UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2023
or
For the transition period from to .
Commission File No.: 001-34705
Codexis, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
200 Penobscot Drive, Redwood City, California
(Address of principal executive offices)
71-0872999
(I.R.S. Employer Identification No.)
94063
(Zip Code)
Registrant’s telephone number, including area code: (650) 421-8100
Title of Each Class:
Common Stock, par value $0.0001 per share
Securities Registered Pursuant to Section 12(b) of the Act:
Trading Symbols(s):
CDXS
Securities Registered Pursuant to Section 12(g) of the Act: None
Name of Each Exchange on which Registered:
The Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-
T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the
definitions of "large accelerated filer, "accelerated filer" and "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Yes
Yes
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Yes
Yes
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☒
Large accelerated filer
Non-accelerated filer
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☐
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
☐
No
No
No
No
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☒
☐
☐
☒
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No
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The aggregate market value of voting and non-voting common stock held by non-affiliates of Codexis as of June 30, 2023 was approximately $ 122.4 million based upon the closing price reported for
such date on the Nasdaq Global Select Market.
As of February 23, 2024, there were 70,303,639 shares of the registrant’s Common Stock, par value $0.0001 per share, outstanding.
Portions of the registrant’s Definitive Proxy Statement to be filed with the Commission pursuant to Regulation 14A in connection with the registrant’s 2024 Annual Meeting of Stockholders (the
"2024 Proxy Statement"), to be filed subsequent to the date hereof, are incorporated by reference into Part III of this Report. Such Definitive Proxy Statement will be filed with the Securities and
Exchange Commission not later than 120 days after the conclusion of the registrant’s fiscal year ended December 31, 2023. Except with respect to information specifically incorporated by reference in
this Form 10-K, the 2024 Proxy Statement is not deemed to be filed as part of this Form 10-K.
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DOCUMENTS INCORPORATED BY REFERENCE
Item 1
Item 1A
Item 1B
Item 1C
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 9C
Item 10
Item 11
Item 12
Item 13
Item 14
Item 15
Item 16
Codexis, Inc.
Annual Report on Form 10-K
For The Year Ended December 31, 2023
TABLE OF CONTENTS
PART I
PART II
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART III
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
PART IV
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the related Notes that appear elsewhere in this Annual
Report on Form 10-K. This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
("the Exchange Act"), particularly in Part I, Item 1: "Business," Part I, Item 1A: "Risk Factors" and Part 2, Item 7: "Management’s Discussion and Analysis of Financial Condition and
Results of Operations." These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "should," "estimate" or
"continue," and similar expressions or variations. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to: any projections
of financial information or performance; any statements about historical results that may suggest trends for our business; any statements of the plans, strategies, and objectives of
management for future operations; any statements of expectation or belief regarding future events, technology developments, our products and product candidates, product sales,
revenues, expenses, liquidity, cash flow, commercial reach, market growth rates or enforceability of our intellectual property rights and related litigation expenses; and any statements of
assumptions underlying any of the foregoing. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of
certain events to differ materially from future results expressed or implied by such forward-looking statements. Accordingly, we caution you not to place undue reliance on these
statements. For a discussion of some of the factors that could cause actual results to differ materially from our forward-looking statements, see the discussion on risk factors that appear
in Part I, Item 1A: "Risk Factors" of this Annual Report on Form 10-K and other risks and uncertainties detailed in this and our other reports and filings with the U.S. Securities and
Exchange Commission ("SEC"). The forward-looking statements in this Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. We
anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the
future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our
views as of any date subsequent to the date of this Annual Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
COMPANY OVERVIEW
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We are a leading enzyme engineering company leveraging our proprietary CodeEvolver directed evolution technology platform to discover, develop, enhance, and commercialize
novel, high-performance enzymes and other classes of proteins. Enzymes are naturally occurring biological molecules critical to almost all biochemical reactions that sustain life. They
can be precisely engineered and optimized for specific functions, and to have particular characteristics, such as an ability to survive environments in which natural enzymes cannot, or to
perform (bio)chemical transformations different than those for which they naturally evolved. We focus on leveraging our capacity to enhance the properties and performance of
enzymes to drive pivotal improvements across two key focus areas: our foundational, revenue-generating biocatalysis pharmaceutical manufacturing business and our Enzyme-
Catalyzed Oligonucleotide Synthesis™ (“ECO Synthesis™”) manufacturing platform, which is currently in development to enable the commercial scale manufacture of RNA
interference (“RNAi”) therapeutics. In July 2023, we announced that we discontinued investment in certain development programs, primarily in our novel biotherapeutics business
segment and that we are actively exploring options to drive value by potentially monetizing non-core life science assets, including in genomics and next generation sequencing (“NGS”).
In our revenue-generating pharmaceutical manufacturing business, we utilize our CodeEvolver technology platform to develop optimized enzymes that are used by some of the
world’s largest pharmaceutical companies to reduce their costs and improve the efficiency and productivity of their manufacturing processes for small molecule therapeutics. Our unique
enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, and improved efficiency in manufacturing. We also use the
CodeEvolver platform technology to develop enzymes for the synthesis of nucleic acids such as DNA/RNA, including enzymes utilized in our ECO Synthesis™ manufacturing
platform, where our enzymes are poised to deliver many of the same benefits we offer in pharmaceutical manufacturing across purity, yield, and improved efficiency. We demonstrated
gram-scale synthesis under process-like conditions with the ECO Synthesis™ manufacturing platform in December 2023 and expect to begin pre-commercial customer testing in 2024.
We anticipate that this will be followed by early commercial licenses to the ECO Synthesis™ manufacturing platform in 2025 and a full commercial launch in 2026.
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History and Core Technology
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We are a pioneer in harnessing computational technologies to drive biology advancements. Since 2002, we have made substantial investments in the development of our proprietary
technology platform, the primary source of our competitive advantage for our business. The CodeEvolver technology platform has the power to transform the
CodeEvolver
performance of an enzyme, tailoring it for a specific application and/or process. Using powerful machine learning tools and sophisticated molecular, cellular, and bioanalytical
workflows, we design and screen libraries of thousands of variants in high throughput every two to four weeks on each project, sequencing every variant and correlating its sequence
with its performance in a highly application-relevant screen. Content-rich libraries screened under real-world conditions can yield dense and valuable datasets, when data-mined
effectively, and multiple parameters can be optimized in parallel. The resulting evolved variants often have a combination of enhanced properties, such as increased activity, specificity,
and stability under desired conditions, or improved expression in the production host. These enhanced properties provide differentiated technical performance in the target application
and can provide our customers increased value in the commercial deployment of their products.
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Recent Changes to Business Strategy
In July 2023, we announced the restructuring of our business to focus resources on programs that we believe have the strongest probability of creating significant value in the near-
term and beyond, including the advancement and commercialization of our ECO Synthesis™ manufacturing platform and growing our complementary pharmaceutical manufacturing
business. As part of this enhanced strategic focus, we also streamlined operations, including the discontinuation of investment in certain development programs, primarily in our
biotherapeutics business, consolidated operations to our Redwood City, California headquarters, and reduced headcount by approximately 25%.
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Our biotherapeutic product candidates, which were in clinical and preclinical development, were discovered using our proprietary CodeEvolver technology platform and ranged
from orally delivered enzymes to engineered transgenes for delivery as gene therapies. The most advanced of our biotherapeutics programs was CDX-7108, a potent lipase intended for
use as a potential treatment for exocrine pancreatic insufficiency (“EPI”), which was being developed under a Strategic Collaboration Agreement with Nestlé Health Science (“Nestlé”)
(the “Nestlé SCA”). As part of the Nestlé SCA, we and Nestlé completed a Phase 1 clinical trial of CDX-7108. In December 2023, we entered into an acquisition agreement with Nestlé
(the “Acquisition Agreement”), pursuant to which we agreed to assign our interests in CDX-7108 (including associated agreements and intellectual property rights) to Nestlé and
terminate the Nestlé SCA. Under the terms of the Acquisition Agreement, Nestlé will be solely responsible for the continued development and commercialization of CDX-7108,
including all associated costs, with Codexis retaining an economic interest in the program through an upfront payment, future potential milestone payments and net-sales based royalties.
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In addition, we used our CodeEvolver® technology platform to engineer a series of transgenes that code for enzymes that may be used as gene therapies to treat rare lysosomal
storage disorders, such as Fabry Disease and Pompe Disease, as well as a blood factor disorder, with Takeda Pharmaceutical Co. Ltd. (“Takeda”). Takeda announced in April 2023 the
discontinuation of these development programs.
Performance Enzymes
Our performance enzymes business consists primarily of two complementary focus areas: pharmaceutical manufacturing and our ECO Synthesis™ manufacturing platform, which
is currently in development to enable the commercial-scale manufacture of RNAi therapeutics. In addition to the overlap in technical enzyme engineering expertise required for
operating our pharmaceutical manufacturing business and developing the ECO Synthesis™ manufacturing platform, we believe both areas include a similar set of potential customers.
Many of our longstanding pharmaceutical manufacturing customers are currently investing in the development of RNAi therapeutics, providing us with an advantage in terms of
commercial reach. Further, our pharmaceutical manufacturing business establishes credibility for the ECO Synthesis™ manufacturing platform by demonstrating our proven history of
engineering technically complex enzymes for large pharmaceutical companies and effectively scaling up to multiple metric tons of manufactured product using our existing platforms.
Pharmaceutical Manufacturing
We believe the pharmaceutical industry represents a significant market opportunity for our performance enzymes as pharmaceutical companies are in constant search of new small
molecule drugs and are under significant competitive pressure both to reduce costs and to increase the speed to market for their products. To address these pressures, pharmaceutical
companies are driven to identify reliable, cost-effective, and sustainable manufacturing processes to produce both their new drug candidates and their existing products, while not
impacting drug safety and efficacy. Cost reduction is increasingly important to drug developers (known as innovators) closer to their product launch and during the commercial stage of
the product, which can last a decade or more. In addition, cost pressures further intensify as innovators lose their patent exclusivities and begin to experience competition from
manufacturers of generic versions of their products.
Our pharmaceutical manufacturing customers, which include many large global pharmaceutical companies, partner with us to develop engineered enzymes for use as biocatalysts,
meeting precisely defined criteria, with the goal of lowering costs and improving the efficiency, productivity and sustainability of their manufacturing processes by: improving
productivity, yield and purity; using water as a primary solvent; eliminating hazardous inputs; enabling the use of simple equipment and reducing the need for capital expenditure;
reducing energy requirements; reducing the generation of chemical byproducts or waste; and reducing the need for late-stage purifications.
As of December 31, 2023, we are selling biocatalysts to pharmaceutical manufacturers for 16 therapeutic drugs that are currently approved for commercial sales.
In July 2022, we announced that we and Pfizer Inc. (“Pfizer”) had entered into an agreement to supply Pfizer with CDX-616, a proprietary high-performance enzyme used to
manufacture a critical intermediate for nirmatrelvir, an active pharmaceutical ingredient in PAXLOVID™, Pfizer’s antiviral therapeutic, which is now approved in the United States for
the treatment of mild-to-moderate COVID-19 in people at high risk of progression to severe illness, and also authorized or approved by other regulatory authorities across the globe.
While we have generated significant revenue from supplying CDX-616 to Pfizer, particularly in 2021 and 2022, there is no future binding commitment for Pfizer to purchase any
particular quantity or quantities of CDX-616 from us.
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We regularly sell biocatalysts, at multi-kilograms to metric tons per annum scale, that have already been engineered, scaled up, and installed in a customer’s commercial process.
For example, in addition to Pfizer, we sell biocatalysts to Merck, Sharp & Dohme (“Merck”) for their manufacture of sitagliptin, the active ingredient in JANUVIA , to Urovant
Sciences GmbH (“Urovant”) and KYORIN Pharmaceutical Co., Ltd. (“Kyorin”) for the manufacture of vibregon, the active ingredient in Urovant’s GEMTESA™ and Kyorin’s
BEOVA products for the treatment of overactive bladder, as well as supporting other products and customers for which public disclosures have not been made.
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In addition to these larger volumes of biocatalysts that are sold for our customers’ ongoing commercial requirements, we also sell lesser quantities of engineered enzymes for use in
a customer’s developmental, qualification or regulatory approval operations. As of December 31, 2023, Codexis is selling biocatalysts to pharmaceutical manufacturers for 12 drug
candidates currently in Phase 2 and Phase 3 clinical trials, or to customers working to convert to an enzymatic manufacturing process for drugs that have been commercially approved.
This pipeline reinforces our confidence in our ability to continue to grow this business over time.
Finally, we also sell even smaller quantities of enzymes (typically grams to multi-kilogram scale) to customers for experimental, testing, and qualification purposes, or as part of an
enzyme engineering project.
In addition to the sale of biocatalysts, we also offer research and development partnerships to our customers. These research and development activities are typically governed by
collaboration agreements, which often contain research fee payments and intellectual property provisions, under which we screen and/or engineer biocatalysts for customers in
connection with their process development efforts. In these collaborations, we typically receive consideration in the form of one or more of the following: upfront payments, milestone
payments, payments for screening and engineering, with other exclusive supply of enzyme or licensing fees and royalties as the customer’s product commercializes.
We also have licensed our CodeEvolver technology platform to pharmaceutical companies to help them develop custom-designed enzymes that are highly optimized for efficient
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manufacturing processes. To date, we have entered into platform technology licensing agreements with each of GlaxoSmithKline Intellectual Property Development Limited, a
subsidiary of GlaxoSmithKline plc (“GSK”), Merck and Novartis Pharma AG (“Novartis”).
ECO Synthesis™ Manufacturing Platform
ECO Synthesis™ Manufacturing Platform Overview
A key strategic priority for Codexis is the advancement and commercialization of our ECO Synthesis™ manufacturing platform, which is currently in development to enable the
commercial scale manufacture of RNAi therapeutics. As of December 31, 2023, there are six approved small interfering ribonucleic acid (“siRNA”) therapeutics on the market in the
United Sates, primarily targeting rare orphan disease indications. However, there are more than 450 RNAi therapeutic assets in development, including over forty that are in Phase 2 and
Phase 3 clinical trials, with more than 40 of these targeting large disease indications such as Alzheimer’s, hyperlipidemia and hypertension. We expect worldwide demand for RNAi
therapeutics to grow significantly as RNAi therapeutics progress through clinical development and are commercially approved.
The current industry standard for manufacturing RNAi therapeutics is a well-established, chemical-based method called phosphoramidite chemistry. This approach has existed for
more than forty years and works effectively for small-scale manufacturing required during the discovery stage of clinical development. However, phosphoramidite chemistry faces
multiple limitations in the context of commercial-scale manufacture of RNAi therapeutics. This approach requires significant infrastructure and capital investment in order to meet the
anticipated future growth in demand for RNAi therapeutics. Phosphoramidite chemistry is also currently limited to single-digit kilogram batch sizes, which presents challenges around
quality control and scalability. Further, chemical synthesis requires large volumes of acetonitrile to facilitate the reaction environment necessary to produce RNAi therapeutics.
Acetonitrile is a toxic solvent with high waste disposal costs and future supply may face constraints and price volatility as demand for RNAi therapeutics grows. As additional RNAi
therapeutic candidates are approved for large disease indications, we believe using traditional chemical synthesis for commercial scale production will become prohibitively expensive,
time-intensive, and challenging for many drug developers and contract development and manufacturing organizations (“CDMOs”).
We believe that the ECO Synthesis™ manufacturing platform presents several advantages to potentially address these limitations. First, this technology is being developed to
integrate within existing manufacturing facilities, potentially eliminating much of the infrastructure investment required for commercial scale manufacturing of RNAi therapeutics with
phosphoramidite chemistry. The ECO Synthesis™ manufacturing platform is also being designed to manufacture tens to hundreds of kilograms of high-purity RNA per batch, with a
closed-loop system intended to increase volumetric reagent efficiency. Finally, our process is aqueous based, potentially mitigating the need for high volumes of acetonitrile,
significantly decreasing chemical waste streams, and reducing heavy disposal and purification costs.
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ECO Synthesis™ Manufacturing Platform Potential Commercial Opportunity
We believe we have significant competitive advantages to successfully execute on the ECO Synthesis™ manufacturing platform opportunity, largely stemming from synergies with
our pharmaceutical manufacturing business in terms of technical expertise and commercial reach. Many of our pharmaceutical manufacturing customers are developing RNAi
therapeutics, and we believe that their familiarity with our ability to engineer and scale complex enzymes is a significant commercial advantage for our ECO Synthesis™ manufacturing
platform. However, there are also key differences that make this platform a compelling opportunity as compared to our existing pharmaceutical manufacturing business. Pharmaceutical
manufacturing generally requires one-to-one custom enzyme engineering projects, which involve significant time and resource investment from Codexis. Our top five selling
pharmaceutical manufacturing enzymes in 2023, excluding sales of CDX-616 related to PAXLOVID™, generated on average between $2.0 million to $9.0 million annually per enzyme
between 2021 and 2023. By contrast, the ECO Synthesis™ manufacturing platform could be applicable to many customers and has the potential to manufacture a range of siRNA.
Further, the potential scalability of our solution is differentiated from phosphoramidite chemistry, which is limited in batch size and requires high volumes of toxic solvent. We believe
that the ECO Synthesis™ manufacturing platform could enable CDMOs and drug developers to scale production of RNA therapeutics and as a result could potentially command
significantly better economic terms than the current annual revenues for pharmaceutical manufacturing enzymes.
A critical component that is complimentary to the ECO Synthesis™ manufacturing platform is our engineered double stranded RNA (“dsRNA”) ligase, which can stitch together
fragments of chemically and/or, in the future, enzymatically synthesized RNA. We believe the dsRNA ligase has the potential to reduce the cost because the cost and impurity profile of
phosphoramidite chemistry-built molecules has been shown to increase with the length of the oligonucleotide. Our capabilities in RNA ligase engineering have been in development
throughout 2023 via customized evolution programs with medium and large pharmaceutical customers developing RNAi therapeutics. The dsRNA ligase is our early market entry into
the RNAi therapeutics manufacturing market. In addition to potentially improving upon the wildtype ligation-based approaches currently available, our dsRNA ligase will serve as a
way to introduce our ECO Synthesis
manufacturing platform to customers who want to begin utilizing an enzymatic approach to the manufacture of RNAi therapeutics.
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Other Differentiated Enzymes
In addition to DNA/RNA synthesis applications, we have also applied our CodeEvolver technology platform to develop customized enzymes for customers using NGS and
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PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications.
In December 2019, we entered into a license agreement to provide Roche Sequencing Solutions, Inc. ("Roche”) with an evolved DNA ligase for NGS library prep. In February
2024, we entered into a new license agreement with Roche granting them rights to our newly engineered DNA ligase, superseding our prior agreement in December 2019 for our evolved
T4 DNA ligase. We are eligible to receive an aggregate of mid-single digit millions in upfront and technical milestones payments. This is consistent with our business strategy to focus
our resources on high-value opportunities in pharmaceutical manufacturing and the ECO Synthesis™ manufacturing platform while monetizing non-core assets within our Life Sciences
portfolio.
In June 2020, we entered into a co-marketing and enzyme supply collaboration agreement with Alphazyme LLC (“Alphazyme”) for the production and co-marketing of enzymes
for life science applications. Since then, this collaboration has enabled the commercialization of Codex HiFi DNA Polymerase, Codex HiFi Hot Start DNA Polymerase, Codex HiFi
Hot Start 2X NGS Mix, Codex HiCap RNA Polymerase, Codex HiFi UL DNA Polymerase, and Codex HiTemp Reverse Transcriptase.
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In June 2020, we entered into a Master Collaboration and Research Agreement with Molecular Assemblies, Inc. (“MAI”) (the “MAI Agreement”), and between June 2020 and
April 2022, we leveraged our CodeEvolver technology platform to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis. At the time we entered into
the MAI Agreement, we purchased $1.0 million in MAI’s Series A financing. In April 2021, Codexis invested an additional $0.6 million in MAI’s Series A financing and, in September
2021, Codexis invested an additional $7.0 million in MAI’s Series B financing. In April 2022, we and MAI announced that, using our CodeEvolver technology platform, we had
developed a novel, engineered terminal deoxynucleotidyl transferase (“TdT”) enzyme which would enable MAI’s Fully Enzymatic Synthesis™ (“FES™”) technology that produces
highly pure, sequence-specific DNA on demand. In August 2022, we and MAI announced that we had entered into a Commercial License and Enzyme Supply Agreement with MAI
(the “MAI Supply Agreement”) under which Codexis shall manufacture and sell the TdT enzyme to MAI for use in native DNA synthesis. In connection with the execution of the MAI
Supply Agreement, we received a milestone payment of $1.0 million in the form of an additional 1,587,049 shares of MAI Series B preferred stock pursuant to the MAI Agreement. In
March 2023, we purchased an additional 985,545 shares of MAI Series B preferred stock for $0.8 million. As of December 31, 2023, we held 5,443,734 shares of MAI Series A
preferred stock and 13,834,180 shares of MAI Series B preferred stock, for an aggregate of 19,277,914 shares of MAI's Series A and B preferred stock earned or purchased from MAI.
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In March 2022, we entered into a Stock Purchase Agreement with seqWell, Inc. (“seqWell”), a privately held life sciences company, pursuant to which we purchased 1,000,000
shares of seqWell's Series C preferred stock for $5.0 million. In March 2023, we entered into a Master Collaboration Agreement and Research Agreement with seqWell (the “seqWell
Agreement”), pursuant to which we are providing research and experimental screening and protein engineering activities in exchange for compensation in the form of additional shares
of seqWell's common stock. We received 205,279 shares of seqWell's common stock from research and development services with seqWell in the year ended December 31, 2023. In
addition to our initial equity investment and the shares we have received under the seqWell Agreement, in September 2023, we purchased an additional 88,256 shares of seqWell's
Series C-1 preferred stock and 44,128 common stock warrants for $0.4 million.
In December 2023, we announced that we have entered into an exclusive licensing agreement with Aldevron LLC (“Aldevron”), a global leader in the custom development and
manufacture of plasmid DNA, RNA and proteins for the biotech industry, whereby Aldevron licensed our Codex® HiCap RNA Polymerase. Under the terms of the deal, Aldevron
received global manufacturing and commercialization rights to the Codex® HiCap RNA Polymerase in exchange for payments for near-term technical milestones, along with
commercial milestones and sales-based royalties for research use only material as well as good manufacturing practices (“GMP”) material.
OUR STRATEGY
Our strategy is to grow our revenues, profits, and stockholder value by leveraging our CodeEvolver directed evolution technology platform in the following ways:
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Growing our foundational revenue-generating pharmaceutical manufacturing business. We intend to continue to pursue opportunities in the pharmaceutical market to use our
enzymes to reduce the costs for manufacturing small molecule drugs. We intend to increase the number of pharmaceutical customers and processes that utilize and benefit from
our novel, cost-saving enzyme biocatalyst solutions.
Developing and commercializing high-performance enzymes for use in nucleic acid synthesis, including our dsRNA Ligase and our proprietary ECO Synthesis™ manufacturing
platform. We intend to enable fully enzymatic nucleic acid synthesis, which includes the development of our proprietary ECO Synthesis™ manufacturing platform to
manufacture RNAi therapeutics at commercial scale through an enzymatic route, including enabling enzymes to manufacture the building blocks, starter materials, and targeting
moieties.
• Monetizing non-core assets and leveraging channel partners with strong commercial reach to drive penetration of other developed, non-core enzymes. Consistent with our
strategy to focus on programs that we believe have the strongest probability of creating significant value in the near-term and beyond, we continue to look for opportunities to
monetize non-core assets and to leverage channel partners with stronger commercial reach to drive penetration of other developed, non-core life sciences enzymes. Recent
examples of this strategy include monetizing CDX-7108 through the purchase agreement with Nestlé and the exclusive licensing agreement with Aldevron for our Codex®
HiCap RNA Polymerase, both of which were announced in December 2023, as well as the exclusive licensing agreement with Roche in February 2024 for the newly engineered
DNA ligase.
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Strategic Collaborations
Licensing Our CodeEvolver Directed Evolution Technology Platform
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GlaxoSmithKline
We entered into our first CodeEvolver Platform Technology Transfer, Collaboration and License Agreement (“GSK CodeEvolver Agreement”) in July 2014 with
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GlaxoSmithKline Intellectual Property Development Limited, a subsidiary of GSK, pursuant to which we granted GSK a non-exclusive, worldwide license to use our CodeEvolver
technology platform in the field of human healthcare for GSK's internal development purposes.
Under the GSK CodeEvolver Agreement, we licensed and transferred our certain patents, patent applications and know-how from our CodeEvolver technology platform to GSK,
completing the transfer in April 2016. Under this agreement, we have the potential to receive contingent payments that range from $5.75 million to $38.5 million per project, dependent
on GSK's successful application of the licensed technology. We are also eligible to receive royalties based on net sales, if any, of a limited set of products developed by GSK using our
CodeEvolver technology platform.
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The term of the GSK CodeEvolver Agreement continues, unless earlier terminated, until the expiration of all payment obligations under the GSK CodeEvolver Agreement. GSK
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can terminate the GSK CodeEvolver Agreement by providing 90 days written notice to us.
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In 2019, we received a $2.0 million milestone payment on the advancement of an enzyme developed by GSK using our CodeEvolver technology platform. In 2021, we received
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two additional milestone payments from GSK under the GSK CodeEvolver Agreement.
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Merck
In August 2015, we entered into a CodeEvolver Platform Technology Transfer and License Agreement (the “Merck CodeEvolver Agreement”) with Merck. The Merck
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CodeEvolver Agreement allows Merck to use our proprietary CodeEvolver technology platform in the field of human and animal healthcare.
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Under the terms of the Merck CodeEvolver Agreement, we granted to Merck an exclusive license under certain patents, patent applications and know-how from our CodeEvolver
technology platform for the research, development and manufacture of novel enzymes for use by Merck in the chemical synthesis of therapeutic products owned or controlled by Merck
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("Merck Exclusive Field") and a non-exclusive worldwide license to use the CodeEvolver technology platform to research, develop and manufacture novel enzymes for use by Merck
in its internal research programs (“Merck Non-Exclusive Field”).
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Under the terms of the Merck CodeEvolver Agreement, Merck paid us upfront technology transfer and license fees and milestone payments over the technology transfer period of
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15 months from August 2015. We also have the potential to receive product-related payments of up to $15.0 million for each active pharmaceutical ingredient (“API”) that is
manufactured by Merck using one or more enzymes that have been developed or are in development using the CodeEvolver technology platform during the 10-year period that begins
on the conclusion of the 15-month technology transfer period. These product-related payments, if any, will be paid by Merck to us for each quarter that Merck manufactures API using a
CodeEvolver -developed enzyme. The payments will be based on the total volume of API produced using the CodeEvolver -developed enzyme.
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In September 2016, we completed the full transfer of the engineering platform technology. In October 2018, we entered into an amendment to the Merck CodeEvolver Agreement
whereby we amended certain licensing provisions and one exhibit. In January 2019, we entered into a second amendment to the Merck CodeEvolver Agreement whereby we installed
certain CodeEvolver
technology platform upgrades into Merck’s platform license installation. We maintained those upgrades for a multi-year term that expired in January 2022.
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Novartis
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In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver Agreement”) with Novartis. The Novartis CodeEvolver
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Agreement allows Novartis to use our proprietary CodeEvolver platform technology in the field of human healthcare.
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Under the terms of the Novartis CodeEvolver Agreement, we granted to Novartis a worldwide license to use certain patents, patent applications and know-how from our
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CodeEvolver technology platform to research, develop and manufacture novel enzymes for use by or on behalf of Novartis as biocatalysts in the chemical synthesis of small molecule
and bioconjugate APIs. The license is exclusive for the research, development and manufacture of novel enzymes for use by Novartis as biocatalysts in the chemical synthesis of API
owned or controlled by Novartis (“Novartis Exclusive Field”) and non-exclusive for the research, development and manufacture of novel enzymes for use by Novartis in the chemical
synthesis of API not owned or controlled by Novartis or any third party (“Novartis Non-Exclusive Field”).
In July 2021, we announced the completion of the technology transfer period during which we transferred our proprietary CodeEvolver technology platform to Novartis (the
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“Technology Transfer Period”).
Pursuant to the Novartis CodeEvolver Agreement, we received an upfront payment of $5.0 million shortly after the effective date. We completed the second technology milestone
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transfer under the agreement and received a milestone payment of $4.0 million in 2020. We have also received an aggregate of $5.0 million for the completion of the third technology
transfer milestone in 2021.
In consideration for the continued disclosure and license of improvements to the technology and materials during a multi-year period that began on the conclusion of the
Technology Transfer Period (the “Improvements Term”), Novartis will pay us annual payments over four years which amount to an additional $8.0 million in aggregate. We also have
the potential to receive quantity-dependent, usage payments for each API that is manufactured by Novartis using one or more enzymes that have been developed or are in development
using the CodeEvolver technology platform during the period beginning on the conclusion of the Technology Transfer Period and ending on the expiration date of the last to expire
licensed patent. These product-related usage payments, if any, will be paid by Novartis to Codexis for each quarter that Novartis manufactures API using a CodeEvolver -developed
enzyme.
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The licenses to Novartis are granted under patents, patent applications and know-how that Codexis owns or controls as of the effective date of the Novartis CodeEvolver
Agreement and that cover the CodeEvolver technology platform. Any improvements to the CodeEvolver technology platform during the Technology Transfer Period will also be
included in the license grants from Codexis to Novartis.
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INTELLECTUAL PROPERTY
Our success depends in large part on our ability to protect our proprietary technology, products and services under patent, copyright, trademark and trade secret laws. We also rely
heavily on confidentiality and non-disclosure and other contractual agreements for further protection of our proprietary technology, products and services. Protection of our proprietary
rights, titles and interests is important for us to offer our customers and partners proprietary technology, products and services that are not available from our competitors, and to
exclude our competitors from practicing technology that we have developed or exclusively licensed from other parties. For example, our ability to successfully supply innovator
pharmaceutical manufacturers as customers depends on our ability to supply proprietary enzymes or methods for making pharmaceutical intermediates or APIs that are not available
from our competitors. Likewise, in the generic pharmaceutical area, protection of our proprietary technology, products and services directed to our enzymes and methods of producing
pharmaceutical products, through patent or trade secret laws or other legal protections is important for us and our customers to maintain a lower cost production advantage over
competitors.
As of December 31, 2023, we owned or controlled approximately 1,990 active issued patents and pending patent applications in the United States and in various foreign
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jurisdictions, many of which are directed to our enabling technologies and specific methods and products that support our business in the pharmaceutical and oligonucleotide synthesis
markets. This portfolio also includes patents and pending patent applications in the biotherapeutics, molecular diagnostics, and other markets. As of December 31, 2023, our patents and
pending patent applications, if issued, have terms that expire between 2024 and approximately 2044. Our United States (“U.S.”) patents and pending patent applications directed to the
CodeEvolver technology platform developed internally by us have terms that expire between 2029 and approximately 2034. It is possible that some U.S. patents and patent
applications (if issued) may be entitled to patent term extensions and/or patent term adjustments, which would extend the protection beyond these expiration dates. It is also possible
that some patents and patent applications (if issued) in other jurisdictions will be entitled to additional patent terms. Our current intellectual property rights also include patents,
trademarks, copyrights, software and certain assumed contracts that we acquired from Maxygen, Inc. (“Maxygen”) in October 2010, which are associated with directed evolution
technology, known as the MolecularBreeding™ technology platform developed by Maxygen. The intellectual property rights and other related assets that we acquired from Maxygen
continue to be subject to existing exclusive and non-exclusive license rights granted by Maxygen to third parties. We continue to file new patent applications in our business areas of
interest, for which terms generally extend 20 years from the non-provisional filing date in the United States.
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As of December 31, 2023, we owned approximately 100 trademark registrations in the United States and foreign jurisdictions, as well as various common law trademarks. These
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include, but are not limited to: Codexis , Codex , CodeEvolver , Mosaic , Sage , Microcyp , MCYP , ProSAR , Unlock the Power of Proteins , the Codexis Protein Engineering
Experts logo, Strategist , Continuity , Ameli , Forager , Analogene , Harvester , Atoms , Riptide , APS and a Codexis design mark (i.e., the stylized Codexis logo), as well as
pending registration applications for ECO Synthesis™ and ecoRNA™.
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COMPETITION
We face differing forms of competition in pharmaceutical manufacturing and RNAi therapeutics manufacturing, as set forth below.
Performance Enzyme
Pharmaceutical Manufacturing
We market our biocatalyst products and services to manufacturers of small molecule pharmaceutical intermediates and APIs. Our primary competitors in that market are companies
marketing either conventional, non-enzymatic catalysts or alternative biocatalyst products and services, or from full-service CDMOs offering conventional chemistry approaches to the
production of APIs. We also face competition from existing in-house technologies (both biocatalysis and conventional chemistries) within our client and potential client companies. The
principal methods of competition and competitive differentiation in this market are price, product quality and performance, including manufacturing yield, safety and environmental
benefits and speed of product delivery. Pharmaceutical manufacturers that use biocatalytic processes can face competition from manufacturers that use more conventional processes
and/or manufacturers that are based in regions (such as India and China) with lower operating, regulatory, safety and environmental costs.
We also compete with companies developing and marketing conventional catalysts including, for example, Solvias AG, BASF, Johnson-Matthey and Takasago International
Corporation.
The market for supplying enzymes for use in pharmaceutical manufacturing is quite fragmented. There is competition from large industrial enzyme companies, as well as
subsidiaries of larger contract research/contract manufacturing organizations, such as DSM Firmenich, Cambrex Corporation, Lonza, WuXi STA and Almac Group Ltd. Some
fermentation pathway design companies, such as Ginkgo Bioworks, whose traditional focus has been to design microorganisms that express small molecule chemicals, could extend into
designing organisms that express enzymes. There is also competition in the enzyme customization and optimization area from several smaller companies, such as BRAIN AG, evoxx
technologies GmbH, c-LEcta GmbH, Enzymicals AG, and Enzymaster.
The market for the manufacture and supply of APIs and intermediates is large, with many established companies. These companies include many of our large innovator and generic
pharmaceutical customers, such as Merck, GSK, Novartis, Pfizer, Bristol-Myers Squibb Company ("Bristol-Myers"), Kyorin, Urovant, and Teva Pharmaceutical Industries Limited
("Teva"), which have significant internal research and development efforts directed at developing processes to manufacture APIs and intermediates for use in their drug product
manufacturing. There is also a large network of CDMOs servicing the innovator companies with supply of APIs and/or intermediates. These C(D)MOs include Cambrex Corporation,
Asymchem, WuXi STA and Almac Group Ltd, among many others. The processes used by these companies (both C(D)MOs and innovators) include classical organic chemistry
reactions, chemo-catalytic reactions, biocatalytic reactions or combinations thereof. Our biocatalyst-based manufacturing processes must compete effectively on cost and efficiency with
these internally developed routes.
We believe that our principal advantage is our ability to rapidly deliver customized biocatalysts for existing and new intermediates and APIs in the pharmaceutical manufacturing
market. This capability has allowed us to create a breadth of biocatalysts with improved performance characteristics including, for example, better activity, stability, and activity on a
range of substrates, compared to traditional chemistry-based manufacturing processes and naturally occurring (and thus not optimized) biocatalysts. We believe that our CodeEvolver
technology platform can provide substantially superior results, in shorter time frames, than companies offering competing biocatalyst development services.
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ECO Synthesis
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Manufacturing Platform for RNAi Therapeutics
Following the restructuring of our business announced in July 2023, our Life Sciences business is now primarily focused on RNAi therapeutics manufacturing as we develop and
commercialize the ECO Synthesis™ manufacturing platform. Phosphoramidite chemistry is the current and long-established industry standard for the manufacture of RNAi therapeutics,
examples including antisense oligonucleotides (“ASO”), small-interfering RNA (“siRNA”), RNA aptamers, and guide RNA (“gRNA”). Primary competitors in this space include
CDMOs, such as Agilent Technologies, which has made significant capital investment to expand their RNA manufacturing capabilities using phosphoramidite chemistry. In addition,
CDMOs and large pharmaceutical companies are seeking to make incremental improvements to phosphoramidite chemistry, including the development of ligation-based approaches,
liquid-phase synthesis, and solvent recycling. There are also multiple early-stage competitors who are pursuing fully enzymatic approaches to the manufacture of RNA, including
EnPlusOne, a private startup company, and a UK-based consortium led by the Centre for Process Innovation (“CPI”) and consisting of multiple academic and research organizations,
including The University of Manchester and large pharmaceutical companies, including AstraZeneca plc and Novartis.
Other
Core Technology
We are a leader in the field of enzyme engineering to create novel enzymes, and our work across Pharmaceutical Manufacturing and the Eco Synthesis manufacturing platform
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relies on our core technology. We are aware that other companies, organizations and persons have developed technologies that appear to have some similarities to our patented
proprietary technologies. For example, we are aware that other companies, including Ginkgo Bioworks, BRAIN, Enzymaster, and Enzymicals AG have alternative methods for
obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity. In addition, academic institutions such as the California Institute of Technology,
University of Manchester, and the Austrian Centre of Industrial Biotechnology are also working in this field. This field is highly competitive with companies and academic and research
institutions actively seeking to develop technologies that could be competitive with our technologies.
Technological developments by others may result in our products and technologies, as well as products manufactured by our customers using our biocatalysts, becoming obsolete.
We monitor publications and patents that relate to directed molecular evolution to be aware of developments in the field and evaluate appropriate courses of action in relation to these
developments.
Many of our competitors have substantially greater manufacturing, financial, research and development, personnel and marketing resources than we do. As a result, our competitors
may be able to develop competing and/or superior technologies and processes, and compete more aggressively and sustain that competition over a longer period of time than we could.
Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors.
We initially commercialized our CodeEvolver technology platform and products in the manufacture of small molecule pharmaceuticals, which remains a primary business focus.
Our customers, which include many large, global pharmaceutical companies, use our technology, products and services in their process development and in manufacturing. Additionally,
we have licensed our proprietary CodeEvolver technology platform to global pharmaceutical companies enabling them to use this technology, in-house, to engineer enzymes for their
own businesses.
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CUSTOMERS
We rely on certain key customers for a significant portion of our total revenues and our accounts receivable balances. For the year ended December 31, 2023, two customers
accounted for approximately 22% and 13% of our total revenues. As of December 31, 2023, four customers accounted for approximately 21%, 13%, 12% and 12% of our accounts
receivable balances. For more information, see Note 15, “Segment, Geographical and Other Revenue Information” in the Notes to the Consolidated Financial Statements set forth in
Item 8 of this Annual Report on Form 10-K.
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OPERATIONS
Our corporate headquarters are located in Redwood City, California and provide general administrative support to our business and are the center of our research, development and
business operations. We have limited internal manufacturing capacity at our headquarters in Redwood City. We expect to rely on third-party manufacturers for commercial production
of our biocatalysts for the foreseeable future. Our in-house manufacturing is dedicated to producing both Codex biocatalyst panels and kits and enzymes for use by our customers in
pilot scale and clinical production. We also supply initial commercial quantities of biocatalysts for use by our collaborators to produce pharmaceutical intermediates and manufacture
biocatalysts that we sell.
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In September 2023, we announced that we had entered into an agreement for the assignment and assumption of lease for our San Carlos, California facility. In the first quarter of
2021, we entered into an arrangement to lease this facility to serve as an additional office and research and development laboratory space which we occupied beginning December 2021.
As part of the restructuring of our business announced in July 2023, we consolidated operations to our Redwood City headquarters and discontinued investment in biotherapeutics. For
additional information on the San Carlos facility, see Note 13, “Commitments and Contingencies” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this
Annual Report on Form 10-K.
Our research and development operations include efforts directed towards engineering biocatalysts, bioprocess development, cellular engineering, biocatalyst screening,
metabolites, strain improvement, fermentation development and process engineering. We conduct enzyme evolution, enzyme production development, microbial bioprocess
development, cellular engineering, microbial evolution and process engineering evaluations and design primarily at our headquarters in Redwood City, California. Manufacturing of our
enzymes is conducted primarily in four locations: at our in-house facility in Redwood City, California and at third-party contract manufacturing organizations, Lactosan GmbH & Co.
KG (“Lactosan”) in Kapfenberg, Austria, ACS Dobfar S.p.A. (“ACSD”) (formerly known as DPhar S.p.A.) in Anagni, Italy, and Alphazyme in Jupiter, Florida, United States.
Generally, we perform smaller scale manufacturing in-house and outsource larger scale manufacturing, representing a large percentage of our production of novel enzymes, to contract
manufacturing organizations.
GOVERNMENT REGULATION
Our enzymes are used by pharmaceutical and biopharmaceutical companies in the manufacture of their drug or biologic product candidates and finished products. In the United
States, the manufacture, distribution, marketing, and sale of drug products and the provision of certain services for development-stage pharmaceutical and biotechnology products are
subject to extensive ongoing regulation by the United States Food and Drug Administration (“FDA”), the United States Department of Health and Human Services (“HHS”), state
boards of pharmacy, state health departments, various accrediting bodies, and similar regulatory authorities in other countries, including laws and regulations governing bribery, fraud,
kickbacks, and false claims. The costs associated with complying with the various applicable federal, state, local, national, and international laws and regulations could be significant,
and the failure to comply with such legal requirements could have an adverse effect on our results of operations and financial condition. The FDA extensively regulates, among other
things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval,
advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of drug and biologic products under the Federal Food, Drug and Cosmetic Act, its
implementing regulations and other laws, including, in the case of biologics, the Public Health Service Act. Our third-party contractors, collaborators, and customers will be required to
navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which they wish to conduct studies or seek
approval or licensure of their product candidates, which may include regulatory inspections for compliance with current good manufacturing practices (“cGMP”). The process of
obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and
financial resources. This regulatory scrutiny results in our customers imposing rigorous quality and other requirements on us as their supplier through supplier qualification processes
and customer contracts and specifications.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following:
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completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s good laboratory practice regulations;
submission to the FDA of an IND, which must become effective before clinical trials in the United States may begin;
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performance of adequate and well-controlled human clinical trials to establish the safety and potency of the product candidate for each proposed indication, conducted in
accordance with the FDA’s good clinical practice (“GCP”) regulations;
preparation and submission to the FDA of a new drug application ("NDA") or biologics license application ("BLA") after completion of all pivotal clinical trials;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP regulations and to
assure that the facilities, methods and controls are adequate to preserve the drug's continued safety, purity and potency, and of selected clinical investigation sites to assess
compliance with Good Clinical Practices, or GCPs; and
FDA review and approval of the NDA or BLA prior to any commercial marketing, sale or distribution of the product.
Environmental, Health and Safety Regulations
We are responsible for ensuring an environmentally responsible, safe, and healthy workplace. We are required to abide by all relevant county, state and federal agency regulations
for environmental, health and safety requirements and have the necessary procedure, permits, and licenses in place to operate accordingly. Our contracts with outside suppliers and
vendors require compliance with applicable laws and regulations.
HUMAN CAPITAL RESOURCES
As of December 31, 2023, we had 174 full-time employees and part-time employees worldwide. Of these employees, 61 were engaged in research and development, 41 were
engaged in operations and quality control and 72 were engaged in selling, general and administrative activities. None of our employees are represented by a labor union. Supported by
our annual employee survey, we believe our relationship with our employees to be generally good. Our scientists, bioinformatics experts and other professionals work collaboratively as
interdisciplinary teams to unlock and advance technological innovation.
Compensation, benefits and development
Our goal is to attract, motivate and retain talent with a focus on encouraging performance, promoting accountability and adhering to our company values. We offer competitive
compensation and benefit programs including a company-matched 401(k) Plan, an Employee Stock Purchase Plan (“ESPP”), stock options for eligible employees, health savings and
flexible spending accounts, paid time off, education and training programs, and employee assistance programs.
Diversity, equity and inclusion
We are committed to our continued efforts to increase diversity and foster an inclusive work environment that supports our global workforce and the communities we serve. We
recruit the best people for the job regardless of gender, ethnicity or other protected traits and it is our policy to fully comply with all laws applicable to discrimination in the workplace.
Our diversity, equity and inclusion principles are also reflected in our employee training and policies. We continue to enhance our diversity, equity and inclusion policies which are
guided by our executive leadership team, including our commitment to green chemistry, demonstrated, among other things, by our “My Green Lab Certification.”
Health and safety
We are committed to maintain a safe and healthy workplace for our employees. Our policies and practices are intended to protect our employees and the surrounding communities
in which we operate.
We continue to monitor COVID-19 local, state, and federal guidance, policies and regulations for changes and we implement modifications to internal guidelines as needed. In
response to the COVID-19 pandemic, we implemented safety protocols and new procedures to protect our employees. These protocols include health and safety standards as required by
state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.
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CORPORATE & AVAILABLE INFORMATION
We were incorporated in Delaware in January 2002 as a wholly-owned subsidiary of Maxygen, Inc. We commenced independent operations in March 2002, after licensing core
enabling technology from Maxygen, Inc. Our principal corporate offices are located at 200 Penobscot Drive, Redwood City, California 94063 and our telephone number is (650) 421-
8100. Our internet address is www.codexis.com. The information on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-
K or any other filings we make with the U.S. Securities and Exchange Commission (the “SEC”).
We make available on or through our website certain reports and amendments to those reports that we file with, or furnish to, the SEC in accordance with the Exchange Act. These
include our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act. We make this information available on or through our website free of charge as soon as reasonably practicable after we electronically file
the information with, or furnish it to, the SEC. Copies of this information may be obtained at the SEC website at www.sec.gov. The contents of these websites are not incorporated into
this filing. Further, the references to website URLs are intended to be inactive textual references only.
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You should carefully consider the risks described below together with the other information set forth in this Annual Report on Form 10-K, which could materially affect our
business, financial condition or future results. The risks described below are not the only risks facing our company. Risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Additional discussion of the material risks and
uncertainties summarized in this risk factor summary, as well as certain other risks and uncertainties that we face, can be found in this section.
ITEM 1A. RISK FACTORS
RISK FACTORS SUMMARY
The following is a summary of the principal factors that cause an investment in the Company to be speculative or risky:
• We have a history of net losses and we may not achieve or maintain profitability.
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Biotherapeutic programs are highly regulated and expensive.
• We are dependent on a limited number of customers.
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Our product supply agreements with customers have finite duration and may not be extended or renewed.
The demand for our product depends in part on our customers' research and development and the clinical and market success of their products.
• With respect to customers purchasing our products for the manufacture of API, the termination or expiration of such patent protection may materially and adversely affect our
revenues, financial condition or results of operations.
• We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes.
• We are dependent on our collaborators, and our failure to successfully manage these relationships could prevent us from developing and commercializing many of our products.
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If we are unable to develop and commercialize new products for the target markets, our business and prospects will be harmed.
• We have invested significant resources to enable fully enzymatic nucleic acid synthesis, which is based on novel ideas and technologies that are largely unproven.
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Future revenues from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize.
Ethical, legal and social concerns about genetically engineered products and processes could limit or prevent the use of our products, processes, and technologies and limit our
revenues.
• We have recently enhanced our strategic focus to concentrate on certain programs and business lines. As a result of this refined focus on returning the foundational, revenue-
generating pharmaceutical manufacturing business and the ECO Synthesis
profitable or for which there is a greater likelihood of success.
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manufacturing platform, we may fail to capitalize on other opportunities that may be more
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Given our recent change in strategic direction, we may receive limited revenue or no future value from certain of our existing license agreements.
• We use hazardous materials in our business, and we must comply with environmental laws and regulations.
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As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and Nasdaq regarding our internal controls over financial
reporting. We may not complete needed improvements to our internal controls over financial reporting in a timely manner, or these internal controls may not be determined to be
effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock and your investment.
• We may need additional capital in the future in order to expand our business.
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• We may not be able to comply with the terms of our five-year loan and security agreement (our “Loan Agreement”) with Innovatus Life Sciences Lending Fund, I, LP, an
affiliate of Innovatus Capital Partners (“Innovatus”).
Our ongoing efforts to deploy our technology in the life science tools market may fail.
Even if our customers or collaborators obtain regulatory approval for any products utilizing our enzymes, such products will remain subject to ongoing regulatory requirements,
which may result in significant additional expense.
If we or our customers fail to comply with certain healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, results of operations,
financial condition and prospects could be adversely affected.
Our efforts to prosecute, maintain, protect and/or defend our intellectual property rights may not be successful.
Our ability to compete may decline if we do not adequately prosecute, maintain, protect and/or defend our proprietary technology, products or services or our intellectual
property rights.
Third parties may claim that we are infringing, violating or misappropriating their intellectual property rights, which may subject us to costly and time-consuming litigation and
prevent us from developing or commercializing our technology, products or services.
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• We may be involved in lawsuits to protect or enforce our intellectual property rights, which could be expensive, time-consuming and unsuccessful.
• We may not be able to enforce our intellectual property rights throughout the world.
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If our biocatalysts are stolen, misappropriated or reverse engineered, others could use these biocatalysts to produce competing products.
• We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company.
• Market and economic conditions may negatively impact our business, financial condition, and share price.
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Business interruptions resulting from disasters or other disturbances could delay us in the process of developing our products and could disrupt our sales.
Evolving expectations around environmental, social and governance matters may expose us to reputational and other risks.
Risks Related to Our Business and Strategy
We have a history of net losses and we may not achieve or maintain profitability.
We have incurred net losses since our inception, including losses of $76.2 million, $33.6 million, and $21.3 million for the years ended December 31, 2023, 2022, and 2021,
respectively. As of December 31, 2023, we had an accumulated deficit of $497.5 million. If we are unable to continue to successfully develop and commercialize products in our
pharmaceutical manufacturing business, increase sales of existing products and services, develop and commercialize our ECO Synthesis manufacturing platform, and or develop new
products or services, or otherwise expand our business, whether through new or expanded collaborations or other products and services, our net losses may increase and we may never
achieve profitability. In addition, some of our agreements, including the agreements with GSK, Merck, Novartis, Nestlé Health Science, Aldevron and Roche provide for milestone
payments, usage payments, and/or future royalty or other payments, which we will only receive if we and/or our collaborators develop and commercialize products or achieve technical
milestones. We also intend to continue to fund the development of additional proprietary performance enzyme products and advance new technologies like our ECO Synthesis
manufacturing platform. There can be no assurance that any of these products or services will become commercially viable or that we will ever achieve profitability on a quarterly or
annual basis. If we fail to achieve profitability, or if the time required to achieve profitability is longer than we anticipate, we may not be able to continue our business. Even if we do
achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
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Biotherapeutic programs are highly regulated and expensive, and our enzyme products are complex and subject to quality control requirements. The ability of our customers,
future customers or collaborators, including any company developing RNAi therapeutics, to advance product candidates utilizing our products to clinical trials and to ultimately
receive regulatory approvals is highly uncertain.
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Although we are no longer developing our own portfolio of biotherapeutics product candidates, we continue to develop enzyme products, including our ECO Synthesis
manufacturing platform, that may be used by our customers, future customers or collaborators in connection with their biotherapeutic product candidates. The successful development of
biotherapeutic candidates involves many risks and uncertainties, requires long timelines and may lead to uncertain results.
Our customers are subject to extensive regulations by the FDA and similar regulatory authorities in other countries for conducting clinical trials and commercializing products for
therapeutic, vaccine or diagnostic use. These regulations result in our customers imposing quality requirements on us for the manufacture of our enzyme products through supplier
qualification processes and customer contracts and specifications
In order to market a biologic or drug product in the United States, our customers, future customers or collaborators must undergo the following process required by the FDA:
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completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA's Good Laboratory Practice requirements;
submission to the FDA of an Investigational New Drug Application (“IND”), which must become effective before human clinical studies may begin in the United States;
approval by an independent institutional review board (“IRB”) representing each clinical site before the clinical study may be initiated at the site;
performance of adequate and well-controlled human clinical studies in accordance with Good Clinical Practice (“GCP”) requirements to establish the safety, purity and potency
(or efficacy) of the product candidate for each proposed indication;
preparation of and submission to the FDA of a Biologics License Application (“BLA”) or New Drug Application (“NDA”)after completion of all clinical studies;
potential review of the product candidate by an FDA advisory committee;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities where the product candidate is produced to assess compliance with current Good
Manufacturing Practice (“cGMP”) requirements;
FDA review and approval of a BLA or NDA prior to any commercial marketing or sale of the product in the United States; and
any post-approval requirements, if applicable.
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and the results are inherently unpredictable. If our customers, future
customers or collaborators are ultimately unable to obtain regulatory approval for their biotherapeutic product candidates utilizing our enzyme products, our business may be harmed. In
addition, if our customers, future customers or collaborators fail to comply with applicable FDA or other regulatory requirements at any time during the drug development process,
clinical testing, the approval process or after approval, they may become subject to administrative or judicial penalties, including the FDA’s refusal to approve a pending application,
withdrawal of an approval, warning letters, product recalls and additional enforcement actions, any of which may have an adverse effect on our financial condition.
We believe our enzyme products are exempt from compliance with the Food, Drug, and Cosmetic Act (“FDCA”) and the current GMP (“cGMP”) regulations of the FDA, as our
products are further processed and incorporated into final drug or biologic products by our customers and we do not make claims related to their safety or effectiveness. Our products are
manufactured following the voluntary quality standards of ISO 9001:2015. In the event we, or our suppliers, produce products that fail to comply with required quality standards, we
may incur delays in fulfilling orders, write-downs, damages resulting from product liability claims and harm to our reputation.
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In the future, our products could become subject to more onerous regulation, or the FDA could disagree with our assessment that our enzyme products are exempt from current
GMP regulations. In addition, the FDA could conclude that the products we provide to our customers are actually subject to the pharmaceutical, drug or biologic quality-related
regulations for manufacturing, processing, packing or holding of drugs, biologics, or finished pharmaceuticals, and could take enforcement action against us, including requiring us to
stop distribution of our products until we are in compliance with applicable regulations, which would reduce our revenue, increase our costs and adversely affect our business,
prospects, results of operations and financial condition.
We are dependent on a limited number of customers.
Although we continue to expand our customer base, our current revenues are derived from a limited number of key customers. For the years ended December 31, 2023 and 2022,
customers that each individually contributed 10% or more of our total revenue accounted for 35% and 56% of our total revenues, respectively. We expect a limited number of customers
to continue to account for a significant portion of our revenues for the foreseeable future. This customer concentration increases the risk of quarterly fluctuations in our revenues and
operating results. The loss or reduction of business from one or a combination of our significant customers could, materially adversely affect our revenues, financial condition and
results of operations.
Our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular
quantity or quantities of our products.
Our product supply agreements with customers generally have a finite duration, may not be extended or renewed and generally do not require the customer to purchase any
particular quantity or quantities of our products. While our products are not considered commodities and may not be easily substituted for by our customers, particularly when our
products are used in the manufacture of active pharmaceutical ingredients, our customers may nevertheless terminate or fail to renew their product supply agreements with us or
significantly curtail their purchases thereunder under certain circumstances. We are working to develop new relationships with existing or new customers, but despite these efforts we
may not, at the time that any of our existing product supply agreements expire or are terminated, or purchases thereunder curtailed, have other contracts in place generating similar or
material revenue. Any such expiration, termination or reduction could materially adversely affect our revenues, financial condition and results of operations. For the year ended
December 31, 2023, we derived a majority of our product revenue from these product supply agreements.
The demand for our products depends in part on our customers’ research and development and the clinical and market success of their products. Our business, financial
condition, and results of operations may be harmed if our customers spend less on, or are less successful in, these activities. In addition, customer spending may be affected by,
among other things, general market and economic conditions beyond our control.
Our customers are engaged in research, development, production, and marketing of pharmaceutical products and intermediates. The amount our customers spend on research,
development, production, and marketing, as well as the outcomes of such research, development, and marketing activities, have a large impact on our sales and profitability, particularly
the amount our customers choose to spend on our offerings. Available resources, the need to develop new products, and consolidation in the industries in which our customers operate
may have an impact on such spending. Our customers and potential customers finance their research and development spending from private and public sources. A reduction in available
financing for and spending by our customers, for these reasons or because of continued unstable or unpredictable economic and marketplace conditions, could have a material adverse
effect on our business, financial condition, and results of operations. If our customers are not successful in attaining or retaining product sales due to market conditions, reimbursement
issues, or other factors, our results of operations may be materially adversely affected.
With respect to customers purchasing our products for the manufacture of APIs for which they have exclusivity due to patent protection, the termination or expiration of such
patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations.
With respect to customers purchasing our products for the manufacture of API, or lead to the manufacture of API, for which exclusivity due to patent protection has or is about to
expire, we can expect that the quantity of our products sold to such customers for such products may decline as generic competition for the API increases. While we anticipate that we
may, in some cases, also be able to sell products to these generic competitors for the manufacture of these APIs, or lead to the manufacture of these APIs, the overall effect on our
revenues, financial condition and results of operations could be materially adverse.
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We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes. We are working to qualify new contract
manufacturers to produce certain of our enzymes, however those efforts may not be successful and therefore we may experience limitations on our ability to supply our enzymes to
customers.
Manufacturing of our enzymes is conducted primarily in four locations: our in-house facility in Redwood City, California, and at three third-party contract manufacturing
organizations, Lactosan in Kapfenberg, Austria, ACSD ( in Anagni, Italy, and Alphazyme in Jupiter, Florida, United States. Generally, we perform smaller scale manufacturing in-house
and outsource the larger scale manufacturing to these contract manufacturers. We have limited internal capacity to manufacture enzymes. As a result, we are dependent upon the
performance and capacity of third-party manufacturers for the larger scale manufacturing of the enzymes used in our pharmaceutical and life sciences businesses.
Accordingly, we face risks of difficulties with, and interruptions in, performance by third party manufacturers, the occurrence of which could adversely impact the availability,
launch and/or sales of our enzymes in the future. Enzyme manufacturing capacity limitations at our third-party manufacturers and manufacturing delays could negatively affect our
business, reputation, results of operations and financial condition. The failure of any contract manufacturer to supply us our required volumes of enzyme on a timely basis, or to
manufacture our enzymes in compliance with our specifications or applicable quality requirements or in volumes sufficient to meet demand, would adversely affect our ability to sell
pharmaceutical and complex chemicals products, could harm our relationships with our customers or collaborators and could negatively affect our revenues and operating results. We
may be forced to secure alternative sources of supply, which may be unavailable on commercially acceptable terms, and could cause delays in our ability to deliver products to our
customers, increase our costs and decrease our profit margins.
We currently have supply agreements in place with Lactosan, ACSD and Alphazyme. In the absence of a supply agreement, a contract manufacturer will be under no obligation to
manufacture our enzymes and could elect to discontinue their manufacture at any time. If we require additional manufacturing capacity and are unable to obtain it in sufficient quantity,
we may not be able to increase our product sales, or we may be required to make substantial capital investments to build that capacity or to contract with other manufacturers on terms
that may be less favorable than the terms we currently have with our suppliers. If we choose to build our own additional manufacturing facility, it could take several years or longer
before our facility is able to produce commercial volumes of our enzymes. Any resources we expend on acquiring or building internal manufacturing capabilities could be at the expense
of other potentially more profitable opportunities. In addition, if we contract with other manufacturers, we may experience delays of several months in qualifying them, which could
harm our relationships with our customers or collaborators and could negatively affect our revenues or operating results.
We are dependent on our collaborators, and our failure to successfully manage these relationships could prevent us from developing and commercializing many of our
products and achieving or sustaining profitability, and could lead to disagreements with our current or former collaborators.
Our ability to maintain and manage collaborations in our markets is fundamental to the success of our business. We currently have license agreements, research and development
agreements, supply agreements and/or distribution agreements with various collaborators. For example, we have ongoing collaborations and agreements with GSK, Merck, Novartis,
Roche and Aldevron that are important to our business and financial results. We may have limited or no control over the amount or timing of resources that any collaborator is able or
willing to devote to our partnered products or collaborative efforts. Any of our collaborators may fail to perform its obligations. These collaborators may breach or terminate their
agreements with us or otherwise fail to conduct their collaborative activities successfully and in a timely manner. Further, our collaborators may not develop products arising out of our
collaborative arrangements or devote sufficient resources to the development, manufacture, marketing or sale of these products. Moreover, disagreements with a collaborator could
develop, and any conflict with a collaborator could lead to litigation, reduce our ability to enter into future collaboration agreements and negatively impact our relationships with one or
more existing collaborators. If any of these events occur, especially if they occur in our collaborations with GSK, Merck or Novartis, or if we fail to maintain our agreements with our
collaborators, we may not be able to commercialize our existing and potential products or grow our business or generate sufficient revenues to support our operations, we may not
receive contemplated milestone payments and royalties under the collaboration, and we may be involved in litigation. Our collaboration opportunities could be harmed and our financial
condition and results of operations could be negatively affected if:
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we do not achieve our research and development objectives under our collaboration agreements in a timely manner or at all;
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we develop products and processes or enter into additional collaborations that conflict with the business objectives of our other collaborators;
our collaborators and/or our contract manufacturers do not receive the required regulatory and other approvals necessary for the commercialization of the applicable product;
we disagree with our collaborators as to rights to intellectual property that are developed during the collaboration, or their research programs or commercialization activities;
we are unable to manage multiple simultaneous collaborations;
our collaborators or licensees are unable or unwilling to implement or use the technology or products that we provide or license to them;
our collaborators become competitors of ours or enter into agreements with our competitors;
our collaborators become unable or less willing to expend their resources on research and development or commercialization efforts due to general market conditions, their
financial condition or other circumstances beyond our control; or
our collaborators experience business difficulties, which could eliminate or impair their ability to effectively perform under our agreements.
Takeda recently confirmed that it will end research, discovery and preclinical work in certain rare disease areas that may overlap with the programs on which we collaborate under
the Strategic Collaboration and License Agreement (the “Takeda Agreement”) we entered into with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary of Takeda, in
March 2020. Takeda announced in April 2023 the discontinuance of these development programs.
Even after collaboration relationships expire or terminate, some elements of the collaboration may survive. For instance, certain rights, licenses and obligations of each party with
respect to intellectual property and program materials may survive the expiration or termination of the collaboration. Disagreements or conflicts between and among the parties could
develop even though the collaboration has ended. These disagreements or conflicts could result in expensive arbitration or litigation, which may not be resolved in our favor.
Finally, our business could be negatively affected if any of our collaborators or suppliers undergoes a change of control or were to otherwise assign the rights or obligations under
any of our agreements.
If we are unable to develop and commercialize new products for the pharmaceutical, biotherapeutics, diagnostics and life science tools markets, our business and prospects will
be harmed.
We plan to launch new products for the pharmaceutical, biotherapeutics, diagnostics and other life science tools markets such as our ECO Synthesis manufacturing platform.
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These efforts are subject to numerous risks, including the following:
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customers in these markets may be reluctant to adopt new manufacturing processes that use our enzymes;
we may be unable to successfully develop the enzymes or manufacturing processes for our products in a timely and cost-effective manner, if at all;
we may face difficulties in transferring the developed technologies to our customers and the contract manufacturers that we may use for commercial scale production of
intermediates and enzymes in these markets;
the biotherapeutics products that use our tools may not receive regulatory approval or be commercially viable;
the contract manufacturers that we may use may be unable to scale their manufacturing operations to meet the demand for these products and we may be unable to secure
additional manufacturing capacity;
customers may not be willing to purchase these products for these markets from us on favorable terms, if at all;
we may face product liability litigation, unexpected safety or efficacy concerns and product recalls or withdrawals;
our customers’ products may experience adverse events or face competition from new products, which would reduce demand for our products;
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we may face pressure from existing or new competitive products; and
we may face pricing pressures from existing or new competitors, some of which may benefit from government subsidies or other incentives.
We have invested significant resources to enable fully enzymatic nucleic acid synthesis, which is based on novel ideas and technologies that are largely unproven.
Our ECO Synthesis™ manufacturing platform is currently in development to enable the commercial-scale manufacture of RNAi therapeutics through an enzymatic route. While we
believe fully enzymatic nucleic acid synthesis will offer certain improvements over phosphoramidite chemistry, including with respect to required infrastructure investments, batch size
limitations and waste disposal challenges, the enzymatic route is novel and has not yet been commercialized. As such, we may be faced with unforeseen results, delays and setbacks, in
addition to the other foreseeable risks and uncertainties associated with the ongoing development of the ECO Synthesis™ manufacturing platform and other products.
Other challenges with a new technology such as our ECO Synthesis™ manufacturing platform include having an unknown and unproven regulatory path, uncertainly around the
value that we can realize from the technology, uncertainty around the timeline for adoption of the technology by customers, and uncertainly around our ability to manufacture and
partner with customers on manufacturing and utilizing the technology.
There can be no assurance that these events we may experience in the future related to enzymatic synthesis will not cause significant delays or unanticipated costs, or that such
development problems can be solved. Any delay or difficulties in developing and commercializing our ECO Synthesis™ manufacturing platform or any of our other current or future
products could adversely affect our business and operations.
Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete or may use their
greater resources to gain market share at our expense.
The biocatalysis and performance enzyme industries and each of our target markets are characterized by rapid technological change. Our future success will depend on our ability to
maintain a competitive position with respect to technological advances. In addition, as we enter new markets, we will face new competition and will need to adapt to competitive factors
that may be different from those we face today.
We are aware that other companies, including DSM, BASF, Bayer and Novozymes have alternative methods for obtaining and generating genetic diversity or use mutagenesis
techniques to produce genetic diversity. Academic institutions such as the California Institute of Technology, the Max Planck Institute and the Austrian Centre of Industrial
Biotechnology are also working in this field. Technological development by others may result in our technology, products and services, as well as products developed by our customers
using our biocatalysts, becoming obsolete.
Our primary competitors in the performance enzymes for the pharmaceutical products markets include (i) companies marketing either conventional, non-enzymatic processes or
biocatalytic enzymes; (ii) manufacturers of pharmaceutical intermediates and APIs; and (iii) existing in-house technologies (both biocatalysts and conventional catalysts) within our
client and potential client companies. The principal methods of competition and competitive differentiation in this market are price, product quality and performance, including
manufacturing yield, safety and environmental benefits, and speed of delivery of product. Pharmaceutical manufacturers that use biocatalytic processes can face increased competition
from manufacturers that use more conventional processes and/or manufacturers that are based in regions (such as India and China) with lower regulatory, safety and environmental
costs.
The market for the manufacture and supply of APIs and intermediates is large with many established companies. These companies include many of our large innovator and generic
pharmaceutical customers, such as Merck, GSK, Novartis, Pfizer, Bristol-Myers, Kyorin, Urovant, and Teva which have significant internal research and development efforts directed at
developing processes to manufacture APIs and intermediates. The processes used by these companies include classical conventional organic chemistry reactions, chemo catalytic
reactions, biocatalytic reactions or combinations thereof. Our biocatalytic based manufacturing processes must compete with these internally developed routes. Additionally, we also
face competition from companies developing and marketing conventional catalysts such as Solvias Inc., BASF and Takasago International Corporation.
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The market for supplying enzymes for use in pharmaceutical manufacturing is quite fragmented. There is competition from large industrial enzyme companies, such as Novozymes
and DuPont, as well as subsidiaries of larger contract research/contract manufacturing organizations, such as DSM, Cambrex Corporation, Lonza, WuXi STA and Almac Group Ltd.
Some fermentation pathway design companies, like Ginkgo Bioworks (who recently acquired Zymergen), whose traditional focus has been to design microorganisms that express small
molecule chemicals, could extend into designing organisms that express enzymes. There is also competition in the enzyme customization and optimization area from several smaller
companies, such as BRAIN AG, Arzeda, c-LEcta GmbH and Evocatal GmbH.
We face competitive challenges related to our ECO Synthesis™ manufacturing platform. Phosphoramidite chemistry is the current and long-established industry standard for the
manufacture of RNA therapeutics. Primary competitors in this space include CDMOs, such as Agilent Technologies, which has made significant capital investment to expand their
RNA manufacturing capabilities using phosphoramidite chemistry. In addition, CDMOs and large pharmaceutical companies are seeking to make incremental improvements to
phosphoramidite chemistry, including the development of ligation-based approaches, liquid-phase synthesis, and solvent recycling. There are also multiple early-stage competitors who
are pursuing fully enzymatic approaches to the manufacture of RNA, including EnPlusOne, a private startup company, and a UK-based consortium led by CPI and consisting of
multiple academic and research organizations, including The University of Manchester and large pharmaceutical companies, including AstraZeneca plc and Novartis.
Our ability to compete successfully in any of these markets will depend on our ability to develop proprietary products that reach the market in a timely manner and are
technologically superior to and/or are less expensive than other products on the market. Many of our competitors have substantially greater production, financial, research and
development, personnel and marketing resources than we do. They also started developing products earlier than we did, which may allow them to establish blocking intellectual property
positions or bring products to market before we can. In addition, certain of our competitors may also benefit from local government subsidies and other incentives that are not available
to us. As a result, our competitors may be able to develop competing and/or superior technologies and processes and compete more aggressively and sustain that competition over a
longer period of time than we could. Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by
one or more of our competitors. We cannot be certain that any products we develop in the future will compare favorably to products offered by our competitors or that our existing or
future products will compare favorably to any new products that are developed by our competitors. As more companies develop new intellectual property in our markets, the possibility
of a competitor acquiring patent or other rights that may limit our products or potential products increases, and could additionally lead to litigation.
Our limited resources relative to many of our competitors may cause us to fail to anticipate or respond adequately to new developments and other competitive pressures. This failure
could reduce our competitiveness and market share, adversely affect our results of operations and financial position, and prevent us from obtaining or maintaining profitability.
Revenues in future years from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize.
Starting the first and second quarters of 2021, we began to receive purchase orders from Pfizer for large quantities of our proprietary enzyme product, CDX-616, for use by Pfizer in
the manufacture of a critical intermediate for its proprietary active pharmaceutical ingredient, nirmatrelvir. Pfizer markets, sells and distributes nirmatrelvir, in combination with the
active pharmaceutical ingredient ritonavir, as its PAXLOVID™ (nirmatrelvir tablets; ritonavir tablets) product, which received FDA approval in May 2023 for the treatment of mild-to-
moderate COVID-19 in adults who are at high risk for progression to severe COVID-19, including hospitalization or death.
Potential revenues in future years from our sales of CDX-616 to Pfizer and other potential customers (including sublicensees of Pfizer technology from The Medicines Patent Pool
(the “MPP”)) are subject to a number of factors which are outside of our control, including, without limitation, the following, all of which could reduce or eliminate our sales of CDX-
616, and therefore materially and adversely affect our business, results of operations and financial condition:
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Pfizer has no future binding commitment to purchase any particular quantity or quantities of CDX-616 from us, and we are dependent upon Pfizer continuing to place orders with
us (whether on a spot basis or under a long-term agreement, when and if executed) for their requirements, if any, for CDX-616;
to our knowledge, sublicensees of Pfizer technology from the MPP have no obligation to purchase CDX-616 from us under their sublicenses with the MPP;
future vaccine development and usage and the development and usage of other new therapies for the treatment or elimination of COVID-19 may eliminate or reduce demand for
PAXLOVID™;
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new variants of COVID-19 may emerge which PAXLOVID™ is not effective in treating;
Pfizer could reformulate or make changes in the manufacturing process for nirmatrelvir which would eliminate or reduce demand for the use of CDX-616 in its manufacture;
sublicensees of Pfizer technology for the manufacture, sale and distribution of PAXLOVID™ from the MPP may not utilize CDX-616 in the manufacture of nirmatrelvir;
national and regional governmental authorities (including those of the United States government) may mandate that raw materials and intermediates used in the manufacture of
PAXLOVID™ to be marketed, sold and distributed within the borders of that country be domestically produced, which could eliminate or reduce demand for the use of CDX-
616 in such country; and
we may be unable (because of lack of available manufacturing capacity at our contract manufacturers, supply chain disruptions or an inability to obtain applicable regulatory
approvals) to manufacture the quantities of CDX-616 that Pfizer may desire to purchase from us.
We have investments in non-marketable securities, which may subject us to significant impairment charges.
We have investments in illiquid or non-marketable equity securities acquired in private transactions. As of December 31, 2023, 7.1% of our consolidated assets consisted of
investment securities, which are illiquid investments. Investments in non-marketable, securities are inherently risky and difficult to value. We account for our non-marketable equity
securities under the measurement alternative. Under the measurement alternative, the carrying value of our non-marketable equity investments is adjusted to fair value for observable
transactions for identical or similar investments of the same issuer or impairment. We evaluate our investment in non-marketable securities when circumstances indicate that we may not
be able to recover the carrying value. We may impair these securities and establish an allowance for a credit loss when we determine that there has been an “other-than-temporary”
decline in estimated fair value of the equity security compared to its carrying value. The impairment analysis requires significant judgment to identify events or circumstances that would
likely have a material adverse effect on the fair value of the investment. Because over 5% of our total assets consisted of non-marketable investment securities, any future impairment
charges from the write down in value of these securities could have a material adverse effect on our financial condition or results of operations.
Ethical, legal and social concerns about genetically engineered products and processes could limit or prevent the use of our technology, products and processes and limit our
revenues.
Some of our technology, products and services, such as our ECO Synthesis manufacturing platform, are genetically engineered or involve the use of genetically engineered
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products or genetic engineering technologies. If we and/or our collaborators are not able to overcome the ethical, legal, and social concerns relating to genetic engineering, our
technology, products and services may not be accepted. Any of the risks discussed below could result in increased expenses, delays, or other impediments to our programs or the public
acceptance and commercialization of products and processes dependent on our technologies or inventions. Our ability to develop and commercialize one or more of our technologies,
products, or processes could be limited by the following factors:
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public attitudes about the safety and environmental hazards of, and ethical concerns over, genetic research and genetically engineered products and processes, which could
influence public acceptance of our technologies, products and processes;
public attitudes regarding, and potential changes to laws governing ownership of, genetic material, which could harm our intellectual property rights with respect to our genetic
material and/or discourage collaborators from supporting, developing, or commercializing our technology, products and services; and
governmental reaction to negative publicity concerning genetically modified organisms, which could result in greater government regulation of genetic research and derivative
products.
The subject of genetically modified organisms has received negative publicity, which has aroused public debate. This adverse publicity could lead to greater regulation and trade
restrictions on imports of genetically altered products. The biocatalysts that we develop have significantly enhanced characteristics compared to those found in naturally occurring
enzymes or microbes. While we produce our biocatalysts only for use in a controlled industrial environment, the release of such biocatalysts into uncontrolled environments could have
unintended consequences. Any adverse effect resulting from such a release could have a material adverse effect on our business and financial condition, damage our reputation, and/or
expose us to liability for any resulting harm.
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We have recently enhanced our strategic focus to concentrate on certain programs and business lines. As a result of this refined focus, we may fail to capitalize on other
opportunities that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we have recently focused our efforts on developing certain programs and business lines. As a result, we may forego or
delay pursuit of business opportunities that later prove to have greater commercial potential. Further our resource allocation decisions may cause us to fail to capitalize on viable
commercial products or profitable market opportunities. In addition, our spending on current and future research and development programs, such as ECO Synthesis manufacturing
platform that is in development, may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular program or
business line, our business and results of operations could be harmed.
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Given our recent change in strategic direction, we may receive limited revenue or no future value from certain of our existing license agreements.
While we have historically invested significant time and financial resources in the development of biotherapeutics assets, including candidates for the treatment of Fabry disease
and Pompe disease, which are included in the Takeda Agreement, in July 2023, we announced we are terminating investment in our biotherapeutics business and in other programs. As a
result, we are renegotiating some of these, along with other license agreements for product candidates in our biotherapeutics, food and feed, and non-core life science assets. For
example, we entered into the Acquisition Agreement with Nestlé under which they acquired rights to our co-developed lipase enzyme CDX-7108 and we received an upfront payment
and the right to downstream milestones and royalties, terminating our prior SCA and development agreement with Nestlé. While we are working to amend or terminate some of our
agreements and enter into new agreements in such a way that we may be able to receive future revenue or other benefits, we may be unsuccessful in doing so. As a result, it remains
uncertain as to whether we will receive any value or benefit from these license agreements going forward. Further, renegotiating these agreements may be costly and could divert
management attention, which could have an adverse impact on our business and results of operations.
We use hazardous materials in our business and we must comply with environmental laws and regulations. Any claims relating to improper handling, storage or disposal of
these materials or noncompliance of applicable laws and regulations could be time consuming and costly and could adversely affect our business and results of operations.
Our research and development and commercial processes involve the use of hazardous materials, including chemical, radioactive and biological materials. Our operations also
produce hazardous waste. We cannot eliminate entirely the risk of accidental contamination or discharge and any resultant injury from these materials. Federal, state, local and foreign
laws and regulations govern the use, manufacture, storage, handling and disposal of, and human exposure to, these materials. We may face liability for any injury or contamination that
results from our use or the use by third parties of these materials, and our liability may exceed our total assets. Although we believe that our activities comply in all material respects
with environmental laws, there can be no assurance that violations of environmental, health and safety laws will not occur in the future as a result of human error, accident, equipment
failure or other causes. Compliance with applicable environmental laws and regulations may be expensive, and the failure to comply with past, present or future laws could result in the
imposition of fines, third party property damage, product liability and personal injury claims, investigation and remediation costs, the suspension of production or a cessation of
operations, and our liability may exceed our total assets. Liability under environmental laws can be joint and several and without regard to comparative fault. Environmental laws could
become more stringent over time imposing greater compliance costs and increasing risks and penalties associated with violations, which could impair our research, development or
production efforts and harm our business. In addition, we may be required to indemnify some of our customers or suppliers for losses related to our failure to comply with
environmental laws, which could expose us to significant liabilities.
Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its
ability to utilize its pre-change net operating loss carryforwards (“NOLs”), to offset future taxable income. If the Internal Revenue Service challenges our analysis that our existing
NOLs are not subject to limitations arising from previous ownership changes, our ability to utilize NOLs could be limited by Section 382 of the Code. Future changes in our stock
ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code. Furthermore, our ability to utilize NOLs of companies that we
may acquire in the future may be subject to limitations. For these reasons, we may not be able to utilize a material portion of the NOLs reflected in our financial statements, even if we
attain profitability.
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As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and Nasdaq regarding our internal controls over financial
reporting. We may not complete needed improvements to our internal controls over financial reporting in a timely manner, or these internal controls may not be determined to be
effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock and your investment.
We are subject to the rules and regulations established from time to time by the SEC and Nasdaq. These rules regulations require, among other things, that we establish and
periodically evaluate procedures with respect to our internal controls over financial reporting. As part of these evaluations, material weaknesses in our internal controls over financial
reporting may be identified. A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility
that a material misstatement of a company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. While we were able to remediate
previously identified material weaknesses in our internal controls over financial reporting, there can be no guarantee we will not identify similar or other material weaknesses in the
future and if such material weaknesses are identified, there can be no guarantee we would be able to remediate such material weaknesses. Any material weaknesses in our internal
controls may adversely affect our ability to record, process, summarize and accurately report timely financial information and, as a result, our consolidated financial statements may
contain material misstatements or omissions.
Reporting obligations as a public company place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel. In addition, as
a public company we are required to document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can
certify as to the effectiveness of our internal controls over financial reporting. Likewise, our independent registered public accounting firm is required to provide an attestation report on
the effectiveness of our internal controls over financial reporting in our Annual Reports on Form 10-K. If our management is unable to certify the effectiveness of our internal controls
or if our independent registered public accounting firm cannot deliver a report attesting to the effectiveness of our internal controls over financial reporting, or if we identify or fail to
remediate material weaknesses in our internal controls, we could be subject to regulatory scrutiny and a loss of public confidence, which could seriously harm our reputation and the
market price of our common stock. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business
effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and may seriously harm our business.
We may need additional capital in the future in order to expand our business.
Our future capital requirements may be substantial, particularly as we continue to develop our business. Although we believe that, based on our current level of operations, our
existing cash, cash equivalents and equity securities will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the
next 12 months, we may need additional capital if our current plans and assumptions change. Our need for additional capital will depend on many factors, including the financial success
of our performance enzyme business, our spending to develop and commercialize new and existing enzyme products and the amount of collaboration funding we may receive to help
cover the cost of such expenditures, the effect of any acquisitions of other businesses, technologies or facilities that we may make or develop in the future, our spending on new market
opportunities, including the ongoing commercialization of our ECO Synthesis manufacturing platform, and the filing, prosecution, enforcement and defense of patent claims. If our
capital resources are insufficient to meet our capital requirements, and we are unable to enter into or maintain collaborations with partners that are able or willing to fund our
development efforts or commercialize any enzyme products that we develop or enable, we will have to raise additional funds to continue the development of our technology and
products and complete the commercialization of products, if any, resulting from our technologies.
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In addition, we may choose to raise additional capital due to market conditions or strategic considerations, such as funding the ongoing commercialization of our ECO Synthesis
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manufacturing platform, even if we believe we have sufficient funds for our current or future operating plans. We may seek to obtain such additional capital through equity offerings,
including pursuant to the EDA, debt financings, credit facilities and/or strategic collaborations. If future financings involve the issuance of equity securities, our existing stockholders
would suffer dilution. In addition, under our Loan Agreement, we are subject to restrictive covenants that limit our ability to conduct our business and could be subject to additional
covenants to the extent we seek other debt financing in the future. Strategic collaborations may also place restrictions on our business. We may not be able to raise sufficient additional
funds on terms that are favorable to us, if at all. If we fail to raise sufficient funds and fail to generate sufficient revenues to achieve planned gross margins and to control operating costs,
our ability to fund our operations, take advantage of strategic opportunities, develop products or technologies, or otherwise respond to competitive pressures could be significantly
limited. If this happens, we may be forced to delay or terminate research or development programs or the commercialization of products resulting from our technologies, curtail or cease
operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, or grant licenses on terms that are not favorable to us. If
adequate funds are not available, we will not be able to successfully execute our business plan or continue our business.
Covenants and other provisions in our Loan Agreement with Innovatus restrict our business and operations in many ways, and if we do not effectively manage our covenants,
our financial conditions and results of operations could be adversely affected. In addition, our operations may not provide sufficient cash to meet the repayment obligations of our
debt incurred under the Loan Agreement.
Pursuant to the Loan Agreement, Innovatus has been granted a security interest in substantially all of our assets. If an event of default occurs under the Loan Agreement, Innovatus
may foreclose on its security interest and liquidate some or all of these assets, which would harm our business, financial condition and results of operations.
In the event of a default in connection with our bankruptcy, insolvency, liquidation, or reorganization, Innovatus would have a prior right to substantially all of our assets to the
exclusion of our general unsecured creditors. Only after satisfying the claims of Innovatus and any unsecured creditors would any amount be available for our equity holders.
The pledge of these assets and other restrictions imposed in the Loan Agreement may limit our flexibility in raising capital for other purposes. Because substantially all of our
assets are pledged to secure the Loan Agreement obligations, our ability to incur additional indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have
an adverse effect on our financial flexibility.
In addition, if we are unable to comply with certain financial and operating restrictions in the Loan Agreement, we may be limited in our business activities and access to credit or
may default under the Loan Agreement. Provisions in the Loan Agreement impose restrictions or require prior approval on our ability, and the ability of certain of our subsidiaries to,
among other things:
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sell, lease or transfer certain parts of our business or property, including equity interests of our subsidiaries;
engage in new lines of business;
acquire new companies and merge or consolidate;
incur additional debt or guarantee the indebtedness of others or our subsidiaries;
create liens or encumbrances;
pay cash dividends and make distributions or redeem or repurchase our capital stock;
• make certain investments;
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enter into transactions with affiliates; and
terminate or, in certain cases, amend our material agreements.
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The Loan Agreement also contains other customary covenants. We may not be able to comply with these covenants in the future. Our failure to comply with these covenants may
result in the declaration of an event of default, which, if not cured or waived, may result in the acceleration of the maturity of indebtedness outstanding under the Loan Agreement and
would require us to pay all amounts outstanding. If the maturity of our indebtedness is accelerated, we may not have sufficient funds then available for repayment or we may not have
the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us or at all. Our failure to repay our obligations under the Loan Agreement
would result in Innovatus foreclosing on all or a portion of our assets, which could force us to curtail or cease our operations.
If we engage in any acquisitions, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations.
We have made acquisitions in the past, and if appropriate opportunities become available, we expect to acquire additional businesses, assets, technologies, or products to enhance
our business in the future. For example, in October 2010, we acquired substantially all of the patents and other intellectual property rights associated with Maxygen’s directed evolution
technology.
In connection with any future acquisitions, we could:
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issue additional equity securities, which would dilute our current stockholders;
incur substantial debt to fund the acquisitions;
use our cash to fund the acquisitions; or
assume significant liabilities including litigation risk.
Acquisitions involve numerous risks, including problems integrating the purchased operations, technologies or products, unanticipated costs and other liabilities, diversion of
management’s attention from our core businesses, adverse effects on existing business relationships with current and/or prospective collaborators, customers and/or suppliers, risks
associated with entering markets in which we have no or limited prior experience and potential loss of key employees. We do not have extensive experience in managing the integration
process and we may not be able to successfully integrate any businesses, assets, products, technologies or personnel that we might acquire in the future without a significant expenditure
of operating, financial and management resources, if at all. The integration process could divert management’s time from focusing on operating our business, result in a decline in
employee morale and cause retention issues to arise from changes in compensation, reporting relationships, future prospects or the direction of the business. Acquisitions may also
require us to record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur
amortization expenses related to certain intangible assets, and incur large and immediate write offs and restructuring and other related expenses, all of which could harm our operating
results and financial condition. In addition, we may acquire companies that have insufficient internal financial controls, which could impair our ability to integrate the acquired company
and adversely impact our financial reporting. If we fail in our integration efforts with respect to any of our acquisitions and are unable to efficiently operate as a combined organization,
our business and financial condition may be adversely affected.
COVID-19 has adversely affected, and any resurgence of COVID-19 pandemic or another global health epidemic may in the future, directly or indirectly, adversely affect our
business, results of operations and financial condition.
COVID-19 has had a significant impact globally, prompting governments and businesses to take unprecedented measures in response. In the United States, COVID-19 has and may
continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.
In the future, our business could be materially adversely affected, directly or indirectly, by the widespread outbreak of contagious disease, such as COVID-19 or any resurgence
thereof. If national, state and local governments in affected regions implement safety precautions, similar to those implemented in response to COVID-19, including quarantines, border
closures, increased border controls, travel restrictions, governmental orders and shutdowns, business closures, cancellations of public gatherings and other measures, such precautions
could, and for COVID-19 did, disrupt normal business operations both in and outside of affected areas and could have significant negative impacts on businesses and financial markets
worldwide.
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The impact of COVID-19 has had, and any resurgence of the COVID-19 pandemic or another pandemic or public health crisis, could in the future have, significant repercussions
across regional, national and global economies and financial markets, and could trigger a period of regional, national and global economic slowdown or regional, national or global
recessions. The outbreak of COVID-19 in many countries adversely impacted regional, national and global economic activity and has continued to contribute to significant volatility and
negative pressure in financial markets. As a result, we may experience difficulty accessing debt and equity capital on attractive terms, or at all, due to the severe disruption and
instability in the global financial markets. In addition, our customers may terminate or amend their agreements for the purchase of our technology, products and services due to
bankruptcy, lack of liquidity, lack of funding, operational failures or other reasons.
Risks Related to Government Regulation
Our ongoing efforts to deploy our technology in the life science tools markets may fail.
We have used our CodeEvolver directed evolution technology platform to develop new products for customers using NGS and PCR/qPCR for in vitro molecular diagnostic
applications. While we have entered into license agreements for products in this market, we do not know if we can successfully compete in this new market. This new market is well
established and consists of numerous large, well-funded entrenched market participants who have long and established track records and customer relationships.
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We have also developed a newly engineered ligase designed to address sequencing challenges. These enzymes, and any additional products that we may develop in the future for
this market, may not succeed in displacing current products. If we succeed in commercializing new products for this market, we may not generate significant revenues and cash flows
from these activities. The failure to successfully deploy products on a timely basis in this space may limit our growth and have a material adverse effect on our financial condition,
operating results and business prospects.
Even if our customers, future customers or collaborators obtain regulatory approval for any products utilizing our enzymes, such products will remain subject to ongoing
regulatory requirements, which may result in significant additional expense.
Any products that receives FDA approval will remain subject to ongoing regulatory requirements for manufacturing, labeling, packaging, distribution, storage, advertising,
promotion, sampling, record-keeping and submission of safety and other post-market information, among other things. Any regulatory approvals received for such products may also be
subject to limitations on the approved indicated uses for which they may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing
testing and surveillance studies. For example, the holder of an approved NDA or BLA in the United States is obligated to monitor and report adverse events and any failure of a product
to meet the specifications in the NDA or BLA. In the United States, the holder of an approved NDA or BLA must also submit new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product labeling or manufacturing process. Similar provisions apply in the European Union (the “EU”). Advertising and
promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws. Similarly, in the EU any promotion
of medicinal products is highly regulated and, depending on the specific jurisdiction involved, may require prior vetting by the competent national regulatory authority. In addition,
product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance
with cGMP requirements and adherence to commitments made in the NDA, BLA or foreign marketing application.
If our customers, future customers or our collaborators or a regulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated
severity or frequency or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of that product, a regulatory agency may
impose restrictions relative to that product, the manufacturing facility or our customers or collaborators, including requiring recall or withdrawal of the product from the market or
suspension of manufacturing.
In addition, if our customers or collaborators fail to comply with applicable regulatory requirements, the FDA and other regulatory authorities may:
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issue an untitled letter or a warning letter asserting a violation of the law;
seek an injunction, impose civil or criminal penalties, and impose monetary fines, restitution or disgorgement of profits or revenues;
suspend or withdraw regulatory approval;
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issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;
• mandate modification of promotional materials and labeling and issuance of corrective information;
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issue consent decrees or corporate integrity agreements, or debar or exclude from federal healthcare programs;
suspend or terminate any ongoing clinical trials or implement requirements to conduct post-marketing studies or clinical trials;
refuse to approve a pending NDA, BLA or comparable foreign marketing application (or any supplements thereto);
restrict the labeling, marketing, distribution, use or manufacturing of products;
seize or detain products or otherwise require the withdrawal or recall of products from the market;
refuse to approve pending applications or supplements to approved applications;
refuse to permit the import or export of products; or
refuse government contracts.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The
occurrence of any event or penalty described above may also inhibit our customers or collaborators’ ability to commercialize products and our ability to generate revenues.
In addition, the FDA’s policies, and policies of foreign regulatory agencies, may change, and additional regulations may be enacted that could prevent, limit or delay regulatory
approval of product candidates. We 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. 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 be subject to enforcement action and we may not achieve or sustain profitability.
If we or our customers fail to comply with certain healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, results of operations,
financial condition and prospects could be adversely affected.
The healthcare industry is highly regulated. We, and our customers, are subject to various local, state, federal, national, and international laws and regulations, which include laws
and regulations promulgated by the FDA, HHS, state boards of pharmacy, state health departments, and similar regulatory bodies in other countries. Additionally, our business
operations and future arrangements with investigators, healthcare professionals, and consultants, among others, may expose us and our customers to broadly applicable fraud and abuse
and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute, the federal civil False Claims Act, the federal Civil Monetary Penalties Law,
and analogous state laws. These laws may constrain the business or financial arrangements and relationships through which we will conduct our operations. Because of the breadth of
these laws and narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be regulated by or subject to challenge under one or
more of such laws. We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts of our employees, agents, contractors, or
collaborators that turn out to violate any of the laws described above. If we or our operations are found to be in violation of any of the laws described above or any other governmental
regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment and the curtailment or restructuring of our operations,
any of which could materially adversely affect our ability to operate our business and our financial results.
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Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations.
In the United States, there have been, and we expect there will continue to be, a number of legislative initiatives to contain healthcare costs. Some of these initiatives, such as
ongoing healthcare reform, including with respect to reforming drug pricing, adverse changes in governmental or private funding of healthcare products and services, legislation or
regulations governing patient access to care, and the delivery, coverage, pricing, and reimbursement of pharmaceuticals and healthcare services may cause our customers to change the
amount of our offerings that they purchase from us or the price they are willing to pay us for these offerings. If cost-containment efforts or other healthcare reform measures limit our
customers’ profitability, they may decrease research and development spending, which could decrease the demand for our products and services and materially adversely affect our
growth prospects. Any of these factors could harm our customers’ businesses, which, in turn, could materially adversely affect our business, financial condition, results of operations,
cash flows, and prospects.
We cannot predict the likelihood, nature, or extent of other health reform initiatives that may arise from future legislative, administrative, or other action. Any substantial revision
of applicable healthcare legislation could have a material adverse effect on the demand for our customers’ products, which in turn could have a negative impact on our results of
operations, financial condition, or business. Changes in the healthcare industry’s pricing, selling, inventory, distribution, or supply policies or practices, or in public or government
sentiment for the industry as a whole, could also significantly reduce our revenue and results of operations.
Compliance with European Union chemical regulations could be costly and adversely affect our business and results of operations.
Some of our products are subject to the EU regulatory regime known as The Registration, Evaluation and Authorization of Chemicals (“REACH”). REACH mandates that certain
chemicals manufactured in, or imported into, the EU be registered and evaluated for their potential effects on human health and the environment. Under REACH, we and our contract
manufacturers located in the EU are required to register certain of our products based on the quantity of such product imported into or manufactured in the EU and on the product’s
intended end-use. The registration, evaluation and authorization process under REACH can be costly and time consuming. Problems or delays in the registration, evaluation or
authorization process under REACH could delay or prevent the manufacture of some of our products in, or the importation of some of our products into, the EU, which could adversely
affect our business and results of operations. In addition, if we or our contract manufacturers fail to comply with REACH, we may be subject to penalties or other enforcement actions,
which could have a material adverse effect on our business and results of operations.
Risks Related to Intellectual Property and Information Technology
Our efforts to prosecute, maintain, protect and/or defend our intellectual property rights may not be successful.
We will continue to file and prosecute patent applications and maintain trade secrets in an ongoing effort to protect our intellectual property rights. It is possible that our current
patents, or patents which we may later acquire, may be successfully challenged or invalidated, in whole or in part. It is also possible that we may not obtain issued patents from our
pending patent applications. We sometimes permit certain patents or patent applications to lapse or go abandoned under appropriate circumstances. Due to uncertainties inherent in
prosecuting patent applications, sometimes patent applications are rejected, and we subsequently abandon them. It is also possible that we may develop proprietary technology, products
or services in the future that are not patentable or that the patents of others will limit or altogether preclude our ability to conduct business. In addition, any patent issued to us or to our
licensor may provide us with little or no competitive advantage, in which case we may abandon such patent, license it to another entity or terminate the license agreement.
Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop technologies, products or services that are identical or similar
to ours or that compete with ours. Patent, trademark, copyright and trade secret laws afford only limited protection for our technology, products and services . The laws of many
countries do not protect our proprietary rights to as great of an extent as do the laws of the United States. Despite our efforts to protect our proprietary rights, unauthorized parties have
in the past attempted, and may in the future attempt, to operate under the aspects of our intellectual property rights, or proprietary technology, products or services or products, or to
obtain and use information that we regard as proprietary. Third parties may also design around our proprietary rights, which may render our protected technology, services and products
less valuable, if the design around is favorably received in the marketplace. In addition, if any of our technology, products and services are covered by third-party patents or other
intellectual property rights, we could be subject to various legal actions. We cannot assure that our technology products and/or services do not infringe, violate or misappropriate any
patents or other intellectual property rights owned or controlled by others or that they will not in the future.
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Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement, invalidity, misappropriation, or other claims.
Any such litigation could result in substantial costs and diversion of our resources. Moreover, any settlement of or adverse judgment resulting from litigation relating to intellectual
property rights could require us to obtain a license to continue to make, use, import, sell or offer for sale the technology, products or services that is the subject of the claim, or otherwise
restrict or prohibit our use of the technology, products or services.
Our ability to compete may decline if we do not adequately prosecute, maintain, protect and/or defend our proprietary technology, products or services or our intellectual
property rights.
Our success depends in part on our ability to obtain patents and maintain adequate protection of our intellectual property rights directed to our technology, products and services in
the United States and other countries. We have adopted a strategy of seeking patent protection in the United States and in foreign countries with respect to certain of the technology used
in or relating to our products, services, and processes. As such, as of December 31, 2023, we owned or controlled approximately 1,990 active issued patents and pending patent
applications in the United States and in various foreign jurisdictions. As of December 31, 2023, our patents and patent applications, if issued, have terms that expire between 2024 and
approximately 2044. We also have license rights to a number of issued patents and pending patent applications in the United States and in various foreign jurisdictions. Our owned and
licensed patents and patent applications include those directed to our enabling technology and to the methods and products that support our business in the pharmaceutical
manufacturing, life sciences, oligonucleotide synthesis, and other markets. We intend to continue to apply for patents relating to our technology, methods, services and products as we
deem appropriate.
Issuance of claims in patent applications and enforceability of such claims once issued involve complex legal and factual questions and, therefore, we cannot predict with any
certainty whether any of our issued patents will survive invalidity claims asserted by third parties. Issued patents and patents issuing from pending applications may be challenged,
invalidated, circumvented, rendered unenforceable or substantially narrowed in scope. In addition, the inventorship and ownership of the patents and patent applications may be
challenged by others. Moreover, the United States Leahy-Smith America Invents Act (“AIA”), enacted in September 2011, brought significant changes to the United States patent
system, which include a change to a “first to file” system from a “first to invent” system and changes to the procedures for challenging issued patents and disputing patent applications
during the examination process, among other things. While interference proceedings are possible for patent claims filed prior to March 16, 2013, many of our filings will be subject to
the post- and pre-grant proceedings set forth in the AIA, including citation of prior art and written statements by third parties, third party pre-issuance submissions, ex parte
reexamination, inter partes review, post-grant review, and derivation proceedings. We may need to utilize the processes provided by the AIA for supplemental examination or patent
reissuance. These proceedings could result in substantial cost to us even if the outcome is favorable. Even if successful, any proceeding may result in loss of certain claims. Any
litigation or proceedings could divert our management's time and efforts. Even unsuccessful claims brought by third parties could result in significant legal fees and other expenses,
diversion of management time, and disruption in our business. Uncertainties resulting from initiation and continuation of any patent or related litigation could harm our ability to
compete.
Additional uncertainty may result from legal precedent handed down by the United States Federal Circuit Court and Supreme Court as they determine legal issues concerning the
scope and construction of patent claims and inconsistent interpretation of patent laws by the lower courts. Accordingly, we cannot ensure that any of our pending patent applications will
result in issued patents, or even if issued, predict the breadth of the claims upheld in our, our licensors', and other companies' patents. Given that the degree of future protection for our
proprietary rights is uncertain, we cannot ensure that: (i) we or our licensors were the first to invent the inventions covered by each of our pending applications, (ii) we or our licensors
were the first to file patent applications for these inventions, or (iii) the proprietary technology, products or services we develop will be patentable. In addition, unauthorized parties may
attempt to copy or otherwise obtain and use our technology, products and services. Monitoring unauthorized use of our intellectual property rights is difficult, and we cannot be certain
that the steps we have taken will prevent unauthorized use of our technology, products or services, particularly in certain foreign countries where the local laws may not protect our
proprietary rights as fully as in the United States. Moreover, third parties could practice our inventions in territories where we do not have patent protection. Such third parties may then
try to import products made using our inventions into the United States or other countries. If competitors are able to use our proprietary technology, products or services, our ability to
compete effectively could be harmed. In addition, others may independently develop and obtain patents for technologies, products or services that are similar to or superior to our
technologies, products or services. If that happens, we may need to license these technologies, products or services, and we may not be able to obtain licenses on reasonable terms, if at
all, which could cause harm to our business.
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Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted. Changes in patent laws and
regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them, or changes in how the relevant governmental authority enforces patent laws or
regulations may weaken our ability to obtain new patents or to enforce patents that we own or may obtain in the future. For example, in some cases, we have filed for unitary patent
protection under the rules implemented on June 1, 2023, in the European Patent Office. We will continue to assess this route of protection on a case-by-case basis, as applications are
filed and patents are granted through the European Patent Office. This may alter our ability to protect our patents in some European countries. Further, the laws of some foreign
countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. For example, in some foreign jurisdictions, governments have the
right to compel patent owners to grant others licenses to their intellectual property under certain circumstances. In addition, any protection afforded by foreign patents may be more
limited than that provided under U.S. patent and intellectual property laws. We may encounter significant problems in enforcing and defending our intellectual property both in the
United States and abroad. For example, if the issuance in a given country of a patent covering an invention is not followed by the issuance in other countries of patents covering the same
invention, or if any judicial interpretation of the validity, enforceability or scope of the claims or the written description or enablement in a patent issued in one country is not similar to
the interpretation given to the corresponding patent issued in other countries, our ability to protect our intellectual property rights in those countries may be limited. Changes in either
patent laws or in interpretations of patent laws in the United States and other countries may materially diminish the value of our intellectual property rights or narrow the scope of our
patent protection. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S. and foreign legislative bodies.
Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future. Any of the foregoing could have a material
adverse effect on our competitive position, business, financial condition, results of operations and prospects.
Third parties may claim that we are infringing, violating or misappropriating their intellectual property rights, which may subject us to costly and time-consuming litigation
and prevent us from developing or commercializing our technology, products or services.
Our commercial success also depends in part on our ability to operate without infringing, violating or misappropriating patents and other intellectual property rights of third parties,
and without breaching any licenses or other agreements that we have entered into with regard to our technologies, products or services. We cannot ensure that patents have not been
issued, or will not be issued, to third parties that could block our ability to obtain patents or to operate as we would like. There may be patents in some countries that, if valid, may block
our ability to make, use, sell, or offer for sale our technology, products or services in those countries, or import our products into those countries, if we are unsuccessful in circumventing
or acquiring rights to these patents. There also may be claims in patent applications filed in some countries that, if granted and valid, may also block our ability to commercialize
technology, products, services or processes in these countries if we are unable to circumvent or obtain rights to them.
The industries in which we operate and the biotechnology industry, in particular, are characterized by frequent and extensive litigation regarding patents and other intellectual
property rights. Many biotechnology companies have employed intellectual property litigation as a way to gain a competitive advantage. We are aware of some patents and patent
applications relating to aspects of our technologies, products or services filed by, and issued to, third parties. We cannot assure that if such third-party patents rights are asserted against
us that we would ultimately prevail. Any involvement in litigation or other intellectual property proceedings inside and/or outside of the United States to defend against claims that we
infringe, misappropriate or violate the intellectual property rights of others may divert our management’s time from focusing on business operations and could cause us to spend
significant amounts of money. Any potential intellectual property litigation also could force us to do one or more of the following:
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stop making, using, selling or importing our technologies, products and services that use the subject intellectual property;
pay monetary damages to the third party asserting claims against us;
grant or transfer rights to third parties relating to our patents or other intellectual property rights;
obtain from the third party asserting its intellectual property rights a license to make, sell, offer for sale, import or use the relevant technology, product or service, which license
may not be available on reasonable terms, or at all; or
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redesign those technologies, products, services or processes that use any allegedly infringing, misappropriated or violated intellectual property rights, or relocate the operations
relating to the allegedly infringing, misappropriated or violated intellectual property rights to another jurisdiction, which may result in significant cost or delay to us, could be
technically infeasible or could prevent us from making, selling, offering for sale, using or importing some of our technologies, products or services in the United States or other
jurisdictions.
We may be involved in lawsuits to protect or enforce our intellectual property rights, which could be expensive, time-consuming and unsuccessful.
Competitors may infringe, violate or misappropriate our intellectual property rights or those of our licensors. To prevent infringement, violation, misappropriation or other
unauthorized use, we have in the past filed, and may in the future be required to file, enforcement claims, which can be expensive and time-consuming. In addition, in an enforcement
proceeding, a court may decide that the intellectual property right that we own or control is not valid, is unenforceable and/or is not infringed, violated or misappropriated. In addition, in
legal proceedings against a third party to enforce a patent directed at one of our technologies, products or services, the defendant could counterclaim that our patent is invalid and/or
unenforceable in whole or in part. In patent enforcement litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds
for a patent validity challenge include an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an
unenforceability assertion could include an allegation that someone connected with prosecution of the patent withheld relevant information from the United States Patent and Trademark
Office (“USPTO”) or made a misleading statement during prosecution. Third parties may also raise similar claims before the USPTO, even outside the context of enforcement litigation.
The outcome following legal assertions of invalidity and unenforceability is unpredictable, and prior art could render our patents or those of our licensors invalid. 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 the respective technology, products or services.
Such a loss of patent protection could have a material adverse impact on our business.
Even if resolved in our favor, litigation or other legal proceedings relating to our intellectual property rights may cause us to incur significant expenses and could distract our
technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim
proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Such litigation or proceedings could substantially increase our expenses and reduce the resources available for operations and research and development activities. We may not have
sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings
more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could
compromise our ability to compete in the marketplace. Furthermore, because of the substantial amount of discovery required in connection with U.S. intellectual property litigation, there
is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
We may not be able to enforce our intellectual property rights throughout the world.
The laws of some foreign countries where we do business do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have
encountered significant problems in protecting and enforcing intellectual property rights in certain foreign jurisdictions. The legal systems of certain countries, particularly certain
developing countries, do not favor the enforcement of patents and other intellectual property rights, particularly those relating to biotechnology technologies. Accordingly, our efforts to
protect and enforce our intellectual property rights in such countries may be inadequate. This could make it difficult for us to stop the infringement, violation or misappropriation of our
patents or other intellectual property rights. Additionally, 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.
If our biocatalysts, or the genes that code for our biocatalysts, are stolen, misappropriated or reverse engineered, others could use these biocatalysts or genes to produce
competing products.
Third parties, including our contract manufacturers, customers and those involved in shipping our biocatalysts, often have custody or control of our biocatalysts. If our biocatalysts,
or the genes that code for our biocatalysts, were stolen, misappropriated or reverse engineered, they could be used by other parties who may be able to reproduce these biocatalysts for
their own commercial gain. If this were to occur, it may be difficult for us to challenge this type of use, especially in countries with limited intellectual property rights protection or in
countries in which we do not have patents covering the misappropriated biocatalysts.
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Confidentiality and non-use agreements with employees, consultants, advisors and other third parties may not adequately prevent disclosures and non-use of trade secrets and
other proprietary information.
In addition to patent protection, we also rely on other intellectual property rights, including protection of copyright, trade secrets, know-how and/or other proprietary information
that is not patentable or that we elect not to patent. However, trade secrets can be difficult to protect, and some courts are less willing or unwilling to protect trade secrets. To maintain
the confidentiality of our trade secrets and proprietary information, we rely in part on trade secret law and contractual agreements to protect our confidential and proprietary information
and processes. We generally enter into confidentiality and invention assignment agreements with our employees, consultants and third parties working on our behalf upon their
commencement of a relationship with us. However, trade secrets and confidential information are difficult to protect and we cannot guarantee that we have entered into such agreements
with each party that may have or have had access to our trade secrets or proprietary technology and processes and we may not enter into such agreements with all employees, consultants
and third parties who have been involved in the development of our intellectual property rights. Nevertheless, without our permission or awareness, our confidential and proprietary
information may be disclosed to third parties, used by the respective individuals for purposes other than for the Company’s business, or obtained through illegal means, such that third
parties could reverse engineer our biocatalysts, enzyme products and processes, to attempt to develop the same technology or develop substantially equivalent technology.
Costly and time-consuming litigation could be necessary to enforce and determine the scope of our confidential and proprietary rights, and failure to protect our trade secrets could
adversely affect our competitive business position. If any of our trade secrets were lawfully obtained, we may be unable to prevent them, or those to whom they communicate it, from
using that technology or information to compete with us or disclosing it publicly. Therefore, these events could have a material adverse effect on our business, financial condition and
results of operations. In particular, a failure to protect our proprietary rights may allow competitors to copy our technology, which could adversely affect our pricing and market share.
In addition to contractual measures, we try to protect the confidential nature of our proprietary information by maintaining physical security of our premises and electronic security
of our information technology systems. Such security measures may not, for example, in the case of misappropriation of a trade secret by an employee, consultant or other third party
with authorized access or with unauthorized access but an intent to steal, provide adequate protection for our proprietary information. Our security measures may not prevent such
employee, consultant or other third party from misappropriating our trade secrets and using them or providing them to a competitor, and recourse we take against such misconduct may
not provide an adequate remedy to protect our interests fully. While we use commonly accepted security measures, trade secret violations are often a matter of state law in the United
States, and the criteria for protection of trade secrets can vary among different jurisdictions. If the steps we have taken to maintain our trade secrets are deemed inadequate, we may have
insufficient recourse against third parties for misappropriating the trade secret.
Risks Related to Owning our Common Stock
We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company,
even if the acquisition would be beneficial to our stockholders.
Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of the Company. Among other things, our amended and
restated certificate of incorporation and bylaws provide for a board of directors which is divided into three classes, with staggered three-year terms and provide that all stockholder
action must be effected at a duly called meeting of the stockholders and not by a consent in writing, and further provide that only our board of directors, the chairman of the board of
directors, our chief executive officer or president may call a special meeting of the stockholders. In addition, our amended and restated certificate of incorporation allows our board of
directors, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions
thereof. These provisions may also 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, who are responsible for appointing the members of our management team. Furthermore, because we are incorporated in Delaware, we are
governed by the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”) which prohibits, with some exceptions, stockholders owning in excess of 15% of our
outstanding voting stock from merging or combining with us. Finally, our charter documents establish advanced notice requirements for nominations for election to our board of
directors and for proposing matters that can be acted upon at stockholder meetings. Although we believe these provisions together provide for an opportunity to receive higher bids by
requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer to acquire our company may be considered beneficial by some stockholders.
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Our bylaws designate a state or federal court located within the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our
stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us our current or former directors, officers, stockholders, or other
employees.
Our bylaws provide that, unless we consent 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 (i) any derivative action or proceeding brought on behalf of us under Delaware law, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former
director, officer, or other employee of the Company to us or our stockholders, (iii) any action asserting a claim against us or any of our directors, officers, or other employees arising
pursuant to any provision of the DGCL or our certificate of incorporation or bylaws (as either may be amended from time to time), (iv) any action asserting a claim against us governed
by the internal affairs doctrine, or (v) any other action asserting an “internal corporate claim,” as defined under Section 115 of the DGCL. The forgoing provisions do not apply to any
claims arising under the Securities Act and, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the sole and
exclusive forum for resolving any action asserting a claim arising under the Securities Act.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our current or former
directors, officers, or other employees, which may discourage lawsuits with respect to such claims. There is uncertainty as to whether a court would enforce such provisions, and the
enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. It is possible that a court could find these types of
provisions to be inapplicable or unenforceable, and if a court were to find the choice of forum provision to be inapplicable or unenforceable in an action, we may incur additional costs
associated with resolving such action in other jurisdictions, which could harm our business, results of operations or financial condition.
Our quarterly or annual operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could
cause our stock price to decline.
Our financial condition and operating results have varied significantly in the past and may continue to fluctuate from quarter to quarter and year to year in the future due to a variety
of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors
described elsewhere in this report:
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our ability to achieve or maintain profitability;
our dependence on a limited number of customers;
our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular
quantity or quantities of our products;
with respect to customers purchasing our products for the manufacture of active pharmaceutical ingredients for which they have exclusivity due to patent protection, the
termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of
operations;
our dependence on a limited number of products in our performance enzymes business;
our reliance on a limited number of contract manufacturers for large scale production of substantially all of our enzyme products;
our relationships with, and dependence on, collaborators in our principal markets;
our ability to successfully and timely develop and commercialize new products, including our ECO Synthesis manufacturing platform, for the markets we serve;
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the potential of GSK, Merck, Novartis or any other performance enzyme customer terminating their agreements with us;
the success of our customers’ products in the market and the ability of such customers to obtain regulatory approvals for products and processes;
our ability to deploy our technology platform in life science tools markets;
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our dependence on our collaborators or customers’ product candidates which could unexpectedly fail at any stage of preclinical or clinical development;
our dependence on our collaborators or customers’ product candidates which may lack the ability to work as intended or cause undesirable side effects;
our ability to successfully prosecute and protect our intellectual property;
our ability to compete if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights;
our ability to avoid infringing the intellectual property rights of third parties;
our involvement in lawsuits to protect or enforce our patents or other intellectual property rights;
our ability to enforce our intellectual property rights throughout the world;
our dependence on, and the need to attract and retain, key management and other personnel;
our ability to prevent the theft or misappropriation of our biocatalysts, the genes that code for our biocatalysts, know-how or technologies;
our ability to protect our trade secrets and other proprietary information from disclosure by employees and others;
our ability to obtain substantial additional capital that may be necessary to expand our business;
our ability to comply with the terms of our Loan Agreement;
our ability to timely pay debt service obligations;
our customers’ ability to pay amounts owed to us in a timely manner;
our ability to avoid charges to earnings as a result of any impairment of goodwill, intangible assets or other long-lived assets;
changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations;
our ability to maintain effective internal control over financial reporting;
our dependency on information technology systems, infrastructure and data;
our ability to control and to improve product gross margins;
our ability to protect against risks associated with the international aspects of our business;
the cost of compliance with EU chemical regulations;
potential advantages that our competitors and potential competitors may have in securing funding or developing products;
our ability to accurately report our financial results in a timely manner;
results of regulatory tax examinations;
• market and economic conditions may negatively impact our business, financial condition, and share price;
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business interruptions due to natural disasters, disease outbreaks or other events beyond our control;
public concerns about the ethical, legal and social ramifications of genetically engineered products and processes;
our ability to integrate our current business with any businesses that we may acquire in the future;
our ability to properly handle and dispose of hazardous materials in our business;
potential product liability claims;
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changes to tax law and related regulations could materially affect our tax obligations and effective tax rate; and
our ability to use our NOLs to offset future taxable income.
Due to the various factors mentioned above, and others, the results of any prior quarterly or annual periods should not be relied upon as indications of our future operating
performance.
We do not intend to pay cash dividends for the foreseeable future.
We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable
future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital
requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors deems relevant.
General Risk Factors
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume
could decline.
The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us or our business. We do not have any
control over these analysts. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock in a negative manner, our stock price would likely
decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our
stock price or trading volume to decline.
We face risks associated with our international business.
While we have a limited number of employees located outside of the United States, we are and will continue to be dependent upon contract manufacturers located outside of the
United States. In addition, we have customers and partners located outside of the United States. Conducting business internationally exposes us to a variety of risks, including:
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changes in or interpretations of U.S. or foreign laws or regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our
foreign-located facilities;
the imposition of tariffs;
the imposition of limitations on, or increase of, withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures;
the imposition of limitations on genetically-engineered or other products or processes and the production or sale of those products or processes in foreign countries;
currency exchange rate fluctuations;
uncertainties relating to foreign laws, regulations and legal proceedings including pharmaceutical, tax, import/export, anti-corruption and exchange control laws;
the availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us;
increased demands on our limited resources created by our operations may constrain the capabilities of our administrative and operational resources and restrict our ability to
attract, train, manage and retain qualified management, technicians, scientists and other personnel;
economic or political instability in foreign countries;
difficulties associated with staffing and managing foreign operations; and
the need to comply with a variety of United States and foreign laws applicable to the conduct of international business, including import and export control laws and anti-
corruption laws.
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Market and economic conditions may negatively impact our business, financial condition, and share price.
Concerns about inflation, energy costs, geopolitical issues, the United States mortgage market and a declining real estate market, unstable global credit markets and financial
conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary
spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, increased unemployment rates, and increased credit
defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or
unpredictable economic and market conditions.
Recently, the closures of Silicon Valley Bank (“SVB”) and Signature Bank (“Signature”) and their placement into receivership with the Federal Deposit Insurance Corporation, and
the government-brokered sale of the deposits and majority of assets of First Republic Bank to JPMorgan Chase, created bank-specific and broader financial institution liquidity risk and
concerns. Although government intervention ensured that depositors at these banks have access to their funds, future adverse developments with respect to specific financial institutions
or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional
market and economic uncertainty. There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur,
and we cannot predict the impact or follow-on effects of these insolvencies more broadly or on our business in particular. Further, we cannot guarantee that the government will
intervene to provide depositors with access to funds if similar events occur in the future. If other banks and financial institutions enter receivership or become insolvent in the future, our
ability to access our existing cash, cash equivalents, and investments may be threatened, which could have a material adverse effect on our business and financial condition.
In addition, if the market and economic conditions described above continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to
complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth
strategy, financial performance, and stock price. Additionally, rising rates of inflation have increased the costs associated with conducting our business, including by causing substantial
increases in the costs of materials, including raw materials and consumables, equipment, services, and labor. Moreover, given the unpredictable nature of the current economic climate,
including future changes in rates of inflation, it may be increasingly difficult for us to predict and control our future expenses, which may harm our ability to conduct our business.
Business interruptions resulting from disasters or other disturbances could delay us in the process of developing our products and could disrupt our sales. Our business
continuity and disaster recovery plans may not adequately protect us from a serious disaster or other disturbance.
Our headquarters and other facilities are located in the San Francisco Bay Area, which in the past has experienced both severe earthquakes and wildfires. Earthquakes, wildfires or
other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. We are also
vulnerable to other types of disasters and other events that could disrupt our operations, such as riot, civil disturbances, war, terrorist acts, public health emergencies, domestic or foreign
conflicts, infections in our laboratory or production facilities or those of our customers or contract manufacturers and other events beyond our control. If a natural disaster or other event
occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our enterprise financial systems or manufacturing
resource planning and enterprise quality systems, 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 currently are limited and are unlikely to prove adequate in the event of a serious disaster
or similar event, and we may incur substantial expenses as a result of the limited nature of such plans. We do not carry insurance for earthquakes and we may not carry sufficient
business interruption insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect on our cash flows and success as an
overall business.
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We are dependent on information technology systems, infrastructure and data, and any failure of these systems could harm our business. Security breaches, loss of data and
other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely
affect our business, results of operations and financial condition.
Information technology helps us operate efficiently, interface with customers, maintain financial accuracy and efficiency and accurately produce our financial statements. If we do
not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies,
the loss of customers, business disruptions or the loss of or damage to intellectual property through security breach. If our information technology systems do not effectively collect,
store, process and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software deficiencies, or human error, our ability to
effectively plan, forecast and execute our business plan and comply with applicable laws and regulations will be impaired, perhaps materially. Our information technology systems and
those of our external vendors, strategic partners and other contractors or consultants are vulnerable to attack and damage or interruption from computer viruses and malware (e.g.
ransomware), malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes,
employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by
persons inside our organization, or persons with access to systems inside our organization. Any such impairment could materially and adversely affect our financial condition, results of
operations, cash flows and the timeliness with which we report our internal and external operating results.
Our business may require us to use and store personal information of our customers, employees, and business partners. This may include names, addresses, phone numbers, email
addresses, contact preferences, tax identification numbers and payment account information. We require usernames and passwords in order to access our information technology
systems. We also use encryption and authentication technologies to secure the transmission and storage of data. However, these security measures may be compromised as a result of
security breaches by unauthorized persons, employee error, malfeasance, faulty password management or other irregularity, and result in persons obtaining unauthorized access to our
data or accounts. Third parties may attempt to fraudulently induce employees or customers into disclosing usernames, passwords or other sensitive information, which may in turn be
used to access our information technology systems. For example, our employees have received “phishing” emails and phone calls attempting to induce them to divulge passwords and
other sensitive information.
In addition, unauthorized persons may attempt to hack into our products or systems to obtain personal data relating to employees and other individuals, our confidential or
proprietary information or confidential information we hold on behalf of third parties. We also rely on external vendors to supply and/or support certain aspects of our information
technology systems. The systems of these external vendors may contain defects in design or manufacture or other problems that could unexpectedly compromise information security of
our own systems, and we are dependent on these third parties to deploy appropriate security programs to protect their systems. If we or our third-party vendors were to experience a
significant cybersecurity breach of our or their information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to
counterparties and data subjects could be material. Our remediation efforts may not be successful. Further, if such an event were to occur and cause interruptions in our operations, it
could result in a material disruption of our development programs and our business operations, whether due to a loss, corruption or unauthorized disclosure of our trade secrets, personal
information or other proprietary or sensitive information or other similar disruptions. Attacks upon information technology systems are also increasing in their frequency, levels of
persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. As a result of the
remote work policies we initiated in response to the COVID-19 pandemic, and our continued hybrid working environment, we may also face increased cybersecurity risks due to our
reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. We
have programs in place to detect, contain and respond to data security incidents, and we make ongoing improvements to our information-sharing products in order to minimize
vulnerabilities, in accordance with industry and regulatory standards. However, because the techniques used to obtain unauthorized access to or sabotage systems change frequently and
may be difficult to detect, we may not be able to anticipate and prevent these intrusions or mitigate them when and if they occur. Even if identified, we may be unable to adequately and
timely investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection and to remove
or obfuscate forensic evidence.
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We and certain of our external vendors are from time to time subject to cyberattacks and security incidents. While we do not believe that we have experienced any significant
system failure, accident, or security breach to date, if such an event were to occur, it could result in the unauthorized access to or unauthorized use, disclosure, release or other processing
of personal information, it may be necessary to notify individuals, governmental authorities, supervisory bodies, the media and other parties pursuant to privacy and security laws. Any
security compromise affecting us, our service providers, vendors, strategic partners, other contractors, consultants or our industry, whether real or perceived, could harm our reputation,
erode confidence in the effectiveness of our security measures and lead to regulatory scrutiny. To the extent that any disruption or security breach were to result in a loss of, or damage
to, our data or systems, or inappropriate disclosure of confidential or proprietary or personal information, we could incur liability, including litigation exposure, penalties and fines,
which may not be covered by insurance or may be in excess of our insurance coverage. Additionally, we could become the subject of regulatory action or investigation, our competitive
position could be harmed and the further development of our products could be delayed. If such an event were to occur and cause interruptions in our operations, it could result in a
material disruption of our business and could materially and adversely affect our business, results of operations and financial condition.
Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our
business, results of operations and financial condition.
The global data protection landscape is rapidly evolving, and we are or may become subject to state, federal and foreign laws, regulations, decisions and directives governing the
privacy, security, collection, storage, transmission, use, processing, retention and disclosure of personal information. Any failure or perceived failure by us to comply with applicable
laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations
and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of certain individually identifiable
health information. Certain states have also adopted and continue to adopt new privacy and security laws and regulations, which govern the privacy, processing and protection of health-
related and other personal information. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially
complex compliance issues for us and our future customers and strategic partners. For example, the California Consumer Privacy Act (“CCPA”) went into effect on January 1, 2020.
The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA also
provides for civil penalties for violations, as well as a private right of action for data breaches (which has increased the likelihood of, and risks associated with, data breach litigation).
Further, the California Privacy Rights Act (“CPRA”) significantly amended the CCPA, which went into effect in January 2023. It imposes additional data privacy obligations on covered
businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data and opt outs for certain uses of sensitive data. It also
created a new California privacy protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. Additional
compliance investment and potential business process changes may also be required. Similar laws regulating personal information generally or health information in particular have
passed in more than a dozen states and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. These
developments increase our compliance burden and our risk, including risks of regulatory fines, litigation and associated reputational harm. Any liability from failure to comply with the
requirements of these laws could adversely affect our financial condition.
Furthermore, the Federal Trade Commission (“FTC”) and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for the
collection, use, sharing and security of personal information that appear to be unfair or deceptive. For example, according to the FTC, failing to take appropriate steps to keep
consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC
expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its
business, and the cost of available tools to improve security and reduce vulnerabilities.
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In the European Union (“EU”), the EU General Data Protection Regulation (“EU GDPR”) governs the processing of personal data. The UK has implemented the EU GDPR as the
UK GDPR which sits alongside the UK Data Protection Act 2018 (the “UK GDPR”, and together with the EU GDPR, the “GDPR”). The GDPR imposes requirements for controllers,
including (among others) specific requirements for obtaining valid consent where consent is the legal basis for processing, requirements around accountability and transparency, the
obligation to consider data protection when any new products or services are developed, the obligation to comply with individuals’ data protection rights, and the obligation to notify
relevant data supervisory authorities of notifiable personal data breaches without undue delay (and no later than 72 hours) after becoming aware of the personal data breach (and affected
data subjects where the personal data breach is likely to result in a high risk to their rights and freedoms). The EU GDPR provides that EU member states may enact their own additional
national laws and regulations regarding the processing of genetic, biometric or health data, which could affect our ability to use and share personal data or could cause our costs to
increase and potentially harm our business and financial condition. Failure to comply with the requirements of the GDPR can result in (among other things) fines of up to the greater of
€20 million (under the EU GDPR) or £17.5 million (under the UK GDPR) or 4% of an organization’s total worldwide annual turnover of the preceding financial year and other
administrative penalties. To the extent that we are subject to the GDPR, compliance with the GDPR may require substantial amendments to our procedures and policies and these
changes could adversely impact our business by increasing operational and compliance costs or impact business practices. Further, there is a risk that the amended policies and
procedures will not be implemented correctly or that individuals within the business will not be fully compliant with the new procedures. There is a risk that we could be impacted by a
cybersecurity incident that results in loss or unauthorized disclosure of personal data, potentially resulting in us facing harms similar to those described above.
Among other requirements, the EU GDPR prohibits the international transfer of personal data subject to the GDPR from the European Economic Area (“EEA”) to third countries
that the European Commission does not recognize as having an ‘adequate’ level of data protection, unless a data transfer mechanism has been put in place or a derogation under the EU
GDPR can be relied on. In July 2020, the Court of Justice of the EU in its Schrems II judgement limited how organizations could lawfully transfer personal data from the EEA to the
United States by invalidating the EU-U.S. Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“EU
SCCs”), including a requirement for companies to carry out a transfer privacy impact assessment (“TIA”). A TIA, among other things, assesses laws governing access to personal data in
the recipient country and considers whether supplementary measures that provide privacy protections additional to those provided under the EU SCCs will need to be implemented to
ensure an ‘essentially equivalent’ level of data protection to that afforded in the EEA.
On October 7, 2022, U.S. President Biden introduced an Executive Order to facilitate a new Trans-Atlantic Data Privacy Framework (“DPF”) and in July 2023, the European
Commission adopted its Final Implementing Decision granting the United States adequacy (“Adequacy Decision”) for EU-U.S. transfers of personal data for entities self-certified to the
DPF. Entities relying on EU SCCs for transfers to the United States are also able to rely on the analysis in the Adequacy Decision as support for their TIA regarding the equivalence of
U.S. national security safeguards and redress.
The UK GDPR also imposes similar restrictions on transfers of personal data from the UK to jurisdictions that the UK Government does not consider adequate, including the United
States. The UK Government has published its own form of the EU SCCs, known as the International Data Transfer Agreement and an International Data Transfer Addendum to the new
EU SCCs. The UK Information Commissioner’s Office has also published its own version of the TIA and guidance on international transfers, although entities may choose to adopt
either the EU or UK-style TIA. Further, on September 21, 2023, the UK Secretary of State for Science, Innovation and Technology established a UK-U.S. data bridge (i.e., a UK
equivalent of the Adequacy Decision) and adopted UK regulations to implement the UK-U.S. data bridge (“UK Adequacy Regulations”). Personal data may now be transferred from the
UK under the UK-U.S. data bridge through the UK extension to the DPF to organizations self-certified under the UK extension to DPF.
As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.
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Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be
modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply.
Various federal, state and foreign legislative or regulatory bodies may enact new or additional laws and regulations concerning privacy, data-retention and data-protection issues,
including laws or regulations mandating disclosure to domestic or international law enforcement bodies, which could adversely impact our business or our reputation with customers.
For example, some countries have adopted laws mandating that certain personal information regarding customers in their country be maintained solely in their country. Having to
maintain local data centers and redesign product, service and business operations to limit processing of personal information to within individual countries could increase our operating
costs significantly. Any failure, or perceived failure, by us to comply with federal, state or international privacy, data-retention or data-protection-related laws, regulations, orders or
industry self-regulatory principles could result in proceedings or actions against us by governmental entities or others, a loss of customer confidence, damage to our brand and reputation
and a loss of customers, any of which could have an adverse effect on our business.
Evolving expectations around corporate responsibility practices, specifically related to environmental, social and governance (“ESG”) matters, may expose us to reputational
and other risks.
Investors, stockholders, customers, suppliers and other third parties are increasingly focusing on ESG and corporate social responsibility endeavors and reporting. Companies that
do not adapt to or comply with the evolving investor or stakeholder expectations and standards, or that are perceived to have not responded appropriately, may suffer from reputational
damage, which could result in the business, financial condition and/or stock price of a company being materially and adversely affected. For example, certain customers have inquired
about our ESG practices and may impose ESG guidelines, procurement policies, sustainability standards, mandates or reporting requirements for, and may scrutinize relationships more
closely with, their suppliers, including us, which may lengthen sales cycles, increase our costs or impair our ability to attract and retain customers. Further, this increased focus on ESG
issues may result in new regulations, international accords and/or third-party requirements that could adversely impact our business, or certain shareholders reducing or eliminating their
holdings of our stock. An allegation or perception that we have not taken sufficient action in these areas could negatively harm our reputation. Additionally, the subjective nature and
wide variety of methods and processes used by various stakeholders, including investors, to assess environmental, social, and governance criteria could result in a negative perception or
misrepresentation of the company's sustainability policies and practices.
43
Not applicable.
Risk Management and Strategy
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1C. CYBERSECURITY
In the normal course of business, we may collect and store personal information and other sensitive information, including proprietary and confidential business information, trade
secrets, intellectual property, sensitive third-party information and employee information. We assess and identify cybersecurity risk to such information by maintaining cybersecurity
policies that require continuous monitoring and detection programs and network security precautions. Our program incorporates industry-standard frameworks, policies and practices
designed to protect the privacy and security of our sensitive information.
We manage cybersecurity risks by maintaining various protections designed to safeguard against cyberattacks, including firewalls and virus detection software, and periodic end
user training on common cybersecurity threats (e.g. phishing exercises and interactive trainings). We have established our disaster recovery plan and we protect against business
interruption by backing up our major systems. In addition, we periodically scan our environment for any vulnerabilities, perform penetration testing and engage third parties to assess
effectiveness of our data security practices. A third party security consultant conducts regular network security reviews, scans and audits, and we may consult with other external experts
as warranted by a particular cybersecurity incident or threat. In addition, we maintain insurance that includes cybersecurity coverage.
Areas of cybersecurity risk are assessed bi-annually, and updates are reported by our Vice President of Information Technology (“VP IT”) to the Board’s Audit Committee and
senior management annually. Where our bi-annual cybersecurity risk assessment identifies areas for improvement, we document and track our remediation activities, which are also
reported to the Audit Committee and senior management annually. In this way, our program to manage cybersecurity risk integrates with our overall risk management processes.
With respect to third parties who provide services affecting critical business management systems, we collect and maintain SOC2 type II reports (attestation of controls at a service
organization over a minimum six-month period). For other third-party service providers, cybersecurity risk is addressed as appropriate.
As of the date of this report, we are not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our
business strategy, results of operations and financial condition. Despite the implementation of our cybersecurity program, our security measures cannot guarantee that a significant
cyberattack will not occur. A successful attack on our information technology systems could have significant consequences to the business. While we devote resources to our security
measures to protect our systems and information, these measures cannot provide absolute security. See “Risk Factors – General Risk Factors” for additional information about the risks
to our business associated with a breach or compromise to our information technology systems.
Governance
The Company’s Board of Directors has visibility into cybersecurity risks through its Audit Committee and through the process described below. The Audit Committee has
oversight of the Company’s cybersecurity risk management programs and the design and operating effectiveness thereof, and reviews reports from Company management on
cybersecurity, data privacy and other risks relevant to the Company’s computerized information system controls and security.
Areas of cybersecurity risk are assessed bi-annually, and updates are reported by the VP IT to the Audit Committee and senior management annually. Where our bi-annual
cybersecurity risk assessment identifies areas for improvement, we document and track our remediation activities, which are also reported to the Audit Committee and senior
management annually.
Senior management has appointed a Cybersecurity Council that is responsible for identifying, escalating, and facilitating the assessment and determination of the materiality of
cybersecurity incidents and threats. The Cybersecurity Council is made up of representatives of IT, Legal and Finance, as well as ad hoc additional members depending on the
circumstances of the incident or threat. The members of the Cybersecurity Council do not have specific expertise in cybersecurity risk other than the VP IT who has more than 20 years
of experience, and engages with trusted third-party experts for support and guidance when additional expertise is required. Prior to joining Codexis, our VP IT has managed
cybersecurity functions, where he was responsible for overseeing cybersecurity strategy and operations, including incident response, threat intelligence, security awareness training
programs, risk assessments and remediation, and regulatory and compliance matters.
44
An actual or suspected cybersecurity incident that jeopardizes the confidentiality, integrity, or availability of Codexis' information systems or any information residing therein (or
threat that presents significant risk to our information systems as identified by IT) is reported to the Cybersecurity Council by our IT Department. The focus of the Cybersecurity
Council is on the investigation and facilitation of senior management’s assessment and determination of materiality of an incident or threat, and such investigation is separate but
contemporaneous with the investigation(s) done under other applicable programs, policies, and plans regarding cybersecurity. The Cybersecurity Council will liaise directly with other
investigation(s) and share information and assessments. Along with assistance from the Cybersecurity Council as necessary, senior management reports its materiality determination and
analysis, including necessary facts to support its determination, to the Audit Committee of the Board of Directors. Pursuant to its charter, the Audit Committee may, along with senior
management, report such determination to the Board of Directors.
FACILITIES
ITEM 2. PROPERTIES
Our headquarters are located in Redwood City, California, where we lease approximately 77,300 square feet of office and laboratory space.
Our lease (“RWC Lease”) with Metropolitan Life Insurance Company (“MetLife”) includes approximately 28,200 square feet of space located at 200 and 220 Penobscot Drive,
Redwood City, California (the “200/220 Penobscot Space”), approximately 37,900 square feet of space located at 400 Penobscot Drive, Redwood City, California (the “400 Penobscot
Space”) (the 200/220 Penobscot Space and the 400 Penobscot Space are collectively referred to as the “Penobscot Space”), and approximately 11,200 square feet of space located at 501
Chesapeake Drive, Redwood City, California (the “Chesapeake Space”).
We entered into the initial lease with MetLife for our facilities in Redwood City in 2004 and the RWC lease has been amended multiple times since then to adjust the leased space
and terms of the RWC Lease. In February 2019, we entered into an Eighth Amendment to the RWC Lease (the “Eighth Amendment”) with MetLife with respect to the Penobscot Space
and the 501 Chesapeake Space to extend the term of the RWC Lease for additional periods. Pursuant to the Eighth Amendment, the term of the lease of the Penobscot Space has been
extended through May 2027. The lease term for the 501 Chesapeake Space has been extended to May 2029. We have one (1) option to extend the term of the lease for the Penobscot
Space for five (5) years, and one (1) separate option to extend the term of the lease for the 501 Chesapeake Space for five (5) years.
In January 2021, we entered into a lease agreement with ARE-San Francisco No. 63, LLC (“ARE”) to lease a portion of a facility comprising approximately 36,593 rentable square
feet at 825 Industrial Road, San Carlos, California to serve as additional office and research and development laboratory space (the “San Carlos Space”). In December 2021, we
commenced occupancy of the San Carlos Space. The lease term for the San Carlos Space was through the end of November 2031, with one (1) option to extend the term of the lease for
the San Carlos Space for five (5) years.
In July 2023, we announced our plan to consolidate operations from our San Carlos facility to our headquarters in Redwood City. On September 1, 2023, the Company entered into
an Assignment and Assumption of Lease (the “Assignment Agreement”) with Vaxcyte, Inc. (“Vaxcyte”) to assign to Vaxcyte all of the Company’s right, title and interest in, under and
to the San Carlos Space and the Lease Agreement, dated as of January 29, 2021. On September 6, 2023, the Company, Vaxcyte and ARE entered into a Consent to Assignment and First
Amendment (the “Consent”) pursuant to which ARE consented to the Assignment Agreement and the assignment by the Company and the assumption by Vaxcyte of the Company’s
interest as tenant in the lease and agreed to release the Company from all of its obligations under the lease that accrue from and after the assignment. The effective date of the
assignment was October 1, 2023.
We believe that the facility that we currently lease in Redwood City, California is adequate for our needs for the immediate future and that, should it be needed, additional space can
be leased to accommodate any future growth.
We are currently not a party to any material pending litigation or other material legal proceedings.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
45
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
MARKET INFORMATION
Our common stock is quoted on the Nasdaq Global Select Market (“Nasdaq”), under the symbol “CDXS.”
As of February 23, 2024, there were approximately 125 stockholders of record. A substantially greater number of stockholders may be "street name" or beneficial holders, whose
shares are held of record by banks, brokers and other financial institutions.
Dividend Policy
We have never declared or paid cash dividends on our common stock, and we currently do not plan to declare dividends on shares of our common stock in the foreseeable future.
We expect to retain our future earnings, if any, for use in the operation and expansion of our business. In addition, unless waived, the terms of our Loan Agreement prohibit us from
paying any cash dividends or making other distributions. The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such
factors as earnings levels, capital requirements, our overall financial condition and any other factors deemed relevant by our board of directors.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item concerning securities authorized for issuance under equity compensation plans is incorporated by reference from the information that will be
set forth in the Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders to be held in 2024 (the
“2024 Proxy Statement”) under the heading “Executive Compensation—Equity Compensation Plan Information.”
Stock Price Performance Graph
The following tabular information and graph compare our total common stock return with the total return for (i) the Nasdaq Composite Index and (ii) the Nasdaq Biotechnology
Total Return Index for the period December 31, 2018 through December 31, 2023. The figures represented below assume an investment of $100 in our common stock at the closing
price on December 31, 2018 and in the Nasdaq Composite Index and the Nasdaq Biotechnology Total Return Index on December 31, 2018 and the reinvestment of dividends into shares
of common stock. The comparisons in the table and graph are required by the SEC and are not intended to forecast or be indicative of possible future performance of our common stock.
The tabular information and graph shall not be deemed “soliciting material” or to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under
that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act.
$100 investment in stock or
index
Codexis, Inc.
Nasdaq Composite Total Return
Nasdaq Biotechnology (Total
Return) Index
Ticker
CDXS
XCMP
XNBI
2018
2019
2020
2021
2022
2023
$
$
$
100.00
100.00
100.00
$
$
$
95.75
136.69
125.11
$
$
$
130.72
198.10
158.17
$
$
$
187.25
242.03
158.20
$
$
$
27.90
163.28
142.19
$
$
$
18.26
236.17
148.72
December 31,
46
Unregistered Sales of Equity Securities and Use of Proceeds
During the year ended December 31, 2023, we did not issue or sell any unregistered securities not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report
on Form 8-K.
Issuer Purchases of Equity Securities
None.
ITEM 6. [RESERVED]
47
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial
statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include, but are not limited to, expectations regarding our strategy,
business plans, financial performance and developments relating to our industry. These statements are often identified by the use of words such as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "should," "estimate," or "continue," and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other
factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item IA: "Risk Factors," of this Annual Report on Form 10-K and elsewhere in
this report. The forward-looking statements in this Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. We anticipate that subsequent
events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current
intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date
subsequent to the date of this Annual Report on Form 10-K.
Business Overview
We are a leading enzyme engineering company leveraging our proprietary CodeEvolver technology platform to discover, develop, enhance, and commercialize novel, high
®
performance enzymes and other classes of proteins. Enzymes are naturally occurring biological molecules critical to almost all biochemical reactions that sustain life. They can be
precisely engineered and optimized for specific functions, and to have particular characteristics, such as an ability to survive environments in which natural enzymes cannot, or to
perform (bio)chemical transformations different than those for which they naturally evolved. We focus on leveraging our capacity to enhance the properties and performance of
enzymes to drive pivotal improvements across two key focus areas: our foundational, revenue-generating pharmaceutical manufacturing business and our Enzyme-Catalyzed
Oligonucleotide (ECO) Synthesis™ (“ECO Synthesis™”) manufacturing platform, which is currently in development to enable the commercial scale manufacture of RNA interference
(RNAi) therapeutics. Our unique enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, and improved efficiency in
manufacturing. In July 2023, we announced that we discontinued investment in certain development programs, primarily in our novel biotherapeutics business segment and that we are
actively exploring options to drive value by potentially monetizing other non-core assets within our Life Sciences portfolio.
Within the pharmaceutical manufacturing business, we utilize our CodeEvolver technology platform to develop optimized enzymes that are used by some of the world’s largest
®
pharmaceutical companies to reduce their costs and improve the efficiency and productivity of their manufacturing processes for small molecule therapeutics. We also use the
CodeEvolver technology platform to develop enzymes for the synthesis of nucleic acids such as DNA/RNA, including our ECO Synthesis™ manufacturing platform. We demonstrated
gram-scale synthesis with the ECO Synthesis™ manufacturing platform in December 2023 and expect to begin pre-commercial customer testing in 2024. We anticipate that this will be
followed by early commercial licenses to the ECO Synthesis™ manufacturing platform in 2025 and a full commercial launch in 2026.
®
Recent Developments
On February 13, 2024, we entered into a five-year loan and security agreement with Innovatus Life Sciences Lending Fund I, LP, an affiliate of Innovatus Capital Partners, LLC
(“Innovatus”), for an aggregate principal amount of up to $40.0 million (the “Loan Agreement”) consisting of two tranches, of which the first tranche of $30.0 million was completed on
execution of the Loan Agreement. We will be eligible to draw on the second tranche of $10.0 million upon achievement of certain milestones including certain pre-specified revenue
thresholds. The two tranches collectively are referred to as the “Term Loans.”
Investing and Financing Activities
In March 2022, we entered into a Stock Purchase Agreement with seqWell Inc. (“seqWell”), a privately held biotechnology company, pursuant to which we purchased 1,000,000
shares of seqWell's Series C preferred stock for $5.0 million. In September 2023, we purchased an additional 88,256 shares of seqWell's Series C-1 preferred stock and 44,128 common
stock warrants for $0.4 million. As of December 31, 2023, we have 1,293,535 shares of seqWell's Series C and C-1 preferred stock that we have earned or purchased since executing the
Stock Purchase Agreement with seqWell.
48
In May 2021, we filed a Registration Statement on Form S-3 with the SEC, that automatically became effective upon its filing, under which we may sell common stock, preferred
stock, debt securities, warrants, purchase contracts, and units from time to time in one or more offerings. On February 27, 2023, we filed a post-effective amendment to that Registration
Statement on Form S-3. Pursuant to that post-effective amendment, we registered an aggregate $200.0 million of securities. In May 2021, we entered into an Equity Distribution
Agreement (“EDA”) with Piper Sandler & Co (“PSC”), under which PSC, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell
over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock. Under the terms of the EDA, PSC may sell the shares at
market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended. During the year ended December 31,
2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA for gross proceeds of $8.7 million, or $7.9 million in net proceeds after PSC's commissions and
direct offering expenses of $0.7 million. As of December 31, 2023, $41.3 million of shares remained available for sale under the EDA. During the year ended December 31, 2022, no
shares of our common stock were sold pursuant to the EDA.
In June 2020, we entered into a Stock Purchase Agreement with MAI, a privately held life sciences company, pursuant to which we purchased 1,587,050 shares of MAI's Series A
preferred stock for $1.0 million. Mr. Nicols, our former President and CEO until August 2022, also joined MAI’s board of directors in June 2020 and remained on MAI's board until
September 2023. Concurrently with our initial equity investment, we entered into a Master Collaboration and Research Agreement with MAI (the “MAI Agreement”), pursuant to which
we performed services utilizing our CodeEvolver directed evolution technology platform to improve DNA polymerase enzymes in exchange for compensation in the form of additional
shares of MAI's Series A and B preferred stock. In April 2021, we purchased an additional 1,000,000 shares of MAI's Series A preferred stock for $0.6 million. In September 2021, we
purchased 9,198,423 shares of MAI's Series B preferred stock for $7.0 million. As of December 31, 2023, we held 19,277,914 shares of MAI's Series A and B preferred stock that we
have earned or purchased since executing the Stock Purchase Agreement with MAI.
®
Business Impact of COVID-19 and Sales of CDX-616 to Pfizer for PAXLOVID™
In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The impact of COVID-
19 affected segments of the global economy and its continuing impacts may affect our operations, including the potential interruption of our supply chain. On May 11, 2023, the
COVID-19 Public Health Emergency (“PHE”) declared under the Public Health Service Act expired. While COVID-19 is no longer considered a PHE, future surges or actions taken in
response to COVID-19 or other PHEs may materially affect our products, supply chain or operations.
As a result of the COVID-19 pandemic, in 2021 and 2022 we received purchase orders from Pfizer Inc. (“Pfizer”) for large quantities of our proprietary enzyme product, CDX-616,
for use by Pfizer in the manufacture of a critical intermediate for its proprietary API, nirmatrelvir, used by Pfizer in combination with the API ritonavir, as its PAXLOVID™
(nirmatrelvir tablets; ritonavir tablets) product for the treatment of COVID-19 infections in humans. We are a party to an Enzyme Supply Agreement with Pfizer Ireland
Pharmaceuticals, a subsidiary of Pfizer, Inc. (the “Pfizer Supply Agreement”), covering the manufacture, sale and purchase of CDX-616 for use by Pfizer in the manufacture of
nirmatrelvir. Under the terms of the Pfizer Supply Agreement, Pfizer paid us a fee of $25.9 million in August 2022 which was recorded as deferred revenue. Pursuant to the agreement,
90% of the fee ($23.3 million) is creditable against (i) future orders of CDX-616 used to manufacture its PAXLOVID™ with shipment dates prior to December 31, 2023, and (ii) fees
associated with any new development and licensing agreements with Pfizer entered into prior to April 4, 2023. On March 31, 2023, we entered into a license agreement whereby Pfizer
utilized a portion of the $23.3 million credit towards a license to develop future product candidates, for which we recognized $5.0 million as non-cash research and development revenue
during the second quarter of 2023. Pfizer's ability to utilize the credit under item (i) above expired on December 31, 2023, and under item (ii) above expired on April 4, 2023. Up to 50%
of any portion of the $25.9 million which has not been credited under items (i) and (ii) is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ with shipment
dates in 2024. The sale of CDX-616 to Pfizer had a substantial impact on our revenues in 2021 and 2022, and to a lesser extent in 2023. Potential revenues in future years from our sales
of CDX-616 to Pfizer and other potential customers (including sublicensees of Pfizer technology from The Medicine Patent Pool) are subject to a number of factors which are outside of
our control and could reduce or eliminate our sales of CDX-616.
49
RESULTS OF OPERATIONS
The following table shows the amounts from our consolidated statements of operations for the periods presented (in thousands, except percentages):
Revenues:
Product revenue
Research and development revenue
Total revenues
Costs and operating expenses:
Cost of product revenue
Research and development
Selling, general and administrative
Restructuring charges
Asset impairment and other charges
Total costs and operating expenses
Loss from operations
Interest income
Other income (expense), net
Loss before income taxes
Provision for income taxes
Net loss
Revenues
2023
Year Ended December 31,
2022
2021
2023
% of Total Revenues
2022
2021
$
$
42,906
27,237
70,143
12,809
58,885
53,250
3,284
9,984
138,212
(68,069)
4,172
(12,274)
(76,171)
69
(76,240)
$
$
116,676
21,914
138,590
38,033
80,099
52,172
3,167
—
173,471
(34,881)
1,441
124
(33,316)
276
(33,592)
$
$
70,657
34,097
104,754
22,209
55,919
49,323
—
—
127,451
(22,697)
459
1,148
(21,090)
189
(21,279)
61
39
100
18
84
76
5
14
197
(97)
6
(17)
(108)
—
(108)
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
84
16
100
27
58
38
2
—
125
(25)
1
—
(24)
—
(24)
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
67
33
100
21
53
47
—
—
121
(21)
—
1
(20)
—
(20)
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
Our revenues consist of product revenue and research and development revenue as follows:
•
•
Product revenue consist of sales of biocatalysts, pharmaceutical intermediates, and Codex biocatalyst panels and kits.
Research and development revenue include license, technology access and exclusivity fees, research services fees, milestone payments, royalties, optimization and screening
fees.
®
Revenues are as follows (in thousands, except percentages):
Product revenue
Research and development revenue
Total revenues
2023
42,906
27,237
70,143
$
$
Year Ended December 31,
2022
$
$
116,676
21,914
138,590
Change
2023
2022
2021
70,657
34,097
104,754
$
$
$
(73,770)
5,323
(68,447)
$
$
%
(63)
24
(49)
%
%
%
$
46,019
(12,183)
33,836
$
$
%
65
(36)
32
%
%
%
Revenues typically fluctuate on a quarterly basis due to the variability in our customers' manufacturing schedules and the timing of our customers' clinical trials. In addition, we
have limited internal capacity to manufacture enzymes. As a result, we are dependent upon the performance and capacity of third party manufacturers for the commercial scale
manufacturing of the enzymes used in our pharmaceutical and fine chemicals business.
We accept purchase orders for deliveries covering periods from one day up to 14 months from the date on which the order is placed. However, some of our purchase orders can be
revised or cancelled by the customer without penalty. Considering these industry practices and our experience, we do not believe the total of customer purchase orders outstanding
(backlog) provides meaningful information that can be relied on to predict actual sales for future periods.
2023 compared to 2022
Total revenues decreased by $68.4 million in 2023 to $70.1 million, as compared to 2022. The decrease was driven by lower product revenue as compared to the prior year.
50
Product revenue was $42.9 million in 2023, a decrease of 63% compared with $116.7 million in 2022. The decrease in product revenue was primarily due to decreased sales of
CDX-616 to Pfizer. This decrease was partially offset by $8.2 million release of prior year's deferrals related to Pfizer's fee, $3.2 million release of prior periods' product revenue
deferrals due to early termination of the enzyme supply obligations to a customer and $1.3 million of product revenue recognized as settlement fee pursuant to the enzyme supply
agreement with the same customer.
Research and development revenue increased by $5.3 million in 2023 to $27.2 million, or 24% compared with $21.9 million in 2022, primarily due to higher revenue from the
Pfizer license agreement and from Nestlé Health Science under the Nestlé SCA and development agreement and the Acquisition Agreement, which was partially offset by lower
research and development fees from existing collaboration agreements being recognized in 2023 as compared to the prior year.
2022 compared to 2021
Total revenues increased by $33.8 million in 2022 to $138.6 million, as compared to 2021. The increase was driven by growth in product revenue of $46.0 million, or 65%, partially
offset by a decrease in research and development revenue of $12.2 million, or 36%.
Product revenue was $116.7 million in 2022, an increase of 65% compared with $70.7 million in 2021. The increase in product revenue was primarily due to $40.9 million higher
revenue from Pfizer sales related to the purchase of CDX-616.
Research and development revenue decreased by $12.2 million in 2022 to $21.9 million, or 36% compared with $34.1 million in 2021, primarily due to lower license fees from
Takeda, decreased revenue from milestone payments received from GSK in 2021 and lower research and development fees from other existing collaboration agreements being
recognized in 2022 as compared to the prior year. A portion of our research and development revenue in 2022 and 2021 was paid to us by MAI in the form of additional shares of MAI
Series A and Series B preferred stock. We received an aggregate of 1,587,049 and 3,491,505 shares of MAI's Series A and B preferred stock for the years ended December 31, 2022 and
2021, respectively.
Costs and Operating Expenses (in thousands, except percentages):
Cost of product revenue
Research and development
Selling, general and administrative
Restructuring charges
Asset impairment and other charges
Total costs and operating expenses
2023
Year Ended December 31,
2022
2021
$
$
12,809
58,885
53,250
3,284
9,984
138,212
$
$
38,033
80,099
52,172
3,167
—
173,471
$
$
22,209
55,919
49,323
—
—
127,451
Change
2023
2022
$
(25,224)
(21,214)
1,078
117
9,984
(35,259)
$
$
%
(66)
(26)
2
4
100
(20)
%
%
%
%
%
%
$
15,824
24,180
2,849
3,167
—
46,020
$
$
%
71
43
6
100
—
36
%
%
%
%
%
%
Costs of Product Revenue and Product Gross Margin
The following table shows the amounts of our product revenue, cost of product revenue, product gross profit and product gross margin from our consolidated statements of
operations (in thousands, except percentages):
Year Ended
December 31,
Change
Year Ended
December 31,
Change
2023
2022
$
%
2022
2021
$
%
Product
revenue
Cost of
product
revenue
(1)
Product
gross profit
Product
gross
margin
(2)
(%)
$
42,906
$
116,676
$
(73,770)
(63)
12,809
38,033
(25,224)
$
30,097
$
78,643
$
(48,546)
(66)
(62)
%
%
%
$
116,676
$
70,657
$
46,019
65
38,033
22,209
15,824
$
78,643
$
48,448
$
30,195
71
62
%
%
%
70
%
67
%
67
%
69
%
(1)
(2)
Cost of product revenue comprises both internal and third-party fixed and variable costs, including materials and supplies, labor, facilities and other overhead costs associated with our product revenue.
Product gross margin is used as a performance measure to provide additional information regarding our results of operations on a consolidated basis.
51
2023 compared to 2022
Cost of product revenue decreased by $25.2 million in 2023 to $12.8 million, as compared to 2022. The decrease was primarily due to lower volume of product sales as compared to
prior year. Product gross margins increased to 70% in 2023 as compared to 67% in 2022, primarily due to product revenue recognized with no related costs in 2023 related to the
utilization of Pfizer's fee and early termination of an enzyme supply agreement with a customer, and was partially offset by variability in the product mix.
2022 compared to 2021
Cost of product revenue increased by $15.8 million in 2022 to $38.0 million, as compared to 2021. The increase was primarily due to a higher volume of product sales and
variations in product mix. Product gross margins decreased to 67% in 2022 as compared to 69% in 2021, primarily due to variations in product mix, variation in prices per volume sold
and higher shipping costs. Some of these cost increases are a result of the impact of inflation and supply chain pressures seen in 2022.
Research and Development Expenses
Research and development expenses consist of costs incurred for internal projects as well as collaborative research and development activities. These costs primarily consist of (i)
employee-related costs, which include salaries and other personnel-related expenses (including stock-based compensation), (ii) various allocable expenses, which include occupancy-
related costs, supplies, depreciation of facilities and laboratory equipment, and (iii) external costs. Research and development expenses are expensed when incurred.
2023 compared to 2022
Research and development expenses were $58.9 million in 2023 compared to $80.1 million in 2022, a decrease of $21.2 million, or 26%. This decrease was primarily due $10.0
million decrease in costs associated with lower headcount, $6.4 million decrease in outside services and Chemistry, Manufacturing and Controls (“CMC”) and regulatory expense, $4.1
million in lower lab supplies expense, $1.3 million in lower stock comp expense, and $1.0 million decrease in lease costs due to the assignment of our San Carlos facility lease. These
were partially offset by $1.7 million in higher allocable costs.
2022 compared to 2021
Research and development expenses were $80.1 million in 2022 compared to $55.9 million in 2021, an increase of $24.2 million, or 43%. The increase was primarily due to an
increase of $7.4 million in costs associated with higher headcount, $4.8 million in higher facilities and repair and maintenance expenses, $5.3 million increase in outside services and
CMC and regulatory expenses, $2.6 million in higher lab supplies, $2.1 million in higher depreciation expenses, $1.1 million in higher stock-based compensation expenses and $0.7
million in higher allocable expenses. Some of these cost increases are a result of the impact of inflation seen in 2022.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of employee-related costs, which include salaries and other personnel-related expenses (including stock-based compensation),
hiring and training costs, consulting and outside services expenses (including audit and legal counsel related costs), marketing costs, building lease costs, and depreciation expenses and
amortization expenses.
2023 compared to 2022
Selling, general and administrative expenses were $53.3 million in 2023 compared to $52.2 million in 2022, an increase of $1.1 million, or 2%. This increase was primarily due to
$3.6 million higher in payroll-based expenses, $0.6 million in higher legal expense, $0.4 million in higher repairs and maintenance expense, and $0.3 million in higher consulting and
outside services. This was partially offset by $3.2 million lower stock based compensation expense and $0.4 million in lower allocable expenses.
52
2022 compared to 2021
Selling, general and administrative expenses were $52.2 million in 2022 compared to $49.3 million in 2021, an increase of $2.8 million, or 6%. The increase was primarily due to
an increase of $6.0 million in costs associated with higher headcount, $1.8 million in higher stock-based compensation costs, $0.8 million in higher outside and temporary services,
which was partially offset by a decrease of $3.5 million in allocable expenses due to higher expenses allocated to research and development activities in 2022 and $3.3 million in lower
legal fees. Some of these cost increases are a result of the impact of inflation seen in 2022.
Restructuring Charges
Restructuring charges consist of employee severance and other termination benefits due to workforce reduction plans that were initiated during the third quarter of 2023 and in the
fourth quarter of 2022. Restructuring charges were $3.3 million and $3.2 million for the years ended December 31, 2023 and 2022, respectively.
Asset Impairment and Other Charges
Asset impairment and other charges for the year ended December 31, 2023 were $10.0 million, consisting of a $9.2 million long-lived asset impairment charge and a $0.8 million
goodwill impairment charge, all of which are non-cash charges. No asset impairment charges were recorded for the years ended December 31, 2022 or 2021.
Interest Income and Other Income (Expense), net (in thousands, except percentages):
2023
4,172
(12,274)
(8,102)
$
$
Year Ended December 31,
2022
2021
$
$
1,441
124
1,565
$
$
459
1,148
1,607
Change
2023
2022
$
2,731
(12,398)
(9,667)
$
$
%
190
(9,998)
(618)
%
%
%
$
982
(1,024)
(42)
$
$
%
214
(89)
(3)
%
%
%
Interest income
Other income (expense), net
Total other income (expense),
net
Interest Income
Interest income increased by $2.7 million in 2023 compared to 2022, primarily due to higher average interest rates on cash balances. Interest income increased by $1.0 million in
2022 compared to 2021, primarily due to higher average interest rates on cash balances, and was partially offset by earned interest income on a non-marketable debt security in the prior
year.
Other Income (Expense), net
Other income (expense), net, decreased by $12.4 million in 2023 compared to 2022, primarily due to impairment of our investments in MAI, seqWell and Arzeda. Other income
(expense), net, decreased by $1.0 million in 2022 compared to 2021, primarily due to a lower gain from remeasurement on the carrying value of our investment in MAI recognized in
2022 as compared to 2021.
Provision for Income Taxes (in thousands, except percentages):
Provision for income taxes
$
69
$
276
$
189
$
(207)
(75)
%
$
87
46
%
2023
Year Ended December 31,
2022
2021
$
%
$
%
Change
2023
2022
The provision for income taxes in 2023 was primarily for current year state income taxes and the accrual of interest and penalties on historic uncertain tax positions.
The provision for income taxes in 2022 was primarily due to the income tax withholding imposed by foreign taxing authorities on income earned in certain countries outside of the
Unites Stated and remitted to the United States and the accrual of interest and penalties on historic uncertain tax positions, as well as current year state income taxes.
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Starting in 2022, changes to Internal Revenue Code Section 174 made by the Tax Cuts and Jobs Act of 2017 no longer permit an immediate deduction for research and development
expenditures in the tax year that such costs are incurred. As a result, the Company capitalized such costs in its 2022 income tax provision resulting in an increase in deferred tax assets
and state income taxes. However, as we have recorded a full valuation allowance on our deferred tax assets, this did not have an impact on our net deferred tax assets.
The provision for income taxes in 2021 was primarily due to the income tax withholding imposed by foreign taxing authorities on income earned in certain countries outside of the
Unites Stated and remitted to the United States and the accrual of interest and penalties on historic uncertain tax positions.
Net Loss
Net loss for 2023 was $76.2 million, or a net loss per basic and diluted share of $1.12. This compared to a net loss of $33.6 million, or $0.51 per basic and diluted share for 2022.
The increase in net loss was primarily related to lower product revenues from CDX-616 and one-time charges recognized during 2023 related to asset impairment, including impairment
in our investments in non-marketable equity securities, and restructuring charges, which was partially offset by lower operating expenses in 2023.
Net loss for 2022 was $33.6 million, or a net loss per basic and diluted share of $0.51. This compared to a net loss of $21.3 million, or $0.33 per basic and diluted share for 2021.
The increase in net loss was primarily related to lower research and development revenues and higher operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the measurement of our ability to meet working capital needs and to fund capital expenditures. We have historically funded our operations primarily through cash
generated from operations, stock option exercises and public and private offerings of our common stock. In addition, pursuant to the Loan Agreement, we received $30.0 million from
Innovatus, as Lender, on February 13, 2024 and may become eligible to borrow up to an additional $10.0 million upon the achievement of certain financial milestones. We actively
manage our cash usage and investment of liquid cash to ensure the maintenance of sufficient funds to meet our working capital needs. Our cash and cash equivalents are held in U.S.
banks.
Our primary uses of capital for the foreseeable future, including the next 12 months, are for compensation and related expenses, research and development expenses including
manufacturing costs, laboratory and related supplies, legal and other regulatory expenses, and general overhead costs.
The following summarizes our cash and cash equivalents balance and working capital as of December 31, 2023, 2022 and 2021 (in thousands):
Cash and cash equivalents
Working capital
Sources of Capital
2023
December 31,
2022
$
$
65,116
57,636
$
$
113,984
113,828
$
$
2021
116,797
128,517
In addition to our existing cash and cash equivalents and revenue generated through our existing operations, we are eligible to earn milestone and other contingent payments for the
achievement of defined collaboration objectives and certain royalty payments under our collaboration agreements with Merck, Nestlé, and Novartis of up to $59.0 million in aggregate.
In addition, under the GSK CodeEvolver Agreement, we have the potential to receive additional contingent payments that range from $5.8 million to $38.5 million per project. Our
ability to earn these milestone and contingent payments and the timing of achieving these milestones is primarily dependent upon the outcome of our collaborators’ research and
development activities and is uncertain at this time.
®
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In addition, pursuant to the terms of the Pfizer Supply Agreement, Pfizer paid us a fee of $25.9 million in August 2022 which was recorded as deferred revenue. Pursuant to the
agreement, 90% of the fee ($23.3 million) is creditable against (i) future orders of CDX-616 used to manufacture its PAXLOVID™ with shipment dates prior to December 31, 2023,
and (ii) fees associated with any new development and licensing agreements with Pfizer entered into prior to April 4, 2023. Subsequent to the end of the first quarter of 2023, we entered
into a license agreement whereby Pfizer utilized a portion of the $23.3 million credit towards a license to develop future product candidates, for which we recognized $5.0 million as
non-cash research and development revenue during the second quarter of 2023. Pfizer's ability to utilize the credit under item (i) above expired on December 31, 2023, and under item
(ii) above expired on April 4, 2023. Up to 50% of any portion of the $25.9 million which has not been credited under items (i) and (ii) is creditable against future orders of CDX-616
used to manufacture PAXLOVID™ with shipment dates in 2024, and any portion of the fee that is not utilized within the specific period will be forfeited and recognized as revenue.
®
We have historically experienced negative cash flows from operations as we continue to invest in key technology development projects and improvements to our CodeEvolver
technology platform, develop and commercialize new and existing products including our ECO Synthesis™ manufacturing platform and expand our business development and
collaboration with new customers. Our cash flows from operations will continue to be affected principally by product sales and product gross margins, sales from licensing our
technology to major pharmaceutical companies, and collaborative research and development services provided to customers, as well as our headcount costs, primarily in research and
development. Our primary source of cash flows from operating activities is cash receipts from our customers for purchases of products, collaborative research and development services,
and licensing our technology to major pharmaceutical companies. Our largest uses of cash from operating activities are for employee-related expenditures, rent payments, inventory
purchases to support our product sales and non-payroll research and development costs.
Loan Agreement and Term Loans
On February 13, 2024, we entered into the Loan Agreement with Innovatus consisting of two tranches, of which the first tranche of $30.0 million was completed upon execution of
the Loan Agreement. We will be eligible to draw on the second tranche of $10.0 million upon achievement of certain milestones including certain pre-specified revenue thresholds. The
Term Loan carries an interest-only period of 36 months and will bear an interest at a floating rate of the sum of (a) the greater of (i) prime rate and (ii) 7.50%, plus (b) 3.25%.
Equity Distribution Agreement
In May 2021, we entered into an Equity Distribution Agreement (“EDA”) with Piper Sandler & Co (“PSC”), under which PSC, as our exclusive agent, at our discretion and at such
times that we may determine from time to time, may sell over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock.
During the year ended December 31, 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA, all during the first half of 2023, and we received net
proceeds of $7.9 million. As of December 31, 2023, $41.3 million of shares remained available for sale under the EDA. Sales of our common stock under this arrangement could be
subject to business, economic or competitive uncertainties and contingencies, many of which may be beyond our control, and which could cause actual results from the sale of our
common stock to differ materially from expectations.
Liquidity
We believe that our existing cash and cash equivalents, combined with our future expectations for product revenues, research and development revenue, and expense management
will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next 12 months. We have based this estimate on
assumptions that may prove to be wrong, and we could utilize our capital resources sooner than we expect.
55
However, we may need additional capital if our current plans and assumptions change. In addition, we may choose to seek other sources of capital even if we believe we have
generated sufficient cash flows to support our operating needs. Our need for additional capital will depend on many factors, including the financial success of our business, the spending
required to develop and commercialize new and existing products including our ECO Synthesis manufacturing platform, the effect of any acquisitions of other businesses, technologies
or facilities that we may make or develop in the future, our spending on new market opportunities, and the potential costs for the filing, prosecution, enforcement and defense of patent
claims, if necessary. If our capital resources are insufficient to meet our capital requirements, and we are unable to enter into or maintain collaborations with partners that are able or
willing to fund our development efforts or commercialize any products that we develop or enable, we will have to raise additional funds to continue the development of our technology
and products and complete the commercialization of products, if any, resulting from our technologies. If future financings involve the issuance of equity securities, our existing
stockholders would suffer dilution. In addition, under our Loan Agreement, we are subject to restrictive covenants that limit our ability to conduct our business and could be subject to
additional covenants to the extent we seek other debt financing in the future. We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all. If we fail
to raise sufficient funds and fail to generate sufficient revenues to achieve planned gross margins and to control operating costs, our ability to fund our operations, take advantage of
strategic opportunities, develop products or technologies, or otherwise respond to competitive pressures could be significantly limited. If this happens, we may be forced to delay or
terminate development of new products or services, such as our ECO Synthesis manufacturing platform, or the commercialization of products resulting from our technologies, curtail
or cease operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, or grant licenses on terms that are not
favorable to us. If adequate funds are not available, we will not be able to successfully execute our business plan or continue our business.
™
™
Cash Flows
The following is a summary of cash flows for the years ended December 31, 2023, 2022 and 2021 (in thousands):
Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net decrease in cash, cash equivalents and restricted cash
Cash Flows from Operating Activities
2023
Year Ended December 31,
2022
2021
$
$
(52,638)
(4,858)
8,167
(49,329)
$
$
11,284
(13,578)
(575)
(2,869)
$
$
(14,267)
(21,422)
3,767
(31,922)
The $63.9 million decrease in net cash provided by operating activities in 2023 as compared to 2022 was primarily due to the net effect of decreases in cash received from our
customers due to lower revenue in 2023 and with 2022 benefiting from the receipt of a $25.9 million fee from Pfizer that is creditable against future orders, partially offset by decreases
in cash paid for cost of revenues and operating expenses.
The $25.6 million increase in net cash provided by operating activities in 2022 as compared to 2021 was primarily due to the receipt of a $25.9 million fee from Pfizer in August
2022 creditable against future orders and increases in cash received from revenue, which was partially offset by increased payments associated with higher operating costs.
Cash Flows from Investing Activities
The $8.7 million decrease in net cash used in investing activities in 2023 as compared to 2022 was primarily due to higher cash utilized for additional investments in equity securities
and purchases of property and equipment in the prior year.
The $7.8 million decrease in net cash used in investing activities in 2022 as compared to 2021 was primarily due to higher cash utilized for additional investments in equity securities
and purchases of property and equipment in 2021.
Cash Flows from Financing Activities
The $8.7 million increase in net cash provided by financing activities in 2023 as compared to 2022 was primarily due to proceeds from issuance of common stock under the EDA
and lower cash paid on taxes related to net share settlement of equity awards.
The $4.3 million decrease in net cash provided by financing activities in 2022 as compared to 2021 was primarily due to higher cash paid on taxes related to net share settlement of
equity awards and lower proceeds from exercises of stock options.
56
OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2023, we had no off-balance sheet arrangements as defined in Item 303 of Regulation S-K as promulgated by the SEC.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. The consolidated financial
statements have been prepared in conformity with generally accepted accounting principles in the United States and include our accounts and the accounts of our wholly owned
subsidiaries. The preparation of our consolidated financial statements requires our management to make estimates, assumptions, and judgments that 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 applicable periods.
Management bases its estimates, assumptions and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Different
assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which, in turn, could change the results from those reported.
Our management evaluates its estimates, assumptions and judgments on an ongoing basis.
The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are
described below.
Revenue Recognition
Our revenues are derived primarily from product revenue and collaborative research and development agreements. The majority of our contracts with customers typically contain
multiple products and services.
The majority of our collaborative contracts contain multiple revenue streams such as upfront and/or annual license fees, research and development services, contingent milestone
payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage, among others. We determine the stand-alone selling price (“SSP”)
and allocate consideration to distinct performance obligations.
We measure revenue based on the consideration specified in the contract with each customer, net of any sales incentives and taxes collected on behalf of government authorities. We
recognize revenue in a manner that best depicts the transfer of promised goods or services to the customer, when control of the product or service is transferred to a customer. We make
significant judgments when determining the appropriate timing of revenue recognition.
Product Revenue
Certain of our agreements provide options to customers which they can exercise at a future date, such as the option to purchase our product during the contract duration at
discounted prices and an option to extend their contract, among others. In accounting for customer options, we determine whether an option is a material right and this requires us to
exercise significant judgment. If a contract provides the customer an option to acquire additional goods or services at a discount that exceeds the range of discounts that we typically
give for that product or service, or if the option provides the customer certain additional goods or services for free, the option may be considered a material right. If the contract gives the
customer the option to acquire additional goods or services at their normal SSPs, we would likely determine that the option is not a material right and, therefore, account for it as a
separate performance obligation when the customer exercises the option. We primarily account for options which provide material rights using the alternative approach available under
the Accounting Standards Codification (“ASC”) 606, as we concluded we meet the criteria for using the alternative approach. Therefore, the transaction price is calculated as the
expected consideration to be received for all the goods and services we expect to provide. We update the transaction price for expected consideration, subject to constraint, each reporting
period if our estimate of future goods to be ordered by customers change. Estimating expected consideration to be received under the alternative approach involves significant judgment.
Research and Development Revenue
The majority of our research and development agreements are based on a contractual rate per dedicated project team working on the project. The underlying product that we
develop for customers does not create an asset with an alternative use to us and the customer receives benefits as we perform the work towards completion. Thus, our performance
obligations are generally satisfied over time as the service is performed. We utilize an appropriate method of measuring progress towards the completion of our performance obligations
to determine the timing of revenue recognition. For each performance obligation that is satisfied over time, we recognize revenue using a single measure of progress either based on
hours incurred or output of services provided.
57
Our contracts frequently provide customers with rights to use or access our products or technology, along with other promises or performance obligations. If we determine that the
customer cannot benefit from the license without our services, the license will be accounted for as combined with the other performance obligations. If we determine that a license is
distinct, we would recognize an allocable portion of the transaction price when the license is transferred to the customer, and the customer can use and benefit from it. We estimate the
SSP for license rights by using historical information if licenses have been previously sold to customers and for new licenses, we consider multiple methods, a discounted cash flow
method which includes the following key assumptions: the development timelines, revenue forecasts, commercialization expenses, discount rate, and the probability of technical and
regulatory success.
At the inception of each arrangement that includes variable consideration such as development milestone payments, we evaluate whether the milestones are considered probable of
being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur,
the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee, such as regulatory approvals, are not considered
probable of being achieved until those approvals are received.
Our CodeEvolver platform technology transfer collaboration agreements typically include license fees, upfront fees, and variable consideration in the form of milestone payments,
®
and sales or usage-based royalties. We have recognized revenues from our platform technology transfer agreements over time.
We also have an agreement under which we have granted a functional license to some elements of our biocatalyst technology. We will recognize revenues for the functional license
at a point in time when the control of the license transfers to the customer.
For license agreements that include sales or usage-based royalty payments to us for which the license is the predominant item to which the royalty relates, we do not recognize
revenue until the underlying sales of the product or usage has occurred. At the end of each reporting period, we estimate the royalty amount. We recognize revenue at the later of (i)
when the related sale of the product occurs, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied, or partially satisfied.
Investment in Non-Marketable Securities
Investment in Non-Marketable Equity Securities
We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost
method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis. Gains and losses on these securities are recognized in other
income (expense), net.
We evaluate equity securities for impairment when circumstances indicate that we may not be able to recover the carrying value. We may impair these securities and establish an
allowance for a credit loss when we determine that there has been an “other-than-temporary” decline in estimated fair value of the debt or equity security compared to its carrying value.
We calculate the estimated fair value of these securities using information from the investee, which may include:
•
•
•
•
•
•
•
•
•
Audited and unaudited financial statements;
Projected technological developments of the company;
Projected ability of the company to service its debt obligations;
If a deemed liquidation event were to occur;
Current fundraising transactions;
Current ability of the company to raise additional financing if needed;
Changes in the economic environment which may have a material impact on the operating results of the company;
Contractual rights, obligations or restrictions associated with the investment; and
Other factors deemed relevant by our management to assess valuation.
The valuation may be reduced if the company's potential has deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be
readjusted.
58
Impairment of Long-Lived Assets
We evaluate the carrying values of long-lived assets, which include property and equipment and right-of-use assets, whenever events, changes in business circumstances or our
planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate. If these facts and circumstances
exist, we assess for recovery by comparing the carrying values of long-lived assets with the future net undiscounted cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measure by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Recent Accounting Pronouncements
See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report
on Form 10-K for a full description of recent accounting standards, including the respective dates of adoption and effects on our consolidated financial position, results of operations and
cash flows.
59
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity
Our unrestricted cash and cash equivalents total $65.1 million at December 31, 2023. We primarily invest these amounts in money market funds which are held for working capital
purposes. We do not enter into investments for trading or speculative purposes. As of December 31, 2023, the effect of a hypothetical 10% decrease in market interest rates would have
an $0.3 million impact on a potential loss in future interest income and cash flows.
Foreign Currency Risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. In periods when the United States dollar (“USD”) declines in
value as compared to the foreign currencies in which we incur expenses, our foreign-currency based expenses increase when translated into USD. Although substantially all of our sales
are denominated in USD, future fluctuations in the value of the USD may affect the price competitiveness of our products outside the United States. Our most significant foreign
currency exposure is due to non-functional currency denominated monetary assets, primarily currencies denominated in other than their functional currency. These non-functional
currency denominated monetary assets are subject to re-measurement which may create fluctuations in other expense, net, a component in our consolidated statement of operations and
in the fair value of the assets in the consolidated balance sheets. As of December 31, 2023, the effect of a hypothetical 10% unfavorable change in exchange rates on currencies
denominated in other than their functional currency would result in a potential loss in future earnings in our consolidated statement of operations and a reduction in the fair value of the
assets of approximately $41 thousand.
Investment in Non-Marketable Equity Securities
We own investments in non-marketable equity securities without readily determinable fair values. We may value these equity securities based on significant recent arms-length
equity transactions with sophisticated non-strategic unrelated investors, providing the terms of these security transactions are substantially similar to the security transactions terms
between the investors and us. The impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify.
60
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Codexis, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm (BDO USA, P.C.; San Francisco, CA; PCAOB ID: 243)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
62
65
66
67
68
69
61
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Codexis, Inc.
Redwood City, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Codexis, Inc. (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United
States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial
reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”) and our report dated February 28, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial
statements based on our audits. We are a public accounting firm registered with the 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
consolidated 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 consolidated 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 consolidated 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 consolidated financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be
communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
As described in Notes 2, 3 and 5 to the consolidated financial statements, the Company enters into contracts with customers that include enzyme supply, licensing, and collaborative
research and development agreements. Certain contracts with customers may contain multiple performance obligations, options, up-front and/or annual license fees, fees for research
and development services, contingent milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage. The Company
recognizes revenue in a manner that best depicts the transfer of promised goods or services to the customer when control of the product or service is transferred to a customer. The
Company makes significant judgments in determining revenue recognition for certain customer contracts.
We identified the evaluation of management’s accounting for revenue from certain new and amended contracts with customers as a critical audit matter due to significant judgments and
estimates involved in the identification of distinct performance obligations, allocation of transaction price to distinct performance obligations, determination and estimation of material
rights, determination of the pattern of transfer of control for each distinct performance obligation and estimation of variable consideration. Auditing these elements involved especially
subjective and complex auditor judgments due to the nature and extent of audit effort required.
62
The primary procedures we performed to address this critical audit matter included:
•
•
•
•
•
Testing the design, implementation and operating effectiveness of internal controls relating to the Company's accounting for certain new and amended revenue contracts,
including controls over identification of distinct performance obligations and material rights, the determination of the timing of revenue recognition, allocation of transaction
price to distinct performance obligations, and the estimation of variable consideration.
Examining a sample of these contracts to test management's identification of significant terms for completeness, including the identification of distinct performance
obligations, material rights and variable consideration.
Evaluating the reasonableness and accuracy of management’s judgments and estimates used in identification and accounting for material rights.
Assessing the reasonableness of management’s judgments and estimates to calculate variable consideration, and the timing of recognizing the related revenue subject to any
constraints.
Evaluating the appropriateness of management’s allocation of the transaction price to the distinct performance obligations and determination of whether identified
performance obligations meet the criteria for over-time revenue recognition.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2013.
San Francisco, California
February 28, 2024
63
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Codexis, Inc.
Redwood City, California
Opinion on Internal Control over Financial Reporting
We have audited Codexis, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the
Company as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2023, and the related notes and our report dated February 28, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying “Item 9A, Controls and Procedures”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, P.C.
San Francisco, California
February 28, 2024
64
Codexis, Inc.
Consolidated Balance Sheets
(In Thousands, Except Per Share Amounts)
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
Restricted cash, current
Financial assets:
Accounts receivable
Contract assets
Unbilled receivables
Total financial assets
Less: allowances
Total financial assets, net
Inventories
Prepaid expenses and other current assets
Total current assets
Restricted cash
Investment in non-marketable equity securities ($0 and $13,921 with a related party)
Right-of-use assets - Operating leases, net
Property and equipment, net
Goodwill
Other non-current assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued compensation
Other accrued liabilities
Current portion of lease obligations - Operating leases
Deferred revenue
Total current liabilities
Deferred revenue, net of current portion
Long-term lease obligations - Operating leases
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 5,000 shares authorized, none issued and outstanding
Common stock, $0.0001 par value per share; 200,000 shares authorized; 69,905 and 65,811 shares issued and outstanding at
December 31, 2023 and December 31, 2022, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements
65
$
$
$
$
65,116 $
519
10,036
815
9,142
19,993
(65)
19,928
2,685
5,218
93,466
1,062
9,700
13,137
15,487
2,463
1,246
136,561 $
5,947 $
11,246
4,735
3,781
10,121
35,830
640
12,243
1,233
49,946
—
7
584,138
(497,530)
86,615
136,561 $
113,984
521
31,904
2,116
7,016
41,036
(163)
40,873
2,029
5,487
162,894
1,521
20,510
39,263
22,614
3,241
350
250,393
3,246
11,453
15,279
5,360
13,728
49,066
16,881
38,278
1,371
105,596
—
6
566,081
(421,290)
144,797
250,393
Codexis, Inc.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
Revenues:
Product revenue ($0, $514 and $0 from a related party)
Research and development revenue ($0, $1,245 and $1,955 from a related party)
Total revenues
Costs and operating expenses:
Cost of product revenue
Research and development
Selling, general and administrative
Restructuring charges
Asset impairment and other charges
Total costs and operating expenses
Loss from operations
Interest income
Other income (expense), net ($0, $208 and $983 from a related party)
Loss before income taxes
Provision for income taxes
Net loss
Net loss per share, basic and diluted
Weighted average common stock shares used in computing net loss per share, basic and diluted
2023
Year Ended December 31,
2022
2021
42,906 $
27,237
70,143
12,809
58,885
53,250
3,284
9,984
138,212
(68,069)
4,172
(12,274)
(76,171)
69
(76,240) $
(1.12) $
68,131
116,676 $
21,914
138,590
38,033
80,099
52,172
3,167
—
173,471
(34,881)
1,441
124
(33,316)
276
(33,592) $
(0.51) $
65,344
70,657
34,097
104,754
22,209
55,919
49,323
—
—
127,451
(22,697)
459
1,148
(21,090)
189
(21,279)
(0.33)
64,568
$
$
$
See accompanying notes to consolidated financial statements
66
December 31, 2020
Exercise of stock options
Release of stock awards
Employee stock-based compensation
Non-employee stock-based compensation
Taxes paid related to net share settlement of equity awards
Net loss
December 31, 2021
Exercise of stock options
Release of stock awards
Employee stock-based compensation
Non-employee stock-based compensation
Taxes paid related to net share settlement of equity awards
Net loss
December 31, 2022
Exercise of stock options
Release of stock awards
Employee stock-based compensation
Non-employee stock-based compensation
Issuance of common stock, net of issuance costs of $721
Taxes paid related to net share settlement of equity awards
Net loss
December 31, 2023
Codexis, Inc.
Consolidated Statements of Stockholders’ Equity
(In Thousands)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
64,283 $
699
181
—
—
(54)
—
65,109
410
373
—
—
(81)
—
65,811
283
796
—
—
3,080
(65)
—
69,905 $
6
—
—
—
—
—
—
6
—
—
—
—
—
—
6
—
—
—
—
1
—
—
7
$
$
536,516 $
5,180
—
11,346
247
(1,206)
—
552,083
955
—
14,398
133
(1,488)
—
566,081
559
—
9,969
2
7,931
(404)
—
584,138 $
(366,419) $
—
—
—
—
—
(21,279)
(387,698)
—
—
—
—
—
(33,592)
(421,290)
—
—
—
—
—
—
(76,240)
(497,530) $
170,103
5,180
—
11,346
247
(1,206)
(21,279)
164,391
955
—
14,398
133
(1,488)
(33,592)
144,797
559
—
9,969
2
7,932
(404)
(76,240)
86,615
See accompanying notes to consolidated financial statements
67
Codexis, Inc.
Consolidated Statements of Cash Flows
(In Thousands)
Operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation
Amortization expense - right-of-use assets - operating and finance leases
Stock-based compensation
Provision (recovery) for credit losses
Equity securities earned from research and development activities ($0, ($1,245), and ($1,955) from a
related party)
Unrealized gain on non-marketable securities ($0, ($208), and ($983) from a related party)
Asset impairment and other charges
Impairment of investment in non-marketable securities
Other non-cash items
Changes in operating assets and liabilities:
Financial assets
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued compensation and other accrued liabilities
Other long-term liabilities
Deferred revenue ($0, $0, $245 to a related party)
Net cash provided by (used in) operating activities
Investing activities:
Purchase of property and equipment
Proceeds from sale of property and equipment
Investment in non-marketable securities ($0, $0, and ($7,630) in a related party)
Net cash used in investing activities
Financing activities:
Proceeds from exercises of stock options
Proceeds from issuance of common stock in connection with public offering
Costs incurred in connection with issuance of common stock at public offering
Taxes paid related to net share settlement of equity awards
Net cash provided by (used in) financing activities
Net decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of the year
Cash, cash equivalents and restricted cash at the end of the year
Supplemental disclosure of cash flow information:
Interest paid
Income taxes
Supplemental non-cash investing and financing activities:
Capital expenditures incurred but not yet paid
2023
Year Ended December 31,
2022
2021
$
(76,240) $
(33,592) $
(21,279)
5,518
4,405
9,971
(65)
(213)
—
9,984
12,215
4
20,247
(656)
(865)
2,287
(14,041)
(5,341)
(19,848)
(52,638)
(4,418)
751
(1,191)
(4,858)
422
8,652
(503)
(404)
8,167
(49,329)
116,026
66,697 $
44 $
194 $
1,068 $
5,402
4,849
14,531
4
(1,245)
(208)
—
—
(29)
(3,225)
(869)
181
207
5,983
(5,223)
24,518
11,284
(8,307)
29
(5,300)
(13,578)
955
—
(42)
(1,488)
(575)
(2,869)
118,895
116,026 $
34 $
100 $
897 $
3,113
2,834
11,593
342
(1,955)
(1,272)
—
—
(19)
(9,156)
(196)
(2,268)
268
6,575
(4,147)
1,300
(14,267)
(13,828)
36
(7,630)
(21,422)
5,180
—
(207)
(1,206)
3,767
(31,922)
150,817
118,895
14
102
2,533
$
$
$
$
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown
above (in thousands):
Cash and cash equivalents
Restricted cash, current and non-current
Total cash, cash equivalents and restricted cash at the end of the period
2023
Year Ended December 31,
2022
2021
$
$
65,116 $
1,581
66,697 $
113,984 $
2,042
116,026 $
116,797
2,098
118,895
See accompanying notes to consolidated financial statements
68
Codexis, Inc.
Notes to Consolidated Financial Statements
Note 1. Description of Business
In these notes to the consolidated financial statements, the “Company,” “we,” “us,” and “our” refers to Codexis, Inc. and its subsidiaries on a consolidated basis.
We discover, develop, enhance, and commercialize novel, high performance enzymes and other classes of proteins leveraging our proprietary CodeEvolver directed evolution
®
technology platform.
We previously managed our business as two business segments, Performance Enzymes and Novel Biotherapeutics. During the fourth quarter of 2023, we made changes to the
structure of our organization in connection with the restructuring of our business that we announced in July 2023, including the discontinuation of investment in certain development
programs, primarily in our biotherapeutics business, consolidation of operations to our Redwood City, California headquarters, and headcount reduction. In connection with these
organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and how our Chief Executive Officer (“CEO”),
our chief operating decision maker, assesses performance and allocates resources. As a result of these changes, our previous Performance Enzymes and Novel Biotherapeutics operating
segments were combined into a single reportable segment. Effective October 1, 2023, the Company's operations are managed and reported to the CEO on a consolidated basis. The CEO
assesses performance and allocates resources based on the consolidated results of operations. We believe that these changes better align internal resources and external go to market
activities in order to create a more efficient and effective organizational structure. Under this new organizational and reporting structure, we managed our business as one reportable
segment as of December 31, 2023. Comparative prior period disclosures that reflected the previous two segments' information have been revised to conform to this change in our
reportable segment.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”)
and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of Codexis, Inc. and its wholly-owned subsidiaries.
The consolidated financial statements include the accounts of Codexis, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that may affect the reported amounts
of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. We regularly assess these estimates which primarily affect revenue
recognition, deferred revenue, inventories, valuation of equity investments, goodwill arising out of business acquisitions, accrued liabilities, stock awards, and the valuation allowances
associated with deferred tax assets. Actual results could differ from those estimates and such differences may be material to the consolidated financial statements.
Foreign Currency Translation
The USD is the functional currency for our operations outside the United States. Accordingly, non-monetary assets and liabilities originally acquired or assumed in other currencies
are recorded in USD at the exchange rates in effect at the date they were acquired or assumed. Monetary assets and liabilities denominated in other currencies are translated into United
States dollars at the exchange rates in effect at the balance sheet date. Translation adjustments are recorded in other expense in the consolidated statements of operations. Gains and
losses realized from non-USD transactions, including intercompany balances not considered as permanent investments, are included in other expense in the accompanying consolidated
statements of operations.
Revenue Recognition
Our revenues are derived primarily from product revenue and collaborative research and development agreements. The majority of our contracts with customers typically contain
multiple products and services. We account for individual products and services separately if they are distinct-that is, if a product or service is separately identifiable from other items in
the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer.
69
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under our product revenue and collaborative research and development agreements,
we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance
obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation
of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation.
The majority of our collaborative contracts contain multiple revenue streams such as upfront and/or annual license fees, fees for research and development services, contingent
milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage, among others. We determine the stand-alone selling
price (“SSP”) and allocate consideration to distinct performance obligations. Typically, we base our SSPs on our historical sales. If an SSP is not directly observable, then we estimate
the SSP taking into consideration market conditions, forecasted sales, entity-specific factors and available information about the customer. We estimate the SSP for license rights by
using historical information if licenses have been previously sold to customers and for new licenses, we consider multiple methods, including a discounted cash flow method which
includes the following key assumptions: the development timelines, revenue forecasts, commercialization expenses, discount rate, and the probability of technical and regulatory
success.
We account for a contract with a customer when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the
contract has commercial substance and collectability of consideration is probable. Non-cancellable purchase orders received from customers to deliver a specific quantity of product,
when combined with our order confirmation, in exchange for future consideration, create enforceable rights and obligations on both parties and constitute a contract with a customer.
We measure revenue based on the consideration specified in the contract with each customer, net of any sales incentives and taxes collected on behalf of government authorities. We
recognize revenue in a manner that best depicts the transfer of promised goods or services to the customer, when control of the product or service is transferred to a customer. We make
significant judgments when determining the appropriate timing of revenue recognition.
The following is a description of principal activities from which we generate revenue:
Product Revenue
Product revenue consist of sales of biocatalysts, pharmaceutical intermediates and Codex biocatalyst panels and kits. A majority of our product revenue is made pursuant to
purchase orders or supply agreements and is recognized either at a point in time when the control of the product has been transferred to the customer typically upon shipment or over
time as the product is manufactured because we have a right to payment from the customer under a binding, non-cancellable purchase order, and there is no alternate use of the product
for us as it is specifically made for the customer’s use.
®
Certain of our agreements provide options to customers which they can exercise at a future date, such as the option to purchase our product during the contract duration at
discounted prices and an option to extend their contract, among others. In accounting for customer options, we determine whether an option is a material right and this requires us to
exercise significant judgment. If a contract provides the customer an option to acquire additional goods or services at a discount that exceeds the range of discounts that we typically
give for that product or service for the same class of customer, or if the option provides the customer certain additional goods or services for free, the option may be considered a
material right. If the contract gives the customer the option to acquire additional goods or services at their normal SSPs, we would likely determine that the option is not a material right
and, therefore, account for it as a separate performance obligation when the customer exercises the option. We primarily account for options which provide material rights using the
alternative approach available pursuant to the applicable accounting guidance, as we concluded we meet the criteria for using the alternative approach. Therefore, the transaction price is
calculated as the expected consideration to be received for all the goods and services we expect to provide under the contract. We update the transaction price for expected consideration,
subject to constraint, each reporting period if our estimates of future goods to be ordered by customers change.
Research and Development Revenue
We perform research and development activities as specified in each respective customer agreement. We identify each performance obligation in our research and development
agreements at contract inception. We allocate the consideration to each distinct performance obligation based on the SSP of each performance obligation. Performance obligations
included in our research and services agreements typically include research and development services for a specified term, periodic reports and small samples of enzyme produced.
70
The majority of our research and development agreements are based on a contractual rate per dedicated project team working on the project. The underlying product that we
develop for customers does not create an asset with an alternative use to us and the customer receives benefits as we perform the work towards completion. Thus, our performance
obligations are generally satisfied over time as the service is performed. We utilize an appropriate method of measuring progress towards the completion of our performance obligations
to determine the timing of revenue recognition. For each performance obligation that is satisfied over time, we recognize revenue using a single measure of progress either based on
hours incurred or output of services provided.
Our contracts frequently provide customers with rights to use or access our products or technology, along with other promises or performance obligations. We must first determine
whether the license is distinct from other promises, such as our promise to manufacture a product. If we determine that the customer cannot benefit from the license without our
manufacturing capability, the license will be accounted for as combined with the other performance obligations. If we determine that a license is distinct and has significant standalone
functionality, we recognize revenues from a functional license at a point in time when the license is transferred to the customer, and the customer can use and benefit from it. We
estimate the SSP for license rights by using historical information if licenses have been previously sold to customers and for new licenses, we consider multiple methods, including a
discounted cash flow method which includes the following key assumptions: the development timelines, revenue forecasts, commercialization expenses, discount rate, and the
probability of technical and regulatory success. For licenses that have been previously sold to other customers, we use historical information to determine SSP.
At the inception of each arrangement that includes variable consideration such as development milestone payments, we evaluate whether the milestones are considered probable of
being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur,
the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee, such as regulatory approvals, are not considered
probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for
which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of
achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a
cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment.
Our CodeEvolver technology platform transfer collaboration agreements typically include license fees, upfront fees, and variable consideration in the form of milestone payments,
®
and sales or usage-based royalties. We have recognized revenues from our platform technology transfer agreements over time as our customer uses our technology.
For license agreements that include sales or usage-based royalty payments to us, we do not recognize revenue until the underlying sales of the product or usage has occurred. At the
end of each reporting period, we estimate the royalty amount. We recognize revenue at the later of (i) when the related sale of the product occurs, or (ii) when the performance obligation
to which some or all of the royalty has been allocated has been satisfied, or partially satisfied.
Practical Expedients, Elections, and Exemptions
We apply certain practical expedients available which permit us not to adjust the amount of consideration for the effects of a significant financing component if, at contract
inception, the expected period between the transfer of promised goods or services and customer payment is one year or less.
We perform monthly services under our research and development agreements, and we use a practical expedient permitting us to recognize revenue at the same time that we have
the right to invoice our customer for monthly services completed to date.
We have elected to treat shipping and handling activities as fulfillment costs.
We have elected to record revenue net of sales and other similar taxes.
Contract Assets
Contract assets include amounts related to our contractual right to consideration for completed performance obligations not yet invoiced. Contract assets are reclassified to
receivables when the rights become unconditional.
71
Contract Liabilities
Contract liabilities are recorded as deferred revenues and include payments received in advance of performance under the contract. Contract liabilities are realized when the
development services are provided to the customer or control of the products has been transferred to the customer. A portion of our contract liabilities relate to supply arrangements that
contain material rights that are recognized using the alternative method, under which the aggregate amount invoiced to the customer for shipped products, including contractual fees, is
higher than the amount of revenue recognized based on the transaction price allocated to the shipped products.
Contract Costs
We recognize a non-current asset for the incremental costs of obtaining a contract with a customer if the entity expects to recover such costs and if those costs would not have been
incurred if the contract had not been obtained, such as commissions paid to sales personnel. We do not typically incur significant incremental costs because the compensation of our
salespeople is not based on contracts closed but on a mixture of company goals, individual goals, and sales goals. If a commission paid is directly related to obtaining a specific contract,
our policy is to capitalize and amortize such costs on a systematic basis, consistent with the pattern of transfer of the good or service to which the asset relates, and over a period beyond
12 months. Contract costs are reported in other non-current assets and were not significant in any of the periods presented.
Cost of Product Revenue
Cost of product revenue comprises both internal and third party fixed and variable costs including materials and supplies, labor, facilities, and other overhead costs associated with
our product sales. Shipping costs are included in our cost of product revenue. Shipping costs were $1.0 million, $3.0 million, and $1.8 million for the years ended December 31, 2023,
2022, and 2021, respectively.
Fulfillment costs, such as shipping and handling, are recognized at a point in time and are included in cost of product revenue.
Cost of Research and Development Services
Cost of research and development services related to services under research and development agreements approximate the research funding over the term of the respective
agreements and is included in research and development expense. Costs of services provided under license and platform technology transfer agreements are included in research and
development expenses and are expensed in the periods in which such costs are incurred.
Research and Development Expenses
Research and development expenses consist of costs incurred for internal projects and partner-funded collaborative research and development activities, as well as license and
platform technology transfer agreements, as mentioned above. These costs include our direct and research-related overhead expenses, which include salaries and other personnel-related
expenses (including stock-based compensation), occupancy-related costs, supplies, and depreciation of facilities and laboratory equipment, as well as external costs, and are expensed as
incurred. Costs to acquire technologies that are utilized in research and development and that have no alternative future use are expensed when incurred.
Advertising
Advertising costs are expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations. Advertising costs were $0.3
million for each of the years ended December 31, 2023, 2022 and 2021.
Stock-Based Compensation
We use the Black-Scholes-Merton option pricing model to estimate the fair value of stock options granted under our equity incentive plans and for our employee stock purchase
plan (“ESPP”). The Black-Scholes-Merton option pricing model requires the use of assumptions, including the expected term of the award and the expected stock price volatility. The
expected term is based on historical exercise behavior for similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.
We use historical volatility to estimate expected stock price volatility. The risk-free rate assumption is based on United States Treasury instruments whose terms are consistent with the
expected term of the stock options. The expected dividend assumption is based on our history and expectation of dividend payouts.
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Restricted Stock Units (“RSUs”), Restricted Stock Awards (“RSAs”) and performance-contingent restricted stock units (“PSUs”) are measured based on the fair market values of
the underlying stock on the dates of grant. Performance based options (“PBOs”) are measured using the Black-Scholes-Merton option pricing model. The vesting of PBOs and PSUs
awarded is conditioned upon the attainment of one or more performance objectives over a specified period and upon continued employment through the applicable vesting date. At the
end of the performance period, shares of stock subject to the PBOs and PSUs vest based upon both the level of achievement of performance objectives within the performance period
and continued employment through the applicable vesting date.
Stock-based compensation expense is calculated based on awards ultimately expected to vest and is reduced for estimated forfeitures at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates. The estimated annual forfeiture rates for stock options, RSUs, PSUs, PBOs, and RSAs are based on historical
forfeiture experience.
The estimated fair value of stock options, RSUs, RSAs and shares to be issued under the ESPP are expensed on a straight-line basis over the vesting term of the grant and the
estimated fair value of PSUs and PBOs are expensed using an accelerated method over the term of the award once management has determined that it is probable that the performance
objective will be achieved. Compensation expense is recorded over the requisite service period based on management's best estimate as to whether it is probable that the shares awarded
are expected to vest. Management assesses the probability of the performance milestones being met on a continuous basis.
Cash and Cash Equivalents
We consider all highly liquid investments with maturity dates of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on
deposit with banks and money market funds. The majority of cash and cash equivalents is maintained with major financial institutions in the United States. Deposits with these financial
institutions may exceed the amount of insurance provided on such deposits.
Restricted Cash
In 2016, we began the process of liquidating our Indian subsidiary. The local legal requirements for liquidation required us to maintain our subsidiary's cash balance in an account
managed by a legal trustee to satisfy our financial obligations. This balance is recorded as current restricted cash on the consolidated balance sheets of $0.5 million as of December 31,
2023 and 2022.
Pursuant to the terms of our lease agreements, we obtained letters of credit collateralized by cash deposit balances of $1.1 million and $1.5 million as of December 31, 2023 and
2022, respectively. These cash deposits balances are recorded as non-current restricted cash on the consolidated balance sheets. For additional information, see Note 13, “Commitments
and Contingencies.”
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and we consider
counterparty credit risk in our assessment of fair value. Carrying amounts of financial instruments, including cash equivalents, accounts receivable, accounts payable, and accrued
liabilities, approximate their fair values as of the balance sheet dates because of their short maturities.
The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2)
an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value
hierarchy consists of three broad levels, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
•
•
Level 1: Inputs that are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2: Inputs that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the
instrument’s anticipated life.
73
•
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management’s best
estimate of what market participants would use in pricing the asset or liability at the measurement date.
Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and unbilled
receivables, contract assets, non-marketable securities, and restricted cash. Cash that is not required for immediate operating needs is invested principally in money market funds. Cash
and cash equivalents are invested through banks and other financial institutions in the United States and India. Such deposits in those countries may be in excess of insured limits. The
Company has not experienced material losses on its deposits of cash and cash equivalents.
We perform ongoing credit evaluations of our customer's financial condition whenever deemed necessary. We maintain an allowance for doubtful accounts based on the expected
collectability of all financial assets, which takes into consideration an analysis of historical bad debts, specific customer creditworthiness and current economic trends. As of
December 31, 2023, we had four customers that accounted for 58% of our accounts receivable balance. As of December 31, 2022, two customers accounted for 63% of our accounts
receivable balance. We believe the accounts receivable balances from our largest customers do not represent a significant credit risk, based on cash flow forecasts, balance sheet
analysis, and past collection experience.
Financial Assets and Allowances
We currently sell enzymes primarily to pharmaceutical and fine chemicals companies throughout the world by the extension of trade credit terms based on an assessment of each
customer's financial condition. Trade credit terms are generally offered without collateral and may include an insignificant discount for prompt payment for specific customers. To
manage our credit exposure, we perform ongoing evaluations of our customers' financial conditions. In addition, accounts receivable include amounts owed to us under our collaborative
research and development agreements.
We recognize accounts receivable at invoiced amounts and we maintain a valuation allowance for credit losses using an impairment model (known as the “current expected credit
loss model” or “CECL”) based on estimates and forecasts of future conditions requiring recognition of a lifetime of expected credit losses at inception on our financing receivables
measured at amortized costs which consisted of accounts receivable, contract assets, and unbilled receivables. We have determined that our financing receivables share similar risk
characteristics including: (i) customer origination in the pharmaceutical and fine chemicals industry, (ii) similar historical credit loss pattern of customers (iii) no meaningful trade
receivable differences in terms, (iv) similar historical credit loss experience and (v) our belief that the composition of certain assets are comparable to our historical portfolio used to
develop loss history. As a result, we measured the allowance for credit loss (“ACL”) on a collective basis. Our ACL methodology considers how long the asset has been past due, the
financial condition of the customers, which includes ongoing quarterly evaluations and assessments of changes in customer credit ratings, and other market data that we believe are
relevant to the collectability of the assets. Nearly all financing receivables are due from customers that are highly rated by major rating agencies and have a long history of no credit loss.
We derive our ACL by establishing an impairment rate attributable to assets not yet identified as impaired.
Unbilled Receivable
The timing of revenue recognition may differ from the timing of invoicing to our customers. When we satisfy (or partially satisfy) a performance obligation, prior to being able to
invoice the customer, we recognize an unbilled receivable when the right to consideration is unconditional.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using a weighted-average approach, assuming full absorption of direct and indirect
manufacturing costs, or based on cost of purchasing from our vendors. If inventory costs exceed expected net realizable value due to obsolescence or lack of demand, valuation
adjustments are recorded for the difference between the cost and the expected net realizable value.
Concentrations of Supply Risk
We rely on a limited number of suppliers for our products. We believe that other vendors would be able to provide similar products; however, the qualification of such vendors may
require substantial start-up time. In order to mitigate any adverse impacts from a disruption of supply, we attempt to maintain an adequate supply of critical single-sourced materials. For
certain materials, our vendors maintain a supply for us. We outsource the large-scale manufacturing of our products to contract manufacturers with facilities in Austria and Italy.
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Property and Equipment
Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization calculated using the straight-line method over their estimated
useful lives as follows:
Asset classification
Laboratory equipment
Computer equipment and software
Office equipment and furniture
Leasehold improvements
Estimated useful life
5 years
3 years
5 years
Lesser of useful life or lease term
Property and equipment classified as construction in process includes equipment that has been received but not yet placed in service. Normal repairs and maintenance costs are
expensed as incurred.
Impairment of Long-Lived Assets
We evaluate the carrying values of long-lived assets, which include property and equipment and right-of-use assets, whenever events, changes in business circumstances or our
planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate. If these facts and circumstances
exist, we assess for recovery by comparing the carrying values of long-lived assets with their future net undiscounted cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For additional
information on the impairment charge recorded for the year ended December 31, 2023, see Note 8, “Balance Sheets Details” and Note 13, “Commitments and Contingencies.” No
impairment charges for long-lived assets were recorded during the year ended December 31, 2022.
Investment in Non-Marketable Equity Securities
We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost
method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis. Gains and losses on these securities are recognized in other
income (expense), net.
We evaluate equity securities for impairment when circumstances indicate that we may not be able to recover the carrying value. We may impair these securities and establish an
allowance for a credit loss when we determine that there has been an "other-than-temporary” decline in the estimated fair value of the equity security compared to its carrying value. We
calculate the estimated fair value of these securities using information from the investee, which may include:
•
•
•
•
•
•
•
•
•
Audited and unaudited financial statements;
Projected technological developments of the company;
Projected ability of the company to service its debt obligations;
If a deemed liquidation event were to occur;
Current fundraising transactions;
Current ability of the company to raise additional financing if needed;
Changes in the economic environment which may have a material impact on the operating results of the company;
Contractual rights, obligations or restrictions associated with the investment; and
Other factors deemed relevant by our management to assess valuation.
The valuation may be reduced if the company's potential has deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be
readjusted. For additional information on the impairment charge recorded for the year ended December 31, 2023, see Note 6, “Investments in Non-Marketable Securities.”
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Goodwill
Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired and is assigned to reporting units. We test goodwill for
impairment considering amongst other things, whether there have been sustained declines in our share price. If we conclude it is more likely than not that the fair value is less than its
carrying amount, a quantitative fair value test is performed. Goodwill had a carrying value of $2.5 million and $3.2 million as of December 31, 2023 and 2022, respectively.
We test goodwill for impairment annually, on the last day of the fourth fiscal quarter, and between annual tests if events and circumstances indicate it is more likely than not that the
fair value is less than its carrying amount. The annual impairment test is completed using either: a qualitative "Step 0" assessment based on reviewing relevant events and circumstances;
or a quantitative "Step 1" assessment, which determines the fair value. To the extent the carrying amount is less than its estimated fair value, an impairment charge is recorded. Using a
relative fair value allocation methodology for assets and liabilities, we compare the carrying amount of net assets and the goodwill to its fair value. If the fair value exceeds its carrying
amount, goodwill is considered not impaired. Any excess carrying amount of goodwill over its fair value is recognized as an impairment. We recorded impairment charges related to
goodwill of $0.8 million, nil, and nil for the years ended December 31, 2023, 2022, and 2021, respectively. For additional information on the impairment charge recorded for the year
ended December 31, 2023, see Note 8, “Balance Sheets Details.”
Lease Accounting
We determine if an arrangement is a lease at inception. Where an arrangement is a lease, we determine if it is an operating lease or a finance lease. At lease commencement, we
record a lease liability and ROU asset. Lease liabilities represent the present value of our future lease payments over the expected lease term which includes options to extend or
terminate the lease when it is reasonably certain those options will be exercised. The present value of our lease liability is determined using our incremental collateralized borrowing
rate at lease inception. ROU assets represent our right to control the use of the leased asset during the lease and are recognized in an amount equal to the lease liability for leases with an
initial term greater than 12 months. Over the lease term, we use the effective interest rate method to account for the lease liability as lease payments are made and the ROU asset is
amortized to the consolidated statement of operations in a manner that results in straight-line expense recognition. We do not apply lease recognition requirements for short-term leases.
Instead, we recognize payments related to these arrangements in the consolidated statement of operations as lease costs on a straight-line basis over the lease term.
Income Taxes
We use the liability method of accounting for income taxes, whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws
and rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are provided when necessary to reduce deferred tax assets to the
amount that will more likely than not be realized.
We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax
credits, benefits and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenues and expenses for tax and
financial statement purposes. Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized on a jurisdiction
by jurisdiction basis. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income in the future. We have recorded a valuation allowance against
these deferred tax assets in jurisdictions where ultimate realization of deferred tax assets is more likely than not to occur. As of December 31, 2023 and 2022, we maintain a full
valuation allowance in all jurisdictions against the net deferred tax assets as we believe that it is more likely than not that the majority of deferred tax assets will not be realized.
We make estimates and judgments about our future taxable income that are based on assumptions that are consistent with our plans and estimates. Should the actual amounts differ
from our estimates, the amount of our valuation allowance may be materially impacted. Any adjustment to the deferred tax asset valuation allowance would be recorded in the
statements of operations for the periods in which the adjustment is determined to be required.
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We account for uncertainty in income taxes as required by the provisions of Accounting Standards Update (“ASU”) 2009-06, Income Taxes (Topic 740) Implementation Guidance
on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities, which clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not
that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to estimate and measure the tax benefit as the largest
amount that is more than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the
probability of various possible outcomes. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and may
not accurately anticipate actual outcomes.
The Tax Reform Act of 1986 and similar state provisions limit the use of net operating loss (“NOL”) carryforwards in certain situations where equity transactions result in a change
of ownership as defined by Internal Revenue Code Section 382. In the event we should experience such a change of ownership, utilization of our federal and state NOL carryforwards
could be limited.
Accounting Pronouncements
Recently adopted accounting pronouncements
Aside from those recently issued accounting pronouncements not yet adopted and described below, there have not been any recent accounting pronouncements or changes in
accounting pronouncements during the year ended December 31, 2023 that are of significance or potential significance to us.
Recently issued accounting pronouncements not yet adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The
amendments in the ASU are intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. This ASU is
effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the effects of the standard on our
consolidated financial statements and related disclosures.
In November 2023, FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in the ASU are intended
to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning
after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The standard should be applied retrospectively to
all prior periods presented in the financial statements. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.
In October 2023, FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.
The amendments in the ASU are intended to amend certain disclosure and presentation requirements for a variety of topics within the Accounting Standards Codification (“ASC”).
These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, as announced by the SEC. The
effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes
effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. We are currently evaluating the effects of the standard on our
consolidated financial statements and related disclosures.
Note 3. Revenue Recognition
Disaggregation of Revenue
The following table provides information about disaggregated revenue from contracts with customers into the nature of the products and services, and geographic regions, and
includes a reconciliation of the disaggregated revenue. The geographic regions that are tracked are the Americas (United States, Canada, and Latin America), EMEA (Europe, Middle
East, and Africa), and APAC (Australia, New Zealand, Southeast Asia, and China).
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Disaggregated information is as follows (in thousands):
Major products and service:
Product revenue
Research and development revenue
Total revenues
Primary geographical markets:
Americas
EMEA
APAC
Total revenues
2023
Year Ended December 31,
2022
2021
$
$
$
$
42,906
27,237
70,143
13,733
22,907
33,503
70,143
$
$
$
$
116,676
21,914
138,590
17,000
56,540
65,050
138,590
$
$
$
$
70,657
34,097
104,754
23,481
20,187
61,086
104,754
For additional information regarding revenue disaggregated by geography, see Note 15, “Segment, Geographical and Other Revenue Information.”
Contract Balances
The following table presents balances of contract assets, unbilled receivables, contract costs, and contract liabilities (in thousands):
Contract assets
Unbilled receivables
Contract costs
Contract liabilities: deferred revenue
December 31, 2023
December 31, 2022
$
$
$
$
815
9,904
—
10,761
$
$
$
$
2,116
7,016
19
30,609
We recognize accounts receivable when we have an unconditional right to recognize revenue and have issued an invoice to the customer. Our payment terms are generally between
30 and 90 days. We recognize unbilled receivables when we have an unconditional right to recognize revenue and have not issued an invoice to our customer. Unbilled receivables are
transferred to accounts receivable on issuance of an invoice. Unbilled receivables are classified separately on the consolidated balance sheets as an asset. We maintain a valuation
allowance on accounts receivables and unbilled receivables. As of December 31, 2023, we have $9.1 million of short-term unbilled receivables presented as unbilled receivables within
current assets and $0.8 million of long-term unbilled receivables that is included within the other non-current assets line item in the consolidated balance sheets. As of December 31,
2022, we had $7.0 million of short-term unbilled receivables presented as unbilled receivables within current asset.
Contract assets represent our right to recognize revenue for custom products with no alternate use and under binding non-cancellable contracts and are largely related to our
procurement of product. We recognize contract assets when we have a conditional right to recognize revenue. The transfer of control of certain products occurs in advance of the
invoicing process, which generates contract assets. In addition, we recognize a contract asset related to milestones not eligible for royalty accounting when we assess it is probable of
being achieved and there will be no significant reversal of cumulative revenues. Contract assets are classified separately on the consolidated balance sheets as an asset and transferred to
accounts receivables when our rights to payment become unconditional.
Contract liabilities, or deferred revenue, represent our obligation to transfer a product or service to the customer, and for which we have received consideration from the customer.
We recognize a contract liability when we receive advance customer payments under development agreements for research and development services, upfront license payments, and
from upfront customer payments received under product supply agreements. Contract liabilities are classified as a liability on the consolidated balance sheets.
Contract costs relate to incremental costs of obtaining a contract with a customer. Contract costs are amortized along with the associated revenue over the term of the contract.
During the years ended December 31, 2023, 2022 and 2021, we had no asset impairment charges related to contract assets.
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We recognized the following revenues (in thousands):
Revenue recognized in the period for:
Amounts included in contract liabilities at the beginning of the period:
Performance obligations satisfied
Changes in the period:
Changes in the estimated transaction price allocated to performance obligations satisfied in prior periods
Performance obligations satisfied from new activities in the period - contract revenue
Total revenues
Performance Obligations
Year Ended December 31,
2023
2022
$
$
17,937
4,165
48,041
70,143
$
$
2,038
279
136,273
138,590
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of
the reporting periods. The estimated revenue does not include contracts with original durations of one year or less, amounts of variable consideration attributable to royalties, or contract
renewals that are unexercised as of December 31, 2023.
The balances in the table below are partially based on judgments involved in estimating future orders from customers subject to the exercise of material rights pursuant to respective
contracts (in thousands):
Product revenue
$
10,121
$
140
$
140
$
360
$
10,761
2024
2025
2026
2027 and
Thereafter
Total
Note 4. Net Loss per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding, less restricted stock awards (“RSAs”) subject
to forfeiture. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock shares outstanding, less RSAs subject to forfeiture,
plus all additional common shares that would have been outstanding, assuming dilutive potential common stock shares had been issued for other dilutive securities. For all periods
presented, diluted and basic net loss per share are identical since potential common stock shares are excluded from the calculation, as their effect was anti-dilutive.
Anti-Dilutive Securities
In periods of net loss, the weighted average number of shares outstanding, prior to the application of the treasury stock method, excludes potentially dilutive securities from the
computation of diluted net loss per common share because including such shares would have an anti-dilutive effect.
The following shares were not considered in the computation of diluted net loss per share because their effect was anti-dilutive (in thousands):
Shares issuable under the Equity Incentive Plans and ESPP
(1)
(1)
Included 568,224 of anti-dilutive potential common shares from ESPP for the year ended December 31, 2023.
Note 5. Collaborative Arrangements
GSK Platform Technology Transfer, Collaboration and License Agreement
2023
9,028
Year Ended December 31,
2022
7,442
2021
5,215
In July 2014, we entered into a CodeEvolver Platform Technology Transfer, Collaboration and License agreement (the “GSK CodeEvolver Agreement”) with GSK. Pursuant to
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the terms of the agreement, we granted GSK a non-exclusive license to use the CodeEvolver technology platform to develop novel enzymes for use in the manufacture of GSK's
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pharmaceutical and health care products. We completed the transfer of the CodeEvolver
have been recognized as of April 2016. Depending upon GSK's successful application of the licensed technology, we have the potential to receive additional contingent payments that
range from $5.8 million to $38.5 million per project.
technology platform to GSK in April 2016 and all revenues relating to the technology transfer
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In 2019, we received a $2.0 million milestone payment relating to the advancement of an enzyme developed by GSK using our CodeEvolver technology platform. In 2021, we
received two additional milestone payments from GSK under the agreement. In 2023, we received an additional milestone payment from GSK under the agreement. We recognized
research and development revenue of $1.3 million, nil, and $4.3 million in the years ended December 31, 2023, 2022, and 2021, respectively.
®
Merck Platform Technology Transfer and License Agreement
In August 2015, we entered into a CodeEvolver technology platform transfer collaboration and license agreement (the “Merck CodeEvolver Agreement”) with Merck, Sharp &
technology platform in the field of human and animal healthcare. In 2016, we completed the final phase in the transfer
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®
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Dohme (“Merck”) which allows Merck to use the CodeEvolver
of the CodeEvolver
technology platform to Merck under the Merck CodeEvolver Agreement.
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We recognized research and development revenues of nil, $40 thousand, and $0.6 million in the years ended December 31, 2023, 2022 and 2021, respectively, for various research
projects under our collaborative arrangement.
We have the potential to receive payments of up to a maximum of $15.0 million for each commercial active pharmaceutical ingredient ("API") that is manufactured by Merck using
one or more novel enzymes developed by Merck using the CodeEvolver technology platform. The API payments, which are currently not recognized in revenue, are based on the
quantity of API developed and manufactured by Merck and will be recognized as usage-based royalties.
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In October 2018, we entered into an amendment to the Merck CodeEvolver Agreement which amended certain licensing provisions and one exhibit. In January 2019, we amended
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the Merck CodeEvolver Agreement to install certain CodeEvolver technology platform upgrades into Merck’s platform license installation and maintain those upgrades for a multi-
year term that expired in January 2022. The license installation was completed in 2019. No research and development revenues were recognized in the years ended December 31, 2023
and 2022. We recognized $0.1 million in research and development revenues under the terms of the amendment in the year ended December 31, 2021.
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Merck Sitagliptin Catalyst Supply Agreement
In February 2012, we entered into a five-year Sitagliptin Catalyst Supply Agreement (“Sitagliptin Supply Agreement”) with Merck whereby Merck may obtain commercial scale
enzyme for use in the manufacture of Januvia , its product based on the active ingredient sitagliptin. In December 2015, Merck exercised its options under the terms of the Sitagliptin
Supply Agreement to extend the agreement for an additional five years through February 2022. In September 2021, the Sitagliptin Supply Agreement was amended to extend the
agreement through December 2026.
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Effective as of January 2016, we and Merck amended the Sitagliptin Supply Agreement to prospectively provide for variable pricing based on the cumulative volume of sitagliptin
enzyme purchased by Merck. We have previously determined that the variable pricing, which provides a discount based on the cumulative volume of sitagliptin enzyme purchased by
Merck, provides Merck material rights and we recognized product revenues using the alternative method wherein we estimated the total expected consideration and allocated it
proportionately with the expected sales. Pursuant to the latest amendment of the Sitagliptin Supply Agreement, we have determined that the latest price per volume of sitagliptin enzyme
to be purchased by Merck no longer provides Merck material rights, and as such we are recognizing product revenue based on contractually stated prices effective as of February 2022.
We recognized $4.4 million, $5.9 million and $9.8 million in product revenue under this agreement in the years ended December 31, 2023, 2022 and 2021, respectively. This
represented 6%, 4%, and 9% of our total revenues in the years ended December 31, 2023, 2022 and 2021, respectively.
During the year ended December 31, 2023, we recorded revenue of $0.7 million from sitagliptin enzyme sales that were recognized over time based on the progress of the
manufacturing process. These products will be shipped within the three-month period following the end of 2023.
Enzyme Supply Agreement
In November 2016, we entered into a supply agreement whereby our customer may purchase quantities of one of our proprietary enzymes for use in its commercial manufacture of
a product. Pursuant to the supply agreement, we received an upfront payment in December 2016 which was recorded as deferred revenue. Such upfront payment will be recognized over
the period of the supply agreement as the customer purchases our proprietary enzyme. We additionally have determined that the volume discounts under the supply agreement provide
the customer material rights and we are recognizing revenues using the alternative method. In 2023, due to the early termination of the enzyme supply agreement with the customer, we
recognized $3.2 million of product revenue from the release of prior periods' product revenue deferrals and also recognized $1.3 million of product revenue as settlement fee pursuant to
the enzyme supply agreement with the same customer.
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As of December 31, 2023 and 2022, we had deferred revenue balances from the supply agreement of nil and $3.3 million.
Commercial Agreement
In April 2019, we entered into a multi-year commercial agreement with Tate & Lyle under which Tate & Lyle has received an exclusive license to use a suite of Codexis novel
performance enzymes in the manufacture of Tate & Lyle’s zero-calorie stevia sweetener, TASTEVA M, and other stevia products. Under the agreement, we will supply Tate & Lyle
with its requirements for these enzymes over a multiple year period and receive royalties on stevia products. In November 2020, we amended the commercial agreement based on Tate
& Lyle's intent to use a specific Codexis novel performance enzyme in its production of TASTEVA M Stevia Sweetener and became eligible to receive milestone payments of up to
$1.1 million. In the fourth quarter of 2020, we became eligible to receive a milestone payment of $0.4 million which we subsequently received in February 2021. The commercial
agreement with Tate & Lyle was terminated in 2023.
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Global Development, Option and License Agreement and Strategic Collaboration Agreement
In October 2017, we entered into the Nestlé License Agreement with Nestlé Health Science and, solely for the purpose of the integration and the dispute resolution clauses of the
Nestlé License Agreement, Nestlé Health Science S.A., to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of PKU.
In January 2019, we received notice from the U.S. Food and Drug Administration (“FDA”) that it had completed its review of our IND for CDX-6114 and concluded that we may
proceed with the proposed Phase 1b multiple ascending dose study in healthy volunteers in the United States. In February 2019, Nestlé Health Science exercised its option to obtain an
exclusive, worldwide, royalty-bearing, sub-licensable license for the global development and commercialization of CDX-6114 for the management of PKU. Upon exercising its option,
Nestlé Health Science made an option payment and assumed all responsibilities for future clinical development and commercialization of CDX-6114. In October 2023, we provided
notice pursuant to Nestlé License Agreement of our intent to abandon or transfer to Nestlé Health Science (at their option) the patents and patent applications related to CDX-6114 as of
December 5, 2023, and Nestlé Health Science notified us that they did not exercise their right to assume responsibility of such patents and patent applications.
In October 2017, we entered into the Nestlé SCA pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver technology platform to develop
novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas. The term of the Nestlé SCA has expired in December 2023, as we opted
out of a renewal period through December 2024.
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In January 2020, we entered into a development agreement with Nestlé Health Science pursuant to which we and Nestlé Health Science are collaborating to advance a lead
candidate discovered through our Nestlé SCA, CDX-7108, targeting exocrine pancreatic insufficiency, into preclinical and early clinical studies. We, together with Nestlé Health
Science, initiated a Phase 1 clinical trial of CDX-7108 in the fourth quarter of 2021, and on February 23, 2023, we and Nestlé Health Science announced interim results. In July 2023,
we announced plans to discontinue our development support of CDX-7108.
Under the Nestlé SCA and the development agreement, we recognized $4.1 million, $7.1 million and $6.9 million in research and development revenue in the years ended
December 31, 2023, 2022 and 2021, respectively. Both the Nestlé SCA and the development agreement were terminated in January 2024.
Acquisition Agreement
In December 2023, we entered into an acquisition agreement (the “Acquisition Agreement”) with Nestlé Health Science, pursuant to which we agreed to assign our interests in
CDX-7108 (including associated agreements and intellectual property rights) to Nestlé Health Science. Under the terms of the Acquisition Agreement, Nestlé Health Science will be
solely responsible for the continued development and commercialization of CDX-7108, including all associated costs, and Codexis will receive upfront payment, future potential
milestone payments and net-sales based royalties. We recognized research and development revenue of $5.0 million for the year ended December 31, 2023 related to the Acquisition
Agreement. We received the $5.0 million upfront fee in January 2024.
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Strategic Collaboration Agreement
In April 2018, we entered into the Porton Agreement with Porton to license key elements of our biocatalyst technology for use in Porton’s global custom intermediate and API
development and manufacturing business. Under the Porton Agreement, we are eligible to receive annual collaboration fees and research and development revenues. We received the
initial collaboration payments of $0.5 million and $0.5 million within 30 days of the effective date and on the first anniversary of the effective date of the Porton Agreement,
respectively. We also received annual collaboration payments of $1.0 million each during the first through fourth anniversaries of the effective date of the Porton Agreement. We
completed the technical transfer in the fourth quarter of 2018 and recognized the related revenue in 2018. We recognized revenue related to the functional license provided to Porton at a
point in time when control of the license was transferred to the customer. The initial term of the Porton Agreement expired in April 2023 and was not renewed for an extended term. We
recognized research and development revenue related to the Porton Agreement of nil, $0.1 million and $1.1 million in the years ended December 31, 2023, 2022 and 2021, respectively.
Platform Technology Transfer and License Agreement
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In May 2019, we entered into the Novartis CodeEvolver Agreement with Novartis. The Novartis CodeEvolver Agreement allows Novartis to use our proprietary CodeEvolver
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technology platform in the field of human healthcare. In July 2021, we announced the completion of the technology transfer period during which we transferred our proprietary
CodeEvolver technology platform to Novartis (the “Technology Transfer Period”). As a part of this technology transfer, we provided to Novartis our proprietary enzymes, proprietary
protein engineering protocols and methods, and proprietary software algorithms. In addition, our teams and Novartis scientists participated in technology training sessions and
collaborative research projects at our laboratories in Redwood City, California and at a designated Novartis laboratory in Basel, Switzerland. Novartis has now installed the
CodeEvolver technology platform at its designated laboratory.
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Pursuant to the agreement, we received an upfront payment of $5.0 million shortly after the effective date of the Novartis CodeEvolver Agreement. We completed the second
technology milestone transfer under the agreement in 2020 and received a milestone payment of $4.0 million. We have also received an aggregate of $5.0 million for the completion of
the third technology milestone in 2021. In consideration for the continued disclosure and license of improvements to the technology and materials during a multi-year period that began
on the conclusion of the Technology Transfer Period (the “Improvements Term”), Novartis will pay Codexis annual payments over four years which amount to an additional
$8.0 million in aggregate. We received an aggregate of $4.0 million for the first two annual payments in 2022 and 2023. The Company also has the potential to receive quantity-
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dependent, usage payments for each API that is manufactured by Novartis using one or more enzymes that have been developed or are in development using the CodeEvolver
technology platform during the period beginning on the conclusion of the Technology Transfer Period and ending on the expiration date of the last to expire licensed patent. Revenue for
the combined initial license and technology transfer performance obligation was recognized overtime based on hours incurred. Revenue allocated to improvements made during the
Improvements Term is being recognized during the Improvements Term.
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We recognized $1.1 million, $1.0 million and $1.6 million in research and development revenue in the years ended December 31, 2023, 2022 and 2021, respectively.
License Agreement
In December 2019, we entered a license agreement with Roche Sequencing Solutions, Inc. (“Roche”) to provide Roche with our evolved T4 DNA ligase high-performance
molecular diagnostic enzyme. The royalty bearing license grants Roche worldwide rights to include the evolved T4 DNA ligase in its nucleic acid sequencing products and workflows.
Under the license agreement, we received an initial collaboration fee payment of $0.8 million within 45 days of the effective date of the agreement, and we received an additional $0.9
million milestone payment after the completion of technology transfer in October 2020. In February 2024, we entered into a new license agreement with Roche granting them rights to
our newly engineered DNA ligase, superseding our prior agreement in December 2019 for our evolved T4 DNA ligase. We are eligible to receive an aggregate of mid-single digit
millions in upfront and technical milestones payments. No research and development revenues were recognized in the years ended December 31, 2023 and 2022. We recognized
research and development fees of $0.9 million in the year ended December 31, 2021.
Strategic Collaboration and License Agreement
In March 2020, we entered into a Strategic Collaboration and License Agreement (the “Takeda Agreement”) with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary
of Takeda Pharmaceutical Co. Ltd. (“Takeda”), pursuant to which we have collaborated with Takeda to research and develop protein sequences for use in gene therapy products for
certain diseases in accordance with each applicable program plan.
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On execution of the Takeda Agreement, we received an upfront non-refundable cash payment of $8.5 million and we initiated activities under three program plans for Fabry
Disease, Pompe Disease, and an undisclosed blood factor deficiency, respectively (the “Initial Programs”). In May 2021, Takeda elected to exercise its option to initiate an additional
program for a certain undisclosed rare genetic disorder; as a result we received the option exercise fee during the third quarter of 2021. We completed the research and development
services relating to the fourth program with Takeda during the second quarter of 2023.
Pursuant to the Takeda Agreement, we are eligible to receive other payments that include (i) clinical development and commercialization-based milestones, per target gene, of up to
$104.0 million and (ii) tiered royalty payments based on net sales of applicable products at percentages ranging from the mid-single digits to low single-digits. Takeda announced in
April 2023 the discontinuation of these development programs.
Revenue relating to the functional licenses provided to Takeda was recognized at a point in time when the control of the license transferred to the customer. We recognized research
and development revenue related to the Takeda Agreement of $2.0 million, $4.9 million and $7.4 million in the years ended December 31, 2023, 2022, and 2021, respectively. As of
December 31, 2023 and 2022, we had deferred revenue balances of nil and $0.9 million, respectively.
Master Collaboration and Research Agreement, Stock Purchase Agreement and Enzyme Supply Agreement
In June 2020, we entered into a Stock Purchase Agreement with Molecular Assemblies, Inc. (“MAI”) in which we purchased 1,587,050 shares of MAI's Series A preferred stock for
$1.0 million. In connection with the June 2020, transaction, John Nicols, our former President and Chief Executive Officer, joined MAI’s board of directors. See Note 14, “Related
Party Transactions” for additional information on our investment in MAI.
Concurrently with our initial equity investment, we entered into the MAI Agreement, pursuant to which we performed services utilizing our CodeEvolver technology platform to
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improve DNA polymerase enzymes in exchange for compensation in the form of additional shares of MAI's Series A and B preferred stock which are valued based on the observed
transaction price of similar securities of MAI issued to third parties. Under the MAI Agreement, we will have the right to use and sell the engineered enzymes to third parties for any
purpose other than for the synthesis of native DNA. Under the MAI Agreement, we would make a $0.5 million payment to MAI upon our achievement of a milestone of $5.0 million in
aggregate commercial sales to third parties of the engineered enzymes or any product incorporating or derived from the engineered enzymes for any purpose other than the synthesis of
native DNA. As contemplated in the MAI Agreement, we executed the Commercial License and Enzyme Supply Agreement with MAI (“MAI Supply Agreement”) in July 2022
following the completion of certain timelines specified in the SOW.
We completed the R&D service with MAI pursuant to the MAI Agreement during the first quarter of 2022. In December 2021, we received the primary milestone payment pursuant
to the MAI Agreement of $1.0 million in the form of an additional 1,587,049 shares of MAI Series B preferred stock. Upon execution of the MAI Supply Agreement in July 2022, we
received the commercialization and enzyme supply agreement milestone payment pursuant to the MAI Agreement of $1.0 million in the form of an additional 1,587,049 shares of MAI
Series B preferred stock. Pursuant to the MAI Agreement, we recognized $1.2 million and $2.0 million in research and development revenue from transactions with MAI in the years
ended December 31, 2022 and 2021, respectively. Payment for the services rendered was received in the form of additional MAI Series A and Series B preferred stock. We received an
aggregate of 1,587,049 and 3,491,505 shares of MAI's Series A and B preferred stock in the years ended December 31, 2022 and 2021, respectively.
In April 2022, we received a purchase order from MAI for the delivery of certain enzyme products to MAI in 2022. In July 2022, we and MAI executed the MAI Supply
Agreement that will enable MAI to utilize an evolved terminal deoxynucleotidyl transferase (“TdT”) enzyme in MAI’s Fully Enzymatic Synthesis™ (“FES™”) technology. We
recognized $0.2 million and $0.5 million in product revenue in the years ended December 31, 2023 and 2022, respectively.
Pfizer Enzyme Supply Agreement
During 2021 and 2022, we received purchase orders from Pfizer, Inc. (“Pfizer”) for large quantities of our proprietary enzyme product, CDX-616, for use by Pfizer in the
manufacture of a critical intermediate for its proprietary active pharmaceutical ingredient, nirmatrelvir, used by Pfizer in combination with the active pharmaceutical ingredient ritonavir,
as its PAXLOVID™ (nirmatrelvir tablets; ritonavir tablets) product for the treatment of COVID-19 infections in humans.
We are a party to an Enzyme Supply Agreement with Pfizer Ireland Pharmaceuticals, a subsidiary of Pfizer, Inc. (the “Pfizer Supply Agreement”), covering the manufacture, sale and
purchase of CDX-616 for use by Pfizer in the manufacture of nirmatrelvir. Under the terms of the Pfizer Supply Agreement, Pfizer paid us a fee of $25.9 million in August 2022 which
was recorded as deferred revenue. Pursuant to the agreement, 90% of the fee ($23.3 million) is creditable against (i) future orders of CDX-616 used to manufacture its PAXLOVID™
with shipment dates prior to December 31, 2023, and (ii) fees associated with
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any new development and licensing agreements with Pfizer entered into prior to April 4, 2023. On March 31, 2023, we entered into a license agreement whereby Pfizer utilized a portion
of the $23.3 million credit towards a license to develop future product candidates, for which we recognized $5.0 million as non-cash research and development revenue in the second
quarter of 2023. Pfizer's ability to utilize the credit under item (i) above expired on December 31, 2023, and under item (ii) above expired on April 4, 2023. We also recognized
$2.0 million of non-cash research and development revenue, and credited against the $25.9 million fee, for other services provided to Pfizer during the year ended December 31, 2023.
Up to 50% of any portion of the $25.9 million which has not been credited under items (i) and (ii) is creditable against future orders of CDX-616 used to manufacture PAXLOVID™
with shipment dates in 2024.
During the fourth quarter of 2023, and pursuant to the Pfizer Supply Agreement, we released the prior year deferrals for the unused portion of the retainer fee that is not creditable
beyond 2023 and we recognized product revenue of $8.2 million in the year ended December 31, 2023. We recognized product revenue of $75.4 million and $34.5 million in the years
ended December 31, 2022 and 2021, respectively, from the sale of quantities of CDX-616 to Pfizer. Product revenues recognized by us from the Pfizer Supply Agreement represented
12%, 54%, and 33% of our total revenues for the years ended December 31, 2023, 2022, and 2021 respectively.
As of December 31, 2023 and 2022, we had $9.5 million and $24.4 million, respectively, in deferred revenue related to the $25.9 million fee received from Pfizer.
Note 6. Investments in Non-Marketable Securities
Non-Marketable Debt Securities
We classify non-marketable debt securities, which are accounted for as available-for-sale, within Level 3 in the fair value hierarchy because we estimate the fair value based on a
qualitative analysis using the most recent observable transaction price and other significant unobservable inputs including volatility, rights, and obligations of the securities we hold.
We determine gains or losses on the sale or extinguishment of non-marketable debt securities using a specific identification method. Unrealized gains and losses from bifurcated
embedded derivatives, which represent share-settled redemption features, are recorded as other expense, net, in the consolidated statements of operations. Unrealized gains and losses on
non-marketable debt securities are recorded as a component of other comprehensive loss until realized. Realized gains or losses are recorded as a component of other income (expense),
net.
In November 2020, we purchased convertible subordinated notes issued by Arzeda Corp. (“Arzeda”), an early-stage computational protein design company, for $1.0 million and
the investment was classified as available-for-sale non-marketable interest-bearing debt securities. In July 2021, we converted the non-marketable debt security with a carrying value of
$1.3 million into 207,070 shares of Series B-2 preferred stock of Arzeda. During the year ended December 31, 2021, we recognized $0.3 million in interest income from interest earned
on our investment in this debt security.
There were no investments in non-marketable debt securities as of December 31, 2023 and 2022.
Non-Marketable Equity Securities
Our non-marketable equity securities are investments in privately held companies without readily determinable market value and primarily relate to our investments in MAI,
seqWell and Arzeda. These investments are accounted for under the measurement alternative and are measured at cost minus impairment, if any, plus or minus changes resulting from
observable price changes for identical or similar securities of the same issuer. Non-marketable equity securities are measured at fair value on a non-recurring basis and classified within
Level 2 in the fair value hierarchy when we estimate the fair value of these investments using the observable transaction price paid by third party investors for the same or similar
security of the same issuers. The fair value of non-marketable equity securities are classified within Level 3 when we estimate fair value using unobservable inputs such as when we
remeasure due to impairment and we use discount rates, market data of comparable companies, and rights and obligations of the securities the Company holds, among others. We adjust
the carrying value of non-marketable equity securities which have been remeasured during the period and recognize resulting gains or losses as a component of other income (expense),
net in the consolidated statements of operations.
In November 2023, the 207,070 shares of Arzeda’s Series B preferred stock were converted into 41,414 common stock pursuant to the Stock Purchase Agreement.
In March 2023, we purchased an additional 985,545 shares of Series B preferred stock for $0.8 million in MAI, a privately held life sciences company. As of December 31, 2023,
we held an aggregate of 19,277,914 shares of MAI's Series A and B preferred stock that we have earned or purchased from MAI. See Note 14, “Related Party Transactions” for
additional information on our investment in MAI.
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In March 2022, we entered into a Stock Purchase Agreement with seqWell Inc. (“seqWell”), a privately held life sciences company, pursuant to which we purchased 1,000,000
shares of seqWell's Series C preferred stock for $5.0 million. In March 2023, we entered into a Master Collaboration Agreement and Research Agreement with seqWell (the “seqWell
Agreement”), pursuant to which we are providing research and experimental screening and protein engineering activities in exchange for compensation in the form of additional shares
of seqWell's common stock. In addition to our initial equity investment and the shares we have received under the seqWell Agreement, in September 2023, we purchased an additional
88,256 shares of seqWell's Series C-1 preferred stock and 44,128 common stock warrants for $0.4 million. We received 205,279 shares of seqWell's common stock from research and
development services with seqWell and we recognized $0.2 million in research and development revenue from these services in the year ended December 31, 2023. As of December 31,
2023, we held an aggregate of 1,088,256 shares of Series C and C-1 preferred stock, 205,279 shares of common stock and 44,128 of common stock warrants that we have earned or
purchased from seqWell.
For the year ended December 31, 2023, we recognized an impairment charge of $12.2 million and included this as adjustment to the carrying value of our investments in seqWell,
Arzeda and MAI. This adjustment, which is presented within other income (expense), net in the consolidated statements of operations, included the write-down of the carrying value of
our investment in seqWell by $3.0 million during the third quarter of 2023 to its estimated fair value as determined based on valuation methods using the recent transaction price of
similar preferred stock securities issued by seqWell and adjusted for the rights and obligations of the preferred stock securities the Company holds. The $1.2 million of impairment
charge on our investment in Arzeda is related to the write-down to its estimated fair value based on the latest observed transaction price of Arzeda's preferred stock securities issued
during the fourth quarter of 2023 and the subsequent conversion of our existing Series B preferred stock into Arzeda's common stock during the fourth quarter of 2023. The other
$8.0 million of impairment charge represents the difference between the estimated fair value and carrying value of our investment in MAI as of December 31, 2023 based on
quantitative and qualitative analysis. This analysis involved use of judgment, estimates and assumptions, such as the near-term prospects of the investee in the market in which it
operates, evaluation of the investee’s financial condition in relation to its outstanding obligations, and probabilities of securing additional capital through various alternative scenarios.
For the year ended December 31, 2022, we recognized a $0.2 million unrealized gain in other income, net, and included as adjustment to the carrying value of our investment in
MAI, for the remeasurement of the additional 1,587,049 shares of Series B preferred stock received as a milestone payment during the third quarter of 2022 based on the latest observed
transaction price of MAI's preferred stock.
Other than as disclosed above, there were no remeasurement events for our investments in non-marketable equity securities in 2023 and 2022. We recognized no realized gains or
losses during the years ended December 31, 2023 and 2022.
The following table presents the carrying value of our non-marketable equity securities (in thousands):
MAI
seqWell
Arzeda
Other investments in non-marketable equity securities
Total non-marketable equity securities
Note 7. Fair Value Measurements
December 31, 2023
December 31, 2022
$
$
6,693
2,625
82
300
9,700
$
$
13,921
5,000
1,289
300
20,510
The following tables present the financial instruments that were measured at fair value on a recurring basis within the fair value hierarchy (in thousands):
Money market funds
Money market funds
Level 1
Level 2
Level 3
Total
$
56,374
$
—
$
—
$
56,374
December 31, 2023
Level 1
Level 2
Level 3
$
77,309 $
—
$
—
$
Total
77,309
December 31, 2022
During the years ended December 31, 2023 and 2022, we did not recognize any significant credit losses nor other-than-temporary impairment losses on non-marketable securities.
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Note 8. Balance Sheet Details
Cash Equivalents
Cash equivalents consisted of the following (in thousands):
Money market funds
(1)
December 31, 2023
December 31, 2022
Adjusted Cost
Estimated Fair
Value
Adjusted Cost
Estimated Fair
Value
$
56,374
$
56,374
$
77,309
$
77,309
(1)
Money market funds are classified in cash and cash equivalents on our consolidated balance sheets. Average contractual maturities (in days) is not applicable.
As of December 31, 2023, the total cash and cash equivalents balance of $65.1 million consisted of money market funds of $56.4 million and cash of $8.7 million held with major
financial institutions. As of December 31, 2022, the total cash and cash equivalents balance of $114.0 million consisted of money market funds of $77.3 million and cash of $36.7
million held with major financial institutions.
Inventories
Inventories consisted of the following (in thousands):
Raw materials
Work in process
Finished goods
Total inventories
Prepaid expenses and other current assets
December 31,
2023
2022
$
$
108
7
2,570
2,685
$
$
108
91
1,830
2,029
As of December 31, 2023, prepaid expenses and other current assets consists of prepaid expenses of $4.6 million and other current assets of $0.6 million. As of December 31, 2022,
prepaid expenses and other current assets consists of prepaid expenses of $4.8 million and other current assets of $0.7 million.
Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
(1)
Laboratory equipment
Leasehold improvements
Computer equipment and software
Office equipment and furniture
Construction in progress
(2)
Property and equipment
Less: accumulated depreciation and amortization
Property and equipment, net
(1)
(2)
Fully depreciated property and equipment with a cost of $3.0 million and $1.5 million were retired during the years ended December 31, 2023 and 2022, respectively.
Construction in progress includes equipment received but not yet placed into service pending installation.
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December 31,
2023
2022
$
$
37,216
11,912
2,565
1,469
1,636
54,798
(39,311)
15,487
$
$
39,679
16,633
3,039
1,345
1,739
62,435
(39,821)
22,614
In July 2023, we announced our plan to consolidate operations from our San Carlos facility to our headquarters in Redwood City. As part of this plan, we entered into agreements to
sell certain laboratory equipment located in our San Carlos facility through an asset auction and as part of the lease assignment of the San Carlos Space to Vaxcyte (see further
discussion at Note 13, “Commitments and Contingencies”). These certain items of laboratory equipment met the assets held for sale criteria and were sold during the fourth quarter of
2023. Using a fair value estimate based of Level 3 inputs in the fair value hierarchy, the Company determined that the carrying value of these assets exceeds fair value less costs to sell,
which resulted in a write-down of $1.5 million, presented within the asset impairment and other charges line item in the consolidated statements of operations in the year ended
December 31, 2023.
During the year ended December 31, 2023, the Company recorded a non-cash impairment charge of $4.7 million associated with the San Carlos facility leasehold improvements.
For additional information, see Note 13, “Commitments and Contingencies.”
Depreciation expense included in both research and development expenses and selling, general and administrative expenses in the consolidated statements of operations was as
follows (in thousands):
Depreciation expense
Goodwill
Goodwill at beginning of period
Impairment
Goodwill at end of period
2023
Year Ended December 31,
2022
2021
$
5,518
$
5,402
$
3,113
December 31,
2023
2022
$
$
3,241
(778)
2,463
$
$
3,241
—
3,241
Goodwill was previously allocated to each of the Company's reporting units. In July 2023, we announced a restructuring of our business and that we are discontinuing investment in
certain development programs, primarily in Novel Biotherapeutics. As a result of this plan, the Company determined that a triggering event had occurred that required an interim
goodwill impairment test during the third quarter of 2023. The fair value estimate used in the interim goodwill impairment test was primarily based on Level 3 inputs in the fair value
hierarchy. Based on the results of the impairment evaluation, the Company determined that the goodwill within the Novel Biotherapeutics reporting unit was impaired, which resulted in
a non-cash impairment charge of $0.8 million to write off all of the associated goodwill. The impairment charge is recorded within the asset impairment and other charges in the
condensed consolidated statements of operation in the year ended December 31, 2023. Goodwill had a carrying value of $2.5 million and $3.2 million as of December 31, 2023 and
2022, respectively.
Other Accrued Liabilities
Other accrued liabilities consisted of the following (in thousands):
Accrued professional and outside service fees
Accrued purchases
Other
Total other accrued liabilities
Note 9. Stock-based Compensation
Equity Incentive Plans
December 31,
2023
2022
2,330
1,402
1,003
4,735
$
$
3,495
10,852
932
15,279
$
$
In January 2023, our board of directors (the “Board”) approved the 2022 Employment Inducement Award Plan (the “2022 Inducement Plan”) which provides for the grant of non-
qualified stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance awards, other stock awards and dividend equivalents to eligible employees with
respect to an aggregate of up to 2,000,000 shares of our common stock. In June 2023, the 2022 Inducement Plan was terminated upon the approval of an amendment to the Company's
2019 Incentive Award Plan (the “2019 Plan”) at the annual meeting of the Company's stockholders (the “Annual Meeting”) in June 2023.
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In 2019, the Board and stockholders approved the 2019 Plan. The 2019 Plan superseded and replaced in its entirety our 2010 Equity Incentive Plan (the “2010 Plan”) which was
effective in March 2010, and no further awards will be granted under the 2010 Plan; however, the terms and conditions of the 2010 Plan will continue to govern any outstanding awards
thereunder. The 2010 Plan provided for the grant of incentive stock options, non-statutory stock options, RSUs, RSAs, PSUs, PBOs, stock appreciation rights, and stock purchase rights
to our employees, non-employee directors and consultants. The 2019 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options,
stock appreciation rights, RSA, RSUs, performance-contingent restricted stock units (“PSUs”), performance based options (“PBOs”), other stock or cash based awards and dividend
equivalents to eligible employees and consultants of the Company or any parent or subsidiary, as well as members of the Board.
The number of shares of our common stock that were initially available for issuance under the 2019 Plan is equal to the sum of (i) 7,897,144 shares, and (ii) any shares subject to
awards granted under the 2010 Plan that were outstanding as of April 22, 2019 and thereafter terminate, expire, lapse or are forfeited. In June 2019, 8.1 million shares authorized for
issuance under the 2019 Plan were registered under the Securities Act of 1933, as amended (the “Securities Act”). In April 2023, the Board approved an amendment to the 2019 Plan
(the “2019 Amended Plan”) which became effective upon stockholders' approval at the Annual Meeting in June 2023. The 2019 Amended Plan included the (i) increase in the number
of shares available by 8,000,000 shares, such that an aggregate of 15,897,144 shares are reserved for issuance under the 2019 Amended Plan and any shares subject to awards granted
under the 2010 Plan, and (ii) increase in the number of shares that may be granted as incentive stock options under the 2019 Amended Plan such that an aggregate of 22,000,000 shares
of common stock may be granted as incentive stock options under the 2019 Amended Plan.
As of December 31, 2023, total shares remaining available for issuance under the 2019 Plan were 9.1 million shares.
Employee Stock Purchase Plan
In April 2023, the Board approved an employee stock purchase plan (the “ESPP”) which became effective upon approval at the Annual Meeting in June 2023. The ESPP allows
eligible employees of the Company to purchase shares of our common stock through payroll deductions over 24-month offering periods. The per share purchase price will be the lower
of 85% of the closing trading price per share of our common stock on the first trading date of an offering period in which a participant is enrolled or 85% of the closing trading price per
share on the purchase date. Participant purchases are limited to a maximum of $25,000 of fair value of our stock per calendar year. The Company is authorized to grant up to 2,000,000
shares of common stock under the ESPP. The first offering period of the ESPP commenced in December 2023 and as of December 31, 2023, the Company had not issued any shares of
common stock under the ESPP. We recognized $25 thousand of stock-based compensation expenses related to the ESPP in the year ended December 31, 2023.
Stock Options
The option exercise price for incentive stock options must be at least 100% of the fair value of our common stock on the date of grant and the option exercise price for non-statutory
stock options is at least 85% of the fair value of our common stock on the date of grant, as determined by the Board. If, at the time of a grant, the optionee directly or by attribution owns
stock possessing more than 10% of the total combined voting power of all of our outstanding capital stock, the exercise price for these options must be at least 110% of the fair value of
the underlying common stock. Stock options granted to employees generally have a maximum term of ten years and vest over four years from the date of grant, of which 25% vest at
the end of one year, and 75% vest monthly over the remaining three years. We may grant options with different vesting terms from time to time. Unless an employee's termination of
service is due to disability or death, upon termination of service, any unexercised vested options will be forfeited at the end of three months or the expiration of the option, whichever is
earlier.
Restricted Stock Units (“RSUs”)
We also grant employees RSUs, which generally vest over either a three year period with 33% of the shares subject to the RSUs vesting on each yearly anniversary of the vesting
commencement date or over a four-year period with 25% of the shares subject to the RSU vesting on each yearly anniversary of the vesting commencement date, in each case contingent
upon such employee’s continued service on such vesting date. RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. We may
grant RSUs with different vesting terms from time to time.
88
Performance-contingent Restricted Stock Units (“PSUs”) and Performance Based Options (“PBOs”)
In prior years, the compensation committee of the Board approved grants of PBOs and PSUs to our executives, and solely in respect of non-executive employees, delegated to our
CEO the authority to approve grants of PSUs. The PSUs and PBOs vest based upon both the successful achievement of certain corporate operating milestones in specified timelines and
continued employment through the applicable vesting date. When the performance goals are deemed to be probable of achievement for these types of awards, recognition of stock-based
compensation expense commences. Once the number of shares eligible to vest is determined, those shares vest in two equal installments with 50% vesting upon achievement, as
determined by the compensation committee of the Board, and the remaining 50% vesting on the first anniversary of achievement, in each case, subject to the recipient’s continued
service through the applicable vesting date. If the performance goals are achieved at the threshold level, the number of shares eligible to vest in respect of the PSUs and PBOs would be
equal to half the number of PSUs granted and one-quarter the number of shares underlying the PBOs granted. If the performance goals are achieved at the target level, the number of
shares eligible to vest in respect of the PSUs and PBOs would be equal to the number of PSUs granted and half of the shares underlying the PBOs granted. If the performance goals are
achieved at the superior level, the number of shares eligible to vest in respect of the PSUs would be equal to two times the number of PSUs granted and equal to the number of PBOs
granted. The number of shares issuable upon achievement of the performance goals at the levels between the threshold and target levels for the PSUs and PBOs or between the target
level and superior levels for the PSUs would be determined using linear interpolation. Achievement below the threshold level would result in no shares being eligible to vest in respect
of the PSUs and PBOs.
No PSUs and PBOs were granted in 2023. In 2022, we awarded PSUs (“2022 PSUs”) and PBOs (“2022 PBOs”), each of which commence vesting based upon the achievement of
various weighted performance goals, including finance and corporate strategy, performance enzymes and biotherapeutics deliverables, research plans, and organizational development.
In the first quarter of 2023, the compensation committee of the Board determined that the 2022 PSUs and 2022 PBOs performance goals had been achieved at 85.0% and 42.5% of the
target level, respectively, and recognized stock-based compensation expenses accordingly. Accordingly, 50% of the shares underlying the 2022 PSUs and PBOs vested in the first
quarter of 2023 and 50% of the shares underlying the 2022 PSUs and PBOs will vest in the first quarter of 2024, in each case, subject to the recipient’s continued service on each vesting
date.
In 2021, we awarded PSUs (“2021 PBOs”) and PBOs (“2021 PBOs”), each of which commence vesting based upon the determination of the compensation committee of the Board
of the achievement of various weighted performance goals, including total revenues, product revenue, performance enzymes pipeline advancements, biotherapeutics pipeline
advancements, organization and infrastructure upgrades, and significant events that can be publicly announced. In the first quarter of 2022, we determined that the 2021 PSUs and 2021
PBOs performance goals had been achieved at 146% and 73% of the target level, respectively, and recognized stock-based compensation expenses accordingly. Accordingly, 50% of the
shares underlying the 2021 PSUs and PBOs vested in the first quarter of 2022 and 50% of the shares underlying the 2021 PSUs and PBOs vested in the first quarter of 2023, in each
case, subject to the recipient’s continued service on each vesting date.
Stock-Based Compensation Expense
Stock-based compensation expense is included in the consolidated statements of operations as follows (in thousands):
Costs of product revenue
Research and development
Selling, general and administrative
Total
2023
Year Ended December 31,
2022
2021
$
$
354
2,631
6,986
9,971
$
$
452
3,907
10,172
14,531
$
$
224
2,663
8,706
11,593
89
The following table presents total stock-based compensation expense by security type included in the consolidated statements of operations (in thousands):
Year Ended December 31,
2022
2023
Stock options
RSUs and RSAs
PSUs
PBOs
ESPP
Total
$
$
3,962
4,447
1,649
(112)
25
9,971
$
$
4,167
4,807
3,268
2,289
—
14,531
$
$
2021
2,764
2,768
2,333
3,728
—
11,593
In connection with the retirement of John Nicols, our former President and Chief Executive Officer, in August 2022, and the Transition and Separation Agreement between Mr.
Nicols and the Company, certain supplementary modifications were made to Mr. Nicols' vested and unvested stock option and PBOs awards including voluntary forfeiture of certain
unvested stock option and PBOs awards and the extension of the post-termination exercise period of certain vested stock option and PBOs awards. During the year ended December 31,
2022, we recorded a one-time, non-cash incremental compensation expense of $1.0 million, net of the required reversal of previously recognized stock-based compensation expenses
attributed to unvested shares, in selling, general and administrative expenses related to these stock option award modifications.
Grant Award Activities:
Stock Option Awards
We estimated the fair value of stock options using the Black-Scholes-Merton option-pricing model based on the date of grant. The following summarizes the weighted-average
assumptions used to estimate the fair value of employee stock options granted:
Expected life (years)
Volatility
Risk-free interest rate
Expected dividend yield
2023
5.8
%
%
%
66.2
4.0
0.0
Year Ended December 31,
2022
5.7
%
%
%
62.1
3.1
0.0
2021
5.6
%
%
%
52.5
0.8
0.0
The following summarizes the weighted-average assumptions used to estimate the fair value of 50,000, nil, and 9,000 shares of stock options granted to non-employees for services
valued at $0.1 million, nil, and $0.1 million during the years ended December 31, 2023, 2022, and 2021 respectively:
Expected life (years)
Volatility
Risk-free interest rate
Expected dividend yield
2023
5.8
%
%
%
70.1
4.7
0.0
Year Ended December 31,
2022
0.0
%
%
%
—
—
0.0
2021
5.6
%
%
%
54.1
0.9
0.0
The weighted average grant date fair value per share of non-employee stock options granted respectively in 2023, 2022, and 2021 was $1.05, nil and $11.29, respectively.
90
The following tables summarizes stock option activities:
Outstanding at December 31, 2020
Granted
Exercised
Forfeited/Expired
Outstanding at December 31, 2021
Granted
Exercised
Forfeited/Expired
Outstanding at December 31, 2022
Granted
Exercised
Forfeited/Expired
Outstanding at December 31, 2023
Number
of
Shares
(In Thousands)
Weighted Average
Exercise Price
Per Share
3,385
286
(664)
(72)
2,935
2,000
(410)
(275)
4,250
2,046
(283)
(839)
5,174
$
$
$
$
$
$
$
$
$
$
$
$
$
7.19
26.85
6.96
17.99
8.90
8.90
2.33
19.01
8.88
5.23
1.97
12.08
7.31
Outstanding at December 31, 2023
Exercisable at December 31, 2023
Vested and expected to vest at December 31, 2023
Number
of
Shares
(In Thousands)
Weighted Average
Exercise Price
Per Share
5,174
2,231
4,748
$
$
$
7.31
8.61
7.42
Weighted Average
Remaining Contractual
Term
(In Years)
6.7
3.6
6.4
Aggregate Intrinsic
Value
(In Thousands)
$
$
$
198
79
170
The weighted average grant date fair value per share of employee stock options granted in 2023, 2022, and 2021 were $3.31, $4.99 and $12.80, respectively. The total intrinsic
value of options exercised in 2023, 2022, and 2021 were $0.7 million, $3.1 million and $14.9 million, respectively.
As of December 31, 2023, there was $8.2 million of unrecognized stock-based compensation, net of expected forfeitures, related to unvested stock options, which we expect to
recognize over a weighted average period of 2.9 years.
Restricted Stock Awards (“RSAs”)
The following table summarizes RSA activities:
Non-vested balance at December 31, 2020
Granted
Vested
Non-vested balance at December 31, 2021
Granted
Vested
Non-vested balance at December 31, 2022
Granted
Vested
Non-vested balance at December 31, 2023
Number
of
Shares
(In Thousands)
Weighted Average
Grant Date Fair Value
Per Share
96
46
(62)
80
159
(58)
181
277
(133)
325
$
$
$
$
$
$
$
$
$
$
11.44
21.91
11.31
17.53
7.53
18.42
8.45
2.89
9.04
3.48
91
The total fair value, as of the vesting date, of RSAs vested in fiscal years 2023, 2022 and 2021 were $0.4 million, $0.5 million and $1.3 million respectively.
As of December 31, 2023, there was $0.6 million of unrecognized stock-based compensation cost related to non-vested RSAs, which we expect to recognize over a weighted
average period of 0.7 years.
Restricted Stock Units ("RSUs")
The following table summarizes RSU activities:
Non-vested balance at December 31, 2020
Granted
Vested
Forfeited/Expired
Non-vested balance at December 31, 2021
Granted
Vested
Forfeited/Expired
Non-vested balance at December 31, 2022
Granted
Vested
Forfeited/Expired
Non-vested balance at December 31, 2023
Number
of
Shares
(In Thousands)
Weighted Average
Grant Date Fair Value
Per Share
176
163
(70)
(37)
232
518
(106)
(126)
518
1,049
(204)
(343)
1,020
$
$
$
$
$
$
$
$
$
$
$
$
$
14.17
26.59
13.57
21.89
21.83
17.46
21.21
19.55
18.15
5.24
18.42
9.71
7.66
The total fair value, as of the vesting date, of RSUs vested in fiscal years 2023, 2022 and 2021 were $1.1 million, $1.8 million and $1.8 million respectively.
As of December 31, 2023, there was $4.1 million of unrecognized stock-based compensation cost related to non-vested RSUs, which we expect to recognize over a weighted
average period of 2.0 years.
Performance-Contingent Restricted Stock Units (“PSUs”)
The following table summarizes PSU activities:
Non-vested balance at December 31, 2020
Granted
Vested
Forfeited/Expired
Non-vested balance at December 31, 2021
Granted
Vested
Forfeited/Expired
Non-vested balance at December 31, 2022
Vested
Forfeited/Expired
Other
Non-vested balance at December 31, 2023
92
Number
of
Shares
(In Thousands)
Weighted Average
Grant Date Fair Value
Per Share
131
82
(66)
(19)
128
686
(107)
(40)
667
(315)
(75)
15
292
$
$
$
$
$
$
$
$
$
$
$
$
$
15.34
26.16
16.14
19.38
21.24
9.55
20.52
19.93
9.41
11.02
12.49
25.05
7.69
The total fair value, as of the vesting date, of PSUs vested in the years ended December 31, 2023, 2022, and 2021 were $1.6 million, $2.1 million, and $1.3 million, respectively.
As of December 31, 2023, there was $0.2 million of unrecognized stock-based compensation cost related to non-vested PSUs, which we expect to recognize over a weighted
average period of 0.2 years.
Performance Based Options (“PBOs”)
We estimated the fair value of PBOs using the Black-Scholes-Merton option-pricing model based on the date of grant. No PBOs were granted to employees for their services during
the year ended December 31, 2023. The following summarize the weighted-average assumptions used to estimate the fair value of PBOs granted:
Expected life (years)
Volatility
Risk-free interest rate
Expected dividend yield
The following tables summarizes PBOs activities:
Outstanding at December 31, 2020
Granted
Exercised
Forfeited/Expired
Outstanding at December 31, 2021
Granted
Forfeited/Expired
Outstanding at December 31, 2022
Forfeited/Expired
Outstanding at December 31, 2023
Number
of
Shares
(In Thousands)
Year Ended December 31,
2022
2021
5.6
%
%
%
54.9
1.8
0.0
5.5
%
%
%
51.9
0.7
0.0
Number
of
Shares
(In Thousands)
Weighted Average
Grant Date Fair Value
Per Share
1,560
433
(35)
(118)
1,840
733
(747)
1,826
(178)
1,648
$
$
$
$
$
$
$
$
$
$
5.05
12.23
9.02
12.23
4.11
9.89
8.29
4.70
9.73
5.64
Exercisable at December 31, 2023
Vested and expected to vest at December 31, 2023
1,627
1,646
$
$
10.96
11.06
Weighted Average
Exercise Price
Per Share
Weighted Average
Remaining
Contractual Term
(In Years)
4.4
4.5
Aggregate Intrinsic
Value
(In Thousands)
$
$
—
—
The total fair value of exercised PBOs for 2023, 2022 and 2021, was nil, nil, and $0.3 million, respectively.
As of December 31, 2023, there was $15.9 thousand of unrecognized stock-based compensation cost related to non-vested PBOs, which we expect to recognize over a weighted
average period of 0.2 years.
93
Employee Stock Purchase Plan (“ESPP”)
The fair value of shares to be issued under the ESPP is computed using the Black-Scholes-Merton option pricing model at the commencement of the offering period. The following
summarizes the weighted-average assumptions used to estimate the fair value of ESPP for the initial offering period:
Expected life (years)
Volatility
Risk-free interest rate
Expected dividend yield
Note 10. Capital Stock
Equity Distribution Agreement
Year Ended December 31,
2023
89.6
5.3
0.0
0.4
%
%
%
In May 2021, we filed a Registration Statement on Form S-3 with the SEC, that automatically became effective upon its filing, under which we may sell common stock, preferred
stock, debt securities, warrants, purchase contracts, and units from time to time in one or more offerings. On February 27, 2023, we filed a post-effective amendment to that Registration
Statement on Form S-3. Pursuant to that post-effective amendment, we registered an aggregate $200.0 million of securities. In May 2021, we entered into an Equity Distribution
Agreement ("EDA”) with Piper Sandler & Co (“PSC”), under which PSC, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell
over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock. Under the terms of the EDA, PSC may sell the shares at
market prices by any method that is deemed to be an "at the market offering" as defined in Rule 415 under the Securities Act of 1933, as amended.
We are not required to sell any shares at any time during the term of the EDA. The EDA will terminate upon the earlier of: (i) the issuance and sale of all shares through PSC on the
terms and conditions of the EDA, or (ii) the termination of the EDA in accordance with its terms. Either party may terminate the EDA at any time upon written notification to the other
party in accordance with the EDA, and upon such notification, the offering will terminate. Under no circumstances shall any shares be sold pursuant to the EDA after the date which is
three years after the registration statement is first declared effective by the SEC. We agreed to pay PSC a commission of 3% of the gross sales price of any shares sold pursuant to the
EDA. With the exception of certain expenses, we will pay PSC up to 8% of the gross sales price of the shares sold pursuant to the EDA for a combined amount of commission and
reimbursement of PSC's expenses and fees.
During the year ended December 31, 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA. During the year ended December 31, 2023, we
received gross proceeds of $8.7 million or $7.9 million in net proceeds after PSC's commissions and direct offering expenses of $0.7 million. As of December 31, 2023, $41.3 million of
shares remained available for sale under the EDA. During the year ended December 31, 2022, no shares of our common stock were sold pursuant to the EDA.
Note 11. 401(k) Plan
In January 2005, we implemented a 401(k) Plan covering certain employees. Currently, all of our United States based employees over the age of 18 are eligible to participate in the
401(k) Plan. Under the 401(k) Plan, eligible employees may elect to reduce their current compensation up to a certain annual limit and contribute these amounts to the 401(k) Plan. We
may make matching or other contributions to the 401(k) Plan on behalf of eligible employees. We recorded employer matching contributions expense of $1.4 million, $1.6 million, and
$1.1 million in the years ended December 31, 2023, 2022, and 2021, respectively.
94
Note 12. Income Taxes
Our loss before provision for income taxes were as follows (in thousands):
United States
Foreign
Loss before provision for income taxes
2023
Year Ended December 31,
2022
$
$
(76,169)
(2)
(76,171)
$
$
(33,269)
(47)
(33,316)
$
$
2021
(21,037)
(53)
(21,090)
The tax provision for the years ended December 31, 2023 and 2022 consists primarily of current year state and foreign income taxes. The tax provision for the year ended December
31, 2021 consists primarily of taxes attributable to foreign operations. The components of the provision for income taxes are as follows (in thousands):
2023
Year Ended December 31,
2022
2021
Current provision:
State
Foreign
Total current provision
Deferred benefit:
Foreign
Total deferred benefit
Provision for income taxes
$
$
27
42
69
—
—
69
$
$
141
142
283
(7)
(7)
276
Reconciliation of the provision for income taxes calculated at the statutory rate to our provision for income taxes is as follows (in thousands):
Tax benefit at federal statutory rate
State taxes
Research and development credits
Foreign operations taxed at different rates
Stock-based compensation
Other nondeductible items
Executive compensation
Change in valuation allowance
Provision for income taxes
2023
Year Ended December 31,
2022
$
$
(15,995)
(2,208)
(925)
—
1,967
438
152
16,640
69
$
$
(6,996)
(494)
(1,793)
78
239
(238)
80
9,400
276
$
$
$
$
—
198
198
(9)
(9)
189
(4,429)
(2,235)
(1,132)
80
(2,698)
711
257
9,635
189
2021
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes, and (b) operating losses and tax credit carryforwards.
95
Significant components of our deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
Net operating losses
Credits
Deferred revenues
Stock-based compensation
Reserves and accruals
Property and Equipment
Intangible assets
Capital losses
R&D Capitalization
Lease liability
Other assets
Total deferred tax assets:
Valuation allowance
Deferred tax liabilities:
Right-of-use assets
Property and Equipment
Other
Total deferred tax liabilities:
Net deferred tax liabilities
December 31,
2023
2022
$
$
72,586
16,412
176
4,445
2,774
457
532
424
26,821
3,608
2,542
130,777
(127,835)
(2,958)
—
—
(2,958)
(16)
$
$
69,915
14,806
1,123
4,967
2,487
—
866
413
16,502
9,586
125
120,790
(111,183)
(8,624)
(736)
(263)
(9,623)
(16)
ASC 740 requires that the tax benefit of NOLs, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is
"more likely than not." Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period. Because of our history of
operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more likely than not to be realized
and, accordingly, has provided a valuation allowance against our deferred tax assets. Accordingly, the net deferred tax assets in all our jurisdictions have been fully reserved by a
valuation allowance. The net valuation allowance increased by $16.7 million during the year ended December 31, 2023, increased by $9.4 million during the year ended December 31,
2022, and increased by $9.6 million during the year ended December 31, 2021. At such time as it is determined that it is more likely than not that the deferred tax assets are realizable,
the valuation allowance will be reduced.
The following table sets forth our federal, state and foreign NOL carryforwards and federal research and development tax credits as of December 31, 2023 (in thousands):
Net operating losses, federal
Net operating losses, federal
Net operating losses, state
Tax credits, federal
Tax credits, state
December 31, 2023
Amount
182,918
118,569
147,481
17,815
19,223
$
$
$
$
$
Expiration
Years
2026-2037
Do not expire
2028-2041
2023-2041
Do not expire
Current U.S. federal and California tax laws include substantial restrictions on the utilization of NOLs and tax credit carryforwards in the event of an ownership change of a
corporation. Accordingly, the Company's ability to utilize NOLs and tax credit carryforwards may be limited as a result of such ownership changes. We performed an analysis in 2023
and determined that there was not a limitation that would result in the expiration of carryforwards before they are utilized.
96
Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and other
comprehensive income. An exception is provided in ASC 740 when there is aggregate income from categories other than continuing operations and a loss from continuing operations in
the current year. In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expenses recorded with respect
to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against
current year losses, income from other sources is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets.
In 2014, we determined that the undistributed earnings of our India subsidiary will be repatriated to the United States, and accordingly, we have provided a deferred tax liability
totaling $16 thousand as of December 31, 2023 and 2022, for local taxes that would be incurred upon repatriation.
We apply the provisions of ASC 740 to account for uncertain income taxes. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in
thousands):
Balance at beginning of year
Additions based on tax positions related to current year
Additions to tax position of prior years
Reductions to tax position of prior years
Balance at end of year
2023
December 31,
2022
$
$
18,571
2,164
—
(531)
20,204
$
$
15,261
3,553
—
(243)
18,571
$
$
2021
12,683
2,206
372
—
15,261
We recognize interest and penalties as a component of our income tax expense. Total interest and penalties recognized in the consolidated statements of operations were $42
thousand, $42 thousand and $61 thousand in 2023, 2022 and 2021, respectively. Total penalties and interest recognized in the balance sheet was $0.6 million, $0.5 million and $0.5
million as of December 31, 2023, 2022 and 2021, respectively. The total unrecognized tax benefits that, if recognized currently, would impact our company’s effective tax rate were
$0.3 million as of December 31, 2023, 2022 and 2021. We do not expect any material changes to our uncertain tax positions within the next 12 months. We are not subject to
examination by United States federal or state tax authorities for years prior to 2002 and foreign tax authorities for years prior to 2014.
Note 13. Commitments and Contingencies
Operating Leases
Our headquarters are located in Redwood City, California, where we occupy approximately 77,300 square feet of office and laboratory space in multiple buildings within the same
business park operated by Metropolitan Life Insurance Company (“MetLife”). Our lease agreement with MetLife (“RWC Lease”) includes approximately 28,200 square feet of space
located at 200 and 220 Penobscot Drive, Redwood City, California (the “200/220 Penobscot Space”) and approximately 37,900 square feet of space located at 400 Penobscot Drive,
Redwood City, California (the “400 Penobscot Space”) (the 200/220 Penobscot Space and the 400 Penobscot Space are collectively referred to as the “Penobscot Space”), and
approximately 11,200 square feet of space located at 501 Chesapeake Drive, Redwood City, California (the “501 Chesapeake Space”).
We entered into the initial lease with MetLife for our facilities in Redwood City in 2004 and the RWC Lease has been amended multiple times since then to adjust the leased space
and terms of the Lease. In February 2019, we entered into an Eighth Amendment to the Lease (the “Eighth Amendment”) with MetLife with respect to the Penobscot Space and the 501
Chesapeake Space to extend the term of the Lease for additional periods. Pursuant to the Eighth Amendment, the term of the lease of the Penobscot Space has been extended through
May 2027. The lease term for the 501 Chesapeake Space has been extended to May 2029. We have one (1) option to extend the term of the lease for the Penobscot Space for five (5)
years, and one (1) separate option to extend the term of the lease for the 501 Chesapeake Space for five (5) years.
Pursuant to the terms of the RWC Lease, we exercised our right to deliver a letter of credit in lieu of a security deposit. The letter of credit is collateralized by deposit balances held
by the bank in the amount of $1.1 million as of December 31, 2023 and 2022, and are recorded as non-current restricted cash on the consolidated balance sheets.
In January 2021, we entered into a lease agreement with ARE-San Francisco No. 63, LLC (“ARE”) to lease a portion of a facility consisted of approximately 36,593 rentable square
feet in San Carlos, California to serve as additional office and research and development laboratory space (the “San Carlos Space”). The lease had a 10-year term from the lease
commencement date of November 30, 2021 with one option to extend the term for an additional period of 5 years.
97
In July 2023, we announced our plan to consolidate operations from our San Carlos facility to our headquarters in Redwood City. On September 1, 2023, the Company entered into
an Assignment and Assumption of Lease (the “Assignment Agreement”) with Vaxcyte, Inc. (“Vaxcyte”) to assign to Vaxcyte all of the Company’s right, title and interest in, under and
to the San Carlos Space and the Lease Agreement, dated as of January 29, 2021. On September 6, 2023, the Company, Vaxcyte and ARE entered into a Consent to Assignment and First
Amendment (the “Consent”) pursuant to which ARE consented to the Assignment Agreement and the assignment by the Company and the assumption by Vaxcyte of the Company’s
interest as tenant in the lease and agreed to release the Company from all of its obligations under the lease that accrue from and after the assignment. Under the Assignment Agreement,
the Company prepaid to ARE (i) the base rent, as defined in the lease agreement, and (ii) certain amounts payable to ARE in connection with tenant improvements completed by ARE
pursuant to the lease, which amounted to $3.1 million. We provided ARE with a $0.5 million security deposit in the form of a letter of credit, which was released in November 2023
following the effectiveness of the lease assignment on October 1, 2023.
As a result of the Assignment Agreement, the Company remeasured the lease obligation for the San Carlos Space as $3.1 million, or the present value of the remaining lease
payments, which consist of the remaining rent through the effectiveness of the lease assignment and certain amounts payable to ARE pursuant to the Assignment Agreement, and wrote
off the remaining lease liability of $19.6 million and the corresponding right of use asset balance. Simultaneously, the Company determined that indicators of impairment existed
because the lease assignment will impact the utilization of the related right of use assets and leasehold improvements in the San Carlos Space, and therefore performed a recoverability
test by estimating future undiscounted net cash flows expected to be generated from the use of these assets. As there were no substantial future cash inflows associated with these assets,
the carrying values of these assets were deemed unrecoverable. As a result, the Company recognized a non-cash impairment charge of $7.7 million, of which $4.7 million is related to
leasehold improvements and $3.0 million for the right of use assets, presented within the asset impairment and other charges line item in the consolidated statements of operations in the
year ended December 31, 2023.
The tables below show the balance of right-of-use assets and lease obligations as of January 1, 2023 and the balance as of December 31, 2023, including the changes during the
period (in thousands):
Right-of-use assets - Operating leases, net, at January 1, 2023
Amortization of right-of-use assets
Additions
Remeasurement due to lease modification
Impairment
Right-of-use assets - Operating leases, net, at December 31, 2023
Lease obligations - Operating leases, net, at January 1, 2023
Lease payments
Interest accretion
Remeasurement due to lease modification
Lease obligations - Operating leases, net, at December 31, 2023
Right-of-use Assets - Operating
Lease, net
39,263
(4,405)
898
(19,622)
(2,997)
13,137
Lease Obligations - Operating
Leases
43,638
(9,897)
1,905
(19,622)
16,024
$
$
$
$
We are required to restore certain areas of the Redwood City facility that we are renting to its original form. We are expensing the asset retirement obligation over the term of the
Redwood City lease. We review the estimated obligation each reporting period and make adjustments if our estimates change. As a result of the lease assignment for the San Carlos
Space, discussed further above, we wrote off the related asset retirement obligation of $0.2 million in 2023. We recorded asset retirement obligations of $0.3 million and $0.5 million as
of December 31, 2023 and 2022, respectively, which are included in other liabilities on the consolidated balance sheets. Accretion expense related to our asset retirement obligations was
nominal in the years ended December 31, 2023 and 2022.
98
Lease and other information
Lease costs amounts included in measurement of lease obligations and other information related to non-cancellable operating leases and finance leases were as follows (in
thousands):
Finance lease costs
Operating lease cost
Short-term lease costs
(1)
Total lease cost
(2)
2023
Year Ended December 31,
2022
2021
$
$
—
6,310
—
6,310
$
$
18
7,321
40
7,379
$
$
106
4,396
70
4,572
(1)
(2)
Short-term lease costs on leases with terms of over one month and less than one year.
The Company had no variable lease costs.
Amounts included in measurement of lease obligations (in thousands):
2023
2022
2021
Year Ended December 31,
Cash paid:
Operating cash flows from operating leases
Non-cash activity:
Operating Lease - Right-of-use assets obtained in exchange for lease liabilities
$
$
9,897
—
$
$
Other information:
Weighted-average remaining lease term (in years)
Weighted-average discount rate
6,506
—
$
$
4,197
25,445
Operating Lease
3.8
%
6.6
As of December 31, 2023, our maturity analysis of annual undiscounted cash flows of the non-cancellable operating leases are as follows (in thousands):
Years ending December 31,
Operating Leases
2024
2025
2026
2027
2028
Thereafter
Total minimum lease payments
Less: imputed interest
Lease obligations
Reconciliation of operating lease liabilities as shown within the audited consolidated balance sheets:
Current portion of lease obligations - Operating leases
Long-term lease obligations - Operating leases
Total operating lease liabilities
99
$
$
$
$
4,727
4,868
5,014
2,533
760
318
18,220
2,196
16,024
3,781
12,243
16,024
Other Commitments
We enter into supply and service arrangements in the normal course of business. Supply arrangements are primarily for fixed-price manufacture and supply. Service agreements are
primarily for the development of manufacturing processes and certain studies. Commitments under service agreements are subject to cancellation at our discretion which may require
payment of certain cancellation fees. The timing of completion of service arrangements is subject to variability in estimates of the time required to complete the work.
The following table provides quantitative data regarding our other commitments. Future minimum payments reflect amounts that we expect to pay including potential obligations
under services agreements subject to risk of cancellation by us (in thousands):
Facility maintenance agreement
Credit Facility
Total
Payments Due by Period
2024
$
701
$
701
2025 and Thereafter
—
$
On June 30, 2017, we entered into a credit facility (the “Credit Facility”) with Western Alliance Bank consisting of term loans (“Term Debt”) up to $10.0 million, and advances
(“Advances”) under a revolving line of credit (“Revolving Line of Credit”) up to $5.0 million with an accounts receivable borrowing base of 80% of eligible accounts receivable. The
right to take draws on the Term Debt expired on December 31, 2022. In March 2023, we terminated the Credit Facility with Western Alliance Bank.
On February 13, 2024, we entered into the Loan Agreement with Innovatus. See further discussion at Note 18, “Subsequent Events.”
Legal Proceedings
We may be involved in legal actions in the ordinary course of business, including inquiries and proceedings concerning business practices and intellectual property infringement,
employee relations and other claims. We will recognize a loss contingency in the consolidated financial statements when it is probable a liability has been incurred and the amount of the
loss can be reasonably estimated. We will disclose any loss contingencies that do not meet both conditions if there is a reasonable possibility that a material loss may have been incurred.
Gain contingencies are not recorded until they are realized.
In April 2022, we reached a settlement resolving a non-material dispute involving the Company's trademark. The terms of the settlement are not material to our business or the
results of operations. We are currently not a party to any material pending litigation or other material proceedings.
Indemnifications
We are required to recognize a liability for the fair value of any obligations we assume upon the issuance of a guarantee. We have certain agreements with licensors, licensees and
collaborators that contain indemnification provisions. In such provisions, we typically agree to indemnify the licensor, licensee and collaborator against certain types of third party
claims. The maximum amount of the indemnifications is not limited. We accrue for known indemnification issues when a loss is probable and can be reasonably estimated. There were
no accruals for expenses related to indemnification issues for any periods presented.
100
Note 14. Related Party Transactions
Molecular Assemblies, Inc.
In June 2020, we entered into a Stock Purchase Agreement with MAI, a privately held life sciences company, pursuant to which we purchased 1,587,050 shares of MAI's Series A
preferred stock for $1.0 million. Mr. Nicols, our former President and CEO until August 2022, also joined MAI’s board of directors in June 2020 and remained on MAI's board until
September 2023. Concurrently with our initial equity investment, we entered into a Master Collaboration and Research Agreement with MAI (the “MAI Agreement”), pursuant to which
performed services utilizing our CodeEvolver technology platform to improve DNA polymerase enzymes in exchange for compensation in the form of additional shares of MAI's
Series A and B preferred stock which are valued based on the observed transaction price of similar securities that MAI issued to third parties. We completed the R&D service with MAI
pursuant to the MAI Agreement during the first quarter of 2022. In addition to our initial equity investment and the shares we have received under the MAI Agreement, in April 2021,
we purchased an additional 1,000,000 shares of MAI's Series A preferred stock for $0.6 million and in September 2021, we purchased 9,198,423 shares of MAI's Series B preferred
stock for $7.0 million.
®
In April 2022, we received a purchase order from MAI for the delivery of certain enzyme products to MAI in 2022. In July 2022, we and MAI executed the MAI Supply
Agreement that will enable MAI to utilize an evolved terminal deoxynucleotidyl transferase (TdT) enzyme in MAI’s Fully Enzymatic Synthesis™ (or FES™) technology.
Revenues recognized from transactions with MAI in the year ended December 31, 2023, and subsequent to the related party period which ended in August 2022, are included in the
consolidated statement of operations. We recognized $1.2 million and $2.0 million in research and development revenue pursuant to the MAI Agreement in the years ended
December 31, 2022 and 2021, respectively. We recognized $0.5 million in product revenue from transactions with MAI in the year ended December 31, 2022 and during the related
party period.
Note 15. Segment, Geographical and Other Revenue Information
Segment Information
We previously managed our business as two business segments, Performance Enzymes and Novel Biotherapeutics. During the fourth quarter of 2023, we made changes to the
structure of our organization in connection with the restructuring of our business that we announced in July 2023, including the discontinuation of investment in certain development
programs, primarily in our biotherapeutics business, consolidation of operations to our Redwood City, California headquarters, and headcount reduction. In connection with these
organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and how our CEO, our chief operating decision
maker, assesses performance and allocates resources. As a result of these changes, our previous Performance Enzymes and Novel Biotherapeutics operating segments were combined
into a single reportable segment.
Effective October 1, 2023, the Company's operations are managed and reported to the CEO on a consolidated basis. The CEO assesses performance and allocated resources based
on the consolidated results of operations. We believe that these changes better align internal resources and external go to market activities in order to create a more efficient and effective
organizational structure. Under this new organizational and reporting structure, we managed our business as one reportable segment as of December 31, 2023. Comparative prior period
disclosures that reflected the previous two segments' information have been revised to conform to this change in our reportable segment.
Significant Customers
Customers that each accounted for 10% or more of our total revenues were as follows:
Customer A
Customer B
Customer C
* Percentage was less than 10%
101
Percentage of Total Revenues
For the Year Ended December 31,
2023
22
13
%
%
*
2022
56
%
*
*
2021
33
11
%
*
%
Customers that each accounted for 10% or more of accounts receivable balances as of the periods presented are as follows:
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
* Percentage was less than 10%
Geographical Information
Geographic revenues are identified by the location of the customer and consist of the following (in thousands):
As of December 31,
2023
*
*
%
%
%
%
12
21
13
12
2022
53
10
%
%
*
*
*
*
2023
Year Ended December 31,
2022
2021
$
$
13,733
22,907
33,503
70,143
$
$
17,000
56,540
65,050
138,590
$
$
23,481
20,187
61,086
104,754
Revenues
(1)
Americas
EMEA
APAC
(4)
(2)(3)
Total revenues
(1)
(2)
(3)
(4)
United States revenue was $13.7 million, $17.0 million, and $23.4 million, for the years ended December 31, 2023, 2022, and 2021, respectively.
Ireland revenue was $0.5 million, $37.2 million, and $1.4 million, for the years ended December 31, 2023, 2022, and 2021, respectively.
Switzerland revenue was $11.1 million, $9.2 million, and $10.1 million, for the for the years ended December 31, 2023, 2022, and 2021, respectively.
China revenue was $20.3 million, $48.6 million, and $43.5 million, for the years ended December 31, 2023, 2022, and 2021, respectively.
Identifiable long-lived assets by location was as follows (in thousands):
United States
Identifiable goodwill was as follows (in thousands):
Goodwill at beginning of period
Impairment
Goodwill at end of period
Note 16. Allowance for Credit Losses
The following table summarizes the financial assets allowance for credit losses (in thousands):
Balance at beginning of period
Provision for credit losses
Write-offs
Adjustment to existing allowance
Balance at end of period
2023
163
—
(33)
(65)
65
$
$
102
December 31,
2023
2022
$
28,624
$
61,877
December 31,
2023
2022
3,241
(778)
2,463
$
$
3,241
—
3,241
December 31,
2022
2021
416
54
(257)
(50)
163
$
$
74
342
—
—
416
$
$
$
$
The following tables summarize accounts receivable by aging category (in thousands):
Accounts receivable
Accounts receivable
$
$
Note 17. Restructuring Charges
December 31, 2023
Current
31-60 Days
61-90 Days
91 Days and Over
Total over 31 Days
Total Balance
9,583 $
209 $
77 $
167 $
453 $
10,036
Current
31-60 Days
61-90 Days
91 Days and Over
Total over 31 Days
Total Balance
28,896 $
1,747 $
469 $
792 $
3,008 $
31,904
December 31, 2022
In July 2023, in alignment with our enhanced strategic focus, we announced a restructuring of our business, including a plan for a workforce reduction of approximately 25%.
During the year ended December 31, 2023, we recorded a restructuring charge related to this workforce reduction of $3.1 million related to severance and related benefit costs. The plan
was substantially completed in September 2023 and severance costs were paid through the fourth quarter of 2023. We do not expect to record any significant future charges related to the
restructuring plan.
In November 2022, we announced a plan for a workforce reduction of approximately 18% to realign and optimize our workforce requirements in alignment with our refined
corporate strategy. The plan was substantially completed in December 2022 and severance costs were paid through the third quarter of 2023. During the years ended December 31, 2023
and 2022, we recorded restructuring charges of $0.2 million and $3.2 million, respectively, related to severance, bonus and other termination benefits in connection with the workforce
reduction announced in November 2022.
We do not expect to record any future charges related to the restructuring plans initiated in 2023 and 2022.
Note 18. Subsequent Events
On February 13, 2024, we entered into a 5-year loan and security agreement (the “Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), an affiliate of
Innovatus Capital Partners, LLC, for an aggregate principal amount of up to $40.0 million (the “Term Loans”). The Term Loans consist of two tranches, of which the first tranche of
$30.0 million was completed on February 13, 2024. We will be eligible to draw on the second tranche of $10.0 million upon achievement of certain milestones including certain pre-
specified revenue thresholds. The Term Loan carries an interest-only period of 36 months and will bear an interest at a floating rate of the sum of (a) the greater of (i) prime rate and (ii)
7.50%, plus (b) 3.25%. In connection with the Term Loans, we are required to issue to Innovatus a warrant to purchase an aggregate of 424,028 shares of the Company’s common stock
at an exercise price of $2.83 per share. The Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial
covenants related to liquidity and net product revenue, with the latter beginning with the period ending September 30, 2024.
103
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
Evaluation of Disclosure Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer and with the participation of our disclosure committee, evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023. The term "disclosure controls and procedures," as defined in Rules 13a-
15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as
of December 31, 2023 at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and
15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external reporting purposes in accordance with United States generally accepted accounting principles.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2023 based on the guidelines established in Internal Control-Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on the results of our evaluation, our management concluded that our internal control over
financial reporting was effective as of December 31, 2023. We reviewed the results of management’s assessment with our Audit Committee.
Our internal control over financial reporting as of December 31, 2023 has been audited by BDO USA, P.C., an independent registered public accounting firm, as stated in their
report which is included in Item 8 of this Annual Report.
Inherent Limitations on Effectiveness of Controls
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, even if determined effective and no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives to prevent or detect misstatements. In addition, the design of disclosure controls
and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures
relative to their costs. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) identified in connection with the evaluation required by
paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act, which occurred during the fourth fiscal quarter of the year ended December 31, 2023, which has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
Rule 10b5-1 Trading Arrangements
ITEM 9B. OTHER INFORMATION
During the three months ended December 31, 2023, none of the directors or executive officers of the Company adopted or terminated any contracts, instructions, or written plans
for the purchase or sale of our securities that were intended to meet the affirmative defense conditions of Rule 10b5-1(c) or any other “non-Rule 10b5-1 trading arrangement.”
104
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
We have adopted a code of ethics applicable to our principal executive, financial and accounting officers and all persons performing similar functions. A copy of our code of ethics
is available on our principal corporate website at www.codexis.com in the Investors section under “Corporate Governance."
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference from the information that will be set forth in the 2024 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the information that will be set forth in the 2024 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference from the information that will be set forth in the 2024 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference from the information that will be set forth in the 2024 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference from the information that will be set forth in the 2024 Proxy Statement.
105
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
1.
2.
Financial Statements: See "Index to Consolidated Financial Statements" in Part II, Item 8 of this Annual Report on Form 10-K
Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K.
106
Exhibit
No.
EXHIBIT INDEX
Description
1.1
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
10.1A*
10.1B*
10.1C*
10.1D*
10.1E
10.1F
10.1G
Equity Distribution Agreement, dated as of May 7, 2021, between Codexis, Inc. and Piper Sandler & Co. (incorporated by reference to Exhibit 1.1 to
the Company’s Current Report on Form 8-K, filed on May 7, 2021).
Amended and Restated Certificate of Incorporation of Codexis, Inc. filed with the Secretary of the State of the State of Delaware on April 27, 2010 and
effective as of April 27, 2010 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2010, filed on May 28, 2010).
Certificate of Designations of Series A Junior Participating Preferred Stock of Codexis, Inc., filed with the Secretary of State of the State of Delaware
on September 4, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on September 4, 2012).
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Codexis, Inc., filed with the Secretary of the State of the State
of Delaware on June 14, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on June 16, 2023).
Amended and Restated Bylaws of Codexis, Inc. effective as of February 8, 2024 (incorporated by reference to Exhibit 3.1 to the Company’s Current
Report on Form 8-K, filed on February 9, 2024).
Reference is made to Exhibits 3.1 through 3.4.
Form of the Company’s Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2012, filed on August 9, 2012).
Form of Warrant to Purchase Common Stock for Codexis, Inc., issued pursuant to the Loan and Security Agreement by and between the Company and
Innovatus Life Sciences Fund I, LP. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on February 13,
2024).
Description of Codexis' Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
Lease Agreement by and between the Company and Metropolitan Life Insurance Company dated as of February 1, 2004.
Amendment to Lease Agreement by and between the Company and Metropolitan Life Insurance Company dated as of June 1, 2004.
Amendment to Lease Agreement by and between the Company and Metropolitan Life Insurance Company dated as of March 9, 2007.
Amendment to Lease Agreement by and between the Company and Metropolitan Life Insurance Company dated as of March 31, 2008.
Fourth Amendment to Lease Agreement by and between the Company and Metropolitan Life Insurance Company dated as of September 17, 2010
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, filed on
November 4, 2010).
Fifth Amendment to Lease Agreement by and between the Company and Metropolitan Life Insurance Company dated as of March 16, 2011
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed on May 6,
2011).
Sixth Amendment to Lease by and between the Company and Metropolitan Life Insurance Company dated as of September 27, 2012 (incorporated by
reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed on November 7, 2012).
107
Exhibit
No.
10.1H
10.1I***
10.2+*
10.3A+
10.3B+
10.3C+
10.3D+
10.3E+
10.3F+
10.3G+
10.4A+
10.4B+
10.4C+
10.5+
10.6
10.7+
Description
Seventh Amendment to Lease by and between the Company and Metropolitan Life Insurance Company dated as of October 11, 2016 (incorporated by
reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, filed on November 8, 2016).
Eighth Amendment to Lease, dated as of February 8, 2019, by and between the Company and Metropolitan Life Insurance Company (incorporated by
reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed on May 8, 2019).
Codexis, Inc. 2010 Equity Incentive Award Plan and Form of Stock Option Agreement.
Codexis, Inc. 2019 Incentive Award Plan (incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8 (File No.
333-232262) filed with the SEC on June 21, 2019).
Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under 2019 Incentive Award Plan (incorporated by
reference to Exhibit 99.2 to the Company's Registration Statement on Form S-8 (File No. 333-232262) filed with the SEC on June 21, 2019).
Form of Stock Option Grant Notice and Stock Option Agreement under 2019 Incentive Award Plan (incorporated by reference to Exhibit 99.3 to the
Company's Registration Statement on Form S-8 (File No. 333-232262) filed with the SEC on June 21, 2019).
Form of Stock Option Grant Notice and Stock Option Agreement under 2019 Incentive Award Plan (incorporated by reference to Exhibit 99.4 to the
Company's Registration Statement on Form S-8 (File No. 333-232262) filed with the SEC on June 21, 2019).
Form of Performance Stock Unit Award Grant Notice and Performance Stock Unit Award Agreement under 2019 Incentive Award Plan (incorporated
by reference to Exhibit 99.5 to the Company's Registration Statement on Form S-8 (File No. 333-232262) filed with the SEC on June 21, 2019).
Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement under 2019 Incentive Award Plan (incorporated by reference to
Exhibit 99.6 to the Company's Registration Statement on Form S-8 (File No. 333-232262) filed with the SEC on June 21, 2019).
Amendment to the Codexis, Inc. 2019 Incentive Award Plan (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K,
filed on June 16, 2023).
Codexis, Inc. 2022 Employment Inducement Award Plan (incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form
S-8 (File No. 333-269163) filed with the SEC on January 9, 2023).
Form of Stock Option Grant Notice and Stock Option Agreement under the 2022 Employment Inducement Award Plan (incorporated by reference to
Exhibit 99.2 to the Company's Registration Statement on Form S-8 (File No. 333-269163) filed with the SEC on January 9, 2023).
Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2022 Employment Inducement Award Plan
(incorporated by reference to Exhibit 99.3 to the Company's Registration Statement on Form S-8 (File No. 333-269163) filed with the SEC on January
9, 2023).
Codexis, Inc. 2023 Employee Stock Purchase Plan (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on
June 16, 2023).
Form of Indemnification Agreement between the Company and each of its directors, officers and certain employees (incorporated by reference to
Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 27, 2023).
Form of Amended and Restated Change in Control Severance Agreement between the Company and certain of its officers (incorporated by reference
to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on November 6, 2019).
108
Exhibit
No.
Description
10.8
10.9A+
10.9B+
10.10A+
10.10B+
10.10C+
10.10D+
10.10E+
10.11†
10.12A
10.12B†
10.12C†
10.13+
10.14A+
10.14B+
Asset Purchase Agreement, dated October 28, 2010, by and among the Company, Codexis Mayflower Holdings, LLC and Maxygen, Inc.
(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on October 28, 2010).
Employment Agreement by and between the Company and Ross Taylor effective as of August 4, 2019 (incorporated by reference to Exhibit 10.3 to
the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on November 6, 2019).
Transition and Separation Agreement by and between the Company and Ross Taylor, dated as of February 3, 2023 (incorporated by reference to
Exhibit 10.8B to the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 27, 2023).
Employment Agreement by and between the Company and John Nicols effective as of May 28, 2012 (incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed on August 9, 2012).
Amendment to Employment Agreement between the Company and John Nicols, dated April 21, 2016 (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, filed on August 9, 2016).
Amendment to Employment Agreement between the Company and John Nicols, dated November 16, 2017 (incorporated by reference to Exhibit 10.8E
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed on March 15, 2018).
Amendment to Employment Agreement between the Company and John Nicols, effective as of June 28, 2019 (incorporated by reference to Exhibit
10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on November 6, 2019).
Transition and Separation Agreement by and between the Company and John Nicols, dated as of July 18, 2022 (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 4, 2022).
Acquisition Agreement by and among the Company, Societé des Produits Nestlé S.A., formerly known as Nestec Ltd. ("Nestlé Health Science"),
effective as of December 26, 2023.
Lease Agreement by and between the Company and ARE-SAN FRANCISCO NO. 63, LLC dated as of January 29, 2021 (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed on May 7, 2021).
Assignment and Assumption of Lease by and between the Company and Vaxcyte, Inc. dated as of September 1, 2023 (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, filed on November 3, 2023).
Consent to Assignment and First Amendment to Lease Agreement by and between the Company, Vaxcyte Inc. and ARE-San Francisco No. 63, LLC
dated as of September 6, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2023, filed on November 3, 2023).
Employment Agreement by and between the Company and Stephen Dilly dated as of August 9, 2022 (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 4, 2022).
Offer Letter by and between the Company and Kevin Norrett dated as of September 12, 2022 (incorporated by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 4, 2022).
Change in Control Severance Agreement by and between the Company and Kevin Norrett dated September 12, 2022 (incorporated by reference to
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 4, 2022).
109
Exhibit
No.
Description
10.15A+
10.15B+
10.16A+
10.16B+
10.17
23.1
24.1
31.1
31.2
32.1**
97.1
101
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
Offer Letter by and between the Company and Margaret Fitzgerald dated as of October 5, 2022 (incorporated by reference to Exhibit 10.13A to the
Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 27, 2023).
Change in Control Severance Agreement by and between the Company and Margaret Fitzgerald dated October 10, 2022 (incorporated by reference to
Exhibit 10.13A to the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 27, 2023).
Offer Letter by and between the Company and Sriram Ryali dated as of December 30, 2023 (incorporated by reference to Exhibit 10.13A to the
Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 27, 2023).
Change in Control Severance Agreement by and between the Company and Sriram Ryali dated January 27, 2023 (incorporated by reference to Exhibit
10.13A to the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 27, 2023).
Loan and Security Agreement by and between the Company and Innovatus Life Sciences Fund I, LP., effective as of February 13, 2024
Consent of BDO USA, P.C., independent registered public accounting firm.
Power of Attorney (see signature page to this Annual Report on Form 10-K).
Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. §1350.
Codexis, Inc. Clawback Policy effective August 24, 2023
The following materials from Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 formatted in Inline Extensible
Business Reporting Language (iXBRL) includes: (i) Consolidated Balance Sheets at December 31, 2023 and December 31, 2022, (ii) Consolidated
Statements of Operations for the years ended December 31, 2023, December 31, 2022 and December 31, 2021, (iii) Consolidated Statements of Cash
Flows for the years ended December 31, 2023, December 31, 2022 and December 31, 2021, (vi) Consolidated Statements of Stockholders’ Equity for
the years ended December 31, 2023, December 31, 2022 and December 31, 2021 and (vii) Notes to Consolidated Financial Statements.
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
110
Exhibit
No.
104
The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, formatted in Inline XBRL and
contained in Exhibit 101.
Description
+ Indicates a management contract or compensatory plan or arrangement.
† Confidential treatment has been granted for certain information contained in this exhibit. Such information has been omitted and filed separately with the Securities and Exchange
Commission.
* Filed as exhibits to the registrant’s Registration Statement on Form S-1 (File No. 333-164044), effective April 21, 2010, and incorporated herein by reference.
** Pursuant to Item 601(b)(32) of Regulation S-K this exhibit is furnished rather than filed with this report.
*** Portions of the exhibit, marked by brackets, have been omitted because the omitted information is (i) not material and (ii) customarily and actually treated as private or confidential.
Not applicable.
ITEM 16. FORM 10-K SUMMARY
111
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
SIGNATURES
thereunto duly authorized.
Date:
February 28, 2024
CODEXIS, INC.
By:
/s/ Stephen Dilly
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and appoints Stephen Dilly, Sriram Ryali and Margaret Fitzgerald, and each of them, with full power of
substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in
the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on Form 10-K and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
SIGNATURE
/s/ Stephen Dilly
Stephen Dilly
/s/ Sriram Ryali
Sriram Ryali
/s/ Byron L. Dorgan
Byron L. Dorgan
/s/ Jennifer Aaker
Jennifer Aaker
/s/ Esther Martinborough
Esther Martinborough
/s/ Alison Moore
Alison Moore
/s/ H. Stewart Parker
H. Stewart Parker
/s/ Rahul Singhvi
Rahul Singhvi
/s/ David V. Smith
David V. Smith
/s/ Dennis P. Wolf
Dennis P. Wolf
TITLE
DATE
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date:
February 28, 2024
Chief Financial Officer (Principal Financial and
Accounting Officer)
Chairman of the Board of Directors
Director
Director
Director
Director
Director
Director
Director
112
Date:
Date:
Date:
Date:
Date:
Date:
Date:
Date:
Date:
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.4
As of February 28, 2024, Codexis, Inc. (“we,” “us” or “our”) had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as
amended: our common stock, $0.0001 par value per share (“common stock”).
Description of Common Stock
The following description of our common stock is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our
amended and restated certificate of incorporation, our certificate of designations of Series A Junior Participating Preferred Stock and our amended and restated bylaws, each of
which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.4 is a part. We encourage you to read our amended and restated
certificate of incorporation, our certificate of designations of Series A Junior Participating Preferred Stock, our amended and restated bylaws and the applicable provisions of
the Delaware General Corporation Law for additional information.
Authorized Capital Stock
Our authorized capital stock consists of:
•
•
200,000,000 shares of common stock, $0.0001 par value per share; and
5,000,000 shares of preferred stock, $0.0001 par value per share, of which 100,000 shares have been designated as Series A Junior Participating Preferred Stock.
Voting Rights
Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Our
stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the voting shares are able to elect all of the directors. In
addition, the affirmative vote of holders of 66 2/3% of the voting power of all of the then outstanding voting stock will be required to take certain actions, including amending
certain provisions of our amended and restated certificate of incorporation, such as the provisions relating to amending our amended and restated bylaws, the classified board
and director liability.
Dividends
Subject to preferences that may be applicable to any then outstanding preferred stock, holders of our common stock are entitled to receive dividends, if any, as may be
declared from time to time by our board of directors out of legally available funds.
Liquidation
In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in the net assets legally available for
distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then
outstanding shares of preferred stock.
Rights and Preferences
Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to our
common stock. The rights, preferences and privileges of the holders of our common stock are subject to and may be adversely affected by the rights of the holders of shares of
any series of our preferred stock that we may designate in the future.
Preferred Stock – Limitations on Rights of Holders of Common Stock
Our board of directors has the authority, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix
the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights,
terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be
greater than the rights of common stock. The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such
holders will receive dividend payments and payments upon our liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing
a change in control of our company or other corporate action.
Anti-Takeover Effects of Provisions of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws and Delaware Law
Some provisions of Delaware law and our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could make
the following transactions more difficult: acquisition of us by means of a tender offer; acquisition of us by means of a proxy contest or otherwise; or 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 that might result in a premium over the market price for our shares.
These provisions, summarized below, are expected 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 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.
Delaware Anti-Takeover Statute
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. Under Section 203, we would generally be prohibited from engaging in any
business combination with any interested stockholder for a period of three years following the time that this stockholder became an interested stockholder unless:
•
•
•
prior to this time, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an
interested stockholder;
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers, and by
employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or
at or subsequent to such time, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not
by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
Under Section 203, a “business combination” includes:
•
•
•
•
•
any merger or consolidation involving the corporation and the interested stockholder;
any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder, subject to limited exceptions;
any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially
owned by the interested stockholder; or
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
2
In general, Section 203 defines an interested stockholder as an entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and
any entity or person affiliated with or controlling or controlled by such entity or person.
Undesignated Preferred Stock
The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that
could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or
management of our company.
Special Stockholder Meetings
Our amended and restated certificate of incorporation provides that a special meeting of stockholders may be called only by our chairman of the board of directors,
Chief Executive Officer or President, or by a resolution adopted by a majority of our board of directors.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals 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 amended and restated certificate of incorporation eliminates the right of stockholders to act by written consent without a meeting.
Classified Board; Election and Removal of Directors; Filling Vacancies
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,
with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of
their respective three-year terms. Because our stockholders do not have cumulative voting rights, our stockholders holding a majority of the shares of common stock
outstanding will be able to elect all of our directors. Our amended and restated certificate of incorporation provides for the removal of any of our directors (i) with cause by the
affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of voting stock entitled to vote at an election of directors, or (ii) without cause
by the affirmative vote of the holders of at least a 66 2/3% of the voting power of all the then-outstanding shares of voting stock entitled to vote at an election of directors.
Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of the board of directors, may only be filled
by a resolution of the board of directors unless the board of directors determines that such vacancies shall be filled by the stockholders. This system of electing and removing
directors and filling vacancies 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.
Amendment of Charter Provisions
The amendment of any of the above provisions, except for the provision making it possible for our board of directors to issue preferred stock, would require approval
by holders of at least 66-2/3% of the voting power of our then outstanding voting stock.
The provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation and our amended and 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 our 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.
Limitations of Liability and Indemnification Matters
Our amended and restated certificate of incorporation contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by
Delaware law. Consequently, our directors will
3
not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
•
•
•
•
any breach of the director’s duty of loyalty to us or our stockholders;
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or
any transaction from which the director derived an improper personal benefit.
Our amended and restated certificate of incorporation provides that we may, and our amended and restated bylaws provide that we are required to, indemnify our
directors and officers, in each case to the fullest extent permitted by Delaware law. Our amended and restated bylaws also provide that we shall advance expenses incurred by a
director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under Delaware law. We have
entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. With
specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts
incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain
qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage
stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our
directors and officers, even though an action, if successful, might benefit us and our stockholders. Further, a stockholder’s investment may be adversely affected to the extent
that we pay the costs of settlement and damage.
The Nasdaq Global Select Market Listing
Our common stock is listed on The Nasdaq Global Select Market under the symbol “CDXS.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is EQ Shareowner Services.
4
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
ACQUISITION AGREEMENT
between
SOCIÉTÉ DES PRODUITS NESTLÉ S.A.
and
CODEXIS, INC.
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE
Section 1.01 Purchase and Sale of Assets
Section 1.02 Excluded Assets
Section 1.03 Assumed Liabilities
Section 1.04 Purchase Price
Section 1.05 Milestone Earnout
Section 1.06 Sales Earnout
Section 1.07 Reports and Reporting
Section 1.08 Allocation of Purchase Price
Section 1.09 Non-Assignable Assets; Previously Transferred Assets
Section 1.10 Withholding Taxes
Section 1.11 Exploitation of Products
ARTICLE II CLOSING
Section 2.01 Closing
Section 2.02 Closing Deliverables
Section 2.03 Delivery of Records
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.01 Organization and Authority of Seller
Section 3.02 No Conflicts or Consents
Section 3.03 Intellectual Property
Section 3.04 Assigned Contracts
Section 3.05 Title to Inventory
Section 3.06 Legal Proceedings; Governmental Orders
Section 3.07 Brokers
Section 3.08 No Other Representations and Warranties
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.01 Organization and Authority of Buyer
Section 4.02 No Conflicts; Consents
Section 4.03 Solvency; Sufficiency of Funds
Section 4.04 Legal Proceedings
Section 4.05 Brokers
Section 4.06 Independent Investigation
Section 4.07 Other Representations and Warranties
2
2
2
2
3
3
4
6
7
7
8
8
8
8
8
9
9
9
10
10
10
11
11
11
11
11
12
12
12
12
12
12
13
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
ARTICLE V COVENANTS
Section 5.01 Certain Activities Prior to the Closing
Section 5.02 Supplement to Disclosure Schedules
Section 5.03 Confidentiality
Section 5.04 Public Announcements
Section 5.05 Exclusivity
Section 5.06 Patent Prosecution and Maintenance
Section 5.07 Patent Enforcement
Section 5.08 Bulk Sales Laws
Section 5.09 VAT
Section 5.10 Further Assurances
Section 5.11 Books and Records; Audit
Section 5.12 Termination of the Existing Agreements
Section 5.13 License to Know-How
Section 5.14 [***]
ARTICLE VI CONDITIONS TO CLOSING
Section 6.01 Conditions on Obligations of Buyer
Section 6.02 Conditions on Obligations of Seller
ARTICLE VII INDEMNIFICATION
Section 7.01 Survival
Section 7.02 Indemnification by Seller
Section 7.03 Indemnification by Buyer
Section 7.04 Certain Limitations
Section 7.05 Indemnification Procedures
Section 7.06 Tax Treatment of Indemnification Payments
Section 7.07 Exclusive Remedies
Section 7.08 Right to Set-Off
ARTICLE VIII TERM AND TERMINATION
Section 8.01 Term
Section 8.02 Termination
Section 8.03 Effect of Termination
ARTICLE IX AMYLASE AND PROTEASE OPTION
Section 9.01 Option
Section 9.02 Notice of Exercise
Section 9.03 Closing
Section 9.04 Patent Prosecution and Costs
13
13
13
13
15
15
16
16
17
17
17
17
18
19
19
20
20
20
20
20
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24
25
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Section 9.05 Limited Right to Continue A&P Enzyme Development Work
Section 9.06 Status Quo
ARTICLE X DISPUTE RESOLUTION
Section 10.01 Elevation of Issues for Resolution
Section 10.02 Arbitration
ARTICLE XI MISCELLANEOUS
Section 11.01 Definitions
Section 11.02 Construction
Section 11.03 Expenses
Section 11.04 Severability
Section 11.05 Notices
Section 11.06 Assignment
Section 11.07 Waivers, Modifications, and Amendments
Section 11.08 Choice of Law
Section 11.09 Injunctive Relief
Section 11.10 Relationship of the Parties
Section 11.11 Entire Agreement
Section 11.12 Cooperation
Section 11.13 Counterparts
Section 11.14 Non-Recourse
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
This Acquisition Agreement (this “ Agreement”) dated as of December 26, 2023 (the “Effective Date”) is entered into between CODEXIS, INC., a
corporation incorporated and existing under the laws of the State of Delaware, having an office located at 200 Penobscot Drive, Redwood City, CA 94063,
USA (“Seller” or “Codexis”), and Société des Produits Nestlé S.A., a société anonyme organized and existing under the laws of Switzerland, having an
office located at 55 Avenue Nestlé, 1800 Vevey, Switzerland (“Buyer” or “NHSc”).
ACQUISITION AGREEMENT
RECITALS
WHEREAS, Buyer (as successor in interest to Nestec Ltd.), and Seller are parties to that certain Strategic Collaboration Agreement, dated as of
October 12, 2017 (as amended through the date hereof, the “Strategic Collaboration Agreement” or “SCA”), pursuant to which the parties agreed to
collaborate to discover enzymes as candidates for use as healthcare products and to perform initial preclinical evaluation of the efficacy of such enzymes;
WHEREAS, Buyer and Seller are parties to that certain Development Agreement, dated as of January 1, 2020 (as amended through the date
hereof, the “Development Agreement” and, together with the Strategic Collaboration Agreement and including, if either or both such agreements expire or
are otherwise terminated, all terms, conditions, and obligations in each that survive such expiration or other termination, the “Existing Agreements”),
pursuant to which the parties agreed to conduct certain development activities with respect to certain enzymes discovered pursuant to the Strategic
Collaboration Agreement;
WHEREAS, the parties desire for Buyer to have the right to further develop and commercialize those certain lipase enzymes that were discovered
under the Strategic Collaboration Agreement and that were further developed pursuant to the Development Agreement, including that certain lipase enzyme
currently identified as CDX-7108 (“CDX-7108” and, together with [***], the “Lipase Project Enzyme”);
WHEREAS, pursuant to the terms of the Existing Agreements, each party has agreed not to Develop or Commercialize the Lipase Project
Enzyme, including the use of any Jointly Owned Invention in connection therewith, unless agreed by the parties in a separate written agreement;
WHEREAS, Seller wishes to sell and assign to Buyer certain identified Patent Rights, Contracts, and other assets related to the Lipase Project
Enzyme, and Buyer wishes to purchase and assume from Seller such assets and certain corresponding liabilities, and Seller otherwise wishes to authorize
Buyer’s Development and Commercialization of, the Lipase Project Enzyme, in each case, subject to the terms and conditions set forth herein;
WHEREAS, Buyer and Seller have also developed the A&P Enzymes (as defined below) under the Existing Agreements; and
WHEREAS, Seller has agreed to grant Buyer an option to acquire certain assets related to the A&P Enzymes and the right to Develop and
Commercialize the A&P Enzymes upon the payment of an agreed upon purchase price, in each case, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
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ARTICLE I
PURCHASE AND SALE
Section 1.01 Purchase and Sale of Assets . Subject to the terms and conditions set forth herein, at the Closing, Seller shall, and shall cause its
Affiliates to, sell, convey, assign, transfer, and deliver to Buyer (or its designated Affiliate), and Buyer shall purchase from Seller and its Affiliates, all of
Seller’s (or its applicable Affiliate’s) right, title, and interest in, to, and under all of the following (the “Purchased Assets”):
(a) the patents and patent applications set forth on Section 1.01(a) of the Disclosure Schedules (the “ Purchased Patents”), and all of
Seller’s and its Affiliates interest in, to and under the Purchased Patents, including the right to sue for past infringement;
(b) all Contracts set forth on Section 1.01(b) of the Disclosure Schedules (the “ Assigned Contracts”) and the rights to assert claims and
take other actions in respect of breaches or other violations of the foregoing occurring after the Closing;
(c) the inventory and other materials set forth on Section 1.01(c) of the Disclosure Schedules (the “ Inventory”);
(d) all Jointly Owned Inventions relating [***] to the Lipase Project Enzyme (the “ Purchased Know-How”);
(e) all Regulatory Documentation owned [***] by Seller and its Affiliates [***] relating to the other Purchased Assets (the “ Acquired
Regulatory Documentation”); and
(f) all other Books and Records owned [***] by Seller and its Affiliates relating [***] to the other Purchased Assets, [***] (collectively, the
“Acquired Books and Records”). For clarity, Acquired Books and Records shall specifically exclude all Tax Returns and related workpapers
including or relating to the Purchased Assets. Books and Records that do not relate [***] to the other Purchased Assets may be redacted to exclude
information that does not relate to the other Purchased Assets.
Section 1.02 Excluded Assets . Other than the Purchased Assets, Buyer expressly understands and agrees that it is not purchasing or acquiring,
and Seller is not selling or assigning, any other assets or properties of Seller or its Affiliates, and all such other assets and properties shall be excluded from
the Purchased Assets and remain the sole and exclusive property of Seller and/or its Affiliates (collectively, the “ Excluded Assets”). Excluded Assets
include, but are not limited to, the assets, properties and rights specifically set forth on Section 1.02 of the Disclosure Schedules.
Section 1.03 Assumed Liabilities.
(a) Subject to the terms and conditions set forth herein, including Section 1.03(b), at the Closing, Buyer shall assume and agree to pay,
perform, and discharge when due any and all Liabilities of Seller arising out, of or relating to, ownership of the Purchased Assets or operation of the
Business on or after the Closing (collectively, the “Assumed Liabilities”), including, but not limited to, the following:
(i) all Liabilities arising under the Assigned Contracts from and after the Closing Date (but, for clarity, this does not limit any
Liabilities under any Assigned
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Contract (or portion thereof) that is or was a Liability of Buyer or any of its Affiliates prior to the Closing Date pursuant to any Existing
Agreement or other agreement between the parties); and
(ii) all Liabilities for (A) Taxes relating to the Purchased Assets for any taxable period (or any portion thereof) beginning on or after
the Closing Date ([***]) and (B) Taxes for which Buyer is liable pursuant to Section 5.09.
(b) Buyer shall not assume and shall not be responsible to pay, perform or discharge any Liabilities of Seller or its Affiliates other than the
Assumed Liabilities (collectively, the “Excluded Liabilities”), which Excluded Liabilities shall include, but not necessarily be limited to:
(i) any Liabilities arising out of or relating to Seller’s ownership of the Purchased Assets prior to the Closing Date or attributable to
any breach of any Assigned Contract on the part of Seller or its Affiliate prior to the Closing Date (but excluding all Liabilities under any
Assigned Contract (or portion thereof) that is or was a Liability of Buyer or any of its Affiliates pursuant to any Existing Agreement or other
agreement between the parties hereto);
(ii) any Liabilities [***];
(iii) any Liabilities [***];
(iv) any Liabilities arising out of or relating to the Excluded Assets; and
(v) any Liabilities (A) for Taxes relating to the Purchased Assets for any taxable period (or any portion thereof) ending on or prior
to the Closing Date; (B) [***].
Section 1.04 Purchase Price. The aggregate purchase price for the Purchased Assets shall be the sum of (a) $5,000,000 (the “ Initial Purchase
Price”); plus (b) the amount of any Milestone Earnout Payments due and payable under Section 1.05, plus (c) the amount of any Sales Earnout Payments
due and payable under Section 1.06 (such sum, the “Purchase Price”).
Section 1.05 Milestone Earnout. Buyer shall pay to Seller the following one-time, non-refundable, non-creditable milestone payments (each, a
“Milestone Earnout Payment”) upon and subject to the achievement of each identified event below (each, a “ Milestone”):
(a) upon [***] (the “[***] Milestone”): $[***];
(b) upon [***] (the “[***] Milestone”): $[***];
(c) upon [***]: $[***];
(d) upon [***]: $[***];
(e) upon consummation of any Sell-On Transaction [***]: an amount equal to [***] of all Sell-On Transaction Profits;
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(f) upon consummation of any Sell-On Transaction [***]: an amount equal to [***] of all Sell-On Transaction Profits; and
(g) upon consummation of any Sell-On Transaction [***]: an amount equal to [***] of all Sell-On Transaction Profits.
For the avoidance of doubt, each of the Milestone Earnout Payments set forth above will be payable only one time, upon the first occurrence of the
corresponding Milestone, and no additional payment will be due in the event of any repeated occurrence of such Milestone, including in relation to more
than one Product. Under no circumstances shall Buyer be obligated to pay Seller more than $[***] in the aggregate pursuant to subsections (a) through (d)
of this Section 1.05.
Buyer shall provide Seller with [***] notice of the achievement of any Milestone, as well as [***] notice after each time Buyer or any of its
Affiliates actually receives any Sell-On Transaction Profits (including pursuant to the release of any proceeds from escrow or provided as part of an
earnout). Following the receipt of such notice of achievement of a Milestone or notice of receipt of Sell-On Transaction Profits, Seller shall issue an invoice
to Buyer for the corresponding Milestone Earnout Payment or documenting that portion of the Sell-On Transaction Profits owed by Buyer to Seller (each
such amount, the “Sell-On Transaction Payment”). Each Milestone Earnout Payment or Sell-On Transaction Payment owing pursuant to this Section 1.05
shall be due by Buyer within [***] following Buyer’s receipt of an invoice therefor. Buyer shall pay each Milestone Earnout Payment and Sell-On
Transaction Payment by wire transfer of immediately available funds to Seller in accordance with the wire transfer instructions provided by Seller in
writing prior to the due date for such payment.
In the event that Buyer consummates any Sell-On Transaction, Buyer shall remain responsible for the payment of the Earnout Payments to Seller
[***] in accordance with the terms of this Agreement.
Section 1.06 Sales Earnout.
( a ) Base Line Calculation. Within [***] after the Launch Date, Buyer shall provide to Seller a report detailing the aggregate Net Sales of
Zenpep (including Combination Products with Zenpep as the Covered Component) during the [***] period [***] (the “Baseline Zenpep [***]
Sales”). Buyer shall include in such report sufficient details to show Buyer’s calculation of such Net Sales, including each subpart thereof. Buyer
shall also provide Seller with all supporting documentation [***] requested by Seller [***] to confirm such calculations and amounts. If Seller does
not dispute in writing the Baseline Zenpep [***] Sales amount set forth in Buyer’s report within [***] after the delivery thereof, such Baseline
Zenpep [***] Sales amount shall be deemed final and binding on the parties. If Seller disagrees with the Baseline Zenpep [***] Sales amount as set
forth in Buyer’s report, Seller shall deliver a written notice of dispute to Buyer setting forth in reasonable detail the specific amount(s) disputed,
[***], and its proposed calculation of such disputed amount(s), together with reasonable supporting documentation (collectively, the “Baseline
Disputed Items”) within [***] after the delivery of Buyer’s report and the parties shall negotiate in good faith a mutually agreeable final Baseline
Zenpep [***] Sales amount to be used by the parties. If the parties are not able to agree upon the Baseline Zenpep [***] Sales amount within [***]
after Seller provides Buyer with such notice of the dispute, then Seller shall engage an independent certified public accounting firm of internationally
recognized standing that is reasonably acceptable to Buyer to audit the calculations. The audit shall be limited to the Baseline Disputed Items that
remain unresolved after the parties’ good faith negotiations (the “Unresolved Baseline Disputed Items”). The
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accounting firm shall be required to enter into a reasonable and customary confidentiality and non-use agreement with Buyer to protect the
confidentiality of Buyer’s books and records. Buyer and its Affiliates shall make the relevant books and records available during normal business
hours for examination by the accounting firm. Except as may otherwise be agreed, the accounting firm shall be provided access to such books and
records at Buyer’s or its Affiliates’ facilities where such books and records are normally kept. Upon completion of the audit, the accounting firm shall
provide both parties a written report disclosing (i) whether or not Buyer’s report is correct with respect to the Unresolved Baseline Disputed Items,
(ii) if any Unresolved Baseline Disputed Item is not correct, the auditor’s determination of the value for such Unresolved Baseline Disputed Item, and
(iii) the specific details concerning any discrepancies. The decision of the accounting firm shall be final and binding on the parties absent manifest
error. The parties shall initially share the costs of the auditor equally; following completion of the auditor, if (1) the value of the Baseline Zenpep
[***] Sales determined by the auditor is [***] than the value of the Baseline Zenpep [***] Sales as put forth by Buyer in its initial report on the
Baseline Zenpep [***] Sales, then Buyer shall pay the entire costs of the auditor, including reimbursing Seller for any amounts paid to such auditor
by Seller or its Affiliates and (2) the value of the Baseline Zenpep [***] Sales Items determined by the auditor is [***] of the value of the Baseline
Zenpep [***] Sales as put forth by Buyer in its initial report on the Baseline Zenpep [***] Sales, [***]. The accounting firm shall not provide Seller
with [***] access to Buyer’s confidential information. The “[***] Baseline” is equal to the product of (i) the Baseline Zenpep [***] Sales as
determined pursuant to this Section 1.06(a); multiplied by (ii) [***]. The “Quarterly Baseline” is equal to the quotient of (A) the [***] Baseline;
divided by (B) four.
(b) Sales Earnout Payments. For each Calendar Quarter, the “ Earnout Sales” means the difference of (i) the Net Sales for such Calendar
Quarter, less (ii) the Quarterly Baseline, provided that if such amount is less than $0, the Earnout Sales for the Calendar Quarter will be deemed to be
$0. During the Earnout Period, for each Calendar Quarter occurring on or after the Launch Date (including the Calendar Quarter in which the Launch
Date occurs), Buyer shall pay to Seller an amount equal to [***] of the Earnout Sales (the “Sales Earnout Payments” and, collectively with the
Milestone Earnout Payments, the “Earnout Payments”) in accordance with Section 1.06(d).
(c) Combination Products. If Buyer, any of its Affiliates, or any Licensee sells any Earnout Product in the form of a Combination Product,
Net Sales of such Combination Product for the purpose of determining the Baseline Zenpep [***] Sales pursuant to Section 1.06(a) and Sales Earnout
Payments due to Seller pursuant to Section 1.06(b) will be calculated as follows:
(i) [***];
(ii) [***];
(iii) [***]; or
(iv) [***].
[***].
(d) Payment Terms and Earnout Statements.
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(i) Buyer shall pay all Sales Earnout Payments due under this Agreement for each Calendar Quarter within [***] after the end of
such Calendar Quarter. Buyer shall make all payments in U.S. dollars by wire transfer of immediately available funds to bank account(s) as
designated in writing by Seller from time to time. For the purpose of converting the local currency in which any Net Sales arise into U.S.
dollars, the rate of exchange to be applied will be the rate of exchange [***].
(ii) If any Earnout Payment is not received by Seller when due, Buyer shall pay to Seller interest on the overdue payment from the
date such payment was due to the date of actual payment at an annual rate equal to [***] percentage points above the U.S. prime interest rate,
as reported by The Wall Street Journal (New York edition) for the first Business Day of the month in which such due date occurs, or if lower,
the maximum amount permitted under applicable Law.
(iii) On or before the due date for all payments to Seller pursuant to Section 1.06(d)(i), Buyer shall provide Seller with a statement (an
“Earnout Statement”) showing for the relevant Calendar Quarter on an Earnout Product-by-Earnout Product basis:
(A) the Gross Sales for the sale of Earnout Products; and
(B) the calculation of Deductions, Net Sales, and Sales Earnout Payments with respect to such Earnout Products, subject to
Section 1.06(c) with respect to Combination Products; and
(C) the exchange rate used for calculating any Sales Earnout Payments.
Upon Seller’s request, Buyer shall provide Seller with such additional documentation as may be reasonably requested by Seller that is [***]
for the information included in each Earnout Statement.
Section 1.07 Reports and Reporting. No later than [***] following the end of each Calendar Quarter, Buyer shall provide Seller with a report of
Net Sales booked by Buyer on an Earnout Product-by-Earnout Product basis, during such Calendar Quarter ended (each, a “Quarterly Estimate”). For the
avoidance of doubt, the Quarterly Estimates are provided for informational purposes only and shall be subject in all respects to the Earnout Statements
provided for the applicable Calendar Quarter. No later than [***] after the expiration of each Calendar Year, Buyer shall furnish Seller with a written report
(each, an “Annual Report”) setting forth: (a) through and including the Calendar Year in which the first Launch Date occurs, [***] its, its Affiliates,’ and
its Licensees’ progress on the Development, Manufacture, and Commercialization of all Products for the Calendar Year just ended, including [***] their
progress and efforts towards the achievement of each Milestone; (b) Buyer’s then-current estimates as to the date of achievement for the [***] Milestone
and the [***] Milestone; and (c) its, its Affiliates,’ and its Licensees’ projections of Net Sales and Sales Earnout Payments for the then-current Calendar
Year; provided [***]. [***]. Upon Seller’s reasonable advance notice (which in no event shall be less than [***]), Buyer shall make its relevant
management personnel reasonably available to Seller’s personnel to discuss in greater detail each Annual Report, the information therein, and related
questions Seller may have; provided that such access shall be during normal local business hours [***].
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Section 1.08 Allocation of Purchase Price . The Purchase Price and the Assumed Liabilities (and any other amounts, if any, properly included
for Tax purposes) shall be allocated in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”) among the Purchased
Assets for all U.S. federal income tax purposes as shown on the allocation schedule set forth on Section 1.08 of the Disclosure Schedules (the “Allocation
Schedule”). Neither the parties nor any of their respective Affiliates shall take any position on any Tax Return or in any Tax contest, proceeding, audit,
appeals or litigation which is inconsistent with the agreed upon allocation unless otherwise required by a final determination within the meaning of Section
1313(a) of the Code (or any similar provision of state, local or non-U.S. Tax Law).
Section 1.09 Non-Assignable Assets; Previously Transferred Assets.
(a) Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a sale, assignment, or transfer of any
Purchased Asset if such sale, assignment, or transfer: (i) violates applicable Law; or (ii) without the consent or waiver of a Person who is not a party
to this Agreement or an Affiliate of a party to this Agreement would result in a breach or violation of an Assigned Contract, result in the termination,
cancellation, or revocation of an Assigned Contract, or result in the creation of any lien on any Purchased Asset, and such consent or waiver has not
been obtained prior to the Closing.
(b) Following the Closing, Seller and Buyer shall use [***] efforts, and shall cooperate with each other, to obtain any such required consent
or waiver, or any release, substitution, or amendment required to assign all Liabilities under any and all Assigned Contracts or other Liabilities that
constitute Assumed Liabilities; [***]. Once such consent, waiver, release, substitution, or amendment is obtained, Seller shall promptly sell, assign,
and transfer to Buyer the relevant Purchased Asset to which such consent, waiver, release, substitution, or amendment relates [***].
(c) To the extent that any Purchased Asset or Assumed Liability cannot be transferred to Buyer pursuant to this Section 1.09, Buyer and
Seller shall use [***] efforts to enter into such arrangements (such as subleasing, sublicensing, or subcontracting) to provide to the parties the
economic and, to the extent permitted under applicable Law, operational equivalent of the transfer of such Purchased Asset or Assumed Liability to
Buyer as of the Closing. Buyer shall, to the extent it receives the benefits of the applicable Purchased Asset, as agent or subcontractor for Seller, pay,
perform, and discharge fully the liabilities and obligations related to such Purchased Asset or Assumed Liability from and after the Closing Date. To
the extent permitted under applicable Law, Seller shall, at Buyer’s expense, hold in trust for and pay to Buyer promptly upon receipt thereof, all
income, proceeds, and other monies received by Seller from and after the Closing Date, to the extent related to such Purchased Asset in connection
with the arrangements under this Section 1.09. [***].
(d) The Parties acknowledge that the Assigned Contracts and Inventory set forth in Section 1.09(d) of the Disclosure Schedules, and
Assumed Liabilities specifically related thereto were assigned and transferred to, and assumed by, Buyer prior to the date of this Agreement (such
Assigned Contracts and Inventory, the “Previously Transferred Assets ” and such Assumed Liabilities, the “ Previously Assumed Liabilities”).
Such Previously Transferred Assets shall be Purchased Assets and, as applicable, Assigned Contracts and Inventory for all purposes of this
Agreement, other than the obligation of Seller to assign and transfer the same at Closing, and
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such Previously Assumed Liabilities shall be Assumed Liabilities for all purposes of this Agreement, other than the obligation of Buyer to assume the
same at Closing.
Section 1.10 Withholding Taxes. [***]. [***]. The parties shall use [***] efforts to cooperate to mitigate or eliminate any such withholding. To
the extent that amounts are so withheld and paid over to the appropriate Tax authority by Buyer, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the person in respect of which such deduction and withholding was made.
Section 1.11 Exploitation of Products. Seller agrees and acknowledges that [***]. Seller acknowledges and agrees that (a) [***], (b) [***], (c)
[***], and (d) the parties solely intend the express provisions of this Agreement (and, for the avoidance of doubt, not the Existing Agreements) to govern
their contractual relationship with respect to the Purchased Assets and the Products. [***].
ARTICLE II
CLOSING
Section 2.01 Closing. Subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated by this
Agreement (the “Closing”) shall take place remotely by exchange of documents and signatures (or their electronic counterparts), on January 5 , 2024 at
8:00 a.m. PST, provided that all of the conditions to Closing set forth in ARTICLE VI are either satisfied or waived by the party entitled to the benefits of
such conditions on such date (other than conditions, which by their nature, are to be satisfied on the Closing Date, but subject to the satisfaction of such
conditions on the Closing Date or waiver by the party entitled to the benefits of such conditions), or at such other time or place or in such other manner as
Seller and Buyer may mutually agree upon in writing. The date on which the Closing is to occur is herein referred to as the “Closing Date.” Each party
shall use [***] efforts to satisfy all conditions to Closing set forth in ARTICLE VI that are within such party’s control, obtain all internal approvals and
complete all internal procedures necessary to proceed to Closing, and otherwise proceed to Closing as soon as possible after the Effective Date.
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Section 2.02 Closing Deliverables.
(a) At the Closing, Seller shall deliver to Buyer the following:
(i) a bill of sale in the form of Exhibit C attached hereto and made a part hereof (the “Bill of Sale”) duly executed by Seller,
transferring the Inventory, Acquired Books and Records, and any other tangible Purchased Assets to Buyer;
(ii) an assignment and assumption agreement in the form of Exhibit D attached hereto and made a part hereof (the “Assignment
and Assumption Agreement ”) duly executed by Seller, effecting the assignment to and assumption by Buyer of the Purchased Assets and
the Assumed Liabilities;
(iii) an assignment in the form of Exhibit E attached hereto and made a part hereof (the “Patent Assignment”) duly executed by
Seller, transferring all of Seller’s right, title, and interest in and to the Purchased Patents to Buyer; and
(iv) a license agreement in the form of Exhibit F attached hereto and made a part hereof (the “Expression System License
Agreement” and, collectively with this
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Agreement, the Assignment and Assumption Agreement, and the Patent Assignment, the “ Transaction Documents”) duly executed by
Seller;
(v) a duly executed signature page to the A&P Acquisition Agreement, to be held in escrow subject to and in accordance with
Section 9.02;
(vi) a properly completed IRS Form W-9; and
(vii) a certificate, dated the Closing Date and signed by a duly authorized officer of Seller, that each of the conditions set forth in
Section 6.01(a) and Section 6.01(b) have been satisfied.
(b) At the Closing, Buyer shall deliver to Seller the following:
(i) the Assignment and Assumption Agreement duly executed by Buyer;
(ii) the Patent Assignment duly executed by Buyer;
(iii) the Expression System License Agreement duly executed by Buyer;
(iv) the Initial Purchase Price by wire transfer of immediately available funds to Seller in accordance with the wire transfer
instructions set forth on Section 2.02(b)(iv) of the Disclosure Schedules; and
(v) a certificate, dated the Closing Date and signed by a duly authorized officer of Buyer, that each of the conditions set forth in
Section 6.02(a) and Section 6.02(b) have been satisfied.
Section 2.03 Delivery of Records. Promptly and in any event within [***] after the Closing Date, Seller shall deliver to Buyer copies of the
Acquired Regulatory Documentation and the Acquired Books and Records via virtual data room or other file-share platform reasonably acceptable to Buyer
(or such other method as mutually agreed by the parties), provided that Seller shall have no obligation to deliver to Buyer any such Acquired Regulatory
Documentation or Acquired Books and Records that are already in Buyer’s or its Affiliates possession or that are publicly available.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedules, Seller represents and warrants to Buyer that the statements contained in this ARTICLE III are true
and correct as of the date hereof.
Section 3.01 Organization and Authority of Seller . Seller is a corporation duly organized, validly existing, and in good standing under the
Laws of the State of Delaware. Seller has all necessary corporate power and authority to enter into this Agreement and the other Transaction Documents to
which Seller is a party, to carry out its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by Seller of this Agreement and any other Transaction Document to which Seller is a party, the performance by Seller of its
obligations hereunder and thereunder, and the consummation by Seller of the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of Seller. This Agreement and the Transaction Documents constitute legal, valid, and binding obligations of Seller
enforceable against Seller
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in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar
Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
Section 3.02 No Conflicts or Consents. The execution, delivery, and performance by Seller of this Agreement and the other Transaction
Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) violate or breach any
provision of the certificate of incorporation or by-laws of Seller; (b) violate or breach any provision of any Law or Governmental Order applicable to Seller
or the Purchased Assets; (c) except as set forth in Section 3.02 of the Disclosure Schedules, require the consent, notice, or other action by any Person under,
conflict with, violate or breach, constitute a default under, or result in the acceleration of any Assigned Contract; or (d) except as set forth in Section 3.02 of
the Disclosure Schedules, require any consent, permit, Governmental Order, filing, or notice from, with, or to any Governmental Authority; except, in the
cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration, or failure to obtain consent or give notice would not have a Material
Adverse Effect and, in the case of clause (d), where such consent, permit, Governmental Order, filing, or notice which, in the aggregate, would not have a
Material Adverse Effect.
Section 3.03 Intellectual Property. Section 3.03 of the Disclosure Schedules contains a current and complete list of all Purchased Patents,
specifying as to each, as applicable: the title; the jurisdiction by or in which it has been issued, registered, or filed; the patent, registration or application
serial number; and the issue, registration, or filing date. The Purchased Patents constitute all currently-existing Patents owned by Seller that [***] for the
Manufacturing or use of CDX-7108 as it currently exists, other than any Patents covered by the Expression System License Agreement. Except for the
Purchased Patents and any Patents covered by the Expression System License Agreement, Seller Controls no Patents that [***] for the Manufacturing or
use of, CDX-7108 as it currently exists. Other than with respect to any ownership right, title, or interest of Buyer or any of its Affiliates, Seller owns all
right, title, and interest in and to the Purchased Patents and Seller has not granted any license or other right under any of the Purchased Patents to any Third
Party other than to service providers under the Assigned Contracts. All assignments and other instruments necessary to establish and record Seller’s
ownership interest in the Purchased Patents have been executed, delivered, and filed with the relevant Governmental Authorities and authorized registrars.
All required filings and fees related to the Purchased Patents due and payable prior to the Effective Date have been submitted with and paid to the relevant
Governmental Authorities and authorized registrars. To Seller’s Knowledge, (a) no Person is infringing any Purchased Patents, and (b) except as set forth
on Section 3.03(b) of the Disclosure Schedules, there are no actual or threatened claims that (i) the currently-listed inventorship of the Purchased Patents is
incorrect, (ii) CDX-7108 (as existing on the date hereof) infringes any Third Party intellectual property rights or (iii) the use of the Codexis Expression
System (as defined in the Expression System License Agreement) to manufacture any Cell Bank (as defined in the Expression System License Agreement)
or CDX-7108 as it currently exists infringes any Third Party intellectual property rights.
Section 3.04 Assigned Contracts.
(a) Correct and complete copies of each Assigned Contract, have been made available to Buyer and its Representatives, including all
amendments and modifications and side agreements relating thereto.
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(b) Except as set forth on Section 3.04 of the Disclosure Schedules: (i) each of the Assigned Contracts represents a legal, valid and binding
obligation of Seller and, to Sellers’ Knowledge, each other party thereto, and is enforceable against Seller and, to Seller’s Knowledge, each other
party thereto, in accordance with its terms, and is in full force and effect, and (ii) none of Seller or, to Seller’s Knowledge, any other party thereto is
in material breach of, or material default under, or has provided or received any notice of any intention to terminate, any of the Assigned Contracts, or
has committed or failed to perform any act which, with or without notice, lapse of time or both would constitute a material breach of or material
default under any of the Assigned Contracts.
Section 3.05 Title to Inventory. Seller has good and valid title to all Inventory included in the Purchased Assets, free and clear of any lien,
charge, claim, pledge, security interest, or other similar encumbrance (“collectively, “Encumbrances”), except for: (a) liens for Taxes not yet due and
payable or being contested in good faith by appropriate procedures; (b) mechanics’, carriers’, workmen’s, repairmen’s, warehouse, or other like liens
arising or incurred in the ordinary course of business; and (c) liens arising under original purchase price conditional sales contracts with third parties
entered into in the ordinary course of business (collectively, “Permitted Encumbrances”).
Section 3.06 Legal Proceedings; Governmental Orders.
(a) Except as set forth in Section 3.06(a) of the Disclosure Schedules, there are no material claims, actions, suits, investigations, or other
legal proceedings (collectively, “Actions”) pending or, to Seller’s Knowledge, threatened against or by Seller or its Affiliates relating to or affecting
the Purchased Assets or the Assumed Liabilities.
(b) Except as set forth in Section 3.06(b) of the Disclosure Schedules, there are no outstanding Governmental Orders against, relating to, or
affecting the Purchased Assets, which would have a Material Adverse Effect.
Section 3.07 Brokers. No broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee or commission in connection
with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Seller or any
of its Affiliates.
Section 3.08 No Other Representations and Warranties . Except for the representations and warranties contained in this ARTICLE III
(including the related portions of the Disclosure Schedules), neither Seller nor any other Person has made or makes any other express or implied
representation or warranty, either written or oral, on behalf of Seller, including any representation or warranty as to the accuracy or completeness of any
information, documents, or material regarding the Products and the Purchased Assets furnished or made available to Buyer and its Representatives in any
form (including any information, documents, or material delivered or made available to Buyer on behalf of Seller for purposes of this Agreement), or as to
the future revenue, profitability, or success of the Products, or any representation or warranty arising from statute or otherwise in Law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Disclosure Schedules, Buyer represents and warrants to Seller that the statements contained in this ARTICLE IV are true
and correct as of the date hereof
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Section 4.01 Organization and Authority of Buyer. Buyer is a société anonyme duly organized, validly existing and in good standing under the
Laws of Switzerland. Buyer has all necessary corporate power and authority to enter into this Agreement and the other Transaction Documents to which
Buyer is a party, to carry out its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution
and delivery by Buyer of this Agreement and any other Transaction Document to which Buyer is a party, the performance by Buyer of its obligations
hereunder and thereunder, and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of Buyer. This Agreement and the Transaction Documents constitute legal, valid, and binding obligations of Buyer enforceable
against Buyer in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.02 No Conflicts; Consents. The execution, delivery, and performance by Buyer of this Agreement and the other Transaction
Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) violate or breach any
provision of the certificate of incorporation or by-laws of Buyer; (b) violate or breach any provision of any Law or Governmental Order applicable to
Buyer; (c) require the consent, notice or other action by any Person under, conflict with, violate or breach, constitute a default under, or result in the
acceleration of any agreement to which Buyer is a party; or (d) require any consent, permit, Governmental Order, filing, or notice from, with, or to any
Governmental Authority by or with respect to Buyer.
Section 4.03 Solvency; Sufficiency of Funds. Immediately after giving effect to the transactions contemplated hereby, Buyer shall be solvent
and shall: (a) be able to pay its debts as they become due; (b) own property that has a fair saleable value greater than the amounts required to pay its debts
(including a reasonable estimate of the amount of all Liabilities); and (c) have adequate capital to carry on its business. No transfer of property is being
made and no obligation is being incurred in connection with the transactions contemplated hereby with the intent, on the part of Buyer, to hinder, delay, or
defraud either present or future creditors of Buyer or Seller. In connection with the transactions contemplated hereby, Buyer has not incurred, nor plans to
incur, debts beyond its ability to pay as they become absolute and matured.
Section 4.04 Legal Proceedings. There are no Actions pending or, to Buyer’s knowledge, threatened against or by Buyer that challenge or seek to
prevent, enjoin, or otherwise delay the transactions contemplated by this Agreement.
Section 4.05 Brokers. No broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee or commission in connection
with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Buyer or any
of its Affiliates.
Section 4.06 Independent Investigation. Buyer has conducted its own independent investigation, review, and analysis of the Products and the
Purchased Assets, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other
documents and data of Seller for such purpose. Buyer acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer has relied solely upon its own investigation and the express representations and warranties of
Seller set forth in ARTICLE III of this Agreement (including related portions of the Disclosure Schedules); and (b)
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neither Seller nor any other Person has made any representation or warranty as to Seller, the Products, the Purchased Assets, or this Agreement, except as
expressly set forth in ARTICLE III of this Agreement (including the related portions of the Disclosure Schedules).
Section 4.07 Other Representations and Warranties . Except for the representations and warranties contained in this ARTICLE IV, neither
Buyer nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Buyer, including
any representation or warranty as to the accuracy or completeness of any information, documents, or material furnished or made available to Seller and its
Representatives in any form (including any information, documents, or material delivered or made available to Seller on behalf of Buyer for purposes of this
Agreement) or any representation or warranty arising from statute or otherwise in Law.
ARTICLE V
COVENANTS
Section 5.01 Certain Activities Prior to the Closing. From the Effective Date until the Closing, except as otherwise provided in this Agreement,
or consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned, or delayed), Seller shall use [***] efforts to maintain
and preserve intact all Purchased Assets, and, without limiting the generality of the foregoing, shall not during such period:
(a) sell, assign, lease, transfer, abandon, fail to maintain, permit to lapse, grant any license or sublicense under or with respect to, or
otherwise dispose of any of the Purchased Assets;
(b) create, incur or otherwise allow the imposition of any Encumbrance upon any of the Purchased Assets, except for Permitted
Encumbrances; or
(c) agree in writing to do any of the foregoing.
Section 5.02 Supplement to Disclosure Schedules. From time to time prior to the Closing, Seller shall have the right (but not the obligation) to
supplement or amend the Disclosure Schedules hereto with respect to any matter hereafter arising after the Effective Date (each a “Schedule Supplement”),
in which case, Seller shall promptly, and in any event prior to Closing, deliver a revised version of the Disclosure Schedules to Buyer. [***].
Section 5.03 Confidentiality.
( a ) Nondisclosure. Each party agrees that, during the Term and thereafter, a party (the “ Receiving Party”) receiving Confidential
Information of the other party (the “Disclosing Party”) (or that has received any such Confidential Information from the other party prior to the
Effective Date) shall (i) maintain in confidence such Confidential Information using not less than the efforts such Receiving Party uses to maintain in
confidence its own proprietary industrial information of similar kind and value, which shall be no less than a reasonable degree of care, (ii) not
disclose such Confidential Information to any Third Party without the prior written consent of the Disclosing Party, except for disclosures expressly
permitted below, and (iii) not use such Confidential Information for any purpose except those permitted by this Agreement. Each Receiving Party will
promptly notify the Disclosing Party upon gaining knowledge of any material use or disclosure of Confidential Information of the other party not
permitted pursuant to this Section 5.03. [***]. For the further avoidance of doubt, all Licensed Know-How is and shall
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be Confidential Information of Seller. The obligations in this Section 5.03 shall not apply with respect to any portion of the Confidential Information
that the Receiving Party may receive to the extent that such information:
(i) is publicly disclosed by the Disclosing Party, either before or after it is disclosed to the Receiving Party hereunder;
(ii) was known to the Receiving Party or any of its Affiliates, without any obligation to keep it confidential or any restriction on its
use, prior to disclosure by the Disclosing Party, and such prior knowledge can be properly documented by the Receiving Party;
(iii) is subsequently disclosed to the Receiving Party or any of its Affiliates by a Third Party lawfully in possession thereof and
without any obligation to keep it confidential or any restriction on its use;
(iv) is published by a Third Party or otherwise becomes publicly available or enters the public domain, either before or after it is
disclosed to the Receiving Party without the Receiving Party’s breach of the terms of this Agreement; or
(v) is independently developed by employees or contractors of the Receiving Party or any of its Affiliates without the aid,
application, or use of Confidential Information of the Disclosing Party, and such independent development can be properly documented by
the Receiving Party.
(b) Authorized Disclosure. The Receiving Party may disclose Confidential Information belonging to the Disclosing Party only to the extent
such disclosure is reasonably necessary in the following instances:
(i) complying with applicable Laws and regulations (including the rules and regulations of the Securities and Exchange Commission
or any national securities exchange) and with judicial or administrative process, if in the reasonable opinion of the Receiving Party’s counsel,
such disclosure is so required for such compliance and the Receiving Party discloses no more than required in its reasonable judgment, and
further provided that with respect to judicially or administratively required disclosures, the Receiving Party (to the extent legally permissible)
shall promptly inform the other party of such required disclosure and use [***] efforts to provide the other party an opportunity to challenge
or limit the disclosure obligations; and
(ii) disclosure to its Affiliates, and to its bona fide actual or potential (A) permitted Licensees, (B) investment bankers, investors,
lenders, or acquirers, or permitted assignees under Section 11.06, in each case, solely for diligence purposes, and (C) each of the parties’
respective Representatives, in each case of (A), (B), and (C), each of whom prior to disclosure must be bound by obligations of confidentiality
and non-use no less restrictive than the obligations set forth in this Section 5.03; provided, however, that the Receiving Party shall remain
responsible for any failure by any Person who receives Confidential Information pursuant to this Section 5.03(b)(ii) to treat such Confidential
Information as required under this Section 5.03.
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If and whenever any Confidential Information is disclosed in accordance with this Section 5.03(b), such disclosure shall not cause any such
information to cease to be Confidential Information, except to the extent that such disclosure results in a public disclosure of such information (other
than by breach of this Agreement).
(c) Tax Filings. Notwithstanding any provision of this Agreement to the contrary, each party (and their Affiliates) shall be free to disclose
this Agreement, the contents hereof, and the transactions contemplated hereby to any Governmental Authority in connection with the filing of any
Tax Return and in any Tax audits, assessments, or administrative or judicial proceedings or other Actions relating to Tax Returns or Taxes.
Section 5.04 Public Announcements . Unless otherwise required by applicable Law, no party to this Agreement shall make any public
announcements in respect of this Agreement or the transactions contemplated hereby without the prior written consent of the other party (which consent
shall not be unreasonably withheld, conditioned, or delayed), and the parties shall cooperate as to the timing and contents of any such announcement.
Notwithstanding the foregoing, Seller may, following the Effective Date, issue a press release regarding this Agreement and the transactions contemplated
hereby containing the information and generally in the form as set forth in Exhibit G attached to and made a part of this Agreement. The contents of any
announcement or similar publicity, which has been reviewed and approved by the reviewing party (including the press release referred to in the prior
sentence), can be re-released by either party without a requirement for re-approval.
Section 5.05 Exclusivity.
(a) During the Restricted Period, Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly engage in, for its own
benefit or for, with, or through any other Person, [***], any other company, partnership, proprietorship, enterprise, organization or business venture
of any kind whatsoever engaged in the Development, Manufacture, Commercialization or other Exploitation of any lipase-containing product in the
field of pancreatic enzyme replacement therapy (the “Restricted Business”) [***]. Notwithstanding the foregoing, Seller may own, directly or
indirectly, solely as an investment, securities of any Person traded on any national securities exchange if Seller is not a controlling Person of, or a
member of a group which controls, such Person and does not, directly or indirectly, own [***] or more of any class of securities of such Person. The
“Restricted Period” shall commence on the Closing Date and shall continue until the third (3 ) anniversary of the Closing Date; provided [***].
rd
(b) Each party acknowledges that a breach or threatened breach by it of this Section 5.05 could give rise to irreparable harm to the other
party, for which monetary damages may not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such
party of any such obligations, the other party shall, in addition to any and all other rights and remedies that may be available to it in respect of such
breach, be entitled to seek equitable relief, including a temporary restraining order, an injunction, specific performance, and any other relief that may
be available from a court of competent jurisdiction (without any requirement to post bond, which such party hereby waives).
(c) Each party acknowledges that the restrictions contained in this Section 5.05 are reasonable and necessary to protect the legitimate
interests of the other party and constitute a material inducement to each party to enter into this Agreement and consummate the transactions
contemplated by this Agreement. In the event that any covenant contained in this Section 5.05
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should ever be adjudicated to exceed the time, geographic, product, or service or other limitations permitted by applicable Law in any jurisdiction,
then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum
time, geographic, product, or service or other limitations permitted by applicable Law. The covenants contained in this Section 5.05 and each
provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written
shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.
Section 5.06 Patent Prosecution and Maintenance.
(a) Following the Closing Date, Buyer shall have the sole right to Prosecute all Purchased Patents and Resultant Patents, including any
Patent Term Extensions or Supplementary Protection Certificates thereto, and shall be solely responsible for the cost and expense thereof. Buyer shall
have the sole right to determine the strategy and material aspects of Prosecution of the Purchased Patents and Resultant Patents, including where and
when applications for Purchased Patents and Resultant Patents will be filed, and claims to be included, excluded, or modified in Purchased Patents
and Resultant Patents applications, or on the selection of internal or external patent counsel or patent agents to be used for filing, Prosecuting and
maintaining the Purchased Patents and Resultant Patents.
(b) Seller shall provide to Buyer all reasonable assistance requested by Buyer in connection with Prosecution under this Section 5.06,
including allowing Buyer reasonable access to Seller’s and its Affiliates’ files and documents and Seller’s and its Affiliates’ then-current personnel
and inventors who may have possession of information relevant to the Prosecution. Any such cooperation by Seller and its Affiliates with respect to
the Purchased Patents and Resultant Patents or any such Prosecution shall be at Buyer’s cost and expense and Buyer shall reimburse Seller for such
reasonable and documented costs and expenses of Seller and its Affiliates.
Section 5.07 Patent Enforcement.
(a) Buyer shall have the sole right to enforce the Purchased Patents and Resultant Patents and intellectual property rights in Purchased
Know-How, including for past infringement, against Third Party infringers (and enter into settlement agreements with such Third Party infringers).
Any recovery obtained in any such enforcement action (or settlement thereof) shall belong to Buyer and Buyer shall treat that portion of the recovery
that is attributable to lost sales or disgorged profits (net of any non-reimbursed costs and expenses directly related to such enforcement action (or
settlement thereof)) as Net Sales hereunder. Buyer shall be responsible for all costs and expenses associated with such enforcement.
(b) Seller shall provide to Buyer all reasonable assistance requested by Buyer in connection with any Action under this Section 5.07,
including allowing Buyer reasonable access to Seller’s and its Affiliates’ files and documents and Seller’s and its Affiliates’ then-current personnel
who may have possession of information relevant to the Action. Any such cooperation by Seller with respect to the Purchased Patents and Resultant
Patents or any such Action shall be at Buyer’s cost and expense and Buyer shall reimburse Seller for such reasonable and documented costs and
expenses of Seller.
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Section 5.08 Bulk Sales Laws. The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any
jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer.
Section 5.09 VAT. The Purchase Price is exclusive of VAT. Any party receiving a supply under this Agreement hereby covenants that it will pay
any such VAT correctly charged in addition to any amounts due under this Agreement. The supplying party agrees that it will raise a Tax invoice (or
equivalent document) to support the charge to VAT. Where the prevailing legislation requires a VAT reverse charge, then the receiving party covenants
that it shall correctly account for VAT in respect of the services received. To the extent that any VAT is chargeable on any Purchased Assets transferred
pursuant to this Agreement, Seller shall deliver to Buyer: (i) a valid VAT invoice where required by applicable Law or practice and (ii) any other
documentation as may be reasonably requested by Buyer to assist it to recover the VAT chargeable or payable, in each case, in such form and within such
timing as may be required by Law. An amount equal to the amount of VAT chargeable or payable by Seller on the Purchased Assets transferred shall be
paid in addition to the consideration provided in this Agreement, by Buyer to Seller within [***] of receipt of a valid VAT invoice (or where no invoice is
required, within [***] of demand) or, if later, [***] before the date on which the obligation to account for VAT would have had to be discharged in order to
avoid liability to interest or a charge or penalty. Seller shall account for all amounts in respect of VAT paid to it by Buyer to the appropriate Governmental
Authorities in compliance with applicable Laws. Both parties shall use [***] efforts to avail of VAT zero-rating, reduced rating or exemption that could
apply. In the event that the local competent Tax authority determines that VAT is chargeable, Buyer in the first instance shall undertake all reasonable steps
to refute any such assertions by the local Tax authority. Each party shall be responsible for any Taxes due on their own account, including any penalties or
interest accruing due to incorrect VAT treatment of the supplies of goods or services made by that party or any failure to correctly account for VAT on any
receipt of a supply of goods or services under this Agreement, except where those penalties or interest arise as a result of the actions of the other party, in
which case that party shall be liable to reimburse the value of the penalties and interest.
Section 5.10 Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute
and deliver such additional documents, instruments, conveyances, and assurances and take such further actions as may be reasonably required to carry out
the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents.
Section 5.11 Books and Records; Audit.
(a) For a period of [***] from the date the last Milestone Earnout Payment or Sales Earnout Payment is made to Seller, Buyer shall, and
shall require its Affiliates and Licensees to, keep and maintain complete, true, accurate, and detailed books and records for the purpose of calculating
any amounts due to Seller hereunder, including any Earnout Payments and Sell-On Transaction Payments. Buyer and its Affiliates shall require
Licensees to report to Buyer or its Affiliates, as applicable, the information required to be made available to Seller pursuant to Section 1.06(d) and
this Section 5.11.
(b) Following the Launch Date, Seller shall have the right to examine and audit Buyer’s and its Affiliates’ books and records referred to in
Section 5.11(a) to verify the accuracy of any reports or payments prepared or delivered to Seller pursuant to this Agreement. Any such audit shall be
on at least [***] prior written notice. Seller’s rights to perform an audit under this
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Section 5.11 shall be limited to not more than [***] and shall be limited to the pertinent books and records for any Calendar Year ending not more
than [***] before the date of the request [***]. The audit shall be performed [***] by an independent certified public accounting firm of
internationally recognized standing that is selected by Seller [***]. The accounting firm shall be required to enter into a reasonable and customary
confidentiality and non-use agreement with Buyer to protect the confidentiality of its books and records. Buyer and its Affiliates shall make the
relevant books and records [***] available during normal business hours for examination by the accounting firm. Except as may otherwise be agreed,
the accounting firm shall be provided access to such books and records at Buyer’s or its Affiliates’ facilities where such books and records are
normally kept. Upon completion of the audit, the accounting firm shall provide both parties a written report disclosing whether or not the relevant
reports or payments are correct, and the specific details concerning any discrepancies. The decision of the accounting firm shall be final and binding
on the parties absent manifest error. The accounting firm shall not provide Seller with [***] access to Buyer’s confidential information. If the
accounting firm conducting an audit pursuant to this Section 5.11 concludes as a result of such audit that any additional amounts were due and
payable to Seller, Buyer shall pay such additional amounts to Seller within [***] after the date that the parties receive such accountant’s written
report, together with interest as per Section 1.06(d)(ii). If the total amount of any underpayments by Buyer to Seller exceeds the lesser of: (i) $[***];
or (ii) [***] of the aggregate total amount that was properly due and payable to Seller for any Calendar Year, then Buyer shall also reimburse Seller
for the documented, reasonable out-of-pocket expenses incurred in conducting the audit, including all costs and expenses paid or payable to the
accounting firm. If the accounting firm conducting an audit pursuant to this Section 5.11 concludes as a result of such audit that any overpayment of
Earnout Payments or other amounts due under this Agreement occurred, Buyer shall receive a credit equal to the amount of such overpayment for use
as a credit against future Earnout Payments, if any, otherwise payable to Seller hereunder. Notwithstanding the foregoing, if Buyer reasonably and in
good faith expects that the amount of such overpayment will exceed the amount of all Earnout Payments payable by Buyer to Seller in the next [***],
at the written election of Buyer, Seller shall pay the amount by which such overpayment to Buyer exceeds such estimated Earnout Payments for the
next [***] in cash (with such remaining amount of the overpayment a credit against future Earnout Payments, if any, otherwise payable to Seller
hereunder), provided that if such amount to be paid by Seller in cash exceeds $[***], Seller may pay such amount in [***] installments over the next
[***].
Section 5.12 Termination of the Existing Agreements. Effective as of the Closing:
(a) the Development Agreement is terminated and cancelled in its entirety by the parties pursuant to Section 10.2(a) of the Development
Agreement, except for Articles 2, 3, 8, 9, 12, 13, 14, and 15 and Sections 10.1 and 10.3 of the Development Agreement which shall survive
termination as per the terms of the Development Agreement (but shall no longer apply to the Lipase Project Enzyme, the Purchased Patents, the
Resultant Patents, or the Purchased Know-How), and upon such termination the Development Agreement (other than such identified surviving
Articles and Section) shall have no further force or effect and none of the parties thereto shall have any further rights or obligations with respect
thereto; and
(b) the Strategic Collaboration Agreement is terminated and cancelled in its entirety by the parties pursuant to Section 12.2.1 of the
Strategic Collaboration Agreement, except for Articles 2, 6, 7, 8, 11, 16, and 17 and Sections 5.7, 9.5, 10.1, 12.1, 14.1, and 15.1 of the Strategic
Collaboration Agreement which shall survive termination as per the terms of the Strategic
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Collaboration Agreement (but shall no longer apply to the Lipase Project Enzyme, the Purchased Patents, the Resultant Patents, and the Purchased
Know-How), and upon such termination the Strategic Collaboration Agreement (other than such identified surviving Articles and Section) shall have
no further force or effect and none of the parties thereto shall have any further rights or obligations with respect thereto.
If there is any conflict or inconsistency between the provisions of the surviving Articles and Sections of an Existing Agreement and the provisions of any
Transaction Document, then the provisions of the Transaction Documents shall prevail. For clarity, the Lipase Project Enzyme, the Purchased Patents, the
Resultant Patents, and the Purchased Know-How, and Buyer’s corresponding interest in the Lipase Project Enzyme and such Purchased Patents, Resultant
Patents, and Purchased Know-How under the Existing Agreements, shall cease to constitute Joint Patents or Jointly Owned Inventions under any Existing
Agreement and cease to be subject to the terms of the Existing Agreements (including the provisions thereof surviving the termination thereof) and, as
between the parties, the Prosecution, defense, and enforcement of the Purchased Patents, Resultant Patents, the Purchased Know-How, and Acquired
Regulatory Documentation will be controlled solely by the terms of this Agreement and not the surviving Articles and Sections of any Existing Agreement.
For clarity, all right, title, and interest in the Purchased Patents, including the right to sue for past infringement, shall belong solely to Buyer as of the
Closing Date.
Section 5.13 License to Know-How. Effective as of the Closing Date and subject to the terms of this Section 5.13, Seller (on behalf of itself and
its Affiliates) hereby grants to Buyer, and Buyer accepts, a non-exclusive, perpetual, irrevocable, royalty-free, worldwide, non-transferable (except as set
forth below), sublicensable (solely as set forth below) license under the Licensed Know-How to Manufacture, Develop, Commercialize, and otherwise
Exploit the Lipase Project Enzyme anywhere in the world, [***]. Buyer shall have no rights or license to any enhancements, improvements, or other
modifications to the Licensed Know-How made by or on behalf of Seller or any of its Affiliates after the Closing Date. All use of the Licensed Know-How
by or under authority of Buyer (or its successors and assigns) from and after the Closing Date shall be on an “AS IS, WHERE IS” basis, with all faults and
all express and implied representations and warranties disclaimed, and at its sole risk. All rights not expressly granted by Seller and its Affiliates hereunder
are reserved by Seller and its Affiliates. The license to the Licensed Know-How granted under this Section 5.13 shall be sublicensable (including through
multiple tiers of sublicensees) only to (i) Affiliates (but only for so long as they remain Affiliates of Buyer), Licensees, and service providers of Buyer and
(ii) any Third Party that acquires one or more of the Purchased Patents or Resultants Patents and such Third Party’s Affiliates (but only for so long as they
remain Affiliates of such Third Party) and service providers, in each case, for use solely within the scope of the above license, and shall be assignable and
transferable only to successors in interest to all or substantially all of the assets of Buyer relating to the Products. Buyer is liable for any acts or omissions of
its Licensees, Affiliates, employees, contractors, representatives, and (direct and indirect) sublicensees that would, if an act or omission of Buyer, be a
breach of this Section 5.13. The rights and licenses granted in this Section 5.13 are subject to, and limited by, any and all licenses, rights, limitations, and
restrictions with respect to the Licensed Know-How previously granted to or otherwise obtained by any Third Party that are in effect as of the Closing Date.
Nothing contained herein will be construed as an obligation to disclose or deliver any technical information or embodiment of any Licensed Know-How or
to provide any technical assistance or other services or deliverables to Buyer or its Affiliates.
Section 5.14 [***]. [***].
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ARTICLE VI
CONDITIONS TO CLOSING
Section 6.01 Conditions on Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Seller contained in ARTICLE III shall be true and correct in all respects as of the Closing Date
with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified
date, which shall be true and correct in all respects as of that specified date), except where the failure of such representations and warranties to be true
and correct would not have a Material Adverse Effect.
(b) Seller shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this
Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date.
(c) Seller shall have delivered to Buyer duly executed counterparts to the Transaction Documents (other than this Agreement) and such
other documents and deliverables set forth in Section 2.02(a).
Section 6.02 Conditions on Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or Seller’s waiver, at or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Buyer contained in ARTICLE IV shall be true and correct in all respects as of the Closing Date
with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified
date, which shall be true and correct in all respects as of that specified date), except where the failure of such representations and warranties to be true
and correct would not have a material adverse effect on Buyer’s ability consummate the transactions contemplated hereby.
(b) Buyer shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this
Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date.
(c) Buyer shall have delivered to Seller duly executed counterparts to the Transaction Documents (other than this Agreement) and such
other documents and deliverables set forth in Section 2.02(b).
Section 7.01 Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall
survive the Closing and shall remain in full force and effect until the date that is [***] from the Closing Date. None of the covenants or other agreements
contained in this Agreement shall survive the expiration or other termination of the Term other than those which by their terms contemplate performance
after termination (including Section 5.03 (Confidential Information) and Section 5.11 (Books and Records; Audits)), and each such surviving covenant and
ARTICLE VII
INDEMNIFICATION
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agreement shall survive termination for the period contemplated by its terms. Notwithstanding the foregoing, any claims asserted in good faith with
reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration
date of the applicable survival period shall not thereafter be barred by the expiration of such survival period and such claims shall survive until finally
resolved.
Section 7.02 Indemnification by Seller . Subject to the other terms and conditions of this ARTICLE VII, from and after the Closing, Seller shall
indemnify Buyer, its Affiliates, and each of their successors and assigns (collectively, the “ Buyer Indemnified Parties”) against, and shall hold the Buyer
Indemnified Parties harmless from and against, any and all losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines,
costs, or expenses of whatever kind, including reasonable out-of-pocket expenses of investigation and reasonable attorneys’ fees and expenses in
connection with any action, [***] (collectively, “Losses”), incurred or sustained by, or imposed upon, any Buyer Indemnified Party based upon, arising out
of, with respect to, or by reason of:
(a) [***];
(b) [***]; or
(c) any Excluded Liability.
Section 7.03 Indemnification by Buyer . Subject to the other terms and conditions of this ARTICLE VII, from and after the Closing, Buyer shall
indemnify Seller, its Affiliates, and each of their successors and assigns (collectively, the “ Seller Indemnified Parties”) against, and shall hold the Seller
Indemnified Parties harmless from and against, any and all Losses incurred or sustained by, or imposed upon, any Seller Indemnified Party based upon,
arising out of, with respect to, or by reason of:
(a) [***];
(b) [***]; or
(c) [***], any Assumed Liability or Buyer’s, its Affiliates’, and its Licensees’ conduct of the Business after the Closing.
Section 7.04 Certain Limitations. The party making a claim under this ARTICLE VII is referred to as the “ Indemnified Party,” and the party
against whom such claims are asserted under this ARTICLE VII is referred to as the “ Indemnifying Party.” The indemnification provided for in Section
7.02 and Section 7.03 shall be subject to the following limitations:
(a) The Indemnifying Party shall not be liable to the Indemnified Party for indemnification under Section 7.02(a) or Section 7.03(a), as the
case may be, until the aggregate amount of all Losses in respect of indemnification under Section 7.02(a) or Section 7.03(a) exceeds $[***] (the
“Deductible”), in which event the Indemnifying Party shall only be required to pay or be liable for Losses in excess of the Deductible.
(b) The aggregate amount of all Losses for which a Seller shall be liable pursuant to Section 7.02(a) shall not exceed [***] of the Purchase
Price (the “Cap”).
(c) In no event shall any Indemnifying Party be liable to any Indemnified Party for any punitive, incidental, consequential, special, or
indirect damages, or for any damages based on
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loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, or diminution
of value or any damages based on any type of multiple, [***].
(d) [***].
(e) Seller shall not be liable under this ARTICLE VII for any Losses based upon or arising out of any inaccuracy in or breach of any of the
representations or warranties of Seller contained in this Agreement if Buyer [***] knowledge of such inaccuracy or breach prior to the Closing.
For purposes of calculating the Deductible or the Cap with respect to any Losses, the Deductible or Cap, as applicable, will be calculated as of the date on
which such Loss is payable by the Indemnifying Party to the Indemnified Party and the Purchase Price for purposes of such calculation will be equal to the
aggregate of the Initial Purchase Price, the Milestone Earnout Payments, and Sales Earnout Payments paid or payable by Buyer to Seller during the period
from the Closing Date until (and including) the date on which such Loss is payable; [***].
Section 7.05 Indemnification Procedures. Whenever any claim shall arise for indemnification hereunder, the Indemnified Party shall promptly
provide written notice of such claim to the Indemnifying Party. Such notice by the Indemnified Party shall: (a) describe the claim in reasonable detail; (b)
include copies of all material written evidence thereof; and (c) indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be
sustained by the Indemnified Party. In connection with any claim giving rise to indemnity hereunder resulting from or arising out of any Action by a Person
who is not a party to this Agreement, the Indemnifying Party, at its sole cost and expense and upon written notice to the Indemnified Party, may assume the
defense of any such Action with counsel reasonably satisfactory to the Indemnified Party. The Indemnified Party shall be entitled to participate in the
defense of any such Action, with its counsel and at its own cost and expense, subject to the Indemnifying Party’s right to control the defense thereof. If the
Indemnifying Party does not assume the defense of any such Action, the Indemnified Party may, but shall not be obligated to, defend against such Action in
such manner as it may deem appropriate, including settling such Action, after giving notice of it to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate and no action taken by the Indemnified Party in accordance with such defense and settlement shall relieve the Indemnifying
Party of its indemnification obligations herein provided with respect to any damages resulting therefrom. The Indemnifying Party shall not be entitled to
assume or maintain control of the defense of any such Action if (i) [***], (ii) such Action seeks an injunction or equitable relief against the Indemnified
Party or any of its Affiliates, or (iii) [***]. Seller and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any
claim, including: (i) making available (subject to the provisions of Section 5.03) records relating to such claim; and (ii) furnishing, without expense (other
than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably
necessary for the preparation of the defense of such claim. The Indemnifying Party shall not settle any Action without the Indemnified Party’s prior written
consent (which consent shall not be unreasonably withheld, conditioned, or delayed).
Section 7.06 Tax Treatment of Indemnification Payments . All indemnification payments made under this Agreement shall be treated by the
parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.
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THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Section 7.07 Exclusive Remedies. Subject to ARTICLE VIII, the parties acknowledge and agree that from and after the Closing their sole and
exclusive remedy with respect to any and all claims (other than claims arising from intentional fraud on the part of a party hereto or its representatives in
connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement, or obligation set
forth herein or otherwise relating to the subject matter of this Agreement shall be pursuant to the indemnification provisions set forth in this ARTICLE VII.
In furtherance of the foregoing, each party hereby waives, from and after the Closing, to the fullest extent permitted under Law, any and all rights, claims,
and causes of action for any breach of any representation, warranty, covenant, agreement, or obligation set forth herein or otherwise relating to the subject
matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective Representatives arising under or based
upon any Law, except pursuant to the indemnification provisions set forth in this ARTICLE VII. Nothing in this Section 7.07 shall limit any Person’s right
to seek and obtain any equitable relief to which such Person shall be entitled or to seek any remedy on account of any intentional fraud by any party hereto
or its representatives.
Section 7.08 Right to Set-Off.
(a) Buyer is expressly authorized, but shall not be obligated, to set-off any Losses that the Parties have agreed in writing, or which have
been finally determined in accordance with ARTICLE X, to be subject to indemnification by Seller hereunder (subject to the limitations set forth in
Section 7.04) against any Milestone Earnout Payment or Sales Earnout Payment or any other payments payable to Seller pursuant to this Agreement.
(b) Neither the exercise nor the failure or delay to exercise such right to withhold or set off pursuant to this Section 7.08 will constitute an
election of remedies or limit the rights and remedies of the Buyer Indemnified Parties hereunder (other than to the extent any Losses have been set off
pursuant to Section 7.08(a)).
ARTICLE VIII
TERM AND TERMINATION
Section 8.01 Term . This Agreement commences upon the Effective Date and will, unless earlier terminated in accordance with Section 8.02,
continue until the later of:
(a) [***] of the Effective Date; and
(b) [***] of the date the last Sales Earnout Payment is made to Seller (the period from the Effective Date until the expiration or other
termination of this Agreement, the “Term”).
Section 8.02 Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual written agreement of Seller and Buyer;
(b) by Buyer by written notice to Seller if:
(i) Buyer is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in, or
failure to perform any representation, warranty, covenant, or agreement made by Seller pursuant to this Agreement that would give rise to the
failure of any of the conditions specified in
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ARTICLE VI and such breach, inaccuracy, or failure cannot be cured by Seller by [***] (the “ Buyer Drop Dead Date”); or
(ii) any of the conditions set forth in Section 6.01 shall not have been fulfilled by the Buyer Drop Dead Date, unless such failure
shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements, or conditions hereof to be performed or
complied with by it prior to the Closing;
(c) by Seller by written notice to Buyer if:
(i) Seller is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in, or
failure to perform any representation, warranty, covenant, or agreement made by Buyer pursuant to this Agreement that would give rise to the
failure of any of the conditions specified in ARTICLE VI and such breach, inaccuracy, or failure cannot be cured by Buyer by [***] (the
“Seller Drop Dead Date”); or
(ii) any of the conditions set forth in Section 6.02 shall not have been fulfilled by the Seller Drop Dead Date, unless such failure
shall be due to the failure of Seller to perform or comply with any of the covenants, agreements, or conditions hereof to be performed or
complied with by it prior to the Closing.
Section 8.03 Effect of Termination . In the event of the termination of this Agreement in accordance with Section 8.02, this Agreement shall
forthwith become void and there shall be no liability on the part of any party hereto except:
(i) that the obligations set forth in this ARTICLE VIII, Section 5.03, ARTICLE X, and ARTICLE XI hereof shall survive
termination; and
(ii) that nothing herein shall relieve any party hereto from liability for any intentional breach of any provision hereof prior to such
termination.
ARTICLE IX
AMYLASE AND PROTEASE OPTION
Section 9.01 Option. Buyer shall have the right (the “Option”), but not the obligation, at any time during the Option Period, to purchase certain
additional assets of Seller on the terms set forth in the A&P Acquisition Agreement and this Article IX. In connection with the grant to Buyer of the Option,
Seller shall deliver, concurrently with the execution of this Agreement and as a condition thereto, an executed signature page to the A&P Acquisition
Agreement, which signature page shall be held in escrow by Buyer [***].
Section 9.02 Notice of Exercise. At any time prior to the expiration or other termination of the Option Period, subject to Section 9.03, Buyer
may, in its sole and absolute discretion, exercise the Option by delivering to Seller a written notice of such exercise (the “Notice of Exercise”). The date the
Notice of Exercise is delivered by Buyer to Seller shall be referred to herein as the “Option Exercise Date.”
Section 9.03 Closing. The transactions contemplated by the A&P Acquisition Agreement shall be consummated on the date that is not later than
[***] after the Option Exercise Date (the “A&P Acquisition Agreement Effective Date”), unless otherwise mutually agreed by the parties or Buyer has
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revoked its Notice of Exercise in accordance with this Section 9.03. During the period from the Option Exercise Date to the A&P Acquisition Agreement
Effective Date, the parties shall prepare in good faith each of the Transaction Documents contemplated by Section 2.02(a) of the A&P Acquisition
Agreement, including the A&P Expression System License Agreement, which shall be substantially in the form and substance of the Expression System
License Agreement and modified to include the particulars of the Plasmid and Cell Bank Strain, Current Facility(ies), Current Services Providers, and other
details relevant to the A&P Project Enzymes (as defined in the A&P Acquisition Agreement) and to provide for the transfer of the Cell Banks for the A&P
Project Enzymes stored at Seller to Buyer, its Affiliate, or a Service Provider. Seller (a) may, within [***] of the Option Exercise Date, supplement, amend,
or add any schedule to the disclosure schedules to the A&P Acquisition Agreement (the “ A&P Disclosure Schedules”), by giving notice to Buyer in
accordance with this Agreement, in order to add information and (b) shall, [***] prior to the A&P Acquisition Agreement Effective Date, update the A&P
Disclosure Schedules to include (i) in Section 1.01(a) thereto, all then-existing Patents owned by Seller or its Affiliates that claim or disclose inventions
comprising, or that are reasonably necessary for the Manufacturing or use of [***] (as each term is defined in the A&P Acquisition Agreement) as each
then-currently exists, other than any Patents covered by the A&P Expression System License Agreement, (ii) in Section 1.01(b) thereto, all Contracts to
which Seller or its Affiliates are party that relate exclusively to the A&P Project Enzymes, and (iii) in Section 1.01(c) thereto, all inventory of drug
substance, drug product, samples thereof, and antibodies, in each case, of [***] then in Seller’s or its Affiliates’ possession or under its control; provided
that [***]. If [***], Buyer shall deliver to Seller on or prior to the A&P Acquisition Agreement Effective Date a copy of the A&P Acquisition Agreement
executed by Buyer and with the A&P Acquisition Agreement Effective Date inserted therein, which will be effective in accordance with the terms of the
A&P Acquisition Agreement as of the A&P Acquisition Agreement Effective Date [***]. For the avoidance of doubt, so long as Buyer has delivered a
Notice of Exercise on or prior to the expiration or termination of the Option Period [***], then the Closing (as defined in the A&P Acquisition Agreement)
shall occur in accordance with the terms of this Agreement and the A&P Acquisition Agreement, as applicable notwithstanding expiration or termination of
the Option Period.
Section 9.04 Patent Prosecution and Costs . During the period prior to the expiration or termination of Option Period, Seller shall continue to
Prosecute and maintain and shall not abandon any of Seller’s existing Patents covering the A&P Enzymes. Without limiting the foregoing, (a) Seller shall,
or shall cause the external law firm prosecuting such Patents to, consult in good faith with Buyer with respect to all material steps to be taken in connection
with such Prosecution and maintenance of such Patents (provided, however, that Seller will not be required to disclose any information to Buyer if such
disclosure would be reasonably likely to result in any waiver of attorney-client privilege, work product doctrine, joint defense privilege or any other
privilege and the parties agree that any disclosure of information pursuant hereto shall not constitute a waiver of any such privilege), and (b) Seller shall
promptly provide Buyer with copies of any notices or correspondence received from any Governmental Authority or other Third Party regarding such
Patents and consult in good faith with Buyer with respect to any written response or further action in response to such notice. Should any patent applications
expire or issue as patents prior to the expiration or termination of the Option Period, prior to the expiration of such patent application or the issuance of such
patent, Seller shall, if requested by Buyer, file a continuing application claiming priority to such patent to the extent such filing is allowed. Buyer shall,
within [***] after Seller’s provision of applicable invoices, reimburse Seller for all reasonable and documented, out-of-pocket costs and expenses of Seller
and its Affiliates incurred during the period prior to the expiration or termination of the Option Period for or in connection with the Patent Prosecution and
maintenance activities of Seller and its Affiliates in accordance with this Section 9.04; provided that, upon Seller’s written request, Buyer shall pay directly
to one or more law firms engaged by Seller or its Affiliates such costs and expenses of such Prosecution.
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Section 9.05 Limited Right to Continue A&P Enzyme Development Work . Notwithstanding Section 7.8 of the SCA, during the Option
Period, Buyer shall have the right (co-exclusively with Seller), but not the obligation, to, solely at Buyer’s sole cost and sole liability, continue the research,
non-clinical Development, and Manufacture (solely for non-clinical use) of the A&P Enzymes, in each case, solely for developing the A&P Enzymes for
[***] (the “A&P Development Work ”). Buyer’s licenses to use any of Seller’s Intellectual Property or Confidential Information to undertake the A&P
Development Work is solely as set forth in, and subject to the limitations and requirements of, the Existing Agreement. No right, license, or permission is
granted to Buyer or any of its Affiliates to Commercialize any A&P Enzyme or any therapy or product including or made from or using any A&P Enzyme.
Other than as otherwise expressly set forth in this Agreement, Seller and its Affiliates have no obligation to provide Buyer with any support or assistance in
connection with any A&P Development Work. Seller shall indemnify Buyer against, and shall hold Buyer harmless from and against, any and all Losses,
incurred or sustained by, or imposed upon, Buyer based upon, arising out of, with respect to, or by reason the A&P Development Work, including Buyer’s
and its Affiliates” activities undertaken in connection with or in furtherance thereof.
Section 9.06 Status Quo. For the avoidance of doubt, unless and until the closing of the A&P Acquisition Agreement, the parties’ rights and
obligations with respect to the A&P Enzymes are governed by the Existing Agreements (including, if the Existing Agreements expire or otherwise
terminate, the terms thereof that survive such expiration or other termination); and, except as set forth in Section 9.05, no new Development,
Manufacturing, or Commercialization rights and obligations related to the A&P Enzymes shall be transferred to Buyer or its Affiliates prior to such time.
ARTICLES X
DISPUTE RESOLUTION
Section 10.01 Elevation of Issues for Resolution. In the event the parties or their Representatives are unable to agree upon any dispute or
disagreement between the parties arising from or in connection with this Agreement, the construction hereof, or the rights, duties or liabilities of either
party hereunder (each a “Dispute”), the parties shall endeavor to resolve such Dispute in accordance with the terms of this Section 10.01. Upon the receipt
of a written notice from one party to the other party of a Dispute (the “Notice of Dispute”), authorized Representatives of the parties, each with authority to
settle the Dispute, shall endeavor to discuss their respective positions and use their good faith efforts to resolve the Dispute. In connection with such
discussion, the parties may agree to confer with one or more mutually acceptable independent Third Party experts having expertise in the relevant subject
matter and both parties shall consider in good faith the views of such Third Party(ies). If for any reason a written agreement signed by both parties is not
reached within [***] after the Notice of Dispute, the parties shall promptly refer the Dispute to the Senior Executives (or their respective designees) for
resolution, which Senior Executives will have authority to settle the Dispute and shall be charged with resolving such Dispute. If such Dispute is not
resolved by the parties’ Senior Executives within [***] after the date the Dispute is referred to them, then the Dispute shall be submitted to binding
arbitration in accordance with Section 10.02.
Section 10.02 Arbitration. Any Dispute that is not resolved by an executed written agreement of the parties in accordance with Section 10.01, as
well as any related claims or other disputes arising out of or in connection with this Agreement including any question regarding its existence, validity, or
termination, whether for breach of contract, tortious conduct, or otherwise and whether predicated on common law, statute, or otherwise (collectively, the
“Related Claims”), shall be referred to and finally resolved by arbitration under the [***] rules (the “Rules”) in effect at the Effective Date except, as they
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may be modified herein or by mutual agreement of the parties, which Rules are deemed to be incorporated by reference into this Section 10.02. The number
of arbitrators shall be three, unless otherwise mutually agreed by the parties, whereby, claimant and the respondent shall each nominate an arbitrator, and
the third arbitrator, who shall be the president of the arbitral tribunal, shall be appointed by the two party-appointed arbitrators in consultation with the
parties, in each case, in accordance with the Rules. Each arbitrator shall be experienced in the subject matter herein and the application of [***] law. The
seat or legal place of arbitration shall be [***]. The language to be used in the arbitral proceedings shall be English.
(a) Within [***] after the appointment of the arbitrators pursuant to this Section 10.02, the arbitrators and the parties shall meet, and each
party shall provide to the arbitrators a written summary of: (i) all issues within the scope of the Dispute and any Related Claims; and (ii) such party’s
position on each such issue. The arbitrators shall set a date for a hearing, which shall be no later than [***] after the appointment of the final arbitrator
pursuant to this Section 10.02, for the presentation of evidence and legal arguments concerning each of the issues identified by the parties; provided,
however, that the parties may jointly agree in writing to extend the foregoing deadlines, or [***].
(b) The arbitrators shall use each of their best efforts to rule on each disputed issue within [***] after the completion of the hearing
described in Section 10.02(a); provided, however, that the parties may jointly agree in writing to extend the foregoing deadlines, or [***]. No
arbitrator (nor any arbitral tribunal) shall have the power to: (i) award any punitive damages or other damages prohibited by Section 7.04; or (ii) to
decide or rule on any issue or other matter that is not clearly with the scope of the Dispute and any Related Claims. The costs of the arbitration shall
be [***] during the course of such arbitration, as assessed by [***], and shall be borne as determined by the arbitrators.
(c) The arbitration proceedings, including the existence of the arbitration proceedings, the facts and circumstances surrounding the
underlying dispute, all submissions, correspondence, and evidence relating to the arbitration proceedings, and any awards issued by the arbitrator
shall be kept confidential by the parties, and the parties shall work with the arbitrators to take such steps as are reasonably necessary to preserve the
confidentiality thereof, except to the extent otherwise required by applicable Law.
(d) Subject to Section 10.02(b), the arbitrators shall have the power to grant any remedy or relief that they deem just and equitable,
including but not limited to injunctive relief, whether interim or final, and any provisional measures ordered by the arbitrator may be enforced by any
court of competent jurisdiction. Notwithstanding the foregoing, nothing in this Agreement shall prevent either party from seeking any
provisional/preliminary relief (including injunctions, attachments, or other such orders in aid of arbitration) from any court of competent jurisdiction,
and any such application to a court for provisional/preliminary relief shall not be deemed incompatible with the terms of this Agreement to arbitrate or
a waiver of the right to arbitrate.
(e) Any award rendered by the arbitrators shall be final and binding on the parties, and each party hereto waives to the fullest extent
permitted by law any right it may otherwise have under the laws of any jurisdiction to any form of appeal of, or collateral attack against, such award.
Judgment upon any awards rendered by the arbitrators may be entered in any court having jurisdiction thereof, including any court having
jurisdiction over any of the parties or their assets.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
(f) Notwithstanding anything in this ARTICLE X to the contrary, any dispute to determine the validity or infringement of a party’s
intellectual property rights by the other party (but excluding, in any event, disputes relating to earnouts or other amounts payable hereunder, whether
or not involving questions of infringement or validity) shall be submitted exclusively to the courts in the jurisdiction of the relevant intellectual
property right, and the parties hereby consent to the jurisdiction of such courts.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Definitions . The terms in this Agreement with initial letters capitalized, whether used in the singular or the plural, shall have the
respective meanings either set forth in Exhibit A attached hereto or in another part of this Agreement and as cross referenced in Exhibit A.
Section 11.02 Construction.
(a) The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to
limit or expand on the meaning of the language contained in the particular Article or Section.
(b) Except where the context otherwise requires, wherever used, the singular shall include the plural, the plural the singular, the use of any
gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or).
(c) The term “including,” “include,” or “includes” as used herein shall mean including, without limiting the generality of any description
preceding such term.
(d) Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument, or other document herein will be
construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented, or otherwise modified (subject
to any restrictions on such amendments, supplements, or modifications set forth herein or therein), (ii) any reference to any applicable Laws herein
will be construed as referring to such Laws as from time to time enacted, repealed, or amended, (iii) any reference herein to any person will be
construed to include the person’s successors and permitted assigns, (iv) the words “herein”, “hereof,” and “hereunder”, and words of similar import,
will be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (v) any reference herein to the words “mutually
agree” or “mutual written agreement” will not impose any obligation on either party to agree to any terms relating thereto except as such party may
determine in such party’s sole discretion, (vi) all references herein to Sections or Exhibits will be construed to refer to Sections and Exhibits to this
Agreement, (vii) the word “days” means calendar days unless otherwise specified, (viii) except as otherwise expressly provided herein all references
to “$” or “dollars” refer to the lawful money of the U.S., and (ix) the words “copy” and “copies” and words of similar import when used in this
Agreement include, to the extent available, electronic copies, files or databases containing the information, files, items, documents, or materials to
which such words apply.
(e) Each party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has
participated in the drafting hereof. In interpreting and applying the terms and provisions of this Agreement, the parties agree that no
28
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
presumption will apply against the party which drafted such terms and provisions. The language in this Agreement is to be construed in all cases
according to its fair meaning.
(f) Any documents will be deemed to have been made available to, and received by, Buyer if such documents were made available to Buyer
[***] prior to the execution and delivery of this Agreement by Seller.
Section 11.03 Expenses . Except as otherwise expressly provided herein (including Section 5.09 hereof), all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
Section 11.04 Severability. If and to the extent that any provision (or any part thereof) of this Agreement is held to be invalid, illegal, or
unenforceable, in any respect in any jurisdiction, the provision (or the relevant part thereof) shall be considered severed from this Agreement and shall not
serve to invalidate the remainder of such provision or any other provisions hereof. The parties shall make a good faith effort to replace any invalid, illegal,
or unenforceable provision (or any part thereof) with a valid, legal, and enforceable provision such that the objectives contemplated by the parties when
entering this Agreement may be realized.
Section 11.05 Notices. Any notice required or permitted to be given by the parties pursuant to this Agreement shall be in writing and shall be (i)
delivered by hand, (ii) delivered by overnight courier with tracking capabilities, (iii) mailed postage prepaid by first class, registered, or certified mail, or
(iv) transmitted by electronic mail, with confirmation copy by mail as provided in clause (iii) above, and in each case addressed to the recipient party as set
forth below, unless changed by notice so given:
If to Buyer:
Société des Produits Nestlé S.A.
55 Avenue Nestlé
1800 Vevey
Switzerland
Email: [***]
[***]
Attention: [***]
[***]
with a copy to (which shall not constitute notice):
Mayer Brown LLP
1221 Avenue of the Americas
New York, NY 10020
Email: [***]
[***]
Attention: [***]
[***]
If to Codexis:
Codexis, Inc.
200 Penobscot Drive
29
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Redwood City, CA 94063
Attention: President
with a copy to (which shall not constitute notice):
Codexis, Inc.
200 Penobscot Drive
Redwood City, CA 94063
Email: [***]
Attention: General Counsel
And
Baker Hostetler LLP
312 Walnut Street, Suite 3200
Cincinnati, OH 45202-4074
Email: [***]
[***]
Attention: [***]
(A) with respect to any notice delivered pursuant to clauses (i), (ii) or (iii), such notice shall not be effective unless it was (1) first delivered via e-mail and
no response was given within [***] and (2) a subsequent notice via e-mail was sent indicating the delivery via method described in clause (i), (ii), or (iii), as
applicable; (B) with respect to any notice delivered pursuant to clauses (i), such notice shall be deemed effective upon submission to such other party, (C)
with respect to any notice delivered pursuant to clause (ii), such notice shall be deemed effective [***] following the date of submission to the carrier, (D)
with respect to any notice delivered pursuant to clause (iii), such notice shall be deemed effective [***] after the date deposited with the applicable carrier,
and with respect to any notice delivered pursuant to clause (iv), (x) upon submission to such other party if sent during normal business hours of the
recipient, and (y) on [***] if sent after normal business hours of the recipient (in the case of (x) or (y), subject to confirmation of receipt by recipient by
reply email). A party may add, delete, or change the person or address to whom notices should be sent at any time upon written notice delivered to the other
party in accordance with this Section 11.05.
Section 11.06 Assignment. Neither this Agreement nor any of the rights or obligations hereunder ([***]) may be assigned or transferred by either
party without the prior written consent of the other party, such consent not to be unreasonably withheld, delayed or conditioned; provided, however, that
either party may, without the other party’s consent, but with written notice to the other party, assign or transfer all of its rights and obligations hereunder to
any Affiliate, or to a Third Party with whom it completes a Business Combination or to whom it sells substantially all of such party’s assets relating to this
Agreement. [***]. This Agreement shall inure to the benefit of and be binding on the parties’ successors and assigns. Any assignment or transfer in
violation of the foregoing shall be null and void and wholly invalid, the assignee or transferee in any such assignment or transfer shall acquire no rights
whatsoever, and the non-assigning, non-transferring party shall not recognize, nor shall it be required to recognize, such assignment or transfer.
Section 11.07 Waivers, Modifications, and Amendments . No waiver, modification, release, or amendment of any obligation under, or
provision of, this Agreement shall be valid or effective unless in writing and signed by all parties hereto. The failure of any party to insist on the
performance of any
30
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
obligation hereunder shall not be deemed to be a waiver of such obligation. Waiver of any provision hereunder or of any breach of any provision hereof
shall not be deemed to be a continuing waiver or a waiver of any other breach of such provision (or any other provision) on such occasion or any succeeding
occasion. Any amendment of this Agreement shall not be binding on the parties unless set out in writing, expressed to amend this Agreement and signed by
authorized representatives of each of the parties.
Section 11.08 Choice of Law . This Agreement (and any claims or disputes arising out of or relating hereto or to the transaction contemplated
hereby or to the inducement of any party to enter herein or therein, whether for breach of contract, tortious conduct, or otherwise and whether predicated on
common law, statute, or otherwise) shall be governed by, enforced, and shall be construed in accordance with the laws of [***], without regard to its
conflicts of law provisions. The parties hereby disclaim the application of the United Nations Convention on the International Sale of Goods to this
Agreement.
Section 11.09 Injunctive Relief. Notwithstanding anything herein to the contrary, each party shall be entitled to seek injunctive relief and specific
performance (including any relief or recovery under this Agreement) in any court of competent jurisdiction in the world.
Section 11.10 Relationship of the Parties . Each party is an independent contractor under this Agreement. Nothing herein is intended or is to be
construed so as to constitute Buyer and Seller as partners, agents, or joint venturers. Neither party shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of the other party or to bind the other party to any contract, agreement, or undertaking with any
Third Party. There are no express or implied third party beneficiaries hereunder.
Section 11.11 Entire Agreement . The parties agree that this Agreement and the attached Exhibits and Disclosure Schedules, together with the
Existing Agreements, constitute the entire agreement between the parties as to the subject matter of this Agreement, and hereby supersede all prior
negotiations, representations, agreements, and understandings (whether written or oral) regarding the same. Subject to Section 9.05, the provisions in the
Existing Agreements pursuant to which each party has agreed not to Develop or Commercialize the Project Enzymes, including the use of any Jointly
Owned Invention in connection therewith, remain in full force and effect except as set forth herein with respect to the Lipase Project Enzyme.
Section 11.12 Cooperation. The parties shall (i) provide assistance to each party as reasonably requested in preparing and filing Tax Returns with
respect to the Purchased Assets; (ii) make available to each other as reasonably requested all information, records, and documents relating to Taxes
concerning the Purchased Assets; (iii) retain any books and records that could reasonably be expected to be necessary or useful in connection with any
preparation by any the other party of any Tax Return, or for any audit relating to Taxes with respect to the Purchased Assets; and (iv) cooperate fully, as and
to the extent reasonably requested by the other party, in connection with any audits, assessments or administrative or judicial proceedings or other Actions
with respect to Taxes relating to the Purchased Assets.
Section 11.13 Counterparts. This Agreement may be executed in counterparts (including using any electronic signature covered by the United
States ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable Law, e.g.,
www.docusign.com), each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed
copy of this Agreement delivered by email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original
signed copy of this Agreement. To the extent applicable, the foregoing constitutes the election of the
31
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
parties to invoke any Law authorizing electronic signatures. Minor variations in the form of the signature page, including footers from earlier versions of
this Agreement, shall be disregarded in determining a party’s intent or the effectiveness of such signature. No party shall raise the use the delivery of
signatures to this Agreement in electronic format as a defense to the formation of a contract and each such party forever waives any such defense.
Section 11.14 Non-Recourse. This Agreement may only be enforced against, and any Action based upon, arising out of or related to this
Agreement, or the negotiation, execution, or performance of this Agreement, may only be brought against the entities that are expressly named as parties
hereto and then only with respect to the specific obligations set forth herein with respect to such party. No past, present, or future director, officer, employee,
incorporator, manager, member, partner, stockholder, Affiliate, agent, attorney, or other Representative of any party hereto or of any Affiliate of any party
hereto, or any of their successors or permitted assigns, shall have any liability for any obligations or liabilities of any party hereto under this Agreement or
for any Action based on, in respect of, or by reason of the transactions contemplated hereby.
* * * * * * * * *
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date written above by their respective
officers thereunto duly authorized.
CODEXIS, INC.
By: /s/ Stephen Dilly
Name: Stephen Dilly
Title: Chief Executive Officer
SOCIÉTÉ DES PRODUITS NESTLÉ S.A.
By: /s/ Claudio Kuoni
Name: Claudio Kuoni
Title: Authorized Signatory
[Signature Page to Acquisition Agreement]
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
EXHIBIT A
DEFINITIONS AND CROSS-REFERENCE TABLE
Certain Definitions. The following terms have the following meanings:
“A&P Acquisition Agreement” or “Amylase and Protease Acquisition Agreement” means the Amylase and Protease Acquisition Agreement in
the form attached hereto and made a part hereof as Exhibit H.
“A&P Enzymes” means the amylase and protease Project Enzymes (as such term is defined in the SCA) [***].
“A&P Expression System License Agreement ” has the meaning given to the term “Expression System License Agreement” in the A&P
Acquisition Agreement.
“A&P Product” means (a) any A&P Enzyme [***] and (b) [***].
“Affiliate” of a Person means an entity that (directly or indirectly) is controlled by, controls, or is under common control with such Person where
control means the direct or indirect ownership of voting securities entitled to cast at least fifty percent (50%) of the votes in the election of directors, or such
other relationship as results in the power to control the management, business, assets, and affairs of an entity.
“BLA” means (a) in the United States, a Biologics License Application, as defined in the United States Public Health Service Act (42 U.S.C. §
262), and applicable regulations promulgated thereunder by the FDA, or any equivalent application that replaces such application, (b) in the EU, a
marketing authorization application, as defined in applicable regulations of the EMA, and (c) in any other country, the relevant equivalent to the foregoing.
“Books and Records” means all files (including all electronic data files and hard copies), documents, correspondence, lists, drawings and
specifications, creative materials, marketing plans, studies (including market research and market data), reports, and other printed or written materials (in
whatever form or medium).
“Business” means, following the Closing Date, the Development, Manufacture, Commercialization and other Exploitation of Products by Buyer, its
Affiliates, and its Licensees.
“Business Combination” means, with respect to a party, any of the following events: (a) any Third Party (or group of Third Parties acting in
concert) acquires, directly or indirectly, shares of such party representing at least a majority of the voting power (where voting refers to being entitled to
vote for the election of directors) then outstanding of such party; (b) such party consolidates with or merges into another corporation or entity which is a
Third Party, or any corporation or entity which is a Third Party consolidates with or merges into such party, in either event pursuant to a transaction in which
at least a majority of the voting power of the acquiring or resulting entity outstanding immediately after such consolidation or merger is not held by the
holders of the outstanding voting power of such party immediately preceding such consolidation or merger; or (c) such party conveys or transfers title to all
or substantially all of its assets to a Third Party.
“Business Day” means a day other than Saturday, Sunday, or any day on which commercial banks located in [***] are authorized or obligated by
applicable Law to close.
34
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Calendar Quarter” means, with respect to any given Calendar Year, the respective periods of three (3) consecutive calendar months ending on
March 31, June 30, September 30 or December 31, provided, however, that (a) the first Calendar Quarter of the Term shall extend from the Effective Date
to the end of the first complete Calendar Quarter thereafter; and (b) the last Calendar Quarter of the Term shall end upon the expiration or termination of
this Agreement.
“Calendar Year ” means each successive period of twelve (12) consecutive months commencing on January 1 and ending on December 31,
provided, however, that (a) the first Calendar Year of the Term shall begin on the Effective Date and end on December 31, 2024; and (b) the last Calendar
Year of the Term shall end on the effective date of expiration or termination of this Agreement.
“Clinical Trial” means a clinical trial in human subjects of a Product.
“Combination Product” means a product consisting of one or more Earnout Products packaged, bundled, or otherwise combined for sale with one
or more other products that are not Earnout Products. All references to any Earnout Product in this Agreement will be deemed to include any Combination
Product.
“Commercialization” means any and all activities relating specifically to the preparation for sale of, offering for sale of, or sale of a product or
service, including activities related to launching, marketing, promoting, distributing, detailing, importing, pricing, reimbursement, and advertising such
product, and interacting with Regulatory Authorities regarding any of the foregoing. When used as a verb, “Commercialize” and “Commercializing”
means to engage in Commercialization, and “ Commercialized” has a correlative meaning.
“Confidential Information” means any and all technical, business, or other information or data of a party or its Affiliates provided orally, visually,
in writing, graphically, electronically, or in another form by or on behalf of such party or its Affiliates to the other party or its Affiliates in connection with
this Agreement The parties acknowledge that the terms of this Agreement shall be treated as Confidential Information of [***] and that the Licensed Know-
How shall be treated as the Confidential Information of Seller.
“Contracts” means all contracts, leases, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other
agreements, commitments and legally binding arrangements, whether written or oral.
“Controlled” or “Control”, when used in reference to any intellectual property, intellectual property right, material, know-how or information, with
respect to a party, means that such party (a) owns or has a license (other than a license granted under this Agreement) to such intellectual property and (b)
has the legal authority or right to: (i) grant, or procure the grant of, a license or sublicense, to the extent provided for herein, of the intellectual property,
intellectual property right, material, know-how or information to the other party; or (ii) in relation to material, know-how and information only, disclose or
provide access to, to the extent provided for herein, such material, know-how or information to the other Party, and in each case, without (x) breaching the
terms of any then-existing agreement or other legally enforceable arrangement with a Third Party, or (y) misappropriating the material, know-how,
intellectual property, intellectual property rights, or information of a Third Party.
“Covered Component” means any product or component contained in a Combination Product that is itself an Earnout Product or, to the extent an
A&P Product is included in a Combination Product after the A&P Acquisition Agreement Effective Date, such A&P Product.
35
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Development” means non-clinical and clinical drug development activities reasonably related to the development and submission of information
to a Regulatory Authority or otherwise to the testing and validation of a therapeutic agent, including toxicology, pharmacology and pre-clinical efforts, test
method development, stability testing, manufacturing process, formulation development, delivery system development, quality assurance and quality
control development, statistical analysis, and clinical trials (including pre- and post-approval studies), whether for purposes of label expansion or otherwise.
Development shall include post-approval Development activities. When used as a verb, “Develop” means to engage in Development.
“Disclosure Schedules” means the disclosure schedules delivered by Seller and Buyer concurrently with the execution and delivery of this
Agreement.
“Earnout Period” means the period starting on the Launch Date and ending on [***] of the Launch Date (inclusive).
“Earnout Product” means each and all of the following: (a) Zenpep; and (b) Products (including in co-formulation with any other product or as
part of a Combination Product).
“EMA” means the European Medicines Agency, or any successor agency thereto.
“European Union” or “EU” means, at any given time, the then-current member states of the European Union; provided that each of the United
Kingdom and Switzerland will also be considered included with the European Union, regardless of each’s actual membership in the EU.
“Exploit” means to make, have made, import, use, sell or offer for sale a product or item. “ Exploitation” has a correlative meaning.
“FDA” means the U.S. Food and Drug Administration, or any successor agency thereto.
“First Commercial Sale” means, with respect to a particular country or jurisdiction, the first commercial sale, transfer, or other disposition by
Buyer, any of its Affiliates, or any Licensee for consumption by an end user of a Product following the receipt of the first Regulatory Approval for such
Product in such country or jurisdiction, excluding any sale, transfer, or disposition that would not constitute a sale for purposes of the definition of Net Sales
([***]).
[***].
“GAAP” means United States generally accepted accounting principles, consistently applied.
“Governmental Authority” means any multi-national, federal, state, local, municipal, provincial, or other governmental authority of any nature
(including any governmental division, prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court, or other tribunal).
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination, or award entered by or with any
Governmental Authority.
“IFRS” means the current International Financial Reporting Standards, as published by the International Accounting Standards Board.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Jointly Owned Inventions” means (a) “Jointly Owned Inventions” as defined in the Strategic Collaboration Agreement and (b) “Jointly Owned
Inventions” as defined in the Development Agreement.
“Know-How” means all non-public data and technical information, including techniques, methods, processes, technology, recipes, formulae,
designs, equipment configurations and uses, Manufacturing data, preclinical and clinical data and study designs, specifications, ingredients, Manufacturing
processes, formulations, sourcing information, quality control and testing procedures, and related trade secrets, but expressly excluding all Patents.
“Knowledge of Seller” or “Seller’s Knowledge” or any other similar knowledge qualification, means the actual knowledge of those individuals
identified on Section A of the Disclosure Schedules, [***].
“Launch Date” means the date of the First Commercial Sale of any Product anywhere in the United States.
“Laws” means all laws, statutes, rules, regulations, ordinances, and other pronouncements having the effect of law of any federal, national,
multinational, state, provincial, county, city, or other political subdivision.
“Liabilities” means liabilities, obligations, or commitments of any nature whatsoever, whether asserted or unasserted, known or unknown, absolute
or contingent, accrued or unaccrued, matured or unmatured, or otherwise.
“Licensed Know-How” means all Know-How owned by Seller or its Affiliates as of the Closing Date that is [***] for the Manufacture of the
Lipase Project Enzyme as conducted as of the Closing Date or is [***] provided to Regulatory Authorities in order to obtain Regulatory Approval for any
product containing any Lipase Project Enzyme anywhere in the world; provided that in no event shall Licensed Know-How include: (a) any Purchased
Assets; (b) any Know-How or other intellectual property licensed pursuant to the Expression System License Agreement; or (c) Seller’s or its Affiliates’
CodeEvolver® platform technology.
“Licensee” means a Third Party that has been granted a license or right to Develop, Manufacture, Commercialize, or otherwise Exploit any Earnout
Product by or through Buyer or Buyer’s Affiliate, either directly or via a sublicense (through one or more tiers). As used in this Agreement, “Licensee” shall
not include a wholesaler, distributor, or reseller of any Earnout Product, to the extent that Buyer or its Affiliate sells to such Person such Earnout Product
and receives only supply price payments and has not granted such wholesaler, distributor, or reseller any license under any Purchased Patent or Resultant
Patent.
“Manufacture” and “Manufacturing” means all activities related to the production, manufacture, processing, formulation, filling, finishing,
packaging, labeling, shipping, handling, and storage of a product or any intermediate thereof, including process development, process qualification and
validation, scale-up, pre-clinical, clinical and commercial manufacture and analytic development, product characterization, stability testing, quality
assurance, and quality control.
“Material Adverse Effect” means any event, occurrence, fact, condition, or change that is materially adverse to the Development and Manufacture
of the Products, taken as a whole.
37
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Net Sales” means: (a) the [***] amounts [***] by or on behalf of Buyer, its Affiliates, or any of their respective Licensees for sales of Earnout
Products within the United States (other than sales between or among Buyer, its Affiliates, or Licensees for subsequent resale, in which case the first sale to
a Third Party that is not a Licensee shall be used for calculation of Net Sales) (collectively, the “Gross Sales”); less (b) only the following deductions to the
extent they are (1) [***], (2) [***], and (3) [***] (collectively, the “Deductions”):
(i) [***];
(ii) [***];
(iii) [***];
(iv) [***]; and
(v) [***].
[***].
[***].
In the event that Buyer, its Affiliates, or any of their respective Licensees makes any adjustments to such Deductions after the associated Net Sales have
been reported pursuant to this Agreement, the adjustments will be reported and reconciled in the next report and payment of any Sales Earnout Payment due.
Buyer must determine all Gross Sales and all of the foregoing Deductions in accordance with [***].
Use, supply, or donation of Earnout Product by Buyer, its Affiliates, or their respective Licensees for no profit (1) [***], (2) [***], (3) [***], or (4) [***]
shall not, in each case, be deemed sales of Earnout Product for purposes of this definition of “Net Sales.”
“Option Period” means the period starting on the Closing Date and ending on the earlier of: (a) March 1, 2025; or (b) termination of this
Agreement.
“Other Component” means any product or component contained in a Combination Product that is not itself an: (a) Earnout Product; or (b) to the
extent an A&P Product is included in a Combination Product after the A&P Acquisition Agreement Effective Date, such A&P Product.
“Patent(s)” means (a) any and all patents and patent applications, including all national, regional and international patents and patent applications,
provisional patent applications; (b) all patent applications filed either (i) from such patents, patent applications, or provisional applications mentioned in
subsection (a) above, or (ii) from an application claiming priority from any of them, including divisionals, continuations, continuations-in-part, provisionals,
converted provisionals and requests for continued examinations; and (c) any and all extensions or restorations by existing or future extension or restoration
mechanisms, including revalidations, reissues, reexaminations and extensions (including any supplementary protection certificates and the like) of the
foregoing patents and/or patent applications in subsections (a) and (b).
“Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability
company, business trust, joint stock company, trust,
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
unincorporated association, foundation, joint venture, or other similar entity, organization, or combination thereof, including a government or political
subdivision, department, or agency.
“Phase II Clinical Trial” means a Clinical Trial, the principal purpose of which is to make a preliminary determination as to whether a therapeutic
product is safe for its intended use and to obtain information about such therapeutic product’s efficacy, in a manner that is generally consistent with 21
C.F.R. § 312.21(b), as amended (or its successor regulation), sufficient to permit the design of Phase III Clinical Trials.
“Phase III Clinical Trial” means a pivotal Clinical Trial with a defined dose or a set of defined doses of a therapeutic product designed to ascertain
efficacy and safety of such therapeutic product, in a manner that is generally consistent with 21 C.F.R. § 312.21(c), as amended (or its successor regulation),
for the purpose of enabling the preparation and submission of a BLA or a foreign equivalent thereof
“Phase III Completion Date” means the date that is [***].
“Product(s)” means (a) the Lipase Project Enzyme [***] and (b) [***].
“Project Enzyme” has the meaning set forth in the in the SCA.
“Prosecution” means the filing, preparation, prosecution (including any interferences, reissue proceedings, reexaminations, and oppositions), inter
partes review, post-grant review, and maintenance of the Purchased Patents and Resultant Patents. When used as a verb, “ Prosecute” and “Prosecuting”
means to engage in Prosecution.
“Regulatory Approval ” means, with respect to a therapeutic product in any country or regulatory jurisdiction, any and all approvals from the
applicable Regulatory Authority sufficient for the import, distribution, marketing, use, offering for sale, and sale of sch therapeutic product in such country
or jurisdiction in accordance with applicable Laws.
“Regulatory Authority” means any national or supranational Governmental Authority (including the FDA and EMA) which has regulatory
responsibility and authority in one or more countries for review and approval of development and commercialization of therapeutic products.
“Regulatory Documentation” has the meaning set forth in the Development Agreement
“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel,
accountants, and other agents of such Person and of the Affiliates of such Person.
“Resultant Patent(s)” mean any Patent [***].
“Sell-On Transaction” means any of the following [***]:
(a) the sale or transfer of one or more of the Purchased Patents or Resultant Patents to any Third Party;
(b) the exclusive or co-exclusive (with Buyer and its Affiliates) licensing of one or more of the Purchased Patents or Resultant Patents to
any Third Party;
39
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
(c) the sale, transfer, or exclusive or co-exclusive (with Buyer and its Affiliates) licensing of one or more of the Purchased Patents or
Resultant Patents to any Affiliate of Buyer, in connection with or followed by any of the following: (i) the direct or indirect acquisition by any Third
Party (or group of Third Parties acting in concert) of shares of such Affiliate representing at least a majority of the voting power (where voting refers
to being entitled to vote for the election of directors) then outstanding of such Affiliate; or (ii) the merger or consolidation of such Affiliate with or
into any Third Party, or the merger or consolidation of any Third Party with or into such Affiliate, in either event pursuant to a transaction in which at
least a majority of the voting power of the acquiring or resulting entity outstanding immediately after such consolidation or merger is not held by the
holders of the outstanding voting power of such Affiliate immediately preceding such consolidation or merger; or
(d) any other similar transaction which has the effect of allowing any Third Party to Develop, Manufacture, or Commercialize any Product
other than doing so solely on behalf and for the benefit of Buyer or its Affiliates or Licensees,
but in no event shall a Business Combination of Buyer be considered a Sell-On Transaction.
“Sell-On Transaction Proceeds” means the: (a) value of all proceeds received by Buyer or any of its Affiliates as consideration for or otherwise in
connection with a Sell-On Transaction, whether in cash, securities, other property, assumption of liability, or otherwise (but excluding any amount received
by Buyer or any of its Affiliates as royalties, profit-sharing payments, or other similar payments (other than milestone payments) based on Net Sales by or
on behalf of any acquiror in a Sell-On Transaction); less (b) [***]. For any such proceeds other than cash, the value of such proceeds will be equal to the
fair market value at the time Buyer or any of its Affiliates receive such proceeds, as determined by the mutual agreement of Buyer and Seller or, if Buyer
and Seller are not able to agree on such fair market value, determined in accordance with the procedures outlined in ARTICLE X. With respect to any
consideration received by Buyer or any of its Affiliates in connection with a Sell-On Transaction in the form of deferred performance or retention-based
payments, “earn-outs”, or other contingent payments based upon the occurrence of future events, including amounts held in escrow following the closing of
a Sell-On Transaction, shall be included in the determination of Sell-On Transaction Proceeds [***]. For the avoidance of doubt, in no event shall Sell-On
Transaction Proceeds include (i) [***] or (ii) [***].
“Sell-On Transaction Profits” means an amount equal to [***].
“Senior Executives” means [***].
“Taxes” means all federal, state, local, foreign, and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary,
franchise, registration, profits, license, withholding, payroll, employment, unemployment, excise, severance, stamp, occupation, premium, property (real or
personal), customs, import and export, goods and services, value added, escheat, unclaimed property, duties, or other taxes, fees, assessments, or charges of
any kind whatsoever, together with any interest, additions, or penalties with respect thereto.
“Tax Return” means any return, declaration, report, claim for refund, or other document relating to Taxes, including any schedule or attachment
thereto, and amendment thereof, required to be supplied to a Governmental Authority in connection with any Taxes.
“Technology” means: (a) all of Seller’s interest in the Purchased Patents; and (b) any Resultant Patents.
40
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Third Party” means any Person other than Seller, Buyer, and their respective Affiliates.
“United States” or “U.S.” means the United States of America, including its territories, possessions, and protectorates.
“VAT” means (a) in relation to any jurisdiction within the European Union, the Tax imposed by the EC Council Directive on the common system
of value added tax (2006/112/EC) and any successor or equivalent legislation and any national legislation implementing that directive together with
legislation supplemental thereto and the equivalent Tax (if any) in that jurisdiction; and (b) in any other jurisdiction, any other value added, goods and
services, consumption or similar Tax chargeable on the supply or deemed supply of goods or services under applicable legislation or regulation.
“Zenpep” means all pancrelipase products (which are currently marketed by Buyer, its Affiliates, or any of their licensees, distributors, or partners
under the trademark Zenpep or Viokace) sold by Buyer, its Affiliates, or any of their respective licensees, whether formulated for administration as a
monotherapy or combination therapy, in co-formulation with any excipient(s) or any other active pharmaceutical ingredient(s), or in a Combination Product,
under any and all formulations or methods of administration. Zenpep includes the products currently sold under BLA022210 or BLA022542 in the U.S.
41
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Cross-Reference Table. The following terms have the meanings set forth in the location in this Agreement referenced below:
Term
A&P Acquisition Agreement Effective Date
A&P Development Work
Acquired Books and Records
Acquired Regulatory Documentations
Actions
Agreement
Allocation Schedule
[***] Baseline
Annual Report
Assigned Contracts
Assignment and Assumption Agreement
Assumed Liabilities
Baseline Disputed Items
Baseline Zenpep [***] Sales
Bill of Sale
Buyer
Buyer Drop Dead Date
Buyer Indemnified Parties
Cap
CDX-7108
Closing
Closing Date
Code
Codexis
Deductible
Development Agreement
Disclosing Party
Dispute
Earnout Payments
Earnout Sales
Earnout Statement
Effective Date
Encumbrances
Excluded Assets
Excluded Liabilities
Existing Agreements
Expression System License Agreement
Indemnified Party
Indemnifying Party
Section
Section 9.03
Section 9.05
Section 1.01(f)
Section 1.01(d)
Section 3.06(a)
Preamble
Section 1.08
Section 1.06(a)
Section 1.07
Section 1.01(b)
Section 2.02(a)(i)
Section 1.03(a)
Section 1.06
Section 1.06(a)
Section 2.02(a)(i)
Preamble
Section 8.02(b)(i)
Section 7.02
Section 7.04(b)
Recitals
Section 2.01
Section 2.01
Section 1.08
Preamble
Section 7.04(a)
Recitals
Section 5.03(a)
Section 10.01
Section 1.06(b)
Section 1.06(b)
Section 1.06(d)(iii)
Preamble
Section 3.05
Section 1.02
Section 1.03(b)
Recitals
Section 2.02(a)(iv)
Section 7.04
Section 7.04
42
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Initial Purchase Price
Inventory
[***]
Lipase Project Enzyme
Losses
Milestone
Milestone Earnout Payment
NHSc
Notice of Dispute
Notice of Exercise
Option
Option Exercise Date
Patent Assignment
[***]
Permitted Encumbrances
Previously Assumed Liabilities
Previously Transferred Assets
Purchased Assets
Purchased Know-How
Purchased Patents
Purchase Price
Quarterly Baseline
Quarterly Estimate
Receiving Party
Related Claims
Restricted Business
Restricted Period
Rules
Sales Earnout Payments
Schedule Supplement
Seller
Seller Drop Dead Date
Seller Indemnified Parties
Sell-On Transaction Payment
Strategic Collaboration Agreement or SCA
Term
Transaction Documents
Unresolved Baseline Disputed Items
Section 1.04
Section 1.01(c)
Section 10.02
Recitals
Section 7.02
Section 1.05
Section 1.05
Preamble
Section 10.01
Section 9.02
Section 9.01
Section 9.02
Section 2.02(a)(iii)
Section 5.14
Section 3.05
Section 1.09(d)
Section 1.09(d)
Section 1.01
Section 1.01(d)
Section 1.01(a)
Section 1.04
Section 1.06(a)
Section 1.07
Section 5.03(a)
Section 10.02
Section 5.05(a)
Section 5.05(a)
Section 10.02
Section 1.06(b)
Section 5.02
Preamble
Section 8.02(c)(i)
Section 7.03
Section 1.05
Recitals
Section 8.01
Section 2.02(a)(iv)
Section 1.06(a)
43
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THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Exhibit C
Bill of Sale
[***]
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Exhibit D
Assignment and Assumption
Agreement
[***]
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Exhibit E
Patent Assignment
[***]
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Exhibit A
Purchased Patents
[●]
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Exhibit F
Expression System License Agreement
[***]
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Exhibit G
Press Release
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Codexis Announces Purchase Agreement with Nestlé Health Science for CDX-7108
Company to retain economic interest in biotherapeutic asset while removing cash burn from development and commercialization costs
REDWOOD CITY, Calif., December 27, 2023 (GLOBE NEWSWIRE) -- Codexis, Inc. (NASDAQ: CDXS), a leading enzyme engineering company,
today announced it has entered into a purchase agreement with Nestlé Health Science, a globally recognized leader in the field of nutritional science, for
CDX-7108, an investigational therapy for the potential treatment of exocrine pancreatic insufficiency (EPI). Under the terms of the agreement, Codexis will
receive up to $45M in potential milestone payments, including a $5M upfront payment, as well as single-digit net-sales-based royalties. Codexis will
receive up to an additional $5M if Nestlé Health Science exercises an option to purchase two additional early-stage enzymes being developed for EPI.
Nestlé Health Science will be solely responsible for the continued development and commercialization of CDX-7108, including all associated costs.
“This agreement solidifies the future development of CDX-7108—a potential new therapy that could be added to the treatment armamentarium for patients
with exocrine pancreatic insufficiency—and enables Codexis to focus resources on the advancement of our ECO Synthesis
platform and the return to
growth of our Pharmaceutical Manufacturing business,” said Stephen Dilly, MBBS, PhD, Chief Executive Officer of Codexis. “Preliminary data from the
CDX-7108 Phase I study announced earlier this year support continued investigation into Phase II clinical studies. We believe that CDX-7108 could
represent a meaningful advance in the standard of care for patients, and we are pleased to retain an economic interest in the program as Nestlé continues
development.”
TM
Codexis and Nestlé Health Science completed pre-clinical work for CDX-7108 and a Phase I clinical trial under the terms of a previous agreement. With
this asset purchase agreement, Nestlé Health Science may continue advancing the compound through the development process.
About CDX-7108
CDX-7108 is a lipase variant specifically engineered to overcome the limitations of traditional pancreatic enzyme replacement therapy (PERT) deficiencies.
PERT is the main treatment for exocrine pancreatic insufficiency (EPI), a debilitating condition of the gastrointestinal tract that is caused by conditions that
impair pancreatic function, such as pancreatitis, pancreatic cancer, Cronh’s disease, celiac disease and cystic fibrosis. CDX-7108 was engineered to be
highly stable to the acidic conditions of the stomach and resistant to proteases in the upper intestines. Preliminary data from an interim analysis of the Phase
I study proof-of-concept arm supported continued investigation into Phase II clinical studies.
About Nestlé Health Science
Nestlé Health Science, a leader in the science of nutrition and gastrointestinal health, is a globally managed business unit of Nestlé. The company is
committed to redefining the management of health, offering an extensive portfolio of science-based nutritional products for patients and consumers. Nestlé
Health Science’s trusted relationship with the healthcare professional-community and significant commercial capabilities provide the foundation for
continued growth of its marketed portfolio of pharmaceutical products including the successful launch in 2023 of a microbiome-based therapeutic.
About Codexis
Codexis is a leading enzyme engineering company leveraging its proprietary CodeEvolver® technology platform to discover, develop and enhance novel,
high-performance enzymes and other classes of proteins. Codexis enzymes solve for real-world challenges associated with small molecule pharmaceuticals
manufacturing and nucleic acid synthesis. The Company is currently developing its proprietary ECO Synthesis
platform to enable the scaled manufacture
of RNAi therapeutics through an enzymatic route. Codexis’ unique enzymes can drive improvements such as higher yields, reduced
TM
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THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
energy usage and waste generation, improved efficiency in manufacturing and greater sensitivity in genomic and diagnostic applications. For more
information, visit www.codexis.com.
Codexis Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terminology such as “aim,”
“anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,”
“positioned,” “potential,” “predict,” “seek,” “should,” “suggest,” “target,” “on track,” “will,” “would” and other similar expressions that are predictions of
or indicate future events and future trends, or the negative of these terms or other comparable terminology. To the extent that statements contained in this
press release are not descriptions of historical facts, they are forward-looking statements reflecting the current beliefs and expectations of management,
including but not limited to statements regarding the anticipated potential benefits of the purchase agreement, such as the anticipated development and
commercial milestone payments, which are dependent, in part, on the efforts of Nestlé Health Science to continue the development and commercialization
of CDX-7108. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties and
other factors that are, in some cases, beyond Codexis’ control and that could materially affect actual results. Factors that could materially affect actual
results include, among others: Codexis’ dependence on its licensees and collaborators; if any of its collaborators terminate their development programs
under their respective license agreements with Codexis; Codexis may need additional capital in the future in order to expand its business; if Codexis is
unable to successfully develop new technology such as its ECO Synthesis
platform; Codexis’ dependence on a limited number of products and
customers, and potential adverse effects to Codexis’ business if its customers’ products are not received well in the markets; if Codexis is unable to develop
and commercialize new products for its target markets; if competitors and potential competitors who have greater resources and experience than Codexis
develop products and technologies that make Codexis’ products and technologies obsolete; if Codexis is unable to accurately forecast financial and
operational performance; and market and economic conditions may negatively impact Codexis’ business, financial condition and share price. Additional
information about factors that could materially affect actual results can be found in Codexis’ Annual Report on Form 10-K filed with the Securities and
Exchange Commission (“SEC”) on February 27, 2023, and in Codexis’ Quarterly Report on Form 10-Q filed with the SEC on November 3, 2023,
including under the caption “Risk Factors,” and in Codexis’ other periodic reports filed with the SEC. Codexis expressly disclaims any intent or obligation
to update these forward-looking statements, except as required by law.
TM
For More Information
Investor Contact
Carrie McKim
(336) 608-9706
ir@codexis.com
Media Contact
Lauren Musto
(781) 572-1147
media@codexis.com
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Exhibit H
A&P Acquisition Agreement
AMYLASE and PROTEASE
ACQUISITION AGREEMENT
between
SOCIÉTÉ DES PRODUITS NESTLÉ S.A.
and
CODEXIS, INC.
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE 2
Section 1.01 Purchase and Sale of Assets 2
Section 1.02 Excluded Assets 2
Section 1.03 Assumed Liabilities. 2
Section 1.04 Purchase Price 3
Section 1.05 Milestone 3
Section 1.06 Reports and Reporting 4
Section 1.07 Allocation of Purchase Price 4
Section 1.08 Non-Assignable Assets. 4
Section 1.09 Withholding Taxes 5
Section 1.10 Exploitation of Products 5
ARTICLE II CLOSING 5
Section 2.01 Closing 5
Section 2.02 Closing Deliverables. 5
Section 2.03 Delivery of Records 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER 6
Section 3.01 Organization and Authority of Seller 6
Section 3.02 No Conflicts or Consents 6
Section 3.03 Intellectual Property 7
Section 3.04 Assigned Contracts. 7
Section 3.05 Title to Inventory 7
Section 3.06 Legal Proceedings; Governmental Orders. 8
Section 3.07 Brokers 8
Section 3.08 No Other Representations and Warranties 8
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 8
Section 4.01 Organization and Authority of Buyer 8
Section 4.02 No Conflicts; Consents 9
Section 4.03 Solvency; Sufficiency of Funds 9
Section 4.04 Legal Proceedings 9
Section 4.05 Brokers 9
Section 4.06 Independent Investigation 9
Section 4.07 Other Representations and Warranties 9
ARTICLE V COVENANTS 9
Section 5.01 Confidentiality. 10
Section 5.02 Public Announcements 11
Section 5.03 Exclusivity. 11
Section 5.04 Patent Prosecution and Maintenance. 12
Section 5.05 Patent Enforcement. 12
Section 5.06 Bulk Sales Laws 13
Section 5.07 VAT 13
Section 5.08 Further Assurances 13
Section 5.09 Termination of application of Certain Surviving Existing Agreements to the Purchased Assets and A&P Project Enzymes 13
Section 5.10 License to Know-How 14
Section 5.11 [***] 15
ARTICLE VI INDEMNIFICATION 15
Section 6.01 Survival 15
Section 6.02 Indemnification by Seller 15
Section 6.03 Indemnification by Buyer 15
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Section 6.04 Certain Limitations 15
Section 6.05 Indemnification Procedures 16
Section 6.06 Tax Treatment of Indemnification Payments 17
Section 6.07 Exclusive Remedies 17
Section 6.08 Right to Set-Off. 17
ARTICLE VII TERM AND TERMINATION 17
Section 7.01 Term 17
ARTICLE VIII DISPUTE RESOLUTION 18
Section 8.01 Elevation of Issues for Resolution 18
Section 8.02 Arbitration 18
ARTICLE IX MISCELLANEOUS 19
Section 9.01 Definitions 19
Section 9.02 Construction. 19
Section 9.03 Expenses 20
Section 9.04 Severability 20
Section 9.05 Notices 20
Section 9.06 Assignment 22
Section 9.07 Waivers, Modifications, and Amendments 22
Section 9.08 Choice of Law 22
Section 9.09 Injunctive Relief 22
Section 9.10 Relationship of the Parties 22
Section 9.11 Entire Agreement 23
Section 9.12 Cooperation 23
Section 9.13 Counterparts 23
Section 9.14 Non-Recourse 23
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
AMYLASE AND PROTEASE ACQUISITION AGREEMENT
This Amylase and Protease Acquisition Agreement (this “ Agreement”) dated as of ____________ (the “Effective Date”) is entered into between
CODEXIS, INC., a corporation incorporated and existing under the laws of the State of Delaware, having an office located at 200 Penobscot Drive,
Redwood City, CA 94063, USA (“Seller” or “Codexis”), and Société des Produits Nestlé S.A., a société anonyme organized and existing under the laws of
Switzerland, having an office located at 55 Avenue Nestlé, 1800 Vevey, Switzerland (“Buyer” or “NHSc”).
RECITALS
WHEREAS, Buyer (as successor in interest to Nestec Ltd.), and Seller are parties to that certain Strategic Collaboration Agreement, dated as of
October 12, 2017 (as amended through the date hereof, the “Strategic Collaboration Agreement” or “SCA”), pursuant to which the parties agreed to
collaborate to discover enzymes as candidates for use as healthcare products and to perform initial preclinical evaluation of the efficacy of such enzymes;
WHEREAS, Buyer and Seller are parties to that certain Development Agreement, dated as of January 1, 2020 (as amended through the date
hereof, the “Development Agreement” and, together with the Strategic Collaboration Agreement and including, if either or both such agreements expire or
are otherwise terminated, all terms, conditions, and obligations in each that survive such expiration or other termination, the “Existing Agreements”),
pursuant to which the parties agreed to conduct certain development activities with respect to certain enzymes discovered pursuant to the Strategic
Collaboration Agreement;
WHEREAS, Buyer and Seller are parties to that certain Acquisition Agreement, dated as of December [x], 2023 (as amended through the date
hereof, the “Lipase Acquisition Agreement”), pursuant to which Buyer has an option to acquire the Purchased Assets and assumed the Assumed Liabilities
(as each term is defined below) on the terms and conditions set forth therein and in this Agreement;
WHEREAS, the parties desire for Buyer to have the right to further develop and commercialize those certain lipase enzymes that were discovered
under the Strategic Collaboration Agreement and that were further developed pursuant to the Development Agreement, including that certain amylase
enzyme currently identified as [***], that certain protease enzyme currently identified as [***] ([***], the “A&P Project Enzymes”);
WHEREAS, pursuant to the terms of the Existing Agreements, each party has agreed not to Develop or Commercialize the A&P Project Enzymes,
including the use of any Jointly Owned Invention in connection therewith, unless agreed by the parties in a separate written agreement; and
WHEREAS, Seller wishes to sell and assign to Buyer certain identified Patent Rights, Contracts, and other assets related to the A&P Project
Enzymes, and Buyer wishes to purchase and assume from Seller such assets and certain corresponding liabilities, and Seller otherwise wishes to authorize
Buyer’s Development and Commercialization of, the A&P Project Enzyme, in each case, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1
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THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
ARTICLE I
PURCHASE AND SALE
Section 1.01 Purchase and Sale of Assets . Subject to the terms and conditions set forth herein, at the Closing, Seller shall, and shall cause its
Affiliates to, sell, convey, assign, transfer, and deliver to Buyer (or its designated Affiliate), and Buyer shall purchase from Seller and its Affiliates, all of
Seller’s (or its applicable Affiliate’s) right, title, and interest in, to, and under all of the following (the “Purchased Assets”):
(a) the patents and patent applications set forth on Section 1.01(a) of the Disclosure Schedules (the “ Purchased Patents”), and all of
Seller’s and its Affiliates interest in, to and under the Purchased Patents, including the right to sue for past infringement;
(b) all Contracts set forth on Section 1.01(b) of the Disclosure Schedules (the “ Assigned Contracts”) and the rights to assert claims and
take other actions in respect of breaches or other violations of the foregoing occurring after the Closing;
(c) the inventory and other materials set forth on Section 1.01(c) of the Disclosure Schedules (the “ Inventory”);
(d) all Jointly Owned Inventions relating [***] to the A&P Project Enzymes (the “ Purchased Know-How”);
(e) all Regulatory Documentation owned [***] by Seller and its Affiliates [***] relating to the other Purchased Assets (the “ Acquired
Regulatory Documentation”); and
(f) all other Books and Records owned [***] by Seller and its Affiliates relating [***] to the other Purchased Assets, [***] (collectively, the
“Acquired Books and Records”). For clarity, Acquired Books and Records shall specifically exclude all Tax Returns and related workpapers
including or relating to the Purchased Assets. Books and Records that do not relate [***] to the other Purchased Assets may be redacted to exclude
information that does not relate to the other Purchased Assets.
Section 1.02 Excluded Assets . Other than the Purchased Assets, Buyer expressly understands and agrees that it is not purchasing or acquiring,
and Seller is not selling or assigning, any other assets or properties of Seller or its Affiliates, and all such other assets and properties shall be excluded from
the Purchased Assets and remain the sole and exclusive property of Seller and/or its Affiliates (collectively, the “ Excluded Assets”). Excluded Assets
include, but are not limited to, the assets, properties and rights specifically set forth on Section 1.02 of the Disclosure Schedules.
Section 1.03 Assumed Liabilities.
(a) Subject to the terms and conditions set forth herein, including Section 1.03(b), at the Closing, Buyer shall assume and agree to pay,
perform, and discharge when due any and all Liabilities of Seller arising out, of or relating to, ownership of the Purchased Assets or operation of the
Business on or after the Closing (collectively, the “Assumed Liabilities”), including, but not limited to, the following:
(i) all Liabilities arising under the Assigned Contracts from and after the Closing Date (but, for clarity, this does not limit any
Liabilities under any Assigned
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Contract (or portion thereof) that is or was a Liability of Buyer or any of its Affiliates prior to the Closing Date pursuant to any Existing
Agreement or other agreement between the parties); and
(ii) all Liabilities for (A) Taxes relating to the Purchased Assets for any taxable period (or any portion thereof) beginning on or after
the Closing Date ([***]) and (B) Taxes for which Buyer is liable pursuant to Section 5.07.
(b) Buyer shall not assume and shall not be responsible to pay, perform or discharge any Liabilities of Seller or its Affiliates other than the
Assumed Liabilities (collectively, the “Excluded Liabilities”), which Excluded Liabilities shall include, but not necessarily be limited to:
(i) any Liabilities arising out of or relating to Seller’s ownership of the Purchased Assets prior to the Closing Date or attributable to
any breach of any Assigned Contract on the part of Seller or its Affiliate prior to the Closing Date (but excluding all Liabilities under any
Assigned Contract (or portion thereof) that is or was a Liability of Buyer or any of its Affiliates pursuant to any Existing Agreement or other
agreement between the parties hereto);
(ii) any Liabilities [***];
(iii) any Liabilities [***];
(iv) any Liabilities arising out of or relating to the Excluded Assets; and
(v) any Liabilities (A) for Taxes relating to the Purchased Assets for any taxable period (or any portion thereof) ending on or prior
to the Closing Date; (B) [***].
Section 1.04 Purchase Price. The aggregate purchase price for the Purchased Assets shall be the sum of (a) $2,500,000 (the “ Initial Purchase
Price”); plus (b) the amount of any Milestone Payment due and payable under Section 1.05 (such sum, the “ Purchase Price”).
Section 1.05 Milestone. Buyer shall pay to Seller $2,500,000 as a one-time, non-refundable, non-creditable milestone payment (the “ Milestone
Payment”) upon and subject to the occurrence of the earliest to occur of the following events (the occurrence of the earliest of such event, the
“Milestone”):
(a) [***];
(b) [***]; and
(c) [***].
For the avoidance of doubt, the Milestone Payment set forth above will be payable only one time, upon the first occurrence of the Milestone, and no
additional payment will be due in the event of any repeated occurrence of the Milestone, including in relation to more than one Product. Under no
circumstances shall Buyer be obligated to pay Seller more than $2,500,000 in the aggregate pursuant to this Section 1.05.
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Buyer shall provide Seller with [***] notice of the achievement of the Milestone. Following the receipt of such notice of achievement of the
Milestone, Seller shall issue an invoice to Buyer for the Milestone Payment. The Milestone Payment, when payable, shall be due by Buyer within [***]
following Buyer’s receipt of an invoice therefor. Buyer shall pay the Milestone Payment by wire transfer of immediately available funds to Seller in
accordance with the wire transfer instructions provided by Seller in writing prior to the due date for such payment.
Section 1.06 Reports and Reporting. No later than [***] after the expiration of each calendar year but only prior to the occurrence of the
Milestone, Buyer shall furnish Seller with a written report (each, an “Annual Report”) setting forth [***] its, its Affiliates’ and its Licensees’ progress and
efforts towards the achievement of the Milestone. [***]. Upon Seller’s reasonable advance notice (which in no event shall be less than [***]), Buyer shall
make its relevant management personnel reasonably available to Seller’s personnel to discuss in greater detail each Annual Report, the information therein,
and related questions Seller may have; provided that such access shall be during normal local business hours [***].
Section 1.07 Allocation of Purchase Price . The Purchase Price and the Assumed Liabilities (and any other amounts, if any, properly included
for Tax purposes) shall be allocated in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”) among the Purchased
Assets for all U.S. federal income tax purposes as shown on the allocation schedule set forth on Section 1.07 of the Disclosure Schedules (the “Allocation
Schedule”). Neither the parties nor any of their respective Affiliates shall take any position on any Tax Return or in any Tax contest, proceeding, audit,
appeals or litigation which is inconsistent with the agreed upon allocation unless otherwise required by a final determination within the meaning of Section
1313(a) of the Code (or any similar provision of state, local or non-U.S. Tax Law).
Section 1.08 Non-Assignable Assets.
(a) Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a sale, assignment, or transfer of any
Purchased Asset if such sale, assignment, or transfer: (i) violates applicable Law; or (ii) without the consent or waiver of a Person who is not a party to this
Agreement or an Affiliate of a party to this Agreement would result in a breach or violation of an Assigned Contract, result in the termination, cancellation,
or revocation of an Assigned Contract, or result in the creation of any lien on any Purchased Asset, and such consent or waiver has not been obtained prior
to the Closing.
(b) Following the Closing, Seller and Buyer shall use [***] efforts, and shall cooperate with each other, to obtain any such required consent or
waiver, or any release, substitution, or amendment required to assign all Liabilities under any and all Assigned Contracts or other Liabilities that constitute
Assumed Liabilities; [***]. Once such consent, waiver, release, substitution, or amendment is obtained, Seller shall promptly sell, assign, and transfer to
Buyer the relevant Purchased Asset to which such consent, waiver, release, substitution, or amendment relates [***].
(c) To the extent that any Purchased Asset or Assumed Liability cannot be transferred to Buyer pursuant to this Section 1.08, Buyer and Seller
shall use [***] efforts to enter into such arrangements (such as subleasing, sublicensing, or subcontracting) to provide to the parties the economic and, to the
extent permitted under applicable Law, operational equivalent of the transfer of such Purchased Asset or Assumed Liability to Buyer as of the Closing.
Buyer shall, to the extent it receives the benefits of the applicable Purchased Asset, as agent or subcontractor for Seller, pay, perform, and discharge fully
the liabilities and obligations related to such Purchased Asset or Assumed Liability from
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and after the Closing Date. To the extent permitted under applicable Law, Seller shall, at Buyer’s expense, hold in trust for and pay to Buyer promptly upon
receipt thereof, all income, proceeds, and other monies received by Seller from and after the Closing Date, to the extent related to such Purchased Asset in
connection with the arrangements under this Section 1.08. [***].
Section 1.09 Withholding Taxes. [***]. [***]. The parties shall use [***] efforts to cooperate to mitigate or eliminate any such withholding. To
the extent that amounts are so withheld and paid over to the appropriate Tax authority by Buyer, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the person in respect of which such deduction and withholding was made.
Section 1.10 Exploitation of Products. Seller agrees and acknowledges that [***]. Seller acknowledges and agrees that (a) [***], (b) [***], and
(c) the parties solely intend the express provisions of this Agreement (and, for the avoidance of doubt, not the Existing Agreements) to govern their
contractual relationship with respect to the Purchased Assets and the Products. [***].
ARTICLE II
CLOSING
Section 2.01 Closing. Subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated by this
Agreement (the “Closing”) shall take place remotely by exchange of documents and signatures (or their electronic counterparts), at [8:00] a.m. PST,
simultaneously with the execution of this Agreement, or at such other time or place or in such other manner as Seller and Buyer may mutually agree upon in
writing. The date on which the Closing is to occur is herein referred to as the “Closing Date.”
Section 2.02 Closing Deliverables.
(a) At the Closing, Seller shall deliver to Buyer the following:
(i) a bill of sale in the form of Exhibit C attached to the Lipase Acquisition Agreement, mutatis mutandis (the “Bill of Sale”) duly
executed by Seller, transferring the Inventory, Acquired Books and Records, and any other tangible Purchased Assets to Buyer;
(ii) an assignment and assumption agreement in the form of Exhibit D to the Lipase Acquisition Agreement, mutatis mutandis (the
“Assignment and Assumption Agreement”) duly executed by Seller, effecting the assignment to and assumption by Buyer of the Purchased
Assets and the Assumed Liabilities;
(iii) an assignment in the form of Exhibit E to the Lipase Acquisition Agreement, mutatis mutandis (the “Patent Assignment ”)
duly executed by Seller, transferring all of Seller’s right, title, and interest in and to the Purchased Patents to Buyer;
(iv) a license agreement in the form of Exhibit F to the Lipase Acquisition Agreement, mutatis mutandis (the “Expression System
License Agreement” and, collectively with this Agreement, the Assignment and Assumption Agreement, and the Patent Assignment, the
“Transaction Documents”) duly executed by Seller; and
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(v) a properly completed IRS Form W-9.
(b) At the Closing, Buyer shall deliver to Seller the following:
(i) the Assignment and Assumption Agreement duly executed by Buyer;
(ii) the Patent Assignment duly executed by Buyer;
(iii) the Expression System License Agreement duly executed by Buyer; and
(iv) the Initial Purchase Price by wire transfer of immediately available funds to Seller in accordance with the wire transfer
instructions provided by Seller to Buyer in writing [***] prior to Closing.
Section 2.03 Delivery of Records. Promptly and in any event within [***] after the Closing Date, Seller shall deliver to Buyer copies of the
Acquired Regulatory Documentation and the Acquired Books and Records via virtual data room or other file-share platform reasonably acceptable to Buyer
(or such other method as mutually agreed by the parties), provided that Seller shall have no obligation to deliver to Buyer any such Acquired Regulatory
Documentation or Acquired Books and Records that are already in Buyer’s or its Affiliates possession or that are publicly available.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedules, Seller represents and warrants to Buyer that the statements contained in this ARTICLE III are true
and correct as of the date hereof.
Section 3.01 Organization and Authority of Seller . Seller is a corporation duly organized, validly existing, and in good standing under the
Laws of the State of Delaware. Seller has all necessary corporate power and authority to enter into this Agreement and the other Transaction Documents to
which Seller is a party, to carry out its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by Seller of this Agreement and any other Transaction Document to which Seller is a party, the performance by Seller of its
obligations hereunder and thereunder, and the consummation by Seller of the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of Seller. This Agreement and the Transaction Documents constitute legal, valid, and binding obligations of Seller
enforceable against Seller in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity).
Section 3.02 No Conflicts or Consents. The execution, delivery, and performance by Seller of this Agreement and the other Transaction
Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) violate or breach any
provision of the certificate of incorporation or by-laws of Seller; (b) violate or breach any provision of any Law or Governmental Order applicable to Seller
or the Purchased Assets; (c) except as set forth in Section 3.02 of the Disclosure Schedules, require the consent, notice, or other action by any Person under,
conflict with, violate or breach, constitute a default under, or result in the acceleration of any Assigned Contract; or (d) except as set forth in Section 3.02 of
the Disclosure Schedules, require any consent, permit, Governmental Order, filing, or notice from, with, or to any Governmental Authority; except, in the
cases
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of clauses (b) and (c), where the violation, breach, conflict, default, acceleration, or failure to obtain consent or give notice would not have a Material
Adverse Effect and, in the case of clause (d), where such consent, permit, Governmental Order, filing, or notice which, in the aggregate, would not have a
Material Adverse Effect.
Section 3.03 Intellectual Property. Section 3.03 of the Disclosure Schedules contains a current and complete list of all Purchased Patents,
specifying as to each, as applicable: the title; the jurisdiction by or in which it has been issued, registered, or filed; the patent, registration or application
serial number; and the issue, registration, or filing date. Except as set forth on Section 3.03 of the Disclosure Schedules, the Purchased Patents constitute all
currently-existing Patents owned by Seller that [***] for the Manufacturing or use of [***] as it currently exists, other than any Patents covered by the
Expression System License Agreement. Except for the Purchased Patents and any Patents covered by the Expression System License Agreement, Seller
Controls no Patents that [***] for the Manufacturing or use of, [***] as each currently exists. Other than with respect to any ownership right, title, or
interest of Buyer or any of its Affiliates, Seller owns all right, title, and interest in and to the Purchased Patents and Seller has not granted any license or
other right under any of the Purchased Patents to any Third Party other than to service providers under the Assigned Contracts. All assignments and other
instruments necessary to establish and record Seller’s ownership interest in the Purchased Patents have been executed, delivered, and filed with the relevant
Governmental Authorities and authorized registrars. All required filings and fees related to the Purchased Patents due and payable prior to the Effective
Date have been submitted with and paid to the relevant Governmental Authorities and authorized registrars. To Seller’s Knowledge, (a) no Person is
infringing any Purchased Patents, and (b) except as set forth on Section 3.03(b) of the Disclosure Schedules, there are no actual or threatened claims that (i)
the currently-listed inventorship of the Purchased Patents is incorrect, (ii) [***] (as each is existing on the date hereof) infringes any Third Party intellectual
property rights, or (iii) the use of the Codexis Expression System (as defined in the Expression System License Agreement) to manufacture any Cell Bank
(as defined in the Expression System License Agreement) or [***] as each currently exists infringes any Third Party intellectual property rights.
Section 3.04 Assigned Contracts.
(a) Correct and complete copies of each Assigned Contract, have been made available to Buyer and its Representatives, including all
amendments and modifications and side agreements relating thereto.
(b) Except as set forth on Section 3.04 of the Disclosure Schedules: (i) each of the Assigned Contracts represents a legal, valid and binding
obligation of Seller and, to Sellers’ Knowledge, each other party thereto, and is enforceable against Seller and, to Seller’s Knowledge, each other
party thereto, in accordance with its terms, and is in full force and effect, and (ii) none of Seller or, to Seller’s Knowledge, any other party thereto is
in material breach of, or material default under, or has provided or received any notice of any intention to terminate, any of the Assigned Contracts, or
has committed or failed to perform any act which, with or without notice, lapse of time or both would constitute a material breach of or material
default under any of the Assigned Contracts.
Section 3.05 Title to Inventory. Seller has good and valid title to all Inventory included in the Purchased Assets, free and clear of any lien,
charge, claim, pledge, security interest, or other similar encumbrance, except for: (a) liens for Taxes not yet due and payable or being contested in good faith
by appropriate procedures; (b) mechanics’, carriers’, workmen’s, repairmen’s, warehouse, or other like liens
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arising or incurred in the ordinary course of business; and (c) liens arising under original purchase price conditional sales contracts with third parties
entered into in the ordinary course of business.
Section 3.06 Legal Proceedings; Governmental Orders.
(a) Except as set forth in Section 3.06(a) of the Disclosure Schedules, there are no material claims, actions, suits, investigations, or other
legal proceedings (collectively, “Actions”) pending or, to Seller’s Knowledge, threatened against or by Seller or its Affiliates relating to or affecting
the Purchased Assets or the Assumed Liabilities.
(b) Except as set forth in Section 3.06(b) of the Disclosure Schedules, there are no outstanding Governmental Orders against, relating to, or
affecting the Purchased Assets, which would have a Material Adverse Effect.
Section 3.07 Brokers. No broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee or commission in connection
with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Seller or any
of its Affiliates.
Section 3.08 No Other Representations and Warranties . Except for the representations and warranties contained in this ARTICLE III
(including the related portions of the Disclosure Schedules), neither Seller nor any other Person has made or makes any other express or implied
representation or warranty, either written or oral, on behalf of Seller, including any representation or warranty as to the accuracy or completeness of any
information, documents, or material regarding the Products and the Purchased Assets furnished or made available to Buyer and its Representatives in any
form (including any information, documents, or material delivered or made available to Buyer on behalf of Seller for purposes of this Agreement), or as to
the future revenue, profitability, or success of the Products, or any representation or warranty arising from statute or otherwise in Law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Disclosure Schedules, Buyer represents and warrants to Seller that the statements contained in this ARTICLE IV are true
and correct as of the date hereof.
Section 4.01 Organization and Authority of Buyer. Buyer is a société anonyme duly organized, validly existing and in good standing under the
Laws of Switzerland. Buyer has all necessary corporate power and authority to enter into this Agreement and the other Transaction Documents to which
Buyer is a party, to carry out its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution
and delivery by Buyer of this Agreement and any other Transaction Document to which Buyer is a party, the performance by Buyer of its obligations
hereunder and thereunder, and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of Buyer. This Agreement and the Transaction Documents constitute legal, valid, and binding obligations of Buyer enforceable
against Buyer in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
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Section 4.02 No Conflicts; Consents. The execution, delivery, and performance by Buyer of this Agreement and the other Transaction
Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) violate or breach any
provision of the certificate of incorporation or by-laws of Buyer; (b) violate or breach any provision of any Law or Governmental Order applicable to
Buyer; (c) require the consent, notice or other action by any Person under, conflict with, violate or breach, constitute a default under, or result in the
acceleration of any agreement to which Buyer is a party; or (d) require any consent, permit, Governmental Order, filing, or notice from, with, or to any
Governmental Authority by or with respect to Buyer.
Section 4.03 Solvency; Sufficiency of Funds. Immediately after giving effect to the transactions contemplated hereby, Buyer shall be solvent and
shall: (a) be able to pay its debts as they become due; (b) own property that has a fair saleable value greater than the amounts required to pay its debts
(including a reasonable estimate of the amount of all Liabilities); and (c) have adequate capital to carry on its business. No transfer of property is being
made and no obligation is being incurred in connection with the transactions contemplated hereby with the intent, on the part of Buyer, to hinder, delay, or
defraud either present or future creditors of Buyer or Seller. In connection with the transactions contemplated hereby, Buyer has not incurred, nor plans to
incur, debts beyond its ability to pay as they become absolute and matured.
Section 4.04 Legal Proceedings. There are no Actions pending or, to Buyer’s knowledge, threatened against or by Buyer that challenge or seek to
prevent, enjoin, or otherwise delay the transactions contemplated by this Agreement.
Section 4.05 Brokers. No broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee or commission in connection
with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Buyer or any
of its Affiliates.
Section 4.06 Independent Investigation. Buyer has conducted its own independent investigation, review, and analysis of the Products and the
Purchased Assets, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other
documents and data of Seller for such purpose. Buyer acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer has relied solely upon its own investigation and the express representations and warranties of
Seller set forth in ARTICLE III of this Agreement (including related portions of the Disclosure Schedules); and (b) neither Seller nor any other Person has
made any representation or warranty as to Seller, the Products, the Purchased Assets, or this Agreement, except as expressly set forth in ARTICLE III of this
Agreement (including the related portions of the Disclosure Schedules).
Section 4.07 Other Representations and Warranties . Except for the representations and warranties contained in this ARTICLE IV, neither
Buyer nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Buyer, including
any representation or warranty as to the accuracy or completeness of any information, documents, or material furnished or made available to Seller and its
Representatives in any form (including any information, documents, or material delivered or made available to Seller on behalf of Buyer for purposes of this
Agreement) or any representation or warranty arising from statute or otherwise in Law.
ARTICLE V
COVENANTS
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Section 5.01 Confidentiality.
( a ) Nondisclosure. Each party agrees that, during the Term and thereafter, a party (the “ Receiving Party”) receiving Confidential
Information of the other party (the “Disclosing Party”) (or that has received any such Confidential Information from the other party prior to the
Effective Date) shall (i) maintain in confidence such Confidential Information using not less than the efforts such Receiving Party uses to maintain in
confidence its own proprietary industrial information of similar kind and value, which shall be no less than a reasonable degree of care, (ii) not
disclose such Confidential Information to any Third Party without the prior written consent of the Disclosing Party, except for disclosures expressly
permitted below, and (iii) not use such Confidential Information for any purpose except those permitted by this Agreement. Each Receiving Party will
promptly notify the Disclosing Party upon gaining knowledge of any material use or disclosure of Confidential Information of the other party not
permitted pursuant to this Section 5.01. [***]. For the further avoidance of doubt, all Licensed Know-How is and shall be Confidential Information
of Seller. The obligations in this Section 5.01 shall not apply with respect to any portion of the Confidential Information that the Receiving Party may
receive to the extent that such information:
(i) is publicly disclosed by the Disclosing Party, either before or after it is disclosed to the Receiving Party hereunder;
(ii) was known to the Receiving Party or any of its Affiliates, without any obligation to keep it confidential or any restriction on its
use, prior to disclosure by the Disclosing Party, and such prior knowledge can be properly documented by the Receiving Party;
(iii) is subsequently disclosed to the Receiving Party or any of its Affiliates by a Third Party lawfully in possession thereof and
without any obligation to keep it confidential or any restriction on its use;
(iv) is published by a Third Party or otherwise becomes publicly available or enters the public domain, either before or after it is
disclosed to the Receiving Party without the Receiving Party’s breach of the terms of this Agreement; or
(v) is independently developed by employees or contractors of the Receiving Party or any of its Affiliates without the aid,
application, or use of Confidential Information of the Disclosing Party, and such independent development can be properly documented by
the Receiving Party.
(b) Authorized Disclosure. The Receiving Party may disclose Confidential Information belonging to the Disclosing Party only to the extent
such disclosure is reasonably necessary in the following instances:
(i) complying with applicable Laws and regulations (including the rules and regulations of the Securities and Exchange Commission
or any national securities exchange) and with judicial or administrative process, if in the reasonable opinion of the Receiving Party’s counsel,
such disclosure is so required for such compliance and the Receiving Party discloses no more than required in its reasonable judgment, and
further provided that with respect to judicially or administratively required disclosures, the Receiving Party (to the extent legally permissible)
shall promptly inform the other party
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of such required disclosure and use [***] efforts to provide the other party an opportunity to challenge or limit the disclosure obligations; and
(ii) disclosure to its Affiliates, and to its bona fide actual or potential (A) permitted Licensees, (B) investment bankers, investors,
lenders, or acquirers, or permitted assignees under Section 9.06, in each case, solely for diligence purposes, and (C) each of the parties’
respective Representatives, in each case of (A), (B), and (C), each of whom prior to disclosure must be bound by obligations of confidentiality
and non-use no less restrictive than the obligations set forth in this Section 5.01; provided, however, that the Receiving Party shall remain
responsible for any failure by any Person who receives Confidential Information pursuant to this Section 5.01(b)(ii) to treat such Confidential
Information as required under this Section 5.01.
If and whenever any Confidential Information is disclosed in accordance with this Section 5.01(b), such disclosure shall not cause any such
information to cease to be Confidential Information, except to the extent that such disclosure results in a public disclosure of such information (other than
by breach of this Agreement).
(c) Tax Filings. Notwithstanding any provision of this Agreement to the contrary, each party (and their Affiliates) shall be free to disclose
this Agreement, the contents hereof, and the transactions contemplated hereby to any Governmental Authority in connection with the filing of any
Tax Return and in any Tax audits, assessments, or administrative or judicial proceedings or other Actions relating to Tax Returns or Taxes.
Section 5.02 Public Announcements . Unless otherwise required by applicable Law, no party to this Agreement shall make any public
announcements in respect of this Agreement or the transactions contemplated hereby without the prior written consent of the other party (which consent
shall not be unreasonably withheld, conditioned, or delayed), and the parties shall cooperate as to the timing and contents of any such announcement.
Notwithstanding the foregoing, Seller may, following the Effective Date, issue a press release regarding this Agreement and the transactions contemplated
hereby containing the information and generally in the form as reasonably agreed upon by the Parties at least [***] prior to the Closing. The contents of any
announcement or similar publicity, which has been reviewed and approved by the reviewing party (including the press release referred to in the prior
sentence), can be re-released by either party without a requirement for re-approval.
Section 5.03 Exclusivity.
(a) During the Restricted Period, Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly engage in, for its own
benefit or for, with, or through any other Person, [***], any other company, partnership, proprietorship, enterprise, organization or business venture
of any kind whatsoever engaged in [***] (the “Restricted Business”) [***]. Notwithstanding the foregoing, Seller may own, directly or indirectly,
solely as an investment, securities of any Person traded on any national securities exchange if Seller is not a controlling Person of, or a member of a
group which controls, such Person and does not, directly or indirectly, own [***] or more of any class of securities of such Person. The “Restricted
Period” shall commence on the Closing Date and shall continue until [***] of the Closing Date; provided [***].
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(b) Each party acknowledges that a breach or threatened breach by it of this Section 5.03 could give rise to irreparable harm to the other party, for
which monetary damages may not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any such
obligations, the other party shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to seek
equitable relief, including a temporary restraining order, an injunction, specific performance, and any other relief that may be available from a court of
competent jurisdiction (without any requirement to post bond, which such party hereby waives).
(c) Each party acknowledges that the restrictions contained in this Section 5.03 are reasonable and necessary to protect the legitimate
interests of the other party and constitute a material inducement to each party to enter into this Agreement and consummate the transactions
contemplated by this Agreement. In the event that any covenant contained in this Section 5.03 should ever be adjudicated to exceed the time,
geographic, product, or service or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform
such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product, or service or other
limitations permitted by applicable Law. The covenants contained in this Section 5.03 and each provision hereof are severable and distinct covenants
and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the
remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable
such covenant or provision in any other jurisdiction.
Section 5.04 Patent Prosecution and Maintenance.
(a) Following the Closing Date, Buyer shall have the sole right to Prosecute all Purchased Patents and Resultant Patents, including any
Patent Term Extensions or Supplementary Protection Certificates thereto, and shall be solely responsible for the cost and expense thereof. Buyer shall
have the sole right to determine the strategy and material aspects of Prosecution of the Purchased Patents and Resultant Patents, including where and
when applications for Purchased Patents and Resultant Patents will be filed, and claims to be included, excluded, or modified in Purchased Patents
and Resultant Patents applications, or on the selection of internal or external patent counsel or patent agents to be used for filing, Prosecuting and
maintaining the Purchased Patents and Resultant Patents.
(b) Seller shall provide to Buyer all reasonable assistance requested by Buyer in connection with Prosecution under this Section 5.04,
including allowing Buyer reasonable access to Seller’s and its Affiliates’ files and documents and Seller’s and its Affiliates’ then-current personnel
and inventors who may have possession of information relevant to the Prosecution. Any such cooperation by Seller and its Affiliates with respect to
the Purchased Patents and Resultant Patents or any such Prosecution shall be at Buyer’s cost and expense and Buyer shall reimburse Seller for such
reasonable and documented costs and expenses of Seller and its Affiliates.
Section 5.05 Patent Enforcement.
(a) Buyer shall have the sole right to enforce the Purchased Patents and Resultant Patents and intellectual property rights in Purchased
Know-How, including for past infringement, against Third Party infringers (and enter into settlement agreements with such Third Party infringers).
Any recovery obtained in any such enforcement action (or settlement thereof) shall
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belong to Buyer. Buyer shall be responsible for all costs and expenses associated with such enforcement.
(b) Seller shall provide to Buyer all reasonable assistance requested by Buyer in connection with any Action under this Section 5.05,
including allowing Buyer reasonable access to Seller’s and its Affiliates’ files and documents and Seller’s and its Affiliates’ then-current personnel
who may have possession of information relevant to the Action. Any such cooperation by Seller with respect to the Purchased Patents and Resultant
Patents or any such Action shall be at Buyer’s cost and expense and Buyer shall reimburse Seller for such reasonable and documented costs and
expenses of Seller.
Section 5.06 Bulk Sales Laws. The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any
jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer.
Section 5.07 VAT. The Purchase Price is exclusive of VAT. Any party receiving a supply under this Agreement hereby covenants that it will pay
any such VAT correctly charged in addition to any amounts due under this Agreement. The supplying party agrees that it will raise a Tax invoice (or
equivalent document) to support the charge to VAT. Where the prevailing legislation requires a VAT reverse charge, then the receiving party covenants
that it shall correctly account for VAT in respect of the services received. To the extent that any VAT is chargeable on any Purchased Assets transferred
pursuant to this Agreement, Seller shall deliver to Buyer: (i) a valid VAT invoice where required by applicable Law or practice and (ii) any other
documentation as may be reasonably requested by Buyer to assist it to recover the VAT chargeable or payable, in each case, in such form and within such
timing as may be required by Law. An amount equal to the amount of VAT chargeable or payable by Seller on the Purchased Assets transferred shall be
paid in addition to the consideration provided in this Agreement, by Buyer to Seller within [***] of receipt of a valid VAT invoice (or where no invoice is
required, within [***] of demand) or, if later, [***] before the date on which the obligation to account for VAT would have had to be discharged in order to
avoid liability to interest or a charge or penalty. Seller shall account for all amounts in respect of VAT paid to it by Buyer to the appropriate Governmental
Authorities in compliance with applicable Laws. Both parties shall use [***] efforts to avail of VAT zero-rating, reduced rating or exemption that could
apply. In the event that the local competent Tax authority determines that VAT is chargeable, Buyer in the first instance shall undertake all reasonable steps
to refute any such assertions by the local Tax authority. Each party shall be responsible for any Taxes due on their own account, including any penalties or
interest accruing due to incorrect VAT treatment of the supplies of goods or services made by that party or any failure to correctly account for VAT on any
receipt of a supply of goods or services under this Agreement, except where those penalties or interest arise as a result of the actions of the other party, in
which case that party shall be liable to reimburse the value of the penalties and interest.
Section 5.08 Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute
and deliver such additional documents, instruments, conveyances, and assurances and take such further actions as may be reasonably required to carry out
the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents.
Section 5.09 Termination of application of Certain Surviving Existing Agreements to the Purchased Assets and A&P Project Enzymes .
Effective as of the Closing:
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(a) Articles 2, 3, 8, 9, 12, 13, 14, and 15 and Sections 10.1 and 10.3 of the Development Agreement, which have survived termination as
per the terms of the Development Agreement, shall no longer apply to the A&P Project Enzymes, the Purchased Patents, the Resultant Patents, or the
Purchased Know-How; and
(b) Articles 2, 6, 7, 8, 11, 16, and 17 and Sections 5.7, 9.5, 10.1, 12.1, 14.1, and 15.1 of the Strategic Collaboration Agreement, which have
survived termination as per the terms of the Strategic Collaboration Agreement, shall no longer apply to the A&P Project Enzymes, the Purchased
Patents, the Resultant Patents, and the Purchased Know-How.
If there is any conflict or inconsistency between the provisions of the surviving Articles and Sections of an Existing Agreement and the provisions
of any Transaction Document, then the provisions of the Transaction Documents shall prevail. For clarity, the A&P Project Enzymes, the Purchased
Patents, the Resultant Patents, and the Purchased Know-How, and Buyer’s corresponding interest in the A&P Project Enzymes and such Purchased Patents,
Resultant Patents, and Purchased Know-How under the Existing Agreements, shall cease to constitute Joint Patents or Jointly Owned Inventions under any
Existing Agreement and cease to be subject to the terms of the Existing Agreements (including the provisions thereof surviving the termination thereof) and,
as between the parties, the Prosecution, defense, and enforcement of the Purchased Patents, Resultant Patents, the Purchased Know-How, and Acquired
Regulatory Documentation will be controlled solely by the terms of this Agreement and not the surviving Articles and Sections of any Existing Agreement.
For clarity, all right, title, and interest in the Purchased Patents, including the right to sue for past infringement, shall belong solely to Buyer as of the
Closing Date.
Section 5.10 License to Know-How. Effective as of the Closing Date and subject to the terms of this Section 5.10, Seller (on behalf of itself and
its Affiliates) hereby grants to Buyer, and Buyer accepts, a non-exclusive, perpetual, irrevocable, royalty-free, worldwide, non-transferable (except as set
forth below), sublicensable (solely as set forth below) license under the Licensed Know-How to Manufacture, Develop, Commercialize, and otherwise
Exploit the A&P Project Enzymes anywhere in the world, [***]. Buyer shall have no rights or license to any enhancements, improvements, or other
modifications to the Licensed Know-How made by or on behalf of Seller or any of its Affiliates after the Closing Date. All use of the Licensed Know-How
by or under authority of Buyer (or its successors and assigns) from and after the Closing Date shall be on an “AS IS, WHERE IS” basis, with all faults and
all express and implied representations and warranties disclaimed, and at its sole risk. All rights not expressly granted by Seller and its Affiliates hereunder
are reserved by Seller and its Affiliates. The license to the Licensed Know-How granted under this Section 5.10 shall be sublicensable (including through
multiple tiers of sublicensees) only to (i) Affiliates (but only for so long as they remain Affiliates of Buyer), Licensees, and service providers of Buyer and
(ii) any Third Party that acquires one or more of the Purchased Patents or Resultants Patents and such Third Party’s Affiliates (but only for so long as they
remain Affiliates of such Third Party) and service providers, in each case, for use solely within the scope of the above license, and shall be assignable and
transferable only to successors in interest to all or substantially all of the assets of Buyer relating to the Products. Buyer is liable for any acts or omissions of
its Licensees, Affiliates, employees, contractors, representatives, and (direct and indirect) sublicensees that would, if an act or omission of Buyer, be a
breach of this Section 5.10. The rights and licenses granted in this Section 5.10 are subject to, and limited by, any and all licenses, rights, limitations, and
restrictions with respect to the Licensed Know-How previously granted to or otherwise obtained by any Third Party that are in effect as of the Closing Date.
Nothing contained herein will be construed as an obligation to disclose or deliver any technical information or embodiment of any Licensed Know-How or
to provide any technical assistance or other services or deliverables to Buyer or its Affiliates.
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Section 5.11 [***]. [***].
ARTICLE VI
INDEMNIFICATION
Section 6.01 Survival Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall
survive the Closing and shall remain in full force and effect until the date that is [***] from the Closing Date. None of the covenants or other agreements
contained in this Agreement shall survive the expiration or other termination of the Term other than those which by their terms contemplate performance
after termination (including Section 5.01 (Confidential Information)), and each such surviving covenant and agreement shall survive termination for the
period contemplated by its terms. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such
time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not
thereafter be barred by the expiration of such survival period and such claims shall survive until finally resolved.
Section 6.02 Indemnification by Seller . Subject to the other terms and conditions of this ARTICLE VI, from and after the Closing, Seller shall
indemnify Buyer, its Affiliates, and each of their successors and assigns (collectively, the “ Buyer Indemnified Parties”) against, and shall hold the Buyer
Indemnified Parties harmless from and against, any and all losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines,
costs, or expenses of whatever kind, including reasonable out-of-pocket expenses of investigation and reasonable attorneys’ fees and expenses in
connection with any action, [***] (collectively, “Losses”), incurred or sustained by, or imposed upon, any Buyer Indemnified Party based upon, arising out
of, with respect to, or by reason of:
(a) [***];
(b) [***]; or
(c) any Excluded Liability.
Section 6.03 Indemnification by Buyer . Subject to the other terms and conditions of this ARTICLE VI, from and after the Closing, Buyer shall
indemnify Seller, its Affiliates, and each of their successors and assigns (collectively, the “ Seller Indemnified Parties”) against, and shall hold the Seller
Indemnified Parties harmless from and against, any and all Losses incurred or sustained by, or imposed upon, any Seller Indemnified Party based upon,
arising out of, with respect to, or by reason of:
(a) [***];
(b) [***]; or
(c) [***], any Assumed Liability or Buyer’s, its Affiliates’, and its Licensees’ conduct of the Business after the Closing.
Section 6.04 Certain Limitations. The party making a claim under this ARTICLE VI is referred to as the “ Indemnified Party,” and the party
against whom such claims are asserted under this ARTICLE VI is referred to as the “ Indemnifying Party.” The indemnification provided for in Section
6.02 and Section 6.03 shall be subject to the following limitations:
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(a) The Indemnifying Party shall not be liable to the Indemnified Party for indemnification under Section 6.02(a) or Section 6.03(a), as the
case may be, until the aggregate amount of all Losses in respect of indemnification under Section 6.02(a) or Section 6.03(a) exceeds $[***] (the
“Deductible”), in which event the Indemnifying Party shall only be required to pay or be liable for Losses in excess of the Deductible.
(b) The aggregate amount of all Losses for which a Seller shall be liable pursuant to Section 6.02(a) shall not exceed [***] of the Purchase
Price (the “Cap”).
(c) In no event shall any Indemnifying Party be liable to any Indemnified Party for any punitive, incidental, consequential, special, or
indirect damages, or for any damages based on loss of future revenue or income, loss of business reputation or opportunity relating to the breach or
alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple, [***].
(d) [***].
(e) Seller shall not be liable under this ARTICLE VI for any Losses based upon or arising out of any inaccuracy in or breach of any of the
representations or warranties of Seller contained in this Agreement if Buyer [***] knowledge of such inaccuracy or breach prior to the Closing.
For purposes of calculating the Deductible or the Cap with respect to any Losses, the Deductible or Cap, as applicable, will be calculated as of the
date on which such Loss is payable by the Indemnifying Party to the Indemnified Party and the Purchase Price for purposes of such calculation will be equal
to the aggregate of the Initial Purchase Price and the Milestone Payment paid or payable by Buyer to Seller during the period from the Closing Date until
(and including) the date on which such Loss is payable; [***].
Section 6.05 Indemnification Procedures. Whenever any claim shall arise for indemnification hereunder, the Indemnified Party shall promptly
provide written notice of such claim to the Indemnifying Party. Such notice by the Indemnified Party shall: (a) describe the claim in reasonable detail; (b)
include copies of all material written evidence thereof; and (c) indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be
sustained by the Indemnified Party. In connection with any claim giving rise to indemnity hereunder resulting from or arising out of any Action by a Person
who is not a party to this Agreement, the Indemnifying Party, at its sole cost and expense and upon written notice to the Indemnified Party, may assume the
defense of any such Action with counsel reasonably satisfactory to the Indemnified Party. The Indemnified Party shall be entitled to participate in the
defense of any such Action, with its counsel and at its own cost and expense, subject to the Indemnifying Party’s right to control the defense thereof. If the
Indemnifying Party does not assume the defense of any such Action, the Indemnified Party may, but shall not be obligated to, defend against such Action in
such manner as it may deem appropriate, including settling such Action, after giving notice of it to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate and no action taken by the Indemnified Party in accordance with such defense and settlement shall relieve the Indemnifying
Party of its indemnification obligations herein provided with respect to any damages resulting therefrom. The Indemnifying Party shall not be entitled to
assume or maintain control of the defense of any such Action if (i) [***], (ii) such Action seeks an injunction or equitable relief against the Indemnified
Party or any of its Affiliates, or (iii) [***]. Seller and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any
claim, including: (i) making available
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(subject to the provisions of Section 5.01) records relating to such claim; and (ii) furnishing, without expense (other than reimbursement of actual out-of-
pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the
defense of such claim. The Indemnifying Party shall not settle any Action without the Indemnified Party’s prior written consent (which consent shall not be
unreasonably withheld, conditioned, or delayed).
Section 6.06 Tax Treatment of Indemnification Payments . All indemnification payments made under this Agreement shall be treated by the
parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.
Section 6.07 Exclusive Remedies. Subject to ARTICLE VII, the parties acknowledge and agree that from and after the Closing their sole and
exclusive remedy with respect to any and all claims (other than claims arising from intentional fraud on the part of a party hereto or its representatives in
connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement, or obligation set
forth herein or otherwise relating to the subject matter of this Agreement shall be pursuant to the indemnification provisions set forth in this ARTICLE VI.
In furtherance of the foregoing, each party hereby waives, from and after the Closing, to the fullest extent permitted under Law, any and all rights, claims,
and causes of action for any breach of any representation, warranty, covenant, agreement, or obligation set forth herein or otherwise relating to the subject
matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective Representatives arising under or based
upon any Law, except pursuant to the indemnification provisions set forth in this ARTICLE VI. Nothing in this Section 6.07 shall limit any Person’s right to
seek and obtain any equitable relief to which such Person shall be entitled or to seek any remedy on account of any intentional fraud by any party hereto or
its representatives.
Section 6.08 Right to Set-Off.
(a) Buyer is expressly authorized, but shall not be obligated, to set-off any Losses that the Parties have agreed in writing, or which have
been finally determined in accordance with ARTICLE VIII, to be subject to indemnification by Seller hereunder (subject to the limitations set forth in
Section 6.04) against the Milestone Payment or any other payments payable to Seller pursuant to this Agreement.
(b) Neither the exercise nor the failure or delay to exercise such right to withhold or set off pursuant to this Section 6.08 will constitute an
election of remedies or limit the rights and remedies of the Buyer Indemnified Parties hereunder (other than to the extent any Losses have been set off
pursuant to Section 6.08(a)).
ARTICLE VII
TERM AND TERMINATION
Section 7.01 Term. This Agreement commences upon the Effective Date and will continue until the later of:
(a) [***] of the Effective Date; and
(b) [***] of the date the Milestone Payment is made to Seller (the period from the Effective Date until the expiration or other termination of
this Agreement, the “Term”).
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ARTICLE VIII
DISPUTE RESOLUTION
Section 8.01 Elevation of Issues for Resolution. In the event the parties or their Representatives are unable to agree upon any dispute or
disagreement between the parties arising from or in connection with this Agreement, the construction hereof, or the rights, duties or liabilities of either
party hereunder (each a “Dispute”), the parties shall endeavor to resolve such Dispute in accordance with the terms of this Section 8.01. Upon the receipt of
a written notice from one party to the other party of a Dispute (the “Notice of Dispute”), authorized Representatives of the parties, each with authority to
settle the Dispute, shall endeavor to discuss their respective positions and use their good faith efforts to resolve the Dispute. In connection with such
discussion, the parties may agree to confer with one or more mutually acceptable independent Third Party experts having expertise in the relevant subject
matter and both parties shall consider in good faith the views of such Third Party(ies). If for any reason a written agreement signed by both parties is not
reached within [***] after the Notice of Dispute, the parties shall promptly refer the Dispute to the Senior Executives (or their respective designees) for
resolution, which Senior Executives will have authority to settle the Dispute and shall be charged with resolving such Dispute. If such Dispute is not
resolved by the parties’ Senior Executives within [***] after the date the Dispute is referred to them, then the Dispute shall be submitted to binding
arbitration in accordance with Section 8.02.
Section 8.02 Arbitration. Any Dispute that is not resolved by an executed written agreement of the parties in accordance with Section 8.01, as
well as any related claims or other disputes arising out of or in connection with this Agreement including any question regarding its existence, validity, or
termination, whether for breach of contract, tortious conduct, or otherwise and whether predicated on common law, statute, or otherwise (collectively, the
“Related Claims”), shall be referred to and finally resolved by arbitration under the [***] rules (the “ Rules”) in effect at the Effective Date except, as they
may be modified herein or by mutual agreement of the parties, which Rules are deemed to be incorporated by reference into this Section 9.02. The number
of arbitrators shall be three, unless otherwise mutually agreed by the parties, whereby, claimant and the respondent shall each nominate an arbitrator, and
the third arbitrator, who shall be the president of the arbitral tribunal, shall be appointed by the two party-appointed arbitrators in consultation with the
parties, in each case, in accordance with the Rules. Each arbitrator shall be experienced in the subject matter herein and the application of [***] law. The
seat or legal place of arbitration shall be [***]. The language to be used in the arbitral proceedings shall be English.
(a) Within [***] after the appointment of the arbitrators pursuant to this Section 8.02, the arbitrators and the parties shall meet, and each
party shall provide to the arbitrators a written summary of: (i) all issues within the scope of the Dispute and any Related Claims; and (ii) such party’s
position on each such issue. The arbitrators shall set a date for a hearing, which shall be no later than [***] after the appointment of the final arbitrator
pursuant to this Section 8.02, for the presentation of evidence and legal arguments concerning each of the issues identified by the parties; provided,
however, that the parties may jointly agree in writing to extend the foregoing deadlines, or [***].
(b) The arbitrators shall use each of their best efforts to rule on each disputed issue within [***] after the completion of the hearing
described in Section 8.02(a); provided, however, that the parties may jointly agree in writing to extend the foregoing deadlines, or [***]. No arbitrator
(nor any arbitral tribunal) shall have the power to: (i) award any punitive damages or other damages prohibited by Section 6.04; or (ii) to decide or
rule on any issue or other matter
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that is not clearly with the scope of the Dispute and any Related Claims. The costs of the arbitration shall be [***] during the course of such
arbitration, as assessed by [***], and shall be borne as determined by the arbitrators.
(c) The arbitration proceedings, including the existence of the arbitration proceedings, the facts and circumstances surrounding the
underlying dispute, all submissions, correspondence, and evidence relating to the arbitration proceedings, and any awards issued by the arbitrator
shall be kept confidential by the parties, and the parties shall work with the arbitrators to take such steps as are reasonably necessary to preserve the
confidentiality thereof, except to the extent otherwise required by applicable Law.
(d) Subject to Section 8.02(b), the arbitrators shall have the power to grant any remedy or relief that they deem just and equitable, including
but not limited to injunctive relief, whether interim or final, and any provisional measures ordered by the arbitrator may be enforced by any court of
competent jurisdiction. Notwithstanding the foregoing, nothing in this Agreement shall prevent either party from seeking any provisional/preliminary
relief (including injunctions, attachments, or other such orders in aid of arbitration) from any court of competent jurisdiction, and any such application
to a court for provisional/preliminary relief shall not be deemed incompatible with the terms of this Agreement to arbitrate or a waiver of the right to
arbitrate.
(e) Any award rendered by the arbitrators shall be final and binding on the parties, and each party hereto waives to the fullest extent
permitted by law any right it may otherwise have under the laws of any jurisdiction to any form of appeal of, or collateral attack against, such award.
Judgment upon any awards rendered by the arbitrators may be entered in any court having jurisdiction thereof, including any court having
jurisdiction over any of the parties or their assets.
(f) Notwithstanding anything in this ARTICLE VIII to the contrary, any dispute to determine the validity or infringement of a party’s
intellectual property rights by the other party (but excluding, in any event, disputes relating to earnouts or other amounts payable hereunder, whether
or not involving questions of infringement or validity) shall be submitted exclusively to the courts in the jurisdiction of the relevant intellectual
property right, and the parties hereby consent to the jurisdiction of such courts.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Definitions. The terms in this Agreement with initial letters capitalized, whether used in the singular or the plural, shall have the
respective meanings either set forth in Exhibit A attached hereto or in another part of this Agreement and as cross referenced in Exhibit A.
Section 9.02 Construction.
(a) The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to
limit or expand on the meaning of the language contained in the particular Article or Section.
(b) Except where the context otherwise requires, wherever used, the singular shall include the plural, the plural the singular, the use of any
gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or).
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(c) The term “including,” “include,” or “includes” as used herein shall mean including, without limiting the generality of any description
preceding such term.
(d) Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument, or other document herein will be
construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented, or otherwise modified (subject
to any restrictions on such amendments, supplements, or modifications set forth herein or therein), (ii) any reference to any applicable Laws herein
will be construed as referring to such Laws as from time to time enacted, repealed, or amended, (iii) any reference herein to any person will be
construed to include the person’s successors and permitted assigns, (iv) the words “herein”, “hereof,” and “hereunder”, and words of similar import,
will be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (v) any reference herein to the words “mutually
agree” or “mutual written agreement” will not impose any obligation on either party to agree to any terms relating thereto except as such party may
determine in such party’s sole discretion, (vi) all references herein to Sections or Exhibits will be construed to refer to Sections and Exhibits to this
Agreement, (vii) the word “days” means calendar days unless otherwise specified, (viii) except as otherwise expressly provided herein all references
to “$” or “dollars” refer to the lawful money of the U.S., and (ix) the words “copy” and “copies” and words of similar import when used in this
Agreement include, to the extent available, electronic copies, files or databases containing the information, files, items, documents, or materials to
which such words apply.
(e) Each party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has
participated in the drafting hereof In interpreting and applying the terms and provisions of this Agreement, the parties agree that no presumption will
apply against the party which drafted such terms and provisions. The language in this Agreement is to be construed in all cases according to its fair
meaning.
(f) Any documents will be deemed to have been made available to, and received by, Buyer if such documents were made available to Buyer
[***] prior to the execution and delivery of this Agreement by Seller.
Section 9.03 Expenses. Except as otherwise expressly provided herein (including Section 5.07 hereof), all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
Section 9.04 Severability. If and to the extent that any provision (or any part thereof) of this Agreement is held to be invalid, illegal, or
unenforceable, in any respect in any jurisdiction, the provision (or the relevant part thereof) shall be considered severed from this Agreement and shall not
serve to invalidate the remainder of such provision or any other provisions hereof The parties shall make a good faith effort to replace any invalid, illegal, or
unenforceable provision (or any part thereof) with a valid, legal, and enforceable provision such that the objectives contemplated by the parties when
entering this Agreement may be realized.
Section 9.05 Notices. Any notice required or permitted to be given by the parties pursuant to this Agreement shall be in writing and shall be (i)
delivered by hand, (ii) delivered by overnight courier with tracking capabilities, (iii) mailed postage prepaid by first class, registered, or certified mail, or
(iv) transmitted by electronic mail, with confirmation copy by mail as provided in clause (iii) above, and in each case addressed to the recipient party as set
forth below, unless changed by notice so given:
20
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
If to Buyer:
[●]
c/o Société des Produits Nestlé S.A.
55 Avenue Nestlé
1800 Vevey
Switzerland
Email: [***]
[***]
Attention: [***]
[***]
with a copy to (which shall not constitute notice):
Mayer Brown LLP
1221 Avenue of the Americas
New York, NY 10020
Email: [***]
[***]
Attention: [***]
[***]
If to Codexis:
Codexis, Inc.
200 Penobscot Drive
Redwood City, CA 94063
Attention: President
with a copy to (which shall not constitute notice):
Codexis, Inc.
200 Penobscot Drive
Redwood City, CA 94063
Email: [***]
Attention: General Counsel
And
Baker Hostetler LLP
312 Walnut Street, Suite 3200
Cincinnati, OH 45202-4074
Email: [***]
[***]
Attention: [***]
[***]
(A) with respect to any notice delivered pursuant to clauses (i), (ii) or (iii), such notice shall not be effective unless it was (1) first delivered via e-
mail and no response was given within [***] and (2) a
21
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
subsequent notice via e-mail was sent indicating the delivery via method described in clause (i), (ii), or (iii), as applicable; (B) with respect to any notice
delivered pursuant to clauses (i), such notice shall be deemed effective upon submission to such other party, (C) with respect to any notice delivered
pursuant to clause (ii), such notice shall be deemed effective [***] following the date of submission to the carrier, (D) with respect to any notice delivered
pursuant to clause (iii), such notice shall be deemed effective [***] after the date deposited with the applicable carrier, and with respect to any notice
delivered pursuant to clause (iv), (x) upon submission to such other party if sent during normal business hours of the recipient, and (y) on [***] if sent after
normal business hours of the recipient (in the case of (x) or (y), subject to confirmation of receipt by recipient by reply email). A party may add, delete, or
change the person or address to whom notices should be sent at any time upon written notice delivered to the other party in accordance with this Section
9.05.
Section 9.06 Assignment . Neither this Agreement nor any of the rights or obligations hereunder may be assigned or transferred by either party
without the prior written consent of the other party, such consent not to be unreasonably withheld, delayed or conditioned; provided, however, that either
party may, without the other party’s consent, but with written notice to the other party, assign or transfer all of its rights and obligations hereunder to any
Affiliate, or to a Third Party with whom it completes a Business Combination or to whom it sells substantially all of such party’s assets relating to this
Agreement. [***]. This Agreement shall inure to the benefit of and be binding on the parties’ successors and assigns. Any assignment or transfer in
violation of the foregoing shall be null and void and wholly invalid, the assignee or transferee in any such assignment or transfer shall acquire no rights
whatsoever, and the non-assigning, non-transferring party shall not recognize, nor shall it be required to recognize, such assignment or transfer.
Section 9.07 Waivers, Modifications, and Amendments . No waiver, modification, release, or amendment of any obligation under, or provision
of, this Agreement shall be valid or effective unless in writing and signed by all parties hereto. The failure of any party to insist on the performance of any
obligation hereunder shall not be deemed to be a waiver of such obligation. Waiver of any provision hereunder or of any breach of any provision hereof
shall not be deemed to be a continuing waiver or a waiver of any other breach of such provision (or any other provision) on such occasion or any succeeding
occasion. Any amendment of this Agreement shall not be binding on the parties unless set out in writing, expressed to amend this Agreement and signed by
authorized representatives of each of the parties.
Section 9.08 Choice of Law. This Agreement (and any claims or disputes arising out of or relating hereto or to the transaction contemplated
hereby or to the inducement of any party to enter herein or therein, whether for breach of contract, tortious conduct, or otherwise and whether predicated on
common law, statute, or otherwise) shall be governed by, enforced, and shall be construed in accordance with the laws of [***], without regard to its
conflicts of law provisions. The parties hereby disclaim the application of the United Nations Convention on the International Sale of Goods to this
Agreement.
Section 9.09 Injunctive Relief. Notwithstanding anything herein to the contrary, each party shall be entitled to seek injunctive relief and specific
performance (including any relief or recovery under this Agreement) in any court of competent jurisdiction in the world.
Section 9.10 Relationship of the Parties. Each party is an independent contractor under this Agreement. Nothing herein is intended or is to be
construed so as to constitute Buyer and Seller as partners, agents, or joint venturers. Neither party shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of the other party or to bind the other party to
22
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THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
any contract, agreement, or undertaking with any Third Party. There are no express or implied third party beneficiaries hereunder.
Section 9.11 Entire Agreement . The parties agree that this Agreement and the attached Exhibits and Disclosure Schedules, together with the
Existing Agreements, constitute the entire agreement between the parties as to the subject matter of this Agreement, and hereby supersede all prior
negotiations, representations, agreements, and understandings (whether written or oral) regarding the same. Subject to Section 5.09 and the terms of the
Lipase Acquisition Agreement, the provisions in the Existing Agreements pursuant to which each party has agreed not to Develop or Commercialize the
Project Enzymes, including the use of any Jointly Owned Invention in connection therewith, remain in full force and effect except as set forth herein with
respect to the A&P Project Enzymes. Further, the parties agree that this Agreement does not supersede or amend the Lipase Acquisition Agreement, which
remains in effect and solely governs the subject matter thereof.
Section 9.12 Cooperation. The parties shall (i) provide assistance to each party as reasonably requested in preparing and filing Tax Returns with
respect to the Purchased Assets; (ii) make available to each other as reasonably requested all information, records, and documents relating to Taxes
concerning the Purchased Assets; (iii) retain any books and records that could reasonably be expected to be necessary or useful in connection with any
preparation by any the other party of any Tax Return, or for any audit relating to Taxes with respect to the Purchased Assets; and (iv) cooperate fully, as and
to the extent reasonably requested by the other party, in connection with any audits, assessments or administrative or judicial proceedings or other Actions
with respect to Taxes relating to the Purchased Assets.
Section 9.13 Counterparts. This Agreement may be executed in counterparts (including using any electronic signature covered by the United
States ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable Law, e.g.,
www.docusign.com), each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed
copy of this Agreement delivered by email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original
signed copy of this Agreement. To the extent applicable, the foregoing constitutes the election of the parties to invoke any Law authorizing electronic
signatures. Minor variations in the form of the signature page, including footers from earlier versions of this Agreement, shall be disregarded in determining
a party’s intent or the effectiveness of such signature. No party shall raise the use the delivery of signatures to this Agreement in electronic format as a
defense to the formation of a contract and each such party forever waives any such defense.
Section 9.14 Non-Recourse. This Agreement may only be enforced against, and any Action based upon, arising out of or related to this
Agreement, or the negotiation, execution, or performance of this Agreement, may only be brought against the entities that are expressly named as parties
hereto and then only with respect to the specific obligations set forth herein with respect to such party. No past, present, or future director, officer, employee,
incorporator, manager, member, partner, stockholder, Affiliate, agent, attorney, or other Representative of any party hereto or of any Affiliate of any party
hereto, or any of their successors or permitted assigns, shall have any liability for any obligations or liabilities of any party hereto under this Agreement or
for any Action based on, in respect of, or by reason of the transactions contemplated hereby.
* * * * * * * * *
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date written above by their respective
officers thereunto duly authorized.
Codexis, Inc.
By:
Name:
Its:
Société des Produits Nestlé S.A.
By:
Name:
Its:
24
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Certain Definitions. The following terms have the following meanings:
EXHIBIT A
DEFINITIONS AND CROSS-REFERENCE TABLE
“Affiliate” of a Person means an entity that (directly or indirectly) is controlled by, controls, or is under common control with such Person where control
means the direct or indirect ownership of voting securities entitled to cast at least fifty percent (50%) of the votes in the election of directors, or such other
relationship as results in the power to control the management, business, assets, and affairs of an entity.
“BLA” means (a) in the United States, a Biologics License Application, as defined in the United States Public Health Service Act (42 U.S.C. § 262), and
applicable regulations promulgated thereunder by the FDA, or any equivalent application that replaces such application, (b) in the EU, a marketing
authorization application, as defined in applicable regulations of the EMA, and (c) in any other country, the relevant equivalent to the foregoing.
“Books and Records” means all files (including all electronic data files and hard copies), documents, correspondence, lists, drawings and specifications,
creative materials, marketing plans, studies (including market research and market data), reports, and other printed or written materials (in whatever form or
medium).
“Business” means, following the Closing Date, the Development, Manufacture, Commercialization and other Exploitation of Products by Buyer, its
Affiliates, and its Licensees.
“Business Combination” means, with respect to a party, any of the following events: (a) any Third Party (or group of Third Parties acting in concert)
acquires, directly or indirectly, shares of such party representing at least a majority of the voting power (where voting refers to being entitled to vote for the
election of directors) then outstanding of such party; (b) such party consolidates with or merges into another corporation or entity which is a Third Party, or
any corporation or entity which is a Third Party consolidates with or merges into such party, in either event pursuant to a transaction in which at least a
majority of the voting power of the acquiring or resulting entity outstanding immediately after such consolidation or merger is not held by the holders of the
outstanding voting power of such party immediately preceding such consolidation or merger; or (c) such party conveys or transfers title to all or
substantially all of its assets to a Third Party.
“Business Day” means a day other than Saturday, Sunday, or any day on which commercial banks located in [***] are authorized or obligated by
applicable Law to close.
“Clinical Trial” means a clinical trial in human subjects of a Product.
“Commercialization” means any and all activities relating specifically to the preparation for sale of, offering for sale of, or sale of a product or service,
including activities related to launching, marketing, promoting, distributing, detailing, importing, pricing, reimbursement, and advertising such product, and
interacting with Regulatory Authorities regarding any of the foregoing. When used as a verb, “Commercialize” and “Commercializing” means to engage
in Commercialization, and “Commercialized” has a correlative meaning.
“Confidential Information” means any and all technical, business, or other information or data of a party or its Affiliates provided orally, visually, in
writing, graphically, electronically, or in another form by or on behalf of such party or its Affiliates to the other party or its Affiliates in connection with this
25
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Agreement The parties acknowledge that the terms of this Agreement shall be treated as Confidential Information of [***] and that the Licensed Know-
How shall be treated as the Confidential Information of Seller.
“Contracts” means all contracts, leases, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements,
commitments and legally binding arrangements, whether written or oral.
“Controlled” or “Control”, when used in reference to any intellectual property, intellectual property right, material, know-how or information, with respect
to a party, means that such party (a) owns or has a license (other than a license granted under this Agreement) to such intellectual property and (b) has the
legal authority or right to: (i) grant, or procure the grant of, a license or sublicense, to the extent provided for herein, of the intellectual property, intellectual
property right, material, know-how or information to the other party; or (ii) in relation to material, know-how and information only, disclose or provide
access to, to the extent provided for herein, such material, know-how or information to the other Party, and in each case, without (x) breaching the terms of
any then-existing agreement or other legally enforceable arrangement with a Third Party, or (y) misappropriating the material, know-how, intellectual
property, intellectual property rights, or information of a Third Party.
“Development” means non-clinical and clinical drug development activities reasonably related to the development and submission of information to a
Regulatory Authority or otherwise to the testing and validation of a therapeutic agent, including toxicology, pharmacology and pre-clinical efforts, test
method development, stability testing, manufacturing process, formulation development, delivery system development, quality assurance and quality
control development, statistical analysis, and clinical trials (including pre- and post-approval studies), whether for purposes of label expansion or otherwise.
Development shall include post-approval Development activities. When used as a verb, “Develop” means to engage in Development.
“Disclosure Schedules” means the disclosure schedules in respect of this Agreement delivered by Seller to Buyer concurrently with the execution by Buyer
of this Agreement and as modified in accordance with Section 9.03 of the Lipase Acquisition Agreement.
“EMA” means the European Medicines Agency, or any successor agency thereto.
“European Union” or “EU” means, at any given time, the then-current member states of the European Union; provided that each of the United Kingdom
and Switzerland will also be considered included with the European Union, regardless of each’s actual membership in the EU.
“Exploit” means to make, have made, import, use, sell or offer for sale a product or item. “ Exploitation” has a correlative meaning.
“FDA” means the U.S. Food and Drug Administration, or any successor agency thereto.
“First Commercial Sale” means, with respect to a particular country or jurisdiction, the first commercial sale, transfer, or other disposition by Buyer, any
of its Affiliates, or any Licensee for consumption by an end user of a Product following the receipt of the first Regulatory Approval for such Product in such
country or jurisdiction, [***].
[***].
26
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“GAAP” means United States generally accepted accounting principles, consistently applied.
“Governmental Authority” means any multi-national, federal, state, local, municipal, provincial, or other governmental authority of any nature (including
any governmental division, prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court, or other tribunal).
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination, or award entered by or with any Governmental
Authority.
“IFRS” means the current International Financial Reporting Standards, as published by the International Accounting Standards Board.
“Jointly Owned Inventions” means (a) “Jointly Owned Inventions” as defined in the Strategic Collaboration Agreement and (b) “Jointly Owned
Inventions” as defined in the Development Agreement.
“Know-How” means all non-public data and technical information, including techniques, methods, processes, technology, recipes, formulae, designs,
equipment configurations and uses, Manufacturing data, preclinical and clinical data and study designs, specifications, ingredients, Manufacturing
processes, formulations, sourcing information, quality control and testing procedures, and related trade secrets, but expressly excluding all Patents.
“Knowledge of Seller” or “Seller’s Knowledge” or any other similar knowledge qualification, means the actual knowledge of those individuals identified
on Section A of the Disclosure Schedules, [***].
“Laws” means all laws, statutes, rules, regulations, ordinances, and other pronouncements having the effect of law of any federal, national, multinational,
state, provincial, county, city, or other political subdivision.
“Liabilities” means liabilities, obligations, or commitments of any nature whatsoever, whether asserted or unasserted, known or unknown, absolute or
contingent, accrued or unaccrued, matured or unmatured, or otherwise.
“Lipase Product” means a “Product” as defined in the Lipase Acquisition Agreement.
“Licensed Know-How” means all Know-How owned by Seller or its Affiliates as of the Closing Date that is [***] for the Manufacture of the A&P Project
Enzymes as conducted as of the Closing Date or is [***] provided to Regulatory Authorities in order to obtain Regulatory Approval for any product
containing any A&P Project Enzymes anywhere in the world; provided that in no event shall Licensed Know-How include: (a) any Purchased Assets; (b)
any Know-How or other intellectual property licensed pursuant to the Expression System License Agreement; or (c) Seller’s or its Affiliates’
CodeEvolver® platform technology.
“Licensee” means a Third Party that has been granted a license or right to Develop, Manufacture, Commercialize, or otherwise Exploit any Product by or
through Buyer or Buyer’s Affiliate, either directly or via a sublicense (through one or more tiers). As used in this Agreement, “Licensee” shall not include a
wholesaler, distributor, or reseller of any Product, to the extent that Buyer or its Affiliate sells to such Person such Product and receives only supply price
payments and has not granted such wholesaler, distributor, or reseller any license under any Purchased Patent or Resultant Patent.
27
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Manufacture” and “Manufacturing” means all activities related to the production, manufacture, processing, formulation, filling, finishing, packaging,
labeling, shipping, handling, and storage of a product or any intermediate thereof, including process development, process qualification and validation,
scale-up, pre-clinical, clinical and commercial manufacture and analytic development, product characterization, stability testing, quality assurance, and
quality control.
“Material Adverse Effect” means any event, occurrence, fact, condition, or change that is materially adverse to the Development and Manufacture of the
Products, taken as a whole.
“Patent(s)” means (a) any and all patents and patent applications, including all national, regional and international patents and patent applications,
provisional patent applications; (b) all patent applications filed either (i) from such patents, patent applications, or provisional applications mentioned in
subsection (a) above, or (ii) from an application claiming priority from any of them, including divisionals, continuations, continuations-in-part, provisionals,
converted provisionals and requests for continued examinations; and (c) any and all extensions or restorations by existing or future extension or restoration
mechanisms, including revalidations, reissues, reexaminations and extensions (including any supplementary protection certificates and the like) of the
foregoing patents and/or patent applications in subsections (a) and (b).
“Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, foundation, joint venture, or other similar entity, organization, or combination thereof,
including a government or political subdivision, department, or agency.
“Phase III Clinical Trial” means a pivotal Clinical Trial with a defined dose or a set of defined doses of a therapeutic product designed to ascertain
efficacy and safety of such therapeutic product, in a manner that is generally consistent with 21 C.F.R. § 312.21(c), as amended (or its successor regulation),
for the purpose of enabling the preparation and submission of a BLA or a foreign equivalent thereof
“Product(s)” means (a) the A&P Project Enzymes [***] and (b) [***].
“Project Enzyme” has the meaning set forth in the in the SCA.
“Prosecution” means the filing, preparation, prosecution (including any interferences, reissue proceedings, reexaminations, and oppositions), inter partes
review, post-grant review, and maintenance of the Purchased Patents and Resultant Patents. When used as a verb, “ Prosecute” and “Prosecuting” means to
engage in Prosecution.
“Regulatory Approval” means, with respect to a therapeutic product in any country or regulatory jurisdiction, any and all approvals from the applicable
Regulatory Authority sufficient for the import, distribution, marketing, use, offering for sale, and sale of sch therapeutic product in such country or
jurisdiction in accordance with applicable Laws.
“Regulatory Authority” means any national or supranational Governmental Authority (including the FDA and EMA) which has regulatory responsibility
and authority in one or more countries for review and approval of development and commercialization of therapeutic products.
“Regulatory Documentation” has the meaning set forth in the Development Agreement
28
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants, and
other agents of such Person and of the Affiliates of such Person.
“Resultant Patent(s)” mean any Patent [***].
“Sell-On Transaction” means any of the following:
(a) the sale or transfer of one or more of the Purchased Patents or Resultant Patents to any Third Party;
(b) the exclusive or co-exclusive (with Buyer and its Affiliates) licensing of one or more of the Purchased Patents or Resultant Patents to
any Third Party;
(c) the sale, transfer, or exclusive or co-exclusive (with Buyer and its Affiliates) licensing of one or more of the Purchased Patents or
Resultant Patents to any Affiliate of Buyer, in connection with or followed by any of the following: (i) the direct or indirect acquisition by any Third
Party (or group of Third Parties acting in concert) of shares of such Affiliate representing at least a majority of the voting power (where voting refers
to being entitled to vote for the election of directors) then outstanding of such Affiliate; or (ii) the merger or consolidation of such Affiliate with or
into any Third Party, or the merger or consolidation of any Third Party with or into such Affiliate, in either event pursuant to a transaction in which at
least a majority of the voting power of the acquiring or resulting entity outstanding immediately after such consolidation or merger is not held by the
holders of the outstanding voting power of such Affiliate immediately preceding such consolidation or merger; or
(d) any other similar transaction which has the effect of allowing any Third Party to Develop, Manufacture, or Commercialize any Product
other than doing so solely on behalf and for the benefit of Buyer or its Affiliates or Licensees,
but in no event shall a Business Combination of Buyer be considered a Sell-On Transaction.
“Senior Executives” means [***].
“Taxes” means all federal, state, local, foreign, and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise,
registration, profits, license, withholding, payroll, employment, unemployment, excise, severance, stamp, occupation, premium, property (real or personal),
customs, import and export, goods and services, value added, escheat, unclaimed property, duties, or other taxes, fees, assessments, or charges of any kind
whatsoever, together with any interest, additions, or penalties with respect thereto.
“Tax Return” means any return, declaration, report, claim for refund, or other document relating to Taxes, including any schedule or attachment thereto,
and amendment thereof, required to be supplied to a Governmental Authority in connection with any Taxes.
“Technology” means: (a) all of Seller’s interest in the Purchased Patents; and (b) any Resultant Patents.
“Third Party” means any Person other than Seller, Buyer, and their respective Affiliates.
29
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“United States” or “U.S.” means the United States of America, including its territories, possessions, and protectorates.
“VAT” means (a) in relation to any jurisdiction within the European Union, the Tax imposed by the EC Council Directive on the common system of value
added tax (2006/112/EC) and any successor or equivalent legislation and any national legislation implementing that directive together with legislation
supplemental thereto and the equivalent Tax (if any) in that jurisdiction; and (b) in any other jurisdiction, any other value added, goods and services,
consumption or similar Tax chargeable on the supply or deemed supply of goods or services under applicable legislation or regulation.
30
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Cross-Reference Table. The following terms have the meanings set forth in the location in this Agreement referenced below:
Term
A&P Project Enzymes
Acquired Books and Records
Acquired Regulatory Documentations
Actions
Agreement
Allocation Schedule
Annual Report
Assigned Contracts
Assignment and Assumption Agreement
Assumed Liabilities
Bill of Sale
[***]
Buyer
Buyer Indemnified Parties
Cap
[***]
Closing
Closing Date
Code
Codexis
Deductible
Development Agreement
Disclosing Party
Dispute
Effective Date
Excluded Assets
Excluded Liabilities
Existing Agreements
Expression System License Agreement
Indemnified Party
Indemnifying Party
Initial Purchase Price
Inventory
[***]
Losses
Lipase Acquisition Agreement
Milestone
Milestone Payment
NHSc
Section
Recitals
Section 1.01(f)
Section 1.01(d)
Section 3.06(a)
Preamble
Section 1.07
Section 1.06
Section 1.01(b)
Section 2.02(a)(i)
Section 1.03(a)
Section 2.02(a)(i)
Recitals
Preamble
Section 6.02
Section 6.04(b)
Recitals
Section 2.01
Section 2.01
Section 1.07
Preamble
Section 6.04(a)
Recitals
Section 5.01(a)
Section 8.01
Preamble
Section 1.02
Section 1.03(b)
Recitals
Section 2.02(a)(iv)
Section 6.04
Section 6.04
Section 1.04
Section 1.01(c)
Section 8.02
Section 6.02
Recitals
Section 1.05
Section 1.05
Preamble
31
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Notice of Dispute
Patent Assignment
[***]
Purchased Assets
Purchased Know-How
Purchased Patents
Purchase Price
Receiving Party
Related Claims
Restricted Business
Restricted Period
Rules
Seller
Seller Indemnified Parties
Strategic Collaboration Agreement or SCA
Term
Transaction Documents
Section 8.01
Section 2.02(a)(iii)
Section 5.11
Section 1.01
Section 1.01(d)
Section 1.01(a)
Section 1.04
Section 5.01(a)
Section 8.02
Section 5.03(a)
Section 5.03(a)
Section 8.02
Preamble
Section 6.03
Recitals
Section 7.01
Section 2.02(a)(iii)
32
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
These Disclosure Schedules (these “ Schedules”) have been prepared in connection with the Amylase and Protease Acquisition Agreement (the
“Agreement”), dated as of [●], entered into between CODEXIS, INC., a corporation incorporated and existing under the laws of the State of Delaware
(“Seller”), and Société des Produits Nestlé S.A., a société anonyme organized and existing under the laws of Switzerland (“ Buyer”). The parties hereto are
referred to herein as the “Parties”, and each a “Party”. Capitalized terms used in these Schedules but not defined herein have the respective meanings
ascribed to such terms in the Agreement.
[***].
Any appendix or schedule attached to these Schedules shall be deemed to be incorporated by reference into these Schedules. The information
contained in these Schedules is as of the date of the Agreement.
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE
THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
These Disclosure Schedules (these “ Schedules”) have been prepared in connection with the Acquisition Agreement (the “ Agreement”), dated as of
December 26, 2023, entered into between CODEXIS, INC., a corporation incorporated and existing under the laws of the State of Delaware (“Seller”), and
Société des Produits Nestlé S.A., a société anonyme organized and existing under the laws of Switzerland (“Buyer”). The parties hereto are referred to
herein as the “Parties”, and each a “Party”. Capitalized terms used in these Schedules but not defined herein have the respective meanings ascribed to such
terms in the Agreement.
[***].
Any appendix or schedule attached to these Schedules shall be deemed to be incorporated by reference into these Schedules. The information
contained in these Schedules is as of the date of the Agreement.
[***]
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
LOAN AND SECURITY AGREEMENT
dated as of February 13, 2024
by and among
INNOVATUS LIFE SCIENCES LENDING FUND I, LP,
as Collateral Agent,
CODEXIS, INC.,
as Borrower
and
THE LENDERS LISTED ON SCHEDULE 1.1 HEREOF
OR OTHERWISE A PARTY HERETO FROM TIME TO TIME
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Certain Defined Terms.
Terms Generally.
Grant of Security Interest
Authorization to File Financing Statements
Pledge of Shares Collateral
Conditions Precedent to Initial Term Loan
Conditions Precedent to all Term Loans
Covenant to Deliver
Procedures for Borrowing
Promise to Pay.
Term Loans.
Payment of Interest on the Term Loan.
Fees
Withholding
Secured Promissory Notes
DEFINITIONS, ACCOUNTING AND OTHER TERMS
1.1
1.2
LOANS AND TERMS OF PAYMENT
2.1
2.2
2.3
2.4
2.5
2.6
CONDITIONS OF LOANS
3.1
3.2
3.3
3.4
CREATION OF SECURITY INTEREST
4.1
4.2
4.3
REPRESENTATIONS AND WARRANTIES
Due Organization, Authorization: Power and Authority
5.1
Collateral.
5.2
Litigation
5.3
No Material Adverse Change; Financial Statements
5.4
Solvency
5.5
Regulatory Compliance
5.6
Investments
5.7
Tax Returns and Payments; Pension Contributions
5.8
Use of Proceeds
5.9
Full Disclosure
5.10
Definition of “Knowledge.”
5.11
Shares
5.12
5.13
Subsidiaries
AFFIRMATIVE COVENANTS
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
Government Compliance.
Financial Statements, Reports, Certificates; Notices.
Inventory; Returns
Taxes; Pensions
Insurance
Operating Accounts.
Protection of Intellectual Property Rights
Litigation Cooperation
Landlord Waivers; Bailee Waivers
Creation/Acquisition of Subsidiaries
Further Assurances
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Dispositions
Changes in Business, Management, Ownership, or Business Locations
Mergers or Acquisitions
Indebtedness
Encumbrance
Maintenance of Collateral Accounts
Restricted Payments
Investments
Transactions with Affiliates
Subordinated Debt
Compliance
Compliance with Anti-Terrorism Laws
Material Agreements
Subsidiaries
Net Product Revenue Covenant
Liquidity Covenant
Post-Closing Obligations.
6.12
6.13
6.14
NEGATIVE COVENANTS
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
7.13
7.14
EVENTS OF DEFAULT
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
8.10
8.11
8.12
8.13
8.14
RIGHTS AND REMEDIES
9.1
9.2
9.3
9.4
9.5
9.6
9.7
9.8
NOTICES
CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
11.1
Payment Default
Covenant Default.
Material Adverse Change
Attachment; Levy; Restraint on Business.
Insolvency
Other Agreements
Judgments
Misrepresentations
Subordinated Debt
Guaranty
Governmental Approvals; FDA Action
Lien Priority; Intellectual Property
Delisting
Stock Price Decline
Rights and Remedies.
Power of Attorney
Protective Payments
Application of Payments and Proceeds
Liability for Collateral
No Waiver; Remedies Cumulative
Demand Waiver
Standards
Waiver of Jury Trial
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Governing Law and Jurisdiction.
11.2
GENERAL PROVISIONS
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
12.10
12.11
12.12
12.13
12.14
12.15
12.16
DEFINITIONS
Successors and Assigns
Indemnification
Severability of Provisions
Interest Rate Limitation
Correction of Loan Documents
Amendments in Writing; Integration
Counterparts
Survival
Confidentiality
Limitations of Damages
Waiver as to Assignees
Right of Set Off
Cooperation of Borrower
Public Announcement
Collateral Agent and Lender Agreement
Borrower Liability
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[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
SCHEDULES, EXHIBITS AND ANNEXES
Schedule 1.1 – Lenders and Commitments
Schedule 6.12 – Net Product Revenue Covenant
Schedule 6.13 – Liquidity Covenant
Exhibit A – Description of Collateral
Exhibit B-1 – Loan Payment Request Form
Exhibit B-2 – Form of Disbursement Letter
Exhibit C – Compliance Certificate
Exhibit D – Form of Secured Promissory Note
Exhibit E – Form of Corporate Borrowing Certificate
Annex I – Collateral Agent and Lender Terms
Annex Y – Loan Interest Rate and Payment of Principal
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as the same may be amended, restated, modified, or supplemented from time to time, this “Agreement”), dated as of
February 13, 2024 (the “Effective Date”), among INNOVATUS LIFE SCIENCES LENDING FUND I, LP, a Delaware limited partnership, as collateral agent (in such
capacity, together with its successors and assigns in such capacity, “ Collateral Agent”), and the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time
to time including INNOVATUS LIFE SCIENCES LENDING FUND I, LP in its capacity as a Lender, and CODEXIS, INC., a Delaware corporation (“ Borrower”), provides
the terms on which the Lenders shall lend to Borrower and Borrower shall repay the Lenders. The parties agree as follows:
1. DEFINITIONS, ACCOUNTING AND OTHER TERMS
1.1
Certain Defined Terms. Capitalized terms used herein shall have the meanings set forth in Section 13 to the extent defined therein.
1.2
Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed
by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall
be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any matter to be determined by a Lender or Collateral Agent may be
determined in their sole discretion, unless another standard is expressly stated, and (f) any reference to any law or regulation herein shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time.
2. LOANS AND TERMS OF PAYMENT
2.1.
Promise to Pay. Borrower hereby unconditionally promises to pay each Lender the outstanding principal amount of the Term Loan advanced to Borrower
by such Lender and accrued and unpaid interest thereon and any other amounts due to a Lender or to Collateral Agent hereunder as and when due in accordance with this
Agreement.
2.2
Term Loans.
(a)
Availability.
Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, to make a term loan to Borrower on
the Effective Date in an aggregate principal amount of Thirty Million Dollars ($30,000,000.00) according to each Lender’s Term Loan Commitment as set forth on Schedule
1.1 hereto (the “Term A Loan”). After repayment, the Term A Loan may not be reborrowed.
(i)
Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, to make a term loan to Borrower
during the Term B Draw Period in an aggregate principal amount of Ten Million Dollars ($10,000,000.00) according to each Lender’s Term Loan Commitment as set forth on
Schedule 1.1 hereto (the “Term B Loan”, and together with the Term A Loan, each individually, and collectively, “ Term Loan”). After repayment, the Term B Loan may
not be reborrowed.
(ii)
(b)
Repayment. Borrower shall make monthly payments of interest only commencing on the second (2nd) Payment Date following the Funding Date
of any Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date immediately preceding the Amortization
Date. Borrower agrees to pay, on the Funding Date of any Term Loan, any initial partial monthly interest payment otherwise due for the period between the Funding Date of
such Term Loan and the first Payment Date after such Funding Date. Commencing on the Amortization Date, and continuing on the Payment Date of each month
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
thereafter, Borrower shall make consecutive equal monthly payments of principal, together with interest in arrears, to each Lender, as calculated by Collateral Agent (which
calculations shall be deemed correct absent manifest error) based upon: (1) the amount of such Lender’s Term Loan, (2) the effective rate of interest, as determined in Section
2.3(a), and (3) a principal repayment schedule equal to (i) in the case of the I/O Extension Event not occurring, twenty four (24) months, or (ii) in the case of the I/O
Extension Event occurring, twelve (12) months. During the amortization period, Collateral Agent shall recalculate the payment amount to give effect to each change of the
Basic Rate as it occurs. All unpaid principal and accrued and unpaid interest with respect to the Term Loan and the Final Fee are due and payable in full on the Maturity Date.
The Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).
(c)
Mandatory Prepayments. If an event described in Section 7.2(d)(ii) occurs or the Term Loan is accelerated following the occurrence of an Event of
Default, Borrower shall immediately pay to Collateral Agent and to each Lender, as applicable, and in accordance with its respective Pro Rata Shares to each Lender, an
amount equal to the sum of: (i) all outstanding principal of the Term Loan plus accrued and unpaid interest thereon through the prepayment date, (ii) the Final Fee, (iii) the
Prepayment Fee, plus (iv) all other Obligations that are due and payable, including, without limitation, Lenders’ Expenses and interest thereon at the Default Rate with respect
to any past due amounts.
(d)
Permitted Prepayment of Term Loan. After the date that is the first anniversary of the Effective Date, Borrower shall have the option to prepay all,
but not less than all, of the Term Loan advanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to
prepay the Term Loan at least five (5) Business Days prior to such prepayment, and (ii) pays to the Lenders on the date of such prepayment, payable to each Lender in
accordance with its respective Pro Rata Share, an amount equal to the sum of (A) all outstanding principal of the Term Loan plus accrued and unpaid interest thereon through
the prepayment date, (B) the Final Fee, (C) the Prepayment Fee, plus (D) all other Obligations that are due and payable, including, without limitation, Lenders’ Expenses and
interest on such other Obligations at the Default Rate, if applicable.
2.3
Payment of Interest on the Term Loan.
(a)
Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under the Term Loan shall accrue interest at a floating per annum rate
equal to the Basic Rate, as determined by Collateral Agent on the Funding Date and as the Prime Rate changes thereafter, which interest shall be payable monthly in arrears in
accordance with Sections 2.2(b) and 2.3(e); provided that at the election of Borrower (which shall be considered elected on the Funding Date of the applicable Term Loan)
with no less than five (5) Business Days’ irrevocable written notice to Collateral Agent prior to the Effective Date, 2.00% of the Basic Rate may be payable in-kind by adding
an amount equal to such 2.00% of the outstanding principal amount to the then outstanding principal balance on each Payment Date until the Payment Date next following the
Amortization Date so as to increase the outstanding principal balance of the Term Loan on each Payment Date and which amount shall be payable when the principal amount
of the applicable Term Loan is payable in accordance with Sections 2.2(b) and 2.3(e) and on which principal amount interest shall be owed pursuant to Section 2.3(a). This
increase in the principal amount of the Term Loans shall not require any action by Borrower, the Lenders, or Collateral Agent; provided, however, that Borrower shall execute
such additional documents as Collateral Agent may reasonably require to evidence the increased principal balance of the Term Loans.
Interest shall accrue on the Term Loan commencing on, and including, the Funding Date of the Term Loan, and shall accrue on the principal amount outstanding under the
Term Loan through and including the day on which the Term Loan is paid in full.
(b)
Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall accrue interest at a floating
per annum rate equal to the rate that is otherwise applicable thereto plus five percentage points (5.00%) (the “Default Rate”). Payment or acceptance of the increased interest
rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit
any other rights or remedies of Collateral Agent.
(c)
including the first day and the last day.
365 Day Year. Interest shall be computed on the basis of a three hundred sixty-five (365) day year and the actual number of days elapsed,
(or, if the funds in such account are insufficient, in any other account maintained by Borrower) for principal and interest payments or any other amounts Borrower owes the
(d)
Debit of Accounts. Collateral Agent and each Lender may debit (or ACH) any deposit accounts designated by Borrower or any of its Subsidiaries
2
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Lenders under the Loan Documents when due; provided, that Collateral Agent shall use commercially reasonable efforts to promptly notify Borrower of any debit of any
amounts other than principal and interest payments when due in accordance with this Agreement. Any such debits (or ACH activity) shall not constitute a set off.
(e)
Payments. Except as otherwise expressly provided herein, all payments by Borrower under the Loan Documents shall be made to the respective
Lender to which such payments are owed, at such Lender’s office in immediately available funds on the date specified herein. Unless otherwise provided, interest is payable
monthly on the Payment Date of each month. Payments of principal and/or interest received after 12:00 noon Eastern time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable,
shall continue to accrue until paid. All payments to be made by Borrower hereunder or under any other Loan Document, including payments of principal and interest, and all
fees, expenses, indemnities and reimbursements, shall be made without set off, recoupment or counterclaim, in lawful money of the United States and in immediately
available funds.
the Basic Rate shall be increased or decreased, effective as of the day of such change in the Prime Rate.
(f)
Changes in Prime Rate. In the event the Prime Rate is changed from time to time hereafter and because of any such change the Basic Rate changes,
2.4
Fees. Borrower shall pay to Collateral Agent:
Term Loan, to be shared among the Lenders in accordance with their respective Pro Rata Shares;
(a)
Facility Fee. The Facility Fee, which shall be due on the Funding Date of each Term Loan (including on the Effective Date) with respect to such
(b)
(c)
and
Final Fee. The Final Fee, when due hereunder, to be shared among the Lenders in accordance with their respective Pro Rata Shares;
Prepayment Fee. The Prepayment Fee, when due hereunder, to be shared among the Lenders in accordance with their respective Pro Rata Shares;
investigation, documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due and payable.
(d)
Lenders’ Expenses. All Lenders’ Expenses (including reasonable and documented out-of-pocket attorneys’ fees and expenses for due diligence,
The Final Fee and the Prepayment Fee shall be fully earned as of the Effective Date. The parties hereto acknowledge and agree that, in light of the impracticality and extreme
difficulty of ascertaining actual damages, the Prepayment Fee and the Final Fee are intended to be a reasonable calculation of the actual damages that would be suffered by the
holders of the Obligations as a result of any prepayment, repayment or other payment. The parties hereto further acknowledge and agree that Collateral Agent and the Lenders
would not have entered into this Agreement without the Borrower’s agreement to pay the Prepayment Fee and the Final Fee as and when required hereunder. The parties
hereto further acknowledge and agree that the Prepayment Fee and the Final Fee are not intended to act as a penalty or to punish the Borrower for any prepayment, repayment
or other payment hereunder.
2.5
Withholding. Payments received by Collateral Agent or the Lenders from Borrower hereunder will be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any governmental authority (including any
interest, additions to tax or penalties applicable thereto). Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international
agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to the Lenders, Borrower hereby covenants and
agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the
making of such required withholding or deduction, each Lender receives a net sum equal to the sum which it would have received had no withholding or deduction been
required and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority. Borrower will, upon request, furnish the Lenders with proof
reasonably satisfactory to the Lenders indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding
payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or
reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.5 shall survive the termination of this Agreement.
3
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
2.6
Secured Promissory Notes. The Term Loan shall be evidenced by a Secured Promissory Note or Notes in the form attached as Exhibit D hereto (each a
“Secured Promissory Note”), and shall be repayable as set forth in this Agreement. Borrower irrevocably authorizes each Lender to make or cause to be made, on or about
the Funding Date of any Term Loan and at the time of receipt of any payment of principal on such Lender’s Secured Promissory Note, an appropriate notation on such
Lender’s Secured Promissory Note Record reflecting the making of such Term Loan or (as the case may be) the receipt of such payment. The outstanding amount of each
Term Loan set forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but
the failure to record, or any error in so recording, any such amount on such Lender’s Secured Promissory Note Record shall not limit or otherwise affect the obligations of
Borrower under any Secured Promissory Note or any other Loan Document to make payments of principal of or interest on any Secured Promissory Note when due. Promptly
after Borrower’s receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrower shall issue, in lieu
thereof, and without bond, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor.
3.
CONDITIONS OF LOANS
3.1
Conditions Precedent to Initial Term Loan. Each Lender’s obligation to make the Term Loan is subject to the condition precedent that Collateral Agent
and each Lender shall consent to or shall have received, in form and substance satisfactory to Collateral Agent and each Lender, such documents, and completion of such
other matters, as Collateral Agent and each Lender may reasonably deem necessary or appropriate, including, without limitation:
(a)
(b)
(c)
copies of the Loan Documents, each duly executed by Borrower and each Subsidiary that is a Loan Party, as applicable;
a completed Perfection Certificate for Borrower and each of its Subsidiaries;
[reserved];
the Operating Documents and good standing certificates of Borrower and each of its Subsidiaries that is a Loan Party certified by the Secretary of
State (or equivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and each jurisdiction in which Borrower and each Subsidiary is
qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;
(d)
approval of the Term Loan and other transactions evidenced by the Loan Documents;
(e)
a copy of resolutions of the governing body for Borrower and each of its Subsidiaries that is a party to any of the Loan Documents evidencing
duly executed original officer’s certificates for Borrower and each Subsidiary that is a party to the Loan Documents certifying as to (i) the
incumbency of each Responsible Officer executing each Loan Document and (ii) the documents delivered pursuant to Section 3.1(d) and 3.1(e), in a form acceptable to
Collateral Agent and the Lenders;
(f)
certified copies, dated as of date no earlier than thirty (30) days prior to the Effective Date, of financing statement searches, as Collateral Agent
shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute
Permitted Liens or have been or, in connection with the initial Term Loan, will be terminated or released;
(g)
a duly executed legal opinion of counsel to Borrower dated as of the Effective Date;
evidence satisfactory to Collateral Agent and the Lenders that the insurance policies required by Section 6.5 hereof are in full force and effect;
a copy of any applicable Investors Rights Agreement and any amendments thereto; and
[reserved]; and
payment of the Facility Fee and Lenders’ Expenses then due as specified in Section 2.4 hereof.
(h)
(i)
(j)
(k)
(l)
4
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
3.2
Conditions Precedent to all Term Loans. The obligation of each Lender to extend each Term Loan, including the initial Term Loan, is subject to the
following conditions precedent:
Disbursement Letter in the form of Exhibit B-2 attached hereto;
(a)
receipt by Collateral Agent of (i) an executed Loan Payment Request Form in the form of Exhibit B-1 attached hereto and (ii) an executed
(b)
the representations and warranties in Section 5 hereof shall be true, accurate and complete in all material respects on the date of each Loan
Payment Request Form and the date of each Disbursement Letter and the Funding Date of each Term Loan; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and
warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and
be continuing or result from the funding of such Term Loan;
(c)
(d)
as determined by such Lender in such Lender’s sole discretion, there has not been any Material Adverse Change;
no Default or Event of Default shall exist or would result from the making of such Term Loan;
to the extent not delivered at the Effective Date, duly executed original Secured Promissory Notes and Warrants, in number, form and content
acceptable to each Lender, and in favor of each Lender according to its Commitment Percentage, with respect to each Credit Extension made by such Lender after the
Effective Date;
(e)
preceding the Funding Date of the Term B Loan; and
(f)
if such Term Loan is the Term B Loan, the Term B Milestone must have been satisfied, as measured on the last day of the month immediately
(g)
payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.
3.3
Covenant to Deliver. Borrower agrees to deliver to Collateral Agent and the Lenders each item required to be delivered to Collateral Agent under this
Agreement as a condition precedent to any Term Loan. Borrower expressly agrees that the Term Loan made prior to the receipt by Collateral Agent or any Lender of any such
item shall not constitute a waiver by Collateral Agent or any Lender of Borrower’s obligation to deliver such item, and any such Term Loan in the absence of a required item
shall be made in each Lender’s sole discretion.
3.4
Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of the Term Loan set forth in this Agreement,
to obtain the Term Loan (other than the Term Loan funded on the Effective Date), Borrower shall notify the Lenders (which notice shall be irrevocable) by electronic mail,
facsimile, or telephone by 12:00 noon New York City time seven (7) Business Days (or such shorter period as agreed by the Lenders) prior to the date the Term Loan is to be
made. Together with any such electronic, facsimile or telephonic notification, Borrower shall deliver to Collateral Agent by electronic mail or facsimile a completed
Disbursement Letter and Loan Payment Request Form executed by a Responsible Officer or his or her designee. Collateral Agent may rely on any telephone notice given by a
person whom Collateral Agent reasonably believes is a Responsible Officer or designee.
4.
CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Collateral Agent, for the ratable benefit of the Lenders, to secure the payment and performance in full of
all of the Obligations, a continuing security interest in, and pledges and assigns as collateral to Collateral Agent, for the ratable benefit of the Lenders, the Collateral, wherever
located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. If Borrower shall acquire a commercial tort claim (as defined in the Code)
with a potential value in excess of Two Hundred Fifty Thousand Dollars ($250,000), Borrower shall grant to Collateral Agent, for the ratable benefit of the Lenders, a security
interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Collateral Agent.
Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as the Lenders’ obligation to extend the Term Loan has
terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens in the Collateral.
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
4.2 Authorization to File Financing Statements. Borrower hereby authorizes Collateral Agent (i) to file financing statements naming Borrower as debtor and
indicating as collateral “all assets” or like language and/or such other more specific indications as Collateral Agent may deem appropriate and (ii) to make such other filings in
the USPTO or other public offices and to take such other action appropriate to establish, perfect, or further protect Collateral Agent’s security interests in the Collateral,
without notice to Borrower. Such financing statements may (i) describe the Collateral as “all personal property of debtor, whether now owned or hereby acquired” or “all
assets of debtor, whether now owned or hereby acquired” or words of similar effect, (ii) describe the Collateral as being of equal or lesser scope or with greater detail, or (iii)
contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance of such financing statements or amendments, as the case may
be. The Borrower also hereby ratifies any and all financing statements or amendments previously filed by Collateral Agent in any jurisdiction of the Borrower described in
Section 3(b) of the Perfection Certificate.
4.3 Pledge of Shares Collateral. If at any time Borrower owns any Shares, Borrower acknowledges that by this Agreement it has, pledged, assigned and granted,
and Borrower does hereby pledge, assign and grant, to Collateral Agent, for the ratable benefit of the Lenders, a security interest in all the Shares, together with all proceeds
and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith, and all
other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations. On the Effective Date, or, to the extent not certificated as of the Effective
Date, within ten (10) days of the certification of any Shares, the certificate or certificates for the Shares will be delivered to Collateral Agent, accompanied by an instrument of
assignment duly executed in blank by Borrower. To the extent required by the terms and conditions governing the Shares, Borrower shall cause the books of each entity whose
Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares and require each Issuer of uncertificated Shares to enter into an agreement granting
Collateral Agent Control over the pledged Shares. Borrower will execute and deliver such documents, and take or cause to be taken such actions, as Collateral Agent may
reasonably request to perfect or continue the perfection of Collateral Agent’s security interest in the Shares. Unless an Event of Default shall have occurred and be continuing,
Borrower shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall
be cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create any
violation of any of such terms. All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Collateral Agent and the Lenders as follows:
5.1 Due Organization, Authorization: Power and Authority. Borrower and each of its Subsidiaries is duly existing and in good standing as a Registered
Organization in its jurisdictions of organization or formation and Borrower and each of its Subsidiaries is qualified and licensed to do business and is in good standing in any
jurisdiction in which the conduct of its businesses or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected
to result in a Material Adverse Effect. In connection with this Agreement, Borrower and each of its Subsidiaries has delivered to Collateral Agent a completed perfection
certificate and any updates or supplements thereto on or before the Effective Date (each a “Perfection Certificate” and collectively, the “Perfection Certificates”). Borrower
represents and warrants that all the information set forth on the Perfection Certificates pertaining to Borrower and each of its Subsidiaries is accurate and complete in all
material respects as of the date delivered or supplemented (to the extent permitted hereunder).
The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan Documents to which it is a party have been duly authorized, and do not (i)
conflict with any of Borrower’s or such Subsidiaries’ organizational documents, including its respective Operating Documents, (ii) contravene, conflict with, constitute a
default under or violate any material Requirement of Law applicable thereto, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which Borrower or such Subsidiary, or any of their property or assets may be bound or affected, (iv) require any
action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect) or are being obtained pursuant to Section 6.1(b), or (v) constitute an event of default under or cause any Lien to arise under or
otherwise cause a change under any material agreement by which Borrower or any of such Subsidiaries, or their respective properties, is bound. Neither Borrower nor any of
its Subsidiaries is in default under any agreement to which it is a party or by which it or any of its assets is bound in which such default could reasonably be expected to result
in a Material Adverse Effect.
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
5.2
Collateral.
(a)
Borrower and each other Loan Party has good title to, have rights in, and the power to transfer each item of the Collateral upon which it purports to
grant a Lien under the Loan Documents, free and clear of any and all Liens except Permitted Liens, and neither Borrower nor any other Loan Party has any Deposit Accounts,
Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the other investment accounts, if any, described in the
Perfection Certificates delivered to Collateral Agent in connection herewith or otherwise with respect of which Borrower or such Subsidiary has given Collateral Agent timely
notice pursuant to Section 6.6(a) and to the extent required under this Agreement, taken such actions as are necessary to give Collateral Agent a perfected security interest
therein. The Accounts are bona fide, existing obligations of the Account Debtors.
Permitted Liens that are permitted by the terms of this Agreement or Requirement of Law to have priority to Collateral Agent’s Lien.
(b)
The security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to
no third party bailee possesses components of the Collateral in excess of Five Hundred Thousand Dollars ($500,000.00).
(c)
On the Effective Date, except as disclosed on the Perfection Certificate (i) the Collateral is not in the possession of any third party bailee, and (ii)
(d)
defects, ordinary wear and tear excepted.
All Inventory and Equipment of Borrower and its Subsidiaries is in all material respects of good and marketable quality, free from material
(e)
Borrower and each of its Subsidiaries is the sole owner of the Intellectual Property each respectively purports to own, free and clear of all Liens
other than Permitted Liens. Except as noted on the Perfection Certificates or disclosed in the next Compliance Certificate delivered after entry of such Material Agreement,
neither Borrower nor any of its Subsidiaries is a party to, or is bound by, any Material Agreement, provided, that the representation made in this sentence on the Effective
Date shall be limited to Material Agreements for which Borrower or any of its Subsidiaries receives revenue or other payments.
5.3
Litigation. Except as disclosed on the Perfection Certificate or otherwise pursuant to Section 6.2(b)(v), there are no actions, suits, arbitrations,
investigations, or other proceedings pending or, to the Knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries
involving more than Two Hundred Fifty Thousand Dollars ($250,000.00) or a claim for infringement of any intellectual property or seeking equitable or extraordinary relief.
Except as disclosed on the Perfection Certificate or otherwise pursuant to Section 6.2(b)(v), there are no actions, suits, arbitrations, investigations or proceedings pending or, to
the Knowledge of the Responsible Officers, threatened in writing by or against Borrower or any Subsidiaries involving challenges to the validity of the Intellectual Property
except as would not reasonably be expected to have a Material Adverse Effect.
5.4
No Material Adverse Change; Financial Statements. All consolidated financial statements for Borrower and its Subsidiaries, delivered to Collateral
Agent fairly present, in conformity with GAAP, in all material respects the consolidated financial condition of Borrower and its Subsidiaries, and the consolidated results of
operations of Borrower and its Subsidiaries. Since the date of the most recent financial statements submitted as required by this Agreement, there has not been a Material
Adverse Change.
5.5
Solvency. Borrower and each of its Subsidiaries, when taken as a whole, are Solvent.
5.6
Regulatory Compliance. Neither Borrower nor any of its Subsidiaries is required to be registered as an “investment company” under the Investment
Company Act of 1940, as amended. Neither Borrower nor any of its Subsidiaries is engaged as one of its important activities in extending credit for margin stock (under
Regulations X, T and U of the Federal Reserve Board of Governors). Borrower and each of its Subsidiaries has complied in all material respects with the Federal Fair Labor
Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding
company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Neither Borrower nor any of its Subsidiaries has violated any laws,
ordinances or rules, the violation of which could reasonably be expected to result in a Material Adverse Effect. Neither Borrower’s nor any of its Subsidiaries’ properties or
assets has been used by Borrower or such Subsidiary or, to Borrower’s Knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than in material compliance with applicable laws. Borrower and each of its Subsidiaries has obtained all consents, approvals and authorizations of,
made all declarations or
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.
None of Borrower, any of its Subsidiaries, or to such Person’s knowledge, any of Borrower’s or its Subsidiaries’ Affiliates or any of their respective agents acting or
benefiting in any capacity in connection with the transactions contemplated by this Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or conspiring to
engage in any transaction that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law,
or (iii) is a Blocked Person. None of Borrower, any of its Subsidiaries, or to the Knowledge of Borrower and any of their Affiliates or agents, acting or benefiting in any
capacity in connection with the transactions contemplated by this Agreement, (x) conducts any business or engages in making or receiving any contribution of funds, goods or
services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to
Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.
5.7
Investments.
Investments. Neither Borrower nor any of its Subsidiaries owns any stock, shares, partnership interests or other equity securities except for Permitted
5.8
Tax Returns and Payments; Pension Contributions. Borrower and each of its Subsidiaries has timely filed all required tax returns and reports, and
Borrower and each of its Subsidiaries, has timely paid all foreign, federal, state, and material local taxes, assessments, deposits and contributions owed by Borrower and such
Subsidiaries in an amount greater than Fifty Thousand Dollars ($50,000.00), in all jurisdictions in which Borrower or any such Subsidiary is subject to taxes, including the
United States, unless such taxes are being contested in accordance with the next sentence. Borrower and each of its Subsidiaries, may defer payment of any contested taxes,
provided that Borrower or such Subsidiary in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted
and Borrower maintains adequate reserve therefor on Borrower’s Books. Neither Borrower nor any of its Subsidiaries is aware of any claims or adjustments proposed for any
of Borrower’s or such Subsidiaries’ prior tax years which could result in additional taxes becoming due and payable by Borrower or its Subsidiaries. Borrower and each of its
Subsidiaries have paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and neither Borrower
nor any of its Subsidiaries have, withdrawn from participation in, and have not permitted partial or complete termination of, or permitted the occurrence of any other event
with respect to, any such plan which could reasonably be expected to result in any liability of Borrower or its Subsidiaries, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other Governmental Authority.
5.9
Use of Proceeds. Borrower shall use the proceeds of the Term Loan solely as working capital and to fund its general business requirements in accordance
with the provisions of this Agreement, and not for personal, family, household or agricultural purposes or for payment of dividends or other distributions to equity holders of
Borrower or any holders of Subordinated Debt.
5.10
Full Disclosure. No written representation, warranty or other statement of Borrower or any of its Subsidiaries in any certificate or written statement given to
Collateral Agent or any Lender, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written
statements given to Collateral Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading (it being recognized that the projections and forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted
result; provided, however, on the Effective Date and on the date each Compliance Certificate or Disbursement Letter is delivered to any Lender, Borrower represents and
warrants to the Lenders that Borrower: (i) has delivered to Collateral Agent Borrower’s most recent projections or forecasts in accordance with the requirements set forth in
Section 6.2(a)(iii), (ii) reaffirms the accuracy of the projections or forecasts delivered pursuant to sub-clause (i), and (iii) to the best of its Knowledge, no fact or facts exist
which, taken together, are reasonably likely to cause Borrower’s actual financial results to, within six (6) months, deviate materially and adversely from the projections or
forecasts delivered pursuant to sub-clause (i)). Furthermore, on the Effective Date and on the date each Compliance Certificate or Disbursement Letter is delivered to any
Lender, Borrower represents and warrants to the Lenders that Borrower, to the best of its Knowledge, is not aware of any fact or facts which, taken together, will cause
Borrower to receive an opinion from its independent certified public accounting firm with a going concern qualification on Borrower’s next annual financial statements (as
required under Section 6.2(a)(ii)) without factoring in proceeds of any pending Term Loans.
5.11
Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness,
to the “best of” Borrower’s knowledge, or with a similar
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.
5.12
Shares. If at any time Borrower owns any Shares, Borrower has full power and authority to create a first lien on the Shares and no disability or contractual
obligation exists that would prohibit Borrower from pledging the Shares pursuant to this Agreement. To Borrower’s Knowledge, there are no subscriptions, warrants, rights of
first refusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares. The Shares have been and will be duly authorized and validly issued,
and are fully paid and non-assessable. To Borrower’s Knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other
proceeding, and Borrower knows of no reasonable grounds for the institution of any such proceedings.
5.13
Subsidiaries. No Subsidiary of Borrower existing as of the Effective Date (i) owns any assets with a value in excess of $1,000, individually or in the
aggregate, (ii) owns any Intellectual Property other than, with respect to Codexis Mayflower Holdings, LLC, non-active Intellectual Property, foreign-registered or filed
Intellectual Property and United States Copyrights to be transferred to Borrower in accordance with Section 6.14(g), or (iii) conducts any operations or transactions other than
those required for liquidation or dissolution of such Subsidiary.
6. AFFIRMATIVE COVENANTS
Borrower shall, and shall cause each of its Subsidiaries to, do all of the following:
6.1
Government Compliance.
(a)
Maintain its and, subject to Section 7.2, all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of organization and
maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to result in a Material Adverse Effect. Comply with all laws,
ordinances and regulations to which Borrower or any of its Subsidiaries is subject, the noncompliance with which could reasonably be expected to result in a Material Adverse
Effect.
Obtain and keep in full force and effect, all of the material Governmental Approvals necessary for the performance by Borrower and its
Subsidiaries of their respective businesses and obligations under the Loan Documents and the grant of a security interest to Collateral Agent for the ratable benefit of the
Lenders, in all of the Collateral.
(b)
6.2
Financial Statements, Reports, Certificates; Notices.
(a)
Deliver to Collateral Agent:
as soon as available, but no later than forty-five (45) days after the last day of each fiscal quarter of Borrower, a company prepared
consolidated and consolidating balance sheet, income statement and cash flow statement covering the consolidated operations of Borrower and its Subsidiaries for such month
certified by a Responsible Officer and in a form reasonably acceptable to Collateral Agent;
(i)
(ii)
as soon as available, but no later than the earlier of one hundred twenty (120) days after the last day of Borrower’s fiscal year and within
five (5) days of filing with the Securities and Exchange Commission, audited consolidated financial statements prepared under GAAP, consistently applied, together with a
report on the financial statements (which report and accompanying financial statements shall (i) not be qualified as to going concern or contain an emphasis of matter
paragraph or like statement as to “going concern” (an “Unqualified Audit Opinion”), and (ii) be unqualified as to scope of audit) without factoring in proceeds of any
pending Term Loans from an independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion;
as soon as available after approval thereof by Borrower’s board of directors, but no later than the earlier of ten (10) Business Days after
such approval and sixty (60) days after the last day of Borrower’s fiscal year, Borrower’s annual (A) financial projections for the entire current fiscal year as approved by
Borrower’s board of directors, which such annual financial projections shall be set forth in a month-by-month format and include separately revenues and costs and include
income statement, balance sheet and statement of cash flow (such annual financial projections as originally delivered to Collateral Agent and reasonably acceptable to
(iii)
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Collateral Agent are referred to herein as the “Annual Projections”; provided that, any revisions of the Annual Projections approved by Borrower’s board of directors shall
be delivered to Collateral Agent no later than seven (7) Business Days after such approval) and (B) budget for the entire current fiscal year (which shall be set forth in a
month-by-month format and include separately all major categories of expenses and include income statement, balance sheet and statement of cash flow) as approved by
Borrower’s board of directors; provided that, any revisions to such budget approved by Borrower’s board of directors shall be delivered to Collateral Agent no later than seven
(7) Business Days after such approval;
within five (5) Business Days, copies of all non-ministerial materials provided to Borrower’s board of directors in connection with each
regularly scheduled quarterly meetings of the board of directors; provided, that Borrower shall not be required to deliver any information (i) that would jeopardize the
attorney-client privilege between Borrower and its legal counsel, or (ii) that is highly confidential proprietary information of the Borrower;
(iv)
five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;
(v)
in the event that Borrower becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within
notice concurrent with the Compliance Certificate required to be delivered pursuant to Section 6.1(b) of any material amendments of or
other changes to the capitalization table of Borrower and any amendments to the Operating Documents of Borrower or any of its Subsidiaries, together with any copies
reflecting such amendments with respect thereto;
(vi)
as soon as available, but no later than forty-five (45) days after the last day of each fiscal quarter of Borrower, copies of the month end
account statements for each Collateral Account maintained by Borrower or its Subsidiaries, which statements may be provided to Collateral Agent by Borrower or directly
from the applicable institution(s); provided, however, screenshots of each Collateral Account maintained by Borrower shall be delivered to Collateral Agent promptly upon
Collateral Agent or any Lender’s written request during the continuation of any Event of Default;
(vii)
prompt delivery of (and in any event within five (5) Business Days after the same are sent or received) copies of all material
correspondence, reports, documents and other filings with any Governmental Authority that could reasonably be expected to have a material adverse effect on any of the
Governmental Approvals material to Borrower’s business or otherwise could reasonably be expected to result in a Material Adverse Effect;
(viii)
or (B) has had or could reasonably be expected to have a Material Adverse Effect;
(ix)
prompt notice of any event that (A) could reasonably be expected to materially and adversely affect the Borrower’s Intellectual Property
6.10;
(x)
written notice within twenty (20) Business Days of Borrower’s creation of a New Subsidiary in accordance with the terms of Section
(xi)
written notice (x) at least ten (10) Business Days prior to Borrower’s (A) adding any new offices or business locations, including
warehouses (unless such new offices or business locations contain less than Five Hundred Thousand Dollars ($500,000.00) in assets or property of Borrower or any of its
Subsidiaries), (B) changing its jurisdiction of organization, (C) changing its organizational structure or type, (D) changing its legal name, (E) changing any organizational
number (if any) assigned by its jurisdiction of organization, or (F) registering or filing any Intellectual Property with the United States Copyright Office, and (y) concurrently
with the delivery of the Compliance Certificates required to be delivered pursuant to Section 6.1(b)(i), of new applications or registrations of any Intellectual Property with the
United States Patent and Trademark Officer;
upon Borrower becoming aware of the existence of any Event of Default or event which, with the giving of notice or passage of time, or
both, would constitute an Event of Default, prompt (and in any event within three (3) Business Days) written notice of such occurrence, which such notice shall include a
reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default;
(xii)
Affiliate of Borrower, is listed on the OFAC Lists or
(xiii)
prompt (and in any event within one (1) day), notice if Borrower or such Subsidiary has Knowledge that Borrower, or any Subsidiary or
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[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
(a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money
laundering;
general details thereof;
(xiv)
notice of any commercial tort claim with an expected value in excess of Two Hundred Fifty Thousand Dollars ($250,000) and of the
information regarding such Person’s organizational identification number within seven (7) Business Days of receiving such organizational identification number;
(xv)
if Borrower or any of its Subsidiaries is not now a Registered Organization but later becomes one, written notice of such occurrence and
public accounting firm, written notice thereof along with a brief explanation for such resignation, termination or change, as applicable;
(xvi)
no later than within seven (7) Business Days after the resignation, termination or change of Borrower’s external independent certified
no later than seven (7) Business Days after the receipt thereof by Borrower, any reports Borrower receives from its contract manufacturer
and/ or contract research organization in connection with any material breaches by the Borrower or any material amendments to its existing agreements with such Person to
the extent that such amendments would materially impair the perfection or priority of Collateral Agent’s Lien on the Collateral;
(xvii)
capacity) that Borrower believes may be actionable against any Lender or Collateral Agent or a defense to payment of any or all Obligations for any reason; and
(xviii)
promptly upon discovery, written notice of any action or inaction by or on behalf of a Lender (in any capacity) or Collateral Agent (in any
event no later than ten (10) Business Days after being requested, or such later time as Collateral Agent or such Lender may agree).
(xix)
other information as reasonably requested by Collateral Agent or any Lender (which information must be provided promptly but in any
Notwithstanding the foregoing, documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed
with the Securities and Exchange Commission) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower
posts such documents, or provides a link thereto, on Borrower’s website on the internet at Borrower’s website address and Borrower notifies Collateral Agent via email of
such posting.
day of each fiscal quarter of Borrower, deliver to Collateral Agent:
(a)
Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than forty-five (45) days after the last
(i)
a duly completed Compliance Certificate signed by a Responsible Officer;
an updated Perfection Certificate to reflect any amendments, modifications and updates to certain information in the Perfection Certificate
after the Effective Date to the extent such amendments, modifications and updates are permitted by one or more specific provisions in this Agreement; in each case, subject to
the review and approval of Collateral Agent;
(ii)
(iii)
(iv)
copies of any material Governmental Approvals obtained by Borrower or any of its Subsidiaries;
written notice of the commencement of, and any material development in, the proceedings contemplated by Section 5.8 hereof;
(v)
written notice of (i) any litigation or governmental proceedings pending or threatened (in writing) against Borrower or any of its
Subsidiaries, which could reasonably be expected to result in damages or costs to Borrower or any of its Subsidiaries of more than Two Hundred Fifty Thousand Dollars
($250,000.00); and (ii) any actions, suits, arbitrations, investigations or proceedings pending or, to the Knowledge of the Responsible Officers, threatened in writing by or
against Borrower or any Subsidiaries involving challenges to the validity of any Intellectual Property necessary for, or used in, the generation of revenues exceeding 5% of
Net Product Revenues for the most recently completed twelve month period;
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
(vi)
written notice within ten (10) Business Days of the termination of any Material Agreement; and
involve more than One Hundred Fifty Thousand Dollars ($150,000.00) individually or in the aggregate in any calendar year.
(vii)
written notice of all returns, recoveries, disputes and claims (including, without limitation, warranty claims) regarding Inventory that
(b)
Keep proper, complete and true books of record and account in accordance with GAAP in all material respects. Borrower shall, and shall cause
each of its Subsidiaries to, allow, at the sole cost of Borrower (which shall include the reasonable fees and expenses of Collateral Agent’s auditor), Collateral Agent or any
Lender, during regular business hours upon reasonable prior notice (provided that no notice shall be required when an Event of Default has occurred and is continuing), to
visit and inspect any of its properties, to examine and make abstracts or copies from any of Borrower’s Books, and to conduct a collateral audit and analysis of its operations
and the Collateral. Such audits shall be conducted no more often than twice every year unless (and more frequently if) an Event of Default has occurred and is continuing.
Notwithstanding the foregoing, upon request of any Lender, Borrower agrees to permit such Lender to communicate with Borrower’s accounting firm with respect to the
consolidated financial statements delivered pursuant to this Section 6.2.
6.3
Inventory; Returns. Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower, or any of
its Subsidiaries, and their respective Account Debtors shall follow Borrower’s, or such Subsidiary’s, customary practices as they exist at the Effective Date.
6.4
Taxes; Pensions. Timely file and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its
Subsidiaries to timely pay, all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower or its Subsidiaries, except as otherwise
permitted pursuant to the terms of Section 5.8 hereof, and shall deliver to Collateral Agent and each Lender, on demand, appropriate certificates attesting to such payments,
and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with the terms of such plans.
6.5
Insurance. Keep Borrower’s and its Subsidiaries’ business and the Collateral insured for risks and in amounts standard for companies in Borrower’s and its
Subsidiaries’ industry and location and as Collateral Agent may reasonably request, including, but not limited to, D&O insurance reasonably satisfactory to Collateral Agent.
Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Collateral Agent and Lenders (provided, that Collateral Agent and
Lenders acknowledge and agree that the policies of insurance maintained by Borrower and its Subsidiaries as of the Effective Date is acceptable) . All property policies shall
have a lender’s loss payable endorsement showing Collateral Agent as lender loss payee and waive subrogation against Collateral Agent, and all liability policies shall show,
or have endorsements showing, Collateral Agent, as additional insured. Collateral Agent shall be named as lender loss payee and/or additional insured with respect to any
such insurance providing coverage in respect of any Collateral, and each provider of any such insurance shall agree, by endorsement upon the policy or policies issued by it or
by independent instruments furnished to Collateral Agent, that it will give Collateral Agent thirty (30) days’ prior written notice before any such policy or policies shall be
materially altered or canceled (other than cancellation for non-payment of premiums, for which ten (10) days’ prior written notice shall be required). At Collateral Agent’s
request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Collateral Agent’s option, be
payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has
occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy within 90 days of receipt thereof up to Three Hundred Fifty
Thousand Dollars ($350,000.00) with respect to any loss, and not exceeding Three Hundred Fifty Thousand Dollars ($350,000.00), in the aggregate for all losses under all
casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal
or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Collateral Agent has been granted a first priority security interest, and (b) after
the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral Agent, be payable to
Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations. If Borrower or any of its Subsidiaries fails to obtain insurance as required under this
Section 6.5 or to pay any amount or furnish any required proof of payment to third persons, Collateral Agent and/or any Lender may make (but has no obligation to do so), at
Borrower’s expense, all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Collateral Agent or such
Lender deems prudent.
4
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
6.6
Operating Accounts.
(a)
Borrower shall provide Collateral Agent five (5) days’ prior written notice before Borrower or any of its Subsidiaries that is a Loan Party
establishes any Collateral Account. In addition, for each Collateral Account that Borrower or any of its Subsidiaries that is a Loan Party at any time maintains, Borrower or
such Subsidiary shall cause the applicable bank or financial institution at or with which such Collateral Account is maintained to execute and deliver a Control Agreement or
other appropriate instrument with respect to such Collateral Account to perfect Collateral Agent’s Lien in such Collateral Account in accordance with the terms hereunder prior
to the establishment of such Collateral Account, which Control Agreement may not be terminated without prior written consent of Collateral Agent. The provisions of the
previous sentence shall not apply to Excluded Accounts.
(b)
Neither Borrower nor any of its Subsidiaries shall maintain any Collateral Accounts except Collateral Accounts maintained in accordance with
Section 6.6. Furthermore, neither Borrower nor any of its Subsidiaries shall maintain Collateral Accounts at banks or financial institutions that are not reasonably acceptable
to Collateral Agent.; provided, that Collateral Agent acknowledges and agrees that the financial institutions with which Borrower and its Subsidiaries maintain Collateral
Accounts as of the Effective Date are reasonably acceptable to Collateral Agent.
6.7
Protection of Intellectual Property Rights. Borrower and each of its Subsidiaries shall: (a) protect, defend and maintain the validity and enforceability of
its Intellectual Property that, in the reasonable business judgment of Borrower, is material to its business; (b) promptly advise Collateral Agent in writing of a challenge to the
validity, or material infringement by a third party of its Intellectual Property; and (c) not allow any Intellectual Property material to its business to be abandoned, forfeited or
dedicated to the public without Collateral Agent’s prior written consent; provided, for the avoidance of doubt, Borrower or its Subsidiaries, as applicable, may abandon,
forfeit or dedicate to the public any Intellectual Property of such Person in the ordinary course of business that is not material to the Loan Parties’ business. If Borrower or any
of its Subsidiaries (i) obtains any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing,
whether as owner, licensee or otherwise, or (ii) applies for any patent or the registration of any trademark or servicemark, then Borrower or such Subsidiary shall provide
written notice thereof to Collateral Agent concurrently with the Compliance Certificates required to be delivered pursuant to Section 6.1(b)(i), and shall execute such
intellectual property security agreements and other documents and take such other actions as Collateral Agent shall reasonably request in its good faith business judgment to
perfect and maintain a first priority perfected security interest in favor of Collateral Agent, for the ratable benefit of the Lenders, in such property. If Borrower or any of its
Subsidiaries decides to register any copyrights or mask works in the United States Copyright Office, Borrower or such Subsidiary shall: (x) provide Collateral Agent and each
Lender with at least ten (10) days prior written notice of Borrower’s or such Subsidiary’s intent to register such copyrights or mask works together with a copy of the
application it intends to file with the United States Copyright Office (excluding exhibits thereto); (y) execute an intellectual property security agreement and such other
documents and take such other actions as Collateral Agent may reasonably request in its good faith business judgment to perfect and maintain a first priority perfected security
interest in favor of Collateral Agent, for the ratable benefit of the Lenders, in the copyrights or mask works intended to be registered with the United States Copyright Office;
and (z) record such intellectual property security agreement with the United States Copyright Office contemporaneously with filing the copyright or mask work application(s)
with the United States Copyright Office. Borrower or such Subsidiary shall promptly provide to Collateral Agent and each Lender with evidence of the recording of the
intellectual property security agreement necessary for Collateral Agent to perfect and maintain a first priority perfected security interest in such property.
6.8
Litigation Cooperation. Commencing on the Effective Date and continuing through the termination of this Agreement, make available to Collateral Agent
and the Lenders, without expense to Collateral Agent or the Lenders, Borrower and each of Borrower’s officers, employees and agents and Borrower’s Books, to the extent
that Collateral Agent or any Lender may reasonably deem them necessary to prosecute or defend any third party suit or proceeding instituted by or against Collateral Agent or
any Lender with respect to any Collateral or relating to Borrower.
6.9
Landlord Waivers; Bailee Waivers . In the event that Borrower or any of its Subsidiaries, after the Effective Date, intends to add any new offices or
business locations where Collateral in excess of Five Hundred Thousand ($500,000.00) will be maintained, including warehouses, or otherwise store any portion of the
Collateral with a value in excess of Five Hundred Thousand ($500,000.00) with, or deliver any portion of such Collateral to, a bailee, in each case pursuant to Section 7.2,
then Borrower or such Subsidiary will first be required to receive the written consent of Collateral Agent (which consent Collateral Agent may grant or deny in its reasonable
discretion) and, at Collateral Agent’s election, Borrower or such Subsidiary shall use commercially reasonable efforts to cause
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
such bailee or landlord, as applicable, to execute and deliver a bailee waiver or landlord waiver, as applicable, in form and substance reasonably satisfactory to Collateral
Agent prior to the addition of any new offices or business locations, or any such storage with or delivery to any such bailee, as the case may be.
6.10
Creation/Acquisition of Subsidiaries. In the event any Borrower or any Subsidiary of any Borrower creates or acquires any Subsidiary after the Effective
Date, Borrower or such Subsidiary shall promptly notify Collateral Agent of such creation or acquisition with twenty (20) Business Days thereof, and Borrower or such
Subsidiary shall take all actions reasonably requested by Collateral Agent to achieve any of the following with respect to such “New Subsidiary” (defined as a Subsidiary
formed or acquired after the date hereof during the term of this Agreement): (i) to cause such New Subsidiary to become either a co-Borrower hereunder or, if such New
Subsidiary is a Foreign Subsidiary, a secured guarantor with respect to the Obligations; and (ii) to grant and pledge to Collateral Agent a perfected security interest in the
Shares of such New Subsidiary.
6.11
Further Assurances. Execute any further instruments and take further action as Collateral Agent or any Lender reasonably requests to perfect or continue
Collateral Agent’s Lien in the Collateral or to effect the purposes of this Agreement, including without limitation, permit Collateral Agent or any Lender to discuss Borrower’s
financial condition with Borrower’s accountants.
6.12
Net Product Revenue Covenant. The Borrower shall comply with the financial covenant set forth in Schedule 6.12.
6.13
Liquidity Covenant. The Borrower shall comply with the liquidity covenant set forth on Schedule 6.13.
6.14
Post-Closing Obligations.
bound by within fourteen (14) days after the Effective Date.
(a)
Borrower shall deliver updated Perfection Certificates listing all Material Agreements that Borrower or any of its Subsidiaries is a party to or
Borrower or any of its Subsidiaries that is a Loan Party within thirty (30) days after the Effective Date.
(b)
Borrower shall deliver duly executed Control Agreements with respect to all Collateral Accounts (other than Excluded Accounts) maintained by
Date within sixty (60) days after the Effective Date.
(c)
Borrower shall dissolve or cause the dissolution of any of its direct or indirect Subsidiaries that are not Loan Parties and existing on the Effective
Within sixty (60) days of the Effective Date, Borrower shall deliver a bailee waiver executed in favor of Collateral Agent in respect of each third
party bailee where Borrower or any Subsidiary maintains Collateral having a book value in excess of Five Hundred Thousand Dollars ($500,000.00); provided, that Borrower
shall have an additional fifteen (15) days to deliver such bailee waivers so long as Borrower is making diligent efforts to obtain such waivers.
(d)
(e)
Within sixty (60) days of the Effective Date, Borrower shall deliver a landlord’s consent executed in favor of Collateral Agent in respect of all of
Borrower’s and each Subsidiaries’ leased locations where Collateral is maintained with a book value in excess of Five Hundred Thousand Dollars ($500,000.00) or which
leased location is the chief executive office of any Borrower; provided, that Borrower shall have an additional fifteen (15) days to deliver such landlord consents so long as
Borrower is making diligent efforts to obtain such consents.
Collateral Agent, for the ratable benefit of the Lenders, as required pursuant to Section 6.5, in form and substance reasonably satisfactory to Collateral Agent.
(f)
Within thirty (30) days of the Effective Date, Borrower shall deliver loss payable and additional insured clauses or endorsements, in favor of
Intellectual Property and its Intellectual property consisting of Copyrights registered or filed with the United States Copyright Office.
(g)
Within ninety (90) days of the Effective Date, Codexis Mayflower Holdings, LLC, shall assign to Borrower all of its active foreign-registered
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
7. NEGATIVE COVENANTS
Borrower shall not, and shall not permit any of its Subsidiaries to, do any of the following without the prior written consent of the Required Lenders:
7.1 Dispositions. Convey, sell, lease, transfer, assign, dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its
business or property (including Intellectual Property), except for Transfers (a) of Inventory in the ordinary course of business, of Intellectual Property in lieu of out-licensing
related to Deprioritized Biotherapeutics and Deprioritized Life Science Enzymes, Intellectual Property that is not material to the business of Borrower or its Subsidiaries and
that otherwise would lapse, be abandoned, forfeited or dedicated to the public, and Intellectual Property in accordance with the terms of Section 6.7; (b) of worn out, surplus,
or obsolete Equipment; (c) in connection with Permitted Liens, Permitted Investments and Permitted Licenses; (d) the use or transfer of money or Cash Equivalents of
investments in private stock or short term investments in the ordinary course of business; (e) liquidation or dissolution of a Subsidiary of Borrower to the extent permitted
under Section 7.2, (f) to any Loan Party; (g) consisting of the granting of Permitted Liens and the making of Permitted Investments, and (h) other Transfers of assets (other
than Intellectual Property of Borrower) having a fair market value of not more than $350,000 per fiscal year.
7.2 Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses engaged in by Borrower as of the Effective Date or any business reasonably related thereto; (b) stop conducting or fail to conduct its business in the ordinary
course, (c) liquidate or dissolve; provided, that a Subsidiary of Borrower may liquidate or dissolve if, prior to such dissolution, such Subsidiary shall transfer substantially all
of its assets to a Loan Party or (d)(i) any Key Person shall cease to be actively engaged in the management of Borrower unless written notice thereof is provided to Collateral
Agent and each Lender within ten (10) days of such cessation and such Key Person is replaced with someone approved by the board of directors of Borrower within sixty (60)
days of such cessation (furthermore, if such Key Person is terminated for cause, then within ten (10) Business Days of such termination, Borrower shall cause its remaining
Key Persons (or other Responsible Officers designated by Borrower in the event of the departure of each of Stephen Dilly and Sri Ryali) to forthrightly discuss the reasons for
the departure of the Key Person with Collateral Agent, except to the extent that such discussion would violate attorney-client privilege or the terms of any confidentiality
agreement to which any such Responsible Officer is subject), or (ii) enter into any transaction or series of related transactions in which (A) the stockholders of Borrower who
were not stockholders immediately prior to the first such transaction own or Control more than 49% of the voting interests and/or economic interests in the capital stock of
Borrower or shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors of Borrower immediately after giving effect
to such transaction or related series of such transactions or (B) Borrower ceases to own and Control 100% of the ownership interests of a Subsidiary of Borrower.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of
its Subsidiaries to acquire, all or substantially all of the capital stock, shares or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary
(provided such surviving Subsidiary is a “co Borrower” hereunder or has provided a secured Guaranty of Borrower’s Obligations hereunder) or with (or into) Borrower
provided Borrower is the surviving legal entity, and as long as no Event of Default is occurring prior thereto or arises as a result therefrom.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein
(except for Permitted Liens), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Collateral Agent, for the ratable benefit of the
Lenders) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower, or any of its Subsidiaries, from assigning, mortgaging, pledging,
granting a security interest in or upon, or encumbering any of Borrower’s or such Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and
except for “Permitted Liens”.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof.
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
7.7 Restricted Payments. Pay any dividends (other than dividends payable solely in capital stock) or make any distribution or payment in respect of or redeem,
retire or purchase any capital stock (other than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements, stockholder rights
plans, director or consultant stock option plans, or similar plans, provided such repurchases do not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the
aggregate per fiscal year); provided, that (i) Borrower may convert any of its convertible stock (including warrants) into other stock issued by Borrower pursuant to the terms
of such convertible securities or otherwise in exchange thereof, (ii) Borrower may convert Subordinated Debt issued by Borrower into capital stock issued by Borrower
pursuant to the terms of such Subordinated Debt and to the extent permitted under the terms of the applicable subordination or intercreditor agreement; and (iii) Borrower may
make cash payments in lieu of fractional shares in an aggregate amount not to exceed $10,000.
7.8 Investments. Directly or indirectly make any Investment other than Permitted Investments.
7.9 Transactions with Affiliates . Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower or any of its
Subsidiaries, except for (a) transactions that are (i) in the ordinary course of Borrower’s or such Subsidiary’s business, (ii) upon fair and reasonable terms (and which are in
fact on such terms) that are no less favorable to Borrower or such Subsidiary than would be obtained in an arm’s length transaction with a non-affiliated Person, and (iii)
disclosed to Collateral Agent in writing no later than ten (10) days after becoming effective; provided, that such notice is not required for (A) confidential disclosure
agreements or non-disclosure agreements, (B) transactions with Borrower’s board of directors, (C) sale and issuance of equity securities of Borrower for the primary purpose
of raising capital, or (D) director, officer and employee compensation and employment agreements (other than executive officer compensation agreements), benefit plans,
including retirement, health and stock option, and indemnification arrangements, (b) ordinary indemnifications of customary covered persons in their capacities as
representatives of a Borrower or a Subsidiary, or (c) Subordinated Debt or equity investments by Borrower’s investors in Borrower or its Subsidiaries.
7.10 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount
thereof, breach the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or otherwise adversely affect the
subordination of the Subordinated Debt to Obligations owed to the Lenders.
7.11 Compliance. Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as
amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Term Loan for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the failure to comply
or violation could reasonably be expected to result in a Material Adverse Effect, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw
from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred
compensation plan which could reasonably be expected to result in any liability of Borrower or any of its Subsidiaries, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other Governmental Authority.
7.12 Compliance with Anti-Terrorism Laws . Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any
Affiliate to, directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists. Neither Borrower nor
any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction
or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked
Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 or any similar
executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.
7.13 Material Agreements. Neither Borrower nor any of its Subsidiaries shall (i) amend a Material Agreement in a manner materially adverse to the Collateral
Agent or Lenders, or (ii) terminate a Material
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Agreement, in each case, without providing written notice to Collateral Agent within fourteen (14) days of such amendment or termination, as applicable.
7.14 Subsidiaries. No more than five percent (5%) of the assets or revenues of Borrower and its Subsidiaries on a consolidated basis shall be owned or produced
by any Foreign Subsidiary. Borrower shall not directly or indirectly lend to, contribute capital to, or guarantee obligations of, Foreign Subsidiaries in an amount exceeding
$250,000.00 in the aggregate. No Subsidiary of Borrower existing on the Effective Date that is not a Loan Party may (i) own any assets with a value in excess of $1,000,
individually, or in the aggregate, (ii) own any Intellectual Property, other than, with respect to Codexis Mayflower Holdings, LLC, non-active Intellectual Property, foreign-
registered or filed Intellectual Property and United States Copyrights to be transferred to Borrower in accordance with Section 6.14(g), or (iii) conduct any operations or
transactions other than those required for liquidation or dissolution of such Subsidiary.
8. EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any Term Loan on its due date, or (b) pay any other Obligations within
three (3) Business Days after such Obligations are due and payable (which three (3) Business Day grace period shall not apply to payments due on the Maturity Date or the
date or acceleration pursuant to Section 9.1(a) hereof);
8.2 Covenant Default.
(a)
Borrower or any of its Subsidiaries fails or neglects to perform any obligation in Sections 6.2 (Financial Statements, Reports, Certificates), 6.4
(Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of Intellectual Property Rights), 6.10 (Creation/Acquisition of Subsidiaries), 6.12 (Financial Covenant),
6.13 (Liquidity Covenant), or 6.14 (Post-Closing Obligations) or Borrower violates any provision in Section 7; provided, however, in the event that Borrower fails to comply
with the requirements of the financial covenant set forth in Section 6.12, Borrower may cure such breach by means of submitting a new Board-approved financial plan to
Collateral Agent under which Borrower is expected to (i)(x) break even on a cash flow basis prior to Maturity Date (which financial plan must be acceptable to Collateral
Agent in its sole discretion) and (y) pay all of its Obligations under the Loan Documents (including, without limitation, all payments of interest and principal), no later than
thirty (30) days after the occurrence of the breach of the financial covenant and (ii) raise, no later than thirty (30) days after the submission of such financial plan to Collateral
Agent, such amount of capital from the sale and issuance of its equity securities having terms acceptable to Required Lenders as required per the new financial plan; provided,
that upon such cure a set forth in (i) and (ii) above, the parties shall amend the covenant in Section 6.12 in accordance with the new financial plan which amendment must be
acceptable to Collateral Agent and shall, among other things, require Borrower to achieve One Hundred percent (100.00%) of the revenue projections set forth in the new
financial plan; provided further, in the event that Borrower fails to comply with the requirement to deliver an Unqualified Audit Opinion on the financial statements set forth
in Section 6.2(a)(ii), Borrower may cure such breach by either (i) raising, no later than sixty (60) days following the date of such audit opinion, an amount of capital, from the
sale and issuance of its equity securities or Subordinated Debt, in each case on terms acceptable to Required Lenders, equal to the difference between the Borrower’s projected
twelve months cash burn and the Borrower’s cash balance at the time of the audit opinion, or (ii) electing to increase the applicable minimum Liquidity Covenant in Section
6.13 to 35% of the aggregate principal amount of Term Loans funded (subject to appropriate increase in the event of Borrower’s delinquency in payment of its rent or accounts
payable to critical vendors) until the issuance of an Unqualified Audit Opinion; or
(b)
Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement
contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant
or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be
cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such
reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Term Loan shall be made during such cure period);
8.3 Material Adverse Change. A Material Adverse Change has occurred;
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
8.4 Attachment; Levy; Restraint on Business.
(a)
(i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or any of its Subsidiaries or of any entity under
control of Borrower or its Subsidiaries on deposit with any institution at which Borrower or any of its Subsidiaries maintains a Collateral Account, or (ii) a notice of lien,
levy, or assessment is filed against Borrower or any of its Subsidiaries or their respective assets by any government agency, and the same under subclauses (i) and (ii) hereof
are not, within thirty (30) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); and
receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or any of its Subsidiaries from conducting any part of its business;
(b)
(i) any material portion of Borrower’s or any of its Subsidiaries’ assets is attached, seized, levied on, or comes into possession of a trustee or
8.5 Insolvency. (a) Borrower or any of its Subsidiaries is or becomes Insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and not dismissed or stayed within forty-five (45) days (but no Term Loan shall be extended while
Borrower or any Subsidiary is Insolvent and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is (a) a default in any agreement to which Borrower or any of its Subsidiaries is a party with a third party or parties (i) resulting in a
right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Five Hundred Thousand Dollars
($500,000.00) or (ii) that could reasonably be expected to result in a Material Adverse Effect; provided, however, that the Event of Default under this Section 8.6(a)(ii) caused
by the occurrence of a default under such other agreement shall be cured or waived for purposes of this Agreement upon Collateral Agent receiving written notice from the
party asserting cure or waiver of the default under such other agreement, if at the time of such cure or waiver under such other agreement (x) Collateral Agent has not declared
an Event of Default under this Agreement and/or exercised any rights with respect thereto; (y) any such cure or waiver does not result in an Event of Default under any other
provision of this Agreement or any other Loan Document; and (z) in connection with any such cure or waiver under such other agreement, the terms of any agreement with
such third party are not modified or amended in any manner which could in the good faith business judgment of Collateral be materially less advantageous to the Borrower or
applicable Subsidiary; (b) any default by Borrower or any Subsidiary under a Material Agreement that permits the counterparty thereto to accelerate the payments owed
thereunder; or (c) a revocation of a Material Agreement to the extent such revocation would materially adversely impair Collateral Agent’s ability to exercise its rights and
remedies under this Agreement or would materially impair the perfection or priority of Collateral Agent’s Lien on the Collateral.
8.7 Judgments. (a) One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Seven Hundred
Fifty Thousand Dollars ($750,000.00) (not covered by independent third party insurance) shall be rendered against Borrower or any of its Subsidiaries and shall remain
unsatisfied, unvacated, or unstayed for a period of thirty (30) days after the entry thereof or (b) any judgments, orders or decrees rendered against Borrower that could
reasonably be expected to have a Material Adverse Effect;
8.8 Misrepresentations. Borrower or any of its Subsidiaries or any Person acting for Borrower or any of its Subsidiaries makes any representation, warranty, or
other statement now or later in this Agreement, any Loan Document or in any writing delivered to Collateral Agent and/or Lenders or to induce Collateral Agent and/or the
Lenders to enter this Agreement or any Loan Document, and such representation, warranty, or other statement, when taken as a whole, is incorrect in any material respect
when made;
8.9 Subordinated Debt. A default or breach occurs under any agreement between Borrower or any of its Subsidiaries and any creditor of Borrower or any of its
Subsidiaries that signed a subordination, intercreditor, or other similar agreement with Collateral Agent or the Lenders, or any creditor that has signed such an agreement with
Collateral Agent or the Lenders breaches any terms of such agreement;
8.10 Guaranty. (a) Any Guaranty terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant
under any Guaranty; (c) any circumstance described in Section 8 occurs with respect to any Guarantor; or (d) a Material Adverse Change with respect to any Guarantor;
8.11 Governmental Approvals; FDA Action. (a) Any Governmental Approval shall have been revoked, rescinded, suspended, modified in an adverse manner, or
not renewed in the ordinary course for a full term and such revocation, rescission, suspension, modification or non-renewal has resulted in or could reasonably be
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
expected to result in a Material Adverse Effect; or (b)(i) the FDA, DOJ, or other Governmental Authority initiates a Regulatory Action or any other enforcement action against
Borrower or any of its Subsidiaries or any supplier of Borrower or any of its Subsidiaries that causes Borrower or any of its Subsidiaries to recall, withdraw, remove or
discontinue manufacturing, distributing, and/or marketing any of its products and such enforcement action could reasonably be expected to result in a Material Adverse Effect,
even if such action is based on previously disclosed conduct; (ii) the FDA issues a warning letter or Regulatory Action to Borrower or any of its Subsidiaries with respect to
any of its activities or products which could reasonably be expected to result in a Material Adverse Effect; (iii) Borrower or any of its Subsidiaries conducts a mandatory or
voluntary recall which could reasonably be expected to result in liability and expense to Borrower or any of its Subsidiaries of Seven Hundred Fifty Thousand Dollars
($750,000.00) or more; (iv) Borrower or any of its Subsidiaries enters into a settlement agreement with the FDA, DOJ, or other Governmental Authority that results in
aggregate liability as to any single or related series of transactions, incidents or conditions, of Seven Hundred Fifty Thousand Dollars ($750,000.00) or more, or that could
reasonably be expected to result in a Material Adverse Effect even if such settlement agreement is based on previously disclosed conduct; or (v) Borrower or any of its
Subsidiaries fails to remediate observations identified in an FDA Form 483 notice of inspection observation to Collateral Agent’s reasonable satisfaction within six (6) months
of receipt; or (vi) the FDA revokes any authorization or permission granted under any Registration, or Borrower or any of its Subsidiaries withdraws any Registration, that
could reasonably be expected to result in a Material Adverse Change.
8.12 Lien Priority; Intellectual Property. Any Lien created hereunder or by any other Loan Document shall at any time fail to constitute a valid and perfected
Lien on any of the Collateral purported to be secured thereby, subject to no prior or equal Lien, other than Permitted Liens arising as a matter of applicable law. Any
Intellectual Property material to Borrower’s business shall cease to be validly owned or licensed by Borrower free and clear of any Liens other than Permitted Liens, or the
Borrower or any of its Subsidiaries is prohibited, banned, enjoined, restrained or prevented from developing, manufacturing or commercializing any product as a result of an
infringement or other violation of any such Intellectual Property.
8.13 Delisting. The shares of common stock of Borrower are delisted from the primary stock exchange on which they are traded after their initial public offering
and such delisting results in such shares not being listed immediately on any other nationally recognized stock exchange in the United States having listing standards at least
as restrictive as the primary stock exchange on which such shares were traded after their initial public offering.
8.14 Stock Price Decline. The price as of the shares of common stock of Borrower listed on the primary stock exchange on which they are listed decreases by 95%
or more in the aggregate (and after taking into account any stock splits and stock combinations) from the closing price on the Effective Date, and remains at such decreased
level for a period of thirty consecutive calendar days.
9. RIGHTS AND REMEDIES
9.1 Rights and Remedies.
(a)
Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may, without notice or demand, do any or all of the
following: (i) deliver notice of the Event of Default to Borrower, (ii) by notice to Borrower declare all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations shall be immediately due and payable without any action by Collateral Agent or the Lenders); provided, however, all
obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and
Collateral Agent and/or the Lenders shall be immediately terminated without any action by Collateral Agent or the Lenders.
of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:
(b)
Without limiting the rights of Collateral Agent and the Lenders set forth in Section 9.1(a) above, upon the occurrence and during the continuance
become part of the Obligations;
(i)
engage such industry, workout, liquidation, and other such consultants as it may elect, and the reasonable fees and expenses thereof shall
give written notice to Borrower to not dispose of, conceal, transfer, sell, or encumber any or all of the Collateral (including cash) without
Collateral Agent’s prior written consent, even if such disposition would otherwise be permitted hereunder in the ordinary course of business absent an Event of Default. Any
such disposition, concealment, transfer, or sale after the giving of such notice shall constitute a wrongful
(ii)
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
conversion of the Collateral. Collateral Agent may obtain a temporary restraining order, injunction, or other equitable relief, without bond, to enforce Borrower’s obligation to
refrain from so impairing the Collateral;
(iii)
foreclose upon and/or sell or otherwise liquidate all or any portion of the Collateral;
to the extent that notice of a particular disposition may be required under the UCC, the notice shall be commercially reasonable
if given at least ten (10) days prior to the disposition, unless a shorter notice period is commercially reasonable under the circumstances. Once notice is given of the date after
which a private disposition may occur, the notice shall remain in effect regardless of the period of time between the notice date and the ultimate disposition, unless and until
the notice is revoked by Collateral Agent in writing;
(1)
(2)
Collateral Agent may sufficiently advertise dispositions of Collateral through publications or media of general business
circulation; may contact other persons, whether or not in the same business as Borrower, for expressions of interest in acquiring all or any portion of the Collateral; may
publicly advertise the Collateral for sale by type, providing further details that Collateral Agent may have readily available only to prospective purchasers who make direct
inquiry; may require potential purchasers to execute confidentiality agreements; and may require potential purchasers to post deposits and/or to otherwise demonstrate their
financial ability and legal eligibility to perform upon any bid;
(3)
the Collateral may be disposed of in such lots as Collateral Agent may elect. Collateral Agent may adjourn any public or private
sale to a different time or place without notice or publication of such adjournment, and may adjourn any sale either before or after offers are received. Collateral Agent (i) may
disclaim disposition warranties, including warranties of title, infringement, possession, quiet enjoyment, merchantability, or other like warranties, whether express or implied;
(ii) may dispose of assets in wholesale rather than retail markets; (iii) may dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types of
Collateral so offered or that generally match buyers and sellers of assets; (iv) may require the purchaser at any foreclosure sale to indemnify Collateral Agent and other parties
against damages incurred in connection with their removal or possession of the Collateral, to require such purchaser to maintain insurance in connection therewith, or both;
and (v) shall not be obligated to, and may rely upon a buyer to, obtain any third-party consents for access to Collateral or to obtain governmental or third party consents for
the collection or disposition of Collateral to be collected or disposed of;
amount held or controlled by Collateral Agent or any Lender owing to or for the credit or the account of Borrower; and/or
(iv)
apply to the Obligations any (a) balances and deposits of Borrower that Collateral Agent or any Lender holds or controls, or (b) any
(v)
commence and prosecute an Insolvency Proceeding or consent to Borrower commencing any Insolvency Proceeding.
continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:
(c)
Without limiting the rights of Collateral Agent and the Lenders set forth in Sections 9.1(a) and (b) above, upon the occurrence and during the
advisable, notify any Person owing Borrower money of Collateral Agent’s security interest in such funds, and verify the amount of such account;
(i)
settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Collateral Agent considers
(ii)
make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrower shall assemble the Collateral if Collateral Agent requests and make it available in a location as Collateral Agent reasonably designates. Collateral Agent
may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which
appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Collateral Agent a license to enter and occupy any of its premises,
without charge, to exercise any of Collateral Agent’s rights or remedies;
ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for sale, the Collateral. Collateral Agent is hereby
granted a nonexclusive, royalty free license or other right to use, without charge, Borrower’s and each of its Subsidiaries’ labels, Patents, Copyrights, mask works, rights of
use of any name, trade secrets, trade names, Trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral
(iii)
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and, in connection with Collateral Agent’s exercise of its rights under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under all licenses and all franchise
agreements inure to Collateral Agent, for the benefit of the Lenders;
entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(iv)
place a “hold” on any account maintained with Collateral Agent or the Lenders and/or deliver a notice of exclusive control, any
(v)
demand and receive possession of Borrower’s Books;
(vi)
appoint a receiver to seize, manage and realize upon any of the Collateral, and such receiver shall have any right and authority as any
competent court will grant or authorize in accordance with any applicable law, including any power or authority to manage the business of Borrower or any of its Subsidiaries.
Borrower hereby irrevocably consents to and waives any right to object to or otherwise contest the appointment of a receiver as provided above. Borrower (i) grants such
waiver and consent knowingly after having discussed the implications thereof with counsel, (ii) acknowledges that (A) the uncontested right to have a receiver appointed for
the foregoing purposes is considered essential by Collateral Agent in connection with the enforcement of its rights and remedies hereunder and under the other Loan
Documents and (B) the availability of such appointment as a remedy under the foregoing circumstances was a material factor in inducing Lenders to extend the Term Loans,
and (iii) agrees to enter into any and all stipulations in any legal actions, or agreements or other instruments in connection with the foregoing, and to cooperate fully with
Lenders and Collateral Agent in connection with the assumption and exercise of control by any receiver; and
Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).
(vii)
subject to Section 9.1(a) and (b), exercise all rights and remedies available to Collateral Agent and each Lender under the Loan
(d)
With respect to a security interest in any Shares:
Collateral Agent may cause any Issuer to register the ownership of its Shares in the name of Collateral Agent or of Collateral Agent’s
nominee or transferee. Such registration shall be deemed a registration for the purpose of facilitating Collateral Agent’s preservation of rights, and not a disposition or strict
foreclosure, unless and until all requirements of Section 9-610 or Section 9-620 of the UCC are satisfied;
(i)
(ii)
upon written notice to the applicable Borrower and Issuer, whether or not the Shares are registered in the name of Collateral Agent or its
nominee, Collateral Agent (or Collateral Agent’s nominee if so registered) may exercise any or all of any Borrower’s rights arising from ownership of such Shares, pursuant to
the irrevocable proxy granted in Section 9.1(d)(v) of this Agreement or any other proxy or as otherwise permitted under applicable law. Without limiting the foregoing,
Collateral Agent or its nominee may (a) cast any votes in any matter, (b) take actions by written consent in any matter, (c) receive distributions, and (d) otherwise exercise or
waive such Borrower’s rights in all respects. Upon further written notice to such Borrower and Issuer, Collateral Agent or its nominee may terminate the exercise of such
voting rights and likewise reinstate them from time to time;
(iii)
Borrower acknowledges that although the Shares may be securities for the purpose of applicable securities laws, as of the Effective Date,
none of the Shares have been registered for public sale pursuant to applicable securities laws. Borrower acknowledges and agrees that (a) although a disposition of such Shares
absent such a registration may result in prices and other terms less favorable than if such sale were a sale made absent such restrictions, Collateral Agent shall be under no
obligation to delay a sale of any of the Shares for the period of time necessary to permit an Issuer or Borrower to register such securities for public sale under the Securities Act
of 1933, as amended, or under applicable state securities laws, even if the Issuer or Borrower would agree to do so, (b) Collateral Agent may restrict such sale to purchasers
who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Shares or part
thereof, and (c) Collateral Agent may take such other actions as Collateral Agent deems appropriate to assure that the sale is undertaken in compliance with all applicable
securities laws;
Borrower is aware that the staff of the Securities and Exchange Commission have issued various No-Action Letters that describe
procedures which, in the view of which staff, permit a foreclosure sale of securities to occur in a manner that is public for purposes of Part 6 of Article 9 of the UCC, yet not
public for purposes of Section 4(2) of the Securities Act. Borrower agrees that a foreclosure sale conducted in conformity with the principles set forth in such No-Action
Letters (a) shall be considered to be a “public disposition”
(iv)
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
for purposes of Section 9-610(c) of the UCC; (b) shall be considered commercially reasonable notwithstanding that Collateral Agent has not registered or sought to register
the interests under the Securities Act, even if such Borrower or the applicable Issuer would agree to pay all costs of the registration process; and (c) shall not be considered to
be commercially unreasonable on account of such procedures;
(v)
Borrower hereby irrevocably appoints Collateral Agent as the proxy and attorney-in-fact of such Borrower, with full authority in the place
and stead of Borrower, and in the name of Borrower or otherwise, to cast the votes and otherwise exercise all rights arising from the ownership of the Shares as provided in
this Agreement upon and during the continuation of an Event of Default. THIS APPOINTMENT IS IRREVOCABLE AND COUPLED WITH AN INTEREST AND
SHALL BE EFFECTIVE UNTIL ALL OBLIGATIONS (OTHER THAN INCHOATE INDEMNITY OBLIGATIONS) HAVE BEEN FULLY REPAID AND
PERFORMED AND COLLATERAL AGENT’S AND THE LENDERS’ OBLIGATION TO PROVIDE THE TERM LOAN TERMINATES. No separate proxy shall
be necessary to evidence such proxy rights, but if there is such a proxy, Collateral Agent’s rights thereunder are cumulative with those in this Agreement.
As provided in Annex I, Collateral Agent shall have the exclusive right to exercise any and all remedies referenced in this Section 9.1. Additionally, notwithstanding any other
provision of this Agreement, Collateral Agent may take any action that Collateral Agent deems appropriate to address an Exigent Circumstance, even if such action would
ordinarily require the consent of the Required Lenders or of all Lenders under other Sections of this Agreement.
9.2 Power of Attorney . Borrower hereby irrevocably appoints Collateral Agent as its lawful attorney in fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s or any of its Subsidiaries’ name on any checks or other forms of payment or security; (b) sign Borrower’s or
any of its Subsidiaries’ name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts
directly with Account Debtors, for amounts and on terms Collateral Agent determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies;
(e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; and (f) transfer the Collateral into the name of Collateral Agent or a third party as the Code or any applicable law permits. Borrower
hereby appoints Collateral Agent as its lawful attorney in fact to sign Borrower’s or any of its Subsidiaries’ name on any documents necessary to perfect or continue the
perfection of Collateral Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity
obligations) have been satisfied in full and Collateral Agent and the Lenders are under no further obligation to extend the Term Loan hereunder. Collateral Agent’s foregoing
appointment as Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral Agent’s rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Collateral Agent’s and the Lenders’ obligation to provide the Term Loan
terminates.
9.3 Protective Payments. If Borrower or any of its Subsidiaries fail to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to
pay any other amount which Borrower or any of its Subsidiaries is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may obtain such
insurance or make such payment, and all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately due and payable, bearing interest at the Default Rate,
and secured by the Collateral. Collateral Agent will make reasonable efforts to provide Borrower with notice of Collateral Agent obtaining such insurance or making such
payment at the time it is obtained or paid or within a reasonable time thereafter. No such payments by Collateral Agent are deemed an agreement to make similar payments in
the future or Collateral Agent’s waiver of any Event of Default.
9.4 Application of Payments and Proceeds. Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by
Collateral Agent from or on behalf of Borrower or any of its Subsidiaries of all or any part of the Obligations, and, as between Borrower on the one hand and Collateral Agent
and Lenders on the other, Collateral Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such
manner as Collateral Agent may deem advisable notwithstanding any previous application by Collateral Agent, and (b) the proceeds of any sale of, or other realization upon all
or any part of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to accrued and unpaid interest and any make-whole amount due on the Obligations
(including any amounts which, but for the provisions of the United States Bankruptcy Code, would have accrued on such amounts); third, to any applicable Prepayment Fee or
Final Fee; fourth, to the principal amount of the Obligations outstanding; and fifth, to any other indebtedness or obligations of Borrower owing to Collateral Agent or any
Lender under the Loan Documents. Any balance remaining shall be delivered to Borrower or to whoever may
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the foregoing, (x) amounts received shall be applied in the
numerical order provided until exhausted prior to the application to the next succeeding category, and (y) each of the Persons entitled to receive a payment in any particular
category shall receive an amount equal to its pro rata share of amounts available to be applied pursuant thereto for such category. Any reference in this Agreement to an
allocation between or sharing by the Lenders of any right, interest or obligation “ratably,” “proportionally” or in similar terms shall refer to Pro Rata Share unless expressly
provided otherwise. Collateral Agent, or if applicable, each Lender, shall promptly remit to the other Lenders such sums as may be necessary to ensure the ratable repayment
of each Lender’s portion of any Term Loan and the ratable distribution of interest, fees and reimbursements paid or made by Borrower. Notwithstanding the foregoing, a
Lender receiving a scheduled payment shall not be responsible for determining whether the other Lenders also received their scheduled payment on such date; provided,
however, if it is later determined that a Lender received more than its ratable share of scheduled payments made on any date or dates, then such Lender shall remit to
Collateral Agent or other Lenders such sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed by Collateral Agent. If any payment
or distribution of any kind or character, whether in cash, properties or securities, shall be received by a Lender in excess of its ratable share, then the portion of such payment
or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for and shall be promptly paid over to the other Lender for application to the
payments of amounts due on the other Lenders’ claims. To the extent any payment for the account of Borrower is required to be returned as a voidable transfer or otherwise,
the Lenders shall contribute to one another as is necessary to ensure that such return of payment is on a pro rata basis. If any Lender shall obtain possession of any Collateral,
it shall hold such Collateral for itself and as agent and bailee for Collateral Agent and other Lenders for purposes of perfecting Collateral Agent’s security interest therein.
9.5 Liability for Collateral. So long as Collateral Agent and the Lenders comply with reasonable lending practices regarding the safekeeping of the Collateral in
the possession or under the control of Collateral Agent and the Lenders, Collateral Agent and the Lenders shall not be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other
Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 No Waiver; Remedies Cumulative. Failure by Collateral Agent or any Lender, at any time or times, to require strict performance by Borrower of any
provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Collateral Agent or any Lender thereafter to demand strict
performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by Collateral Agent and the Required Lenders and then is only
effective for the specific instance and purpose for which it is given. The rights and remedies of Collateral Agent and the Lenders under this Agreement and the other Loan
Documents are cumulative. Collateral Agent and the Lenders have all rights and remedies provided under the Code, any applicable law, by law, or in equity. The exercise by
Collateral Agent or any Lender of one right or remedy is not an election, and Collateral Agent’s or any Lender’s waiver of any Event of Default is not a continuing waiver.
Collateral Agent’s or any Lender’s delay in exercising any remedy is not a waiver, election, or acquiescence.
9.7 Demand Waiver. Borrower waives, to the fullest extent permitted by law, demand, notice of default or dishonor, notice of payment and nonpayment, notice of
any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by
Collateral Agent or any Lender on which Borrower or any Subsidiary is liable.
9.8 Standards. Where not expressly founded upon specific rights of Collateral Agent as a secured party under the UCC, the provisions of this Article 9 shall be
interpreted as the agreement of Collateral Agent, Lenders and Borrower as to the standards measuring the fulfillment of the duties of Collateral Agent as a secured party.
Borrower warrants, represents, and agrees that none of the provisions of this Article are “manifestly unreasonable” for the purposes of Section 9-603 of Article 9 of the UCC.
Nothing contained in this Article shall be construed to grant any rights to Borrower or to impose any duties on Collateral Agent that would not have been granted or imposed
by this Agreement or by applicable law in the absence of this Article.
10. NOTICES
All notices, consents, requests, approvals, demands, or other communication (collectively, “Communication”) by any party to this Agreement or any other Loan Document
must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the
U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by facsimile or email transmission
with confirmation; (c) one (1) Business Day after deposit
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REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
with a reputable overnight courier with all charges prepaid and required verification of delivery; or (d) when delivered, if hand delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Any of Collateral Agent, Lender or Borrower may change its
mailing address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.
If to Borrower: CODEXIS, INC.
200 Penobscot Drive
Redwood City, CA 94063
Attn: Sri Ryali
Email: [*]
with a copy (which shall
not constitute notice) to:
Sidley Austin LLP
1001 Page Mill Road, Building 1 Palo Alto, CA 94304
Attn: Cynthia Bai
Email: [*]
If to Collateral Agent: INNOVATUS LIFE SCIENCES
LENDING FUND I, LP
th
777 Third Avenue, 25 Floor
New York, NY 10017
Attn: Claes Ekstrom, Webb George
Email: [*]
with a copy (which shall
not constitute notice) to: Cooley LLP
th
3 Embarcadero Center, 20 Floor
San Francisco, CA 94111
Attn: Mischi a Marca
Fax: (415) 693 2222
Email: [*]
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
11.1 Waiver of Jury Trial. EACH OF BORROWER, COLLATERAL AGENT AND LENDERS UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) BASED UPON OR ARISING OUT OF
THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS AMONG BORROWER,
COLLATERAL AGENT AND/OR LENDERS RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR
THE RELATIONSHIP THAT IS BEING ESTABLISHED AMONG BORROWER, COLLATERAL AGENT AND/OR LENDERS. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS
WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
11.2 Governing Law and Jurisdiction.
(a)
Governing Law. THIS AGREEMENT, THE OTHER LOAN DOCUMENTS (EXCLUDING THOSE LOAN DOCUMENTS THAT BY THEIR
OWN TERMS ARE EXPRESSLY GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER AND ALL MATTERS ARISING FROM OR RELATED THERETO SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF ANY LAWS OTHER THAN THE LAWS OF THE STATE OF NEW YORK), INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY
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[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE COLLATERAL, PROVIDED, HOWEVER, THAT IF THE LAWS OF ANY JURISDICTION
OTHER THAN NEW YORK SHALL GOVERN IN REGARD TO THE VALIDITY, PERFECTION OR EFFECT OF PERFECTION OF ANY LIEN OR IN REGARD TO
PROCEDURAL MATTERS AFFECTING ENFORCEMENT OF ANY LIENS IN COLLATERAL, SUCH LAWS OF SUCH OTHER JURISDICTIONS SHALL
CONTINUE TO APPLY TO THAT EXTENT.
(b)
Submission to Jurisdiction. Any legal action or proceeding with respect to the Loan Documents shall be brought exclusively in the courts of the
State of New York located in the City of New York, Borough of Manhattan, or of the United States of America for the Southern District of New York and, by execution and
delivery of this Agreement, Borrower hereby accepts for itself and in respect of its Property, generally and unconditionally, the jurisdiction of the aforesaid courts.
Notwithstanding the foregoing, Collateral Agent and Lenders shall have the right to bring any action or proceeding against Borrower (or any property of Borrower) in the
court of any other jurisdiction Collateral Agent or Lenders deem necessary or appropriate in order to realize on the Collateral or other security for the Obligations. The parties
hereto hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or
hereafter have to the bringing of any such action or proceeding in such jurisdictions.
(c)
Service of Process. Borrower irrevocably waives personal service of any and all legal process, summons, notices and other documents and other
service of process of any kind and consents to such service in any suit, action or proceeding brought in the United States of America with respect to or otherwise arising out of
or in connection with any Loan Document by any means permitted by applicable requirements of law, including by the mailing thereof (by registered or certified mail, postage
prepaid) to Codexis, Inc., attention: Sri Ryali, located at 200 Penobscot Drive, Redwood City, California 94063, and each Borrower hereby appoints Codexis, Inc. as its agent
to receive such service of process. Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
other manner permitted by applicable requirements of law or commence legal proceedings or otherwise proceed against Borrower in any other jurisdiction.
(d)
Non-exclusive Jurisdiction. Nothing contained in this Section 11.2 shall affect the right of Collateral Agent or Lenders to serve process in any
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not transfer, pledge
or assign this Agreement or any rights or obligations under it without Collateral Agent’s prior written consent (which may be granted or withheld in Collateral Agent’s
discretion, subject to Section 12.5). The Lenders have the right, without the consent of or notice to Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation
in (any such sale, transfer, assignment, negotiation, or grant of a participation, a “ Lender Transfer”) all or any part of, or any interest in, the Lenders’ obligations, rights, and
benefits under this Agreement and the other Loan Documents.
12.2 Indemnification. Borrower agrees to indemnify, defend and hold Collateral Agent and the Lenders and their respective directors, officers, employees,
consultants, agents, attorneys, or any other Person affiliated with or representing Collateral Agent or the Lenders (each, an “Indemnified Person”) harmless against: (a) all
obligations, demands, claims, and liabilities (collectively, “Claims”) asserted by any other party in connection with; related to; following; or arising from, out of or under, the
transactions contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid by Indemnified Person in connection with; related to; following;
or arising from, out of or under, the transactions contemplated by the Loan Documents between Collateral Agent, and/or the Lenders and Borrower (including reasonable
attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct (as determined in a final,
non-appealable judgment of a court of competent jurisdiction). Borrower hereby further indemnifies, defends and holds each Indemnified Person harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including
the fees and disbursements of counsel for such Indemnified Person) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding,
whether or not such Indemnified Person shall be designated a party thereto and including any such proceeding initiated by or on behalf of Borrower, and the reasonable
expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than
any broker retained by Collateral Agent or Lenders) asserting any right to payment for the transactions contemplated hereby which may be imposed on, incurred by or asserted
against such Indemnified Person as a result of or in connection with the transactions contemplated hereby and the use or intended use of the proceeds of the loan proceeds
except
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[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
for liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements directly caused by such Indemnified Person’s gross
negligence or willful misconduct (as determined in a final, non-appealable judgment of a court of competent jurisdiction).
12.3 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
Notwithstanding the foregoing, this Agreement and any other Loan Document may be amended by Collateral Agent without the need to obtain the consent of Borrower or any
Lender if such amendment is delivered in order to correct or cure (x) ambiguities, errors, omissions, or defects, (y) to effect administrative changes of a technical or
immaterial nature or (z) incorrect cross references or similar inaccuracies in this Agreement or the applicable Loan Document.
12.4 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees,
charges and other amounts that are treated as interest on such Loan under Applicable Law (collectively, “ charges”), shall exceed the maximum lawful rate (the “Maximum
Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with Applicable Law, the rate of interest payable in
respect of such Loan hereunder, together with all charges payable in respect thereof, shall be limited to the Maximum Rate. To the extent lawful, the interest and charges that
would have been paid in respect of such Loan but were not paid as a result of the operation of this Section shall be cumulated and the interest and charges payable to such
Lender in respect of other Loans or periods shall be increased (but not above the amount collectible at the Maximum Rate therefor). Any amount collected by such Lender that
exceeds the maximum amount collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Loan or refunded to Borrower so that at no
time shall the interest and charges paid or payable in respect of such Loan exceed the maximum amount collectible at the Maximum Rate.
12.5 Correction of Loan Documents. Collateral Agent may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent
with the agreement of the parties, and shall provide Borrower copies of any such amended Loan Documents.
12.6 Amendments in Writing; Integration.
No amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent
thereunder, or any consent to any departure by Borrower or any of its Subsidiaries therefrom, shall in any event be effective unless the same shall be in writing and signed by
Borrower, Collateral Agent and the Required Lenders provided that:
(a)
Commitment or Commitment Percentage shall be effective as to such Lender without such Lender’s written consent;
(i)
no such amendment, waiver or other modification that would have the effect of increasing or reducing a Lender’s Term Loan
Collateral Agent’s written consent or signature;
(ii)
no such amendment, waiver or modification that would affect the rights and duties of Collateral Agent shall be effective without
(iii)
no such amendment, waiver or other modification shall, unless signed by all the Lenders directly affected thereby, (A) reduce the
principal of, rate of interest on or any fees with respect to any Term Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with
respect to any Term Loan; (B) postpone the date fixed for, or waive, any payment of principal of any Term Loan or of interest on any Term Loan (other than default interest)
or any fees provided for hereunder (other than late charges or for any termination of any commitment); (C) change the definition of the term “Required Lenders” or the
percentage of Lenders which shall be required for the Lenders to take any action hereunder; (D) release all or substantially all, or any material portion, of the Collateral,
authorize Borrower to sell or otherwise dispose of all or substantially all, or any material portion, of the Collateral or release any Guarantor of all or any portion of the
Obligations or its guaranty obligations with respect thereto, except, in each case with respect to this clause (D), as otherwise may be expressly permitted under this Agreement
or the other Loan Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the definitions of
the terms used in this Section 12.6 insofar as the definitions affect the substance of this Section 12.6; (F) consent to the assignment, delegation or other transfer by Borrower of
any of its rights and obligations under any Loan Document or release Borrower of its payment obligations under any Loan Document, except, in each case with respect to this
clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the definitions of Pro
Rata Share, Term Loan Commitment, Commitment Percentage or that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of
Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations; or
26
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
(I) amend any of the provisions of Section 12.6. It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other
modification of the type described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the immediately preceding sentence; and
(iv)
Borrower’s consent shall not be required as to any amendment or waiver to Annex I, except as to Section 9 thereof.
designate covenants in this Agreement less restrictive by notification to a representative of Borrower.
(b)
Other than as expressly provided for in Section 12.5(a)(i) and (iii), Collateral Agent may, if requested by the Required Lenders, from time to time
This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements
with respect to such subject matter. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this
Agreement and the Loan Documents merge into this Agreement and the Loan Documents.
(c)
12.7 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when
executed and delivered, is an original, and all taken together, constitute one Agreement.
12.8 Survival. All covenants, representations and warranties made in this Agreement continue in full force and effect until this Agreement has terminated pursuant
to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement)
have been satisfied. The obligation of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the confidentiality provisions in Section 12.8 below,
shall survive until the statute of limitations with respect to such claim or cause of action shall have run.
12.9 Confidentiality. In handling any confidential information each of Borrower, the Lenders and Collateral Agent shall exercise the same degree of care that it
exercises for their own proprietary information, but disclosure of information may be made: (a) subject to the terms and conditions of this Agreement, to the Lenders’ and
Collateral Agent’s Subsidiaries or Affiliates; (b) to prospective transferees (other than those identified in (a) above) or purchasers of any interest in the Term Loan ( provided,
however, the Lenders and Collateral Agent shall, except upon the occurrence and during the continuance of an Event of Default, obtain such prospective transferee’s or
purchaser’s agreement to the terms of this provision or to similar confidentiality terms); (c) as required by law, regulation, subpoena, or other order; (d) to Lenders’ or
Collateral Agent’s regulators (including any self-regulatory authority) or as otherwise required in connection with an examination or audit; (e) in exercising remedies under
the Loan Documents or in connection with any suit, action or proceeding relating to this Agreement, any other Loan Document or the enforcement of rights hereunder or the
defense of any claim, suit, action or proceeding; (f) with the consent of the Borrower, and (g) to third party service providers of the Lenders and/or Collateral Agent so long as
such service providers have executed a confidentiality agreement or have agreed to similar confidentiality terms with the Lenders and Collateral Agent with terms no less
restrictive than those contained herein. Confidential information does not include information that either: (i) is in the public domain or in the Lenders’ and/or Collateral
Agent’s possession when disclosed to the Lenders and/or Collateral Agent, or becomes part of the public domain after disclosure to the Lenders and/or Collateral Agent at no
fault of the Lenders or Collateral Agent; or (ii) is disclosed to the Lenders and/or Collateral Agent by a third party, if the Lenders and/or Collateral Agent does not know that
the third party is prohibited from disclosing the information; or (iii) is independently developed by such Person other than as a result of a breach of this Section 12.8.
Collateral Agent and the Lenders may use confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes,
and market analysis. The provisions of the immediately preceding sentence shall survive the termination of this Agreement. The agreements provided under this Section 12.8
supersede all prior agreements, understanding, representations, warranties, and negotiations between the parties about the subject matter of this Section 12.8.
12.10 Limitations of Damages. In no event shall Lenders or Collateral Agent ever be liable to Borrower, nor shall Borrower be liable to Collateral Agent or any
Lender for (i) special, consequential, incidental, or other such damages arising from or related to the Term Loans or any of the Loan Documents, or (ii) punitive, exemplary,
or other such damages arising from or related to the Term Loans or any of the Loan Documents.
12.11 Waiver as to Assignees . To the fullest extent permitted by Section 9-403 of the UCC, Borrower agrees not to assert against an assignee of any of the
Obligations any claim or defense that they may have against Collateral Agent or a Lender.
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[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
12.12 Right of Set Off. Borrower hereby grants to Collateral Agent and to each Lender, a lien, security interest and right of set off as security for all Obligations to
Collateral Agent and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Collateral Agent or the Lenders or any entity under the control of Collateral Agent or the Lenders (including a Collateral Agent
affiliate) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Collateral Agent or the
Lenders may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any
other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED BY BORROWER.
12.13 Cooperation of Borrower. If necessary, Borrower agrees to (i) execute any documents reasonably required to effectuate and acknowledge each assignment
of a Term Loan Commitment or Term Loan to an assignee in accordance with Section 12.1, (ii) make Borrower’s management available to meet with Collateral Agent and
prospective participants and assignees of Term Loan Commitments (which meetings shall be conducted no more often than twice every twelve months unless an Event of
Default has occurred and is continuing), and (iii) assist Collateral Agent or the Lenders in the preparation of information relating to the financial affairs of Borrower as any
prospective participant or assignee of a Term Loan Commitment or Term Loan reasonably may request. Subject to the provisions of Section 12.9, Borrower authorizes each
Lender to disclose to any prospective participant or assignee of a Term Loan Commitment, any and all information in such Lender’s possession concerning Borrower and its
financial affairs which has been delivered to such Lender by or on behalf of Borrower pursuant to this Agreement, or which has been delivered to such Lender by or on behalf
of Borrower in connection with such Lender’s credit evaluation of Borrower prior to entering into this Agreement.
12.14 Public Announcement. Borrower hereby agrees that Collateral Agent and each Lender may make a public announcement of the transactions contemplated
by this Agreement, and may publicize the same in marketing materials, newspapers and other publications, and otherwise, and in connection therewith may use Borrower’s
name, tradenames and logos.
12.15 Collateral Agent and Lender Agreement. Collateral Agent and each Lender hereby agree to the terms and conditions set forth on Annex I attached hereto.
Borrower acknowledges and agrees to the terms and conditions set forth on Annex I attached hereto.
12.16 Borrower Liability. Any Borrower may, acting singly, request Credit Extensions hereunder. Each Borrower hereby appoints the other as agent for the other
for all purposes hereunder, including with respect to requesting Credit Extensions hereunder. Each Borrower hereunder shall be jointly and severally obligated to repay all
Credit Extensions made hereunder, regardless of which Borrower actually receives said Credit Extension, as if each Borrower hereunder directly received all Credit
Extensions. Each Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, and (b) any right to require Collateral Agent or any
Lender to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Collateral Agent and or any
Lender may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale)
without affecting any Borrower’s liability. Notwithstanding any other provision of this Agreement or other related document, each Borrower (i) irrevocably waives all rights
that it may have at law or in equity subrogating Borrower to the rights of Collateral Agent and the Lenders under this Agreement or otherwise allowing Borrower to benefit
from, or to participate in, any security for the Obligations and (ii) waives, until the Obligations have been paid in full, all rights that it may have at law or in equity to seek
contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the
Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for
indemnification, reimbursement or any other arrangement prohibited or limited under this Section shall be null and void to the extent of such prohibition or limitation. If any
payment is made to a Borrower in contravention of this Section, such Borrower shall hold such payment in trust for Collateral Agent and the Lenders and such payment shall
be promptly delivered to Collateral Agent for application to the Obligations, whether matured or unmatured.
13. DEFINITIONS
As used in this Agreement, the following terms have the following meanings:
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[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Account” is any “account” as defined in the Code.
“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made under the Code.
“Affiliate” means, with respect to a specified Person, another Person that, directly or indirectly through one or more intermediaries, (i) Controls or is Controlled by, or is
under common Control with, the Person specified, (ii) owns, is owned by, or is under common ownership with, the Person specified, as to more than ten percent (10%) of
voting equity or of equity value, or (iii) has a Managing Role with respect to the Person specified or with another Person that is an Affiliate of the specified Person by
operation of subsection (i) of this definition.
“Amortization Date” is the earliest of (i) an Event of Default occurring and (ii)(x) March 1, 2027, or (y) if the I/O Extension Event occurs, March 1, 2028.
“Annual Projections” is defined in Section 6.2(a)(iii).
“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering, including without limitation Executive Order No. 13224 (effective September 24, 2001), the
USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.
“Basic Rate” is with respect to each Term Loan, the floating per annum rate of interest (based on a year of three hundred sixty five (365) days) equal to the sum of (a) the
greater of (i) Prime Rate, subject to Section 2.3(f), and (ii) seven and one half percent (7.50%), plus (b) three and one quarter percent (3.25%).
“Blocked Person” is any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person owned or controlled by, or
acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which any Lender
is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports
“terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by
OFAC or other similar list.
“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records including ledgers, federal, and state tax returns, records regarding Borrower’s or its
Subsidiaries’ assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such
information.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is closed.
“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of
not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either
Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., and (c) certificates of deposit maturing no more than one (1) year after issue provided that the account in
which any such certificate of deposit is maintained is subject to a Control Agreement in favor of Collateral Agent.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of New York; provided, that, to the extent that the Code is
used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term
contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or
priority of, or remedies with respect to, Collateral Agent’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State
of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account, or any other bank account maintained by Borrower or any Subsidiary at any
time.
29
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to time.
“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made under the Code, except for deposit
accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s, or any of its Subsidiaries’, employees
and identified to Collateral Agent by Borrower as such in the Perfection Certificate.
“Compliance Certificate” is that certain certificate in substantially the form attached hereto as Exhibit C.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other
obligation of another Person such as an obligation directly or indirectly guaranteed, endorsed, co made, discounted or sold with recourse by that Person, or for which that
Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates,
currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent
Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably
anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support
arrangement.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings analogous thereto.
“Control Agreement” is any control agreement entered into among the depository institution at which Borrower or any of its Subsidiaries maintains a Deposit Account or the
securities intermediary or commodity intermediary at which Borrower or any of its Subsidiaries maintains a Securities Account or a Commodity Account, Borrower and such
Subsidiary, and Collateral Agent pursuant to which Collateral Agent, for the benefit of the Lenders, obtains “control” (within the meaning of the Code) over such Deposit
Account, Securities Account, or Commodity Account.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof,
whether published or unpublished and whether or not the same also constitutes a trade secret.
“Credit Extension” means an advance of funds under a Term Loan.
“Default” means an event that with the passage of time could result in an Event of Default.
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.
“Deprioritized Biotherapeutics” are [*].
“Deprioritized Life Science Enzymes” are [*].
“Disbursement Letter” is that certain form attached hereto as Exhibit B-2.
“DOJ” means the U.S. Department of Justice or any successor thereto or any other comparable Governmental Authority.
“Dollars,” “dollars” and “$” each mean lawful money of the United States.
“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures,
and vehicles (including motor vehicles and trailers) not held for sale or lease, and any interest in any of the foregoing.
“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.
30
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Excluded Account” means (i) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s,
or any of its Subsidiaries’ employees, (ii) collateral accounts permitted under clause (l) of the definition of Permitted Liens, in each case identified to Collateral Agent by
Borrower as such, and (iii) any other deposit account of Borrower or any Subsidiary which Collateral Agent agrees in its discretion may be deemed an “Excluded Account”.
“Exigent Circumstance” means any event or circumstance that, in the reasonable judgment of Collateral Agent, imminently threatens the ability of Collateral Agent to realize
upon all or any material portion of the Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction or material waste thereof,
or failure of Borrower or any of its Subsidiaries after reasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Collateral
Agent, could reasonably be expected to result in a material diminution in value of the Collateral.
“Facility Fee” is a fee due on each Funding Date, an amount equal to 1.00% of the amount of Term Loan funded on such Funding Date, payable to the Lenders in accordance
with their respective Pro Rata Shares.
“FDA” means the U.S. Food and Drug Administration or any successor thereto or any other comparable Governmental Authority.
“Final Fee” is a payment (in addition to and not a substitution for the regular monthly payments of principal or accrued interest or any other fee payable hereunder) due on
the earliest to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or (c) the prepayment of the Term Loan pursuant to Section 2.2(c) or (d), in each case
equal to three percent (3.00%) multiplied by the aggregate amount of the Term Loans funded under this Agreement, payable to Lenders in accordance with their respective Pro
Rata Shares.
“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the laws of the United States or any state thereof.
“Funding Date” is any date on which the Term Loan is made to or on account of Borrower, which shall be a Business Day.
“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by
a significant segment of the accounting profession in the United States, which are applicable to the circumstances as of the date of determination.
“General Intangibles” are all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and
includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether
published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any
trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property,
rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and
business interruption insurance), payments of insurance and rights to payment of any kind.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from
or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body (including,
without limitation, the FDA and any state board of pharmacy or state pharmacy licensing authority), court, central bank, arbitration authority, or other entity exercising
executive, legislative, judicial, quasi-judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory
organization.
“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent for the benefit of the Lenders.
31
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.
“I/O Extension Event” means Borrower has achieved, prior to March 1, 2027, trailing twelve months of Operating Cash Flow greater than $0.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters
of credit, excluding unsecured trade payables arising in the ordinary course of business, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c)
capital lease obligations, and (d) Contingent Obligations.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, compositions or proceedings seeking reorganization, arrangement, or other relief.
“Insolvent” means not Solvent.
“Intellectual Property” means all of Borrower’s or any of its Subsidiaries’ right, title and interest in and to the following:
(a)
(b)
(c)
(d)
(e)
its Copyrights, Trademarks and Patents;
any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know how, operating manuals;
any and all source code;
any and all design rights which may be available to Borrower;
any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue
for and collect such damages for said use or infringement of the Intellectual Property rights identified above;
(f)
(g)
asset.
all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and
all licenses, sublicenses or other contracts under which Borrower or any Subsidiary is granted rights by third parties in any Intellectual Property
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made under the Code, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such
inventory as is temporarily out of any Person’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any
Person.
“IP Security Agreement” is that certain Intellectual Property Security Agreement executed and delivered by Borrower to Collateral Agent and dated as of the Effective Date,
as may be amended, restated, or otherwise modified or supplemented from time to time.
“Issuer” means an issuer of Shares.
“Key Person” is each of Borrower’s (i) [*], (ii) [*]and (iii) [*].
“Knowledge” means to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable
investigation, of the Responsible Officers.
32
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Lender” is any one of the Lenders.
“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this Agreement pursuant to Section 12.1.
“Lenders’ Expenses” are all reasonable and documented audit fees and expenses, costs, and expenses (including reasonable and documented out-of-pocket attorneys’ fees
and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection fees, auditor fees and filing fees) for preparing, amending, negotiating,
administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise
incurred by Collateral Agent and/or the Lenders in connection with the Loan Documents.
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind, whether voluntarily incurred or arising by operation of
law or otherwise against any property.
“Loan Documents” are, collectively, this Agreement, the IP Security Agreement, each Secured Promissory Note, each Warrant, the Perfection Certificate(s), each Control
Agreement, each Compliance Certificate, each Loan Payment Request Form, each Disbursement Letter, any subordination agreements, any note, or notes or guaranties
executed by Borrower or any other Person, and any other present or future agreement entered into by Borrower, any Guarantor or any other Person for the benefit of the
Lenders and Collateral Agent in connection with this Agreement; all as amended, restated, or otherwise modified or supplemented from time to time.
“Loan Party” or “Loan Parties” means each Borrower and each Guarantor.
“Loan Payment Request Form” is that certain form attached hereto as Exhibit B-1.
“Management Plan” is Borrower’s projected revenue provided to Collateral Agent as of the Effective Date, as such Management Plan may be updated from time to time in
accordance with Section 8.2.
“Managing Role” means a managing member, manager, director, executive officer, or other role with senior management responsibilities as to a Person.
“Market Capitalization” means, with respect to Borrower, as of any date of determination, an amount equal to the closing price (or 30-day volume weighted average price
where specified) of Borrower’s common shares multiplied by the total outstanding common shares of Borrower as of such date.
“Material Adverse Change” is an event or circumstance that, either individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse
Effect.
“Material Adverse Effect” is (a) a material adverse change in, or a material adverse effect on, the operations, business, properties, liabilities (actual or contingent), condition
(financial or otherwise), or prospects of Borrower or any Subsidiary or guarantor of the Obligations, including such changes affecting Borrower that result from matters that
generally affect the industries and markets in which Borrower operates, such as changes in financial markets or general economic conditions and outbreak or escalation of war
or major hostilities or epidemic or acts of terrorism, or (b) a material adverse effect on (i) the ability of Borrower to timely perform its Obligations including with respect to
the Collateral, (ii) the legality, validity, binding effect, or enforceability against Borrower of any Loan Document to which it is a party or (iii) the rights, remedies and benefits
available to, or conferred upon, Collateral Agent or any Lender under any Loan Documents.
“Material Agreement” is any license, agreement or other contractual arrangement with any Person (i) whereby Borrower or any of its Subsidiaries is or is reasonably likely
to pay or receive aggregate consideration on or after the Effective Date equal to at least $5,000,000, (ii) that is otherwise material to the business, condition (financial or
otherwise), operations, performance, properties, or prospects of Borrower or any Subsidiary such that the termination thereof of or default thereunder by any Person would
reasonably be expected to have a Material Adverse Effect.
“Maturity Date” is February 13, 2029.
“Net Product Revenue” is the sum, as of any period of determination, of (i) consolidated product revenue determined in accordance with GAAP for such period and (ii)
revenue from licensing, royalties, collaboration and
33
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
partnership transactions for such period related to Borrower’s ECO Synthesis and CodeEvolver platforms, or other partnered enzymes that may not be accounted for as
product revenue under GAAP (but otherwise determined in accordance with GAAP); provided that Net Product Revenue excludes Research and Development Revenue and
Paxlovid Revenue.
“Obligations” are all of Borrower’s obligations to pay when due any debts, principal, interest, make-whole amount, Lenders’ Expenses, the Prepayment Fee, the Final Fee,
and other amounts Borrower owes the Lenders now or later, in connection with, related to, following, or arising from, out of or under, this Agreement or the other Loan
Documents (other than the Warrant), or otherwise, and including interest and other amounts accruing after Insolvency Proceedings begin (whether or not allowed) and debts,
liabilities, or obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the performance of Borrower’s duties under the Loan Documents (other than the
Warrant).
“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.
“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg.
49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other
applicable Executive Orders.
“Operating Cash Flow” is, for any period, cash flow from operations including capital expenditures for such period, determined in accordance with GAAP.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of
organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is
a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar
agreement), each of the foregoing with all current amendments or modifications thereto.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, re-examination
certificates, utility models, extensions and continuations-in-part of the same.
“Paxlovid Revenue” is the retainer fee to the extent recognized as revenue on Borrower’s statement of operations prepared in accordance with GAAP arising out of the sale of
CDX-616 to Pfizer Inc. and its affiliates for the manufacture of Paxlovid (including any such revenue recognized in respect of that certain Enzyme Supply Agreement, dated
July 14, 2022, between Borrower and Pfizer Ireland Pharmaceuticals, as amended, restatement, replaced, supplemented or otherwise modified from time to time).
“Payment Date” is the first (1st) calendar day of each calendar month, commencing on March 1, 2024.
“Permitted Exclusive Licenses” are (i) exclusive licenses existing as of the Effective Date and disclosed to Lender in the Perfection Certificate, including any extensions,
renewals, and replacements thereof, (ii) [*], (iii) [*], (iv) [*], and (v) [*].
“Permitted Indebtedness” is:
(a)
(h)
(i)
(j)
(k)
Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the other Loan Documents;
Indebtedness existing on the Effective Date and disclosed on the Perfection Certificate(s);
Subordinated Debt;
Indebtedness in connection with credit cards incurred in the ordinary course of business;
Indebtedness consisting of capitalized lease obligations and purchase money Indebtedness, in each case incurred by Borrower or any of its
Subsidiaries to finance the acquisition, repair, improvement or construction of fixed or capital assets of such Person, provided that (i) the aggregate outstanding
34
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
principal amount of all such Indebtedness does not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) at any time and (ii) the principal amount of such Indebtedness
does not exceed the lower of the cost or fair market value of the property so acquired or built or of such repairs or improvements financed with such Indebtedness (each
measured at the time of such acquisition, repair, improvement or construction is made);
(l)
Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of Borrower’s business;
(m)
Indebtedness consisting of letters of credit in an amount not to exceed Five Hundred Thousand Dollars ($500,000) in the aggregate at any time;
(n)
(o)
(p)
Intercompany indebtedness constituting a Permitted Investment;
guarantees of Permitted Indebtedness;
unsecured Indebtedness in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) at any time; and
extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (j) above, provided that
the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon Borrower, or its Subsidiary, as the case
may be.
(q)
“Permitted Investments” are:
(a)
(b)
Investments disclosed on the Perfection Certificate(s) and existing on the Effective Date;
Investments consisting of cash and Cash Equivalents, and any Investments permitted by Borrower’s investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has been approved in writing by Collateral Agent;
(c)
Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of
Borrower;
(d)
(e)
Investments consisting of Excluded Accounts and Deposit Accounts in which Collateral Agent has a perfected security interest;
Investments in connection with Transfers permitted by Section 7.1;
(f)
Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower’s board of directors, not to exceed One Hundred Seventy Five Thousand Dollars ($175,000.00) in the aggregate for (i) and (ii) in
any fiscal year;
of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;
(g)
Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement
the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary;
(h)
Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in
Investments (i) by a Loan Party in another Loan Party, (ii) by a Subsidiary that is not a Loan Party in a Loan Party, (iii) by a Loan Party in
Subsidiaries (other than Subsidiaries existing on the Effective Date that are not Loan Parties), that are not Loan Parties in an aggregate amount not to exceed Fifty Thousand
Dollars ($50,000.00) per fiscal year;
(i)
35
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
fiscal year and One Million Dollars ($1,000,000.00) in the aggregate;
(j)
cash Investments in joint ventures or strategic alliances in an amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in any
of technology, the development of technology or the providing of technical support; and
(k)
non-cash Investments in joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing
(l)
other Investments not exceeding Five Hundred Thousand Dollars ($500,000) in the aggregate in any fiscal year of Borrower.
“Permitted Licenses” are (A) licenses of over-the-counter software that is commercially available to the public, (B) non-exclusive licenses for the use of the Intellectual
Property of Borrower or any of its Subsidiaries related to ECO Synthesis and CodeEvolver platforms entered into in the ordinary course of business, (C) Permitted Exclusive
Licenses, (D) any other licenses for the use of the Intellectual Property of Borrower or any of its Subsidiaries consented to by the Required Lenders (which shall not be
unreasonably withheld), and (E) non-exclusive intercompany licenses, sublicenses or grants of rights for development, manufacture, production, commercialization (including
commercial sales to end users), marketing, promotion, co-promotion, sales or distribution, in each case, solely among the Loan Parties; provided, that, with respect to each
such license described in clauses (B), (C) or (D), the license constitutes an arm’s-length transaction, the terms of which, on their face, do not provide for a sale or assignment
of such Intellectual Property that would result in or the equivalent of a transfer of title of such Intellectual Property, and do not restrict the ability of Borrower or any of its
Subsidiaries, as applicable, to (i) pledge, grant a security interest in or lien on, or assign or otherwise Transfer any Intellectual Property or (ii) grant a security interest to
Collateral Agent therein.
“Permitted Liens” are:
(a)
Liens existing on the Effective Date and disclosed on the Perfection Certificates or arising under this Agreement and the other Loan Documents;
Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for
which Borrower maintains adequate reserves on Borrower’s Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;
(b)
(c)
liens securing Indebtedness permitted under clause (e) of the definition of “Permitted Indebtedness,” provided that (i) such liens exist prior to the
acquisition of, or attach substantially simultaneous with, or within twenty (20) days after the, acquisition, lease, repair, improvement or construction of, such property financed
or leased by such Indebtedness and (ii) such liens do not extend to any property of Borrower other than the property (and proceeds thereof) acquired, leased or built, or the
improvements or repairs, financed by such Indebtedness;
(d)
Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed Three Hundred Fifty Thousand Dollars ($350,000.00), and which are not delinquent
or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or
sale of the property subject thereto;
the ordinary course of business (other than Liens imposed by ERISA);
(e)
Liens to secure payment of workers’ compensation, employment insurance, old age pensions, social security and other like obligations incurred in
servitudes, easements, rights of way, restrictions and other similar encumbrances on real property imposed by applicable laws and encumbrances
consisting of zoning or building restrictions, easements, licenses, restrictions on the use of property or minor imperfections in title thereto which, in the aggregate, are not
material, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business;
(f)
other obligations of a like nature arising in the ordinary
(g)
deposits or pledges of cash to secure bids, tenders, contracts (other than contracts for the payment of money), leases, surety and appeal bonds and
36
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
course of business, in an aggregate amount not exceeding Two Hundred and Fifty Thousand Dollars ($250,000) at any time;
renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;
(h)
Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension,
(i)
leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit
granting Collateral Agent or any Lender a security interest in such license;
banker’s liens, rights of setoff and Liens in favor of financial institutions incurred in the ordinary course of business arising in connection with
Borrower’s deposit accounts or securities accounts held at such institutions solely to secure payment of fees and similar costs and expenses and provided such accounts are
maintained in compliance with Section 6.6 hereof;
(j)
(k)
(l)
Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7;
Liens securing Indebtedness described in clause (g) of the definition of “Permitted Indebtedness”; and
(m)
Permitted Licenses.
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate, entity or Governmental Authority.
“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration or
otherwise, an additional fee payable to the Lenders in amount equal to:
principal and accrued interest amount of the Term Loan prepaid; provided, however, no voluntary prepayment may be made during such period;
(a)
for a prepayment made on or after the Effective Date through and including the first anniversary of the Effective Date, three percent (3.00%) of the
anniversary of the Effective Date, two percent (2.00%) of the principal and accrued interest amount of the Term Loan prepaid; and
(b)
for a prepayment made after the date which is the first anniversary of the Effective Date through and including the date which is the second
anniversary of the Effective Date, one percent (1.00%) of the principal and accrued interest amount of the Term Loan prepaid; and
(c)
for a prepayment made after the date which is the second anniversary of the Effective Date through and including the date which is the third
the principal and accrued interest amount of the Term Loan prepaid.
(d)
for a prepayment made after the date which is the third anniversary of the Effective Date and prior to the Maturity Date, zero percent (0.00%) of
“Prime Rate” is the Prime Rate published in the Money Rates section of The Wall Street Journal.
“Property” means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible.
“Pro Rata Share” is, as of any date of determination, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by
dividing the outstanding principal amount of the Term Loan held by such Lender by the aggregate outstanding principal amount of the Term Loan.
37
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made under the Code.
“Registration” means any registration, authorization, approval, license, permit, clearance, certificate, and exemption issued or allowed by the FDA or state pharmacy
licensing authorities (including, without limitation, new drug applications, abbreviated new drug applications, biologics license applications, investigational new drug
applications, over-the-counter drug monograph, device pre-market approval applications, device pre-market notifications, investigational device exemptions, product
recertifications, manufacturing approvals, registrations and authorizations, CE Marks, pricing and reimbursement approvals, labeling approvals or their foreign equivalent,
controlled substance registrations, and wholesale distributor permits).
“Regulatory Action” means an administrative, regulatory, or judicial enforcement action, proceeding, investigation or inspection, FDA Form 483 notice of inspectional
observation, warning letter, untitled letter, other notice of violation letter, recall, seizure, Section 305 notice or other similar written communication, injunction or consent
decree, issued by the FDA or a federal or state court.
“Related Persons” means, with respect to any Person, each Affiliate of such Person and each director, officer, employee, agent, trustee, representative, attorney, accountant
and each insurance, environmental, legal, financial and other advisor and other consultants and agents of or to such Person or any of its Affiliates.
“Required Lenders” means (i) for so long as all of the Persons that are Lenders on the Effective Date (each an “Original Lender”) have not assigned or transferred any of
their interests in the Term Loan, Lenders holding one hundred percent (100%) of the aggregate outstanding principal balance of the Term Loan, or (ii) at any time from and
after any Original Lender has assigned or transferred any interest in its Term Loan, Lenders holding at least fifty one percent (51%) of the aggregate outstanding principal
balance of the Term Loan.
“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such
Person or any of its property is subject.
“Research and Development Revenue” is all research services fees classified as research and development revenue on Borrower’s statement of operations prepared in
accordance with GAAP.
“Responsible Officer” is any of the [*].
“Secured Promissory Note” is defined in Section 2.6.
“Secured Promissory Note Record” is a record maintained by each Lender with respect to the outstanding Obligations owed by Borrower to Lender and credits made
thereto.
“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made under the Code.
“Shares” is one hundred percent (100.00%) of the stock, units or other evidence of ownership held by Borrower or its Subsidiaries of any Subsidiary; provided, however, as to
any stock, units or other evidence of ownership held by Borrower or its Subsidiary in a Foreign Subsidiary, “Shares” shall be limited to the greater of sixty-five percent (65%)
of the Foreign Subsidiary or the maximum portion thereof that may from time to time be pledged without causing a material adverse tax consequence to Borrower.
“Solvent” is, with respect to any Person: the fair salable value of such Person’s consolidated assets (including goodwill minus disposition costs) exceeds the fair value of such
Person’s liabilities; such Person is not left with unreasonably small capital after the transactions in this Agreement; and such Person is able to pay its debts (including trade
debts) as they mature in the ordinary course (without taking into account any forbearance and extensions related thereto).
“Subordinated Debt” is indebtedness incurred by Borrower or any of its Subsidiaries subordinated to all Indebtedness of Borrower and/or its Subsidiaries to the Lenders
(pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Collateral Agent and the Lenders entered into between
38
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Collateral Agent, Borrower, and/or any of its Subsidiaries, and the other creditor), on terms acceptable to Collateral Agent and the Lenders, as determined in their sole
discretion.
“Subsidiary” is, with respect to any Person, any Person of which more than fifty percent (50%) of the voting stock or other equity interests (in the case of Persons other than
corporations) is owned or controlled, directly or indirectly, by such Person or through one or more intermediaries. Unless otherwise specified, references herein to a
Subsidiary means a Subsidiary of Borrower.
“Term Loan” is defined in Section 2.2(a)(ii).
“Term A Loan” is defined in Section 2.2(a)(i).
“Term B Loan” is defined in Section 2.2(a)(ii).
“Term B Draw Period” means the period commencing on the later of January 1, 2025 and the first date on which Borrower achieves the Term B Milestone and ending on the
earlier of (i) June 30, 2025 or (ii) the occurrence of an Event of Default (unless such Event of Default is waived by Collateral Agent and Lenders for the purposes of the
continuation of the Term B Draw Period); provided, however, that the Term B Draw Period shall not commence if when Borrower achieves the Term B Milestone, an Event
of Default has occurred and is continuing.
“Term B Milestone” is the achievement by Borrower of (i) TTM Net Product Revenue of [*], and (ii) the pro forma, after giving effect to the Term B Loan, ratio of
aggregate amount of Indebtedness of Borrower to its then Market Capitalization (based on a 30-day volume weighted average price) equal to twenty five percent (25.00%) or
less.
“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make the Term Loan, up to the principal amount shown on Schedule 1.1. “Term Loan
Commitments” means the aggregate amount of such commitments of all Lenders.
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the
entire goodwill of the business of Borrower and each of its Subsidiaries connected with and symbolized by such trademarks.
“TTM Net Product Revenue” means trailing twelve (12) months’ Net Product Revenue, as of any date of determination.
“Warrant” means any of that certain Warrant to Purchase Stock dated the Effective Date issued by Borrower in favor of each Lender or such Lender’s Affiliates or any other
warrant entered into in connection with the Term Loan, all as may be amended, restated, or otherwise modified or supplemented from time to time.
[Balance of Page Intentionally Left Blank]
39
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
BORROWER:
CODEXIS, INC.
By /s/ Sri Ryali
Name: Sri Ryali
Title: Chief Financial Officer
COLLATERAL AGENT AND LENDER:
INNOVATUS LIFE SCIENCES LENDING FUND I, LP
By: Innovatus Life Sciences GP, LP
Its: General Partner
By /s/ Andy Dym
Name: Andy Dym
Title: Authorized Signer
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
[*]
SCHEDULE 1.1
Lenders and Commitments
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
EXHIBIT A
Description of Collateral
The Collateral consists of all of Borrower’s presently owned and hereafter acquired or arising right, title and interest in and to following personal property and fixtures:
All goods, Accounts (including health care insurance receivables), Equipment, fixtures, Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles (including Intellectual Property, payment intangibles, and software), commercial tort claims, documents, instruments
(including any promissory notes), chattel paper (whether tangible or electronic), cash, money, deposit accounts and other Collateral Accounts, all certificates of deposit,
fixtures, letters of credit (whether or not the letter of credit is evidenced by a writing) and letter-of-credit rights, investment property (including certificated securities,
uncertificated securities, securities entitlements, securities accounts, commodity contracts, and commodity accounts), supporting obligations, and financial assets, whether
now owned or hereafter acquired, wherever located; and
All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments,
accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral shall not include: (i) any interest of a Loan Party as a lessee under an Equipment lease if such Loan Party is prohibited
by the terms of such lease from granting a security interest in such lease or under which such an assignment or Lien would cause a default to occur under such lease; provided,
however, that upon termination of such prohibition, such interest shall immediately become Collateral without any action by any Loan Party or Lender, (ii) Equipment that is
subject to a Permitted Lien in connection with the financing of such Equipment if the holder of such Lien has prohibited in writing the applicable Loan Party from granting
Liens on such property in favor of third parties; provided that immediately upon the ineffectiveness, lapse or termination of any such provision, the term “Collateral” shall
automatically include, and the applicable Loan Party shall be deemed to have granted a security interest in, all of its rights, title and interests in and to such property as if such
provision had never been in effect, (iii) any Excluded Accounts, (iv) the equity interests in any joint venture where the pledge of such equity interests would be prohibited by
any applicable contractual requirement pertaining to any such joint venture, or (v) any leases, licenses, permits or agreements to which Borrower is a party, or any of its right,
title or interest thereunder, to the extent that, and for so long as, a grant of a security interest therein would, under the express terms of such lease, license, permit or agreement,
result in a breach of the terms of, constitute a default under or create a right of termination in favor of any party thereto (other than Borrower) under, such lease, license, permit
or agreement (other than to the extent that any such term (a) has been waived or (b) would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, 9-409 of the
UCC or other applicable provisions of the UCC of any relevant jurisdiction or any other applicable law or principles of equity); provided, however, that (x) the Collateral shall
include (and such security interest shall attach) immediately upon the ineffectiveness, lapse, termination or waiver of such provision and (y) the Collateral shall include all
proceeds arising under or from any such lease, license, permit or contract.
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
[*]
EXHIBIT B-1
Loan Payment Request Form
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
[*]
EXHIBIT B-2
Form of Disbursement Letter
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
[*]
EXHIBIT C-1
Compliance Certificate
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
[*]
Exhibit C-2
Loan Confirmation
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
EXHIBIT D
Form of Secured Promissory Note
[see attached]
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
$____________________ Dated: [_______], 2024
SECURED PROMISSORY NOTE
(Term [A][B] Loan)
FOR VALUE RECEIVED, the undersigned, CODEXIS, INC., a Delaware corporation (“Borrower”) HEREBY PROMISES TO PAY to the order of INNOVATUS
LIFE SCIENCES LENDING FUND I, LP (“Lender”) the principal amount of [___________] MILLION DOLLARS ($______________) or such lesser amount as shall
equal the outstanding principal balance of the Term [A][B] Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of such Term [A][B]
Loan, at the rates and in accordance with the terms of the Loan and Security Agreement dated February 13, 2024 by and among Borrower, Lender, INNOVATUS LIFE
SCIENCES LENDING FUND I, LP, as Collateral Agent, and the other Lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified
from time to time, the “Loan Agreement”). If not sooner paid, the entire principal amount and all accrued and unpaid interest hereunder shall be due and payable on the
Maturity Date as set forth in the Loan Agreement. Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in the Loan Agreement.
Principal, interest and all other amounts due with respect to the Term [A][B] Loan, are payable in lawful money of the United States of America to Lender as set forth in the
Loan Agreement and this Secured Promissory Note (this “Note”). The principal amount of this Note and the interest rate applicable thereto, and all payments made with
respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note.
The Loan Agreement, among other things, (a) provides for the making of a secured Term [A][B] Loan by Lender to Borrower, and (b) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
This Note may not be prepaid except as set forth in Section 2.2(c) and Section 2.2(d) of the Loan Agreement.
This Note and the obligation of Borrower to repay the unpaid principal amount of the Term [A][B] Loan, interest on the Term [A][B] Loan and all other amounts due Lender
under the Loan Agreement is secured under the Loan Agreement.
Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of
this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to
enforce any of Borrower’s obligations hereunder not performed when due.
This Note shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of New York.
The ownership of an interest in this Note shall be registered on a record of ownership maintained by Lender or its agent. Notwithstanding anything else in this Note to the
contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record of ownership and the transferee is
identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this Note (as recorded on such record of ownership) as the
owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Note on the part of any other person or entity.
[Balance of Page Intentionally Left Blank]
296116227 v13
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.
BORROWER:
CODEXIS, INC.
By
Name:
Title:
296116227 v13
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
[*]
EXHIBIT E
CORPORATE BORROWING CERTIFICATE
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
[*]
ANNEX I
Collateral Agent and Lender Terms
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
ANNEX Y
LOAN INTEREST RATE AND PAYMENT OF PRINCIPAL
(Term Loan)
[*]
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
[*]
SCHEDULE 6.12
NET PRODUCT REVENUE COVENANT
[*] = CERTAIN MARKED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
[*]
SCHEDULE 6.13
LIQUIDITY COVENANT
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Codexis, Inc.
Redwood City, California
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-255926) and Form S-8 (No. 333-167752, 333-172166,
333-179903, 333-187711, 333-194524, 333-202596, 333-210022, 333-216587, 333-223693, 333-224885, 333-230037, 333-232262, 333-269163, 333-273661,
and 333-273662) of Codexis, Inc. of our reports dated February 28, 2024, relating to the consolidated financial statements, and the effectiveness of the Company’s
internal control over financial reporting, which appear in this Annual Report on Form 10-K.
/s/ BDO USA, P.C.
San Francisco, CA
February 28, 2024
Exhibit 31.1
I, Stephen Dilly, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Codexis, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: February 28, 2024
/s/Stephen Dilly
Stephen Dilly
President and Chief Executive Officer
Exhibit 31.2
I, Sriram Ryali, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Codexis, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: February 28, 2024
/s/Sriram Ryali
Sriram Ryali
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Codexis, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and
Exchange Commission (the “Report”), Stephen Dilly, President and Chief Executive Officer of the Company and Sriram Ryali, Chief Financial Officer of the Company,
respectively, do each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
•
•
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 28, 2024
/s/Stephen Dilly
Stephen Dilly
President and Chief Executive Officer
/s/Sriram Ryali
Sriram Ryali
Chief Financial Officer
CODEXIS, INC.
POLICY ON RECOUPMENT OF INCENTIVE COMPENSATION
Introduction
The Board of Directors (the “Board”) of Codexis, Inc. (the “Company”) has adopted this Policy on Recoupment of Incentive Compensation
(this “Policy”), which provides for the recoupment of compensation in certain circumstances in the event of a restatement of financial results
by the Company. This Policy shall be interpreted to comply with the requirements of U.S. Securities and Exchange Commission (“SEC”) rules
and Nasdaq Stock Market (“Nasdaq”) listing standards implementing Section 954 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (the “Dodd-Frank Act”) and, to the extent this Policy is in any manner deemed inconsistent with such rules, this Policy
shall be treated as retroactively amended to be compliant with such rules.
Administration
This Policy shall be administered by the Compensation Committee (the “Compensation Committee”) of the Board. Any determinations made
by the Compensation Committee shall be final and binding on all affected individuals. The Compensation Committee is authorized to interpret
and construe this Policy and to make all determinations necessary, appropriate or advisable for the administration of this Policy, in all cases
consistent with the Dodd-Frank Act. The Board or Compensation Committee may amend this Policy from time to time in its discretion.
Covered Executives
This Policy applies to any current or former “executive officer,” within the meaning of Rule 10D-1 under the Securities Exchange Act of 1934,
as amended, of the Company or a subsidiary of the Company (each such individual, an “Executive”). This Policy shall be binding and
enforceable against all Executives and their beneficiaries, executors, administrators, and other legal representatives.
Recoupment Upon Financial Restatement
If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial
reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial
statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were
corrected in the current period or left uncorrected in the current period (a “Financial Restatement”), the Compensation Committee shall cause
the Company to recoup from each Executive, as promptly as reasonably possible, any erroneously awarded Incentive-Based Compensation, as
defined below.
No-Fault Recovery
Recoupment under this Policy shall be required regardless of whether the Executive or any other person was at fault or responsible for
accounting errors that contributed to the need for the Financial Restatement or engaged in any misconduct.
Compensation Subject to Recovery; Enforcement
This Policy applies to all compensation granted, earned or vested based wholly or in part upon the attainment of any financial reporting
measure determined and presented in accordance with
the accounting principles used in preparing the Company’s financial statements, and any measure that is derived wholly or in part from such
measures, whether or not presented within the Company’s financial statements or included in a filing with the SEC, including stock price and
total shareholder return (“TSR”), including but not limited to performance-based cash, stock, options or other equity-based awards paid or
granted to the Executive (“Incentive-Based Compensation”). Compensation that is granted, vests or is earned based solely upon the
occurrence of non-financial events, such as base salary, restricted stock or options with time-based vesting, or a bonus awarded solely at the
discretion of the Board or Compensation Committee and not based on the attainment of any financial measure, is not subject to this Policy.
In the event of a Financial Restatement, the amount to be recovered will be the excess of (i) the Incentive-Based Compensation received by the
Executive during the Recovery Period (as defined below) based on the erroneous data and calculated without regard to any taxes paid or
withheld, over (ii) the Incentive-Based Compensation that would have been received by the Executive had it been calculated based on the
restated financial information, as determined by the Compensation Committee. For purposes of this Policy, “Recovery Period” means the three
completed fiscal years immediately preceding the date on which the Company is required to prepare the Financial Restatement, as determined
in accordance with the last sentence of this paragraph, or any transition period that results from a change in the Company’s fiscal year (as set
forth in Section 5608(b)(i)(D) of the Nasdaq Listing Rules). The date on which the Company is required to prepare a Financial Restatement is
the earlier to occur of (A) the date the Board or a Board committee (or authorized officers of the Company if Board action is not required)
concludes, or reasonably should have concluded, that the Company is required to prepare a Financial Restatement or (B) the date a court,
regulator, or other legally authorized body directs the Company to prepare a Financial Restatement.
For Incentive-Based Compensation based on stock price or TSR, where the amount of erroneously awarded compensation is not subject to
mathematical recalculation directly from the information in the Financial Restatement, then the Compensation Committee shall determine the
amount to be recovered based on a reasonable estimate of the effect of the Financial Restatement on the stock price or TSR upon which the
Incentive-Based Compensation was received and the Company shall document the determination of that estimate and provide it to Nasdaq.
Incentive-Based Compensation is considered to have been received by an Executive in the fiscal year during which the applicable financial
reporting measure was attained or purportedly attained, even if the payment or grant of such Incentive-Based Compensation occurs after the
end of that period.
The Company may use any legal or equitable remedies that are available to the Company to
recoup any erroneously awarded Incentive-Based Compensation, including but not limited to by collecting from the Executive cash payments
or shares of Company common stock from or by forfeiting any amounts that the Company owes to the Executive.
No Indemnification
The Company shall not indemnify any Executive or pay or reimburse the premium for any insurance policy to cover any losses incurred by
such Executive under this Policy.
Exceptions
The compensation recouped under this Policy shall not include Incentive-Based Compensation received by an Executive (i) prior to beginning
service as an Executive or (ii) if he or she did not serve as an Executive at any time during the performance period applicable to the Incentive-
2
Based Compensation in question. The Compensation Committee (or a majority of independent directors serving on the Board) may determine
not to seek recovery from an Executive in whole or part to the extent it determines in its sole discretion that such recovery would be
impracticable because (A) the direct expense paid to a third party to assist in enforcing recovery would exceed the recoverable amount (after
having made a reasonable attempt to recover the erroneously awarded Incentive-Based Compensation and providing corresponding
documentation of such attempt to Nasdaq), (B) recovery would violate the home country law that was adopted prior to November 28, 2022, as
determined by an opinion of counsel licensed in the applicable jurisdiction that is acceptable to and provided to Nasdaq, or (C) recovery would
likely cause the Company’s 401(k) plan or any other tax-qualified retirement plan to fail to meet the requirements of Section 401(a)(13) or
Section 411(a) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
Other Remedies Not Precluded
The exercise by the Compensation Committee of any rights pursuant to this Policy shall be without prejudice to any other rights or remedies
that the Company, the Board or the Compensation Committee may have with respect to any Executive subject to this Policy.
Effective Date and Applicability
This Policy has been adopted by the Board on August 24, 2023, and shall apply to any Incentive-Based Compensation that is received by an
Executive on or after October 2, 2023.
3