certificate representing this Warrant or the Shares transferred in accordance with this Section 13 shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

 

5


14. Rights of Stockholders. No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

15. Expiration of Warrant; Notice of Certain Events Terminating This Warrant.

(a) This Warrant shall expire and shall no longer be exercisable upon the earlier to occur of:

(i) The date that is five years from the original issue date of this Warrant;

(ii) The closing of an Initial Public Offering; or

(iii) Any Change of Control.

(b) The Company shall provide at least ten (10) days prior written notice of any event set forth in Section 15(a).

16. Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at Holder’s address set forth below and (ii) if to the Company, at the address of its principal corporate offices (attention: President), or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.

17. “Market Stand-Off” Agreement. The Holder hereby agrees that, during the period of duration specified by the Company and an underwriter of common stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except common stock included in such registration; provided, however, that:

(a) all officers and directors of the Company and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements;

 

6


(b) the Company obtains from persons who hold two percent (2%) or greater of the Company’s outstanding capital stock, a lock-up agreement similar to that set forth in this Section 17; and

(c) such market stand-off time period shall not exceed one hundred eighty (180) days for the Company’s initial public offering, and ninety (90) days for any subsequent public offerings.

Holder agrees to provide to the other underwriters of any public offering such further agreements as such underwriter may reasonably request in connection with this market stand-off agreement, provided that the terms of such agreements are substantially consistent with the provisions of this Section 17. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.

Notwithstanding the foregoing, the obligations described in this Section 17 shall not apply to a registration relating solely to employee benefit plans on Form S-8 or a similar form which may be promulgated in the future, or a registration relating solely to an SEC Rule 145 transaction.

18. Registration Rights Agreement. The registration rights of the Holder (including Holders’ successors) with respect to the Shares will be the same as those granted to holders of Shares issued pursuant to the Company’s Note and Warrant Purchase Agreements, dated as of March 1, 2016, April 8, 2016, April 29, 2016 and June 14, 2016.

19. Governing Law. This Warrant and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law provisions of the State of New York or of any other state.

20. Rights and Obligations Survive Exercise of Warrant. Unless otherwise provided herein, the rights and obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

[Signature page follows]

 

7


Issued this 30th day of December, 2016.

 

CENTREXION THERAPEUTICS CORPORATION
By:   /s/ Gregg Beloff
Title:   Chief Financial Officer

 

HOLDER:
/s/ Zhang Xuefeng
Mr. Zhang Xuefeng
Address:
Keyuan South Road No. 88 Tianfu Life Science Park
B1-9F
Wuhou District, Chengdu

China

 

8


EXHIBIT A

NOTICE OF EXERCISE

 

TO:

CENTREXION THERAPEUTICS CORPORATION

________________________

________________________

Attention: President

1. The undersigned hereby elects to purchase __________ shares of _____________ pursuant to the terms of the attached Warrant.

2. Method of Exercise (Please initial the applicable blank):

 

   

The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

 

   

The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 4 of the Warrant.

3. Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:

 

(Name)
 
(Address)

4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in Section 11 of the attached Warrant (including Section 11(e) thereof) are true and correct as of the date hereof.

 

    

(Signature)

 

    

(Name)

 

(Date)      (Title)


EXHIBIT B

FORM OF TRANSFER

(To be signed only upon transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________________________________________ the right represented by the attached Warrant to purchase ____________ shares of ________________________ of Centrexion Therapeutics Corporation to which the attached Warrant relates, and appoints ______________ Attorney to transfer such right on the books of __________, with full power of substitution in the premises.

Dated: ____________________

 

 
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

Address:

   
   
   
 

Signed in the presence of:

________________________________


EX-4.5.2

Exhibit 4.5.2

Schedule of Holders of

Warrants to Purchase Series C Preferred Stock

 

Holder

   Number of
Shares
     Exercise
Price
     Issuance
Date
     Expiration
Date
 

InterWest Partners IX, LP

     85,714        $1.75        3/1/2016        3/1/2021  

Sol J. Barer

     5,714        $1.75        3/1/2016        3/1/2021  

Jonathan G Davis Trust

     14,286        $1.75        3/1/2016        3/1/2021  

David Pozen and Joanna Pozen, as Trustees of the Pozen Family 2016 Trust

     28,571        $1.75        3/1/2016        3/1/2021  

MAI 2 LLC

     22,857        $1.75        3/1/2016        3/1/2021  

Thomas Kempner

     11,429        $1.75        3/1/2016        3/1/2021  

Carl M. Loeb Trustee Thomas Kempner

     11,429        $1.75        3/1/2016        3/1/2021  

Robert Grinberg

     11,429        $1.75        3/1/2016        3/1/2021  

Michael Dan

     4,286        $1.75        3/1/2016        3/1/2021  

Denice Hill

     4,285        $1.75        8/6/2018        3/1/2021  

Irrevocable Aloha Trust

     11,429        $1.75        3/1/2016        3/1/2021  

EZ MM&B Holdings LLC

     11,429        $1.75        3/1/2016        3/1/2021  

Aptorum Group Limited

     28,571        $1.75        3/1/2016        3/1/2021  

Robert K Green TOD

     11,429        $1.75        3/1/2016        3/1/2021  


Stephen Meringoff

     28,571      $ 1.75        3/1/2016        3/1/2021  

MarketPlace Lofts L.P.

     42,857      $ 1.75        3/1/2016        3/1/2021  

GH Healthlink Capital

     171,429      $ 1.75        3/1/2016        3/1/2021  

Lawrence M Blatt Trust

     2,857      $ 1.75        3/1/2016        3/1/2021  

Dyke Rogers

     8,571      $ 1.75        3/1/2016        3/1/2021  

Robert and Marjie Kargman

     28,571      $ 1.75        3/1/2016        3/1/2021  

Irwin Blitt Rev Trust

     8,571      $ 1.75        3/1/2016        3/1/2021  

Diana and David Freshwater Trust

     8,571      $ 1.75        3/1/2016        3/1/2021  

DJ & J LLC

     3,800      $ 1.75        3/1/2016        3/1/2021  

Rudes GCT Investment Ptn.

     14,286      $ 1.75        3/1/2016        3/1/2021  

F3F SPA

     20,000      $ 1.75        3/1/2016        3/1/2021  

InterWest Partners IX, LP

     85,714      $ 1.75        4/8/2016        4/8/2021  

River Charitable Remainder Trust

     5,714      $ 1.75        4/8/2016        4/8/2021  

Jeffrey B. Kindler

     5,714      $ 1.75        4/8/2016        4/8/2021  

AR Properties

     17,143      $ 1.75        4/8/2016        4/8/2021  

David Pyott Trust

     28,571      $ 1.75        4/8/2016        4/8/2021  

Transpac Investments Limited

     11,429      $ 1.75        4/8/2016        4/8/2021  

RM Kargman Life Insurance Trust

     28,571      $ 1.75        4/8/2016        4/8/2021  

 

2


Kargman Rev Trust

     28,571      $ 1.75        4/8/2016        4/8/2021  

David Schwartz

     5,714      $ 1.75        4/8/2016        4/8/2021  

KF Business Ventures

     114,286      $ 1.75        4/8/2016        4/8/2021  

Mark Rubin

     5,714      $ 1.75        4/8/2016        4/8/2021  

Matthew Orlando

     1,429      $ 1.75        4/8/2016        4/8/2021  

Donald Fishbein

     2,857      $ 1.75        4/8/2016        4/8/2021  

Peter Friedland

     2,857      $ 1.75        4/8/2016        4/8/2021  

William Strawbridge

     1,429      $ 1.75        4/8/2016        4/8/2021  

INSYS Therapeutics, Inc.

     28,571      $ 1.75        4/8/2016        4/8/2021  

Henry Morris Zachs

     8,571      $ 1.75        4/8/2016        4/8/2021  

ACB Holdings

     1,429      $ 1.75        4/8/2016        4/8/2021  

Notas Family Trust

     3,429      $ 1.75        4/8/2016        4/8/2021  

Jonathan Perelman

     1,143      $ 1.75        4/8/2016        4/8/2021  

Robert Green Trust

     5,714      $ 1.75        4/8/2016        4/8/2021  

James Campbell Regina Anderson

     2,857      $ 1.75        4/29/2016        4/29/2021  

Mahyar Eidgah

     1,429      $ 1.75        4/29/2016        4/29/2021  

Roger Lash Rev Living Trust

     1,429      $ 1.75        4/29/2016        4/29/2021  

Rick Mace

     1,714      $ 1.75        4/29/2016        4/29/2021  

 

3


Garfinkle Trust – Morris Garfinkle

     1,429      $ 1.75        4/29/2016        4/29/2021  

Lisa Rudes Grandchildren Trust

     14,286      $ 1.75        4/29/2016        4/29/2021  

Lawrence D Stern Annuity Trust

     28,571      $ 1.75        4/29/2016        4/29/2021  

BES Investments

     4,286      $ 1.75        4/29/2016        4/29/2021  

Marc Cohen

     1,714      $ 1.75        4/29/2016        4/29/2021  

Gary Ferman

     2,857      $ 1.75        4/29/2016        4/29/2021  

James and Arlene Payne

     17,143      $ 1.75        4/29/2016        4/29/2021  

Jim Aukstuolis

     1,714      $ 1.75        4/29/2016        4/29/2021  

Robert James Brickley

     1,429      $ 1.75        4/29/2016        4/29/2021  

Steven Glassman

     1,429      $ 1.75        6/14/2016        6/14/2021  

Shanghai Healthcare Industry

     571,429      $ 1.75        6/14/2016        6/14/2021  

Blairoma LLC

     65,057      $ 1.75        6/14/2016        6/14/2021  

TOTAL

     1,714,285           

 

4


THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

 

 

CENTREXION THERAPEUTICS CORPORATION

WARRANT TO PURCHASE SHARES

This Warrant is issued to                                               by Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), pursuant to the terms of that certain Note and Warrant Purchase Agreement (the “Note Purchase Agreement”) of even date herewith, in connection with the Company’s issuance to the holder of this Warrant of a Subordinated Convertible Promissory Note (the “Note”).

1.    Purchase of Shares. Subject to the terms and conditions hereinafter set forth and set forth in the Note Purchase Agreement, the holder of this Warrant is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to the number of fully paid and nonassessable Shares (as defined below), that equals the quotient obtained by dividing (a) the Warrant Coverage Amount (as defined below) by (b) the Exercise Price (as defined below).

2.    Definitions.

(a)    Change of Control. The term “Change of Control” shall mean (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions with the Company (including, without limitation, any stock purchase, reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (ii) a sale of all or substantially all of the assets of the Company, unless the Company’ stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (solely by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity.

(b)    Exercise Price. The exercise price for the Shares shall be $1.75 per share, as adjusted for any stock splits, dividends, combinations and the like (such price, as adjusted from time to time, is herein referred to as the “Exercise Price”).

 

5


(c)    Initial Public Offering. The term “Initial Public Offering” shall mean an initial underwritten public offering of the Company’s common stock, par value $0.001 per share (“Common Stock”), which results in gross proceeds of at least $20,000,000.

(d)    Non-Qualified Financing. The term “Non-Qualified Financing” shall mean a financing occurring prior to a Qualified Financing or a Change of Control pursuant to which the Company sells shares of its Common Stock or preferred stock of the Company (“Preferred Stock”) in a financing other than a Qualified Financing or an Initial Public Offering, and in connection with which the holders of a majority of the outstanding principal amount under the Notes elect by written consent to convert such Notes into shares of the Company’s securities issued in such Non-Qualified Financing.

(e)    Qualified Financing. The term “Qualified Financing” shall mean an equity financing occurring prior to a Change of Control pursuant to which the Company sells shares of its Common Stock or Preferred Stock (or convertible debt securities or, if approved by the holders of a majority of the aggregate outstanding amount under the Notes, non-convertible debt securities) at a fully-diluted pre-money valuation of at least $75,000,000 and with aggregate gross proceeds to the Company of not less than $10,000,000.

(f)    The Shares. The term “Shares” shall mean shares of the class and series of securities issued to investors in a Qualified Financing or a Non-Qualified Financing which occurs prior to a Change of Control.

(g)    Warrant Coverage Amount. The term “Warrant Coverage Amount” shall mean that amount which equals 10% of the principal amount of the Note.

3.    Change of Control. In the event of a Change of Control prior to a Qualified Financing or a Non-Qualified Financing, then, subject to Section 3 of the subordination agreement agreed upon among the holder of this warrant, the Company and Silicon Valley Bank (the “Subordination Agreement”), the holder of this Warrant will be entitled to receive in cash the amount they would have received upon consummation of such Change of Control if this Warrant had been exercised for shares of the Company’s Common Stock at the Exercise Price immediately prior thereto.

4.    Initial Public Offering. In the event that prior to a Qualified Financing or a Non-Qualified Financing, the Company completes an Initial Public Offering and this Warrant has not yet been exercised, then this Warrant shall automatically, without any further action on the part of the holder of this Warrant or the Company, be exercised on a cashless basis. The Company shall issue to the holder hereof a number of shares of Common Stock computed using the following formula:

X = Y (A - B)

A

 

6


Where

 

  X —

The number of shares of Common Stock to be issued to the holder of this Warrant.

 

  Y —

The number of shares of Common Stock purchasable under this Warrant which equals (a) the Warrant Coverage Amount divided by (b) the Exercise Price.

 

  A —

The price to the public per share of Common Stock on the cover of the final prospectus for the Initial Public Offering.

 

  B —

The Exercise Price (as adjusted to the date of such calculations).

5.    Exercise. (a) Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

(i)    the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

(ii)    the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

(b)    Exercise Period. This Warrant shall be exercisable, in whole or in part, during the term commencing on the closing date of a Qualified Financing or a Non-Qualified Financing (as defined below) or an Initial Public Offering and ending on the expiration of this Warrant pursuant to Section 15 hereof.

6.    Certificates for Shares. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the subscription notice.

7.    Issuance of Shares. The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof.

8.    Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

(a)    Subdivisions, Combinations and Other Issuances. If the Company shall at any time prior to the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 8(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

 

7


(b)    Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 8(a) above), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c)    Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

9.    No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

10.    Representations of the Company. The Company represents that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.

11.    Representations and Warranties by the Holder. The Holder represents and warrants to the Company as follows:

(a)    This Warrant and the Shares issuable upon exercise thereof are being acquired for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”). Upon exercise of this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.

(b)    The Holder understands that the Warrant and the Shares have not been registered under the Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Act pursuant to Section 4(a)(2) thereof, and that they must be held by the Holder indefinitely, and that the Holder must therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Act or is exempted from such registration.

 

8


(c)    The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Shares purchasable pursuant to the terms of this Warrant and of protecting its interests in connection therewith.

(d)    The Holder is able to bear the economic risk of the purchase of the Shares pursuant to the terms of this Warrant.

(e)    The Holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act.

12.    Restrictive Legend.

The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.

13.    Warrants Transferable. Subject to compliance with the terms and conditions of this Section 13, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes), upon surrender of this Warrant properly endorsed or accompanied by written instructions of transfer. With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or the Shares and indicating whether or not under the Act certificates for this Warrant or the Shares to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure

 

9


compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 13 that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Each certificate representing this Warrant or the Shares transferred in accordance with this Section 13 shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

14.    Rights of Stockholders. No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

15.    Expiration of Warrant; Notice of Certain Events Terminating This Warrant.

(a)    This Warrant shall expire and shall no longer be exercisable upon the earlier to occur of:

(i)    The date that is five years from the original issue date of this Warrant;

(ii)    The closing of an Initial Public Offering; or

(iii)    Any Change of Control.

(b)    The Company shall provide at least ten (10) days prior written notice of any event set forth in Section 15(a).

16.    Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if

 

10


delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the Schedule of Investors to the Note Purchase Agreement, and (ii) if to the Company, at the address of its principal corporate offices (attention: President), or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.

17.    “Market Stand-Off” Agreement. The Holder hereby agrees that, during the period of duration specified by the Company and an underwriter of common stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except common stock included in such registration; provided, however, that:

(a)    all officers and directors of the Company and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements;

(b)    the Company obtains from persons who hold two percent (2%) or greater of the Company’s outstanding capital stock, a lock-up agreement similar to that set forth in this Section 17; and

(c)    such market stand-off time period shall not exceed one hundred eighty (180) days for the Company’s initial public offering, and ninety (90) days for any subsequent public offerings.

Holder agrees to provide to the other underwriters of any public offering such further agreements as such underwriter may reasonably request in connection with this market stand-off agreement, provided that the terms of such agreements are substantially consistent with the provisions of this Section 17. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.

Notwithstanding the foregoing, the obligations described in this Section 17 shall not apply to a registration relating solely to employee benefit plans on Form S-8 or a similar form which may be promulgated in the future, or a registration relating solely to an SEC Rule 145 transaction.

18.    Registration Rights Agreement. The registration rights of the Holder (including Holders’ successors) with respect to the Common Stock issuable upon exercise of this Warrant, or, if this Warrant is exercisable for convertible securities, upon conversion of such securities, will be the same as those granted to the holders of Shares issued in the Qualified Financing.

19.    Governing Law. This Warrant and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law provisions of the State of New York or of any other state.

 

11


20.    Rights and Obligations Survive Exercise of Warrant. Unless otherwise provided herein, the rights and obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

[Signature page follows]

 

12


Issued this                                         .

 

CENTREXION THERAPEUTICS CORPORATION
By:    
Title:    

 

13


EXHIBIT A

NOTICE OF EXERCISE

 

TO:   CENTREXION THERAPEUTICS CORPORATION
     
     
  Attention: President  

1.    The undersigned hereby elects to purchase                          shares of                          pursuant to the terms of the attached Warrant.

2.    Method of Exercise (Please initial the applicable blank):

 

 

The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

 

 

The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 4 of the Warrant.

3.    Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:

 

     
  (Name)  
     
     
  (Address)  

4.    The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in Section 11 of the attached Warrant (including Section 11(e) thereof) are true and correct as of the date hereof.

 

     
    (Signature)
     
    (Name)
       
(Date)     (Title)


EXHIBIT B

FORM OF TRANSFER

(To be signed only upon transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                                                                           the right represented by the attached Warrant to purchase                                      shares of                                                   of Centrexion Therapeutics Corporation to which the attached Warrant relates, and appoints                                  Attorney to transfer such right on the books of                             , with full power of substitution in the premises.

 

Dated:    

 

 
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
Address:    
   
   

 

Signed in the presence of:
 

 


EX-4.5.3

Exhibit 4.5.3

Schedule of Holders of

Warrants to Purchase Series D Preferred Stock

 

Holder

   Number of
Shares
     Exercise
Price
     Issuance
Date
     Expiration
Date
     Preamble
Promissory
Note Series
Reference
     Warrant
Coverage%
 

InterWest Partners IX, LP

     77,778        $1.80        4/28/2017        4/28/2022        A        10  

James N. Campbell 2012 Dynasty Trust, Regina H. Anderson & Louis F. Friedman, Trustees

     11,111        $1.80        4/28/2017        4/28/2022        A        10  

Jeffrey B. Kindler

     16,667        $1.80        4/28/2017        4/28/2022        A        10  

Randall M. Stevens

     5,556        $1.80        4/28/2017        4/28/2022        A        10  

Sol J. Barer

     16,667        $1.80        4/28/2017        4/28/2022        A        10  

AAR Associates, L.P.

     1,389        $1.80        4/28/2017        4/28/2022        A        10  

Booknet LLC

     13,889        $1.80        4/28/2017        4/28/2022        A        10  

Bradley Resources Co LLC

     2,778        $1.80        4/28/2017        4/28/2022        A        10  

Brandon Jones

     2,778        $1.80        4/28/2017        4/28/2022        A        10  

Charles J. Magolske

     1,389        $1.80        4/28/2017        4/28/2022        A        10  

Edgar D. Jannotta, Jr. Exempt Family Trust

     13,889        $1.80        4/28/2017        4/28/2022        A        10  

Faith Family Holdings, LP

     5,556        $1.80        4/28/2017        4/28/2022        A        10  

Franklin M. Berger

     5,556        $1.80        4/28/2017        4/28/2022        A        10  

James Moonier

     1,389        $1.80        4/28/2017        4/28/2022        A        10  

Jeff Roberts

     5,556        $1.80        4/28/2017        4/28/2022        A        10  


                              
 

    

 

Klaus Kretschmer

     5,556      $ 1.80        4/28/2017        4/28/2022        A        10  

Lagom LLC

     8,333      $ 1.80        4/28/2017        4/28/2022        A        10  

Mark Coleman

     1,389      $ 1.80        4/28/2017        4/28/2022        A        10  

Michael J. Gahan

     5,556      $ 1.80        4/28/2017        4/28/2022        A        10  

Michael Mullins

     1,111      $ 1.80        4/28/2017        4/28/2022        A        10  

Montauk, LLC

     13,889      $ 1.80        4/28/2017        4/28/2022        A        10  

Neal Polan

     3,056      $ 1.80        4/28/2017        4/28/2022        A        10  

Northlea Partners

     1,389      $ 1.80        4/28/2017        4/28/2022        A        10  

Philip T. Ruegger

     8,333      $ 1.80        4/28/2017        4/28/2022        A        10  

Ralph Finerman

     1,389      $ 1.80        4/28/2017        4/28/2022        A        10  

Richard A. Smith

     5,556      $ 1.80        4/28/2017        4/28/2022        A        10  

Robert C. Jamo

     5,556      $ 1.80        4/28/2017        4/28/2022        A        10  

Robert Masters

     2,778      $ 1.80        4/28/2017        4/28/2022        A        10  

Seymour H. Block Defined Benefit Plan

     1,389      $ 1.80        4/28/2017        4/28/2022        A        10  

Starlight Investment Holdings Limited

     5,556      $ 1.80        4/28/2017        4/28/2022        A        10  

Stephen D’Antonio

     5,556      $ 1.80        4/28/2017        4/28/2022        A        10  

Stephen R. Mut

     2,778      $ 1.80        4/28/2017        4/28/2022        A        10  

Steven J. Wice

     2,778      $ 1.80        4/28/2017        4/28/2022        A        10  

 

2


                              

Timothy Hogue

     2,778      $ 1.80        4/28/2017        4/28/2022        A        10  

Trevor Fetter

     11,111      $ 1.80        4/28/2017        4/28/2022        A        10  

Trust for Descendants of Charles & Elizabeth Kontulis UAD 1/27/10

     5,556      $ 1.80        4/28/2017        4/28/2022        A        10  

Cynthia Finerman Living Trust

     556      $ 1.80        5/10/2017        5/10/2022        A        10  

Jeffrey E. Goldman

     2,778      $ 1.80        5/10/2017        5/10/2022        A        10  

Rehoboth Hundred LLC

     1,389      $ 1.80        5/10/2017        5/10/2022        A        10  

Stephen R. Quazzo Trust dated 11/9/95

     5,556      $ 1.80        5/10/2017        5/10/2022        A        10  

Arnold Ursaner

     2,778      $ 1.80        5/23/2017        5/23/2022        A        10  

InterWest Partners IX, LP

     277,778      $ 1.80        10/10/2017        10/10/2022        B        25  

Shawn Tomasello

     69,444      $ 1.80        10/10/2017        10/10/2022        B        25  

Jeffrey B. Kindler

     138,889      $ 1.80        10/10/2017        10/10/2022        B        25  

Randall M. Stevens

     13,889      $ 1.80        10/10/2017        10/10/2022        B        25  

Barer & Son Capital, LLC

     34,722      $ 1.80        10/10/2017        10/10/2022        B        25  

 

3


THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

CENTREXION THERAPEUTICS CORPORATION

WARRANT TO PURCHASE SHARES

Dated as of                         

This Warrant is issued as of the date set forth above (the “Issuance Date”) to                                          (the “Holder”) by Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), pursuant to the terms of that certain Series [A][B] Note and Warrant Purchase Agreement (the “Purchase Agreement”) of even date herewith, in connection with the Company’s issuance to the holder of this Warrant of a Series [A][B] 2018 Subordinated Convertible Promissory Note (the “Note”).

1.    Purchase of Shares. Subject to the terms and conditions hereinafter set forth and set forth in the Purchase Agreement, the holder of this Warrant is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to the number of fully paid and nonassessable Shares (as defined below), that equals the quotient obtained by dividing (a) the Warrant Coverage Amount (as defined below) by (b) the Exercise Price (as defined below).

2.    Definitions.

(a)     Change of Control. The term “Change of Control” shall mean (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions with the Company (including, without limitation, any stock purchase, reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (ii) a sale of all or substantially all of the assets of the Company, unless the Company’ stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (solely by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity.

 

4


(b)     Exercise Price. The exercise price for the Shares shall be $1.80 per share, as adjusted for any stock splits, dividends, combinations and the like (such price, as adjusted from time to time, is herein referred to as the “Exercise Price”).

(c)     Initial Public Offering. The term “Initial Public Offering” shall mean an initial underwritten public offering of the Company’s common stock, par value $0.001 per share (“Common Stock”), which results in gross proceeds of at least $20,000,000.

(d)     Non-Qualified Financing. The term “Non-Qualified Financing” shall mean a financing occurring prior to a Qualified Financing or a Change of Control pursuant to which the Company sells shares of its Common Stock or preferred stock of the Company (“Preferred Stock”) in a financing other than a Qualified Financing or an Initial Public Offering, and in connection with which the holders of a majority of the outstanding principal amount under the Notes elect by written consent to convert such Notes into shares of the Company’s securities issued in such Non-Qualified Financing.

(e)     Qualified Financing. The term “Qualified Financing” shall mean an equity financing occurring prior to a Change of Control pursuant to which the Company sells shares of its Common Stock or Preferred Stock (or convertible debt securities or, if approved by the holders of a majority of the aggregate outstanding amount under the Notes, non-convertible debt securities) with aggregate gross proceeds to the Company of not less than $10,000,000.

(f)     The Shares. The term “Shares” shall mean shares of the class and series of securities issued to investors in a Qualified Financing or a Non-Qualified Financing which occurs prior to a Change of Control.

(g)     Warrant Coverage Amount. The term “Warrant Coverage Amount” shall mean that amount which equals [10][25]% of the principal amount of the Note.

3.    Change of Control. In the event of a Change of Control prior to a Qualified Financing or a Non-Qualified Financing, then, subject to Section 3 of the subordination agreement agreed upon among the holder of this warrant, the Company and Silicon Valley Bank (the “Subordination Agreement”), the holder of this Warrant will be entitled to receive in cash the amount they would have received upon consummation of such Change of Control if this Warrant had been exercised for shares of the Company’s Common Stock at the Exercise Price immediately prior thereto.

4.    Initial Public Offering. In the event that prior to a Qualified Financing or a Non-Qualified Financing, the Company completes an Initial Public Offering and this Warrant has not yet been exercised, then this Warrant shall automatically, without any further action on the part of the holder of this Warrant or the Company, be exercised on a cashless basis. The Company shall issue to the holder hereof a number of shares of Common Stock computed using the following formula:

X = Y (A - B)

A

 

5


Where

 

  X  —

The number of shares of Common Stock to be issued to the holder of this Warrant.

 

  Y  —

The number of shares of Common Stock purchasable under this Warrant which equals (a) the Warrant Coverage Amount divided by (b) the Exercise Price.

 

  A  —

The price to the public per share of Common Stock on the cover of the final prospectus for the Initial Public Offering.

 

  B  —

The Exercise Price (as adjusted to the date of such calculations).

5.    Exercise. (a) Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

(i)    the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

(ii)    the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

(b)     Exercise Period. This Warrant shall be exercisable, in whole or in part, during the term commencing on the closing date of a Qualified Financing or a Non-Qualified Financing (as defined below) or an Initial Public Offering and ending on the expiration of this Warrant pursuant to Section 15 hereof.

6.    Certificates for Shares. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within 30 days of the delivery of the subscription notice.

7.    Issuance of Shares. The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof.

8.    Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

(a)     Subdivisions, Combinations and Other Issuances. If the Company shall at any time prior to the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 8(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

 

6


(b)     Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 8(a) above), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c)     Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

9.    No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

10.    Representations of the Company. The Company represents that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.

11.    Representations and Warranties by the Holder. The Holder represents and warrants to the Company as follows:

(a)     This Warrant and the Shares issuable upon exercise thereof are being acquired for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”). Upon exercise of this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.

(b)     The Holder understands that the Warrant and the Shares have not been registered under the Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Act pursuant to Section 4(a)(2) thereof, and that they must be held by the Holder indefinitely, and that the Holder must therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Act or is exempted from such registration.

 

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(c)     The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Shares purchasable pursuant to the terms of this Warrant and of protecting its interests in connection therewith.

(d)     The Holder is able to bear the economic risk of the purchase of the Shares pursuant to the terms of this Warrant.

(e)     The Holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act.

12.    Restrictive Legend. The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.

13.    Warrants Transferable. Subject to compliance with the terms and conditions of this Section 13, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes), upon surrender of this Warrant properly endorsed or accompanied by written instructions of transfer. With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or the Shares and indicating whether or not under the Act certificates for this Warrant or the Shares to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice

 

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and reasonably satisfactory opinion or other evidence, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 13 that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Each certificate representing this Warrant or the Shares transferred in accordance with this Section 13 shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

14.    Rights of Stockholders. No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

15.    Expiration of Warrant; Notice of Certain Events Terminating This Warrant.

(a)    This Warrant shall expire and shall no longer be exercisable upon the earlier to occur of:

(i)    The date that is five years from the Issuance Date;

(ii)    The closing of an Initial Public Offering; or

(iii)    Any Change of Control.

(b)    The Company shall provide at least 10 days prior written notice of any event set forth in Section 15(a).

16.    Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the Holder’s

 

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signature page to the Purchase Agreement, and (ii) if to the Company, at the address of its principal corporate offices (Attention: Chief Financial Officer), or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.

17.    “Market Stand-Off” Agreement. The Holder hereby agrees that, during the period of duration specified by the Company and an underwriter of common stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except common stock included in such registration; provided, however, that:

(a)     all officers and directors of the Company and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements;

(b)     the Company obtains from persons who hold two percent or greater of the Company’s outstanding capital stock, a lock-up agreement similar to that set forth in this Section 17; and

(c)     such market stand-off time period shall not exceed 180 days for the Company’s initial public offering, and 90 days for any subsequent public offerings.

Holder agrees to provide to the other underwriters of any public offering such further agreements as such underwriter may reasonably request in connection with this market stand-off agreement, provided that the terms of such agreements are substantially consistent with the provisions of this Section 17. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.

Notwithstanding the foregoing, the obligations described in this Section 17 shall not apply to a registration relating solely to employee benefit plans on Form S-8 or a similar form which may be promulgated in the future, or a registration relating solely to an SEC Rule 145 transaction.

18.    Registration Rights Agreement. The registration rights of the Holder (including the Holder’s successors) with respect to the Common Stock issuable upon exercise of this Warrant, or, if this Warrant is exercisable for convertible securities, upon conversion of such securities, will be the same as those granted to the holders of Shares issued in the Qualified Financing.

19.    Governing Law. This Warrant and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law provisions of the State of New York or of any other state.

 

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20.    Rights and Obligations Survive Exercise of Warrant. Unless otherwise provided herein, the rights and obligations of the Company, of the Holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

[Signature page follows.]

 

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IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the date first above written.

 

CENTREXION THERAPEUTICS CORPORATION
By:    
  Name:
  Title:

 

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EXHIBIT A

FORM OF NOTICE OF EXERCISE

 

TO:   CENTREXION THERAPEUTICS CORPORATION
     
     
  Attention: Chief Financial Officer  

1.    The undersigned hereby elects to purchase                          shares of                          pursuant to the terms of the attached Warrant.

2.    Method of Exercise (Please initial the applicable blank):

 

 

The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

 

 

The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 4 of the Warrant.

3.    Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:

 

         
   

 

   
  (Name)  
     
     
  (Address)  

4.    The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in Section 11 of the attached Warrant (including Section 11(e) thereof) are true and correct as of the date hereof.

 

     
    (Signature)
     
    (Name)
       
(Date)     (Title)


EXHIBIT B

FORM OF TRANSFER

(To be signed only upon transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                                                                           the right represented by the attached Warrant to purchase                              shares of                                               of Centrexion Therapeutics Corporation to which the attached Warrant relates, and appoints                                  Attorney to transfer such right on the books of                                 , with full power of substitution in the premises.

 

Dated:    

 

 
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
Address:    
   
   

 

Signed in the presence of:
 

 


EX-5.1

Exhibit 5.1

 

  

200 Clarendon Street

Boston, Massachusetts 02116

Tel: +1.617.948.6000 Fax: +1.617.948.6001

www.lw.com

 

LOGO    FIRM / AFFILIATE OFFICES
   Beijing    Moscow
   Boston    Munich
   Brussels    New York
   Century City    Orange County
   Chicago    Paris
   Dubai    Riyadh
November 5, 2018    Düsseldorf    Rome
   Frankfurt    San Diego
   Hamburg    San Francisco
   Hong Kong    Seoul
   Houston    Shanghai
   London    Silicon Valley
Centrexion Therapeutics Corporation    Los Angeles    Singapore
200 State Street    Madrid    Tokyo
Boston, MA 02109    Milan    Washington, D.C.

 

Re:    Registration Statement No. 333-227902;
   $92,000,000 of shares of Common Stock, $0.001 par value per share

Ladies and Gentlemen:

We have acted as special counsel to Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), in connection with the proposed issuance of up to $92,000,000 of shares (including shares subject to the underwriters’ option to purchase additional shares) of common stock, $0.001 par value per share (the “Shares”). The Shares are included in a registration statement on Form S–1 under the Securities Act of 1933, as amended (the “Act”), filed with the Securities and Exchange Commission (the “Commission”) on October 19, 2018 (Registration No. 333-227902) (as amended, the “Registration Statement”). The term “Shares” shall include any additional shares of common stock registered by the Company pursuant to Rule 462(b) under the Act in connection with the offering contemplated by the Registration Statement. This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or related Prospectus, other than as expressly stated herein with respect to the issue of the Shares.

As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter. With your consent, we have relied upon certificates and other assurances of officers of the Company and others as to factual matters without having independently verified such factual matters. We are opining herein as to the General Corporation Law of the State of Delaware and we express no opinion with respect to any other laws.

Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, when the Shares shall have been duly registered on the books of the transfer agent and registrar therefor in the name or on behalf of the purchasers, and have been issued by the Company against payment therefor (not less than par value) in total numbers that do not exceed the total number of shares available under the Company’s certificate of incorporation and in the


November 5, 2018

Page 2

 

LOGO

 

circumstances contemplated by the form of underwriting agreement most recently filed as an exhibit to the Registration Statement, the issue and sale of the Shares will have been duly authorized by all necessary corporate action of the Company, and the Shares will be validly issued, fully paid and nonassessable. In rendering the foregoing opinion, we have assumed that the Company will comply with all applicable notice requirements regarding uncertificated shares provided in the General Corporation Law of the State of Delaware.

This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectus under the heading “Legal Matters.” We further consent to the incorporation by reference of this letter and consent into any registration statement filed pursuant to Rule 462(b) with respect to the Shares. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.

 

Very truly yours,

 

/s/ LATHAM & WATKINS LLP


EX-10.2

Exhibit 10.2

CENTREXION THERAPEUTICS CORPORATION

2018 INCENTIVE AWARD PLAN

ARTICLE I.

PURPOSE

The Plan’s purpose is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities. Capitalized terms used in the Plan are defined in Article XI.

ARTICLE II.

ELIGIBILITY

Service Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein.

ARTICLE III.

ADMINISTRATION AND DELEGATION

3.1    Administration. The Plan is administered by the Administrator. The Administrator has authority to determine which Service Providers receive Awards, grant Awards and set Award terms and conditions, subject to the conditions and limitations in the Plan. The Administrator also has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable. The Administrator may correct defects and ambiguities, supply omissions and reconcile inconsistencies in the Plan or any Award as it deems necessary or appropriate to administer the Plan and any Awards. The Administrator’s determinations under the Plan are in its sole discretion and will be final and binding on all persons having or claiming any interest in the Plan or any Award.

3.2    Appointment of Committees. To the extent Applicable Laws permit, the Board may delegate any or all of its powers under the Plan to one or more Committees or officers of the Company or any of its Subsidiaries. The Board may abolish any Committee or re-vest in itself any previously delegated authority at any time.

ARTICLE IV.

STOCK AVAILABLE FOR AWARDS

4.1    Number of Shares. Subject to adjustment under Article VIII and the terms of this Article IV, Awards may be made under the Plan covering up to the Overall Share Limit. As of the Plan’s effective date under Section 10.3, the Company will cease granting awards under the Prior Plans; however, Prior Plan Awards will remain subject to the terms of the applicable Prior Plan. Shares issued under the Plan may consist of authorized but unissued Shares, Shares purchased on the open market or treasury Shares.

4.2    Share Recycling. If all or any part of an Award or Prior Plan Award expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award or Prior Plan Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award or Prior Plan Award, the unused Shares covered by the Award or Prior Plan


Award will, as applicable, become or again be available for Award grants under the Plan. Further, Shares delivered (either by actual delivery or attestation) to the Company by a Participant to satisfy the applicable exercise or purchase price of an Award or Prior Plan Award and/or to satisfy any applicable tax withholding obligation (including Shares retained by the Company from the Award or Prior Plan Award being exercised or purchased and/or creating the tax obligation) will, as applicable, become or again be available for Award grants under the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards or Prior Plan Awards shall not count against the Overall Share Limit.

4.3    Incentive Stock Option Limitations. Notwithstanding anything to the contrary herein, no more than 10,000,000 Shares may be issued pursuant to the exercise of Incentive Stock Options.

4.4    Substitute Awards. In connection with an entity’s merger or consolidation with the Company or the Company’s acquisition of an entity’s property or stock, the Administrator may grant Awards in substitution for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted on such terms as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the Overall Share Limit (nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided above), except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the Shares available for Awards under the Plan as provided above); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors prior to such acquisition or combination.

4.5    Non-Employee Director Compensation. Notwithstanding any provision to the contrary in the Plan, the Administrator may establish compensation for non-employee Directors from time to time, subject to the limitations in the Plan. The Administrator will from time to time determine the terms, conditions and amounts of all such non-employee Director compensation in its discretion and pursuant to the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of Awards granted to a non-employee Director as compensation for services as a non-employee Director during any fiscal year of the Company may not exceed $750,000, increased to $1,100,000 in the fiscal year in which the Plan’s effective date occurs or in the fiscal year of a non-employee Director’s initial service as a non-employee Director. The Administrator may make exceptions to this limit for individual non-employee Directors in extraordinary circumstances, as the Administrator may determine in its discretion, provided that the non-employee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving non-employee Directors.

 

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ARTICLE V.

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

5.1    General. The Administrator may grant Options or Stock Appreciation Rights to Service Providers subject to the limitations in the Plan, including any limitations in the Plan that apply to Incentive Stock Options. The Administrator will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock Appreciation Right and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right. A Stock Appreciation Right will entitle the Participant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of the Stock Appreciation Right an amount determined by multiplying the excess, if any, of the Fair Market Value of one Share on the date of exercise over the exercise price per Share of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations of the Plan or that the Administrator may impose and payable in cash, Shares valued at Fair Market Value or a combination of the two as the Administrator may determine or provide in the Award Agreement.

5.2    Exercise Price. The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in the Award Agreement. The exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option or Stock Appreciation Right.

5.3    Duration. Each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that the term of an Option or Stock Appreciation Right will not exceed ten years. Notwithstanding the foregoing and unless determined otherwise by the Company, in the event that on the last business day of the term of an Option or Stock Appreciation Right (other than an Incentive Stock Option) (i) the exercise of the Option or Stock Appreciation Right is prohibited by Applicable Law, as determined by the Company, or (ii) Shares may not be purchased or sold by the applicable Participant due to any Company insider trading policy (including blackout periods) or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the term of the Option or Stock Appreciation Right shall be extended until the date that is thirty (30) days after the end of the legal prohibition, black-out period or lock-up agreement, as determined by the Company; provided, however, in no event shall the extension last beyond the ten year term of the applicable Option or Stock Appreciation Right. Notwithstanding the foregoing, if the Participant, prior to the end of the term of an Option or Stock Appreciation Right, violates the non-competition, non-solicitation, confidentiality or other similar restrictive covenant provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company or any of its Subsidiaries, the right of the Participant and the Participant’s transferees to exercise any Option or Stock Appreciation Right issued to the Participant shall terminate immediately upon such violation, unless the Company otherwise determines. In addition, if, prior to the end of the term of an Option or Stock Appreciation Right, the Participant is given notice by the Company or any of its Subsidiaries of the Participant’s Termination of Service by the Company or any of its Subsidiaries for Cause, and the effective date of such Termination of Service is subsequent to the date of the delivery of such notice, the right of the Participant and the Participant’s transferees to exercise any Option or Stock Appreciation Right issued to the Participant shall be suspended from the time of the delivery of such notice until the earlier of (i) such time as it is determined or otherwise agreed that the Participant’s service as a Service Provider will not be terminated for Cause as provided in such notice or (ii) the effective date of the Participant’s Termination of Service by the Company or any of its Subsidiaries for Cause (in which case the right of the Participant and the Participant’s transferees to exercise any Option or Stock Appreciation Right issued to the Participant will terminate immediately upon the effective date of such termination of Service).

 

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5.4    Exercise. Options and Stock Appreciation Rights may be exercised by delivering to the Company a written notice of exercise, in a form the Administrator approves (which may be electronic), signed by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, payment in full (i) as specified in Section 5.5 for the number of Shares for which the Award is exercised and (ii) as specified in Section 9.5 for any applicable taxes. Unless the Administrator otherwise determines, an Option or Stock Appreciation Right may not be exercised for a fraction of a Share.

5.5    Payment Upon Exercise. Subject to Section 10.8, any Company insider trading policy (including blackout periods) and Applicable Laws, the exercise price of an Option must be paid by:

(a)    cash, wire transfer of immediately available funds or by check payable to the order of the Company, provided that the Company may limit the use of one of the foregoing payment forms if one or more of the payment forms below is permitted;

(b)    if there is a public market for Shares at the time of exercise, unless the Company otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to pay the exercise price, or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price; provided that such amount is paid to the Company at such time as may be required by the Administrator;

(c)    to the extent permitted by the Administrator, delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their Fair Market Value;

(d)    to the extent permitted by the Administrator, surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Value on the exercise date;

(e)    to the extent permitted by the Administrator, delivery of a promissory note or any other property that the Administrator determines is good and valuable consideration; or

(f)    to the extent permitted by the Company, any combination of the above payment forms approved by the Administrator.

ARTICLE VI.

RESTRICTED STOCK; RESTRICTED STOCK UNITS

6.1    General. The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to the Company’s right to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant (or to require forfeiture of such shares) if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator may grant to Service Providers Restricted Stock Units, which may be subject to vesting and forfeiture conditions during the applicable restriction period or periods, as set forth in an Award Agreement. The Administrator will determine and set forth in the Award Agreement the terms and conditions for each Restricted Stock and Restricted Stock Unit Award, subject to the conditions and limitations contained in the Plan.

 

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6.2    Restricted Stock.

(a)    Dividends. Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such Shares, unless the Administrator provides otherwise in the Award Agreement. In addition, unless the Administrator provides otherwise, if any dividends or distributions are paid in Shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, the Shares or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid.

(b)    Stock Certificates. The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of shares of Restricted Stock, together with a stock power endorsed in blank.

6.3    Restricted Stock Units.

(a)    Settlement. The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, in a manner intended to comply with Section 409A.

(b)    Stockholder Rights. A Participant will have no rights of a stockholder with respect to Shares subject to any Restricted Stock Unit unless and until the Shares are delivered in settlement of the Restricted Stock Unit.

(c)    Dividend Equivalents. If the Administrator provides, a grant of Restricted Stock Units may provide a Participant with the right to receive Dividend Equivalents. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Restricted Stock Units with respect to which the Dividend Equivalents are granted and subject to other terms and conditions as set forth in the Award Agreement.

ARTICLE VII.

OTHER STOCK OR CASH BASED AWARDS

Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive Shares to be delivered in the future and including annual or other periodic or long-term cash bonus awards (whether based on specified Performance Criteria or otherwise), in each case subject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines. Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal (which may be based on the Performance Criteria), transfer restrictions, and vesting conditions, which will be set forth in the applicable Award Agreement.

 

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ARTICLE VIII.

ADJUSTMENTS FOR CHANGES IN COMMON STOCK

AND CERTAIN OTHER EVENTS

8.1    Equity Restructuring(a). In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article VIII, the Administrator will equitably adjust each outstanding Award as it deems appropriate to reflect the Equity Restructuring, which may include adjusting the number and type of securities subject to each outstanding Award and/or the Award’s exercise price or grant price (if applicable), granting new Awards to Participants, and making a cash payment to Participants. The adjustments provided under this Section 8.1 will be nondiscretionary and final and binding on the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.

8.2    Corporate Transactions. In the event of any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, combination, amalgamation, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Laws or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change) and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Laws or accounting principles:

(a)    To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;

(b)    To provide that such Award shall vest and, to the extent applicable, be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;

(c)    To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and/or applicable exercise or purchase price, in all cases, as determined by the Administrator;

(d)    To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards and/or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article IV hereof on the maximum number and kind of shares which may be issued) and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards;

(e)    To replace such Award with other rights or property selected by the Administrator; and/or

 

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(f)    To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.

8.3    Administrative Stand Still. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of Common Stock, including any Equity Restructuring or any securities offering or other similar transaction, for administrative convenience, the Administrator may refuse to permit the exercise of any Award for up to sixty days before or after such transaction.

8.4    General. Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 8.1 above or the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger, consolidation dissolution or liquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares. The Administrator may treat Participants and Awards (or portions thereof) differently under this Article VIII.

ARTICLE IX.

GENERAL PROVISIONS APPLICABLE TO AWARDS

9.1    Transferability. Except as the Administrator may determine or provide in an Award Agreement or otherwise for Awards other than Incentive Stock Options, Awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or, subject to the Administrator’s consent, pursuant to a domestic relations order, and, during the life of the Participant, will be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, will include references to a Participant’s authorized transferee that the Administrator specifically approves.

9.2    Documentation. Each Award will be evidenced in an Award Agreement, which may be written or electronic, as the Administrator determines. Each Award may contain terms and conditions in addition to those set forth in the Plan.

9.3    Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.

9.4    Termination of Status. The Administrator will determine how the disability, death, retirement, authorized leave of absence or any other change or purported change in a Participant’s Service Provider status affects an Award and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable.

 

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9.5    Withholding. Each Participant must pay the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by law to be withheld in connection with such Participant’s Awards by the date of the event creating the tax liability. The Company may deduct an amount sufficient to satisfy such tax obligations based on the applicable statutory withholding rates (or such other rate as may be determined by the Company after considering any accounting consequences or costs) from any payment of any kind otherwise due to a Participant. Subject to Section 10.8 and any Company insider trading policy (including blackout periods), Participants may satisfy such tax obligations (i) in cash, by wire transfer of immediately available funds, by check made payable to the order of the Company, provided that the Company may limit the use of the foregoing payment forms if one or more of the payment forms below is permitted, (ii) to the extent permitted by the Administrator, in whole or in part by delivery of Shares, including Shares retained from the Award creating the tax obligation, valued at their Fair Market Value, (iii) if there is a public market for Shares at the time the tax obligations are satisfied, unless the Company otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to satisfy the tax obligations, or (B) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to satisfy the tax withholding; provided that such amount is paid to the Company at such time as may be required by the Administrator, or (iv) to the extent permitted by the Company, any combination of the foregoing payment forms approved by the Administrator. If any tax withholding obligation will be satisfied under clause (ii) of the immediately preceding sentence by the Company’s retention of Shares from the Award creating the tax obligation and there is a public market for Shares at the time the tax obligation is satisfied, the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on the applicable Participant’s behalf some or all of the Shares retained and to remit the proceeds of the sale to the Company or its designee, and each Participant’s acceptance of an Award under the Plan will constitute the Participant’s authorization to the Company and instruction and authorization to such brokerage firm to complete the transactions described in this sentence.

9.6    Amendment of Award; Repricing. The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date, and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Participant’s consent to such action will be required unless (i) the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award, or (ii) the change is permitted under Article VIII or pursuant to Section 10.6. Notwithstanding the foregoing or anything in the Plan to the contrary, the Administrator may not except pursuant to Article VIII, without the approval of the stockholders of the Company, reduce the exercise price per share of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price per share that is less than the exercise price per share of the original Options or Stock Appreciation Rights.

9.7    Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all Award conditions have been met or removed to the Company’s satisfaction, (ii) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy any Applicable Laws. The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.

 

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9.8    Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.

9.9    Additional Terms of Incentive Stock Options. The Administrator may grant Incentive Stock Options only to employees of the Company, any of its present or future parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years. All Incentive Stock Options will be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option, the Participant agrees to give prompt notice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option made within (i) two years from the grant date of the Option or (ii) one year after the transfer of such Shares to the Participant, specifying the date of the disposition or other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition or other transfer. Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code. Any Incentive Stock Option or portion thereof that fails to qualify as an “incentive stock option” under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the $100,000 limitation under Treasury Regulation Section 1.422-4, will be a Non-Qualified Stock Option.

ARTICLE X.

MISCELLANEOUS

10.1    No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement.

10.2    No Rights as Stockholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Laws require, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on stock certificates issued under the Plan that the Administrator deems necessary or appropriate to comply with Applicable Laws.

10.3    Effective Date and Term of Plan. Unless earlier terminated by the Board, the Plan will become effective on the day prior to the Public Trading Date and will remain in effect until the tenth anniversary of the earlier of (i) the date the Board adopted the Plan or (ii) the date the Company’s stockholders approved the Plan, but Awards previously granted may extend beyond that date in accordance with the Plan. If the Plan is not approved by the Company’s stockholders, the Plan will not become effective, no Awards will be granted under the Plan and the Prior Plans will continue in full force and effect in accordance with their terms.

 

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10.4    Amendment of Plan. The Administrator may amend, suspend or terminate the Plan at any time; provided that no amendment, other than an increase to the Overall Share Limit, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participant’s consent. No Awards may be granted under the Plan during any suspension period or after Plan termination. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect before such suspension or termination. The Board will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.

10.5    Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.

10.6    Section 409A.

(a)    General. The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (A) exempt this Plan or any Award from Section 409A, or (B) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date. The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 10.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A.

(b)    Separation from Service. If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a termination of a Participant’s Service Provider relationship will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the termination of the Participant’s Service Provider relationship. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”

(c)    Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.

 

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10.7    Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent of the Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his or her capacity as an Administrator, director, officer, other employee or agent of the Company or any Subsidiary. The Company will indemnify and hold harmless each director, officer, other employee and agent of the Company or any Subsidiary that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless arising from such person’s own fraud or bad faith.

10.8    Lock-Up Period. The Company may, at the request of any underwriter representative or otherwise, in connection with registering the offering of any Company securities under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any Shares or other Company securities during a period of up to one hundred eighty days following the effective date of a Company registration statement filed under the Securities Act, or such longer period as determined by the underwriter.

10.9    Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this section by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”). The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data that the Company holds regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 10.9 in writing, without cost, by contacting the local human resources representative. The Company may cancel Participant’s ability to participate in the Plan and, in the Administrator’s discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws the consents in this Section 10.9. For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.

10.10    Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.

 

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10.11    Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary) that the Administrator has approved, the Plan will govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan will not apply.

10.12    Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding any state’s choice-of-law principles requiring the application of a jurisdiction’s laws other than the State of Delaware.

10.13    Claw-back Provisions. All Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to any Company claw-back policy, including any claw-back policy adopted to comply with Applicable Laws (including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder) as set forth in such claw-back policy or the Award Agreement.

10.14    Titles and Headings. The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.

10.15    Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Laws. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in conformance with Applicable Laws. To the extent Applicable Laws permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Laws.

10.16    Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except as expressly provided in writing in such other plan or an agreement thereunder.

10.17    Broker-Assisted Sales. In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid under the final sentence of Section 9.5: (a) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other Participants in the Plan in which all participants receive an average price; (c) the applicable Participant will be responsible for all broker’s fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for such sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.

 

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ARTICLE XI.

DEFINITIONS

As used in the Plan, the following words and phrases will have the following meanings:

11.1    “Administrator” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.

11.2    “Applicable Laws” means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted.

11.3    “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units or Other Stock or Cash Based Awards.

11.4    “Award Agreement” means a written agreement evidencing an Award, which may be electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.

11.5    “Board” means the Board of Directors of the Company.

11.6    “Cause” means (i) if a Participant is a party to a written employment or consulting agreement with the Company or any of its Subsidiaries or an Award Agreement in which the term “cause” is defined (a “Relevant Agreement”), “Cause” as defined in the Relevant Agreement, and (ii) if no Relevant Agreement exists, (A) the Administrator’s determination that the Participant failed to substantially perform the Participant’s duties (other than a failure resulting from the Participant’s Disability); (B) the Administrator’s determination that the Participant failed to carry out, or comply with any lawful and reasonable directive of the Board or the Participant’s immediate supervisor; (C) the occurrence of any act or omission by the Participant that could reasonably be expected to result in (or has resulted in) the Participant’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (D) the Participant’s unlawful use (including being under the influence) or possession of illegal drugs on the premises of the Company or any of its Subsidiaries or while performing the Participant’s duties and responsibilities for the Company or any of its Subsidiaries; or (E) the Participant’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its Subsidiaries.

11.7    “Change in Control” means and includes each of the following:

(a)    A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (i) and (ii) of subsection (c) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, an employee benefit plan maintained by the Company or any of its Subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or

(b)    During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c)) whose election by the Board or nomination for election by the Company’s

 

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stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(c)    The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

(i)    which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

(ii)    after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.

Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b) or (c) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).

The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.

11.8    “Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.

11.9    “Committee” means one or more committees or subcommittees of the Board, which may include one or more Company directors or executive officers, to the extent Applicable Laws permit. To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a “non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.

11.10    “Common Stock” means the common stock of the Company.

 

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11.11    “Company” means Centrexion Therapeutics Corporation, a Delaware corporation, or any successor.

11.12     “Consultant” means any person, including any adviser, engaged by the Company or its parent or Subsidiary to render services to such entity if the consultant or adviser: (i) renders bona fide services to the Company; (ii) renders services not in connection with the offer or sale of securities in a capital-raising transaction and does not directly or indirectly promote or maintain a market for the Company’s securities; and (iii) is a natural person.

11.13    “Designated Beneficiary” means the beneficiary or beneficiaries the Participant designates, in a manner the Administrator determines, to receive amounts due or exercise the Participant’s rights if the Participant dies or becomes incapacitated. Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate.

11.14    “Director” means a Board member.

11.15    “Disability” means a permanent and total disability under Section 22(e)(3) of the Code, as amended.

11.16    “Dividend Equivalents” means a right granted to a Participant under the Plan to receive the equivalent value (in cash or Shares) of dividends paid on Shares.

11.17    “Employee” means any employee of the Company or its Subsidiaries.

11.18    “Equity Restructuring” means a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other Company securities) or the share price of Common Stock (or other Company securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.

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

11.20    “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: (i) if the Common Stock is listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (ii) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (iii) without an established market for the Common Stock, the Administrator will determine the Fair Market Value in its discretion. Notwithstanding the foregoing, with respect to any Award granted on the pricing date of the Company’s initial public offering, the Fair Market Value shall mean the initial public offering price of a Share as set forth in the Company’s final prospectus relating to its initial public offering filed with the Securities and Exchange Commission.

11.21    “Greater Than 10% Stockholder” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporation, as defined in Section 424(e) and (f) of the Code, respectively.

 

15


11.22    “Incentive Stock Option” means an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code.

11.23    “Non-Qualified Stock Option” means an Option not intended or not qualifying as an Incentive Stock Option.

11.24    “Option” means an option to purchase Shares.

11.25    “Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property.

11.26    “Overall Share Limit” means the sum of (i) 2,128,294 Shares; (ii) any shares of Common Stock which are subject to Prior Plan Awards which become available for issuance under the Plan pursuant to Article IV and (iii) an annual increase on the first day of each calendar year beginning January 1, 2019 and ending on and including January 1, 2028, equal to the lesser of (A) 4% of the aggregate number of shares of Common Stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of Shares as is determined by the Board.

11.27     “Participant” means a Service Provider who has been granted an Award.

11.28    “Performance Criteria” mean the criteria (and adjustments) that the Administrator may select for an Award to establish performance goals for a performance period, which may include the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a Subsidiary, division, business segment or business unit of the Company or a Subsidiary, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies. The Committee may provide for exclusion of the impact of an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, extraordinary items, and other unusual, infrequently occurring or non-recurring charges or events, (b) asset write-downs, (c) litigation or claim judgments or settlements, (d) acquisitions or divestitures, (e) reorganization or change in the corporate structure or capital structure of the Company, (f) an event either not directly related to the operations of the Company, Subsidiary, division, business segment or business

 

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unit or not within the reasonable control of management, (g) foreign exchange gains and losses, (h) a change in the fiscal year of the Company, (i) the refinancing or repurchase of bank loans or debt securities, (j) unbudgeted capital expenditures, (k) the issuance or repurchase of equity securities and other changes in the number of outstanding shares, (l) conversion of some or all of convertible securities to Common Stock, (m) any business interruption event (n) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles, or (o) the effect of changes in other laws or regulatory rules affecting reported results.

11.29    “Plan” means this 2018 Incentive Award Plan.

11.30    “Prior Plans” means, collectively, the Company’s 2013 Equity Incentive Plan and any prior equity incentive plans of the Company or its predecessor.

11.31     “Prior Plan Award” means an award outstanding under the Prior Plans as of the Plan’s effective date in Section 10.3.

11.32    “Public Trading Date” means the first date upon which the Common Stock is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system, or, if earlier, the date on which the Company becomes a “publicly held corporation” for purposes of Treasury Regulation Section 1.162-27(c)(1).

11.33    “Restricted Stock” means Shares awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.

11.34    “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date, subject to certain vesting conditions and other restrictions.

11.35    “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.

11.36    “Section 409A” means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authority thereunder.

11.37    “Securities Act” means the Securities Act of 1933, as amended.

11.38    “Service Provider” means an Employee, Consultant or Director.

11.39    “Shares” means shares of Common Stock.

11.40    “Stock Appreciation Right” means a stock appreciation right granted under Article V.

11.41    “Subsidiary” means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.

 

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11.42    “Substitute Awards” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.

11.43    “Termination of Service” means the date the Participant ceases to be a Service Provider.

* * * * *

 

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CENTREXION THERAPEUTICS CORPORATION

2018 INCENTIVE AWARD PLAN

STOCK OPTION GRANT NOTICE

Capitalized terms not specifically defined in this Stock Option Grant Notice (the “Grant Notice”) have the meanings given to them in the 2018 Incentive Award Plan (as amended from time to time, the “Plan”) of Centrexion Therapeutics Corporation (the “Company”).

The Company has granted to the participant listed below (“Participant”) the stock option described in this Grant Notice (the “Option”), subject to the terms and conditions of the Plan and the Stock Option Agreement attached as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference.

 

Participant:   
Grant Date:   
Exercise Price per Share:   
Shares Subject to the Option:   
Final Expiration Date:   
Vesting Commencement Date:   
Vesting Schedule:    [To be specified in individual award agreements]
Type of Option    [Incentive Stock Option/Non-Qualified Stock Option]

By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.

 

CENTREXION THERAPEUTICS CORPORATION     PARTICIPANT
By:                       
Name:         [Participant Name]
Title:        


Exhibit A

STOCK OPTION AGREEMENT

Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.

ARTICLE I.

GENERAL

1.1    Grant of Option. The Company has granted to Participant the Option effective as of the grant date set forth in the Grant Notice (the “Grant Date”).

1.2    Incorporation of Terms of Plan. The Option is subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.

ARTICLE II.

PERIOD OF EXERCISABILITY

2.1    Commencement of Exercisability. The Option will vest and become exercisable according to the vesting schedule in the Grant Notice (the “Vesting Schedule”) except that any fraction of a Share as to which the Option would be vested or exercisable will be accumulated and will vest and become exercisable only when a whole Share has accumulated. Notwithstanding anything in the Grant Notice, the Plan or this Agreement to the contrary, unless the Administrator otherwise determines, the Option will immediately expire and be forfeited as to any portion that is not vested and exercisable as of Participant’s Termination of Service for any reason.

2.2    Duration of Exercisability. The Vesting Schedule is cumulative. Any portion of the Option which vests and becomes exercisable will remain vested and exercisable until the Option expires. The Option will be forfeited immediately upon its expiration.

2.3    Expiration of Option. The Option may not be exercised to any extent by anyone after, and will expire on, the first of the following to occur:

(a)    The final expiration date in the Grant Notice;

(b)    Except as the Administrator may otherwise approve, the expiration of three (3) months from the date of Participant’s Termination of Service, unless Participant’s Termination of Service is for Cause or by reason of Participant’s death or Disability;

(c)    Except as the Administrator may otherwise approve, the expiration of one (1) year from the date of Participant’s Termination of Service by reason of Participant’s death or Disability; and

(d)    Except as the Administrator may otherwise approve, Participant’s Termination of Service for Cause.


ARTICLE III.

EXERCISE OF OPTION

3.1    Person Eligible to Exercise. During Participant’s lifetime, only Participant may exercise the Option. After Participant’s death, any exercisable portion of the Option may, prior to the time the Option expires, be exercised by Participant’s Designated Beneficiary as provided in the Plan.

3.2    Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised, in whole or in part, according to the procedures in the Plan at any time prior to the time the Option or portion thereof expires, except that the Option may only be exercised for whole Shares.

3.3    Tax Withholding.

(a)    The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with the Plan of any withholding tax arising in connection with the Option as Participant’s election to satisfy all or any portion of the withholding tax by requesting the Company retain Shares otherwise issuable under the Option.

(b)    Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the Option, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the Option. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or exercise of the Option or the subsequent sale of Shares. The Company and the Subsidiaries do not commit and are under no obligation to structure the Option to reduce or eliminate Participant’s tax liability.

ARTICLE IV.

OTHER PROVISIONS

4.1    Adjustments. Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.

4.2    Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant (or, if Participant is then deceased, to the person entitled to exercise the Option) at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.

4.3    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

4.4    Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.

 

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4.5    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

4.6    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Option will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.

4.7    Entire Agreement. The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

4.8    Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.

4.9    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to the Option, as and when exercised pursuant to the terms hereof.

4.10    Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.

4.11    Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.

4.12    Incentive Stock Options. If the Option is designated as an Incentive Stock Option:

(a)    Participant acknowledges that to the extent the aggregate fair market value of shares (determined as of the time the option with respect to the shares is granted) with respect to which stock options intended to qualify as “incentive stock options” under Section 422 of the Code, including the Option, are exercisable for the first time by Participant during any calendar year exceeds $100,000 or if for any other reason such stock options do not qualify or cease to qualify for treatment as “incentive stock options” under Section 422 of the Code, such stock options (including the Option) will be treated as non-qualified stock options. Participant further acknowledges that the rule set forth in the preceding

 

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sentence will be applied by taking the Option and other stock options into account in the order in which they were granted, as determined under Section 422(d) of the Code. Participant acknowledges that amendments or modifications made to the Option pursuant to the Plan that would cause the Option to become a Non-Qualified Stock Option will not materially or adversely affect Participant’s rights under the Option, and that any such amendment or modification shall not require Participant’s consent. Participant also acknowledges that if the Option is exercised more than three (3) months after Participant’s Termination of Service as an Employee, other than by reason of death or disability, the Option will be taxed as a Non-Qualified Stock Option.

(b)    Participant will give prompt written notice to the Company of any disposition or other transfer of any Shares acquired under this Agreement if such disposition or other transfer is made (a) within two (2) years from the Grant Date or (b) within one (1) year after the transfer of such Shares to Participant. Such notice will specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer.

* * * * *

 

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CENTREXION THERAPEUTICS CORPORATION

2018 INCENTIVE AWARD PLAN

RESTRICTED STOCK UNIT GRANT NOTICE

Capitalized terms not specifically defined in this Restricted Stock Unit Grant Notice (the “Grant Notice”) have the meanings given to them in the 2018 Incentive Award Plan (as amended from time to time, the “Plan”) of Centrexion Therapeutics Corporation (the “Company”).

The Company has granted to the participant listed below (“Participant”) the Restricted Stock Units described in this Grant Notice (the “RSUs”), subject to the terms and conditions of the Plan and the Restricted Stock Unit Agreement attached as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference.

 

Participant:   
Grant Date:   
Number of RSUs:   
Vesting Commencement Date:   
Vesting Schedule:    [To be specified in individual award agreements]

By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.

 

CENTREXION THERAPEUTICS CORPORATION     PARTICIPANT
By:                       
Name:         [Participant Name]
Title:        


Exhibit A

RESTRICTED STOCK UNIT AGREEMENT

Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.

ARTICLE I.

GENERAL

1.1    Award of RSUs and Dividend Equivalents.

(a)    The Company has granted the RSUs to Participant effective as of the grant date set forth in the Grant Notice (the “Grant Date”). Each RSU represents the right to receive one Share or, at the option of the Company, an amount of cash, in either case, as set forth in this Agreement. Participant will have no right to the distribution of any Shares or payment of any cash until the time (if ever) the RSUs have vested.

(b)    The Company hereby grants to Participant, with respect to each RSU, a Dividend Equivalent for ordinary cash dividends paid to substantially all holders of outstanding Shares with a record date after the Grant Date and prior to the date the applicable RSU is settled, forfeited or otherwise expires. Each Dividend Equivalent entitles Participant to receive the equivalent value of any such ordinary cash dividends paid on a single Share. The Company will establish a separate Dividend Equivalent bookkeeping account (a “Dividend Equivalent Account”) for each Dividend Equivalent and credit the Dividend Equivalent Account (without interest) on the applicable dividend payment date with the amount of any such cash paid.

1.2    Incorporation of Terms of Plan. The RSUs are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.

1.3    Unsecured Promise. The RSUs and Dividend Equivalents will at all times prior to settlement represent an unsecured Company obligation payable only from the Company’s general assets.

ARTICLE II.

VESTING; FORFEITURE AND SETTLEMENT

2.1    Vesting; Forfeiture. The RSUs will vest according to the vesting schedule in the Grant Notice except that any fraction of an RSU that would otherwise be vested will be accumulated and will vest only when a whole RSU has accumulated. In the event of Participant’s Termination of Service for any reason, all unvested RSUs will immediately and automatically be cancelled and forfeited, except as otherwise determined by the Administrator or provided in a binding written agreement between Participant and the Company. Dividend Equivalents (including any Dividend Equivalent Account balance) will vest or be forfeited, as applicable, upon the vesting or forfeiture of the RSU with respect to which the Dividend Equivalent (including the Dividend Equivalent Account) relates.

2.2    Settlement.

(a)    RSUs and Dividend Equivalents (including any Dividend Equivalent Account balance) will be paid in Shares or cash at the Company’s option as soon as administratively practicable after the vesting of the applicable RSU, but in no event more than sixty (60) days after the RSU’s vesting date. Notwithstanding the foregoing, the Company may delay any payment under this Agreement that the Company


reasonably determines would violate Applicable Law until the earliest date the Company reasonably determines the making of the payment will not cause such a violation (in accordance with Treasury Regulation Section 1.409A-2(b)(7)(ii)), provided the Company reasonably believes the delay will not result in the imposition of excise taxes under Section 409A.

(b)    If an RSU is paid in cash, the amount of cash paid with respect to the RSU will equal the Fair Market Value of a Share on the day immediately preceding the payment date. If a Dividend Equivalent is paid in Shares, the number of Shares paid with respect to the Dividend Equivalent will equal the quotient, rounded down to the nearest whole Share, of the Dividend Equivalent Account balance divided by the Fair Market Value of a Share on the day immediately preceding the payment date.

ARTICLE III.

TAXATION AND TAX WITHHOLDING

3.1    Representation. Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences of this Award and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.

3.2    Tax Withholding.

(a)    The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with the Plan of any withholding tax arising in connection with the RSUs or Dividend Equivalents as Participant’s election to satisfy all or any portion of the withholding tax by requesting the Company retain Shares otherwise issuable under the Award.

(b)    Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the RSUs and the Dividend Equivalents, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the RSUs or Dividend Equivalents. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the RSUs or the Dividend Equivalents or the subsequent sale of Shares. The Company and the Subsidiaries do not commit and are under no obligation to structure the RSUs or Dividend Equivalents to reduce or eliminate Participant’s tax liability.

ARTICLE IV.

OTHER PROVISIONS

4.1    Adjustments. Participant acknowledges that the RSUs, the Shares subject to the RSUs and the Dividend Equivalents are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.

4.2    Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.

 

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4.3    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

4.4    Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.

4.5    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

4.6    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement, the RSUs and the Dividend Equivalents will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.

4.7    Entire Agreement. The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

4.8    Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.

4.9    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs and Dividend Equivalents, and rights no greater than the right to receive cash or the Shares as a general unsecured creditor with respect to the RSUs and Dividend Equivalents, as and when settled pursuant to the terms of this Agreement.

4.10    Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.

4.11    Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.

* * * * *

 

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CENTREXION THERAPEUTICS CORPORATION

2018 INCENTIVE AWARD PLAN

RESTRICTED STOCK GRANT NOTICE

Capitalized terms not specifically defined in this Restricted Stock Grant Notice (the “Grant Notice”) have the meanings given to them in the 2018 Incentive Award Plan (as amended from time to time, the “Plan”) of Centrexion Therapeutics Corporation (the “Company”).

The Company has granted to the participant listed below (“Participant”) the shares of Restricted Stock described in this Grant Notice (the “Restricted Shares”), subject to the terms and conditions of the Plan and the Restricted Stock Agreement attached as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference.

 

Participant:   
Grant Date:   
Number of Restricted Shares:   
Vesting Commencement Date:   
Vesting Schedule:    [To be specified in individual award agreements]

By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.

 

CENTREXION THERAPEUTICS CORPORATION     PARTICIPANT
By:                       
Name:         [Participant Name]
Title:        


Exhibit A

RESTRICTED STOCK AGREEMENT

Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.

ARTICLE I.

GENERAL

1.1    Issuance of Restricted Shares. The Company will issue the Restricted Shares to the Participant effective as of the grant date set forth in the Grant Notice and will cause (a) a stock certificate or certificates representing the Restricted Shares to be registered in Participant’s name or (b) the Restricted Shares to be held in book-entry form. If a stock certificate is issued, the certificate will be delivered to, and held in accordance with this Agreement by, the Company or its authorized representatives and will bear the restrictive legends required by this Agreement. If the Restricted Shares are held in book-entry form, then the book-entry will indicate that the Restricted Shares are subject to the restrictions of this Agreement.

1.2    Incorporation of Terms of Plan. The Restricted Shares are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.

ARTICLE II.

VESTING, FORFEITURE AND ESCROW

2.1    Vesting. The Restricted Shares will become vested Shares (the “Vested Shares”) according to the vesting schedule in the Grant Notice except that any fraction of a Share that would otherwise become a Vested Share will be accumulated and will become a Vested Share only when a whole Vested Share has accumulated.

2.2    Forfeiture. In the event of Participant’s Termination of Service for any reason, Participant will immediately and automatically forfeit to the Company any Shares that are not Vested Shares (the “Unvested Shares”) at the time of Participant’s Termination of Service, except as otherwise determined by the Administrator or provided in a binding written agreement between Participant and the Company. Upon forfeiture of Unvested Shares, the Company will become the legal and beneficial owner of the Unvested Shares and all related interests and Participant will have no further rights with respect to the Unvested Shares.

2.3    Escrow.

(a)    Unvested Shares will be held by the Company or its authorized representatives until (i) they are forfeited, (ii) they become Vested Shares or (iii) this Agreement is no longer in effect. By accepting this Award, Participant appoints the Company and its authorized representatives as Participant’s attorney(s)-in-fact to take all actions necessary to effect any transfer of forfeited Unvested Shares (and Retained Distributions (as defined below), if any, paid on such forfeited Unvested Shares) to the Company as may be required pursuant to the Plan or this Agreement and to execute such representations or other documents or assurances as the Company or such representatives deem necessary or advisable in connection with any such transfer. The Company, or its authorized representative, will not be liable for any good faith act or omission with respect to the holding in escrow or transfer of the Restricted Shares.


(b)    All cash dividends and other distributions made or declared with respect to Unvested Shares (“Retained Distributions”) will be held by the Company until the time (if ever) when the Unvested Shares to which such Retained Distributions relate become Vested Shares. The Company will establish a separate Retained Distribution bookkeeping account (“Retained Distribution Account”) for each Unvested Share with respect to which Retained Distributions have been made or declared in cash and credit the Retained Distribution Account (without interest) on the date of payment with the amount of such cash made or declared with respect to the Unvested Share. Retained Distributions (including any Retained Distribution Account balance) will immediately and automatically be forfeited upon forfeiture of the Unvested Share with respect to which the Retained Distributions were paid or declared.

(c)    As soon as reasonably practicable following the date on which an Unvested Share becomes a Vested Share, the Company will (i) cause the certificate (or a new certificate without the legend required by this Agreement, if Participant so requests) representing the Share to be delivered to Participant or, if the Share is held in book-entry form, cause the notations indicating the Share is subject to the restrictions of this Agreement to be removed and (ii) pay to Participant the Retained Distributions relating to the Share.

2.4    Rights as Stockholder. Except as otherwise provided in this Agreement or the Plan, upon issuance of the Restricted Shares by the Company, Participant will have all the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and to receive dividends or other distributions paid or made with respect to the Restricted Shares.

ARTICLE III.

TAXATION AND TAX WITHHOLDING

3.1    Representation. Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences of the Restricted Shares and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.

3.2    Section 83(b) Election. If Participant makes an election under Section 83(b) of the Code with respect to the Restricted Shares, Participant will deliver a copy of the election to the Company promptly after filing the election with the Internal Revenue Service.

3.3    Tax Withholding.

(a)    The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with the Plan of any withholding tax arising in connection with the Restricted Shares as Participant’s election to satisfy all or any portion of the withholding tax by requesting the Company retain Shares otherwise deliverable under the Award.

(b)    Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the Restricted Shares, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the Restricted Shares. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the Restricted Shares or the subsequent sale of the Restricted Shares. The Company and the Subsidiaries do not commit and are under no obligation to structure this Award to reduce or eliminate Participant’s tax liability.

 

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ARTICLE IV.

RESTRICTIVE LEGENDS AND TRANSFERABILITY

4.1    Legends. Any certificate representing a Restricted Share will bear the following legend until the Restricted Share becomes a Vested Share:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF THE COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A RESTRICTED STOCK AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

4.2    Transferability. The Restricted Shares and any Retained Distributions are subject to the restrictions on transfer in the Plan and may not be sold, assigned or transferred in any manner unless and until they become Vested Shares. Any attempted transfer or disposition of Unvested Shares or related Retained Distributions prior to the time the Unvested Shares become Vested Shares will be null and void. The Company will not be required to (a) transfer on its books any Restricted Share that has been sold or otherwise transferred in violation of this Agreement or (b) treat as owner of such Restricted Share or accord the right to vote or pay dividends to any purchaser or other transferee to whom such Restricted Share has been so transferred. The Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, or make appropriate notations to the same effect in its records.

ARTICLE V.

OTHER PROVISIONS

5.1    Adjustments. Participant acknowledges that the Restricted Shares are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.

5.2    Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.

5.3    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

5.4    Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.

5.5    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in this Agreement or the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

 

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5.6    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Restricted Shares will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.

5.7    Entire Agreement. The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

5.8    Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.

5.9    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Award.

5.10    Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.

5.11    Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.

* * * * *

 

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EX-10.3

Exhibit 10.3

CENTREXION THERAPEUTICS CORPORATION

2018 EMPLOYEE STOCK PURCHASE PLAN

ARTICLE I.

PURPOSE

The purposes of this Centrexion Therapeutics Corporation 2018 Employee Stock Purchase Plan (as it may be amended or restated from time to time, the “Plan”) are to assist Eligible Employees of Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), and its Designated Subsidiaries in acquiring a stock ownership interest in the Company pursuant to a plan which is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Code, and to help Eligible Employees provide for their future security and to encourage them to remain in the employment of the Company and its Designated Subsidiaries.

ARTICLE II.

DEFINITIONS AND CONSTRUCTION

Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates. Masculine, feminine and neuter pronouns are used interchangeably and each comprehends the others.

2.1    “Administrator” shall mean the entity that conducts the general administration of the Plan as provided in Article XI. The term “Administrator” shall refer to the Committee unless the Board has assumed the authority for administration of the Plan as provided in Article XI.

2.2    “Applicable Law” shall mean the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where rights under this Plan are granted.

2.3    “Board” shall mean the Board of Directors of the Company.

2.4    “Change in Control” shall mean and include each of the following:

(a)    A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (i) and (ii) of subsection (c) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, an employee benefit plan maintained by the Company or any of its Subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or

(b)    During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c)) whose election by the Board or nomination for election by the Company’s


stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(c)    The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

(i)    which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

(ii)    after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.

The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto.

2.5    “Code” shall mean the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.

2.6    “Common Stock” shall mean the common stock of the Company.

2.7    “Company” shall mean Centrexion Therapeutics Corporation, a Delaware corporation, or any successor.

2.8    “Compensation” of an Eligible Employee shall mean the gross base compensation received by such Eligible Employee as compensation for services to the Company or any Designated Subsidiary, including overtime payments and excluding sales commissions, incentive compensation, bonuses, expense reimbursements, fringe benefits and other special payments.

2.9    “Designated Subsidiary” shall mean any Subsidiary designated by the Administrator in accordance with Section 11.3(b).

2.10    “Effective Date” shall mean the day prior to the Public Trading Date.

2.11    “Eligible Employee” shall mean an Employee: (a) who does not, immediately after any rights under this Plan are granted, own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of Common Stock and other stock of the Company, a Parent or a Subsidiary (as determined under Section 423(b)(3) of the Code); (b) whose

 

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customary employment is for more than twenty hours per week; and (c) whose customary employment is for more than five months in any calendar year. For purposes of the foregoing, the rules of Section 424(d) of the Code with regard to the attribution of stock ownership shall apply in determining the stock ownership of an individual, and stock that an Employee may purchase under outstanding options shall be treated as stock owned by the Employee; provided, however, that the Administrator may provide in an Offering Document that an Employee shall not be eligible to participate in an Offering Period if: (i) such Employee is a highly compensated employee within the meaning of Section 423(b)(4)(D) of the Code; and/or (ii) such Employee has not met a service requirement designated by the Administrator pursuant to Section 423(b)(4)(A) of the Code (which service requirement may not exceed two years), and/or (iii) such Employee is a citizen or resident of a foreign jurisdiction and the grant of a right to purchase Common Stock under the Plan to such Employee would be prohibited under the laws of such foreign jurisdiction or the grant of a right to purchase Common Stock under the Plan to such Employee in compliance with the laws of such foreign jurisdiction would cause the Plan to violate the requirements of Section 423 of the Code, as determined by the Administrator in its sole discretion; provided, further, that any exclusion in clauses (i), (ii) or (iii) shall be applied in an identical manner under each Offering Period to all Employees, in accordance with Treasury Regulation Section 1.423-2(e).

2.12    “Employee” shall mean any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Designated Subsidiary. “Employee” shall not include any director of the Company or a Designated Subsidiary who does not render services to the Company or a Designated Subsidiary as an employee within the meaning of Section 3401(c) of the Code. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company or Designated Subsidiary and meeting the requirements of Treasury Regulation Section 1.421-1(h)(2). Where the period of leave exceeds three (3) months and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the first day immediately following such three (3)-month period.

2.13    “Enrollment Date” shall mean the first Trading Day of each Offering Period.

2.14    “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

2.15    “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: (i) if the Common Stock is listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (ii) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (iii) without an established market for the Common Stock, the Administrator will determine the Fair Market Value in its discretion.

2.16    “Offering Document” shall have the meaning given to such term in Section 4.1.

2.17    “Offering Period” shall have the meaning given to such term in Section 4.1.

2.18    “Parent” shall mean any corporation, other than the Company, in an unbroken chain of corporations ending with the Company if, at the time of the determination, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

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2.19    “Participant” shall mean any Eligible Employee who has executed a subscription agreement and been granted rights to purchase Common Stock pursuant to the Plan.

2.20    “Plan” shall mean this 2018 Employee Stock Purchase Plan.

2.21    “Public Trading Date shall mean the first date upon which the Common Stock is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system, or, if earlier, the date on which the Company becomes a “publicly held corporation” for purposes of Treasury Regulation Section 1.162-27(c)(1).

2.22    “Purchase Date” shall mean the last Trading Day of each Offering Period.

2.23    “Purchase Price” shall mean the purchase price designated by the Administrator in the applicable Offering Document (which purchase price shall not be less than 85% of the Fair Market Value of a Share on the Enrollment Date or on the Purchase Date, whichever is lower); provided, however, that, in the event no purchase price is designated by the Administrator in the applicable Offering Document, the purchase price for the Offering Periods covered by such Offering Document shall be 85% of the Fair Market Value of a Share on the Enrollment Date or on the Purchase Date, whichever is lower; provided, further, that the Purchase Price may be adjusted by the Administrator pursuant to Article VIII and shall not be less than the par value of a Share.

2.24    “Securities Act” shall mean the Securities Act of 1933, as amended.

2.25    “Share” shall mean a share of Common Stock.

2.26    “Subsidiary” shall mean any corporation, other than the Company, in an unbroken chain of corporations beginning with the Company if, at the time of the determination, each of the corporations other than the last corporation in an unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain; provided, however, that a limited liability company or partnership may be treated as a Subsidiary to the extent either (a) such entity is treated as a disregarded entity under Treasury Regulation Section 301.7701-3(a) by reason of the Company or any other Subsidiary that is a corporation being the sole owner of such entity, or (b) such entity elects to be classified as a corporation under Treasury Regulation Section 301.7701-3(a) and such entity would otherwise qualify as a Subsidiary.

2.27    “Trading Day” shall mean a day on which national stock exchanges in the United States are open for trading.

ARTICLE III.

SHARES SUBJECT TO THE PLAN

3.1    Number of Shares. Subject to Article VIII, the aggregate number of Shares that may be issued pursuant to rights granted under the Plan shall be 266,000 Shares. In addition to the foregoing, subject to Article VIII, on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028, the number of Shares available for issuance under the Plan shall be increased by that number of Shares equal to the lesser of (a) 1% of the Shares outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of Shares as determined by the Board. If any right granted under the Plan shall for any reason terminate without having been exercised, the Common Stock not purchased under such right shall again become available for issuance under the Plan. Notwithstanding anything in this Section 3.1 to the contrary, the number of Shares that may be issued or transferred pursuant to the rights granted under the Plan shall not exceed an aggregate of 3,697,572 Shares, subject to Article VIII.

 

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3.2    Stock Distributed. Any Common Stock distributed pursuant to the Plan may consist, in whole or in part, of authorized and unissued Common Stock, treasury stock or Common Stock purchased on the open market.

ARTICLE IV.

OFFERING PERIODS; OFFERING DOCUMENTS; PURCHASE DATES

4.1    Offering Periods. The Administrator may from time to time grant or provide for the grant of rights to purchase Common Stock under the Plan to Eligible Employees during one or more periods (each, an “Offering Period”) selected by the Administrator. The terms and conditions applicable to each Offering Period shall be set forth in an “Offering Document” adopted by the Administrator, which Offering Document shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate and shall be incorporated by reference into and made part of the Plan and shall be attached hereto as part of the Plan. The provisions of separate Offering Periods under the Plan need not be identical.

4.2    Offering Documents. Each Offering Document with respect to an Offering Period shall specify (through incorporation of the provisions of this Plan by reference or otherwise):

(a)    the length of the Offering Period, which period shall not exceed twenty-seven months;

(b)    the maximum number of Shares that may be purchased by any Eligible Employee during such Offering Period, which, in the absence of a contrary designation by the Administrator, shall be 25,000 Shares; and

(c)    such other provisions as the Administrator determines are appropriate, subject to the Plan.

ARTICLE V.

ELIGIBILITY AND PARTICIPATION

5.1    Eligibility. Any Eligible Employee who shall be employed by the Company or a Designated Subsidiary on a given Enrollment Date for an Offering Period shall be eligible to participate in the Plan during such Offering Period, subject to the requirements of this Article V and the limitations imposed by Section 423(b) of the Code.

5.2    Enrollment in Plan.

(a)    Except as otherwise set forth in an Offering Document or determined by the Administrator, an Eligible Employee may become a Participant in the Plan for an Offering Period by delivering a subscription agreement to the Company by such time prior to the Enrollment Date for such Offering Period (or such other date specified in the Offering Document) designated by the Administrator and in such form as the Company provides.

(b)    Each subscription agreement shall designate a whole percentage of such Eligible Employee’s Compensation to be withheld by the Company or the Designated Subsidiary employing such Eligible Employee on each payday during the Offering Period as payroll deductions under the Plan. The

 

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percentage of Compensation designated by an Eligible Employee may not be less than 1% and may not be more than the maximum percentage specified by the Administrator in the applicable Offering Document (which percentage shall be 25% in the absence of any such designation) as payroll deductions. The payroll deductions made for each Participant shall be credited to an account for such Participant under the Plan and shall be deposited with the general funds of the Company.

(c)    A Participant may increase or decrease the percentage of Compensation designated in his or her subscription agreement, subject to the limits of this Section 5.2, or may suspend his or her payroll deductions, at any time during an Offering Period; provided, however, that the Administrator may limit the number of changes a Participant may make to his or her payroll deduction elections during each Offering Period in the applicable Offering Document (and in the absence of any specific designation by the Administrator, a Participant shall be allowed one change to his or her payroll deduction elections during each Offering Period). Any such change or suspension of payroll deductions shall be effective with the first full payroll period following five business days after the Company’s receipt of the new subscription agreement (or such shorter or longer period as may be specified by the Administrator in the applicable Offering Document). In the event a Participant suspends his or her payroll deductions, such Participant’s cumulative payroll deductions prior to the suspension shall remain in his or her account and shall be applied to the purchase of Shares on the next occurring Purchase Date and shall not be paid to such Participant unless he or she withdraws from participation in the Plan pursuant to Article VII.

(d)    Except as otherwise set forth in an Offering Document or determined by the Administrator, a Participant may participate in the Plan only by means of payroll deduction and may not make contributions by lump sum payment for any Offering Period.

5.3    Payroll Deductions. Except as otherwise provided in the applicable Offering Document, payroll deductions for a Participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which the Participant’s authorization is applicable, unless sooner terminated by the Participant as provided in Article VII or suspended by the Participant or the Administrator as provided in Section 5.2 and Section 5.6, respectively.

5.4    Effect of Enrollment. A Participant’s completion of a subscription agreement will enroll such Participant in the Plan for each subsequent Offering Period on the terms contained therein until the Participant either submits a new subscription agreement, withdraws from participation under the Plan as provided in Article VII or otherwise becomes ineligible to participate in the Plan.

5.5    Limitation on Purchase of Common Stock. An Eligible Employee may be granted rights under the Plan only if such rights, together with any other rights granted to such Eligible Employee under “employee stock purchase plans” of the Company, any Parent or any Subsidiary, as specified by Section 423(b)(8) of the Code, do not permit such employee’s rights to purchase stock of the Company or any Parent or Subsidiary to accrue at a rate that exceeds $25,000 of the fair market value of such stock (determined as of the first day of the Offering Period during which such rights are granted) for each calendar year in which such rights are outstanding at any time. This limitation shall be applied in accordance with Section 423(b)(8) of the Code.

5.6    Decrease or Suspension of Payroll Deductions. Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 5.5 or the other limitations set forth in this Plan, a Participant’s payroll deductions may be suspended by the Administrator at any time during an Offering Period. The balance of the amount credited to the account of each Participant that has not been applied to the purchase of Shares by reason of Section 423(b)(8) of the Code, Section 5.5 or the other limitations set forth in this Plan shall be paid to such Participant in one lump sum in cash as soon as reasonably practicable after the Purchase Date.

 

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5.7    Foreign Employees. In order to facilitate participation in the Plan, the Administrator may provide for such special terms applicable to Participants who are citizens or residents of a foreign jurisdiction, or who are employed by a Designated Subsidiary outside of the United States, as the Administrator may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Such special terms may not be more favorable than the terms of rights granted under the Plan to Eligible Employees who are residents of the United States. Moreover, the Administrator may approve such supplements to, or amendments, restatements or alternative versions of, this Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of this Plan as in effect for any other purpose. No such special terms, supplements, amendments or restatements shall include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the stockholders of the Company.

5.8    Leave of Absence. During leaves of absence approved by the Company meeting the requirements of Treasury Regulation Section 1.421-1(h)(2) under the Code, a Participant may continue participation in the Plan by making cash payments to the Company on his or her normal payday equal to his or her authorized payroll deduction.

ARTICLE VI.

GRANT AND EXERCISE OF RIGHTS

6.1    Grant of Rights. On the Enrollment Date of each Offering Period, each Eligible Employee participating in such Offering Period shall be granted a right to purchase the maximum number of Shares specified under Section 4.2, subject to the limits in Section 5.5, and shall have the right to buy, on each Purchase Date during such Offering Period (at the applicable Purchase Price), such number of whole Shares as is determined by dividing (a) such Participant’s payroll deductions accumulated prior to such Purchase Date and retained in the Participant’s account as of the Purchase Date, by (b) the applicable Purchase Price (rounded down to the nearest Share). The right shall expire on the last day of the Offering Period.

6.2    Exercise of Rights. On each Purchase Date, each Participant’s accumulated payroll deductions and any other additional payments specifically provided for in the applicable Offering Document will be applied to the purchase of whole Shares, up to the maximum number of Shares permitted pursuant to the terms of the Plan and the applicable Offering Document, at the Purchase Price. No fractional Shares shall be issued upon the exercise of rights granted under the Plan, unless the Offering Document specifically provides otherwise. Any cash in lieu of fractional Shares remaining after the purchase of whole Shares upon exercise of a purchase right will be credited to a Participant’s account and carried forward and applied toward the purchase of whole Shares for the next following Offering Period. Shares issued pursuant to the Plan may be evidenced in such manner as the Administrator may determine and may be issued in certificated form or issued pursuant to book-entry procedures.

6.3    Pro Rata Allocation of Shares. If the Administrator determines that, on a given Purchase Date, the number of Shares with respect to which rights are to be exercised may exceed (a) the number of Shares that were available for issuance under the Plan on the Enrollment Date of the applicable Offering Period, or (b) the number of Shares available for issuance under the Plan on such Purchase Date, the Administrator may in its sole discretion provide that the Company shall make a pro rata allocation of the Shares available for purchase on such Enrollment Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all

 

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Participants for whom rights to purchase Common Stock are to be exercised pursuant to this Article VI on such Purchase Date, and shall either (i) continue all Offering Periods then in effect, or (ii) terminate any or all Offering Periods then in effect pursuant to Article IX. The Company may make pro rata allocation of the Shares available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional Shares for issuance under the Plan by the Company’s stockholders subsequent to such Enrollment Date. The balance of the amount credited to the account of each Participant that has not been applied to the purchase of Shares shall be paid to such Participant in one lump sum in cash as soon as reasonably practicable after the Purchase Date.

6.4    Withholding. At the time a Participant’s rights under the Plan are exercised, in whole or in part, or at the time some or all of the Common Stock issued under the Plan is disposed of, the Participant must make adequate provision for the Company’s federal, state, or other tax withholding obligations, if any, that arise upon the exercise of the right or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the Participant’s compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Participant.

6.5    Conditions to Issuance of Common Stock. The Company shall not be required to issue or deliver any certificate or certificates for, or make any book entries evidencing, Shares purchased upon the exercise of rights under the Plan prior to fulfillment of all of the following conditions:

(a)    The admission of such Shares to listing on all stock exchanges, if any, on which the Common Stock is then listed;

(b)    The completion of any registration or other qualification of such Shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, that the Administrator shall, in its absolute discretion, deem necessary or advisable;

(c)    The obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(d)    The payment to the Company of all amounts that it is required to withhold under federal, state or local law upon exercise of the rights, if any; and

(e)    The lapse of such reasonable period of time following the exercise of the rights as the Administrator may from time to time establish for reasons of administrative convenience.

ARTICLE VII.

WITHDRAWAL; CESSATION OF ELIGIBILITY

7.1    Withdrawal. A Participant may withdraw all but not less than all of the payroll deductions credited to his or her account and not yet used to exercise his or her rights under the Plan at any time by giving written notice to the Company in a form acceptable to the Company no later than one week prior to the end of the Offering Period. All of the Participant’s payroll deductions credited to his or her account during an Offering Period shall be paid to such Participant as soon as reasonably practicable after receipt of notice of withdrawal and such Participant’s rights for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of Shares shall be made for such Offering Period. If a Participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the next Offering Period unless the Participant timely delivers to the Company a new subscription agreement.

 

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7.2    Future Participation. A Participant’s withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company or a Designated Subsidiary or in subsequent Offering Periods that commence after the termination of the Offering Period from which the Participant withdraws.

7.3    Cessation of Eligibility. Upon a Participant’s ceasing to be an Eligible Employee for any reason, he or she shall be deemed to have elected to withdraw from the Plan pursuant to this Article VII and the payroll deductions credited to such Participant’s account during the Offering Period shall be paid to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 12.4, as soon as reasonably practicable, and such Participant’s rights for the Offering Period shall be automatically terminated.

ARTICLE VIII.

ADJUSTMENTS UPON CHANGES IN STOCK

8.1    Changes in Capitalization. Subject to Section 8.3, in the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), Change in Control, reorganization, merger, amalgamation, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, as determined by the Administrator, affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any outstanding purchase rights under the Plan, the Administrator shall make equitable adjustments, if any, to reflect such change with respect to (a) the aggregate number and type of Shares (or other securities or property) that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 and the limitations established in each Offering Document pursuant to Section 4.2 on the maximum number of Shares that may be purchased); (b) the class(es) and number of Shares and price per Share subject to outstanding rights; and (c) the Purchase Price with respect to any outstanding rights.

8.2    Other Adjustments. Subject to Section 8.3, in the event of any transaction or event described in Section 8.1 or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate (including without limitation any Change in Control), or of changes in Applicable Law or accounting principles, the Administrator, in its discretion, and on such terms and conditions as it deems appropriate, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any right under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

(a)    To provide for either (i) termination of any outstanding right in exchange for an amount of cash, if any, equal to the amount that would have been obtained upon the exercise of such right had such right been currently exercisable or (ii) the replacement of such outstanding right with other rights or property selected by the Administrator in its sole discretion;

 

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(b)    To provide that the outstanding rights under the Plan shall be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar rights covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;

(c)    To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding rights under the Plan and/or in the terms and conditions of outstanding rights and rights that may be granted in the future;

(d)    To provide that Participants’ accumulated payroll deductions may be used to purchase Common Stock prior to the next occurring Purchase Date on such date as the Administrator determines in its sole discretion and the Participants’ rights under the ongoing Offering Period(s) shall be terminated; and

(e)    To provide that all outstanding rights shall terminate without being exercised.

8.3    No Adjustment Under Certain Circumstances. No adjustment or action described in this Article VIII or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to fail to satisfy the requirements of Section 423 of the Code.

8.4    No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Administrator under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to outstanding rights under the Plan or the Purchase Price with respect to any outstanding rights.

ARTICLE IX.

AMENDMENT, MODIFICATION AND TERMINATION

9.1    Amendment, Modification and Termination. The Administrator may amend, suspend or terminate the Plan at any time and from time to time; provided, however, that approval of the Company’s stockholders shall be required to amend the Plan to: (a) increase the aggregate number, or change the type, of shares that may be sold pursuant to rights under the Plan under Section 3.1 (other than an adjustment as provided by Article VIII); (b) change the corporations or classes of corporations whose employees may be granted rights under the Plan; or (c) change the Plan in any manner that would cause the Plan to no longer be an “employee stock purchase plan” within the meaning of Section 423(b) of the Code.

9.2    Certain Changes to Plan. Without stockholder consent and without regard to whether any Participant rights may be considered to have been adversely affected, to the extent permitted by Section 423 of the Code, the Administrator shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld from Compensation during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Administrator determines in its sole discretion to be advisable that are consistent with the Plan.

 

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9.3    Actions In the Event of Unfavorable Financial Accounting Consequences. In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:

(a)    altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;

(b)    shortening any Offering Period so that the Offering Period ends on a new Purchase Date, including an Offering Period underway at the time of the Administrator action; and

(c)    allocating Shares.

Such modifications or amendments shall not require stockholder approval or the consent of any Participant.

9.4    Payments Upon Termination of Plan. Upon termination of the Plan, the balance in each Participant’s Plan account shall be refunded as soon as practicable after such termination, without any interest thereon.

ARTICLE X.

TERM OF PLAN

The Plan shall be effective on the Effective Date. The effectiveness of the Plan shall be subject to approval of the Plan by the stockholders of the Company within twelve months following the date the Plan is first approved by the Board. No right may be granted under the Plan prior to such stockholder approval. No rights may be granted under the Plan during any period of suspension of the Plan or after termination of the Plan.

ARTICLE XI.

ADMINISTRATION

11.1    Administrator. Unless otherwise determined by the Board, the Administrator of the Plan shall be the Compensation Committee of the Board (or another committee or a subcommittee of the Board to which the Board delegates administration of the Plan) (such committee, the “Committee”). The Board may at any time vest in the Board any authority or duties for administration of the Plan.

11.2    Action by the Administrator. Unless otherwise established by the Board or in any charter of the Administrator, a majority of the Administrator shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present and, subject to Applicable Law and the Bylaws of the Company, acts approved in writing by a majority of the Administrator in lieu of a meeting, shall be deemed the acts of the Administrator. Each member of the Administrator is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Designated Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

 

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11.3    Authority of Administrator. The Administrator shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(a)    To determine when and how rights to purchase Common Stock shall be granted and the provisions of each offering of such rights (which need not be identical).

(b)    To designate from time to time which Subsidiaries of the Company shall be Designated Subsidiaries, which designation may be made without the approval of the stockholders of the Company.

(c)    To construe and interpret the Plan and rights granted under it, and to establish, amend and revoke rules and regulations for its administration. The Administrator, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

(d)    To amend, suspend or terminate the Plan as provided in Article IX.

(e)    Generally, to exercise such powers and to perform such acts as the Administrator deems necessary or expedient to promote the best interests of the Company and its Subsidiaries and to carry out the intent that the Plan be treated as an “employee stock purchase plan” within the meaning of Section 423 of the Code.

11.4    Decisions Binding. The Administrator’s interpretation of the Plan, any rights granted pursuant to the Plan, any subscription agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.

ARTICLE XII.

MISCELLANEOUS

12.1    Restriction upon Assignment. A right granted under the Plan shall not be transferable other than by will or the applicable laws of descent and distribution, and is exercisable during the Participant’s lifetime only by the Participant. Except as provided in Section 12.4 hereof, a right under the Plan may not be exercised to any extent except by the Participant. The Company shall not recognize and shall be under no duty to recognize any assignment or alienation of the Participant’s interest in the Plan, the Participant’s rights under the Plan or any rights thereunder.

12.2    Rights as a Stockholder. With respect to Shares subject to a right granted under the Plan, a Participant shall not be deemed to be a stockholder of the Company, and the Participant shall not have any of the rights or privileges of a stockholder, until such Shares have been issued to the Participant or his or her nominee following exercise of the Participant’s rights under the Plan. No adjustments shall be made for dividends (ordinary or extraordinary, whether in cash securities, or other property) or distribution or other rights for which the record date occurs prior to the date of such issuance, except as otherwise expressly provided herein or as determined by the Administrator.

12.3    Interest. No interest shall accrue on the payroll deductions or contributions of a Participant under the Plan.

 

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12.4    Designation of Beneficiary.

(a)    A Participant may, in the manner determined by the Administrator, file a written designation of a beneficiary who is to receive any Shares and/or cash, if any, from the Participant’s account under the Plan in the event of such Participant’s death subsequent to a Purchase Date on which the Participant’s rights are exercised but prior to delivery to such Participant of such Shares and cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under the Plan in the event of such Participant’s death prior to exercise of the Participant’s rights under the Plan. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary shall not be effective without the prior written consent of the Participant’s spouse.

(b)    Such designation of beneficiary may be changed by the Participant at any time by written notice to the Company. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company shall deliver such Shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

12.5    Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

12.6    Equal Rights and Privileges. Subject to Section 5.7, all Eligible Employees will have equal rights and privileges under this Plan so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Subject to Section 5.7, any provision of this Plan that is inconsistent with Section 423 of the Code will, without further act or amendment by the Company, the Board or the Administrator, be reformed to comply with the equal rights and privileges requirement of Section 423 of the Code.

12.7    Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.

12.8    Reports. Statements of account shall be given to Participants at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of Shares purchased and the remaining cash balance, if any.

12.9    No Employment Rights. Nothing in the Plan shall be construed to give any person (including any Eligible Employee or Participant) the right to remain in the employ of the Company or any Parent or Subsidiary or affect the right of the Company or any Parent or Subsidiary to terminate the employment of any person (including any Eligible Employee or Participant) at any time, with or without cause.

12.10    Notice of Disposition of Shares. Each Participant shall give prompt notice to the Company of any disposition or other transfer of any Shares purchased upon exercise of a right under the Plan if such disposition or transfer is made: (a) within two years from the Enrollment Date of the Offering Period in which the Shares were purchased or (b) within one year after the Purchase Date on which such Shares were purchased. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer.

 

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12.11    Governing Law. The Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof or of any other jurisdiction.

12.12    Electronic Forms. To the extent permitted by Applicable Law and in the discretion of the Administrator, an Eligible Employee may submit any form or notice as set forth herein by means of an electronic form approved by the Administrator. Before the commencement of an Offering Period, the Administrator shall prescribe the time limits within which any such electronic form shall be submitted to the Administrator with respect to such Offering Period in order to be a valid election.

* * * * *

 

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EX-10.4

Exhibit 10.4

CENTREXION THERAPEUTICS CORPORATION

NON-EMPLOYEE DIRECTOR COMPENSATION PROGRAM

Non-employee members of the board of directors (the “Board”) of Centrexion Therapeutics Corporation (the “Company”) shall receive cash and equity compensation as set forth in this Non-Employee Director Compensation Program (this “Program”). The cash and equity compensation described in this Program shall be paid or be made, as applicable, automatically and without further action of the Board, to each member of the Board who is not an employee of the Company or any parent or subsidiary of the Company (each, a “Non-Employee Director”) who is entitled to receive such cash or equity compensation, unless such Non-Employee Director declines the receipt of such cash or equity compensation by written notice to the Company. This Program shall remain in effect until it is revised or rescinded by further action of the Board. This Program may be amended, modified or terminated by the Board at any time in its sole discretion. The terms and conditions of this Program shall supersede any prior cash and/or equity compensation arrangements for service as a member of the Board between the Company and any of its Non-Employee Directors, except for equity compensation previously granted to a Non-Employee Director. This Program shall become effective on the date of the effectiveness of the Company’s Registration Statement on Form S-1 relating to the initial public offering of common stock (the “Effective Date”).

CASH COMPENSATION

The schedule of annual retainers (the “Annual Retainers”) for the Non-Employee Directors is as follows:

 

Position

   Amount  

Base Board Fee

   $ 40,000  

Chairman of the Board

   $ 35,000  

Chair of Audit Committee

   $ 15,000  

Chair of Compensation Committee

   $ 12,000  

Chair of Nominating and Corporate Governance Committee

   $ 8,000  

Member of Audit Committee (non-Chair)

   $ 7,500  

Member of Compensation Committee (non-Chair)

   $ 6,000  

Member of Nominating and Corporate Governance Committee

   $ 4,000  

 

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For the avoidance of doubt, the Annual Retainers in the table above are additive and a Non-Employee Director shall be eligible to earn an Annual Retainer for each position in which he or she serves. The Annual Retainers shall be earned on a quarterly basis based on a calendar quarter and shall be paid in cash by the Company in arrears not later than the fifteenth day following the end of each calendar quarter. In the event a Non-Employee Director does not serve as a Non-Employee Director, or in the applicable position, for an entire calendar quarter, the retainer paid to such Non-Employee Director shall be prorated for the portion of such calendar quarter actually served as a Non-Employee Director, or in such position, as applicable. In addition, the Annual Retainers will be prorated for the first calendar quarter in which the Effective Date occurs, which proration will be based on the number of days of the calendar quarter remaining in such quarter after the Effective Date.

OPTION ELECTION

Beginning with Annual Retainers earned in 2019, each Non-Employee Director may elect (an “Option Election”) to receive stock options to purchase shares of the Company’s common stock (the “Elective Options”) in lieu of all (or a portion) of the amount of the Non-Employee Director’s Annual Retainer. An Option Election must be made by submitting an Option Election in the form determined by the Company (an “Option Election Form”) to the Company’s Chief Financial Officer or his or her delegate no later than the date specified by the Company. An Option Election shall become effective only with respect to the Annual Retainer earned in the calendar year following the calendar year in which the Option Election Form is received by the Company; provided, that, an Option Election may be made by a Non-Employee Director nominee (who is not, at the time of nomination, an incumbent or former Non-Employee Director) prior to or within thirty (30) days following the date the nominee commences services as a Non-Employee Director and such Option Election shall be effective for Annual Retainer amounts earned following the later of the date the nominee commences services as a Non-Employee Director and the date the Option Election Form is provided to the Company’s Chief Financial Officer or his or her delegate. An Option Election may apply to more than one calendar year, shall become effective and binding on the Non-Employee Director once the calendar year to which the Option Election applies has commenced and once made, is irrevocable and may not be changed with respect to any Annual Retainer paid to the Non-Employee Director for such calendar year.

Each Elective Option shall be automatically granted on January 1st of the applicable calendar year with respect to which the related Annual Retainer is scheduled to be earned (the “Applicable Year”) and the number of Elective Options shall be determined by dividing (i) the Annual Retainer or portion thereof subject to the Option Election for the Non-Employee Director, by (ii) the Elective Option’s Black-Scholes Value (defined below), rounded down to the nearest whole share; provided, that, in the event the Board increases the Annual Retainer during a calendar year, the Elective Option related to such increased Annual Retainer for such calendar year shall be automatically granted on the effective date of the increase in the Annual Retainer and the number of such additional Elective Options shall be determined by dividing (i) the additional Annual Retainer or a proportion thereof of the Annual Retainer that was subject to the Option Election for such calendar year payable to the Non-Employee Director, by (ii) the Elective Option’s Black-Scholes Value, rounded down to the nearest whole share.

 

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EQUITY COMPENSATION

Each Non-Employee Director shall be granted the following options to purchase the Company’s common stock (each, an “Option”) under and subject to the terms and provisions of the Company’s 2018 Incentive Award Plan or any other applicable Company equity incentive plan then-maintained by the Company (the “Equity Plan”). Each Option shall be granted subject to an award agreement, including attached exhibits, in substantially the form previously approved by the Board. For the avoidance of doubt, the number of shares subject to the Options set forth below are after giving effect to the reverse stock split of the Company’s common stock that is expected to occur in connection with the initial public offering of the Company’s common stock and the number of shares subject to the Options shall be subject to adjustment as provided in the Equity Plan.

 

Initial Option    20,000 shares
Subsequent Option    10,000 shares

A.    Initial Options. Each Non-Employee Director who is initially elected or appointed to the Board after the Effective Date shall receive the Initial Option on the date of such initial election or appointment. No Non-Employee Director shall be granted more than one Initial Option.

B.    Subsequent Options. A Non-Employee Director who (i) served as a Non-Employee Director on the Effective Date or has been serving as a Non-Employee Director on the Board for at least six months as of the date of any annual meeting of the Company’s stockholders after the Effective Date and (ii) will continue to serve as a Non-Employee Director immediately following such meeting, shall be automatically granted a Subsequent Option on the date of such annual meeting. For the avoidance of doubt, a Non-Employee Director elected for the first time to the Board at an annual meeting of the Company’s stockholders shall only receive an Initial Award in connection with such election, and shall not receive any Subsequent Award on the date of such meeting as well.

C.    Termination of Employment of Employee Directors. Members of the Board who are employees of the Company or any parent or subsidiary of the Company who subsequently terminate their employment with the Company and any parent or subsidiary of the Company and remain on the Board will not receive an Initial Options, but to the extent that they are otherwise entitled, will receive, after termination of employment with the Company and any parent or subsidiary of the Company, Subsequent Options.

 

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D.    Terms of Options Granted to Non-Employee Directors.

1.    Exercise Price. The per-share exercise price of each Option and Elective Option granted to a Non-Employee Director shall equal the Fair Market Value (as defined in the Equity Plan) of a share of the Company’s common stock on the date the Option or Elective Option, as applicable, is granted.

2.    Vesting.

a.    Initial Options. Each Initial Option shall vest and become exercisable in substantially equal installments on each of the first three anniversaries of the date of grant, such that the Initial Option shall be fully vested on the third anniversary of the date of grant, subject to the Non-Employee Director continuing in service as a Non-Employee Director through each such vesting date.

b.    Subsequent Options. Each Subsequent Option shall vest and become exercisable on the earlier of the first anniversary of the date of grant or the day immediately prior to the date of the next annual meeting of the Company’s stockholders occurring after the date of grant, in either case, subject to the Non-Employee Director continuing in service as a Non-Employee Director through such vesting date.

c.    Elective Option. Each Elective Option shall vest and become exercisable as to 25% of the shares subject to the Elective Option on March 31st, June 30th, September 30th and December 31st of the Applicable Year (each, an “Elective Option Vesting Date”), subject to the Non-Employee Director continuing in service as a Non-Employee Director through the applicable vesting date, provided that, in the event a Non-Employee Director does not serve as a Non-Employee Director, or in the applicable position, for an entire calendar quarter, the Elective Option will become vested and exercisable as to the portion of the Elective Option obtained by multiplying (x) the portion of the Elective Option that would have otherwise vested if the Non-Employee Director had remained in service on the following Elective Option Vesting Date by (y) a fraction (I) the numerator of which is the number of days in the calendar quarter prior to the Non-Employee Director’s termination of service and (II) the denominator of which is the number of days in the calendar quarter in which the Non-Employee Director’s termination of service occurs.

d.    Forfeiture of Options. Unless the Board otherwise determines, any portion of an Initial Option, Subsequent Option or Elective Option which is unvested or unexercisable at the time of a Non-Employee Director’s termination of service on the Board as a Non-Employee Director shall be immediately forfeited upon such termination of service and shall not thereafter become vested and exercisable. All of a Non-Employee Director’s Initial Options, Subsequent Options and Elective Options shall vest in full immediately prior to the occurrence of a Change in Control (as defined in the Equity Plan), to the extent outstanding at such time.

 

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3.    Term. The maximum term of each option granted to a Non-Employee Director hereunder shall be ten (10) years from the date the option is granted.

4.    Black-Scholes Value. “Black-Scholes Value” means with respect to an option, the per share fair value of the option determined as of the option’s date of grant using the Black-Scholes option pricing model that the Company most recently used in preparing its (audited or unaudited) consolidated financial statements that have been filed with the Securities Exchange Commission (“Financial Statements”) and using as inputs into such model (i) the Fair Market Value of a share of common stock on the option’s date of grant and (ii) such other assumptions as were reported by the Company in the Financial Statements for the most recent period covered by the Financial Statements (and if any such assumptions were reported as a range of values, using the arithmetic mean of the reported values).

Notwithstanding anything in this Program to the contrary, the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of stock options granted to a Non-Employee Director as compensation for services as a Non-Employee Director during any fiscal year of the Company may not exceed $750,000 (the “NED Limit”), increased to $1,100,000 in the fiscal year in which the Effective Date occurs or in the fiscal year of a Non-Employee Director’s initial service as a Non-Employee Director. The NED Limit shall be applied to reduce compensation in the following order: (A) reduction in any Initial Option granted during such year; (B) reduction in any Subsequent Option granted during such year; (C) reduction on a pro-rata basis of any cash, Elective Option or other compensation, payments or benefits that are exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and (D) reduction of any cash, Elective Option or other compensation, payments or benefits otherwise payable to the Non-Employee Director on a pro-rata basis or such other manner that complies with Section 409A. The Board may make exceptions to the NED Limit in extraordinary circumstances, as the Board may determine in its discretion, provided that the Non-Employee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving Non-Employee Directors.

* * * * *

 

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EX-10.5

Exhibit 10.5

CENTREXION THERAPEUTICS CORPORATION

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is made and entered into as of                     , 20[18] between Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”), and [Name] (“Indemnitee”).

WITNESSETH THAT:

WHEREAS, highly competent persons have become more reluctant to serve corporations as directors, officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Bylaws and Certificate of Incorporation of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“DGCL”). The Bylaws and Certificate of Incorporation and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws and Certificate of Incorporation of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; [and]

 

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WHEREAS, Indemnitee does not regard the protection available under the Company’s Bylaws and Certificate of Incorporation and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; [and]

[WHEREAS, Indemnitee has certain rights to indemnification and/or insurance provided by [NAME] which Indemnitee and [NAME] intend to be secondary to the primary obligation of the Company to indemnify Indemnitee as provided herein, with the Company’s acknowledgement and agreement to the foregoing being a material condition to Indemnitee’s willingness to serve on the Board;]

NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as an officer or director from and after the date hereof, the parties hereto agree as follows:

1.    Indemnity of Indemnitee. The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof:

(a)    Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of his Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him, or on his behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.

(b)    Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnification may be made.

 

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(c)    Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

(d)    Indemnification of Appointing Stockholder.    If (i) Indemnitee is or was affiliated with one or more venture capital funds that has invested in the Company (an “Appointing Stockholder”), and (ii) the Appointing Stockholder is, or is threatened to be made, a party to or a participant in any Proceeding relating to or arising by reason of Appointing Stockholder’s position as a stockholder of, or lender to, the Company, or Appointing Stockholder’s appointment of or affiliation with Indemnitee or any other director, including without limitation any alleged misappropriation of a Company asset or corporate opportunity, any claim of misappropriation or infringement of intellectual property relating to the Company, any alleged false or misleading statement or omission made by the Company (or on its behalf) or its employees or agents, or any allegation of inappropriate control or influence over the Company or its Board members, officers, equity holders or debt holders, then the Appointing Stockholder will be entitled to indemnification hereunder for Expenses to the same extent as Indemnitee, and the terms of this Agreement as they relate to procedures for indemnification of Indemnitee and advancement of Expenses shall apply to any such indemnification of Appointing Stockholder.

(e)    The rights provided to the Appointing Stockholder under this Section 1(e) shall (i) be suspended during any period during which the Appointing Stockholder does not have a representative on the Company’s Board and (ii) terminate on an initial public offering of the Company’s Common Stock; provided, however, that in the event of any such suspension or termination, the Appointing Stockholder’s rights to indemnification will not be suspended or terminated with respect to any Proceeding based in whole or in part on facts and circumstances occurring at any time prior to such suspension or termination regardless of whether the Proceeding arises before or after such suspension or termination. The Company and Indemnitee agree that the Appointing Stockholder is an express third party beneficiary of the terms of this Section 1(d).

2.    Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in Section 1 of this Agreement, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful.

 

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3.    Contribution.

(a)    Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

(b)    Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction or events from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered. The relative fault of the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

(c)    The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

(d)    To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to

 

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be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

4.    Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness, or is made (or asked) to respond to discovery requests, in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

5.    Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. The Indemnitee shall qualify for advances upon the execution and delivery to the Corporation of this Agreement, which shall constitute an undertaking by Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free.

6.    Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

(a)    To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. Notwithstanding the foregoing, any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially prejudices the interests of the Company.

(b)    Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four methods, which shall be at the election of the Board: (1) by a majority vote of the disinterested directors, even though less than a quorum, (2) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum, (3) if there are no

 

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disinterested directors or if the disinterested directors so direct, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee, or (4) if so directed by the Board, by the stockholders of the Company. For purposes hereof, disinterested directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought by Indemnitee.

(c)    If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by the Board. Indemnitee may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after the conclusion of the Proceeding giving rise to the request for indemnification, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware for resolution of any objection which shall have been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed.

(d)    In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(e)    Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise (as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer,

 

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agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(f)    If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after the conclusion of the Proceeding giving rise to the request for indemnification, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such sixty (60)-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(f) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after the conclusion of the Proceeding giving rise to the request for indemnification, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such resolution and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such resolution and such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat.

(g)    Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board or stockholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(h)    The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

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(i)    The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

7.    Remedies of Indemnitee.

(a)    In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within ninety (90) days after the conclusion of the Proceeding giving rise to the request for indemnification, (iv) payment of indemnification required by Section 4 is not made pursuant to this Agreement within thirty (30) days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in Court of Chancery of the State of Delaware of Indemnitee’s entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within one hundred eighty (180) days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). The Company shall not oppose Indemnitee’s right to seek any such adjudication.

(b)    In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b).

(c)    If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d)    In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

 

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(e)    The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.

(f)    Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

8.    Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.

(a)    The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders, a resolution of directors of the Company, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Certificate of Incorporation, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b)    To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

 

9


(c)    [The Company hereby acknowledges that Indemnitee has certain rights to indemnification, advancement of expenses and/or insurance provided by [●] and certain of its affiliates (collectively, the “Fund Indemnitors”). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the Certificate of Incorporation or Bylaws of the Company (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors, and, (iii) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Fund Indemnitors are express third party beneficiaries of the terms of this Section 8(c).]

(d)    [Except as provided in paragraph (c) above,] in the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee (other than against the Fund Indemnitors), who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(e)    [Except as provided in paragraph (c) above,] the Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(f)    [Except as provided in paragraph (c) above,] the Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

 

10


9.    Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

(a)    for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision[, provided, that the foregoing shall not affect the rights of Indemnitee or the Fund Indemnitors set forth in Section 8(c) above]; or

(b)    for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law; or

(c)    in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

10.    Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.

11.    Security. To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.

12.    Enforcement.

(a)    The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

 

11


(b)    This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

(c)    The Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting the Indemnitee’s rights to receive advancement of expenses under this Agreement.

13.    Definitions. For purposes of this Agreement:

(a)    “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

(b)    “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(c)    “Enterprise” shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

(d)    “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including without limitation the premium, security for, and other costs relating to any cost bond, supersede as bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(e)    “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

12


(f)    “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of his or her Corporate Status, by reason of any action taken by him or of any inaction on his part while acting in his or her Corporate Status; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement.

14.    Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Further, the invalidity or unenforceability of any provision hereof as to either Indemnitee or Appointing Stockholder shall in no way affect the validity or enforceability of any provision hereof as to the other. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee and Appointing Stockholder indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

15.    Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

16.    Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

17.    Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent:

(a)    To Indemnitee at the address set forth below Indemnitee’s signature hereto.

 

13


(b)    To the Company at:

Centrexion Therapeutics Corporation

200 State Street, 6th Floor

Boston, Massachusetts 02109

Attention: Chief Executive Officer

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

18.    Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or any other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

19.    Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

20.    Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably The Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801 as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

SIGNATURE PAGE TO FOLLOW

 

14


IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement on and as of the day and year first above written.

 

CENTREXION THERAPEUTICS CORPORATION
By:    
  Name:    
  Title:    

 

INDEMNITEE
 
Name:    
Address:
     
     
     
     

 

15


EX-10.7.1

Exhibit 10.7.1

Confidential Treatment Requested Centrexion Therapeutics Corporation

 

 

PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

 

dated

NOVEMBER 11, 2015

by and between

BOEHRINGER INGELHEIM INTERNATIONAL GMBH

hereinafter “BII

and

CENTREXION THERAPEUTICS CORPORATION

hereinafter “CENTREXION

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL

EXECUTION VERSION - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

LIST OF EXHIBITS

 

Exhibit 1.4    Assigned Patents
Exhibit 1.25    Development Compounds
Exhibit 2.1    Assignment Form
Exhibit 4.2    Development Plan

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

PATENT ASSIGNMENT AND LICENSING AGREEMENT

This Patent Assignment and Licensing Agreement (“Agreement”) is entered into on November 11, 2015 (“Effective Date”)

by and between

Boehringer Ingelheim International GmbH (“BII”), a German limited liability company, with offices at Binger Straße 173, 55216 Ingelheim am Rhein, Germany; and

Centrexion Therapeutics Corporation (“CENTREXION”), a Delaware Corporation, with offices at 509 South Exeter Street, Baltimore, Maryland 21202, U.S.A.

BII and CENTREXION may be referred to as individually a “Party”, and collectively the “Parties”.

RECITALS

WHEREAS, BII is a global pharmaceutical company within the Boehringer Ingelheim group of companies;

WHEREAS, CENTREXION is a biotech company focused on the treatment of pain;

WHEREAS, BII is in the process of terminating its activities in relation to the CCR2, CB2 and SSTR4 programs (each a “Development Program”) for the treatment of pain and reallocating its R&D and other personnel working on these programs. Accordingly, BII is willing to transfer to CENTREXION its technology related to CCR2, CB2 and SSTR4 and to grant to CENTREXION an exclusive, worldwide, royalty-bearing license to Develop, Manufacture and Commercialize Products in the Field during the Term, and CENTREXION is willing to further Develop, Manufacture and Commercialize Products in the Field during the Term (terms as defined below) and to make certain upfront, milestone and royalty payments in exchange for such transfer and license.

NOW, THEREFORE, in consideration of the mutual covenants, agreements and stipulations set forth herein, the receipt and legal sufficiency of which are hereby mutually acknowledged, the Parties hereby agree as follows:

 

1.

DEFINITIONS.

For purposes of this Agreement, the following capitalized terms shall have the following meanings, whether used in the singular or plural:

 

1.1

Affiliate” shall mean, with respect to a Party, any legal entity which, at the time such determination is being made, is controlled by, controlling or under common control with such Party. As used in this definition, the term “control”, whether used as a noun or verb, refers to the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of a legal entity, whether through the ownership of voting rights (e.g., fifty per cent (50%) or more of the equity, the ordinary voting power or the general partnership interest), by contract or otherwise.

 

1.2

Agreement” shall have the meaning given in the Preamble.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

2


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

1.3

Applicable Laws” shall mean all applicable provisions of all statutes, laws, rules, regulations, administrative codes, ordinances, decrees, orders, decisions, guidance documents, injunctions, awards, judgments, and permits, including licenses of or from Regulatory Authorities and any rules, regulations, guidelines or other requirements of national and international patent offices and Regulatory Authorities, each as in effect from time to time.

 

1.4

Assigned Patents” shall mean the Patents listed in Exhibit 1.4.

 

1.5

BII Claim” shall have the meaning given in Section 11.3.2.

 

1.6

BII Losses” shall have the meaning given in Section 11.3.2.

 

1.7

BII Party” shall have the meaning given in Section 11.3.2.

 

1.8

Breaching Party” shall have the meaning given in Section 12.1.3.

 

1.9

Business Day” shall mean any other day than Saturday, Sunday or any other day on which commercial banks in Ingelheim, Germany or Baltimore, Maryland, USA are authorized or required by law to remain closed.

 

1.10

Calendar Quarter” shall mean a period of three calendar months ending on 31 March, 30 June, 30 September or 31 December in any calendar year.

 

1.11

Centrexion Claim shall have the meaning given in Section 11.3.1.

 

1.12

Centrexion Losses” shall have the meaning given in Section 11.3.1.

 

1.13

Centrexion Party” shall have the meaning given in Section 11.3.1.

 

1.14

CMO” shall mean a contract manufacturing organization.

 

1.15

Combination Product” shall mean a pharmaceutical formulation containing as its active ingredients both a Compound and one or more other therapeutically active ingredients.

 

1.16

Commercialization” shall mean any and all activities directed to the preparation for sale of, offering for sale of, or sale of the Product, including activities related to marketing, promoting, distributing, importing and exporting the Product, and interacting with Regulatory Authorities regarding any of the foregoing. For the avoidance of doubt, “Commercialization” shall not include the Manufacture of Product. When used as a verb, to “Commercialize” and “Commercializing” shall mean to engage in Commercialization, and “Commercialized” has a correlative meaning.

 

1.17

Commercially Reasonable Efforts” shall mean, with respect to the efforts to be expended by, and the resources to be employed by, a Party with respect to any objective, the reasonable, diligent and good faith efforts, and commercially reasonably financial investment to accomplish such objective as such Party or a company with a corresponding industry focus, size and global reach would normally use to accomplish a similar objective under similar circumstances. It is understood and agreed that with respect to the Development and Commercialization of Product by CENTREXION, such efforts shall be substantially equivalent to those efforts and resources commonly used by CENTREXION or a company with a corresponding industry focus, size and global reach, for pharmaceutical development candidates or products owned by it or to which it has rights, which development candidate or product is at a similar stage in its development or product life and is of similar market potential, taking into account all scientific, commercial and other factors that CENTREXION or a company with a corresponding industry focus, size and global reach would take into account, including efficacy, safety, expected and actual cost and time to develop, expected and actual profitability, approved labelling, the competitiveness of

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

3


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

  alternative products in the marketplace, the expected and actual market exclusivity (including patent and other proprietary position and regulatory exclusivity) of the Product, the expected and actual amounts of marketing and promotional expenditures and the likelihood of receipt of a Regulatory Approval given the Regulatory Authority involved.

 

1.18

Competing Product” shall have the meaning given in Section 5.3.

 

1.19

Compounds” shall mean any Development Compounds or any Family Compounds.

 

1.20

Confidential Information” shall mean all information not publicly available, including:

 

  (a)

the existence and terms of this Agreement and any discussions and negotiations in relation to the subject matter of this Agreement;

 

  (b)

the Licensed Know-How and Results; and

 

  (c)

Development Data relating to the Compounds and Products, the Field, or the business, affairs, research and development activities, results of pre-clinical and clinical trials, national and multinational regulatory proceedings and affairs, finances, plans, contractual relationships and operations of the Parties including reports and other information provided pursuant to Section 6 (Reporting Obligations).

 

1.21

Control” or “Controlled” shall mean with respect to the subject item or right, the ability (whether by ownership, license or otherwise, other than pursuant to this Agreement) of a Party to grant to the other Party access or a license as provided herein under such item or right without violating the terms of any agreement or other arrangement with any Third Party.

 

1.22

Co-Packaged Product” shall mean a single packaged product containing a Product and one or more other therapeutically or prophylactically active ingredient as separate components in a co-packaged form.

 

1.23

CRO” shall mean a contract research organization.

 

1.24

Development” shall mean all research, non-clinical and clinical testing and drug development activities conducted in respect of the Compounds and Products, including those necessary or reasonably useful or otherwise requested or required by a Regulatory Authority as a condition or in support of obtaining or maintaining Regulatory Approvals and to successfully Develop, Manufacture and Commercialize the Products for use in the Field. “Development” shall include test method development and stability testing, formulation development, delivery system development, non-clinical testing, mechanism studies, toxicology, pharmacokinetics, clinical trials, quality assurance/quality control, regulatory affairs activities, statistical analysis and report writing, submission of documents, market research and pharmaco-economic studies.

 

1.25

Development Compounds” shall mean the CCR2, CB2 and SSTR4 compounds, including front runner and backup compounds specified in Exhibit 1.25.

 

1.26

Development Data” shall mean any non-clinical or clinical data relating to the Development or the use of the Compounds and Products in the Field, including but not limited to results, pre-clinical, clinical, safety, manufacturing and quality control data and information (in-cluding trial designs and protocols), registration (IND/regulatory) dossiers, assay and biological methodology, any reports of non-clinical studies and clinical trials, and all other documentation containing or embodying such data.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

4


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

1.27

Development Plan” shall have the meaning given in Section 4.2.

 

1.28

Development Program” shall have the meaning given in the Preamble.

 

1.29

Disclosing Party” shall have the meaning given in Section 10.1.

 

1.30

Effective Date” shall have the meaning given in the Preamble.

 

1.31

Family Compounds” shall mean any compound covered by a claim in the Assigned Patents.

 

1.32

Field” shall mean the treatment or prevention of any and all diseases or conditions in humans and/or animals.

 

1.33

First Commercial Sale” shall mean, on a country-by-country and Product-by-Product basis, the first sale of Products by or on behalf of CENTREXION, its Affiliates or Sublicensees to a Third Party end user in such country in exchange for cash or some equivalent to which value can be assigned after such Product has been granted all necessary Regulatory Marketing Approvals by a Regulatory Authority having jurisdiction for such country.

 

1.34

Intellectual Property” shall mean any and all Know How (including copyright and other rights therein), Patents, trademarks, design rights and other rights in designs, copyrights, database rights, and all other intellectual property rights in each case whether registered or unregistered, and including applications for the grant of any such rights and rights of renewal in respect of any such rights, and all other forms of protection having similar or equivalent effect in any part of the world.

 

1.35

Know-How” shall mean all methods, materials, data, reports, analyses and other technical, scientific and other know-how and information, results, non-clinical, clinical, safety, process and Manufacturing and quality control data and information (including trial designs and protocols), registration dossiers, in each case, solely to the extent confidential and proprietary and in written, electronic or any other form.

 

1.36

Licensed Know-How” shall mean all Know-How owned or controlled by BII as of the Effective Date necessary for, or specifically related to, the discovery, development, manufacture or use of Compounds and/or Products.

 

1.37

Major Market Country” shall mean the USA, Germany, France, Great Britain, Italy, Spain, PRC and Japan.

 

1.38

Manufacture” shall mean all activities related to the synthesis, making, production, processing, purifying, formulating, filling, finishing, shipping and holding of the Licensed Product, or any intermediate thereof, including process development, process qualification and validation, scale-up, pre-clinical, clinical and commercial production and analytical development, product characterization, stability testing, quality assurance, and quality control.

 

1.39

Marketing Authorization” shall mean the Regulatory Approval which is required to Commercialize a Product in a particular country or region of the Territory. For the avoidance of doubt, Market Authorization shall include a provisional or conditional approval provided and as long as it grants the right to Commercialize a Product.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

5


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

1.40

Net Sales” shall mean the gross amount of sales of Products invoiced by CENTREXION, its Affiliates and Sublicensees to unaffiliated Third Parties, less:

 

  (a)

sales returns and allowances actually paid, granted or accrued, including trade, quantity and cash discounts and any other adjustments, including those granted on account of price adjustments or billing errors;

 

  (b)

rejected goods, damaged or defective goods, recalls, returns;

 

  (c)

rebates, chargeback rebates, compulsory rebates, reimbursements or similar payments granted or given to wholesalers or other distributors, buying groups, health care insurance carriers or other institutions;

 

  (d)

adjustments arising from consumer discount programs or other similar programs;

 

  (e)

non-collectable receivables related to Product;

 

  (f)

customs or excise duties, sales tax, consumption tax, value added tax, and other taxes (except income taxes); or

 

  (g)

charges for packing, freight, shipping and insurance (to the extent that CENTREXION, its Affiliates and Sublicensees bear the cost for Products).

Each of the foregoing deductions shall be determined as incurred in the ordinary course of business in type and amount consistent with good industry practice and in accordance with generally accepted accounting principles or more specifically, the principles of the German commercial code (“Handelsgesetzbuch” or “HGB”) on a basis consistent with CENTREXION’s audited consolidated financial statements. For sake of clarity and avoidance of doubt, sales by CENTREXION, its Affiliates or Sublicensees of a Product to a permitted Recognized Agent or Third Party Distributor of such Product in a given country shall be considered a sale to an unaffiliated Third Party. All such discounts, allowances, credits, rebates, and other deductions shall be fairly and equitably allocated to the Products and other products of CENTREXION and its Affiliates and Sublicensees such that the Product does not bear a disproportionate portion of such deductions.

Supply of Products other than for cash shall be substituted to price on bona fide arms length sales; whereas the price shall be the average price of sold product for cash during the period based on quantity of drug substance sold.

Any Product used for promotional or advertising purposes or used for clinical trials or other research purposes shall not be included in Net Sales. Donations for charity reasons shall also not be Net Sales.

Recognized Agent or Third Party Distributor for the purpose of this definition shall mean any third party which distributes products directly to customers in countries where CENTREXION has no Affiliate or Sublicensee

 

1.41

Non-Breaching Party” shall have the meaning given in Section 12.1.3.

 

1.42

Patents” shall mean all patents and patent applications including divisions, continuations, continuations-in-part, reissues, re-examinations, extensions and the like; the term shall also include utility models (Gebrauchsmuster).

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

6


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

1.43

Phase I Clinical Trial” shall mean a study of a Product in human volunteers or patients principally for determining initial tolerance, safety and/or pharmacokinetic (including, inter alia, drug-drug interactions and food effects) as well as first preliminary efficacy information in single dose, single ascending dose, multiple dose and/or multiple ascending dose regimens.

 

1.44

Phase IIa Clinical Trial” shall mean a study of a Product in human patients principally to determine clinical efficacy, safety, pharmacokinetics and/or dose finding before embarking on Phase IIb Clinical Trials.

 

1.45

Phase IIb Clinical Trial” shall mean a study of a Product in human patients principally to determine clinical efficacy, safety, pharmacokinetics and/or dose finding before embarking on Phase III Clinical Trials.

 

1.46

Phase III Clinical Trial” shall mean, with respect to the United States, any human clinical trial, that, if the defined end-points are met, is intended to be a pivotal trial for obtaining Regulatory Approval in the indication being studied or to otherwise establish safety and efficacy in patients with the indication being studied for purposes of filing for Marketing Authorization with the United States Food and Drug Administration (or its successor) as required under 21 C.F.R. §312.21(c), or, with respect to a jurisdiction other than the United States, an equivalent clinical study. In the event that a human clinical trial that would otherwise meet the definition of a Phase II Clinical Trial would, if the defined end-points are met, be sufficient to obtain Marketing Authorization in the indication being studied then, for the purposes of this Agreement, such trial shall be considered a Phase III Clinical Trial.

 

1.47

Product(s)” shall mean any Product containing a Development Compounds or any Family Compounds; for clarification, all Products containing the same Compound shall be considered one Product.

 

1.48

Receiving Party” shall have the meaning given in Section 10.1.

 

1.49

Regulatory Approval(s)” shall mean and include any license, permit, authorization and approval of, and registration, filing and other notification to, any Regulatory Authority within the Territory, which grant the approval to Develop, Manufacture and/or Commercialize a Product in a particular country or region of the Territory. For the avoidance of doubt, Regulatory Approvals shall include a provisional or conditional approval provided and as long as it grants the right to Develop, Manufacture and Commercialize a Product. Regulatory Approvals shall include Marketing Authorizations.

 

1.50

Regulatory Authority” shall mean any national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity in each country in the Territory involved in the reviewing, granting or revoking of Regulatory Approvals for the Products. Regulatory Authorities include FDA and EMA.

 

1.51

Results” shall have the meaning given in Section 9.3.1.

 

1.52

Royalties” shall have the meaning given in Section 8.2.1.

 

1.53

Royalty Period” shall have the meaning given in Section 8.3.3.

 

1.54

Royalty Term” shall have the meaning given in Section 8.2.3.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

7


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

1.55

Sublicensee” shall mean any Third Party licensee (aside from a Party’s Affiliates and any Third Party contractors used by a Party in the Development, Manufacture or Commercialization of the applicable Compounds or Products on a Party’s behalf) which obtains rights to use the Assigned Patents, Licensed Know-How or Results for the Development, Manufacture and/or Commercialization of Compounds and/or Products, regardless of whether such license is granted by a Party, its Affiliates, its licensees or any Sublicensee.

 

1.56

Territory” shall mean the entire world.

 

1.57

Third Party” shall mean any party other than CENTREXION and its Affiliates and BII and its Affiliates.

 

1.58

Third Party License” shall mean a license granted by BII to the Assigned Patents or Licensed Know-How.

 

1.59

Valid Claim” shall mean with respect to a particular country, and in each case to the extent contained within an Assigned Patent,

 

  (a)

any claim of an issued and unexpired patent in such country that (i) has not lapsed or been revoked, has not been held unenforceable or invalid by a decision of a court or governmental agency of competent jurisdiction, which decision is un-appealable or un-appealed within the time allowed for appeal; and (ii) has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue, post grant review or disclaimer or otherwise in such country; or

 

  (b)

a claim of a pending patent application, which claim has not been abandoned or finally disallowed without the possibility of appeal or re-filing of the application; provided, however, that if a claim has been pending for more than ten (10) years after filing or following nationalization of a patent application, such claim shall not constitute a Valid Claim for purposes of the License Agreement unless and until a patent issues with such claim.

The word “including” or any variation thereof means “including without limitation” or any variation thereof and shall not be construed to limit any general statement which it follows to the specific or similar items or matters immediately following it.

 

2.

ASSIGNMENT AND LICENSE.

 

2.1

Patent. Conditional solely upon receipt of all upfront payments by BII, BII hereby assigns and transfers to CENTREXION the Assigned Patents, and CENTREXION accepts such assignment and transfer. The Assignment will refer to CENTREXION’s business address at 509 South Exeter Street, Baltimore, Maryland 21202, U.S.A.. An Assignment form is attached to this Agreement as Exhibit 2.1 CENTREXION shall register and record the transfer of ownership right of the Assigned Patents with the competent patent offices worldwide, at its own effort and cost.

BII retains an exclusive, cost-free, perpetual, worldwide, transferrable and sublicenseable (in multiple tiers) right to use the Assigned Patents solely for non-clinical research purposes.

 

2.2

License grant. BII hereby grants to CENTREXION, during the term of this Agreement and in accordance with the terms and conditions of this Agreement, and CENTREXION hereby accepts, an exclusive, royalty-bearing license to the Licensed Know-How, to Develop, Manufacture and Commercialize Products in the Field in the Territory.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

8


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

2.3

Right to Sublicense. CENTREXION is entitled to sublicense its rights under Section 2.2, to any of its Affiliates, provided that it shall inform BII of such sublicense. Any sublicense to a Third Party shall require the prior written consent of BII, such consent not to be unreasonably withheld or delayed. The right to sublicense is subject to (i) the sublicense agreement containing terms and conditions that are not inconsistent with those contained in this Agreement, and shall include, inter alia, provisions regarding confidentiality, indemnification, audit, record-keeping, termination and consequences of termination for BII’s protection that are consistent with the corresponding terms and conditions provided herein. CENTREXION shall remain liable to BII for all obligations under this Agreement, including its obligation to pay any amounts due on account of sales or other disposition of Compounds and Products by Sublicensees. CENTREXION shall send to BII a copy of the signed sublicensing agreement within [***] after its execution, subject to reasonable redaction of Confidential Information. The Parties acknowledge that any and all information provided by CENTREXION to BII under this Section 2.3 shall be deemed to be Confidential Information of CENTREXION and shall be subject to the terms of Section 10.

 

2.4

No additional rights. Nothing in this Agreement shall be deemed or implied to be, and the Parties disclaim all implied rights to, the grant by BII to CENTREXION of any right, title or interest in any product, Intellectual Property, any formulation technology, operating procedures, marketing materials or strategies, intangibles, material or proprietary rights of BII, except as are expressly set forth in this Agreement.

 

3.

TECHNOLOGY TRANSFER.

 

3.1

Transferred Data. During the due diligence, BII has made available to CENTREXION a data package relating to Development Compounds including (i) all regulatory applications, submissions and approvals, and (ii) copies of pre-clinical and clinical data owned or controlled by BII. All Transferred Data shall be delivered to CENTREXION or its designee pursuant to the technology transfer agreement entered into by the parties as of the Effective Date (the “Tech Transfer Agreement”). Conditional solely upon receipt of all upfront payments by BII, BII hereby assigns and transfers to CENTREXION BII’s rights to all such documents, and CENTREXION accepts such assignment and transfer.

 

3.2

Technology Transfer. Promptly following the Effective Date and receipt of all upfront payments by BII, BII shall conduct a technology transfer to CENTREXION with respect to the Development Compounds, such transferred technology to include manufacturing technology and other technology as further specified in the Tech Transfer Agreement. BII shall provide the support and services described in the Tech Transfer Agreement subject to CENTREXION’s satisfaction of its reimbursement or payment obligations as set forth in the Tech Transfer Agreement.

 

3.3

Inventory Transfer. Promptly following the Effective Date and receipt of all upfront payments by BII, BII shall conduct an inventory transfer to CENTREXION with respect to the Development Compounds, such transferred inventory to include drug substance as further specified in the Tech Transfer Agreement. BII shall provide the transfer of the inventory described in the Tech Transfer Agreement subject to CENTREXION’s satisfaction of its reimbursement or payment obligations as set forth in the Tech Transfer Agreement.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

9


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

4.

DEVELOPMENT.

 

4.1

Diligence. CENTREXION shall be solely responsible for the Development of Products in the Field in the Territory, and CENTREXION, together with its Affiliates and Sublicensees, and with or through the use of CMOs and CROs, shall use Commercially Reasonable Efforts to Develop the Products in the Field in the Territory. CENTREXION shall bear all costs related to such Development, including the Manufacture of Compounds and Products required for such Development, in accordance with this Section 4. CENTREXION shall perform its obligations and the defined Development activities in accordance with Applicable Laws.

 

4.2

Development Plan. The Development activities shall be performed by CENTREXION and/or a CRO or CMO in accordance with the development plan in Exhibit 4.2 hereto (“Development Plan”). CENTREXION shall perform the Development within the timelines set forth in the Development Plan.

 

4.3

Development Milestones. CENTREXION shall achieve the following development milestones (“Development Milestones”):

 

  (a)

CCR2: [***] before [***];

 

  (b)

CB2: [***] before [***]; and

 

  (c)

SSTR4: [***] before [***].

 

4.4

Extensions of Time. If CENTREXION is unlikely to accomplish a specific development or commercialization-related task under this Agreement or the Development Plan, it shall promptly inform BII hereof. If such delay is caused by bona fide and documented scientific, technical or regulatory reasons, then CENTREXION and BII shall negotiate in good faith towards a reasonable extension of time for CENTREXION to achieve the specific task or event, and BII shall not unreasonably deny or condition such extension, provided, however, that BII shall have no obligation to grant an extension of the Development Milestones specified in Section 4.3.

 

4.5

Responsibility for Manufacture. Subject to specific provisions in the CENTREXION shall have the sole responsibility for the manufacture of Development Compounds and/or Products, including, but not limited to, clinical supply of Development Compounds and/or Products.

 

5.

COMMERCIALIZATION.

 

5.1

Diligence obligations. CENTREXION shall be solely responsible for the Commercialization of Products in the Field in the Territory, and, together with its Affiliates and Sublicensees, will use Commercially Reasonable Efforts to Commercialize the Products in the Field. Without limiting the generality of the Commercially Reasonable Efforts obligations under this Section 5.1, CENTREXION shall

 

  (a)

when appropriate, based on satisfactory data obtained during the Development, use its Commercially Reasonable Efforts to secure all required Marketing Authorizations and reimbursement authorizations in at least each Major Market Country for at [***] in the Field;

 

  (b)

shall be responsible for timely filing all applications, reports and other documents required to be filed in order to obtain and maintain any Marketing Authorizations for Products; and

 

  (c)

make the First Commercial Sale of at least [***] in each Major Market Country within [***] following the issuance of the Marketing Authorizations required for the Commercialization of the respective Products in each Major Market Country.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

10


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

5.2

Costs. CENTREXION shall bear any and all costs regarding the Commercialization of the Compounds and Products in the Field, including the costs of its own commercial supplies of and the post-marketing surveillance studies (Phase 4).

 

5.3

Competing Products. In the event CENTREXION, any of its Affiliates or any of its Sublicensees outside the scope of this Agreement commences Clinical Trials or Commercializes any product that modulates the same target as a Product as its primary mechanism of action and that is developed for the treatment or prevention of pain in humans and/or animals (“Competing Product”), and irrespective of whether CENTREXION used Assigned Patents or Licensed Know-How to Develop such Competing Product, BII shall be entitled (i) to terminate the exclusivity of the license under Section 2.2 above, so that CENTREXION shall retain a non-exclusive right to use under Section 2.2, (ii) to obtain a non-exclusive, cost-free, sublicensable (in multiple tiers), transferable, perpetual back-license under the Assigned Patents and (ii) to independently exploit the respective Compounds and Products in the Field. CENTREXION shall grant to BII a non-exclusive license to use the Results for any independent exploitation of the respective Compounds and Products in the Field.

 

6.

REPORTING.

 

6.1

Development Reporting. CENTREXION shall inform BII, on an at least biannually basis, of the development activities performed in connection with the Products, any Results achieved or generated and timelines until next milestone. CENTREXION shall inform BII in cases of material changes to the development including but not limited to significant delays in the time lines towards the next milestone within [***] of the event triggering such delay.

 

6.2

Commercialization Reporting. After the First Commercial Sale of Products by CENTREXION, its Affiliate or Sublicensee, CENTREXION shall furnish BII with Calendar Quarterly reports of (i) all of its sales of Products and (ii) a summary of its Commercialization activities performed in at least each Major Market Country under this Agreement. Each such Calendar Quarterly report shall (i) be furnished to BII within [***] after the end of the Calendar Quarter to which it relates; and (ii) state the total sales of the Products, broken down by country and by Product, during the Calendar Quarter, the Net Sales derived by CENTREXION, its Affiliates and Sublicensees from such sales, and the Royalties and milestone payments, if any, payable by CENTREXION to BII with respect to such Net Sales.

 

7.

REGULATORY MATTERS.

 

7.1

Regulatory responsibilities of CENTREXION. After the Effective Date, CENTREXION shall be solely responsible for all regulatory matters including the filing for approvals for the Compounds and Products in the Field, and shall own, directly or through its Affiliates or Sublicensees, all Regulatory Approvals for the Compounds and Products in the Field. CENTREXION shall satisfy and perform any and all global pharmacovigilance responsibilities, such as but not limited to global safety database maintenance, global literature screening, periodic safety report generation (e.g., the Development Safety Update Reports (“DSUR”)), signal detection, risk management, Company Core Data Sheet (“CCDS”) maintenance, management of authority requests, arising under any applicable laws as of the execution date of this agreement with regard to the Product.

 

7.2

Regulatory responsibilities of BII. BII shall satisfy and perform any and all pharmacovigilance responsibilities related to the Products arising under any applicable laws prior to the Effective Date.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

11


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

7.3

Safety Reports. BI has no Individual Case Safety Reports (ICSR) related to the Products in its global safety database and no other safety reports (e.g., Development Safety Update Reports (DSUR) have been written (collectively, “Safety Reports”). As Studies are closed, no further Safety Reports are expected. Accordingly, the Parties agree that BII will not provide any Safety Reports to CENTREXION.

 

8.

PAYMENT AND PAYMENT TERMS.

 

8.1

Upfront and milestone payments. In partial consideration for the transfer of the Assigned Patents and the licenses granted under this Agreement, CENTREXION agrees to pay to BII the following upfront payments, development milestone payments and commercial milestone payments:

 

8.1.1

Upon execution of this Agreement, CENTREXION shall pay to BII the following upfront payments:

 

           CCR2:   [***]
  CB2:   [***]
  SSTR4:   [***]

 

 

 

8.1.2

In addition to the upfront payment, CENTREXION will pay to BII milestone payments as follows:

 

 

(a)   upon initiation (first patient in) of the first Phase I Clinical Trial:

 

CB2:

   [***]
 

SSTR4:

   One Million US Dollars (US$ 1,000,000)
 

(b)   upon [***]:

  
 

CCR2:

   [***]
 

CB2:

   [***]
 

(c)   upon [***]:

  
 

CCR2:

   [***]
 

CB2:

   [***]
 

(d)   upon [***]:

  
 

CCR2:

   [***]
 

CB2:

   [***]
 

SSTR4:

   [***]
 

(e)   upon [***]:

  
 

CCR2:

   [***]
 

CB2:

   [***]
 

SSTR4:

   [***]
 

(f)   Upon [***]:

  
 

CCR2:

   [***]
 

CB2:

   [***]
 

SSTR4:

   [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

12


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

For clarity, if at the time any milestone payment is due for a Product under this Section 8.1.2,, the payment for any preceding milestone(s) shall become due at the time the most recent milestone event is achieved. For example, in case of the [***] immediately after the completion of [***] the milestone payment for the [***] shall also become due.

 

8.1.3

In further consideration of the exclusive licenses granted by BII to CENTREXION hereunder, and subject to the terms and conditions set forth in this Agreement, CENTREXION shall make the following commercial milestone payments upon achievement of the following aggregate Net Sales [***] for each Development Program:

 

 

(a)   Annual Net Sales of [***]:

 

CCR2:

   [***]
 

CB2:

   [***]
 

SSTR4:

   [***]
 

(b)   Annual Net Sales of [***]:

 

CCR2:

   [***]
 

CB2:

   [***]
 

SSTR4:

   [***]
 

(c)   Annual Net Sales of [***]:

 

CCR2:

   [***]
 

CB2:

   [***]
 

SSTR4:

   [***]

 

8.1.4

The milestone payments above will be made, separately for each of the Development Programs, only for the first achievement of a given milestone by a Product.

 

8.1.5

CENTREXION shall inform BII on the occurrence of a regulatory milestone event under Section 8.1.2 and a commercial milestone event under Section 8.1.3 as soon as possible, but in no event later than within [***] after the occurrence thereof.

 

8.1.6

All payments to be made by CENTREXION to BII under Sections 8.1.1 to 8.1.3 hereof are not refundable for any reason. None of the payments to be made by CENTREXION to BII under Sections 8.1.1 to 8.1.3 may be credited against any of CENTREXION’s Royalty obligations under Section 8.2.

 

8.2

Royalties.

 

8.2.1

In further consideration for the transfer of the Assigned Patents and the licenses granted under this Agreement, CENTREXION shall pay to BII royalties on Net Sales of the Products as follows (“Royalties”):

 

 

 

(a)   Annual Net Sales up to [***]:

 

CCR2:

   [***]
 

CB2:

   [***]
 

SSTR4:

   [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

13


Confidential Treatment Requested Centrexion Therapeutics Corporation

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DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

 

(b)   Annual Net Sales [***]-[***]:

 

CCR2:

   [***]
 

CB2:

   [***]
 

SSTR4:

   [***]
 

(c)   Annual Net Sales >[***]:

 

CCR2:

   [***]
 

CB2:

   [***]
 

SSTR4:

   [***]

 

8.2.2

Net Sales. The Royalties shall be calculated on the basis of the global annual aggregated Net Sales, which in turn shall be calculated on a Product by Product and country-by-country basis from the First Commercial Sale until the expiration of the Royalty Term.

 

8.2.3

Royalty Term. The obligation to pay Royalties shall begin, on a country-by-country and Product by Product basis, with the First Commercial Sale. The obligation to pay Royalties with respect to the Product would expire on a country-by-country and Product-by-Product basis by the last to occur of the following (“Royalty Term”):

 

  (a)

the date on which such Product is no longer covered by a Valid Claim of an Assigned Patent;

 

  (b)

the date on which such Product is no longer covered by any other governmental grant of exclusivity (e.g., data, regulatory or marketing exclusivity) in such country in the indication; or

 

  (c)

ten (10) years from first launch of the respective Product in the country, provided the Licensed Know-How is still proprietary, or such Licensed Know-How is no longer proprietary owing to a breach of CENTREXION’s confidentiality obligations hereunder or such obligations of its Affiliates or Sublicensees.

 

8.2.4

Royalty Reductions.

 

  (a)

In the event Royalties are payable in any given country only on the basis of Section 8.2.3(c) above, then the Royalty otherwise payable for such Product in such country will be reduced in such country by [***].

 

  (b)

In the event CENTREXION is required to obtain a license from a third party in order to avoid infringing such third party’s patent(s) in the development, manufacture, use, or sale of any Product (a “Required Third Party License”). CENTREXION may deduct up to [***] of any royalties due under Required Third Party Licenses from any royalties due under this Agreement; provided, however, that the royalties due hereunder shall not be reduced by more than [***] of the royalties that would have been payable absent the effects of this Section 8.2.4(b).

 

8.2.5

Combination Product or Co-Packaged Product. In the event a Product is sold as a Combination Product or Co-Packaged Product, Net Sales of the Combination Product or Co-Packaged Product will be calculated as follows:

 

  (a)

If the Combination Product or Co-Packaged Product, the Product and the other product are sold separately, Net Sales of the Product portion of Combination Products and Co-Packaged Products will be calculated by [***].

 

  (b)

If the Combination Product or the Co-Packaged Product and the Product are sold separately, but the average gross selling price of the other product(s) cannot be determined, Net Sales of the Combination Product or the Co-Packaged Product shall be equal to [***].

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

  (c)

If the Combination Product or the Co-Packaged Product and the other product(s) are sold separately, but the average gross selling price of the Product cannot be determined, Net Sales of the Combination Product and/or Co-Packaged Product shall be equal to [***].

 

  (d)

If the Combination Product or Co-Packaged Product are sold separately, but the average gross selling price of neither the Product nor the other product(s) can be determined, Net Sales of the Combination Product or Co-Packaged Product shall be equal [***].

The average gross selling price for such other product(s) contained in the Combination Product or Co-Packaged Product shall be calculated for each calendar year by [***], as published by IMS or another mutually agreed independent source.

In the initial calendar year during which a Combination Product or Co-Packaged Product is sold, a forecasted average gross selling price shall be used for the Product, other product(s), or Combination Product and/or Co-Packaged Product. Any over or under payment due to a difference between forecasted and actual average gross selling prices shall be paid or credited in the second Royalty payment of the following calendar year. In the following calendar year the average gross selling price of the previous year shall apply from the second Royalty payment on.

 

8.2.6

Blended Rates. The Parties acknowledge and agree that the Assigned Patents transferred and the Licensed Know-How licensed under this Agreement may justify Royalty rates and/or Royalty terms of differing amounts for sales of Products, which rates could be applied separately to Products involving the exercise of Assigned Patents and/or the incorporation of Licensed Know-How, and that if such Royalties were calculated separately, Royalties relating to the Assigned Patents and Royalties relating to the Licensed Know-How would last for different terms. The Parties have determined in light of such considerations and for reasons of mutual convenience that blended Royalty rates for the Assigned Patents and the Licensed Know-How licensed hereunder will apply during a single Royalty term (which blended Royalty rates would be advantageous for both Parties) for sales of Products. Consequently, the Parties have agreed to adopt the Royalty rates set forth in this Section 8.2 with respect to the sales of Products as blended Royalty rates.

 

8.3

Payment Terms.

 

8.3.1

Upfront payment. The upfront payment shall be due and payable within [***] after the later of (i) the Parties’ execution of this Agreement by facsimile or email transmission, and (ii) CENTREXION’s receipt of an invoice of such amount from BII; provided that such amount shall not become payable until such time as CENTREXION has received a duly signed original of the Agreement by BII.

 

8.3.2

Milestone Payments. Each milestone payment shall be due and payable to BII within [***] after receipt of an invoice from BII, which shall be provided to CENTREXION as soon as practicable after CENTREXION has notified BII that the particular milestone has been achieved (whether achieved by or on behalf of BII or any of its Affiliates or Sublicensees). CENTREXION will notify BII within [***] after the achievement of any milestone event for which a payment to BII is required under Section 8.1 and BII shall send to CENTREXION an invoice for the corresponding milestone payment.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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8.3.3

Royalty Payments. Royalties shall be paid on a Calendar Quarterly basis (“Royalty Period”). Within [***] after the end of each Royalty Period in which any Net Sales occur, CENTREXION shall calculate the Royalty payments owed to BII and shall inform BII about the amount owed to BII in writing and BII shall send to CENTREXION an invoice for the corresponding Royalty payments. All Royalty payments shall be computed by converting the Net Sales in each country in the Territory into the currency of Euros, using the monthly exchange rates published by the European Central Bank in Frankfurt/Main, Germany. In calculating the Royalties in each quarter, the average Royalty rate will first be calculated based on the cumulative year to date aggregate Net Sales in the Territory, other than in countries where the Reduced Royalty Rate applies. In case during a calendar year Royalties payable change from Full Royalty Rate to Reduced Royalty Rate or vice versa, the whole Net Sales in such year shall be included in the aggregate Net Sales. At the end of such calendar year the Parties shall reconcile together with the first royalty report of the following year the exact Royalty due for such change in order to account for the calendar month when such change occurred. The Royalty payable in each quarter will then be the sum of the amounts payable for Territories where Full Royalty Rates apply, less the aggregate amount of royalties previously paid in respect of these countries and of such year, plus the Royalties payable for countries where the Reduced Royalty Rate applies.

 

8.3.4

Reports. Each Royalty payment shall be accompanied by a written report describing the Net Sales of the Product sold by or on behalf of CENTREXION, its Affiliates and Sublicensees during a Calendar Quarter in each country in the Territory in which such Product occurred in the Calendar Quarter covered by such statement, specifying: the gross sales (if available) and Net Sales in each country’s currency, including an accounting of deductions taken in the calculation of Net Sales; the applicable exchange rate to convert from each country’s currency to Euros; and the Royalties payable in Euros.

 

8.3.5

Records. CENTREXION, its Affiliates and/or its Sublicensees shall keep and maintain complete and accurate records pertaining to sale or other disposition of the Product(s) in sufficient detail so that the Royalties payable and the Royalty reports will be verified. Such records shall be open to inspection during business hours for at least three (3) full calendar years following the end of the calendar year to which they pertain, but in any event not more than once per calendar year, by a nationally recognized independent certified public accountant selected by BII to whom CENTREXION has no reasonable objections and retained at BII’s expense. Said accountant shall sign a confidentiality agreement prepared by CENTREXION and reasonably acceptable to BII and shall then have the right to examine the records kept pursuant to this Agreement and report to BII the findings (but not the underlying data) of said examination of records as are necessary to evidence that the records were or were not maintained and used in accordance with this Agreement. A copy of any report provided to BII by the accountant shall be given concurrently to CENTREXION. If said examination of records reveals any underpayment(s) of the Royalty payable, then CENTREXION shall promptly pay the balance due to BII, and if the underpayment(s) is/are more than [***], then CENTREXION shall also bear the expenses of said accountant. If said examination of records reveals any overpayment(s) of Royalty payable, then BII shall credit the amount overpaid against CENTREXION’s future Royalty payment(s) during the next [***] period, and if such payments are insufficient to provide an adequate credit, then BII shall pay the remaining amounts within [***] to CENTREXION.

 

8.3.6

Taxes. If applicable laws or regulations require withholding of CENTREXION of any taxes imposed upon by BII on account of any royalties and payments, paid under this Agreement, such taxes shall be deducted by CENTREXION as required by law from such remittable royalty and payment and shall be paid by CENTREXION to the proper tax authorities. Official receipts of payment of any withholding tax shall be secured and sent to BI as evidence of such payment. The parties shall exercise their best efforts to ensure that any withholding taxes imposed are

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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  reduced as far as possible under the provisions of any relevant tax treaty. CENTREXION supports BII to get the required certificate of withholding tax exemption from US taxes regulated by the double taxation treaty between USA and Germany and CENTREXION supports BII to get the withheld US taxes refunded, if required.

 

8.3.7

Overdue Payments. Payments not paid within [***] after the due date shall bear interest at an annual rate of [***] above the three-month-LIBOR rate of the respective currency for the time period in which such amount is outstanding, as disclosed from time to time by the European Central Bank which applied on the due date. Calculation of interest will be made for the exact number of days in the interest period based on a year of 360 days (actual/360) by CENTREXION.

 

8.3.8

Financial Standards. All financial terms and standards (including any calculation of Net Sales, Development costs and financial payments due under this Agreement) shall be governed by and determined in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and shall be consistent with CENTREXION’s audited consolidated financial statements. Notwithstanding the above and notwithstanding the requirements or principles of U.S. GAAP, Net Sales shall be calculated in accordance with the formula specified in Section 1.41.

 

9.

INTELLECTUAL PROPERTY.

 

9.1

Assigned Patents.

 

9.1.1

Patent Transfer. BII shall provide CENTREXION with copies of the patent files of all Assigned Patents available at BII on the Effective Date (via electronic delivery) except for such files kept with the local patent representatives which shall remain with the respective representative until further instruction from CENTREXION. Except as otherwise provided in this Agreement, CENTREXION will be responsible for the maintenance and prosecution of the Assigned Patents after the Effective Date. If BII receives any bills or invoices for such work performed after the Effective Date, then BII will forward to CENTREXION such bills or invoices for payment by CENTREXION and BII shall have no liability for CENTREXION’s failure to timely pay such bills or invoices.

 

9.1.2

Local Patent Representatives. BII shall inform in writing all of its local patent representatives in the Territory within [***] after the Effective Date that: (i) the Assigned Patents have been assigned to CENTREXION, (ii) any future correspondence and further invoices regarding the Assigned Patents should be directly sent to CENTREXION and (iii) local patent representatives immediately inform CENTREXION about the further due dates related to Assigned Patents. For a period of [***] after the Effective Date BII shall forward to CENTREXION any correspondence it nevertheless receives from its local patent representatives or any patent offices regarding the Assigned Patents.

 

9.1.3

Maintenance and Prosecution of the Assigned Patents prior to the Effective Date. BII will be responsible for the maintenance and prosecution of the Assigned Patents on and prior to the Effective Date. BII will pay all prosecution fees, maintenance fees and/or such other fees due and required by the relevant patent offices for maintenance of the Assigned Patents on or prior to the Effective Date and will pay all bills and invoices for work performed on or prior to the Effective Date in connection with the maintenance and/or prosecution of the Assigned Patents. CENTREXION shall reimburse BII all fees and external costs paid by BII in relation to the maintenance and/or prosecution of the Assigned Patents after [***], in particular fees and costs paid in order to ensure that due dates prescribed for (i) the entry of International Patent Applications listed in Exhibit 1.4 into the regional/national Phase according to Art. 22 and 39

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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  PCT and (ii) the validation of the European Patents listed in Exhibit 1.4 pursuant Art. 65 EPC are met. For clarity, work relating to the transfer of the Assigned Patents to CENTREXION, whether performed before or after the Effective Date shall not constitute work performed in connection with the maintenance or prosecution of the Assigned Patents for purposes of this Section.

 

9.1.4

Prosecution. CENTREXION shall be responsible for preparing, filing, prosecuting and maintaining, throughout the world, all of the Assigned Patents, CENTREXION shall inform BII on an at least biannually basis about the status of the Patents and of the patent prosecution of all Assigned Patents. Should BII inquire about the status of specific Assigned Patents, CENTREXION shall provide upon BII’s written request any substantive communications with the competent patent offices that may affect the scope of such Assigned Patents and give BII reasonable opportunity to review and comment upon the text of any communication with the competent patent offices for Assigned Patents, and that CENTREXION shall not unreasonably refuse to address any of BII’s comments. CENTREXION shall use Commercially Reasonable Efforts to prosecute and maintain these Assigned Patents.

 

9.1.5

Royalties. The Parties agree that the assignment and transfer of the Assigned Patents shall only facilitate the prosecution, maintenance and exploitation of these Assigned Patents and shall not affect the term of the Royalty payments. Accordingly, as long as these Assigned Patents contain a Valid Claim, CENTREXION shall be obligated to pay Royalties thereon.

 

9.1.6

Discontinuance. If CENTREXION decides to discontinue maintaining any Assigned Patent, CENTREXION will notify BII of such decision in writing well in advance (e.g., at the latest [***] prior to any applicable regulatory deadline, if any), and BII will have the right to request the cost-free assignment and transfer of the Assigned Patent. If CENTREXION discontinues maintaining an Assigned Patent without notifying BII and the Assigned Patent lapses, CENTREXION shall pay to BII contractual damages based on the estimated amount of Royalties that would be payable by CENTREXION to BII during the remainder of the statutory term of such Assigned Patent if the Assigned Patent had not lapsed.

 

9.1.7

Enforcement. If a Party becomes aware of any infringement, anywhere in the world, of any issued Patent within the Assigned Patents, it will promptly notify the other Party in writing to that effect. CENTREXION shall have the primary right, but not the obligation, to take action to obtain a discontinuance of infringement or bring suit against a Third Party infringer of the Assigned Patents. CENTREXION shall bear all expenses of such suit. If CENTREXION elects not to take action or to bring suit to prosecute such infringement, it shall notify BII of such election within [***] after receipt of the notice of the infringement or immediately after the election to stop any such suit. If after the expiration of the [***] period (or, if earlier, the date upon which CENTREXION provides written notice that it does not plan to bring such action), CENTREXION has neither obtained a discontinuance of infringement of the Assigned Patent, as the case may be, nor filed suit against any such Third Party infringer of such Patents, then BII shall have the right, but not the obligation, to take action or bring suit against such Third Party infringer of such Patents, provided that BII shall bear all the expenses of such suit. The non-enforcing Party shall provide such assistance as the enforcing Party shall reasonably request in connection with any action or suit hereunder to prevent or enjoin any such infringement or unauthorized use of an Assigned Patent, including agreeing to be joined as a party to such action or suit and executing legal documents. Such assistance will be provided by the non-enforcing Party at the enforcing Party’s cost.

 

9.1.8

Sharing of recoveries. Any recoveries obtained as a result of any proceeding against a Third Party infringer (where the infringement relates to the Development, Manufacture and/or Commercialization of any Product) shall be allocated as follows:

 

  (a)

Such recovery shall first be used to reimburse each Party for all reasonable litigation costs in connection with such litigation paid by that Party;

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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  (b)

such recovery shall then be used to compensate each Party for the respective damages suffered from the infringement of the respective Patent, provided that in the event the remaining portion of the recovery is not sufficient to compensate each Party’s damages, such compensation shall be paid on a pro-rata share based on the respective damages suffered; and

 

  (c)

the remaining portion of such recovery, if any, shall be distributed to the enforcing Party.

 

9.2

Licensed Know-How. BII retains all rights to the Licensed Know-How, subject only to the licenses granted hereunder. For the avoidance of doubt, CENTREXION shall only be entitled to utilize the Licensed Know-How in accordance with CENTREXION’s rights and obligations under this Agreement.

 

9.3

Results.

 

9.3.1

BII hereby acknowledges that CENTREXION is the owner of all inventions, data and other results developed by CENTREXION under this Agreement (“Results”), and BII shall acquire no rights, title or interest whatsoever in or to any such Results, except as specifically provided under this Agreement.

 

9.3.2

CENTREXION shall be responsible for filing, prosecuting and maintaining, throughout the world, all Patents based on the Results. The costs of filing, prosecuting and maintaining such Patents shall be borne by CENTREXION, subject to CENTREXION’s right to elect to discontinue the patent prosecution and maintenance as set forth in Section 9.3.3 below.

 

9.3.3

If CENTREXION elects to cease the filing, prosecution and/or maintenance of a Result in any country of the Territory, CENTREXION shall provide BII with written notice immediately upon the decision to discontinue the filing, prosecution, maintenance and/or defense of such Patent, as the case may be, in any event, however, not later than [***] before any relevant deadline relating to or any public disclosure of the relevant Result. In such event, CENTREXION shall permit BII, at BII’s sole discretion, to take over or continue, as the case may be, the filing, prosecution, maintenance and defense of such Patent at BII’s own expense. If BII to take over and continue such prosecution, maintenance and defense, CENTREXION shall transfer ownership in such Patent and execute such documents and perform such acts, at BII’s expense, as may be reasonably necessary to permit BII to take over and continue the filing, prosecution, maintenance and/or defense of such Patent at its own cost; such Patent shall no longer be considered a Result.

 

9.4

Third Party Rights. If the Development, Manufacture and/or Commercialization of any Product is alleged by a Third Party to infringe a Third Party’s Intellectual Property, the Party becoming aware of such allegation shall promptly notify the other Party. CENTREXION shall be responsible for defending such allegation and any suit brought by a Third Party based on such allegation. If a Third Party sues BII alleging that BII’S activities pursuant to this Agreement infringe or will infringe said Third Party’s Intellectual Property, CENTREXION shall, upon BII’s request, assume the responsibility for and the costs of such suit and hold BII harmless against any claims or costs related to such suit.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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10.

CONFIDENTIALITY.

 

10.1

Obligation of confidentiality. As of the Effective Date, all Confidential Information disclosed, revealed or otherwise made available to one Party (“Receiving Party”) by or on behalf of the other Party (“Disclosing Party”) under, or as a result of, this Agreement are made available to the Receiving Party solely to permit the Receiving Party to exercise its rights, and perform its obligations, under this Agreement. The Receiving Party shall not use any of the Disclosing Party’s Confidential Information for any other purpose, and shall not disclose, reveal or otherwise make any of the Disclosing Party’s Confidential Information available to any other person, firm, corporation or other entity, without the prior written authorization of the Disclosing Party, except as explicitly stated in this Section 10.

 

10.2

Additional obligations.

 

10.2.1

Appropriate safeguards. In furtherance of the Receiving Party’s obligations under Section 10.1 hereof, the Receiving Party shall take all reasonable steps, and shall implement all appropriate and reasonable safeguards, to seek to prevent the unauthorized use or disclosure of any of the Disclosing Party’s Confidential Information.

 

10.2.2

Recipients of Confidential Information. Without limiting the generality of this Section 10.2, the Receiving Party shall disclose any of the Disclosing Party’s Confidential Information only to those of its Affiliates, officers, employees, assignees, licensees, Sublicensees, contract service providers, and its potential assignees, licensees and Sublicensees, and consultants and investors and potential investors that have a need to know the Disclosing Party’s Confidential Information, in order for the Receiving Party to exercise or confirm its rights and/or to perform its obligations under this Agreement, and only if such officers, employees, assignees, licensees, Sublicensees, contract service providers, and its potential assignees, licensees and Sublicensees, and consultants and investors and potential investors have executed appropriate non-disclosure agreements containing substantially similar terms regarding confidentiality and non-use as those set out in this Agreement or are otherwise bound by obligations of confidentiality effectively prohibiting the unauthorized use or disclosure of the Disclosing Party’s Confidential Information.

 

10.2.3

Unauthorized use or disclosure. The Receiving Party shall furnish the Disclosing Party with written notice immediately of it becoming aware of any unauthorized use or disclosure of any of the Disclosing Party’s Confidential Information by any officer, employee, assignee, licensee or Sublicensee, or potential assignee, contract service provider, and its licensee or Sublicensee, or consultant, investor or potential investor of the Receiving Party, and shall take all actions reasonably required in order to prevent any further unauthorized use or disclosure of the Disclosing Party’s Confidential Information.

 

10.3

Limitations. The Receiving Party’s obligations under Sections 10.1 and 10.2 hereof shall not apply to the extent that the Receiving Party can demonstrate by competent evidence that any of the Disclosing Party’s Confidential Information:

 

  (a)

is in the public domain, or becomes generally available to the public through no fault of the Receiving Party;

 

  (b)

was known to the Receiving Party, without restriction of use or disclosure, prior to being made available hereunder;

 

  (c)

is disclosed, revealed or otherwise made available to the Receiving Party by a Third Party, without restriction of use or disclosure, that is under no obligation of non-disclosure and/or non-use to the Disclosing Party in relation to the subject item; or

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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  (d)

is required to be disclosed under Applicable Law, or in connection with any application by the Receiving Party for any Regulatory Approvals; provided, however, that the Receiving Party shall furnish the Disclosing Party’s with as much prior written notice of such disclosure requirement as reasonably practicable, to permit the Disclosing Party, in its sole discretion, to take appropriate action, including seeking a protective order, in order to prevent the Disclosing Party’s Confidential Information from passing into the public domain or becoming generally available to the public.

 

10.4

Return of Confidential Information. Subject to Section 12.2, upon termination (but not expiration) of this Agreement for any reason whatsoever, the Receiving Party shall cease all use of and return to the Disclosing Party, or destroy, as the Disclosing Party shall specify in writing promptly upon such termination, all copies of all documents and other materials that contain or embody any of the Disclosing Party’s Confidential Information, except to the extent that the Receiving Party is (i) required by Applicable Laws to retain such documents and materials or (ii) remains entitled under this Agreement to use such Confidential Information, and provided further that each Party may keep a single copy of all Confidential Information within its legal archives solely to assure compliance with the provisions of this Section 10. Within [***] after the date of termination of this Agreement, the Receiving Party shall furnish the Disclosing Party with a certificate, duly executed by an officer of the Receiving Party, confirming that the Receiving Party has complied with its obligations under this Section 10.4.

 

10.5

Survival. All of the Receiving Party’s obligations under Sections 10.1 and 10.2 hereof, with respect to the protection of the Disclosing Party’s Confidential Information, shall for a period of [***] survive the expiration or termination of this Agreement for any reason whatsoever.

 

10.6

Public announcements. During the term of this Agreement, no public announcement concerning the existence of, terms, or subject matter of this Agreement shall be made, either directly or indirectly, by any Party, without first obtaining the prior written approval of the other Party and agreement upon the nature and text of such public announcement; such agreement and approval shall not be unreasonably withheld or delayed. Each Party agrees that it shall co-operate fully with the other with respect to all disclosures regarding this Agreement to any governmental or regulatory agencies, including requests for confidential treatment of proprietary information of either Party included in any such disclosure.

 

10.7

Applicable laws. Nothing in this Agreement shall be construed as preventing or in any way inhibiting either Party from complying with Applicable Laws governing activities and obligations undertaken pursuant to this Agreement, in any manner which it reasonably deems appropriate, including, for example, by disclosing to Regulatory Authorities Confidential Information or other information received from the other Party, subject to Section 10.3(d) and 11.6.

 

10.8

Scientific Publications. BII acknowledges that CENTREXION may have a legitimate interest to publish in a journal, paper or magazine or to present at professional meetings or to make similar disclosures of the Development Data or other information relating to the Compounds and Products generated by BII (“Scientific Publications”). Such Scientific Publications shall comply with widely accepted scientific standards. BII’s contribution shall be acknowledged in any Scientific Publication by co-authorship or acknowledgment, whichever is appropriate in accordance with customary scientific practice. In case of joint publications, the citation order and respective functions of the authors (e.g. first author, last author, corresponding author) shall be determined in good faith by the Parties, in accordance with the rules applicable in the scientific community.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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11.

WARRANTIES; LIABILITIES; INDEMNIFICATION AND INSURANCE.

 

11.1

Warranties.

 

11.1.1

Representations and warranties of each Party. Each of BII and CENTREXION hereby represents and warrants to the other Party hereto that as of the Effective Date:

 

  (a)

it is a corporation or entity duly organized and validly existing under the laws of the state or other jurisdiction of its incorporation or formation;

 

  (b)

its execution, delivery and performance of this Agreement by such Party does not conflict with any other agreement by which it is bound, and has been duly authorized by all requisite corporate action and does not require any shareholder action or approval; and

 

  (c)

it has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder.

Furthermore, each of BII and CENTREXION hereby covenants to the other Party that it shall at all times comply with all Applicable Laws relating to its activities under this Agreement.

 

11.1.2

Representations and warranties of BII. Subject to the disclosures in Exhibit 11.1 hereto, BII hereby represents and warrants that, as of the Effective Date:

 

  (a)

to its knowledge, it Controls (free and clear of any liens, mortgages, security interests, charges, encumbrances or otherwise) the entire right, title and interest in the Assigned Patents and the Licensed Know-How;

 

  (b)

it has the right to enter into this Agreement and to grant the licenses contained herein;

 

  (c)

it has no knowledge of (i) any Intellectual Property of a Third Party that would be infringed by the practice of the Assigned Patents and the Licensed Know-How and could reasonably be considered a material impediment of the rights granted herein; or (ii) any correspondence from any Third Party notifying it of such potentially relevant issued patents Controlled by such Third Party; and

 

  (d)

to its knowledge, there are no Third Party Licenses; and

 

  (e)

to its knowledge it has not received any claims or correspondence from any Third Party asserting that the development or commercialization of the Compounds would constitute an infringement or misappropriation of such intellectual property owned or controlled by a Third Party.

 

11.1.3

Diligence warranty of CENTREXION. CENTREXION acknowledges and agrees that BII has answered all questions of CENTREXION relating to the due diligence of the Compounds and Products, and CENTREXION warrants that it has diligently reviewed all such information, including information relating to the Assigned Patents and Licensed Know-How, the Compounds and the Products provided by BII.

 

11.1.4

Disclaimer. Except as specifically and expressly set forth in this Section 11, each Party makes no representation or warranty and specifically disclaims any guarantee, express or implied, relating to the Assigned Patents and the Licensed Know-How, or any other information disclosed, revealed or otherwise made available to the other Party under this Agreement or otherwise, including, but not limited to any representation or warranty that the Development of

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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  the Compounds and Products will be successful, in whole or in part, that the Assigned Patents and Licensed Know-How will be suitable for exploitation or that the Compounds and Products conform to the requirements of any Applicable Laws. Subject only to Section 11.1.2 above, BII expressly disclaims any warranties or conditions, express, implied, statutory or otherwise with respect to the Assigned Patents and Licensed Know-How, the Compounds and Products, including any warranty of merchantability, fitness for a particular purpose or non-infringement.

 

11.2

Limitation of Liability. Except in the case of willful or intentional misconduct or gross negligence, neither Party shall be liable to the other Party for any indirect, punitive or consequential damages, whether based on contract or tort, or arising under Applicable Law or otherwise.

 

11.3

Indemnification.

 

11.3.1

BII’s obligations to indemnify. BII shall indemnify, defend and hold CENTREXION, its Affiliates, and its and their employees, agents, officers, and directors (individually and/or collectively referred to hereinafter as a “Centrexion Party”) harmless from and against any and all losses, liabilities, damages, expenses or fees paid or payable by CENTREXION or a Centrexion Party to a Third Party (collectively, “Centrexion Losses”) to the extent that such Centrexion Losses result from or arise in connection with a claim, suit or other proceeding made or brought by a Third Party against CENTREXION or a Centrexion Party (a “Centrexion Claim”) based on, resulting from, or arising in connection with:

 

  (a)

any material breach of any of BII’s representations or warranties set forth in this Agreement;

 

  (b)

any other grossly negligent, willful or intentional misconduct, error or omission on the part of BII, or any officer, director, employee, agent or representative of BII;

provided, however, that BII shall not be obligated to indemnify, defend or hold harmless CENTREXION or a Centrexion Party from any Centrexion Claim or for any Centrexion Loss incurred by CENTREXION or a Centrexion Party to the extent CENTREXION is responsible for indemnifying, defending and holding BII and BII Parties harmless for such Claims as set forth in Section 11.3.2.

 

11.3.2

CENTREXION’s obligations to indemnify. CENTREXION shall indemnify, defend and hold BII, its Affiliates and its and their officers, directors, trustees, agents and employees (individually and/or collectively referred to herein as an “BII Party”) harmless from and against any and all losses, liabilities, damages, expenses or fees paid or payable by BII or a BII Party to a Third Party (collectively, “BII Losses”) to the extent that such BII Losses result from or arise in connection with a claim, suit or other proceeding made or brought by a Third Party against BII or a BII Party (an “BII Claim”) based on, resulting from, or arising in connection with:

 

  (a)

any material breach of any of CENTREXION’s obligations, representations, warranties or covenants set forth in this Agreement;

 

  (b)

any other grossly negligent, willful or intentionally wrongful act, error or omission on the part of CENTREXION, or any officer, director, employee, agent or representative of CENTREXION;

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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  (c)

any claim that the Development, Manufacture and/or Commercialization of a Compound or a Product fails to conform to the requirements of any Applicable Laws;

 

  (d)

any product liability claim regarding the Products to the extent Commercialized by CENTREXION; or

 

  (e)

any Third Party claim regarding an allegation that the Manufacture or Commercialization by CENTREXION of Compounds or Products pursuant to and consistent with the provisions of this Agreement infringes such Third Party’s Intellectual Property;

provided, however, that CENTREXION shall not be obligated to indemnify, defend or hold harmless BII or an BII Party from any BII Claim or for any BII Loss incurred by BII or an BII Party to the extent BII is responsible for indemnifying, defending and holding CENTREXION and Centrexion Parties harmless for such Claims as set forth in Section 11.3.1.

 

11.3.3

Indemnification procedures.

 

  (a)

Each indemnified Party shall notify the indemnifying Party (and in reasonable detail) of the Claim within [***] after receipt by such indemnified Party of notice of the CENTREXION Claim or BII Claim, as the case may be, or otherwise becoming aware of the existence or threatened existence thereof (such CENTREXION Claim or BII Claim being referred to as a “Claim”). Failure to give such notice shall not constitute a defense, in whole or in part, to any Claim by an indemnified Party hereunder except to the extent the rights of the indemnifying Party are materially prejudiced by such failure to give notice. The indemnifying Party shall notify in English the indemnified Party of its intentions as to the defense of the Claim or potential Claim within [***] after receipt of notice of the Claim. If the indemnifying Party assumes the defense of a Claim against an indemnified Party, the indemnifying Party shall have no obligation or liability under this Section 11 as to any Claim for which settlement or compromise of such Claim or an offer of settlement or compromise of such Claim is made by an indemnified Party without the prior written consent of the indemnifying Party, which consent shall not be unreasonably withheld.

 

  (b)

The indemnifying Party shall assume exclusive control of the defense and settlement (including all decisions relating to litigation, defense and appeal) of any such Claim (so long as it has confirmed its indemnification obligation responsibility to such indemnified Party under this Section 11.3 with respect to a given Claim); provided, however, that the indemnifying Party may not settle such Claim in any manner that would require payment by the indemnified Party, or would materially adversely affect the rights granted to the indemnified Party hereunder, or would materially conflict with the terms of this Agreement, or adversely affect other products, without first obtaining the indemnified Party’s prior written consent, which consent shall not be unreasonably withheld.

 

  (c)

The indemnified Party shall reasonably cooperate with the indemnifying Party in its defense of the Claim (including, without limitation, making documents and records available for review and copying and making persons within its control available for pertinent testimony in accordance with the confidentiality provisions of Section 10, and neither Party shall be required to divulge privileged material to the other) at the indemnifying Party’s expense. If the indemnifying Party assumes defense of the Claim, an indemnified Party may participate in, but not control, the defense of such Claim using attorneys of its choice and at its sole cost and expense, with such cost and expense not being covered by the indemnifying Party. If an indemnifying Party does not agree

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

24


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

  to assume the defense of the Claim asserted against the indemnified Party (or does not give notice that it is assuming such defense), or if the indemnifying Party assumes the defense of the Claim in accordance with this Section 11.3 yet fails to defend or take other reasonable, timely action, in response to such Claim asserted against the indemnified Party, the indemnified Party shall have the right to defend or take other reasonable action to defend its interests in such proceedings, and shall have the right to litigate, settle or otherwise dispose of any such Claim; provided, however, that no Party shall have the right to settle a Claim in a manner that would adversely affect the rights granted to the other Party hereunder, or would materially conflict with this Agreement, or would require a payment by the Party, or adversely affect the Party (its Affiliates) or its products in or outside the territory, without the prior written consent of the Party entitled to control the defense of such Claim, which consent shall not be unreasonably withheld.

 

11.3.4

Insurance. CENTREXION shall obtain and maintain during the term of this Agreement reasonable and adequate general liability insurance, patients insurance and product liability insurance. CENTREXION shall provide to BII written proof of the existence of such insurance upon request.

 

12.

TERM AND TERMINATION; CONSEQUENCES OF TERMINATION.

 

12.1

Term and Termination.

 

12.1.1

Term. This Agreement shall become effective as of the Effective Date and shall expire on a Product-by-Product and country-by-country basis upon the expiration of the last payment obligation by CENTREXION.

 

12.1.2

Termination for convenience. CENTREXION shall have the right to terminate this Agreement at its own discretion at any time by providing [***] prior written notice to BII.

 

12.1.3

Termination for cause.

 

  (a)

In the event that either Party (“Breaching Party”) commits a material breach or default of any of its obligations hereunder, such material breach to include a breach by CENTREXION of the Development and diligence obligations under Section 4, the other Party hereto (“Non-Breaching Party”) may give the Breaching Party written notice of such material breach or default, and shall request that such material breach or default be cured as soon as reasonably practicable. Subject to Section 12.1.4, in the event that the Breaching Party fails to cure such breach or default within [***] after the date of the Non-Breaching Party’s written notice thereof (in the event of default of payment within [***] after the date of the Non-Breaching Party’s notice), the Non-Breaching Party may terminate this Agreement by giving written notice of termination to the Breaching Party. In the event the Breaching Party indicates in writing that it will be unable or is unwilling to cure the breach, this Agreement may be terminated by the Non-Breaching Party with immediate effect.

 

  (b)

BII may terminate this Agreement in the event CENTREXION or any of its Affiliates directly or indirectly challenges the validity of the Assigned Patents in a legal proceeding or supports a Third Party in the challenge of an Assigned Patent in a legal proceeding (in each case before a court of competent jurisdiction). In the event a Sublicensee of CENTREXION challenges the validity of an Assigned Patent, BII may terminate this Agreement hereunder, if CENTREXION does not terminate such sublicense agreement with immediate effect.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

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DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

12.2

Consequences of Termination.

 

12.2.1

Expiration. Upon expiration of this Agreement, CENTREXION shall, on a Product-by-Product and country-by-country basis, retain a perpetual, fully paid-up, non-exclusive and cost-free right to use the Licensed Know-How solely for the Products in such country and in the Field.

 

12.2.2

Termination for convenience by CENTREXION or for cause by BII. If this Agreement is terminated by CENTREXION in accordance with Section 12.1.2 or by BII in accordance with Section 12.1.3,

 

  (a)

CENTREXION shall no longer have any right to use the Assigned Patents and ownership of all Assigned Patents shall automatically transfer back to BII;

 

  (b)

CENTREXION’s licenses under Section 2 of this Agreement shall automatically lapse and all of BII’s rights to the Licensed Know How automatically revert back to BII; and

 

  (c)

CENTREXION shall retain a right to distribute and sell its existing inventory of the Products for a period of not more than [***] following the date of the effective termination hereof, subject to CENTREXION’s continuing obligation to pay sales milestones and Royalties with respect to the Net Sales derived from the distribution and sale of such existing inventory of the Products, in accordance with the requirements of Section 8 hereof.

 

  (d)

BII shall have the right to request in writing within [***] after the effective date of such termination, at CENTREXION’s cost and expense, solely to the extent reasonably necessary for BII to continue the Development, Manufacture and Commercialization of the Products:

 

  (i)

a complete set of all Development Data, in particular IND/regulatory dossiers, to be provided in original form (i.e., with the relevant signatures and as suitable for submission for Regulatory Approval) and other Know How of CENTREXION regarding the Compounds and the Products and requested by BII, such Development Data and other Know How to also be provided in electronic form within [***] after receipt of such notice;

 

  (ii)

the transfer of Regulatory Approvals, pricing approvals and reimbursement agreements held by CENTREXION, its Affiliates or Sublicensees;

 

  (iii)

if Regulatory Approvals have not been obtained by CENTREXION, its Affiliates or Sublicensees, that CENTREXION(i) either transfers to BII all applications to Regulatory Authorities, i.e. the Investigational New Drug Application (IND) and the status of an application for the Regulatory Approvals and notifies the competent Regulatory Authority thereof and supplies BII with all documents already prepared by CENTREXION, its Affiliates or Sublicensees for the filing of applications for Regulatory Approvals (with CENTREXION using all efforts to promptly undertake such actions), or (ii) applies for the closing of any application with the Regulatory Authorities; and

 

  (iv)

the grant of a non-exclusive, cost-free, perpetual, worldwide, transferrable and sublicenseable (in multiple tiers) license to the Results and Background IP of CENTREXION, to the extent such Results and Background IP of CENTREXION have been used, or are necessary, for the Development, Manufacture and/or Commercialization of the Products, in each instance for the continued Development, Manufacture and Commercialization of Products.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

CENTREXION shall ensure that its Affiliates and Sublicensees grant respective licenses to Results and Background IP to BII.

 

12.2.3

Termination for cause by Centrexion. If this Agreement is terminated by CENTREXION in accordance with Section 12.1.3, CENTREXION shall elect to either (i) terminate the Agreement and pursue whatever remedies may be available to CENTREXION hereunder or at law or in equity or (ii) continue the Agreement; provided that the Agreement shall automatically be amended, with no action required by either Party, such that CENTREXION’s obligations hereunder shall terminate except for its obligations under Sections 6.2, 7, 8, 9, 10 and 11, and the licenses granted by BII to CENTREXION hereunder shall continue in full force and effect, on a perpetual, irrevocable basis, sublicenseable in multiple tiers, in accordance with Section 2, and subject to CENTREXION’s payment of the payments specified in Section 9.

 

12.2.4

Accrued payment claims. Termination of this Agreement for any reason whatsoever shall not relieve CENTREXION of its obligations to pay all Royalties and other amounts payable to BII which have accrued prior to, but remain unpaid as of, the date of expiration or termination hereof, or which accrue thereafter, in accordance with Section 12.2.2(c) hereof. Upon termination of this Agreement any accrued payment obligations shall become immediately due and payable.

 

12.2.5

Termination for cause. Termination of this Agreement in accordance with Section 12.1.3 shall not affect or impair the Non-Breaching Party’s right to pursue any legal remedy, including the right to recover damages, for any harm suffered or incurred by the Non-Breaching Party as a result of such breach or default.

 

12.2.6

Survival. Sections 1, 6, 8, 10, 11, 12, and 14 shall survive the expiration or termination of this Agreement.

 

13.

GOVERNMENT APPROVALS.

Government approvals. As of and after the Effective Date, CENTREXION and BII will reasonably cooperate and use respectively all Commercially Reasonable Efforts to obtain all approvals required and make all registrations, filings and applications, to give all notices and to obtain as soon as practicable all other consents, transfers, approvals, orders, qualifications authorizations, permits and waivers, if any, and to do all other things necessary or desirable for the consummation of the transactions as contemplated hereby.

 

14.

GENERAL PROVISIONS.

 

14.1

Assignment. Neither Party shall have the right or the power to assign any of its rights or obligations under this Agreement, without the prior written consent of the other Party, except that it may assign this Agreement to the successor to all or substantially all of the assets of such assigning Party as are relevant to this Agreement.

 

14.2

Force majeure. If the performance of any part of this Agreement by either Party, or any obligation under this Agreement, is prevented, restricted, interfered with or delayed by reason of any cause beyond the reasonable control of the Party liable to perform, unless conclusive evidence to the contrary is provided, the Party so affected shall, upon giving written notice to the other Party, be excused from such performance to the extent of such prevention, restriction,

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

  interference or delay, provided that the affected Party shall use its Commercially Reasonable Efforts to avoid or remove such causes of non-performance and shall continue performance with the utmost dispatch whenever such causes are removed. When such circumstances arise, the Parties shall discuss what, if any, modification of the terms of this Agreement may be required in order to arrive at an equitable solution.

 

14.3

Notices. All notices hereunder shall be in writing in the English language and shall be delivered by personal delivery, by registered mail / international courier, or by facsimile and confirmed by registered mail / international courier on the next Business Day after the transmission, and shall be deemed given (a) on the date of delivery if delivered by personal delivery on a Business Day; (b) on the third Business Day from and including the day of sending in the case of a delivery by registered mail / international courier; or (c) on the next Business Day following the day of transmission in the case of a delivery by facsimile (confirmed by a copy sent as provided above). All notices shall be given:

if to BII, addressed to:

Boehringer Ingelheim International GmbH

[***]

[***]

Binger Str. 173

55216 Ingelheim

Germany

Telephone: [***]

Facsimile: [***]

With a copy to:

[***]

Address as above

if to CENTREXION, addressed to:

[***]

CENTREXION Therapeutics Corporation

509 South Exeter Street, Suite 202

Baltimore, Maryland 21202

U.S.A.

Email: [***]

Telephone: [***]

Facsimile: [***]

 

14.4

Governing law. This Agreement and all disputes arising hereunder, shall be exclusively governed by, and interpreted and enforced in accordance with the laws of Switzerland, without regard to its conflict of law rules.

 

14.5

Jurisdiction. Exclusive jurisdiction shall lie with the courts in Zurich, Switzerland.

 

14.6

Severability. If any provision of this Agreement is determined by any court or administrative tribunal of competent jurisdiction to be invalid or unenforceable, the Parties shall negotiate in good faith a replacement provision that is commercially equivalent, to the maximum extent

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

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DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

  permitted by Applicable Laws, to such invalid or unenforceable provision. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement. Nor shall the invalidity or unenforceability of any provision of this Agreement in one country or jurisdiction affect the validity or enforceability of such provision in any other country or jurisdiction in which such provision would otherwise be valid or enforceable.

 

14.7

Entire Agreement and Amendments. This Agreement, together with all Exhibits attached hereto, constitutes the entire agreement between the Parties regarding the subject matter hereof, and supersedes all prior agreements, understandings and communications between the Parties, with respect to the subject matter hereof, provided, however, that confidentiality agreements between of the Parties regarding the subject matter hereto and entered into before the Effective Date, including the confidential disclosure agreement entered into by and between the Parties dated [to be completed], shall remain effective with respect to information exchanged between the Parties before the Effective Date. No modification or amendment of this Agreement shall be binding upon the Parties unless in writing and executed by the duly authorized representative of each of the Parties; this shall also apply to any change of this Section.

 

14.8

Waivers. The failure by either Party hereto to assert any of its rights hereunder, including the right to terminate this Agreement due to a breach or default by the other Party hereto, shall not be deemed to constitute a waiver by that Party of its right thereafter to enforce each and every provision of this Agreement in accordance with its terms.

 

14.9

Independent Contractors. The Parties are independent contractors and this Agreement shall not constitute or give rise to an employer-employee, agency, partnership or joint venture relationship among the Parties and each Party’s performance hereunder is that of a separate, independent entity.

 

14.10

Headings. The headings are placed herein merely as a matter of convenience and shall not affect the construction or interpretation of any of the provisions of this Agreement.

- signature page follows -

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

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DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

IN WITNESS WHEREOF, this Agreement has been signed by the Parties hereto in two originals, each Party acknowledging receipt of one original.

 

Boehringer Ingelheim International GmbH     CENTREXION Therapeutics Corporation
By:   /s/ Jürgen Beck     By:   /s/ Kerrie Brady
Name:   Jürgen Beck     Name:   Kerrie Brady
Title:   Authorized Signatory     Title:   Chief Business Officer

 

By:   /s/ Dorothee Schwall-Rudolph
Name:   Dorothee Schwall-Rudolph
Title:   Authorized Signatory

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

30


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Exhibit 1.4 Assigned Patents

Patent portfolio of the SSTR4 program

Patent Family: [***]

Title: [***]

 

Country/Docket

  

Filing date

  

Application no.

  

Publication no.

  

Status

[***]

   [***]    [***]    [***]    [***]

Patent Family: [***]

Title: [***]

 

Country / Docket

  

Filing date

  

Application no.

  

Publication no.

[***]

   [***]    [***]    [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

31


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Patent portfolio of the CCR2 program

Patent family [***]

Title: [***]

 

Country / Docket

  

Application date

  

Application number

  

Publication number

  

Patent number

[***]

  

[***]

  

[***]

  

[***]

  

[***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

32


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Patent family [***]

Title: [***]

 

Country / Docket

  

Application date

  

Application number

  

Publication number

  

Patent number

[***]

   [***]    [***]    [***]    [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

33


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Patent family [***]

Title: [***]

 

Country / Docket

  

Application date

  

Application number

  

Publication number

  

Patent number

[***]

   [***]    [***]    [***]    [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

34


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Patent portfolio of the CB2 program

Patent family [***]

Title: [***]

 

Country / Docket

  

Application date

  

Application number

  

Publication number

  

Patent number

[***]

   [***]    [***]    [***]    [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

35


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Exhibit 1.25 Development Compounds

CCR2 (BI 416970)

CB2 (BI 1206016)

SSTR4 (BI 440290)

SSTR4BU (BI443438)

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Exhibit 2.1 Assignment Form

PATENT ASSIGNMENT

THIS ASSIGNMENT is made on “DATE” between

Boehringer Ingelheim International GmbH (“BII”), a German limited liability company, with offices at Binger Straße 173, 55216 Ingelheim am Rhein, Germany

And

Centrexion Therapeutics Corporation (“CENTREXION”), a Delaware Corporation, with offices at 509 South Exeter Street, Baltimore, Maryland 21202, U.S.A

WHEREAS BII owns and controls certain patents and patent applications related to SSTR4 agonists, CCR2 antagonists and CB2 agonists.

NOW THEREFORE in consideration of the premises contained herein and for other valuable consideration that has been exchanged, CENTREXION requests and the BII HEREBY ASSIGNS to CENTREXION, who accepts, the Patents (which are the patents and patent applications listed on the attached Annex 1 and all other patents and patent applications in any country that (i) claim priority to a patent or patent application listed on the attached Annex 1 or (ii) have a common priority with a patent or patent application listed on the attached Annex 1), all rights to claim priority from any of the Patents, all the right, title and interest therein and to all inventions disclosed therein, and all the rights, powers and privileges conferred on the proprietor thereof by the grant of the Patents, including the right to sue for damages and other remedies in respect of any infringement of the Patents which may have occurred prior to the date hereof TO HOLD the same unto the Assignee absolutely.

AND BII hereby gives explicit consent to CENTREXION to register and record the transfer of ownership right with the respective intellectual property offices worldwide.

In consideration for the above assignment, the CENTREXION has paid to BII the amount of EUR 1 (+ VAT, if applicable), receipt of which is acknowledged by BII.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

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DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

This Agreement shall be governed by and construed in accordance with German law.

EXECUTED the date and year first above written

Boehringer Ingelheim International GmbH

Ingelheim, Date

 

by      
ppa.       ppa.  
  Authorized Signatories      

 

Centrexion Therapeutics Corporation
by
 

 

 

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Annex 1

Patent portfolio of the SSTR4 program

Patent Family: [***]

Title: [***]

 

Country / Docket

  

Filing date

  

Application no.

  

Publication no.

  

Status

[***]

   [***]    [***]    [***]    [***]

Patent Family: [***]

Title: [***]

 

Country / Docket

  

Filing date

  

Application no.

  

Publication no.

[***]

   [***]    [***]    [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

39


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Patent portfolio of the CCR2 program

Patent family [***]

Title: [***]

 

Country / Docket

  

Application date

  

Application number

  

Publication number

  

Patentnumber

[***]

   [***]    [***]    [***]    [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

40


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Patent family [***]

Title: [***]

 

Country / Docket

  

Application date

  

Application number

  

Publication number

  

Patentnumber

[***]

   [***]    [***]    [***]    [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

41


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Patent family [***]

Title:    [***]

 

Country / Docket

  

Application date

  

Application number

  

Publication number

  

Patentnumber

[***]

   [***]    [***]    [***]    [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

42


Confidential Treatment Requested Centrexion Therapeutics Corporation

STRICTLY CONFIDENTIAL AND ATTORNEY-CLIENT-PRIVILEGED

DRAFT - BII - CENTREXION - PATENT ASSIGNMENT AND LICENSING AGREEMENT

 

Patent portfolio of the CB2 program

Patent family [***]

Title: [***]

 

Country / Docket

  

Application date

  

Application number

  

Publication number

  

Patent number

[***]

   [***]    [***]    [***]    [***]

 

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

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Exhibit 4.2 Development Plan

[***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

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Confidential Treatment Requested Centrexion Therapeutics Corporation

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Proposed
Indication at
Start of

Development

  

Phase 1

(first
patient in)

  

Phase 2a

(first
patient in)

  

Phase 2b

(first
patient in)

  

Phase 3

(first
patient in)

  

NDA
filing

BI-CCR2

   OA pain    [***]    [***]    [***]    [***]    [***]

BI-CB2

   Neuropathic pain    [***]    [***]    [***]    [***]    [***]

BI-SSTR4

   Chronic pain    [***]    [***]    [***]    [***]    [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

45


EX-10.7.2

Exhibit 10.7.2

Confidential Treatment Requested Centrexion Therapeutics Corporation

AMENDMENT #1

TO PATENT ASSIGNMENT AND LICENSING AGREEMENT

This Amendment No. 1 (“Amendment No. 1”) to the Patent Assignment and Licensing Agreement by and between Boehringer Ingelheim International GmbH (“BII”) and Centrexion Therapeutics Corporation (“CENTREXION”), dated November 11, 2015, (the “Agreement”) is entered into effective as of January 29, 2018.

WHEREAS, pursuant to the Agreement, in November 2017 CENTREXION provided BII with a progress report related to activities during the period May 2017 through November 2017 (the “November 2017 Progress Report,” attached hereto as Exhibit A); and

WHEREAS, the November 2017 Progress Report updated certain expected timelines and expected completion dates for certain milestone events set forth in the Agreement; and

WHEREAS, CENTREXION and BII (each, a “Party” and together, the “Parties”) wish to amend the Agreement by replacing the original timelines and expected milestone completion dates contained therein with the new timelines and expected milestone completion dates set forth in the November 2017 Progress Report; and

WHEREAS, the Parties wish to further amend the Agreement to set forth a practical procedure whereby they may agree upon additional, future amendments to the Agreement’s timelines and expected milestone completion dates in the event additional, future changes to such timelines or dates are required;

NOW, THEREFORE, in consideration of the mutual covenants, agreements and stipulations set forth herein and in the Agreement, the receipt and legal sufficiency of which are hereby mutually acknowledged, and intending to be legally bound, the Parties hereby agree to amend the Agreement as follows:

1. The last sentence of Section 4.2 of the Agreement shall be deleted and replaced in its entirety with the following language:

CENTREXION shall perform the Development within the timelines as set forth within the most recent Agreed Progress Report provided by CENTREXION to BII. The Parties agree and acknowledge that as of the date of Amendment No. 1 to this Agreement, the most recent Agreed Progress Report is the November 2017 Progress Report.

2. Section 4.3 of the Agreement shall be deleted and replaced in its entirety with the following language:

Development Milestones. CENTREXION shall achieve the following development milestones (“Development Milestones”):

(a) CCR2: Initiation (first patient in) of a Phase IIa Clinical Trial before the expected date for such Development Milestone consistent with the timelines set forth in the most recent Agreed Progress Report.

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 

1


Confidential Treatment Requested Centrexion Therapeutics Corporation

 

(b) CB2: Initiation (first patient in) of a Phase I Clinical Trial before the expected date for such Development Milestone consistent with the timelines set forth in the most recent Agreed Progress Report.

(c) SSTR4: Initiation (first patient in) of a Phase I Clinical Trial before the expected date for such Development Milestone consistent with the timelines set forth in the most recent Agreed Progress Report.

3. Section 4.4 of the Agreement shall be deleted and replaced in its entirety with the following language:

Extensions of Time. If CENTREXION is unlikely to accomplish a specific development, or commercialization-related task under this Agreement or the Development Plan, it shall inform BII thereof in its next Progress Report and shall state therein a new time line for expected accomplishment or achievement of such task or Development Milestone. Within [***] of receipt from CENTREXION of a Progress Report, BII shall inform CENTREXION in writing if BII has any objection to or concerns about any revised or restated timelines or expected completion dates for Development Milestones set forth therein. If BII does not so inform CENTREXION in writing of any objections or concerns within such timeframe, then BII shall be deemed to have agreed to any revised or restated timelines for Development Milestones as set forth in such Progress Report, and such Progress Report shall be considered an “Agreed Progress Report.” In the event BII does inform CENTREXION in writing of any objections or concerns within the [***] timeframe, the Parties will discuss and attempt to resolve in good faith BII’s objection or concerns; provided, however, that BII shall have no obligation to grant an extension of the Development Milestones specified in Section 4.3 and the most recent Agreed Progress Report. In such case, the Progress Report will only be deemed to be an “Agreed Progress Report” if both Parties thereafter expressly so agree in writing.

4. Section 6.1 of the Agreement shall be deleted and replaced in its entirety with the following language:

Development Reporting. CENTREXION shall inform BII, on an at least [***] basis, of the development activities performed in connection with the Products, any Results achieved or generated and timelines until next milestone. Each such report shall be known as a “Progress Report.” CENTREXION shall inform BII in each Progress Report of any material changes to the development including but not limited to significant delays in or changes to the timelines towards the next applicable milestone.

[remainder of page intentionally left blank]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 

2


Confidential Treatment Requested Centrexion Therapeutics Corporation

 

IN WITNESS WHEREOF, this Amendment No. 1 to the Agreement has been signed by the Parties hereto in two originals, each Party acknowledging receipt of one original.

 

Boehringer Ingelheim International GmbH     CENTREXION Therapeutics Corporation
By:   /s/ Jürgen Beck     By:   /s/ Kerrie Brady
Name:   Jürgen Beck     Name:   Kerrie Brady
Title:   Authorized Signatory     Title:   Chief Business Officer

 

By:   /s/ Dorothee Schwall-Rudolph
Name:   Dorothee Schwall-Rudolph
Title:   Authorized Signatory

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 

3


Confidential Treatment Requested Centrexion Therapeutics Corporation

 

Exhibit A

Progress Report – May 2017 – November 2017

[***]

As communicated previously to Boehringer Ingelheim, the FDA restrictions on the highest dose (50 mg) for CNTX-6016 in the SAD study has required Centrexion to undertake additional pharmacology/toxicology studies, [***]. The nonclinical studies are nearly complete, and Centrexion will be submitting an IND amendment to the FDA early next year to seek relief on the 50 mg dose restriction in Phase 1. [***].

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 

4


Confidential Treatment Requested Centrexion Therapeutics Corporation

 

Progress Report - November 2017 - May 2018

[***]

As communicated previously to Boehringer Ingelheim, the FDA restrictions on the high dose for CNTX-6016 in the SAD study has required Centrexion to undertake additional pharmacology/toxicology studies [***]. The CNTX-6016 nonclinical studies are now complete and Centrexion submitted an IND amendment to the FDA on May 3, 2018 to seek relief on the high dose in Phase 1. [***]

 

Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

 

5


EX-10.9

Exhibit 10.9

EXECUTION COPY

October 8, 2013

BY EMAIL

Jeffrey Kindler

[***]

[***]

 

Re:

Executive Employment Agreement

Dear Jeff:

This letter agreement (the “Agreement”) confirms the terms and conditions of your employment with Centrexion Corporation (the “Company”):

1. Position. You will serve as the Company’s Chief Executive Officer (the “CEO”) and report to, and only to, the Company’s Board of Directors (the “Board”). You shall have all of the duties, responsibilities and authority commensurate with the position in similar type companies. All employees shall report to you or your designee. It is understood and agreed that, while you render services to the Company, you will not engage in any other employment, consulting or other business activities (whether full-time or part-time), unless you first obtain the Board’s approval. Those activities in which you participate as of the date of hereof and that have been disclosed in writing to the undersigned are hereby approved. It is understood and agreed that you may serve on other boards but only if such outside board service does not present a conflict or potential conflict of interest as determined by the Board in good faith. Those outside boards on which you serve as of the date hereof and that have been disclosed in writing to the undersigned are hereby approved. You also may engage in religious, charitable and other community activities so long as such activities do not interfere or conflict with your obligations to the Company. The time commitments to outside boards and other activities have been discussed by you with the Board and are hereby approved. While you are employed as the CEO, you shall serve on and after January 1, 2014 as a member of the Board; provided that prior to that date you shall have an observer status on the Board. Upon the ending of your employment, you shall immediately resign from the Board as well as from any other position(s) to which you were elected or appointed in connection with your position as CEO; provided that if you are entitled to a Board seat after the ending of your employment pursuant to your equity position in the Company as of your date of termination, you shall not be required to resign from the Board solely because of the ending of your employment. You will be entitled to indemnification protection and directors’ and officers’ liability insurance coverage, including with respect to advancement of attorneys’ fees and associated costs, in to the same extent that such protection is provided to the Company’s other directors and/or senior executives.

 

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2. Start Date; Term.The term of this Agreement shall begin on October 8, 2013 (the “Start Date”) and shall continue until the third anniversary of the Start Date (the “Initial Term”); provided that commencing with the third anniversary of the Start Date and on each successive anniversary thereof (each, an “Extension Date”), the Agreement shall be automatically extended for an additional one-year period (each a “Renewal Term”), unless you or the Company provides the other party with sixty (60) days’ prior written notice before the next Extension Date that the Agreement shall not be so extended (a “Nonrenewal Notice”). The Initial Term together with any Renewal Terms shall be referred to herein as (the “Term”). The above notwithstanding, your employment under this Agreement may be terminated during the Term in accordance with Section 7, subject to Section 8. The giving of a Nonrenewal Notice by the Company shall be treated as a termination without Cause by the Company as of the end of the then Term.

3. Salary. The Company will pay you a base salary at the rate of $325,000 per year, payable in accordance with the Company’s standard payroll schedule and subject to applicable deductions and withholdings. Your base salary will be subject to periodic review and adjustments at the Company’s discretion; provided that your base salary will not be subject to decrease except pursuant to a salary reduction program affecting substantially all of the senior level employees of the Company that does not adversely affect you to a greater extent than other similarly situated employees and does not decrease your base salary by more than ten percent (10%) of your highest Base Salary. Your base salary, as adjusted from time to time, shall be referred to herein as “Base Salary.”

4. Annual Bonus. You will be eligible for annual bonuses, each bonus targeted at an amount equal to the greater of one hundred percent (100%) of your Base Salary and one half of one percent (0.5%) of the value of the Company’s equity as of the first day of the fiscal year for which the bonus award is made. The actual amount of the bonus will be determined by the Board and/or the Compensation Committee of the Board (the “Compensation Committee”) in its/their good faith discretion, based on its/their assessment of your performance and that of the Company against established goals (which shall be set after consultation with you). The bonus plan shall contemplate payouts lower or higher than the target based on your achievement of some, all or more than all of the goals. During the Initial Term, any bonus may be paid to you, in the Company’s discretion, in the form of cash or fully vested stock options or other fully vested equity. After the Initial Term, any annual bonus must be paid in cash unless otherwise agreed to in writing by the parties. Any stock options granted to you pursuant to this Section shall be at a price per share equal to the fair market value as of the date of grant, as determined by the Board, and shall be subject to the terms and conditions of the Company’s equity incentive plan and associated equity incentive agreement (collectively the “Equity Documents”); provided and notwithstanding anything to the contrary in the Equity Documents, such stock options shall be fully vested upon grant and be exercisable until the earlier of (i) a Change of Control (as defined in the Equity Documents, as may be amended from time to time) in which the Company’s equity and stock options are cashed out; (ii) the date that is six (6) months following the initial public offering of the Company’s equity securities, provided that, if there is any “lockup” in connection with such offering or any secondaries within such six (6) month period, the period shall be extended until six (6) months after the end of the “lockups;” or (iii) the expiration of the option term, which shall be ten (10) years from the date of grant, regardless of whether you are employed by the Company on such date. You must be employed on December 31 of each year to earn a bonus for that year, except as otherwise provided herein, and, if earned, the bonus will be paid (or stock option granted) no later than March 15 of the immediately following year.

 

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5. Business Travel/Expenses; Office Support. The Company will reimburse you for travel and other business expenses consistent with the terms and conditions of the Company’s expense reimbursement policies. The Company will also pay for the office space and administrative support services that are reasonably necessary to support you and the Company’s staff members. The Company will pay or reimburse you for your reasonable legal fees in connection with the Agreement within thirty (30) days of presentation or your invoices, which invoices will be presented within sixty (60) days of execution of this Agreement. The Company will provide you with an office in Fairfield County, Connecticut, as your main office or make other arrangements to reimburse you for use of an office by you in such area and reimburse you for travel in all events such that you will have no after-tax cost for travel from such area to the Company’s scientific offices in Baltimore, Maryland.

6. Benefits/Vacation. You will be eligible to participate in the employee benefits and insurance programs generally made available to the Company’s full-time employees once such plans are adopted by the Company. Details of such benefits programs, including mandatory employee contributions, if any, and waiting periods, if applicable, will be made available to you when such benefit(s) become available. You will be entitled to accrue up to four (4) weeks of vacation per year. Accrued but unused vacation shall be paid out upon termination of employment to the extent required by the Company’s vacation policy. The Company will pay for your participation in a health plan reasonably satisfactory to you, taking into consideration the size of the Company, its resources and your needs.

7. At-Will Employment; Accrued Obligations. Your employment is “at will,” meaning you or the Company may terminate it at any time for any or no reason. In the event of the termination of your employment for any reason, the Company shall (i) promptly pay you your base salary through your last day of employment (the “Date of Termination”) as well as the amount of any documented expenses properly incurred by you on behalf of the Company prior to any such termination and not yet reimbursed; (ii) if, as of the Date of Termination the Company’s vacation policy provides for the pay out of accrued but unused vacation upon termination of employment, promptly pay you your accrued but unused vacation; (iii) pay or provide you any employee benefits (including equity) to which you are entitled upon the termination of your employment under any Company plan or program in accordance with the terms thereof (including as specified in Section 4 hereof); (iv) pay you the annual bonus, if any, to which you are entitled for the fiscal year prior that in which your Date of Termination falls, payable when annual bonuses are paid or would be paid to other employees for such year (collectively, the “Accrued Obligations”).

8. Termination Payments. In the event the Company terminates your employment for any reason, the Company shall pay you or provide you with the Accrued Obligations. In addition, in the event the Company terminates your employment without Cause or you resign from your employment for Good Reason (both as defined below) and provided you: (i) enter into, do not revoke and comply with the terms of a separation agreement substantially in the form annexed hereto as Attachment A (the “Release”); (ii) except as provided in Section 1, resign from any and all positions, including, without implication of limitation, as a director, trustee or officer, that you then hold with the Company and any affiliate of the Company; and (iii) except as provided in Section 2 of the Restrictive Covenant Agreement (defined below), return all Company

 

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property and comply with any instructions related to deleting and purging duplicates of such Company property (collectively the “Termination Payments Conditions”), the Company will provide you with the following “Termination Payments”: (a) continuation of your Base Salary for the twelve (12) month period that immediately follows the Date of Termination (the “Salary Continuation Period”) (the “Salary Continuation Payments”); (b) a monthly payment until the earlier of: (i) the end of the Salary Continuation Period; or (ii) the date you become eligible for health insurance through another employer, equal to the monthly cost of continuation of group health plan benefits under 29 U.S.C. § 1161 et seq. (commonly known as “COBRA”), less the amount of the monthly premium being paid by you for such benefits as of the Date of Termination (the “COBRA Payments”); and (c) a pro rata bonus for the fiscal year in which your Date of Termination occurs based on the bonus which would have been earned for such year, in the good faith discretion of the Board and/or the Compensation Committee, multiplied by a fraction where the numerator is the number of days employed during such year and the denominator is 365 (the “Pro Rata Bonus”). The Salary Continuation and COBRA Payments shall commence within 60 days after the Date of Termination and shall be made on the Company’s regular payroll dates; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments shall begin to be paid in the second calendar year and, in the event you miss a regular payroll period between the Date of Termination and the first payment date, the first Salary Continuation and Benefit Continuation Payments shall include a “catch up” payment. The Pro Rata Bonus shall be payable when annual bonuses are paid or would be paid to other employees for such year. Solely for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, each Termination Payment is considered a separate payment. The Termination Payments shall not be subject to any obligation to mitigate, or any offset for any amounts you otherwise earn.

9. Termination of Employment as a Result of Death, Disability, Your Resignation Without Good Reason or a Termination by the Company for Cause. In the event your employment is terminated as a result of your (i) death, (ii) Disability, (iii) resignation without Good Reason or (iv) termination for Cause by the Company, you will be entitled to the Accrued Obligations but you will not be entitled to Termination Payments, except that in the case of death or Disability termination you shall receive a Pro Rata Bonus at the time annual bonuses are paid or would be paid to other employees for such year.

10. Confidential Information and Restricted Activities. By signing this Agreement, you represent that you have carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed on you pursuant to the Company’s Employee Noncompetition, Nonsolicitation, Confidentiality and Assignment Agreement (the “Restrictive Covenant Agreement”) attached as Attachment B, the terms of which are incorporated by reference herein. You agree without reservation that these restraints are necessary for the reasonable and proper protection of the Company and its affiliates, and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area. You further agree that, if were you to materially breach in the covenants contained in this Agreement or the Restrictive Covenant Agreement, in addition to the Company’s other legal and equitable remedies, the Company may suspend or cease any Termination Payments to which you might otherwise be entitled. Any such suspension or termination of the Termination Payments by the Company in the event of a breach by you shall not affect your ongoing obligations to the Company.

 

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11. Definitions. For purposes of this Agreement:

“Cause” means: (i) conduct by you in connection with your service to the Company that is fraudulent, knowingly and materially unlawful, or grossly negligent; (ii) your material breach of your material responsibilities to the Company or your willful failure to comply with lawful directives of the Board or material written policies of the Company; (iii) material breach by you of your representations, warranties, covenants and/or obligations under this Agreement (including the Restrictive Covenant Agreement); (iv) material willful misconduct by you which seriously discredits or damages the Company or any of its affiliates, and/or (v) failure to attempt in good faith to perform your duties or responsibilities to the Company, after written notice to you and a reasonable opportunity to cure (if curable) that shall not exceed thirty (30) days.

“Disability” means you have unable because of physical or mental illness or incapacity to perform your material duties for 180 out of any 365 consecutive days and notice of termination by the Company as a result of Disability has been given to you while you so remain Disabled.

“Good Reason” means that you have complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following actions undertaken by the Company without your express prior written consent: (i) the material diminution in your responsibilities, authority and function; (ii) a reduction in your base salary, provided, however, that Good Reason shall not be deemed to have occurred in the event of a reduction in your base salary that is pursuant to a salary reduction program affecting substantially all of the senior level employees of the Company and that does not adversely affect you to a greater extent than other similarly situated employees and does not decrease your highest Base Salary by more than ten percent (10%); (iii) a requirement by the Company that you relocate your principal location of employment to a location that is more than seventy-five (75) miles outside of Westport, Connecticut; or (iv) a material breach of the Agreement by the Company. “Good Reason Process” means that (i) you have notified the Company in writing of the first occurrence of the Good Reason condition within forty-five (45) days of the first occurrence of such condition, (ii) the Company has not cured such condition within thirty (30) days of such notice (the “Cure Period”); and (iii) you terminate your employment within thirty (30) days after the end of the Cure Period. If the Company cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

12. Taxes; Section 409A. All forms of compensation referred to in this Agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law. Anything in this Agreement to the contrary notwithstanding, if at the time of your separation from service within the meaning of Section 409A of the Code, the Company determines that you are a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, using the permissible identity method selected by the Company from time to time or, if none, the default method, then to the extent any payment or benefit that you becomes entitled to under this Agreement on account of your separation from service would be considered deferred compensation subject to the 20 percent additional tax imposed pursuant to

 

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Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after your separation from service, or (B) your death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule. All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by you during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred, provided that tax gross-up payments, if any, shall be paid to you in any event no later than the end of the taxable year immediately following the taxable year in which you remit the related taxes. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit. To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon your termination of employment, then such payments or benefits shall be payable only upon your “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h). Each payment in any series of payments shall be a separate payment for purposes of Section 409A of the Code. If any payment may be made within a period of time, the determination of the payment date shall be solely that of the Company. The Company and you intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with or exemption from Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with, or be exempt from Section 409A of the Code.

13. Disparagement. You agree that, except in the good faith performance of your duties to the Company, while employed by the Company and for three (3) years thereafter, you will not disparage the Company or its officers, directors or employees. The Company agrees that while you are employed and for three (3) years thereafter neither it formally nor the officers or directors, directly or indirectly, will disparage you. The foregoing shall not be violated by truthful testimony in response to legal process or in actions to enforce agreements between you and the Company, normal competitive type statements or rebuttal of statements made by others.

14. Interpretation, Amendment and Enforcement. This Agreement, including the Restrictive Covenant Agreement, constitutes the complete agreement between you and the Company with regard to your employment with the Company, contains all of the terms of your employment with the Company and supersedes any prior agreements, representations or understandings (whether written, oral or implied) between you and the Company with regard to your employment with the Company. The terms of this Agreement and the resolution of any disputes as to the meaning, effect, performance or validity of this Agreement or arising out of,

 

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related to, or in any way connected with this Agreement, your employment with the Company or any other relationship between you and the Company (the “Disputes”) will be governed by New York law, excluding laws relating to conflicts or choice of law. Except as provided in the last two sentences of this Section 13, any Dispute, and any claim or controversy related to any Dispute, shall, to the fullest extent permitted by law, be resolved solely and exclusively by binding arbitration, in accordance with the Employment Arbitration Rules of the American Arbitration Association which may be in effect at the time of the demand for arbitration. The location of the arbitration shall be New York, New York, or any other location that may be selected by mutual agreement of the parties. The parties agree that the decision rendered by the arbitrator will be final and binding on the parties. Each party will be responsible for such party’s own attorneys’ fees and out-of-pocket expenses as a result of such arbitration proceedings except that each party shall pay 50% of the expenses and fees of the arbitrators; provided that the arbitrator shall have the discretionary authority but not the obligation to award you all or a portion of your reasonable attorney’s fees and litigation costs, to be paid by the Company, in the event that the arbitrator determines that you are the prevailing party, and provided further that the arbitrator shall award such fees to you if so required by law. In the event that any person or entity other than any party to this Agreement may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 13 shall be specifically enforceable. Notwithstanding the foregoing, this Section 13 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate, including, without limitation, to enforce the Restrictive Covenant Agreement; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 13. All court actions that are permitted pursuant to this Agreement shall be instituted in the courts of competent jurisdiction in the State of New York and the parties hereby consent to personal jurisdiction and venue in such courts.

15. Assignment. Neither you nor the Company may make any assignment of this Agreement or any interest in it, by operation of law or otherwise, without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under this Agreement (including the Restrictive Covenant Agreement) without your consent to any parent or to any person or entity with whom the Company shall hereafter effect a reorganization, consolidate with, or merge into or to whom it transfers all or substantially all of its properties or assets, provided that if there is not an assumption by law, the transferee assumes the obligations hereunder in writing. This Agreement shall inure to the benefit of and be binding upon you and the Company, and each of your and its respective successors, executors, administrators, heirs and permitted assigns.

16. Miscellaneous. This Agreement may not be modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by you and a Board member of the Company. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement. The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

 

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17. Other Terms. By signing this Agreement, you represent to the Company that you have no contractual commitments or other legal obligations that would or may prohibit you in any material respect from performing your duties for the Company. As with any employee, you must submit satisfactory proof of your identity and your legal authorization to work in the United States.

Please acknowledge, by signing below, that you have accepted this Agreement.

 

Very truly yours,
By:   /s/ Sol Barer
  Sol Barer
  Chairman

I have read and accept this employment offer:

 

/s/ Jeffrey Kindler
Jeffrey Kindler

 

Dated:   10/8/13

[Signature Page to Jeff Kindler Employment Agreement]


ATTACHMENT A

RELEASE

This Release (the “Release”) is entered into by and between Jeffrey Kindler (the “Executive”) and Centrexion Corporation (the “Employer”) in connection with the Executive Employment Agreement by and between the Executive and the Employer dated October 8, 2013 (the “Employment Agreement”).

For purposes of this Release, the Employer and its affiliates shall individually and collectively be referred to herein as the “Company”. This is the Release referenced in Section 8 of the Employment Agreement. Terms with initial capitalization that are not otherwise defined in this Release have the meanings set forth in the Employment Agreement. The consideration for the Executive’s agreement to this Release consists of the Termination Payments set forth in Section 8 of the Employment Agreement, which are conditioned on (i) the Company’s termination of the Executive’s employment without Cause or the Executive’s resignation from his employment for Good Reason (if any, a “Qualifying Termination”) and (ii) the Executive’s satisfaction of the Termination Payment Conditions (including, without, limitation, the entry into, nonrevocation of and compliance with this Release).

 

   

Tender of Release. This Release is automatically tendered to the Executive upon the Date of Termination that occurs as a result of the Company’s termination of the Executive’s employment without Cause or the Executive’s resignation from his employment for Good Reason.

 

   

Resignation; Return of Property. As a condition of receiving the Termination Payments, the Executive hereby (i) resigns from any and all positions, including, without implication of limitation, as a director, trustee or officer, that he holds with the Company and any affiliate of the Company, except as provided in Section 1 of the Employment Agreement; and (ii) except as provided in Section 2 of the Restrictive Covenant Agreement, agrees to return all Company property and comply with any instructions related to deleting and purging duplicates of such Company property.

 

   

Release of Claims. In consideration for, among other terms, the Termination Payments, to which the Executive acknowledges he would otherwise not be entitled, the Executive voluntarily releases and forever discharges the Company, its affiliated and related entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and fiduciaries of such plans, and, as regards matters related to the Company, the current and former officers, directors, shareholders, employees, attorneys, accountants and agents of each of the foregoing in their official and personal capacities (collectively referred to as the “Releasees”) generally from all claims, demands, debts, damages and liabilities of every name and nature, known or unknown (“Claims”) that, as of the date when the Executive signs this Agreement, the Executive has, ever had, now claims to have or ever claimed to have had against any or all of the Releasees. This release includes, without limitation, all Claims:

 

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relating to the Executive’s employment by and termination of employment with the Company; of wrongful discharge or violation of public policy;

of breach of contract;

of defamation or other torts;

of discrimination or retaliation under federal, state or local law (including, without limitation,

Claims of discrimination or retaliation under the Age Discrimination in Employment Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964 and the New York State Human Rights Law);

under

Title 20 of the Maryland State Government Article

the Maryland Equal Pay for Equal Work Law

the Maryland Family and Medical Leave Law

the Maryland Wage and Hour Law

the Maryland Wage Payment & Collection Law

the Maryland Flexible Leave Act

the Connecticut Human Rights and Opportunities Act,

the Connecticut Fair Employment Practices Act

the Connecticut Family and Medical Leave Act

the Connecticut Equal Pay Law

the Connecticut Whistleblower Protection Statute

Connecticut Wage Payment Laws

Connecticut Occupational Safety and Health Act;

under any other federal or state statute;

for wages, bonuses, incentive compensation, stock, stock options, vacation pay or any other

compensation or benefits, whether under Article 6 of the New York Labor Law or otherwise;

and

for damages or other remedies of any sort, including, without limitation, compensatory damages,

punitive damages, injunctive relief and attorney’s fees.

The Executive also agrees not to accept damages of any nature, other equitable or legal remedies for his own benefit or attorney’s fees or costs from any of the Releasees with respect to any Claim released by this Agreement. As a material inducement to the Company to enter into this Agreement, the Executive represents that he has not assigned any Claim to any third party.

 

   

Limitations on Executive’s Release of Claims. Notwithstanding anything in the “Release of Claims” section above to the contrary:

 

   

Employment Agreement. Nothing in this Release limits the Executive’s rights to (i) the Accrued Obligations, and (ii) the Termination Payments due pursuant to Section 8 of the Employment Agreement (subject to a Qualifying Termination and satisfaction of the Termination Payment Conditions).

 

   

Indemnification. Nothing in this Release limits the Executive’s rights to (i) indemnification, (ii) advancement of legal fees, or (iii) directors’ and officers’ liability insurance coverage.

 

A-10


   

Equity. Nothing in this Release is intended to affect the Executive’s rights or obligations as to equity interests in the Company, including but not limited to pursuant to standard Company agreements entered into in connection with the Executive’s equity interests and/or any stockholder’s agreement between the Executive and the Company.

 

   

Statutory Benefit Rights. Nothing in this Release is intended to release or waive the Executive’s right to COBRA or to unemployment insurance benefits.

 

   

Ongoing Obligations of the Executive. The Executive reaffirms his ongoing obligations under the Employment Agreement, including, without limitation, the Restrictive Covenant Agreement (the terms of which are incorporated by reference herein), as a condition of receiving the Termination Payments.

 

   

No Assignment. The Executive represents that he has not assigned to any other person or entity any Claims against any Releasee.

 

   

Right to Consider and Revoke Release. The Executive acknowledges that he has been given the opportunity to consider this Release for a period of [TBD] days (the “Consideration Period”). In the event the Executive executed this Release before the end of the Consideration Period, he acknowledges that such decision was entirely voluntary and that he had the opportunity to consider this Release until the end of the Consideration Period. To accept this Release, the Executive shall deliver a signed Release to the Company’s then most senior Human Resources professional (“HR”) before the end of the Consideration Period. [For a period of seven (7) days from the date when the Executive executes this Release (the “Revocation Period”), he shall retain the right to revoke this Release by written notice that is received by HR on or before the last day of the Revocation Period. ] This Release shall take effect only if it is executed within the Consideration Period as set forth above [and not revoked pursuant to the preceding sentence.] If those conditions are satisfied, this Release shall become effective and enforceable on the date immediately [following the last day of the Revocation Period] (the “Effective Date”).

 

   

Other Terms.

 

   

Legal Representation; Review of Release. The Executive acknowledges that he has been advised to discuss all aspects of this Release with his attorney, that he has carefully read and fully understands all of the provisions of this Release and that he is voluntarily entering into this Release.

 

   

Binding Nature of Release. This Release shall be binding upon the Executive and upon his heirs, administrators, representatives and executors.

 

   

Modification of Release; Waiver. This Release may be amended only upon a written agreement executed by the Executive and the Company.

 

A-11


   

Severability. In the event that at any future time it is determined by a court of competent jurisdiction that any provision or term of this Release is illegal, invalid or unenforceable, the remaining provisions and terms of this Release shall not be affected thereby and the illegal, invalid or unenforceable term or provision shall be severed from the remainder of this Release. In the event of such severance, the remaining provisions and terms shall be binding and enforceable; provided, however, and for the avoidance of doubt, in no event shall the Company be required to provide the Termination Payments to the Executive if all or part of the “Release of Claims” section above is held to be invalid or unenforceable.

 

   

Governing Law and Interpretation. This Release shall be deemed to be made and entered into in the State of New York, and shall in all respects be interpreted, enforced and governed under the laws of the State of New York, without giving effect to the conflict of laws provisions of the State of New York. The language of all parts of this Release shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against either of the parties.

 

   

Entire Agreement; Absence of Reliance. This Release constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties concerning such subject matter. The Executive acknowledges that he is not relying on any promises or representations by the Company or the agents, representatives or attorneys of any of the entities within the definition of Company regarding any subject matter addressed in this Release.

[signature page follows]

 

A-12


IN WITNESS WHEREOF, the parties have executed this Release effective on the date and year first above written.

 

CENTREXION CORPORATION
By:    
Its:    
 

Date

 

Jeffrey Kindler

 

Date


ATTACHMENT B

CENTREXION CORPORATION

Employee Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement

In consideration and as a condition of my employment by Centrexion Corporation (along with its subsidiaries and affiliates, the “Company”), I agree as follows:

 

1. Proprietary Information. I agree that all information, whether or not in writing, concerning the Company’s business, technology, business relationships or financial affairs which the Company has not released to the general public (collectively, “Proprietary Information”) is and will be the exclusive property of the Company. By way of illustration, Proprietary Information may include information or material which has not been made generally available to the public, such as: (a) corporate information, including plans, strategies, methods, policies, resolutions, negotiations or litigation; (b) marketing information, including strategies, methods, customer identities or other information about customers, prospect identities or other information about prospects, or market analyses or projections; (c) financial information, including cost and performance data, debt arrangements, equity structure, investors and holdings, purchasing and sales data and price lists; (d) operational and technological information, including plans, specifications, manuals, forms, templates, software, designs, methods, procedures, diagrams, schematics, notes, data, clinical trial design, formulae, molecules, organisms, cell lines, gene sequences, samples, chemical compounds, assays, biological materials, laboratory materials, discoveries, inventions, improvements, concepts and ideas; and (e) personnel information, including personnel lists, reporting or organizational structure, resumes, personnel data, compensation structure, performance evaluations and termination arrangements or documents. Proprietary Information also includes information received in confidence by the Company from its customers or suppliers or other third parties.

2. Recognition of Company’s Rights. I will not, at any time, without the Company’s prior written permission, except in the good faith performance of my duties to the Company, either during or after my employment, disclose any Proprietary Information to anyone outside of the Company, or use or permit to be used any Proprietary Information for any purpose other than the performance of my duties as an employee of the Company. I will cooperate with the Company to prevent the unauthorized disclosure of all Proprietary Information. I will deliver to the Company all copies of Proprietary Information in my possession or control upon the earlier of a request by the Company or termination of my employment. The above notwithstanding, I may retain my personal address book as well as, subject to review by

the Company, (a) while I am a director, all Proprietary Information generally made available to directors of the Company and (b) while an investor, all Proprietary Information generally made available to investors in the Company.

3. Rights of Others. I understand that the Company is now and may hereafter be subject to non-disclosure or confidentiality agreements with third persons which require the Company to protect or refrain from use of Proprietary Information. I agree to be bound by the terms of such agreements in the event I have access to such Proprietary Information.

4. Avoidance of Conflict of Interest. I will advise the Company’s Board of Directors of the Company or his or her nominee at such time as any activity of either the Company or another business presents me with a conflict of interest or the appearance of a conflict of interest as an employee of the Company. I will take whatever action is reasonably requested of me by the Company (taking into consideration my fiduciary duties to other entities) to resolve any conflict or appearance of conflict which it finds to exist.

5. Developments. I will make full and prompt disclosure to the Company of all inventions, discoveries, designs, developments, methods, modifications, improvements, processes, algorithms, databases, computer programs, formulae, techniques, trade secrets, graphics or images, audio or visual works and other works of authorship (collectively “Developments”), whether or not patentable or copyrightable, that are created, made, conceived or reduced to practice by me (alone or jointly with others) or under my direction during the period of my employment and that relate in any way to the Company’s activities. I acknowledge that all such work performed by me is on a “work for hire” basis, and I hereby do assign and transfer and, to the extent any such assignment cannot be made at present, will assign and transfer, to the Company and its successors and assigns all my right, title and interest in all Developments that (a) relate to the business of the Company or any of the products or services being researched, developed, manufactured or sold by the Company; or (b) result from tasks assigned to me by the Company; or (c) result from confidential or proprietary information of the Company (“Company-Related Developments”), and all related patents, patent applications, trademarks and trademark

 

 

1


applications, copyrights and copyright applications, and other intellectual property rights in all countries and territories worldwide and under any international conventions (“Intellectual Property Rights”).

To preclude any possible uncertainty, I have set forth on Exhibit A attached hereto a complete list of Developments that I have, alone or jointly with others, conceived, developed or reduced to practice prior to the commencement of my employment with the Company that I consider to be my property or the property of third parties and that I wish to have excluded from the scope of this Agreement (“Prior Inventions”). If disclosure of any such Prior Invention would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Prior Inventions in Exhibit A but am only to disclose a cursory name for each such invention, a listing of the party(ies) to whom it belongs and the fact that full disclosure as to such inventions has not been made for that reason. I have also listed on Exhibit A all patents and patent applications in which I am named as an inventor, other than those which have been assigned to the Company (“Other Patent Rights”). If no such disclosure is attached, I represent that there are no Prior Inventions or Other Patent Rights. If, in the course of my employment with the Company, I incorporate a Prior Invention into a Company product, process or machine or other work done for the Company, I hereby grant to the Company a nonexclusive, royalty-free, paid-up, irrevocable, worldwide license (with the full right to sublicense) to make, have made, modify, use, sell, offer for sale and import such Prior Invention. Notwithstanding the foregoing, I will not incorporate, or permit to be incorporated, Prior Inventions in any Company-Related Development without the Company’s prior written consent.

This Agreement does not obligate me to assign to the Company any Development other than Company-Related Developments. I understand that to the extent this Agreement is required to be construed in accordance with the laws of any state which precludes a requirement in an employee agreement to assign certain classes of inventions made by an employee, this paragraph 5 will be interpreted not to apply to any invention which a court rules and/or the Company agrees falls within such classes. I also hereby waive all claims to any moral rights or other special rights which I may have or accrue in any Company-Related Developments.

6. Documents and Other Materials. I will keep and maintain adequate and current records of all Proprietary Information and Company-Related Developments developed by me during my employment, which records will be available to and remain the sole property of the Company at all times.

All files, letters, notes, memoranda, reports, records, data, sketches, drawings, notebooks, layouts, charts, quotations and proposals, specification sheets, program listings, blueprints, models, prototypes, diagrams, schematics or

other written, photographic or other tangible material containing Proprietary Information, whether created by me or others, which come into my custody or possession, are the exclusive property of the Company to be used by me only in the performance of my duties for the Company. Any property situated on the Company’s premises and owned by the Company, including without limitation computers, disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Company at any time with or without notice. In the event of the termination of my employment for any reason, I will deliver to the Company all files, letters, notes, memoranda, reports, records, data, sketches, drawings, notebooks, layouts, charts, quotations and proposals, specification sheets, program listings, blueprints, models, prototypes, or other written, photographic or other tangible material containing Proprietary Information, and other materials of any nature pertaining to the Proprietary Information of the Company and to my work, and will not take or keep in my possession any of the foregoing or any copies, except that subject to review by the Company, I may keep those materials described in the last sentence of Section 2 above in accordance with such section.    

7. Enforcement of Intellectual Property Rights. I will reasonably cooperate with the Company, both during and after my employment with the Company, with respect to the procurement, maintenance and enforcement of Intellectual Property Rights in Company-Related Developments. I will sign, both during and after the term of this Agreement, all papers, including without limitation copyright applications, patent applications, declarations, oaths, assignments of priority rights, and powers of attorney, which the Company may reasonably deem necessary or desirable in order to protect its rights and interests in any Company-Related Development. If the Company is unable, after reasonable effort, to secure my signature on any such papers, I hereby irrevocably designate and appoint each officer of the Company as my agent and attorney-in-fact to execute any such papers on my behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development.

8. Non-Competition and Non-Solicitation. In order to protect the Company’s Proprietary Information and good will, during my employment and for a period of twelve (12) months following the termination of my employment for any reason (the “Restricted Period”), I will not directly or indirectly, whether as owner, partner, shareholder, director, consultant, agent, employee, co-venturer or otherwise, engage, participate or invest in any business activity anywhere in the United States that researches, develops, manufactures, licenses or markets any products, or performs any services, that are competitive with the products or services of the Company, or products or services that the Company has under development or that are the subject of active planning at any time during my employment; provided

 

 

2


that this shall not prohibit any possible investment in publicly traded stock of a company representing less than one percent of the stock of such company or in private investment vehicles for which I do not control any aspect of the investments by such vehicles related to investments in competition. In addition, during the Restricted Period, I will not, directly or indirectly, in any manner, other than for the benefit of the Company, (a) divert or take away any of the customers, business or prospective customers of the Company or any of its suppliers, or call upon or solicit in order to do so, and/or (b) solicit, entice or attempt to persuade any other employee or consultant of the Company to leave the services of the Company for any reason or otherwise participate in or facilitate the hire, directly or through another person or entity, of any person who is employed or exclusively engaged by the Company or who was employed or exclusively engaged by the Company within six months of the attempt to hire such person, provided that the foregoing shall not be violated by advertising not targeted at the foregoing in (a) or (b) or by serving as a reference upon request. I acknowledge and agree that if I violate any of the provisions of this paragraph 8, the running of the Restricted Period will be extended by the time during which I engage in such violation(s). Notwithstanding the foregoing, after the end of my employment, the obligations above other than (b) in the preceding sentence shall not apply to my employment by any publicly traded company where the competitive activities of such company comprise less than five percent (5%) of the revenues under my supervision measured as of the end of the fiscal year ending immediately prior to my commencement of employment with such company.

9. Government Contracts. I acknowledge that the Company may have from time to time agreements with other persons or with the United States Government or its agencies which impose obligations or restrictions on the Company regarding inventions made during the course of work under such agreements or regarding the confidential nature of such work. I agree to comply with any such obligations or restrictions upon the direction of the Company. In addition to the rights assigned under paragraph 5, I also assign to the Company (or any of its nominees) all rights which I have or acquired in any Company-Related Developments, full title to which is required to be in the United States under any contract between the Company and the United States or any of its agencies.

10. Prior Agreements. I hereby represent that, except as I have fully disclosed previously in writing to the Company, I am not bound by the terms of any agreement with any previous employer or other party to refrain from using or disclosing any trade secret or confidential or proprietary information in the course of my employment with the Company or to refrain from competing, directly or indirectly, with the business of such previous employer or any other party. I further represent that my performance of all the terms of this Agreement as an employee of the Company does not and will not breach any agreement to keep in confidence

proprietary information, knowledge or data acquired by me in confidence or in trust prior to my employment with the Company. I will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.

11. Remedies Upon Breach. I understand that the restrictions contained in this Agreement are necessary for the protection of the business and goodwill of the Company and I consider them to be reasonable for such purpose. Any breach of this Agreement is likely to cause the Company substantial and irrevocable damage and therefore, in the event of such breach, the Company, in addition to such other remedies which may be available, will be entitled to specific performance and other injunctive relief

12. Use of Voice, Image and Likeness. I give the Company permission to use my voice, image or likeness, with or without using my name, for the purposes of advertising and promoting the Company, or for other purposes deemed appropriate by the Company in its reasonable discretion, except to the extent expressly prohibited by law, but only in a positive manner as to me.

13. Publications. I will obtain the Company’s written approval before publishing or submitting for publication any material that relates to my work at the Company (except for general identifying information or information that is otherwise in the public domain through no breach by me of this Agreement) and/or incorporates any Proprietary Information.

14. No Employment Obligation. I understand that this Agreement does not create an obligation on the Company or any other person to continue my employment. I acknowledge that my employment with the Company is at will and therefore may be terminated by the Company or me at any time and for any reason, subject to Section 8 of the Employment Agreement.

15. Survival and Assignment by the Company. I understand that my obligations under this Agreement will continue in accordance with its express terms regardless of any changes in my title, position, duties, salary, compensation or benefits or other terms and conditions of employment. I further understand that my obligations under this Agreement will continue following the termination of my employment regardless of the manner of such termination and will be binding upon my heirs, executors and administrators. The Company will have the right to assign this Agreement to its affiliates, successors and assigns. I expressly consent to be bound by the provisions of this Agreement for the benefit of the Company or any parent, subsidiary or affiliate to whose employ I may be transferred without the necessity that this Agreement be resigned at the time of such transfer; provided that in the event of such transfer or in any event after any acquisition of the Company the limitations of

 

 

3


Section 8 shall be limited to the Company’s activities and not the activities of any acquirer of the Company.

16. Disclosure to Future Employers. During the Restricted Period (as defined in paragraph 8), I will provide a copy of this Agreement to any prospective employer, partner or coventurer prior to entering into an employment, partnership or other business relationship with such person or entity.

17. Severability. In case any provisions (or portions thereof) contained in this Agreement shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision (or portion thereof) had never

been contained herein. If, moreover, any one or more of the provisions (or portions thereof) contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

18. Interpretation. This Agreement will be deemed to be made and entered into in the State of New York, and will in all respects be interpreted, enforced and governed under the laws of the State of New York. I hereby agree to consent to personal jurisdiction of the state and federal courts situated within the State of New York for purposes of enforcing this Agreement, and waive any objection that I might have to personal jurisdiction or venue in those courts.

 

 

[End of Text]

 

4


I UNDERSTAND THAT THIS AGREEMENT AFFECTS IMPORTANT RIGHTS. BY SIGNING BELOW, I CERTIFY THAT I HAVE READ IT CAREFULLY AND AM SATISFIED THAT I UNDERSTAND IT COMPLETELY.

IN WITNESS WHEREOF, the undersigned has executed this agreement as a sealed instrument as of the date set forth below.

 

Signed:   /s/ Jeffrey Bruce Kindler      
  (Employee’s full name )      

 

Type or print name:   Jeffrey Bruce Kindler   Date: 10/8/13

[Signature Page to Attachment B to Jeff Kindler Employment Agreement]


EXHIBIT A

 

To:

Centrexian Corporation

 

From:

Jeffrey Kindler

 

Date:

10/8/13

 

SUBJECT:

Prior Inventions

The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by the Company that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company:

 

   No inventions or improvements      

   See below:      
       
       
       
   Additional sheets attached      

The following is a list of all patents and patent applications in which I have been named as an inventor:

   None      

   See below:      
       
       
       


AMENDMENT

TO

EMPLOYMENT AGREEMENT

This Amendment (the “Amendment”) to that certain employment agreement (the “Employment Agreement”), dated as of October 8, 2013, by and between Centrexion Therapeutics Corporation, a Delaware corporation (the “Company”) and Jeffrey Kindler (the “Executive,” and, together with the Company, the “Parties”) is made as of November 2, 2018 by and between the Company and Executive. Except as set forth in this Amendment, capitalized terms used but not defined herein shall have the meanings ascribed to them in the Employment Agreement.

WITNESSETH

WHEREAS, the Company and Executive desire to amend the terms of the Employment Agreement as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive and the Company hereby agree to the following:

1. Amendments to the Employment Agreement. The Employment Agreement shall be amended, subject to and effective upon the consummation of the initial public offering of the Company’s Common Stock, par value $0.001 per share, under the Securities Act of 1933 (as amended), as follows:

 

  (a)

The first sentence of Section 3 of the Employment Agreement is hereby amended and restated in its entirety to read as follows: “The Company will pay you a base salary at the rate of $600,000 per year, payable in accordance with the Company’s standard payroll schedule and subject to applicable deductions and withholdings.”

 

  (b)

The first sentence of Section 4 of the Employment Agreement is hereby amended and restated in its entirety to read as follows: “You will be eligible for annual bonuses. The bonus for the Company’s 2018 fiscal year will be targeted at an amount equal to one hundred percent (100%) of the actual base salary you earned in 2018 and, beginning in the Company’s 2019 fiscal year, each bonus will be targeted at an amount equal to sixty-five percent (65%) of your Base Salary.”

 

  (c)

The final sentence of Section 5 of the Employment Agreement is hereby amended and restated in its entirety to read as follows: “The Company will provide you with an office in Fairfield County, Connecticut, as your main office or make other arrangements to reimburse you for use of an office by you in such area and reimburse you for travel in all events such that you will have no after-tax cost for travel from such area to the Company’s offices in the Boston metropolitan area.”


  (d)

Clause (i) of the second sentence of Section 8 of the Employment agreement is hereby amended and restated in its entirety to read as follows: “(i) enter into and do not revoke, within sixty (60) days following your employment termination, and comply with the terms of a separation agreement substantially in the form annexed hereto as Attachment A (the “Release”);”

2. Entire Agreement; No Other Amendment. The Employment Agreement, as amended by this Amendment, contains the entire agreement among the Parties with respect to the subject matter thereof and amends, restates and supersedes all prior and contemporaneous arrangements or understandings with respect thereto. Except as expressly set forth in this Amendment, the Employment Agreement shall remain unchanged and shall continue in full force and effect according to its terms.

3. Effectiveness. Upon the effectiveness of this Amendment, on and after the date hereof, each reference in the Employment Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import, and each reference in the other documents entered into in connection with the Employment Agreement, shall mean and be a reference to the Employment Agreement, as amended hereby.

4. Acknowledgement. Executive acknowledges and agrees that Executive has carefully read this Amendment in its entirety, fully understands and agrees to its terms and provisions and intends and agrees that it be final and legally binding on Executive and the Company.

5. Governing Law; Counterparts. This Amendment shall be construed in accordance with the laws of the State of New York without regard to any conflicts of laws principles that would result in the application of any other law, and may be executed in several counterparts, each of which shall be deemed an original and all of which together shall constitute one document.

[signature page follows]

 

- 2 -


IN WITNESS WHEREOF, the Parties have executed this Amendment on the respective dates set forth below.

 

    EXECUTIVE
Dated: November 2, 2018    

/s/ Jeffrey Kindler

    Jeffrey Kindler
    CENTREXION THERAPEUTICS CORPORATION

Dated: November 2, 2018

    By:  

/s/ Sol. J. Barer, Ph.D.

   

Name:

 

Sol. J. Barer, Ph.D.

   

Its:

 

Chairman of the Board of Directors


EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Centrexion Therapeutics Corporation:

We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the prospectus. Our report dated September 10, 2018, except for Note 16, as to which the date is November 5, 2018, contains an explanatory paragraph that states that the Company has incurred operating losses and negative cash flows from operations since inception, which raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of that uncertainty.

/s/ KMPG LLP

Cambridge, MA

November 5, 2018